Chapter 551 Crisis and Opportunity

Chapter 551 Crisis and Opportunity

Chapter 551 Crisis and Opportunity

"I have also learned about Orange Sky Golden Harvest's investment in film and television projects in the past two years. Last year's "Midnight Going", as a suspenseful Hong Kong film, only had a Douban score of 3.2 points and a box office of only 780 million Hong Kong dollars.

There is also a remake of "Star Wishlist: Love Again", which only earned 520 million in the mainland.

As for this year, Orange Sky Golden Harvest has only three projects in reserve, and there are no top IPs, which is not acceptable.

In the end, the film and television industry still relies on works to speak for itself. How can Orange Sky Golden Harvest regain the confidence of shareholders when it has no works now? "

In the conference room, Wang Hao spoke eloquently about the current operating status of Orange Sky Golden Harvest. His high-level analysis made a number of Orange Sky Golden Harvest executives, including Wu Kebo, nod their heads frequently.

However, both Wu Kebo and Wang Hao knew in their hearts that his words were just a disguised denial of Orange Sky Golden Harvest so as to lower the price for subsequent acquisitions.

For Wu Kebo, he had no intention of running the company well, nor did he help the development of China's film and television culture industry, and he loved and pursued film and television culture.

Wang Hao is also aware of this. According to the information collected by their company, Wu is a typical capital operator and a thorough businessman.

This can actually be seen from the time he founded Orange Sky Entertainment to his subsequent management operations.

For example, when he acquired Golden Harvest, it was not "relying on sentiment to save Hong Kong films" as the outside world imagined. Just by relying on the backdoor listing, Orange Sky Entertainment was one step ahead of Light Media, Huayi Brothers, and Galaxy Entertainment to become the first listed entertainment company in the mainland.

As for packaging a company and then selling it after going public, that is actually Wu Kebo’s plan.

Therefore, after completing the acquisition, relying on the large amount of funds raised from the listing, the popular Orange Sky Golden Harvest began to increase the expansion of its mainland business.

On the one hand, the news was released that Golden Harvest would restart its film production and investment, "planning to produce 3-4 small and medium-sized films every year in the future. The company will also participate in investing in huge film investment projects with great potential."

On the other hand, the company is expanding its cinemas, "hoping to add 200 screens in two years."

It seems like a good idea, but the boss's goal is to sell the company. Without a viable business philosophy and corporate culture, how can the people below be united? It will just get away with it.

Therefore, Orange Sky Golden Harvest's development plan became full of problems during its actual implementation.

The lack of core film talent and miscalculated cinema expansion caused Orange Sky Golden Harvest to fall directly from being the first listed entertainment company.

But as the saying goes, "A tiger dies but its frame remains standing", and Orange Sky Golden Harvest is still alive and well. To some outsiders, this company is still impressive and is one of the big companies in the entertainment industry.

Today, Orange Sky has spent ten years to establish the Golden Harvest cinema brand in mainland China. Now it’s time to sell the fattened duck at a good price.

In fact, before the Galaxy Group came, there had been frequent reports of changes in Orange Sky Golden Harvest.

At the beginning of the year, Jiaxing Xinye, Huiying Investment and Qingzhong Tongchuang Asset Management planned to invest 2 million yuan, 1.5 million yuan and 5000 million yuan respectively to subscribe for a total of 13.79% of the expanded shares of Orange Sky Golden Harvest Cinemas (China).

Among them, Jiaxing Xinye is a joint venture fund under CITIC Securities, Huiying Investment is an investment entity under Weying Times, and one of the major shareholders of Weying Times is Wanda.

In less than half a year, Orange Sky Golden Harvest terminated its subscription agreement with Huiying Investment and Qingzhong Tongchuang.

Now Galaxy Group has come to see if there is any chance. If the negotiations fail, then the future will probably be the same as in the original time and space, with all of its mainland cinema industries being acquired by Nanhai Holdings at a price of 33.8 billion yuan.

This figure is definitely a high premium. After all, the total market value of Orange Sky Golden Harvest is only HK$18.9 billion (approximately RMB 16.76 billion). Nanhai Holdings almost spent twice the price to buy the loss-making Orange Sky Golden Harvest cinema business.

However, Dadi Cinema, a subsidiary of Nanhai Holdings, is the second largest cinema investment and management company in China. It owns 350 cinemas in operation across the country, with 1911 screens, covering 164 cities.

If Orange Sky Golden Harvest is acquired, plus the company's own cinemas and screens, Dadi Cinemas will have 426 cinemas and 2442 screens across the country. Not only will it surpass the leading cinema chain Wanda Cinema Line in terms of the number of cinemas, but the number of screens will also be close to Wanda Cinema Line's 2789.

