All is not rosy on China's silver screens(2)

Le Vision Pictures has an edge over its rivals in its distribution channels and management over its rivals, but its inadequate supply of films that enjoy widespread popularity and huge sales has lessened its total box office revenue.

Tiny Times 1.0 and 2.0 contributed as much as 800 million yuan in ticket sales, 80 percent of the company's total box office revenue.

No matter how effective and well-developed a studio's distribution system is, without good content, it is hard for it to yield practical benefits, Peng said.

Profit-generating model

Another potential problem for the market is a contradiction between declining profits per screen and the increase of screen numbers.

Despite the large increase in theater screens every year, the annual average yield per screen has been in decline since 2010, when China's box office exceeded 10 billion yuan for the first time, said Wei Pengju, dean of the Culture Economics Institute at the Central University of Finance and Economics.

This can be attributed, to some extent, to the falling annual growth rate of moviegoers, a shortage of quality domestic movies and the government's cut in film imports.

The number of moviegoers surged 46 percent year-on-year to 345 million in 2011, but only witnessed a growth rate of 34 percent in 2012, followed by a 32 percent increase last year, according to statistics from EntGroup Consulting.

The government reduced the number of imported movies from 75 in 2012 to 57 last year in order to protect domestic productions, Peng said.

He said for film companies that have gone public, branching out into other film-related sectors might be a good solution for allaying the high risks of the industry.

In 2013, Huayi Brothers purchased a 20 percent stake in a theater management corporation for 210 million yuan, which was followed by the acquisition of a 51 percent stake in Zhejiang Yongle Film and TV Co for about 400 million yuan.

Beijing Enlight Media plans to buy a 27.6 percent stake of a film and TV series company — New Classics Media Copany — for 829 million yuan, it announced in October.

Analysts said these investments can be interpreted as the film studios' efforts to shore up their TV series businesses as well as to balance the financial risks involved in film production.

Taking Huayi Brothers as an example, in the first three quarters of 2013, the producer reported a 35.38 percent decline in its TV series arm year-on-year, earning only 142 million yuan.

The fall in TV drama revenue also pushed the company to post a lower total revenue growth of 13.92 percent during the same period, in comparison with 31.17 percent a year earlier.

"In the long run, these investment decisions to strengthen the TV series business will create benefits for the companies because they can develop the TV series content into film adaptations or vice versa without paying extra copyright fees," said Peng, adding that, so far, this benefit-generating model hasn't been fully practiced by Chinese companies.

The negative side of this maneuver comes from a reduction in cost and resources for filmmaking production, he said.

Interestingly, some small-budget productions replaced big-budget films in raking in large ticket sales last year.

Finding Mr. Right, a romance comedy released in March, earned 519 million yuan in box office revenue for a total investment of less than 30 million yuan. Actress-turned director Zhao Wei's debut So Young earned 717.8 million yuan in ticket sales, ranking third in China's highest-grossing list of 2013, while costing only 60 million yuan to produce.

"The unexpected success of small-budget movies is a transitional phenomenon in the Chinese movie industry's evolution, and won't last long," Wei said.

"I think the general and everlasting principle of the movie market is big-budget productions producing big returns, and this is also the trend toward which China's movie industry is moving," Wei said.

"Only then can China's movie market be judged as mature," he added.