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China’s Enlight Projects at Least 95% Fall in Net Profit in First Half of 2019

Beijing-based Enlight Media, one of China’s most prominent production companies, said Monday it expects a steep decrease in net profits of up to 96% in the first half of the year compared to the same period in 2018 — an indicator of the deep turmoil in the Chinese industry, which has been hit by regulatory changes and new tax burdens.

Whereas the company booked net profits of RMB2.1 billion ($305 million at today’s exchange rate) in the first half of 2018, Enlight projects net profits of just between RMB85 million ($12.4 million) and RMB105 million ($15.3 million) in the first six months of 2019 — a year-on-year decrease of 95% to 96%. The final figure will be revealed later in a future report following a formal audit.

The decline comes despite the box office success of two of Enlight’s titles, director Ning Hao’s Chinese New Year hit, “Crazy Alien,” which grossed $320 million, and Hayao Miyazaki’s nearly 20-year-old animated classic, “Spirited Away.” The latter is currently in the midst of its China big-screen debut and has made $69.8 million after 25 days in theaters.

Enlight has theatrically released five other titles so far this year: well-received documentary “Four Springs,” Japanese animated film “Natsume’s Book of Friends: The Movie,” the Zhou Dongyu-starring small-budget title “On the Balcony,” controversial sixth generation director Lou Ye’s “The Shadow Play,” and the gritty snow-laden thriller “Savage.”

The company attributed its decline in profits to “an increase in film costs during the reporting period compared to the same period last year.” But Enlight is one of dozens of publicly listed Chinese entertainment companies predicting massive losses or significant profit declines for the first half of the year. Though each company’s situation might be slightly different, the overall pictures painted by the reports is a bleak one for the state of China’s industry.

Enlight added in its official announcement that, despite its involvement in three TV series — “Just an Encore,” “Unbeatable You,” and one that roughly translates to “Tower of Listening to the Snow” — profits from its TV business also decreased slightly year-on-year in the first half of 2019.

It has a robust lineup in the near future. Its space exploration-themed family drama, “Looking Up,” hits theaters Thursday, and thanks to numerous other release-date cancellations is now poised to be the breakout hit of the summer. Four other of its films have already been scheduled for release in July and August, while it said nine more titles are expected to hit screens by the end of the year.

Though the firm has done better than many others by avoiding sliding into losses, the news of its downturn comes at a time when broader economic growth is sluggish. On Monday, China announced GDP growth in Q2 of just 6.2%, its slowest rate in nearly three decades.

At a recent summit of leaders in China’s film and TV industry, Enlight chairman Wang Changtian said he felt that the entire sector had hit rock bottom, and that while pressure will still be on for the rest of this year, he hoped that things could improve in the next, Chinese reports said.

Meanwhile, the closure of a number of film and TV companies would be a “normal response” to current market conditions, he said. “Some of those that haven’t been established for very long will close without even having started to do things. And others who encounter difficulties may not be able to hold on and survive.”

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