Moreover, Dadi's cinema layout is mainly focused on second-, third- and fourth-tier cities, while Golden Harvest's market layout is mainly focused on first- and second-tier cities. Therefore, the acquisition of Orange Sky Golden Harvest will be a very good supplement to Dadi's market layout.

Of course, whether it is Wanda or Dadi, the message behind the acquisition of Orange Sky Golden Harvest is actually only one, that is, under the current circumstances, the wave of mergers and integrations of cinema companies is about to begin.

And if we go a step deeper, this is actually also a land grabbing and monopoly movement of capital in the film, television, culture and entertainment circles.

This is just like the six major Hollywood companies. China's film, television, culture and entertainment industries are developing rapidly today. As the market expansion period is coming to an end, it will naturally enter the next stage.

At present, there are actually only a few big players in this industry.

Dadi Cinema and Wanda occupy the screening end of the downstream film and television industry. Backed by real estate capital, they empower real estate with culture and have ample funds on hand.

In particular, Yu Pinhai, the boss of Nan Hai Holdings, the parent company of Dadi Cinema, was once a prominent figure in the Hong Kong capital market. One of the directors of Dadi Cinema is Shum Jianxun, a famous Hong Kong filmmaker and former boss of D&B Films, so Dadi Cinema also has some Hong Kong background.

In addition, the three major Internet new capitals, Tencent, Alibaba, and Baidu, are eyeing the entertainment market covetously. They are in urgent need of traffic as nutrients for their own development and are extending their tentacles to every corner of this industry.

After that, there are the old forces in the cultural and entertainment industry, such as Huaying, Moying and other state-owned film and television companies, which are the mainstay and ballast.

As for private film and television companies, except for the Galaxy Group which is the only dominant one and can compete with the big capitals mentioned above by relying on excellent content creation, mature film industrialization system and advanced and comprehensive development, other companies like Huayi, Orange Sky, Light Media, Bona and others have almost all gone downhill and have to choose to sell themselves and join the aforementioned companies.

Real estate capital, Hong Kong circle, Internet, state-owned enterprises, Galaxy Group, these are the new circles in China's film and television cultural industry today.

They have long since completed the disintegration of the Beijing circle, Northwest circle, Shanghai circle, and Hong Kong circle in China's past film, television, culture and entertainment industries, forming a more complex state under the capital system.

This is like the Spring and Autumn Period and the Warring States Period, when heroes vied for supremacy and there was both competition and cooperation. It was the most chaotic time, but also the most prosperous time. It just depended on who would be eliminated first and who would have the last laugh.

Well, the first company to be eliminated has already appeared. Orange Sky Golden Harvest is now lying on the chopping board, coveted by Wanda, Dadi, Galaxy and other companies.

After the initial back and forth, Galaxy Group finally came up with a rough cooperation plan. Galaxy Group required Orange Sky Golden Harvest's parent company to assume its own HK$6 million debt and reduce the asset-liability ratio of the acquisition target from 89% to 41%, which would release HK$2.1 million in cash flow.

此外估值锚定也以2016年3月微影时代入股时的29亿元估值为基准，不过可以溢价10%至31.9亿元。

Of course, these are just preliminary intentions. Business negotiations cannot be concluded in one go, and there will be repeated twists and turns later.

However, with the intervention of Galaxy Group, it may not be so easy for Dadi Cinema to acquire Orange Sky Golden Harvest Cinema Line as before.

As for whether the acquisition of Orange Sky Golden Harvest is cost-effective, this is not a problem for Galaxy Group.

After all, because of its focus on film and television production, Galaxy Group did not make much involvement in cinema chains and mainly relied on Huaying Group and Wanda Pictures.

If they can now acquire Orange Sky Golden Harvest’s cinema chain, then the 52 core business district cinemas they own in the Yangtze River Delta and the Pearl River Delta will be able to provide a boost to the Galaxy Group’s industrial chain layout, making it more complete and not constrained by the cinema chain.

Moreover, a large part of the reason why Orange Sky Golden Harvest is doing poorly is that the quality of the film and television works it invested in and controlled was not good and the box office results were terrible, which is in sharp contrast to Wanda and Dadi.

But Galaxy Group has no shortage of good film works. The film works it invests in will be released in theaters, which can greatly reduce operating costs, and good works can also attract more audiences to the cinema.

Of course, having good works is only one aspect. Wang Hao has a very clear plan for the group company's theater development strategy. Now it all depends on what decision Orange Sky Golden Harvest will make?

Anyway, the bait has been laid, and during the negotiation just now, Wang Hao also made a promise.

