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Jack Gao’s Smart Cinema App Distributes 120 Titles in Its First Year (EXCLUSIVE)

Former Wanda executive Jack Gao’s new venture, the movie-streaming mobile app Smart Cinema, has brought in around $4 million in virtual ticket sales and distributed 120 titles so far in its first year of operation, passing the million-ticket mark earlier this year.

Founded last May, the company seeks to boost the Chinese box office by giving viewers the ability to stream a large array of theatrical releases directly on their phones for easy viewing on the train, in the tub, or in one of the regions under-served by the country’s existing 60,000 screens.

Titles can be viewed a single time on a single device and paused during streaming. But the films cannot be fast forwarded or rewound, projected onto a larger screen or otherwise recorded. With the average movie ticket in China going for around RMB35 ($5.21), the RMB25 ($3.72) price per pop for a mobile-only experience is quite high and makes picture quality (and thus connection speed and bandwidth) all the more crucial.

“It’s a luxurious, expensive experience,” said Gao. “It’s not about giving a discount to upset the existing business model.”

Gao, former director of AMC Entertainment, describes himself as a firm believer in the current BO-driven movie-financing system rather than as a potential disruptor. Yet he also says change is necessary.

“The movie theater industry must evolve or it will find itself marginalized,” Gao told Variety at Smart Cinema’s Silicon Valley-esque open-plan office on the eastern reaches of Beijing. “It’s a 125-year-old business model.”

Cinema attendance is going down in China, falling to just 12% occupancy of theater seats, Gao said. And while the number of cinemas in the country has grown rapidly in recent years, nearly half of county-level cities have just one theater or none at all. Around 80% of China’s 1.4 billion people didn’t go to the movies last year.

Theaters are also more limited in their inventory. While Wanda-type cinemas last weekend showed just three new titles, Gao’s platform showed 48, albeit many of them lesser-known ones. So far, the firm has seen most success with small-budget titles with hyper-local appeal, such as minority-language films.

The vast majority of Chinese moviegoers already buy their theatrical tickets online. Smart Cinema capitalizes on China’s hyper-developed mobile payment systems to allow users to gift virtual movie tickets to each other over social media, letting bosses buy tickets for their employees or lovers for their dates. Over the lunar new year, Smart Cinema partnered with the government of the coastal city of Qingdao to help officials gift everyone within the city limits a free ticket to enjoy over the holiday.

The company is also making new pushes into VR, and has developed goggles that allow you to watch your film in a 3D environment, chatting and seated next to the virtual  avatars of three of your friends who are watching along with you at the same time.

The company is in the process of firming up the mechanism through which its ticket sales will be counted towards the country’s national box office total. This could be crucial to the venture’s success, as it aligns the company’s objectives with the Chinese government’s. Authorities this year will seek to break 2018’s box office record despite a weaker lineup of theatrical releases, and will likely welcome whatever help they can get.

Around 65% of the company’s 194 employees are working on back-end IT and R&D to develop ways of linking the app to China’s national distribution and box office reporting systems, ensuring copyright protection, and improving the user experience. Many were high-level engineers poached from Alibaba.

Gao says his team is for the moment mainly focused on “getting China right” before expanding. But the platform already has pilot versions in Spain and Italy, and is looking at moving into Hong Kong, Taiwan and Macau sometime this year.

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