Capitalization of cinema chain to increase speed, "horse racing enclosure" is difficult to sustain the industry needs to be upgraded urgently.

the continuous growth of cinema box office revenue has brought more room for imagination to the industry, attracting many new competitors to enter, and the industry reshuffle is accelerated.

original title: Hengdian Film and Television and Jinyi Film and Television have successively listed the cinema industry or welcome new students to the inflection point

data show that as of November 11, the cumulative box office of China's film market this year reached 49.05 billion yuan, more than 45.506 billion yuan for the whole year of 2016. According to the preliminary statistics of the box office share, the cinema line has earned 25.638 billion yuan at the box office. The continuous growth of cinema box office revenue has brought more room for imagination to the industry, attracting many new competitors to enter, and the industry reshuffle is accelerated. Recently, as Hengdian Film and Television and Jinyi Film and Television have successively landed in the capital market, the securitization rate of the top ten cinema enterprises in China has reached 90%. In the eyes of people in the industry, it may be followed by the reshaping of the cinema industry.

< strong > the speed of capitalization of cinema giants < / strong >

October 12, Hengdian Film and Television officially listed on the Shanghai Stock Exchange, issuing 53 million shares to the public. As of June 30, Hengdian Pictures had 245 asset-linked studios, and in the next three years, Hengdian plans to build 210 cinemas in more than 200 cities across the country, according to the prospectus.

subsequently, Jinyi Film and Television was listed on the Shenzhen Stock Exchange on October 16. Data show that as of June 30, Jinyi Film and Television had 321 cinemas, including 144 own cinemas and 177 affiliated cinemas. Its Jinyi cinema chain has an annual box office of more than 2 billion yuan, ranking among the top seven in the country in market share. According to the company's previously announced fund-raising plan, the money it raised will be used to invest in the construction of 40 cinemas across the country.

the reporter noted that in just more than two years after Wanda's successful listing in early 2015, nine of the top 10 cinema chains have landed in the capital market. Taking the box office revenue in the first half of this year as the reference standard, the top 10 cinema companies in China are Wanda Film, Earth Cinema Line, Shanghai Lianhe Cinema Line, China Film Southern Shinkansen, China Film Digital Cinema Line, China Film Star Mei, Jinyi Cinema Line, Hengdian Film and Television, Huaxia United, and Jiangsu Happy Blue Sea Cinema Line. In 2016, Chinese movies, Shanghai movies and Happy Blue Ocean respectively landed in the A-share market, while Dadi Cinema chose to list the new third board, and the capitalization concentration of the top 10 cinema companies is already quite high. As Hengdian Film and Television, Jinyi Film and Television have landed in the capital market, the degree of capitalization of cinema giants continues to accelerate, and the competition in the industry is more fierce.

looking at the prospectuses of a number of listed cinema companies, we can find that not only listed companies have focused on increasing cinema investment to improve revenue scale and profitability, and further expand market share, those film and television companies that are still waiting to be listed also regard the development of cinema layout as the primary goal of financing. For example, Boehner Pictures made it clear in its prospectus issued earlier. More than half of the funds raised will be spent on cinema projects.

< strong > the pursuit of "horse racing enclosure" is difficult to sustain < / strong >

although the collective choice of cinema line companies to go public means that the industry will reap more abundant funds, but industry analysts also note that cinema giants still put the expansion of the number of cinemas in the first place, which seems to ignore the new situation that cinema profits are slowing down.

