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China’s film industry – changing market dynamics driven by technology

Bar chart showing China's online video market by revenue for 2009 - 2019, and forecast until 2022.

Chinese moviegoers bought a total of 548 million movie tickets in China in 2020, and the country’s total box office reached CNY 20.4 billion (about USD 3 billion) in 2020, overtaking the North America to become the world’s largest movie market for the first time (until 2019, China had been the world’s second largest movie market).

China’s ascent to pole position in 2020 is despite China’s box office takings plunging 68.2% year-on-year (YoY) from a record high of USD 9.2 billion in 2019, and a 66.5% decline from 2018 – due to cinema shutdowns as a result of the Covid pandemic and significant losses as a result of delayed or scrapped film releases. As many as seven Chinese films that were scheduled to be released during the Lunar New Year Holiday 2020 were pulled which is estimated to have cost USD 210 million in those two days alone. The roughly one week long Lunar Holiday is a key release period for Chinese films. Chinese authorities shut Chinese cinemas nationwide for 178 days from January 23, to July 20 when cinemas were allowed to re-open at 30%. The restriction was lifted to 50% on August 14, and 75% on September 25.

The shutdowns hit industry players hard. Maoyan Entertainment (HKG:1896) for instance, China’s largest online movie ticketing app for instance said revenues plunged to 89.7% YoY to CNY 200 million during the six months to June 2020, from 1.94 billion the same period a year earlier. Tencent-backed (HKG:0700) ticketing platform Maoyan Entertainment, dominates China’s online movie ticket sales with an estimated market share of 60% in China where more than 80% of all movie tickets are sold online (mostly over mobile devices). Together with arch rival Alibaba-backed (HKG:9988) Taopiaopiao which has a market share of 30%, the duo command a combined market share of as much as 90% of China’s online movie ticket sales.

Wanda Film Holding万达院线 (SHE:002739), which acquired AMC Entertainment Holdings (NYSE:AMC) in 2012 to become the largest cinema chain operator in the world said revenues declined 73.93% YoY during the first six months of 2020 to CNY 1.97 billion, pushing the company into the red, with a net loss of CNY 1.57 billion a staggering 398.8% decline from a year earlier when it reported a profit of CNY 524 million. Box office revenues which sank 88.5% YoY to CNY 580 million in 1H 2020, accounted for just 27% of total revenue during the period.

Meanwhile, North American box office revenues sank more than 80% YoY to USD 2.28 billion in 2020, from USD 11.4 billion in 2019 according to American media analytics firm Comscore (NASDAQ:SCOR) as a result of the Covid pandemic which shut cinemas throughout the country causing blockbuster Hollywood productions like Black Widow and Wonder Woman 1984 to postpone their 2020 releases. According to Comscore by late 2020, just 34% of all North American theatres were open.

Last October, Wanda Film’s AMC Entertainment warned the US Securities and Exchange Commission (SEC) that it could run out of cash within half a year, as poor attendance weighs on its cash flow despite 494 of its 598 theatres being open as of October. The cash-strapped movie theatre operator has managed to raise USD 200 million but is still short of USD 750 million more which it needs to ensure its survival.

Chinese moviegoers– a declining market

Movie viewership is on a downward trend with Chinese watching an average of 1.73 theatrical films in 2020, down from 2.88 in 2019, and 3.06 the year before. This could be due to the fact that with an average age of 28.8 years in 2020, Chinese movie-goers are on average younger than their American counterparts. Just 11% of Chinese movie-goers are above 40 years of age (compared with more than 50% in the United States according to data from Statista).

This young, tech-savvy generation appear to be more inclined towards watching films online from the comfort of their homes, and at the convenience of their time and pace, rather than in cinema as evidenced by a 2019 report from Tencent and Moayan which reveals that in 2019 just 66 million movie tickets were sold for the year’s top 10 highest-grossing films in China, while those same films were viewed 503 million times online. Their preference for options to suit their online lifestyle is also amply evidenced by China’s online movie ticket sales which has steadily increased over the years climbing from 76.1% in 2016, 81.6% in 2017, and 84.3% in 2018.

Meanwhile, the rise of “internet films” which are movies commissioned by internet streaming platforms such as Baidu-backed ((NASDAQ:BIDU) iQIYI (NASDAQ:IQ), Tencent Video and Alibaba’s Youku Tudou, (China’s three biggest online video streaming companies) further illustrate the shifting dynamics of China’s conventional film industry. China’s online video market has grown tremendously and having emerged as major online film distributors, these online video behemoths are now increasingly moving to increase their involvement in the film industry with a particular focus on online-only “internet films”.

Bar chart showing China's online video market by revenue for 2009 - 2019, and forecast until 2022.

