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Internet-Plus Poised To Transform China’s Film Business Models

Self-confidence overflowed as Chinese film and Internet executives pitched a new business model that may be on the way to transforming the fortunes of local studios and rolling back the influence of Hollywood in China.

At a high-powered seminar on Sunday at the Shanghai film festival, the plutocrat bosses of Bona Film Group and Enlight Media lifted the curtain on new slates of local pictures that each number more than 20, and are fuelled by big data, Internet-generated intellectual property and new media marketing.

Executives from Youzu Interactive and Alibaba Digital Entertainment were there to egg them on with further talk of transactional content platforms and massive crowd funding.

The term ‘Internet Plus’ is attributed to China’s premier Li Keqiang and is a reference to the ability of the Internet to enable new things.

“We have been through 12 years of initial reform. Now we need Baidu, Alibaba and Tencent to help us increase our competitiveness versus Hollywood. Already in the past year we have growth of online sales and fan bases,” said Yu Dong, chairman and CEO of producer-distributor Bona Film Group. He then went on to trail the announcement of a new 26 film slate that he said has a box office target of RMB10 billion ($1.6 billion).

Enlight Media chairman Wang Chengtian said that his firm, which he described as a “generation 1.5 film company,” is lining up a slate of 20 movies.

Wang predicted that a Netflix like, subscription video, company will succeed in China. “But it may not be one of the existing players,” he said.

Liu Chunning, head of Alibaba Digital Entertainment, said that Alibaba’s ‘T-Mall Box Office’ which will launched in the coming months, intends to be that newcomer. He described it as China’s largest household cinema and said that it will not be free of charge, unlike China’s currently dominant online streaming services which are advertising supported. Building a widely-used transactional platform he described as being “a catalyst for the whole film industry.”

Wang similarly predicted that such new ancillary platforms would transform the revenue models of Chinese film companies. “We can see that box office will be less than half of what we earn in future, with the majority coming from other media and IP sales,” he said. Currently, the Chinese film business sees some 85% of its income coming from theatrical box office. The country suffers from poorly developed ancillary markets, low TV syndication fees and piracy.

While the executives’ focus was largely on fulfilling the needs of their massive domestic market, they saw themselves as building world-beating businesses from China. In a two hour talk there was no talk of regulation or censorship, only of opportunity, making tons of money and beating fuddy-duddy Hollywood.

“Hollywood is stubborn, old-fashioned and inefficient,” said one speaker. “Japan and Europe are lagging behind,” said Youzu’s Lin.

At several points the discussion turned to whether Chinese movie companies are being swamped by the country’s Internet giants. But a consensus appeared to emerge that content remains king.

“In two recent meetings with [Alibaba founder] Jack Ma, he has told me that he wants wider dissemination of film, more involvement in ticket sales and merchandise. He convinced me of the need for quality content from which these things flow,” said Enlight’s Wang. “We are not working for Baidu, Alibaba and Tencent, but rather for the Chinese audience.”

Alibaba Digital Entertainment’s Liu said: “We will leverage our assets to create an entertainment ecosystem that is open to all producers. Liu said that Alibaba’s structured version of crowd funding, called Yue Le Bao, has held some 13 funding rounds, raised over RMB560 million ($91 million) and made investments into 20 movies and TV series to date.

Yu said that Bona’s 26 film slate is likely to contain several Internet-generated properties and TV shows, one feature to be directed by Zhang Muye the author of the hit novel series “Ghost Blows Out The Light” (which is being adapted by Wanda, Enlight and Huayi Brothers as December blockbuster “The Ghouls”) and a TV series based on a subsequent novel series “Ghost Never Speaks.” Yu also revealed that Bona is working with China Film Group on a third film in CFG’s revolutionary propaganda film series.

Yu spoke of his Friday announcement of plans to take NASDAQ-listed Bona Film private. Already speculation is running high that the company will be relisted on a Chinese stock market. “My audience is in China. Coming home is the wish of all investors and partners,” he said.

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