Moving on from Chinese movies

Wang Zhonglei discusses the wider entertainment industry and yearns for more time with his family.

Wang Zhonglei, who founded the country's first A-share listed entertainment company, Huayi Brothers Media Corp, with his elder brother in 1994, came to Shanghai with the usual entourage of film stars and their minders to showcase the company's latest multi-million yuan productions at the 15th Shanghai International Film Festival in mid-June.

Of course, Wang is a regular at this and other film festivals around the world. But this time he and his company had more to show than movies. Since 2009 when the company was listed, Huayi Brothers has embarked on an ambitious program of diversification into theme parks and other related businesses that now account for more than 70 percent of the company's total revenue. Huayi Brothers' sales revenue amounted to 892 million yuan (140 million U.S. dollars) in 2011.

Having made almost all the best-seller movies in the past decade in China, including the legendary Aftershock, with global box office revenues of more than 100 million U.S. dollars, and working with many major movie stars including Chen Daoming and Li Bingbing, Huayi Brothers is trying to reinvent the traditional profile of Chinese movie companies as pure film producers.

"Now the company's focus is on its film-related businesses, such as cinemas, computer games, music, fashion and theme parks, to name just a few," Wang told China Daily.

He was keen to emphasize that his real passion remains in making movies but, for now at least, he is more preoccupied with building an entertainment empire that can stand up to Hollywood's behemoths such as Warner Bros.

Portfolio expansion

The latest news from Huayi Brothers is its co-investment in a movie-themed commercial zone in Haikou, Hainan province.

The zone, covering nearly 1 square kilometer and featuring scenes from classic movies made by the company's top director Feng Xiaogang, as well as restaurants, stores, cinemas and hotels, was named after the director and also marks the company's first move into commercial real estate.

Haikou is not a stand-alone project. Huayi Brothers is planning to spend four to five years building another movie-themed park in Suzhou, Jiangsu province, even though the coming Disney resort will be just a two-hour drive away.

"China has not had any real movie-themed parks before. We will develop them based on adventure films or children's movies to create a place for family entertainment," the 42-year-old president of the company, said, projecting full confidence in the project.

Some analysts express doubts whether the local movie industry is able to handle diversified business. They point out investing in films is already a high-risk enterprise with an 80 percent failure rate. Huayi Brothers' ability to keep making money is a hot topic of conversation in China's entertainment circle.

The corporation's first quarter report for the financial year starting in 2012 did not make happy reading. Net profit dropped by 21.57 percent year-on-year. Revenue from online games and music saw a huge fall of more than 50 percent.

Huayi Brothers' revenue dropped by 16.73 percent year-on-year in 2011, its fiscal report said.

In the face of criticism, Wang accused his detractors of bias.

"The industry has seen rapid expansion," he said. "There are problems because the strategic administration of many companies is comparatively weak compared with their US counterparts. However, Huayi Brothers is taking care over its plans. We just need some time. How can you expect a new business to become profitable overnight?"

Wang said Huayi Brothers intends to continue diversifying its business.

It set up a joint venture in Hong Kong to launch the special administrative region's first Mandarin movie channel in February in what Wang hopes will be a Chinese version of HBO that will eventually cover the whole world.

In May, the company entered the premium fashion industry in association with Septwolves, a menswear firm in Fujian province, by staging an haute couture fashion show.

It is also the second-largest stockholder in Ourpalm Co Ltd, a mobile terminal game producer that was listed on the A-share market in May, showing a steady performance so far.

Where to go?

No matter how diversified the business becomes, Wang insisted he will always regard movies as a very important constituent of the company.

The market has changed a lot compared with five or six years ago when Huayi Brothers was the only movie producer that attracted local audiences to the cinema. Competition from within and outside the country has created a tough environment.

The announcement that China will expand the number of imported films was made after a meeting in Los Angeles between Vice-President Xi Jinping and US Vice-President Joe Biden in February.

China agreed to import 14 US films in 3D or IMAX formats every year in addition to the current quota of 20 revenue-sharing foreign films.

"The competition is more cutthroat than ever. Every month this year, Chinese movies have competed with three to four Hollywood productions," Wang said.

Box office receipts for domestic films in the first half of this year garnered only a little more than 10 percent in market share.

Since Chinese movies became fully commercialized in 2005, attendances at domestic movies have generally stood at around 55 percent compared with foreign films.

From that figure to a little more than 10 percent this year, is something of a collapse. "The major reason, of course, is the opening up of imported US movies," Wang said.

"No one could compete with the huge 3D Titanic this spring but that doesn't mean we don't have any market margin." he added.

Having just visited South Korea, Wang likes to compare the movie market in China with the one there.

South Korean people visit the cinema on average twice a year, while the number in Chinese cities is once every two years. "The huge gap means the market has potential," he said.

Wang discovered that South Korea's movie industry was also affected after it lifted its limit on imported movies in 1986 but it soon recovered. This year, South Korean movies account for about 60 percent of box office receipts, the same as before 1986.

Wang said he believes Chinese movies will have a brighter autumn or winter this year because almost all big productions will be unveiled in the second half. They include 1942, a huge production in the making for more than 10 years. It was directed by Feng Xiaogang, the most popular director in China.

The 2012 Chinese Movie Industry Report released by China Film Association says that China will surpass Japan to become the world's second-largest movie market this year with annual box office takings hitting 2.85 billion U.S. dollars.

"We can become No 2 or even grow as big as the US considering our market size. But talking about movies specifically, I think Chinese films can be a delicious starter but not a main course because of the language barrier," Wang said.

"I am looking for real co-production, but many foreign companies only pay attention to the huge Chinese market or are looking for funds. I don't want that sort of cooperation. I hope international cooperation can involve Chinese concepts and tell Chinese stories to the global English-speaking market," he said.

Huayi Brothers' recent international cooperation with Legendary East over The Great Wall shows the company's ambition to march into the international market. The story tells the story of China's Great Wall and is much more than a platform to demonstrate kung fu moves.

Passion

Wang Zhonglei and his elder brother Wang Zhongjun, the current chairman, set up Huayi Brothers in 1994 as an advertising company. It entered the film industry through investing in Feng Xiaogang's comedies.

Wang was a Beijing native and grew up in a military compound in the 1970s like many offspring of the military. Watching movies was among his happiest moments.

"My passion for films may come from those exciting battle films I watched," he said. In Wang's view, good commercial movies should have dramatic conflicts and rich creativity. The latest good example is The Girl with the Dragon Tattoo, he said.

As a "busy and happy movie man", Wang said almost every minute in his life is occupied by films. Because his time is limited, he changed his hobby from reading philosophy and essays to reading books related to movies, including novels that have been turned into films.

Asked which is his favorite book recently, he is a rare exception from other interviewees who often cite famous titles such as The Confessions of Jean-Jacques Rousseau. Wang expressed admiration for online writers.

"The best part of online writers is their creativity and imagination, a quality that is essential in a good scriptwriter," Wang said. One of his latest favorites is Notes from a Grave Robber, which combines reality and legend.

"Huayi Brothers set up a new department recently to pay close attention to the works of online writers," he added.

Unavoidably, Wang has read negative news about movie stars under the Huayi label. He said it used to concern him but he doesn't care anymore.

"Who can take entertainment gossip seriously?" he said.

"If I stopped working in the movie industry, I'd like to spend my time being a good husband," he said.

The movie industry has taken up too much time that could have been spent with his wife, whom he met on an airplane when he was 20 years old.

"I feel I haven't done enough as a husband. If possible, I would spare more time for my wife and son."