Film Industry A Blue Ocean? Tsunami Is Only Waves Behind

摘要: The past week has been Wang Zhonglei’s ChinaJoy time, during which he talked about gaming, IP and Huayi’s value on films.

(Chinese Version)

Without a doubt, last week has been Wang Zhonglei’s ChinaJoy time.

On July 27th, founder, vice president, and CEO of Huayi Bros. Media Group, Wang Zhonglei, attended the grand opening of ChinaJoy and gave out his speech on ways of fusing different fields in the booming IP era. Wang made his speech after Ding Lei from NetEase.

As the first film entertainment company that entered the mobile gaming sector and has built a gaming army, Huayi’s accomplishments are the perfect examples of ChinaJoy’s theme this year, which is embracing multi-entertainment in the new gaming era.

On 25th, Wang Zhonglei left directly for ChinaJoy in Shanghai after attending the opening ceremony of SweetTech’s Visual World offline theme park invested by Huayi. The next day, he appeared on the interactive entertainment conference GET held by Kidstone, which aims to kickstart IPs and make the ACG industry thrive in China. On the conference Wang announced the initiation of the joint venture Jiaochong Entertainment of the two companies.

After the speech on 27th, Wang attended Xianyu Game’s press conference for its Star Project, on which conference Xiangyu Game revealed its brand new development strategies in data traffic, IP, sports, and e-sports etc. The next night, he then showed up on the thanking party held by YOUZU, THEDREAM, YINGXIONG, Quick SDK and Huayi. These activities all involved Huayi’s Internet entertainment businesses (VR, fan economy, multi-screen interaction, gaming).

Wang Zhonglei mentioned in the beginning of his speech that he had been to ChinaJoy two years ago as an observer. That was the ChinaJoy in 2014, one year after Huayi acquired YINHAN Games’ Space Hunter.

On the ChinaJoy conference that year, Wang Zhongjun appeared on a gaming forum for the very first, and the theory that the connection between film entertainment and gaming would only intensify he mentioned on the conference is happening in today’s industry.

So how should we look at the relationship between film and games? What do we make of gaming companies’ entry into the film industry? How will Huayi’s Internet entertainment business fuse with other businesses and transform? How will Huayi, a company that has been making emphasis on monolithic kernel, score its film entertainment business in the first half of this year?

To answer these questions, Wang Zhonglei accepted Entertainment Dream Studio’s interview during ChinaJoy.

Wang stated in the interview that he fully understands gaming companies’ logic of establishing their own film division, such as Tencent Film and Linekong Film. “They believe they have many IPs that can be converted into something else at their disposal, and therefore they would like to develop content on their own instead of finding collaborators,” Wang explained. “That’s why these companies were founded.” It should be noted that many companies believe the film sector is a blue ocean, but tsunami lurks in the blue ocean, according to Wang Zhonglei.

space hunter

space hunter

Huayi’s investment in gaming started from Wang Zhongjun’s friend circle and the company’s Internet entertainment business is maturing

“As a matter of fact, Huayi invests in gaming companies, especially those that focus on mobile gaming. I think it makes Huayi some sort of forerunner in the field,” Wang Zhonglei said.

What Wang Zhonglei was referring is apparently the investment in OurPalm Tech. As the first film entertainment company that entered the mobile gaming sector, Huayi’s development in the Internet entertainment sector can date back to 2010. Starting with investing in OurPalm, the Internet gaming sector was the first target for Huayi in the Internet entertainment industry.

In 2012, OurPalm, whose second largest shareholder is Huayi, successfully got listed on the stock market and became the first listed mobile gaming company in the A-share market, marking the beginning of prosperous mobile gaming era. After several times of reducing holding-shares, Huayi still was still holding 6.37% of OurPalm’s shares by the end of 2015.

As a matter of fact, Huayi had launched some attempts in the gaming sector before. In December 2010, Huayi announced the joint venture Beijing Huayi Giant Interactive Tech Ltd with Giant Interactive Group and their cooperation on running Giant Interactive’s 3D multi-player online RPG King of Kings 3. Two years later, Giant Interactive Group purchased the joint venture back while Huayi had gained access to the gaming industry.

Later on, Huayi first acquired YINHAN Games, led the A-round financing in Xianyu Game, invested in YINGXIONG and became the company’s second largest shareholder. Huayi then subsequently established a complete industrial chain which consists of game development, game distribution and e-sports. At present, besides the gaming business, Huayi’s Internet entertainment line also includes VR, fan economy and multi-screen interaction.

