Chapter 552

Chapter 552

Chapter 552

To put it bluntly, the problem of Orange Sky Golden Harvest and Star Media is a funding issue.

Unsuccessful investments in film and television projects have resulted in a single profit model. The theater chains do not have real estate properties of their own, and most of the cinemas are rented venues, which keeps their costs high.

After all, it is still 2016. Although the domestic real estate market has experienced some twists and turns in recent years, it is still on an upward trend overall.

As housing prices rise, the rent of commercial real estate will naturally increase year by year. Even if a contract for several years can be signed at a time, it is impossible for the rental price to remain the same as in the past.

Therefore, it is normal for these two companies to face difficulties with tight cash flow.

According to the intelligence information collected by the Galaxy Group, both companies are now facing the risk of broken capital chains and huge debts.

Among them, the cold winter of Star Media seems to come earlier than that of Orange Sky Golden Harvest.

Since the beginning of this year, it has been revealed that Star Cinema has been unable to screen new films due to overdue distribution payments, and some cinemas in remote areas have also been facing operational difficulties.

It is foreseeable that in the future, Star Media will face the problems of arrears of property fees, water and electricity bills, employee wages, salary and rent, and even ticket payments to China Film Digital Film Development Co., Ltd., which will result in the suspension of issuance of secret keys to most of Star Media's cinemas and the inability to play new films.

If no other company takes over, the final outcome of Star Media Entertainment will probably be the suspension of operations of many cinemas, the suspension of trading of Star Media Holdings and its removal from the Hang Seng Index.

Well, according to Wang Hao’s memory from his previous life, it seemed that Xingmei was even worse off than Orange Sky Golden Harvest.

So when the Galaxy Group came to visit this time, Xingmei was also very enthusiastic about it.

Because of the current situation of Star Cinemas, there are actually only a few domestic cinema chains that can take over.

Needless to say, Wanda and Dadi have relatively ample cash flow. Then there are the three Internet companies, Alibaba, Tencent, and Baidu. The only one left is Galaxy Group.

Galaxy Group is well aware of this, and the acquisition proposal it proposed is far more stringent than the one for Orange Sky Golden Harvest, and the acquisition price is extremely low.

However, Galaxy Group also stated that it could take over part of Star Media Cinemas' debts, including TVB's US$8300 million, by converting debt into equity, which made Star Media and their creditors very excited.

Because everyone can see that if Galaxy Group takes over these cinema chains, it will undoubtedly be more reliable than Star Media.

For a long period of time afterwards, Galaxy Group had been busy negotiating the acquisition with Orange Sky Golden Harvest and Star Entertainment. The parties were pulling each other over their respective interests, almost to the point of fighting for every last ounce of profit.

But overall, Galaxy Group has more advantages in negotiations.

After all, in today's environment, Galaxy Group still has a lot of room for choice in cinema chain acquisitions, while Orange Sky Golden Harvest and Stellar Entertainment cannot afford to delay.

In addition to cinema chains, Galaxy Group is also in contact with companies in other entertainment industries.

For example, Wuzhou Film Distribution Co., Ltd. was established in 2014. It is a company integrating film marketing planning and distribution. It was jointly established by Wanda Film and Television Media Co., Ltd., Dadi Times Film Distribution Co., Ltd., Guangzhou Jinyi Film and Television Media Co., Ltd. and Hengdian Cinema Chain Co., Ltd. It owns the distribution rights of domestic and imported films and is a large company mainly engaged in global cinema film distribution business.

Just looking at this introduction, isn’t it amazing?
However, in 2016, the operating income of Wuzhou Distribution was halved year-on-year, from 12.61 billion yuan to 6.5 million yuan. Its core problem is the same as that of Orange Sky and Star Media, which is the problem of blood-making. There are too few good movies.

Basically, all the current high-grossing movie records in China have been broken by Galaxy Group.

