Those listed companies that have transformed their films are now losing more than anyone else.

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Image Source @视觉中国

Image Source @视觉中国

Titanium Media Note: This article from the micro-channel public number poisonous eye (ID: youhaoxifilm), Author: Jiang Yuqi, Pengxiang, editor: Ye East division, titanium authorized media release.

“What do Chinese companies that raise pigs, do dairy products, open restaurants, do metal pipes, sell hardware, and fireworks have something in common? Answer: They have all become film companies.”

In April of 2014, the CEO of Yi Kai Capital Co., Ltd. At that time, the total box office of domestic films has been rising for many years, and the concept of film and television in the capital market has been fired, and a number of listed companies have been transformed into film and television media companies through mergers and acquisitions.

As high as it was, it is as miserable as it is now. Poisonous eyes found that in 2018, not only a large number of cultural and recreational film and television listed companies lost money, several companies even lost more than 4 billion. In the 21 data News Lab chart, the total net profit of the media industry in 2018 was-28.2 billion, ranking first in all industries. Behind this, it is precisely because of the large number of mergers and acquisitions of Chinese entertainment media companies in the past two or three years, which have also made them prepare for huge goodwill impairment.

In fact, film and television companies are far from as bright as they thought. Not only is the film loss rate not low, but even if you get a bright box office, the actual revenue is often far from the total box office results. At first many companies into the film and television industry, now many companies are trying to film and television. Why don't movie companies make as much money as they think?

After the crazy merger, leaving the "one place" goodwill and billions of losses

2015 is probably the most glorious moment in the film and television industry.

At that time, the total box office of the country was 44 billion, up 48% from the 29.6 billion in 2014, and the total box office of the movie has maintained rapid growth for many years – from 4.3 billion in 2008 to 44 billion in 2015, just 8 years. Time, the box office has turned 10 times. The film of 1 billion+ box office has emerged in an endless stream, and many new and old companies have become rich overnight.

Box office continues to soar, capital markets are naturally no less popular, 2015 is also the film and television industry in the capital market the most beautiful moment.

At the end of 2014, Ma Yun, Ma Huateng, and Ma Mingzhe “Sanma” became shares in Huayi, which sold 3.6 billion in cash at a time. Subsequently, Huayi acquired two stars, Dongyang Haoyang and Dongyang Mela, with a valuation of 1.08 billion and 1.5 billion. The company, the actual controlling shareholder of the latter is Feng Xiaogang, the company’s net asset value was -5,500 yuan; in March 2015, before Alibaba’s RMB 2.4 billion was invested in the light, Ma Yun and Wang Changtian discussed the “300 billion movie market”. How to do it"……

According to statistics, in 2015, there were 88 reorganizations of the film and television industry, involving a total of 43.5 billion yuan. The listed companies of the cultural media only raised 86.5 billion yuan in the same year.

In fact, since 2013, some players in the capital markets who have little to do with the entertainment industry have been taking advantage of the situation. Zhongnan heavy Industry, which specializes in manufacturing business, changed its name to Zhongnan Culture after acquiring a cultural and entertainment company; Beijing Tourism formally entered the literary and art circle after acquiring 100 per cent of the shares in Beijing Ferris Wheel for 150 million yuan, and later renamed it "Beijing Culture". Shen Dongjun, president of psychic jewelry, set up diamond film industry, Xiange love for catering, panda fireworks for fireworks and so on, which also announced plans to buy film and television companies.

This is why Wang ran joked that "Chinese pig farmers, dairy products, restaurants, metal pipes, hardware sellers and fireworks have become film and television companies."

Weibo of Wang ran, CEO of Yi Kai Capital Co., Ltd.

No one thought, however, that the scenery of 2015 was the pinnacle of film and television and media companies in capital markets over the years. In 2016, 2017, the overall growth rate of the entertainment sector fell from an all-time high of 73 times PE to 31 times in 2017. In 2018, the share price of entertainment companies that experienced the "tax incident" plummeted. The market capitalization of most film and television companies has shrunk by more than 60 percent compared with their valuation peaks, and the average PE fell to a trough at the end of 2018.

