Outlook for the Chinese Film Industry

1
Outlook for the Chinese Film Industry
2
China Film Industry Information

• Index
• Ingredients to a Successful China Film Industry
• China Government supports Chinas film
  industry
• China Film Industry Learns from the US Film
  Industry
• National Conference for China Film Makers
• China film industry developments
• Increase in the building rate of theaters in
  China
• 2005-2007 Theater and Screen Increase Chart
• Modernization of China culture
• China theatre box office sales chart
• Public opportunities for China film industry
• Investment returns
• Is it hard to invest into Chinas Big
  Budget films
• Demand and Supply
• Location Fee Comparison
• Comparison for soap opera and film
• An American Economist view
• Key elements to successfully make a movie

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Ingredients to a Successful China Film
Industry
4
Chinese Government Supports the China Film
Industry

• Chinese Government makes an important
  announcement on January 8, 2004. Chinas central
  film department states Were all about speeding
  up Chinas Film Industry. They point out that
• Movies have become more and more popular in China
• Movies are a part of the main stream culture
• Movies are produced by new technology
• Movies are getting big investments are high
  risk
• Movies are now very serious business
• The film making industry will become one of the
  most important industries for China.

5
China Film Industry Learns from US Film Industry

• Chinese film producers are struggling to make
  ends meet even though the countrys movie
  industry earns good profits, say officials.
• China produced 406 films in 2008, according to a
  report produced by the Chinese Film Association
  in June. The total box office returns in China
  last year stood at 4.3 billion yuan and 60
  percent or 2.58 billion came from the domestic
  movies
• In a mature film industry, the box office is not
  the only source of revenue, said Jiang Defu,
  director of the marketing department under the
  China Film Group Corporation.
• In Hollywood, 30 percent of the revenues come
  from the box office, while the remaining 70
  percent come from other sources, including
  advertisement, he said.
• We still need to learn from their experience.
  Chinese film producers should not only attract
  audience into cinema but also explore the market
  out of the cinema (theatres), he said.
• http//blog.taragana.com/e/2009/07/18/chinese-film
  -producers-face-financial-woes-17552/

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National Conference for China Film Makers

• 2008, 8th National Conference for China Film
  Makers
• President and VP of the conference both
  announce that after 30 years of new culture and
  economic reform, Chinas film industry has had
  huge revolutionary improvement.
• The world film industry notices and is
  starting to focus on China
• China film industry is showing fast healthy
  development with break through potential

7
Film Industry Development

• Technology
• Updated from outdated traditional film to digital
  computerized projectors
• Formatting changed from analog to digital
• Business Management
• Now practicing new ways to manage the film
  industry (from centralized government to
  public)
• Now allowing public Investment opportunities
• The box office theaters increase
• Since 2004, the box office ticket sales increased
  over 220 and it helped create an atmosphere for
  building new theaters in China today on average,
  one new theater is built per day

8
Film Industry Development Continued

• Building Theaters with Modern Features
• Theater are built multi-functional with more
  entertainment value
• Theaters contains vending for soft drink, food,
  toys, clothes, and movie memorabilia
• Changed from the outdated theater format (one
  screen per theater) to the modern theater format
• (5-10 screens per theater)
• Seating style was updated for comfort allowing
  more leg and seating room

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Increase in the building rate of theaters in China

• Because of the desire to modernize, there was a
  need to increase the theater building rate
• Modernization opened up a new market for theater
  investment opportunities and has helped China
  catch up to the rest of the world
• Since 2002, China has become the front runner for
  rapid theater building, averaging nearly 1.56
  screens created per day
• In 2008, China built 118 new theaters and added
  570 screens
• Also adding on average 1.7 more showings per day
  to accommodate the increase in audience
• Showings per day increased from 1,000 5 years ago
  to a current record of 4,097

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2005-2007 Theater and Screen Increase Chart
Based on the increase in theaters and screens in
China as well as box office ticket sales, the
film business reflects a very good investment
value From 2004 2008 China box office had
record breaking tickets sales
11
Modernization of China Culture

• China reform creates major change
• After 20 years of reform, Chinas economic
  problems were solved
• Now people live better lives and look forward
  to entertainment after a long day of work
• In the late 90s, China became one of the
  fastest modernizing countries

12
Modernization of China Culture Continued

• People are becoming more modern after the
  modernization of the film industry
• Fans (movie goers) increase as films become
  more intriguing and show modernization
• From 2002 to 2008, China box office sales
  average increase was 25 yearly
• By 2008 it past the 30 marker for yearly
  average increase