It is also foreseeable that in the future, Galaxy Group's [Galaxy Cinematic Universe] will continue to exert its strength, and its works will continue to create brilliance.

But the problem is that Galaxy Group has its own distribution company, and it is quite powerful. It can even distribute its own films to South Korea, Japan, Southeast Asia, Europe and the United States.

And although Wuzhou has the right to distribute imported films, for true Hollywood blockbusters, the first choice is still the distribution company of Huaying Group.

So even though Wuzhou has the support of several major cinema chains, they can only pick up some mediocre works.

As for using a few major cinema chains to monopolize competition and reduce the number of screenings by not allowing Wuzhou to distribute films?

Are you kidding? Cinemas also need to make money, okay? These are different departments, and it's a joint venture. There is competition among the four cinema chains. How can they work together to monopolize the market?

Therefore, when Galaxy Group contacted Wanda Films and expressed its intention to acquire a stake in Wuzhou, these cinema companies welcomed it with open arms. They were even not so opposed to Galaxy Group's plan to acquire Orange Sky Golden Harvest and Stellar Media and try to get involved in the cinema industry.

This is also part of the Galaxy Group's plan.

After all, although Galaxy Group's creative and profitable capabilities are top-notch in the country and world-class, it is also impossible for it to monopolize the entire film and television entertainment industry. This is not allowed.

Therefore, in this chaotic era of the Warring States Period of entertainment, while developing oneself, it is also natural to form alliances.

Real estate and cinema capital, for example, is far more suitable for Galaxy Group to cooperate with than Internet capital.

On the one hand, these real estate cinema capitals are at the lowest end of the entire film and television industry chain, while the Galaxy Group is at the upstream end of the film and television industry chain. There is still a certain buffer space between the two, and the conflict of interest will not be so intense.

Secondly, Wang Hao has the insights of later generations and knows that the real estate cinema chain capital will not have an easy time in the future. This will not be such a big threat to the Galaxy Group, and there is no need to worry that the other party will turn the tables one day.

Even for a company like Wanda Group, Galaxy Group still has certain opportunities to pick up bargains and buy at the bottom in the future.

Therefore, compared to acquiring a cinema chain, investing in Wuzhou Distribution is undoubtedly much simpler.

Galaxy Group was attracted by the relationship between Galaxy Films and the four major cinema chains and the scheduling data of 80% of the cinema chains in the country. This can not only help Galaxy Pictures to promote its films accurately, but also achieve in-depth cooperation with Tao Piao.com.

Wuzhou Distribution also took a fancy to Galaxy Group’s strong creative ability and future high-quality films.

The two parties hit it off almost immediately and quickly reached a cooperation intention.

Since the beginning of this year, that is, in the middle of 2016, the regulatory policy has shifted, and new regulations on restructuring, refinancing, and reduction of holdings have been introduced one after another, and mergers and acquisitions have entered a strict regulatory cycle. Therefore, Galaxy Group did not implement the strategic equity swap plan, and was prepared to wait, but first chose the financial equity plan, subscribing to 2% of Wuzhou's equity with 20 million yuan in cash.

Because it is a financial investment, Galaxy Group will in principle only send one observer director to Wuzhou Distribution, who will not participate in the company's daily operations but can obtain financial statements and strategic planning information.

At the same time, Galaxy Group obtained the priority subscription rights issued by Wuzhou, and can follow up the investment in proportion in subsequent financing to ensure that the equity is not diluted.

If Wuzhou fails to achieve an IPO before the end of 2018, Galaxy Group has the right to require the original shareholders to repurchase shares at an annual interest rate of 8%.

It can be said that at present, this is just a normal business investment behavior, so it has not caused any waves inside or outside the circle.

Also failing to make any waves were the collaborations between Galaxy Group and Shenzhen Appotronics Co., Ltd., Shenyang Heshuo Film and Television Equipment Co., Ltd. and Shanghai Yaomu Network Technology Co., Ltd.

