Chinese internet companies are taking over the film industry

Pointing to the success of Chinese movies like Tencent-backed Monster Hunt, Chinese internet companies are restructuring the country’s burgeoning film industry with their technology and online platforms, pundits say.

Some go further and predict that internet companies will take over the industry altogether.

“Filmmaking will be new media-oriented and characterized by the internet,” said Feng Jun, a senior analyst with EntGroup, a leading research centre for China’s entertainment industry.

“It is possible that all movie companies in China will work for Chinese internet companies in the future,” she added.

Not that such a transition comes without risk: only 15 per cent of Chinese films released at domestic theatres turn a profit, Feng said.

Monster Hunt is a genre-straddling fantasy comedy that blends live-action and animation over two fun-packed hours. The movie, which cost 350 million yuan (US$56.35 million) to make, has already set several milestones in China.

It is the highest-grossing Chinese movie ever made, having netted over 1.6 billion yuan (US$257.6 million) since its July 16 debut. It is also the fastest to rake in 1 billion yuan in China, a feat it achieved in just eight days.

If that is not enough, it earned more in a single day at the Chinese box office on July 18 than any other home-grown movie to date, reaping 180 million yuan.

Some film critics have attributed its popularity to the timing of its release, but there seem to be several other factors, including protectionism, at play.

Although Hollywood unloads its big-gun summer blockbusters at this time of year, China’s censors protect domestic films in July by banning foreign movies from being screened at domestic theatres.

However, industry observers like Feng claim it was the financial and marketing support of China’s Tencent, Asia’s second-biggest internet company after Alibaba, that made the difference in Monster Hunt’s fortunes.

And as the market changes, consumers would rather have their favorite dish made to order than wait to see what the chef serves up – a goal that industry experts say is very achievable in an increasingly democratic internet age.

“In the future, the model will be: we find out what you want to watch, and then we make it for you,” said Cheng Dai-Wai, secretary general of the Guangdong Film Industry Association, which is based in the southern Chinese province of the same name.

“Only those investors that understand the internet and mobile users will be able to turn a handsome profit from filmmaking,” he told the South China Morning Post by phone.

Chinese internet companies have been involved in most of the top-grossing movies at the domestic box office since last year, serving as producers, distributors, exhibitors and even ticket vendors, Feng said.

In March 2014, Alibaba Group, the powerhouse behind China’s now-dominant online shopping channels Taobao and Tmall, obtained a majority stake in ChinaVision, since renamed Alibaba Pictures Group, for over US$800 million.

This led to another milestone just over a month ago when the subsidiary announced that it would be partnering with Paramount to promote the latest installment of Tom Cruise’s Mission: Impossible franchise, marking Alibaba’s first movie investment in Hollywood.

Companies like these are tapping their resources and technologies, such as big data, social media and online ticket sales to help better discern internet users’ tastes as well as to help promote and sell the movies, Feng added.

China now ranks as the world’s second-largest movie market after the US. Box-office receipts last year hit 29.64 billion yuan, up 36 per cent from 2013 and five times the 2009 figure of 6.01 billion yuan, according to industry figures.

The country is also building infrastructure on a colossal scale. It added more than 5,000 new screens for each of the last two years to leave the number hovering around 23,600 in 2014, according to

Alibaba continued its eclectic shopping spree this year by snapping up aUS$382 million stake in Beijing Enlight Media, a production company that specializes in filmmaking.

Enlight was the lead producer and distributor of Lost in Thailand, the 2012 smash hit that topped the Chinese box office helped spur a tourism boom in the “Land of Smiles”. The movie about two men who go hunting for their boss in Thailand earned over US$200 million at the Chinese box-office.

In the last 12 months, Alibaba has also purchased a 16.5 per cent stake in online video giant Youku Tudou and acquired an 8 per cent stake in another Chinese production company, Huayi Brothers.

In April, Alibaba Pictures Group dipped into its coffers to acquire Guangdong Yueke Software Engineering, one of the largest suppliers of cinema-ticketing systems on the Chinese mainland, for the bargain price of US$134 million.

China’s top search engine Baidu is also getting in on the action. But the company, which recently announced a US$1 billion buyback of its shares after seeing its market price slide, is involved in movie production largely through iQiyi, the online video platform it launched in 2010.

It launched iQIYI Pictures, a production company, this July and claims to already have seven Chinese and one Hollywood movie in the pipeline.

More internet giants are forging links with the Chinese film industry and offering diversified products and services, from making films available to online viewers to selling discounted tickets.

Online ticket seller Maoyan saw its movie ticket sales reach 5 billion yuan in 2014, a number it expects to triple this year, media reports show.

Both Cheng and Feng say the success of Monster Hunt highlights the power of China’s big internet companies and points the way forward.

The movie was originally invested in by Bill Kong, president of Hong Kong’s Edko Films, and scheduled to be released at the end of 2014.

But production plans and promotional campaigns ground to halt after its lead actor, Taiwan’s Kai Ko was arrested with Jackie Chan’s son Jaycee Chan for possession of narcotics in August of last year.

In China, any actors, industry professionals or entertainers who are convicted for taking illegal substances, engaging in prostitution or committing other such misdeeds are given lifetime bans from appearing in future filmed productions.

With the movie apparently destined for the junk yard, Kong changed the storyline by investing another 70 million yuan and re-shooting it with the financial backing of Tencent Video and Heyi Pictures, the film unit of Alibaba-backed internet television company Youku Tudou.

Kong chose several artists who are popular with China’s younger internet users and changed the plot to match their taste, Feng said.

The promotional campaigns that subsequently played out on the Chinese internet companies’ mobile and online platforms were crucial to the film’s success, she said.

Maoyan is an online-to-offline (O2) company, which means it focuses on connecting users of its internet site to physical goods and services nearby.

After running trial screenings of Monster Hunt at hundreds of Chinese cinemas, it found the audience demographic skewed in favor of female spectators and customized its marketing accordingly, the company said.

The tickets it sold online made up 40 per cent of the 171 million yuan the movie earned in revenue on its opening day in China, according to EntGroup.

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