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Shanghai Festival: Chinese Film Studios Rethink Growth Strategy as Challenges Loom

Five movie studios and one Internet giant lined up on stage Sunday in Shanghai, seemingly seeking to develop a sense of urgency that goads the film industry to bigger and better things. But whether they were all on the same side was moot.

“Consolidation is on its way,” said Ren Zhonglun, CEO of state-backed Shanghai Film Group. “Large companies will be the ones which are best able to withstand the high levels of risk in the film industry.”

“We need to have a sense of crisis, challenges are coming,” said James Wang, co-head of private sector conglomerate Huayi Brothers. His company has sought to manage risk by diversification into theme parks, live entertainment and music.

Yu Dong, chairman of Bona Film Group, pointed to the example of Hollywood and said that the Chinese industry needs to reduce the influence of directors, and company founders (like himself), to become more producer driven. “China has the opportunity in the next five years not only to overtake Hollywood but to become more professional.”

Wang Changtian, CEO of Enlight, pointed to multiple worries. “The crisis now is a slowdown of capital inflow. Banks and stock markets are getting nervous about film companies, making loans harder to obtain, and secondary share issues harder to launch,” he said. “Government is cancelling tax breaks for film, and exhibitors have lowest rentals in the world.”

In private, many of the same executives have pointed to the double-edged influence of China’s tech giants, which seem en route to dominating the film industry through their powerful online ecosystems that connect directly with consumers, their access to data, and their colossal financial resources. E-commerce giant, Alibaba is now an equity shareholder in Enlight, Bona and Huayi, as well as owning stakes in exhibition and finance companies.

Fan Luyuan, head of Alibaba Digital Entertainment Group, was careful to promote himself as a modest newcomer, and to position Alibaba as a facilitator, rather than a voracious rival to the traditional film companies. “We are a platform company,” he said. But even his attempts at sounding friendly, sounded ominous. Alibaba’s Yulebao is “powerful finance tool for the film industry,” he said. And said that  Alibaba’s array of streaming, ticketing and marketing companies constitutes a “powerhouse of film distribution.”

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