Bona Film Group Celebrates 15 Years of Success

Bona Film Group at 15 CATHERINE
Courtesy of Bona Film Group

Bona film group celebrated its 15th anniversary in June with a lavish dinner for some 200 friends at a luxury hotel in Shanghai. Among the touches were Coca-Cola bottles personalized with the names of each of the guests.

The 15 years that Bona has existed neatly coincides with the 15-year history of the Chinese film industry in the modern era. Prior to deregulation, the landscape meant domination by state-owned studios whose twin tasks were propaganda and job creation. Sweeping changes allowed the emergence of private sector players and growing innovation.

On Nov. 4, Bona signed a deal to invest $235 million in a slate of Hollywood tentpole movies. The distributor is making the investment through TSG Entertainment Finance, headed by financial guru Chip Seelig’s the Seelig Group.

Despite its bifurcated roots at Polybona and Poly Group, the commercial wing of the Chinese army, Bona Film Group can claim to be the country’s first private company to win a distribution license. As such, it has been party to many of the changes thrown up by the rapid succession of evolutionary steps in the Chinese business since 2000.

These include private-sector distribution, the arrival of multiplexes, co-production with other parts of Greater China, growing financial sophistication, and, more recently, a boom in contemporary Chinese movies.

For all that, the company still very much retains the personal imprint of Yu Dong, its founder, chairman and CEO.
While other companies have diversified into music, fashion, or theme parks, or still further afield into e-commerce, Yu has maintained Bona’s focus on film distribution and the upstream (production and talent management) and downstream (exhibition) businesses immediately adjacent to the distribution core.

Yu has become known for his smart analysis of the distribution and exhibition businesses as they changed beyond all recognition — and for his pithy predictions.

His suggestion in mid-2014 that China’s conventional film companies may all soon find themselves working for the Internet giants was particularly memorable. It crystallized the moment perfectly, while serving as a warning that the film industry’s destiny may already have slipped out of its own hands. And it seemed to be laced with a tinge of regret, since Yu, a well-known high-stakes casino gambler, had not leveraged his company more highly and pushed it further into social media, technology or used its share listing to load up with acquisitions.

Instead, Bona built a distribution operation to rival the dominant state-owned enterprises. “Think of a gourd, (with) distribution the narrow bit through which everything else passes,” Yu says.

By 2007, Bona was handling 14 Chinese films per year, making it the second-biggest distributor of Chinese movies behind China Film Group with a 17% market share for Chinese films. While handling the big, revenue-share Hollywood films remains off-limits and the preserve of CFG and Huaxia, Bona was able to supplement its Chinese film releases with the acquisition of smaller foreign films acquired on a flat-fee basis.

Since that time, Bona has become synonymous with co-productions involving Hong Kong partners or talent: Such pics as Wilson Yip’s “Dragon Tiger Gate” (2006, with Mandarin Entertainment); Andrew Lau and Alan Mak’s “Confession of Pain” (2006, with Media Asia); Derek Yee’s “Protege” (2007, with Artforce); and Felix Chong and Mak’s “Overheard” (2009, with Pop Movies and Film Unlimited) have come from the group.

Yu’s pragmatic taste for the commercial experience and sensibilities of the Hong Kong industry was made more formal through the short-lived Cinema Popular joint venture with Peter Chan’s We Pictures (its one big hit was Teddy Chen’s “Bodyguards and Assassins”), and by the acquisition of a majority stake in Distribution Workshop, a Hong Kong-based film sales company that brought with it vastly experienced executives Nansun Sun and Jeffrey Chan, who today is Bona’s chief operating officer.

More recently the continuation of the Hong Kong riff has brought Bona larger-scale hits “Flying Swords of Dragon Gate” (2011) and “The Taking of Tiger Mountain” (2014), both directed by Tsui Hark; and comedies “The Man From Macau” (2014) and sequel “Man From Macau 2” (2015), both directed by Wong Jing. Bona also financed Ann Hui’s 2011 festival favorite “A Simple Life.” The film gave Yu a significant cameo role — as a big shot mainland Chinese film producer — and earned it a hefty awards haul.

Numerous tech companies from China had tapped the U.S. equity markets, but when Catherine Zeta-Jones rang the bell in December 2010 marking the start of trading of Bona’s shares on NASDAQ, the flotation was the first by a Chinese pure-play movie company. The decision to list in the U.S. was partly based on a view that the North American investment community was more familiar with the sector than the Chinese markets. It also reflected Bona and Yu’s predilection for financial engineering.

Prior to flotation, Bona had attracted private-equity backers including the Asian arms of U.S. fund groups Sequoia and Matrix Capital. And at a time when Chinese banks mostly lent to state-owned enterprises, Bona had also received a loan from the Industrial and Commercial Bank of China. A couple of years later, Bona unveiled one of China’s first film funds, a 1 billion yuan ($163 million) cash pool backed, among others, by Sequoia and Gopher Capital.

The fund allowed Bona to offload some production risk, while still enabling the company to keep control of production and secure Chinese rights for its distribution pipeline. (Distribution Workshop also often got to handle international sales on many of the fund titles.) It also enabled Bona to step up its expansion into cinema ownership, a move that Yu says gave Bona a degree of extra control in distribution, and also helped smooth out corporate earnings by allowing the company to share the box office successes of other producers and distributors.

Other corporate moves by Bona included the co-investment with rival Huayi into China Lion Distribution, a specialty North American distributor that releases Chinese movies into the diaspora markets, and the 2012 investment into Bona by News Corp. (later 21st Century Fox).

The move was supposedly initiated by Rupert Murdoch’s then-wife, Wendi, and gave News Corp. a rare stake (and board member) in a Chinese distributor. It also seemed to cement a co-production deal with the studios’ local-language production arm, Fox Intl. Prods. The recent Chinese remake of Fox’s “Bride Wars” was the film from the pact.

By July 2014, however, and with the winds within News Corp. by then blowing in a different direction, the stake was sold to Yu and on to fast-moving Chinese conglomerate Fosun Intl., giving Fosun 19.9% of Bona.

The purchase put the company in the same Fosun-backed orbit as Jeff Robinov’s new Studio 8 outfit, as well as vacation firm Club Mediterranee and Korean talent agency SM Entertainment. With Studio 8, Bona quickly hatched a finance and distribution deal on Ang Lee’s “Billy Lynn’s Long Halftime Walk.”

Then, in July, Yu dropped a bombshell. Catching other investors on the hop, he announced a possible move to delist the company from NASDAQ. Numerous other Chinese firms have made similar “going private” moves and then relisted on Chinese share markets, where last year company valuations skyrocketed.

Yu’s plan may have come unstuck as Chinese stock markets plunged in July and August, causing sudden investment freezes and a government-decreed halt to IPOs.

But, given the still stratospheric valuations for Chinese media companies, and Yu’s own predictions about the continued growth of the Middle Kingdom theatrical box office, his play may yet prove to be another winning hand.

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