When talking about the initial incentive for Huayi to invest in the gaming sector, Wang Zhonglei stated that it’s deeply linked to Zhongjun’s social network of entrepreneurs and friend circle. “I believe Zhongjun’s friends like Shi Yuzhu from the Giant Interactive Group and the conversations between them enabled him to explore this brand new world,” he said.

Although at that time, not only Huayi, but also the entire gaming industry, were aware of the later impact brought by this combination.

From Wang Zhonglei’s perspective, the incentive was that the gaming sector had a stronger ability to cash in continuously and that’s exactly what Huayi was lacking in at that moment. Back then Huayi was only a listed film company that was hoping to reach other fields in the entertainment industry and find more channels to profit.

So, what role does the gaming business play in Huayi’s business layout? In today’s situation where the film industry is fusing with the gaming sector, what chemical reaction and new opportunities will emerge from the new company and the original lines?

Wang Zhonglei stated that the role that the gaming sector is playing is getting more complicated. At first, it was merely a direction for investment and later it became an interactive line with the potential of transforming into a user base of Huayi’s users.

“Games, celebrities, or some other new media stuff all have a very high user retention rate. Games and the real-site entertainment, VR, and fan economy I am engaged in right now can help me attain and keep users, which is my current goal. It enables me to grow along with the enterprise, with my content and products.”

The fusion of films and games has proven to be rather successful as Warcraft provides Huayi a stimulus to go further

Early as two years ago, Wang Zhongjun has mentioned that besides advertising, companies could only gain profit through the gaming sector in the Internet momde on the ChinaJoy conference.

However, two years have passed and Huayi hasn’t come up with many game productions fused with movie contents yet.

In July 2013, Huayi announced publicly to purchase 50.88% of YINHAN’s shares with ¥672 million. After two years of running-in, YINHAN now is working on the film adaptation of Space Hunter the game. It’s reported that the scriptwriting process and shooting preparation of Space Hunter have already started.

According to Wang Zhonglei, Space Hunter is invested by YINHAN and Huayi has chosen the most fitting script team for the movie, bringing many of the best producers to help boot it. Meanwhile, YINHAN’s film and gaming IP Ice Fantasy will launch its mobile gaming product soon.

“The process has indeed been slow, but it has met our expectation. We want to do things right, and that’s why the process seems to be slow. It’s in fact very difficult to pull of an adaptation like this from the experience we learned from successful commercial cases.

It requires mature industrial foundation. For example, the U.S. has a very mature industry system but the country doesn’t have many successful cases in adapting games into movies either,” Wang Zhonglei explained.

Wang Zhonglei further illustrated the matter with the example of Warcraft, saying that the movie is a success only in China, but the accomplishment is enough an incentive to make him work harder on this direction. He believes that Chinese audience is different from global audience and that of the north America. That said, Chinese audience wants higher sense of interaction and engaging experience. That’s what set the course for Huayi.

Wang Zhonglei stated that the fusion of movies and games at nature is a matter of achieving the transformation between IPs, since the content property of games and movies are is very different. It’s like you have to build a brand new world concept and character settings, which matter a lot for companies that value the quality of content like Huayi, therefore we don’t want to do anything reckless. Many companies are making their attempts.

We even found that the younger the company the more eager it tries. But I don’t think it makes us conservative and them more courageous. I have always respected the content, so I will only start doing things when I believe everything is ready.

Some might considers Huayi’s gaming division as an agent company for celebrities for the fact that the company lacks previous exploration in the field of game and movie fusion. According to Wang Zhonglei, that’s not the whole story.

In the early phase the company would need some immediate cooperation effect for show, but it doesn’t necessarily mean the company doesn’t pay attention to the IP transformation, said Wang Zhonglei. In this way, an effective and valuable transformation can be achieved. In this case, what Huayi is doing is not merely following a celebrity-based mode, but a model that’s easier to operate on.

The entry of game companies pumps new blood into the film industry, however it doesn’t change the fact the film industry has always been a highly risky industry

In the past year, a large group of movie&game companies surfaced to the ground. So what will the gaming industry, with a volume of ¥150 billion, bring to the film industry which has a volume of ¥60 billion?

“In my opinion, these upcoming movie&game companies will make the industry more prosperous. Their business logic is quite simple, believing that they have many usable IPs at their disposal, waiting to be explored. Apart from seeking cooperation with other companies, they tend to like the idea of developing products independently. I think that’s what will make them succeed,” Wang Zhonglei commented.

Nowadays, many people believe that the film industry is a blue ocean. “They believe so. However, from my understanding, tsunamis lurk in this blue ocean, despite how beautiful it looks,” Wang Zhonglei stressed.