The trend is similar to that in the West where studios are increasingly finding themselves with the difficult decision on whether a movie will be streamed online through a streaming platform such as Netflix (NASDAQ:NFLX) or whether they should stick to traditional theatres.

Meanwhile streaming giants such as Netflix and tech behemoths such as Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) are also flexing their muscles in the film industry with a number of them churning out their own original video content, leveraging on their positions as major consumer entertainment or e-commerce platforms to market and distribute their content, and thereby disrupting Hollywood’s decades-old stronghold on the world of entertainment.

Local content gaining greater share of film consumption

Imported films accounted for about a sixth of China’s total box office takings in 2020, a 55% year-on-year decline according to figures from Maoyan Entertainment. The decline was largely attributed to the Covid pandemic which affected Hollywood release schedules, as well as rising interest in domestic content. Foreign films had been seeing consistent declines in their share of China’s box office takings over the past few years, accounting for 38% in 2018, 35.9% in 2019, and just 16.3% in 2020.

China’s growing importance in the global film industry has made Hollywood studios eager to capture a share of the pie, however with the Chinese government limiting the number of distribution slots for foreign films and domestic productions increasingly gaining greater appeal among Chinese movie goers as a result of greater content, and improving quality and competitiveness, foreign films are fighting an uphill battle in China.

Chinese film The Eight Hundred, which was released in August earned USD 461 million in the global box office, making it the highest grossing film in 2020 according to data from box office tracking website Box Office Mojo.

Produced Huayi Brothers (SHE:300027), Tencent Pictures (HKG:0700), Alibaba Pictures and Beijing Enlight Media (SHE:30251), The Eight Hundred is the first Chinese film to reach the top spot in the global box office, and is the first non-English film to win the annual global box office crown since 1915.

Competition looks set to intensify as a growing number of local players enter the market as well. Alibaba Pictures, which has so far positioned itself as a joint rather than a primary role in local film production is now reportedly working on expanding its original content production capabilities, with the launch of a new in-house film studio called “Surprise Works”.

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Bangladesh Briefings 2021: Bangladesh export receipts slump to five-year low in 2020

05 Jan 2021

According to data from the country’s Export Promotion Bureau, Bangladesh’s exports slumped 14.6% YoY to USD 33.6 billion in 2020, hitting a five year low. December 2020 exports slumped 6.1% YoY to USD 3.3 billion, making Bangladesh the only country in South Asia to see exports decline during the month.

Garment exports – Bangladesh’s biggest export earner – dropped 17% YoY to USD 27.5 billion, while export receipts of leather and leather products – the second biggest  export earner – declined 20% YoY to USD 768 million in 2020. Exports of jute and jute goods soared 13.6% to USD 1 billion, pharmaceutical exports rose 10.8%to  USD 148.40 million and home textile exports rose 15.2% to USD 936 million. Agriculture product exports declined 5.7% to USD 863 million and frozen and live fish exports dropped about 6.5% to USD 445 million.

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China Briefings 2021: HR software startup WorkTrans bags investment from Tencent, Sequoia

08 Jan 2021

Human resource software startup WorkTrans has raised a combined USD 190.5 million in Series C and Series D rounds of financing. Its US$50.5 million series C round was led by Sequoia Capital China and existing investors, while Tencent and the China Capital Investment Group joined its US$140 million series D funding round.

Founded in 2015, WorkTrans’s AI-powered SaaS platform provides human resource management tools such as attendance management, change management, staff turnover etc. The startup counts French retailer Carrefour (EPA:CA), and Chinese glass manufacturer Fuyao Glass (SHA:600660) among its clients.  

AI-chip startup Horizon Robotics raises USD 400 million Series C2

07 Jan 2021

Chinese semiconductor startup Horizon Robotics,  often touted as China’s answer to Nvidia (NASDAQ:NVDA) has completed a USD 400 million Series C2 funding round led by UK-based investment firm Baillie Gifford, Yunfeng Capital, battery manufacturer CATL,  and others.

Alibaba eyeing USD 5 billion bond sale

07 Jan 2021

Tech giant Alibaba (HKG:0700) is reportedly eyeing a USD 5 billion US dollar denominated bond sale this month. 

Alibaba to shut down music streaming app Xiami next month

05 Jan 2021

Alibaba (HKG:9988) is shutting down its music streaming app Xiami next month, bringing to an end the tech giant’s entertainment ambitions. Founded in 2006, Xiami was acquired by Alibaba in 2013, as the company looked to expand into the entertainment industry.

China overtakes the US as world’s biggest box office market in 2020

02 Jan 2021

China overtook the U.S. as the world’s biggest box office market for the first time in 2020 with total box office revenues reaching CNY 20.42 billion (about USD 3 billion), considerably higher than the U.S. which raked in USD 2.28 billion according to data from Chinese online ticketing platform Maoyan Entertainment (HKG:1896) and and American media analytics firm Comscore (NASDAQ:SCOR). 

