Losses at Huayi Brothers Media one of China’s longest-running private sector film studios, hit $567 million in 2019. CEO Jerry Ye (aka Ye Ning) has resigned and will be replaced as head of film operations by James Wang Zhonglei, co-founder of the group and its current deputy chairman.
The company issued several dozen documents to the Shenzhen Stock Exchange on Wednesday, covering the 2019 losses, further losses in the coronavirus-hit first quarter of 2020, and plans to raise some $325 million from outside investors.
Huayi was one of the pioneers of film-making in the era after China ended the state studio monopolies at the beginning of the 21st century. It has since diversified from film into animation, television production, fashion and theme parks.
But the past two years have been particularly difficult for Huayi. In 2018 its film “Cell Phone 2” directed by Feng Xiaogang was at the center of a storm about tax evasion which reshaped the relations between producers and talent throughout the Chinese industry. In 2019, its big-budget war film “The Eight Hundred,” fell foul of changing politics and a new censorship regime, and has still not yet been released.
The closure of cinemas from late January, due to the coronavirus, has caused further damage to traditional studios and distributors in China without a significant online component. Huayi’s losses between January and March rose from $13.2 million (RMB93 million) to $20.3 million (RMB143 million).
The capital injection will take the form of a private share placing. Entertainment and tech giants Tencent and Alibaba, both existing shareholders, are expected to take part in the funding round. So too is Sunshine Life Insurance, soundstage operator Xiangshan Cultural Development, and Yuyuan Tourist Mart, part of Fosun International, one of China’s most freewheeling conglomerates.
The investment injections come with multiple strategic co-operation deals. Alibaba’s money is provided through Alibaba Pictures, with which Huayi promises to cooperate on film and TV content production, film distribution, live entertainment and artist management. Tencent’s cash buys it Huayi’s cooperation on international projects, video games and short-form video content.
Ye joined Huayi as head of the film operations following an earlier career with cinema giant Wanda. He was regarded as a top executive and his switch of allegiance caused problems between Wanda and Huayi. He retains a position as chairman of distribution subsidiary Huaying Tianxia. Ye will be replaced on the company’s main board by Gao Hui.
In another executive movement at Huayi, Liu Tao has stepped down as board member and deputy GM, where he had been responsible for star driven intellectual properties. He will retain his role at another Huayi subsidiary Dongyang Haohan.