Starting from the film industry now with nearly two decades of experience, Huayi is highly aware of the high risks within the film industry. In Wang Zhonglei’s opinion, there are only two ways to counter high riskts. One is that the leader must be ahead of the market trend and the content creators must be leading in content production. Besides that, the enterprise needs to build up scale so as to spread out the risks and control them.

“This year has been a rough one for Huayi so far. The box office of the films we launched are not meeting our estimates although we do think they are really good ones. For companies short of scale or ones that lack in product diversification, it would be a disaster,” Wang Zhonglei said. “Eventually the company will lose faith in this particular industry and exit from it. I think this is a common obstacle for capital-oriented companies.”

Huayi’s previous layout in the actual scene entertainment and Internet entertainment has provided the company with the ability to remain stable in the market against risks brought about by the movie&game business.

Empowered by the ability to innovate on original entertainment quality contents, Huayi is making ways to build a complete grand entertainment industrial chain through its layout in the three major business sectors. Quality contents from the company’s film entertainment business are going online, which can be adapted into games, online TV series and movies, and fan economy products etc.

On the other hand, they are also going offline, becoming touchable products in theme parks and tourist towns. Additionally, the profit and influence these products gain can continuously improve Huayi’s brand image and provide the company with the money to keep bringing about quality contents.

The influence of these three major sectors are taking effect, and it’s going to bring up greater advantage to the company in the next two coming years, according to Wang Zhonglei. As a matter of fact, it takes Huayi around 8 years to prepare for this grand transformation. The conditions Huayi possesses are rare among most Chinese film enterprises.

“The only way to attract the audience is through content. There’s no other way around.”

Apparently, the ability to produce quality content is the core drive that enables Huayi to have a stable and great performance in its three major business lines. That’s whu Huayi has made focusing on improving content the priority in the company’s three major strategies.

In March this year, former vice president of Wanda Culture Industry Group Ye Ning took up the post of CEO at Huayi Bros. Media Group, which shows Huayi’s determination in improving its film business.

“The first half of 2016 has been rough for Huayi in the film sector, or let’s say a tough period in which the company is doing really badly in the market,” Wang Zhonglei commented, when talking about Huayi’s performance in the first half of the year. “This is something I have been clear about.”

“But this might only be temporary,” Wang Zhonglei said. “For companies like Huayi that respect contents and pay attention to developing them, it’s actually a good thing. Like I have said before. There are just too many people swimming in this blue ocean and everybody thinks it’s paradise, but in fact tsunamis just about to come and turn everyone upside down.

Many people might choose to swim back to the boats or the land. Swimmers that stay behind are companies like us. For me, this is an opportunity.”

Additionally, Wang Zhonglei stated that there were many reasons for the poor performance in box office in the first half of 2016. First of all, the surge of movie audience base in recent years is attributed to the low-pricing campaign, however it’s commonly known that low-pricing strategy could only work for a short period and has a rather low user retention rate. Besides that, the lack of powerful content is also a major factor. Movies are a complex product.

They consist of themes, directors, actors and actresses etc. But in recent time, something is missing in many movies. For instance, nowadays it feels like everyone can be a movie director despite the lack of talent. Also, celebrities are losing their appeal too. They are just everywhere. We can see them in movies, we can see them on TV in TV series, variety shows, and commercials. Eventually we kind of get tired of them.

Just like Wang Zhonglei had said: only contents can draw the audience back.

“Huayi is a leading force in film production in China. We make high-quality movies,” Wang Zhonglei said. “Our leadership is professional in this filed. And our producers share a consensus on the movie style we produce.”

Wang Zhonglei also revealed that Huayi has been working on the arrangement of the product line for around two years, and that the company would launch some products in the third of fourth quarter this year. “Everybody can see that we really emphasize on the ability to produce content,” Wang Zhonglei stressed. “We will continue to specify the contents and stick to our principles on film production.”

“Films that take a stand. Such films are what set Huayi apart from other film companies. Huayi produces high-quality films that convey value, tell good stories and build strong characters. For example, we have been shooting films that centered around characters such as Mr. Six, Assembly, Aftershock, and If You Are The One.

We pay attention to the story telling of characters and we connect the audience with the value and many other perspectives in our films. This is what Huayi has been trying to do.”

“Also, franchise movies are one of our top priorities as well for Huayi.”

“We also pay special attention to meeting female audience’s demand. The truth is female viewers want to see movies with subtle stories, emotional ones that touch them.”

“Animations. We have founded Dianjing Animation, the creativity source that’s centered on IP. In the future, it will continuously pump IP resources into our three major business lines.”

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[The article is published and edited with authorization from the author @Entertainment Dream Studio, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.

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