Fan Bingbing’s “Tax Gate” exposes industry chaos

Under the cover of the nest, the end of the M&A transformation is more radical, and the losses now facing may be even more serious.

Central South culture is one of the most typical representatives.

In 2013, Zhongnan Heavy Industry Co., Ltd., which specializes in pipe fittings manufacturing, reorganized and acquired Datang Brilliant Media Co., Ltd. to enter the cultural industry. It also initiated the establishment of M&A funds with Zhongnan Group and Zhongzhi Capital as the cultural media industry integration platform for listed companies. After that, Zhongnan Heavy Industry began to acquire companies in the cultural industry such as film and television and games frequently, and officially changed its name to Zhongnan Culture in 2016.

Just entering the cultural circle, the performance of Central South Culture has continued to rise. From 2015 to 2017, the net profit has risen from tens of millions to nearly 300 million yuan, and the company has also participated in the explosion of "I am not a drug god". film.

Zhongnan culture once participated in "I am not a drug god"

At the end of last year, due to the failure to fulfill the internal approval decision-making procedures to issue commercial acceptance bills, external guarantees, controlling shareholders and actual controllers, etc., Zhongnan Culture was directly put on the ST hat, and the securities abbreviation was changed to “ST South China”.

With the overall decline of cultural and entertainment companies last year, ST Central South 2018 annual report showed that the company achieved operating income of 970 million yuan, down 36.4 percent from the same period last year, of which the revenue of the cultural and entertainment industry was 362 million yuan, down more than 60 percent from the same period last year, and the proportion of cultural entertainment in the total revenue also fell from 64.74 percent in 2017 to 37.36 percent; its net profit was-2.1 billion yuan, down 81.7 percent from the same period last year. At the same time, due to the company's M & A target performance is not up to expectations, ST Central South Plan proposed more than 1.5 billion goodwill impairment preparation, which has become the main reason for the company's loss of more than 2 billion.

Since 2017, ST's shares in Central South have fallen to just 1.53 yuan from a high of 10.2 yuan, with market capitalization down more than 90 percent from its peak, leaving the company with only 2.5 billion of its market value. Chen Shaozhong, the real controller of Central South Culture, said at this year's Central South Culture shareholders' meeting that "consideration is being given to dipping off some inefficient cultural and recreational assets, depending, of course, on the price," Chen Shaozhong, the real controller of Central South Culture, said at this year's Central South Culture shareholders' meeting.

The performance of Central South Culture in the past two years

Another company that transformed film and television from industrial manufacturing also experienced a sharp decline last year. Xinke Materials originally specialized in copper processing, rare earth and other composite materials. Since 2014, Xinke Materials has planned 5 mergers and acquisitions, involving film and television culture, tourism, automobile services and other fields, in addition to the acquisition of Xi'an in 2015. In addition to the success of Mengzhou Film and Television, the other four failed, and the company was renamed Dream Boat (600255.SH).

The renamed Mengzhou shares in the film and television business is not smooth sailing. The company completed shooting in 2015, "Football Love" has not yet been released. Last year, the company's net profit was 1.26 billion, down 939 percent from 2017, and the company's provision for goodwill impairment of 900 million yuan was also an important reason for the company's sharp loss last year.

Coincidentally, 6 years spent more than 8 billion to acquire 19 companies to transform film and television. Jebsen shares, because of the pressure on "War Wolf 2" and "Red Sea", was once regarded as a model of transformation of film and television companies. Last year, Jebsen shares also made provision for goodwill impairment of 800 million yuan, net profit fell by more than 90%, and the company has more than 4.7 billion goodwill. (Click here to read: In the early days of "War Wolf 2", now the performance collapse and layoffs 30%, what happened to this company?)

Perhaps the most successful of the transformed companies is Beijing culture. Over the past few years, Beijing culture has been able to crush the popular styles of the film market every year, from "Wolf Warriors 2" in 2017 to "I am not the god of medicine" in 2018, to "wandering Earth" this year, all of which are box office blockbuster films at the box office, and the share price of Beijing Culture has repeatedly soared during the release of the film because of the pressure on these popular styles.

