Despite what the company called a “challenging” period, Chinese online publisher and TV producer China Literature completed its first year on the stock market with a 22% increase in profits to $156 million (RMB1.1 billion). It was rewarded with a 10% jump in its shares by midday Wednesday.
The company, which was spun off from social media and games giant Tencent and listed on the Hong Kong Stock Exchange in December 2018, reported a 66% increase in revenue to $1.19 billion (RMB8.35 billion), for the year to December 2019.
One effect of the coronavirus outbreak is to see the company focus more on TV and less on feature film than had previously been planned for the current year.
The company said that its paid membership had recently increased, as a result of people staying at home during quarantines and enforced lockdowns. But it said that the virus-induced shutdown of filming could reduce its ability to complete film and TV content. China’s cinemas have also been closed since the end of January, due to virus-precaution measures.
It said that business was affected by “rising competition over price and traffic, together with delayed broadcast approval for drama series.” Two months ahead of its flotation, China Literature bought control of New Classics Media, one of China’s leading film and TV producers.
China Literature heaped praise on NCM, calling it “the critical missing piece that we have been seeking to amplify the value of our intellectual properties.” But China Literature’s regulatory filing shows that NCM missed its $100 million (RMB700 million) net profit target, reporting only $76.7 million (RMB538 million) in the year. That caused China Literature to cut the performance-related cash and shares payout to NCM’s former owners.
The year was one of difficult transition for the Chinese film and TV industries. The sector adjusted to a new government regulator and a changed tax environment, introduced after the Fan Bingbing tax avoidance scandal of 2018.
NCM drama shows including “Memories of Peking,” “Awakening of Insects,” and “The Best Partner” all achieved good ratings and rankings on search engines. Another, “Joy of Life,” was adapted from one of China Literature’s most popular online novels, and has been renewed for a second season.
Online publishing and video content production remain the group’s core operations, but it is also diversifying into licensing of IP for adaptation into films, TV and web series, animations and games. In 2019, it licensed around 160 literary works to third-parties for adaptation.
Its own animation series included “Galaxy Devastator,” “Cinderella Chef,” “Martial Universe,” and new seasons of “Battle Through the Heavens.” Its “The King’s Avatar: For the Glory” became the first E-sports animated film to hit Chinese cinemas in 2019.
“If the epidemic doesn’t worsen, the impact on the shooting schedule of dramas won’t be big,” said co-CEO Liang Xiaodong, on a conference call. But “cinemas are all closed and we are not sure when they will reopen.”
Parent company, Tencent is scheduled to unveil its 2019 financials later on Wednesday.