As long as Orange Sky Golden Harvest sells its cinema business to Galaxy Group, Galaxy Group will also help Orange Sky Golden Harvest Entertainment complete the transformation from heavy assets to light assets.

In other words, in the future, Galaxy Group can set aside a certain investment share for its five film and television projects to be included in Orange Sky Golden Harvest.

After confirming the acquisition intention with Orange Sky Golden Harvest, Wang Hao went to Star Media Group on the 6th floor of Building D, Wantong Center, No. 19A Chaowai Street, Chaoyang District.

Like Orange Sky Golden Harvest, Wang Hao approached this company because he was attracted by their cinema industry.

As a large media company founded in 2001, Stellar Media was also a force to be reckoned with in China's film, television and entertainment industry during its peak period.

It owns more than 30 companies and owns the entire film and entertainment industry chain in China, including film and television production, theater distribution, cinema investment, advertising production, cinema back-end product development, film and television bases, artist and model agency, etc. It was once on par with Huayi, Orange Sky, and Galaxy.

Especially in terms of cinema chains, if Orange Sky relies on the acquisition of Golden Harvest and uses well-known Hong Kong brands to enter the market, then Star Media mainly relies on official power.

In 2002, Stellar Media established China's first cinema chain in a joint venture with Huaying Group. It has been ranked first in China's cinema box office for three consecutive years and has a considerable share of the Chinese film box office market.

In terms of cinema investment, Star Media also invested in and built the first modern five-star multi-hall cinema in China - Shanghai Star Media CP International Cinema.

Star Media’s five-star cinemas are located in central cities such as BJ, Shanghai, Tianjin, Chengdu, and Kunming. They are among the best in terms of cinema quality and quantity, and all of them take a high-end approach, forming a staggered competition with Orange Sky Golden Harvest.

However, as mentioned before, in the new era, there are always some people and companies that cannot keep up with the ever-changing pace.

随着10年往后华夏影视娱乐产业的飞速发展，2013年星美院线就从原本只有83家影城，变成了2015年的130家，然后是现如今2016年的217家。

It can be said that the strategy adopted by Star Media Cinemas in recent years is rapid expansion. When the cinema market in first- and second-tier cities is basically saturated, Star Media has been scrambling to grab land and quickly move to third- and fourth-tier cities.

Even Star Media stated that by the end of 2017, their goal is to reach 365 cinemas and 2290 screens.

However, in sharp contrast to the expansion of Star Media, the growth rate of domestic movie box office has begun to slow down due to restrictions on ticket subsidies.

Well, in this regard, the box office performance of Galaxy Group cannot be used as a reference. After all, they are different from other film and television companies.

Anyway, if we exclude the movies released by Galaxy Group, the box office results during the recent summer and National Day holidays were actually not ideal.

Not long ago, even La Peikang, the boss of Huaying Group, specifically asked Wang Hao, asking his company to shoulder more responsibilities, to make more movies, and to release them more frequently, so as to fill several important schedules every year.

Similarly, Wanda had actually communicated with Galaxy Group.

Nowadays, as Hollywood special effects blockbusters are becoming less and less attractive to domestic audiences and local films are facing a creative dilemma, the market is really relying on Galaxy Pictures to save the day.

Under such circumstances, the surge in the number of cinemas and the fact that it has not been able to invest in good movies for several years have put tremendous pressure on Star Entertainment's operations.

In 2016, SMI achieved revenue of HK$37.89 billion, a year-on-year increase of 13.1%, while suffering a loss of HK$2.67 million, making it the only loss-making company among the eight listed cinema companies.

Among them, the acquisition and construction of new cinemas led to a rapid increase in expenses, and the booming real estate market caused rents to increase year by year, so that the operating costs of cinemas increased significantly.

In addition, its overall revenue is still overly dependent on box office revenue, and coupled with the slowdown in the film and television market, its box office revenue in 2016 fell 18% year-on-year.

As of the second half of this year, Star Media Holdings' cash and bank deposits were approximately HK$2.07 million, but its net current liabilities had reached HK$19.82 billion.

It can be said that the problem of tight capital chain of Star Media Entertainment is gradually becoming prominent. Judging from the data, this is actually the same problem as that of Orange Sky Golden Harvest.

Actually, there are two points. First, the two cinema companies do not have good content-generating capabilities. Whether they produce their own works or participate in investments, they have no outstanding works. Their profit model is single and they can only rely on the box office share of the cinemas.

Second, unlike Wanda and Dadi Cinemas, they do not have their own commercial real estate, which can reduce the most important rental costs of cinemas. This is actually the most fatal point.

(End of this chapter)