13
2004 2008 China Theater Box Office Sales
Chart
In the past few years, Chinas film industry
produced many new films. With the increase in
theaters, it made the film industry more popular
and profitable than ever before, breaking record
after record between 2004-2008.
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Opportunities Are Opened To The General
Public

• The Opportunity
• In 2002, Chinas Centralized Film Regulation
  Agency announced new opportunities for
  independent film makers
• New policies were introduced for making
  non-government funded films
• Films could now be funded by private companies
  and independent film makers/producers
• The policy change created new domestic investment
  opportunities

15
Opportunities Are Opened To The General
Public Continued

• International Investment Opportunities Increase
• Because of the increase in opportunities
• Interest comes from many international film/movie
  investment companies
• Companies include IDG New Media Foundation, A3
  International Asian Film Foundation, China Movie
  Foundation, and many other large film investment
  corporations
• A close watch is being given to China for future
  film investment opportunities

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(ROI) Return On Investment Is Very High

• Mr. Gow, VP of the Beijing Movie Theater,
  invested 3,000,000 RMB (440,000 Dollars) on the
  film The Final End and there was a conservative
  ROI of over 50
• Mr. Gow says, in recent years, investment into
  the film business has become very competitive
  because investors want to show higher returns on
  their investment dollars
• Another reason is because TV Soap Opera investors
  found that the soap opera market is harder to
  break into than the film industry
• Opportunities in the soap opera market are often
  taken by large entertainment investment
  corporations

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Is it hard to invest into Chinas Big
Budget films?

• There are very few films in China with a one
  billion (1,000,000,000) RMB (140 million
  dollars) budget (1-3 a year)
• There are many lower to mid range budget films to
  be made and many talented film directors and
  producers waiting to be supported
• These producers/directors are the next new wave
  of Chinas Big independent film makers Their
  budget are not as high as their US counter parts
• Budgets are usually around the 5 million
  (5,000,000) RMB (7,000,000 dollars)

18
Demand and Supply

• Chinas fast growing demand in the movie market
  holds a need to supply this demand
• There are challenges because there is huge room
  for small budget to mid range budget films that
  are almost non-existent
• Another challenge is co-producing collaborative
  films (small o large) between Chinese and
  Americans
• (Excluding Taiwan and Hong Kong) Compared to
  Hollywood, its much easier to raise funds for a
  film and make a film under or at budget because
  of the economic exchange rate and the cost of
  labor in China

19
Location Fee Comparison

• Location Only Fee
• A day shoot on set in the US costs about 2000
  for an independent film in Los Angeles, CA
• In Chinas Guan Dong Movie and TV town, it would
  cost about 500 RMB (about 75 Dollars) for a day
  shoot on set.

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Comparison for Soap Opera and Film

• 100,000 US Dollars 681,000 RMB in China
• 35-14,000 episodes for a Soap Opera
• In 2007, profit per episode around 50,000
  70,000 RMB
• 30 episodes of profit at 70,000 RMB/episode
  2,000,000 RMB
• 1350 hours total watch time plus pre- production,
  production, and post production time
• A movie is 90-120 mins compared to 1350 hours of
  soap opera
• Production time for a movie is much shorter
• Budget is much lower for a film than a soap opera
• Distribution time is shorter (6 weeks) for movies
  than a soap opera (30 weeks)
• Profit return takes less time on a movie than a
  soap opera
• More possibilities for international distribution
  on movies

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American Economist goes to China to do
market research

• He Says
• The whole world watches American TV and thinks
  theyre the center of the entertainment world
• Actually, America is only 4 of the world
  population
• China is 20 of the world population
• China has a very strong market value
• America has about 40,000 movie screens and China
  has about 4,000
• America has 1 movie screen for every 10,000
  people and China has 1 movie screen for 100,000
  people
• 2009 ticket price in China is 9 US dollars
  (10-15 in Beijing Shanghai)

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American Economist goes to China to do
market research continued

• American investment is rare in Chinese market
• Most film budgets in China range from
  300,000-700,000 US dollars
• Categories include Karate, Drama, Police
  Action, Comedy, Historic, Horror, Animation
• Most popular movies are based on daily life of
  people in China
• 2nd most popular movies are mostly Hollywood
  imitations with huge product placement
• 3rd most popular are reality documentary, that
  are low investment high profit return

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Key Elements to a successful movie

• Good script and screen play writing
• Good Budget Preparation
• Good Production/Directing and Casting
• Good Distribution and Release Dates
• Promotion Product and Commercial Value