Imported films accounted for just about a sixth of China’s total box office in 2020, a staggering 55% year-on-year decline, attributed to the the pandemic which affected Hollywood release dates as well as diminishing appeal of foreign content. Foreign films’ share of China’s box office have been consistently declining over the years accounting for 38% of China’s annual box office in 2018, 35.9% in 2019, and just 16.3% in 2020. 

Click for more insights on China’s film industry. 

Chinese robot maker Flexiv raises over USD 100 million Series B

01 Jan 2021

Chinese robot maker Flexiv has closed its Series B round which raised more than USD 100 million from investors including Tencent-backed (HKG:0700) food delivery giant Meituan. Meta Capital, New Hope Group, Longwood, Jack Ma’s YF Capital, Gaorong Capital, GSR Ventures, and Plug and Play’s China and US ventures also participated in the funding round. The latest funding round brings the total amount raised to USD 122 million (the last funding round was in 2019 when Flexiv raised USD 22 million). “The strategic funding from leading companies and funds in various industries will mainly be used for mass production and marketing, new market development, and cutting-edge R&D,” said Flexiv CEO Shiquan Wang in a press release. “We will continue focusing on automation transformation of the manufacturing industry, while exploring new applications in a broader range of industries including services, agriculture, logistics, medical care, and so on,” he added.  

Founded in 2016, Flexiv designs and develops adaptive robots that combines industrial-grade force control, computer vision and AI technology.  The robots can be used in the fields of home appliances, consumer electronics, aerospace and aircraft, new energy, and automotive electronics. 

 

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India Briefings 2021: Online grocery startup Jumbotail raises USD 14.2 million for wholesale marketplace

08 Jan 2021

Homegrown wholesale marketplace startup Jumbotail has raised an additional USD 14.2 million in a new tranche of its Series B funding round which was led by VII Ventures. Nutresa, Veronorte, Jumbofund, Klinkert Investment Trust, Peter Crosby Trust, Nexus Venture Partners, and Discovery Ventures participated in the round. Founded in 2015, Jumbotail’s wholesale marketplace platform connects India’s thousands of mom-and-pop ‘kirana’ stores, supermarkets and retailers with brands and producers of daily essentials. The startup’s clients include Mars Wrigley and Reckitt Benckiser.

Click here for more insights on India’s e-commerce sector.

Pharmacy retail chain startup Generico raises INR 100 million debt funding

08 Jan 2021

Indian specialized pharmacy retail startup Generico has raised INR 100 million in debt funding from Indian venture debt funding firm Alteria Capital. The startup raised an additional INR 10 million from Alteria through Series A2 compulsorily convertible preference shares (CCPS).

Founded in 2017, Generico is a specialized pharmacy chain focused on generic medicines. 

Edtech unicorn operating revenue jumps 5.6 times in FY 2020

07 Jan 2021

Indian edtech unicorn Unacademy reported total income of INR 860 million for financial year ended March 2020 31, a four-fold jump from FY 2019 when total income amounted to INR 220 million according to a report from Entrackr. Operating revenue jumped 5.6 times from INR 117 million in FY 2019 to INR 650 million in FY 2020. Around 95% of this revenue was generated from educational services while advertising and other non-operating income accounted for the rest. The startup’s bottom line however continued to worsen, with losses tripling to INR 3 billion in FY 2020 from INR 903 million the previous year. However, EBITDA margins improved considerably from -766% in FY 2019 to -457% in FY 2020.

Snapchat and Google in talks to invest in Sharechat

05 Jan 2021

According to a Techcrunch report, Google (NASDAQ:GOOG) and messaging platform Snapchat (NYSE:SNAP) are in advanced talks with Twitter-backed (NYSE:TWTR) Indian vernacular social content startup Sharechat to participate in the startup’s Series E funding round which is expected to raise more than USD 200 million with Google along pumping in more than USD 100 million. The round will give Sharechat a post-money valuation of more than USD 1 billion.

Fintech startup CRED raises USD 81 million Series C, completes ESOP buyback 

04 Jan 2021 

Bengaluru-based fintech startup CRED has raised USD 81 million in its Series C funding round let by existing investors DST Global, Sequoia Capital, Ribbit Capital, Tiger Global and General Catalyst. Sofina Capital, Coatue and Times Internet’s Satyan Gajwani  participated in the round. The latest funding round gives CRED a post-money valuation of USD 806 million. Along with the funding round, CRED also completed its first ESOP buyback program worht INR 90 million from existing and former employees.

