China’s Virus Crisis Hands Initiative to Video Streamers, Games Companies

China’s streaming and online games companies have received a boost from the cancelation of seven major film releases that were expected to have dominated the Chinese New Year holidays, and the enforced closure of the country’s cinemas.

Wuhan, the epicenter of the coronavirus outbreak, and a dozen other Chinese cities are under government-mandated lockdown, causing tens of millions of people to cancel their travel plans and stay at home instead. That has handed the initiative to streaming companies.

Social media postings suggest that millions of people are stuck at home – some in cities under lockdown, others simply benefiting from the extra three days holiday mandated by the Chinese government – playing games and watching movies online.

The New York-traded shares of games and online entertainment firms have defied the recent stock market downturns and made modest gains. Streamer iQIYI closed the Thursday trading session at $22.43 per ADR, compared with $20.80 on Friday. Search giant Baidu was at $125.74 Thursday, compared with $121.02 last Friday. Games streamer, Huya was at $19.14, compared with $17.30 four days earlier. China’s stock markets remain closed until Monday, Feb. 2.

The decision by producer and streaming company Huanxi Media to cancel the holiday release of its “Lost in Russia” in favor of a streaming release, a week ago, was an unprecedented move for a major franchise movie.

On the eve of the holidays and as the virus outbreak reached dangerous proportions, Huanxi said that it would stream the film free of charge on its own Huanxi Plus platform and simultaneously license rights to Bytedance, operator of the Douyin, Toutiao, Xigua Video, Huoshan and Wasu Fresh Time platforms in a deal worth $90 million (RMB630 million).

Internet monitoring service Techweb reported Thursday that “Lost in Russia” had been watched over 600 million times in three days on Bytedance outlets, by 150 million households. That included 25 million views in Hubei Province.

While Huanxi was able to move quickly because it is the outright owner of the online rights, Bona Film Group has followed its example a week later. China’s mainstream streaming leaders iQIYI and Tencent Video on Friday announced via social media that they had picked up the Donnie Yen-starring “Enter the Fat Dragon.” The film, which is a remake of the 1978 Wong Jing-directed action comedy, is co-directed by Wong and Japan’s Kenji Tanigaki, and had been scheduled to release on Feb. 10. It will play online from Feb. 1.

iQIYI Weibo posting

“Enter the Fat Dragon” will be available on Tencent Video’s Early-Access Transactional On-Demand service.

“The Early-Access Transactional on-Demand mode is not just a temporary act for the coronavirus outbreak period, but a long-term innovation to maintain a healthy and sustainable development for Chinese movie industry, an attempt to balance the interests of users, movie production parties and online video platforms,” Tencent told Variety.

“iQIYI hopes to serve both users and movie industry partners in the long run with (its) early-access transactional on-demand mode,” the company said in an emailed statement. It is providing free of charge access to other blockbuster movies including “Spirited Away,” “Youth,” “Adrift” and “Legend of The Demon Cat” for users during the prolonged Spring Festival holiday.

Jack Gao’s Smart Cinema, which is pioneering straight to mobile film releases in the theatrical window, announced that it had picked up rights to 2017 action adventure film “Into the Rainbow.” The film, a China-New Zealand co-venture, stars Maria Grazia Cucinotta, who may be one of the few Italian actors to have a fan base in China.

Bona Film Group confirmed the streaming “Fat Dragon” deal, but provided no financial details. The film’s so-so performance in Hong Kong may have been a deciding factor in choosing to switch tactics. It was released on Jan. 23 in Hong Kong and limped into sixth place with $520,000 (HK$4.03 million) in its first six days.

The decisions by Huanxi and Bytedance have caused anger among cinema owners, who have said that the streaming first approach damages the industry. A letter of complaint was sent by 23 cinema chains and film studios, including Wanda Film Holding and Henan Oscar Theatre Chain, was sent to the National Film Administration.

“This goes against the payment and revenue model that the movie industry has cultivated over many years, is trampling and intentionally destroying the movie industry and premiere models, and play a lead role in causing destruction,” it said.

Bona was also one of the companies signatory to the letter. But moving ahead with the “Fat Dragon” license deal, suggests that Bona, which has interests in production and exhibition, has shifted position.

Both Bona and Huanxi say that they have reserved judgement on whether they will give the titles theatrical outings in the future, when the virus outbreak is under greater control and cinemas reopen.

There is no indication that will happen any time soon. On Friday, Chinese authorities announced the largest daily increase in confirmed infections and deaths. The number of infections is close to 10,000 and the death toll 213.

On Thursday, The World Health Organization named the outbreak as a “global emergency.” It defines that as an “extraordinary event” that constitutes a risk to other countries and requires a coordinated international response.

In another indication of possibly prolonged disruption, sporting events in February and March were cancelled Thursday.

The new season of the Chinese Super League, the country’s lucrative soccer tournament had been scheduled to kick off on Feb. 22. But the Chinese Football Association said that “all types of football matches” would be indefinitely postponed in order to “carry out prevention and control of the pneumonia epidemic.”

Similarly, the World Indoor Athletics Championships, due to be hosted in Nanjing in March, have been postponed until 2021.

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