Explosive works of Beijing culture

However, although it can crush the popular style every year, Beijing culture is more like a capital hype, in the wave after wave of speculation, Beijing Culture's share price is also getting lower and lower-after the release of "Wolf Warriors 2" in 2017, Beijing Culture's share price reached a peak of 22 yuan, now only 9.9 yuan, the market value has fallen by more than half in two years, now only 7 billion.

The successful transformation of Beijing culture is more like a case. Turning over the 2018 annual report, many companies that had undergone a vigorous transformation have handed over a record of a sharp decline in performance in 2018: the contemporary East, which was the main focus of the cement business, had a net profit of -1.6 billion in 2018, down 1559% year-on-year; The Lukang culture of textiles and clothing has a net profit of 56.09 million in 2018, down 80% year-on-year; the Huangshi Group, which is mainly engaged in the dairy industry, has only 13% of its revenue from film and television business in 2018, but its net profit is 6.2 billion, which is also related to other transformations. The company has fallen sharply, with a year-on-year decline of more than 1186%...

The bright film and television industry, actually the risk is very high.

The original infinite scenery of cross-border players, why in a twinkling of an eye has fallen into a dilemma? Many companies conclude in their annual reports that they attribute the reasons to "film and television cold winter," industry downturn, "and" policy and regulatory changes. " But in fact, the change of the overall environment is more "push the hand", and in the existing film and television industry model, brilliance often only exists on the surface, high risk is the normal that the upstream companies of film and television need to face.

In 2018, the total box office in the mainland reached an all-time high of 60.97 billion, and six films with a box office of 2 billion appeared to be popular, but even if we put aside the impact of the impairment of goodwill (read here: private film and television companies, at the most dangerous moment), the performance of many domestic film and television companies still experienced a large decline or even loss.

In fact, although many films often earn billions of yuan at the box office, the revenue that can bring to a single producer company is often less than 1/10 of the box office.

According to China's current sub-accounting policy (click here to read: how is the money between the cinema and the producers | Grandpa Popular Science 3), the entire part of a movie after deducting taxes and special funds, the rest (about 91%) will be divided by the cinema line, the film side (production + Xuanfa), and the final can be loaded into the production side pocket may only be 25% of the total box office. Therefore, a film with a box office of 1 billion yuan, 100% of the investment in the proportion of the producers can also get 250 million, not to mention the fact that many films behind the production of more than a dozen, so the smaller producer may only be divided Get millions of dollars in income.

Take the head content company's light media as an example. According to the data provided by the Lighthouse Professional Edition, in 2018, the film company, Horgos Youth Light Film and other children and grandchildren participated in the total movie box office of more than 7 billion yuan, while still Participated in the distribution of a large number of hot films, including "Chinatown Detective 2", "a good show" and so on.

But such a luxurious sheet did not eventually turn into bright results. Revenue from Light Media's "Film and Derivatives" business was only 1 billion yuan in 2018, down 12.99 percent from a year earlier, with gross margins of 32.18 percent, down 11.83 percent from the same period last year. Affected by this, Light Media deducted non-net profit loss as high as 285 million yuan in 2018, down 161.73 percent from the same period last year.

Light 2018 Annual report data

The box office is high and the revenue is low. It is very important that the proportion of light invested in many films is not high. For example, in the "Chinatown Detective 2" which sells nearly 3.4 billion, Horgos Youth Light Film is only the seventh joint producer (Lighthouse Professional Edition information), so the actual revenue of the company may be only a few hundred. Tens of millions of yuan.

A similar situation is very common in the film and television circles. Jinyi Film and Television has invested more than 10 billion in the total box office of the film in 2018. It has invested in "Hong Kong Action" and "Xihong City's richest man" and other big movies, but its related income is only 45 million yuan. (Click here to read: What is the daily limit of Jinyi Film?); According to the announcement issued by Jebsen, the company has earned 40 million in revenue by investing in "Red Sea Action" - the total box office of the film and 3.6 billion. This is not a big number.

Even if the producer can be assigned a relatively large box office number, it will not necessarily cover the cost of the film. In recent years, the cost of domestic production has been rising, and films with an investment of 100 million are already very common. And if the cost of a film reaches 300 million yuan, under the existing business model, it means that it may need to sell 700 million to 800 million to return.