South Korea’s Mirae Asset launches India fund for early-stage startups

04 Jan 2021 

South Korean investment firm Mirae Asset Venture Investment has launched an India-focused fund for early stage startups. The fund, called Mirae Asset Venture Opportunities Fund 1, will have a corpus of USD 35 million (INR 2.56 billion), and an option to take it up to USD 75 million according to the Ashish Dave, the fund’s Chief Executive. The fund plans to make investments in Seed and Series A rounds. 

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Indonesia Briefings 2021: Investment platform raises USD 25 million Series A

11 Jan 2021

Ajaib Group, an online investment platform has raised USD 25 million in its Series A funding round led by Horizons Ventures, a venture capital firm founded by Hong Kong tycoon  Li Ka-Shing, and Alpha JWC. Existing investors SoftBank Ventures Asia, Insignia Ventures and Y Combinator participated.

Founded in 2018, Ajaib provides a platform for investors to invest in stocks, ETFs, and mutual funds.

Robo-advisor startup Bibit raises USD 30 million from Sequoia India

06 Jan 2021

Fintech startup Bibit has raised USD 30 million in fresh funding led by Sequoia India. Existing investors East Ventures, EV Growth, AC Ventures and 500 Startups participated.

Founded in early 2019, Bibit’s robo-advisory platform builds customized mutual fund portfolios based on the users’ risk profiles and investment goals. Barely two years old, the startup has already seen phenomenal growth with more than a million first time investors joining in 2020 alone.

Gojek in merger talks with Tokopedia

05 Jan 2021

Indonesian ride-hailing and payments unicorn Gojek is reportedly in advanced merger talks with homegrown e-commerce unicorn PT Tokopedia, ahead of a planned IPO of the combined entity according to a Bloomberg report. Gojek and Tokopedia have reportedly considered a merger since 2018 however merger discussions accelerated after deal talks between Gojek and Singapore-based arch rival Grab reached an impasse.

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International Briefings 2021: CEBR expects China to overtake the U.S. as world’s largest economy in 2028

01 Jan 2021

The Centre for Economics and Business Research (CEBR), a UK-based consultancy group expects China to overtake the U.S. as the world’s largest economy in dollar terms in 2028, about half a decade earlier than estimated after China recovered faster than the U.S. from the Covid-pandemic.

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Philippines Briefings 2021: Philippines imposes temporary tariffs on imported cars and trucks

04 Jan 2021

The Philippines is imposing temporary duties on imported passenger cars and trucks in an effort to protect the local automotive manufacturing industry which has seen a rising imports partly driven by carmakers such as Isuzu Motors and Honda Motors halting local production and importing vehicles from countries in the region instead.

“The Philippines has one of the most open markets relative to our ASEAN neighbors. While we generally do not restrict products coming into the market, we also need to ensure the level playing field for our local industry,” said Ramon Lopez, secretary of the Department of Trade and Industry (DTI).

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Singapore Briefings 2021: Singapore unemployment drops to 3.3% in November 2020

09 Jan 2021

Singapore’s unemployment rate improved to 3.3% in November 2020, from 3.6% in October 2020 and 3.6% in September 2020 according to data from Singapore’s Ministry of Manpower. Resident (which refers to Singapore Citizens and Permanent Residents) and citizen unemployment rates improved as well from 4.8% to 4.6% and 4.9% to 4.7% respectively. 109,500 residents were unemployed in November 2020, including 94,000 citizens.

OCBC aiming to double users on payment app Pay Anyone

09 Jan 2021

OCBC Bank (SGX:039) is aiming to double the number of users on its digital payment app Pay Anyone this year, as the bank forges partnerships and expands offers to boost acceptance and usage.

Fintech startup GoBear shuts operations

05 Jan 2021

Singaporean fintech startup GoBear announced that it will cease business citing a difficult business conditions and the inability to “raise more funds to continue operations” as a result of the Covid pandemic. Founded in 2015, GoBear launched as a metasearch engine before transitioning towards financial services. GoBear last raised USD 17 million in May last year, from existing investors Walvis Participaties, a Dutch venture capital firm, and Aegon N.V., a life insurance and asset management provider. The last funding round brought the total amount raised to USD 97 million and was aimed at expanding its consumer financial services platform which had been available in major Asian markets including Singapore, Hong Kong, Indonesia, Malaysia, Philippines, Thailand, and Vietnam.

Singapore, Malaysia terminate High Speed Rail (HSR) project

02 Jan 2021

Singapore and Malaysia have announced their decision to scrap the a high-speed rail line between the two countries after negotiations collapsed. Malaysia is expected to compensate Singapore for costs incurred in implementing the project which Singapore claims exceeds SGD 270 million, including consultancy costs and manpower.