China’s BAT tech giants fuel film industry growth

20/04/2018

Chinese tech giants Baidu, Alibaba, and Tencent – often referred to as BAT – have laid out investment strategies in cinema in China and abroad

 

According to business intelligence services ITJUZI and tianyancha, Tencent has invested in 51 entertainment companies with a large portion of its investments dedicated to animation studios. Tencent’s investment volume has an advantage over the other two tech giants. It has invested heavily in animation, and through its own traffic and capital advantages thanks to WeChat, no other player can rival its position in the animation industry.

 

Alibaba Pictures continues to suffer losses

 

Alibaba has invested in every aspect of the film supply chain from financing to production and distribution through 48 entertainment firms. Despite positive reports in Chinese media, Alibaba’s film unit revealed losses around US$254 million for the fifteen months ending March 31. This continues its losing streak from 2016 to the present. The company says that its profits were most hurt by spending on marketing through Tao Piao Piao.

Similar to China’s national investment strategy, when numbers dip, an increase in spending is usually encouraged. Jack Ma purchased ChinaVision Media Group, a Hong Kong-listed media and content producer in June 2014, but shares have continued to drop. Despite this, Steven Spielberg’s Amblin Partners threw Jack Ma a bone with a strategic partnership to co-produce and finance films for global and Chinese audiences.

 

Baidu invests in streaming content, including China’s Netflix, iQiyi

 

Baidu has invested less than the other giants, but where it has placed its bets represent a different take on China’s film industry. Most of its money has been spent on iQiyi, the equivalent of Netflix in China, which just debuted on the Nasdaq in March. iQiyi also shows strength in animation, having invested in two high-profile animation companies in Q1. iQiyi anime also produced several popular projects, and with capital investment, should continue to build momentum.

As of January, iQiyi, ranked first among Chinese video platforms with monthly active app users totaling 509 million, versus Tencent Video’s 480 million and Youku’s 420 million, according to local research firm Analysis.cn.

 

China’s middle class expected to fuel film industry, but not without setbacks

 

Despite this fervent activity in the sector, Chinese cinema faces challenges. At a recent panel on screenwriting at the Beijing Film Festival, experts pointed out that screenwriters in China don’t receive the respect or recognition they deserve, holding many Chinese talents back from entering the industry. In addition, due to content censorship and a strict social environment, science fiction, superhero, and romantic dramas celebrating pure love may not thrive according to panelist Song Fangjin.

As China’s middle class continues to grow, experts expect consumption of cinema to grow as well. CEO of Le Chuang Entertainment Zhang Zhao stated that third to fifth tier cities would drive the expansion of the industry. In addition, he pointed out that China’s entertainment industry is far more influenced by the internet. Social and micro-video platforms such as Tik Tok, Douyin let users interact while posting short-form content. Other social platforms, such as WeChat, which just added streaming video to public accounts, monopolize the time Chinese devote to screen entertainment, as does the social commerce trend which blends social media, livestreaming video, and e-commerce.

 

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