Liu Jia, an expert on the film industry, said that the current growth rate of cinema construction is much higher than that of the market. The size of cinemas has been growing rapidly, but due to the lack of corresponding strategies to follow up and enhance endogenous motivation, cinema profits have slowed down. It is an indisputable fact that the output efficiency of single cinema and single screen continues to decline. "

some cinema operators told reporters frankly that the box office of different cinemas is affected by factors such as region and the flow of people, and that polarization is more obvious, and many cinemas are facing greater pressure in operation, although various cinemas are trying to diversify, but the phenomenon of homogenization is still becoming more and more serious.

in fact, the data disclosed in Jin Yi's prospectus also exposed this problem. The box office revenue of Jinyi Film and Television in 2015 and 2016 was 2.88 billion yuan and 2.77 billion yuan respectively, ranking sixth and seventh in the country. The operating income in 2015 and 2016 was 2.325 billion yuan and 2.156 billion yuan respectively, and the net profit was 247 million yuan and 196 million yuan respectively. It has been declining for two years in a row. As a result, industry analysts worry that while net profit is declining, Jinyi Film and Television's market share is expanding and the number of cinemas is also growing. will this cause the company to shoulder the financial burden while obtaining expansion funds through debt financing? In addition, the reporter also noticed that the gross profit margin of the Hengdian film projection business has been declining in the past three years, from 16.92% in 2015 to less than 10% this year, and the gross profit ratio has dropped from 50.79% in 2015 to less than 30% this year. This fully confirms Liu Jia's judgment that the output efficiency of cinemas and screens continues to decline.

< strong > the industry is in urgent need of upgrading < / strong >

"Why don't cinema investors respond to such data and work hard on subdivision and accuracy? Cinema investment projects are still in demand, but ignore more accurate research and analysis guidance for the market. " Liu Jia said that he believes that cinema operators should be vigilant and not blindly pursue a large total amount and large scale.

however, the continuous construction of cinemas and the increase in the number of screens may be difficult to change in a short period of time. It is reported that due to the needs of their own transformation, and attracted by the potential of cinema chains and the film and television industry, many real estate developers are scrambling to join in the construction of cinema lines: Taihe Group's first Taihe Cinema in Beijing opened in July this year; Poly Group's Poly Film Holdings holding Wanhe Cinema Line, and acquired Star Group in March to obtain the cinema resources behind it. Evergrande has opened a total of 103 studios by the end of September, and plans to increase the number of studios to 500 in the next three years.

in this regard, Wang Zheng, chief media analyst at Everbright Securities, believes that the era of rapidly expanding the number of screens to boost the box office has gradually passed, and the operation and management of cinemas must be raised to a new height. especially after the market has gone through a bubble that has lasted for several years, some small cinema lines that lack brand advantages will face mergers and acquisitions. Liu Jia also said: "improving business efficiency, optimizing the profit model of cinemas and cinemas, and maintaining sustainable profit growth are the core competitiveness of cinemas."

at present, the focus of cinema competition is still focused on differentiated management, but in fact, this "differentiation" is not obvious.

according to the plan of Hengdian Film and Television, most of its new cinemas are located in cities below the third tier. Hengdian Film and Television said that in recent years, the domestic moviegoer market has gradually sank, the cinema market in first-tier cities is becoming saturated, and the number of cinema visitors in second-and third-tier cities has maintained rapid growth. The layout of cinema construction projects focusing on second-and third-tier cities has broad market prospects, and the completion of the project will help to enhance the company's coverage and control in the cinema market. However, after comparison, it can be found that not only Hengdian Film and Television, Jinyi Film and Television, Wanda Cinema Line, etc., have also extended the strategic layout to second-tier, third-tier and even fourth-tier cities. In the layout of the industry, the major cinema lines are actually becoming more and more consistent, not to mention differential competition.

the report of the 19th CPC National Congress pointed out: "Socialism with Chinese characteristics has entered a new era, and the principal contradiction in our society has been transformed into a contradiction between the people's growing needs for a better life and unbalanced and inadequate development." When it comes to the field of film projection, it shows the contradiction between the development trend of fine market demand and the extensive and unitary management of commercial theaters. It can be predicted that in the future, the upgrading of China's cinema industry still has a long way to go. In addition to relying solely on the box office, how to improve the comprehensive strength of cinemas is more important for operators.

Edit: mary