There are many reasons for the high cost of film investment and the gradual narrowing of income, such as the sudden increase of star pay, the rapid growth of propaganda expenses and other factors, as well as the problems that will inevitably occur in the development of the industry, such as the decline of box office revenue and the improvement of film production level. Although the country has introduced policies to limit star pay, many companies are not optimistic about a substantial drop in costs and include "rising costs" in corporate risk.

In North America, where the film industry is relatively developed, major studios often enrich the monetization method and reduce the pressure from high investment by creating serialized IP and developing derivative industries. At this stage, including Huayi Brothers, Light Media, and Wanda Movies, many Chinese private film companies are trying to explore more monetization methods and business lines to avoid the above risks, but they are subject to IP training cycle and domestic film and television company resources. More dispersed and other influences, no company has found a suitable way out.

It is precisely because no company has explored other better monetization methods, which has led to the transformation and production of film and television business, which is a very high-risk thing in China. There have been more than one practitioner who has revealed to the drug lords that although many movies seem to be driving billions of box-offices, at present, in the entire film and television industry, less than 10% of the movies can be made without losing money every year. It is less than 5%.

Throughout 2018, 11 domestic films grossed between 100 million and 200 million yuan, accounting for 5 percent of the top pyramid in terms of box office receipts. However, according to the cost data disclosed on the Internet, including Nineteen generations of ancestors (170 million), "European Strategy" (150 million), "Yunnan insect Valley" (150 million), "Ye Man external biography: Zhang Tianzhi" (130 million), "Weather pre-explosion" (120 million), a number of films are at risk of loss. As for hundreds of millions of investments like Ashuro but only tens of millions at the box office, sometimes it may even lose the "home" of participants.

Potential risks disclosed by Light Media's 2018 annual report

In fact, the unknownness of film revenue has long been the consensus of the film industry. As a subjective and strong cultural product, many things may influence the audience's choice: "The Last Night of the Earth" caused inexplicable word of mouth due to marketing. Crash; "Animal World" was unexpectedly popular because of "I am not a drug god", but did not achieve the desired results; before the unfavorable happy twist, was evaluated in the "Aunt of Li Tea" "aesthetic fatigue" ... what kind of theme will Fire, what kind of factors may inexplicably lead to a decline in the box office, is not something that film and television companies can master.

The Last Night of the Earth

In fact, it is not just a film company, a TV series company, a variety company and other content companies are also likely to face a lot of uncertainty about a policy or a big environment. As mentioned in the previous article, the backlog has brought great pressure to many TV shows: "The 8-year-old TV series can't be broadcast", who will be the last straw to die a camel? ) For a large amount of work like

So a company made a lot of money in cinemas last year and lost a lot next year, which is too common in the film and television industry. In the past two decades, there have been few standing evergreen trees in the Chinese content production industry. Even the traditional "private five" have also encountered a content crisis in the near future, and have been challenged by the latecomers. (click here to read: the "Big five" of private film companies should have rearranged their seats long ago.)

Baqing said to invest 500 millon, is Asia's largest single investment film and television show.

Under this industry background, many cross-border companies do not have much experience and resources in the production and production fields. They do not have the ability to control the production and distribution of projects. The form enters the film and television industry, so it will be more passive than some old players. In most cases, it can only be "seeing the sky to eat" and gambling luck.

To really avoid these risks through industrialization is not a one-off effort, even Hollywood has spent decades. Many cross-border companies in the most prosperous era of China's film and television industry, only saw the demographic dividend, driven by the industry gap, the surface of the flash, but did not realize that this is not easy. Some senior film and television practitioners complained to the drug lord: "In the past, some cross-border players, even the film's accounting rules are not clear, they rushed into the game. The final result is to let the industry lose its original norms."

After this round of crisis, many talents gradually realized the true face of the film and television industry: in fact, the seemingly glamorous film and television industry, in the fastest growing years, the total box office is only tens of billions. If you put it in the real estate industry or even just a few middle-stage companies for one year's sales; in contrast, the risk and uncontrollability of this industry is much higher than many traditional industries. If you can use the market loopholes to earn fast. Money, in today's increasingly intelligent audience, these companies may only be able to leave a good reputation.

Intern Li Shi Xinzhu is also helpful to this article.

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