Compared with the previous ones, these three are even less famous inside and outside the circle. Not to mention ordinary people, even many people in the circle have never heard of their names.

But in fact, these three companies are also very well-known. Among them, Shenzhen Appotronics Co., Ltd. is a leading domestic semiconductor light source technology company.

They have already occupied an important position in the projection display field in 2016, and their ALPD laser display technology is widely used in movie projectors and high-end film and television production equipment.

The company is now in a period of rapid expansion and wants to seek opportunities to cooperate with film and television producers to develop customized equipment and expand its business.

It just so happened that Galaxy Group also wanted to strengthen its own technical reserves in high-end shooting equipment and cinema projection systems, and at the same time prepare for the upgrade of cinema projection equipment after the subsequent acquisition of Orange Sky Golden Harvest and Star Cinema Line.

So after mutual inspection, the two sides quickly started specific project cooperation.
Then there is Shenyang Heshuo Film and Television Equipment Co., Ltd. You can tell what this company does just by listening to the name. They are a leading supplier of film and television equipment in Northeast China. In 2016, they have participated in a number of provincial integrated media center equipment procurement projects, mainly providing lighting hoists, digital direct boxes, slide rail brackets and other professional equipment for film and television production.

Although it was established relatively late, its customization capabilities in the fields of acoustic design and stage design can complement Galaxy Group's equipment needs in the construction of film and television bases, and is especially suitable for large-scale real-life shooting projects.

There is also Shanghai Yaomu Network Technology Co., Ltd., which was established later. It only received 2016 million angel financing from Galaxy Group in January 1. Now at the end of the year, it has received a follow-up investment in the A round from Galaxy Group.

Their company mainly produces special effects video tools for mobile terminals. Although it has been established for a short time, its technical team comes from Adobe and Autodesk, and its core algorithm is innovative in the field of mobile real-time rendering.

To put it simply, users can use AI algorithms to generate Hollywood-level special effects on their mobile phones.

This technology is highly compatible with the Douyin APP that Galaxy Group is currently vigorously developing.

Although Galaxy Group is also conducting research on video special effects AI, its main focus is still on more commercial and professional large-scale film and television production. It does not pay much attention to such specific small scenes. Investing in Shanghai Yaomu Network Technology Co., Ltd. happens to be a certain supplement to the company's ecology.

Anyway, 2016 was an extremely busy year for Wang Haodu, and it was also a year of vigorous development and expansion for the Galaxy Group.

And as the chaos in the entertainment industry continues and the intensity of capital competition increases, this kind of company expansion will continue for a long time in the future.

After all, Wang Hao can be said to be the one who knows best how troublesome the "film and television winter" will be for China's film and television culture industry in the next few years.

Before 2016, capital from industries such as real estate and the Internet poured into the film and television industry on a large scale, which indeed promoted the great development of the entire industry.

The entire film and television market is thriving, and directors, stars and others in the industry are making a fortune.

But beneath this prosperity, there are also many hidden dangers and landmines.

Not all film, television, culture and entertainment companies can be like Galaxy Group, which focuses on developing technology, building a film industrialization system, and paying attention to film and television creation.

The influx of hot money has led to the prevalence of abnormal ecosystems such as "sky-high pay" and "yin-yang contracts". For example, a top star's pay for a single drama was as high as 1.2 million yuan, accounting for more than 70% of the total production cost, but the tax he paid was only tens of millions or hundreds of millions. There are countless similar cases.

The booming market has also led to a structural imbalance in supply and demand, with overcapacity in film and television productions nationwide and a surge in the number of cinema chains. In 2016, the number of screens nationwide exceeded 4, but the average daily box office per screen has dropped from 2015 in 2.3 to 1.8 this year.

In addition, the content of other film and television companies except Galaxy Pictures has begun to become homogenized, their investment works rely on the star effect to cause word-of-mouth controversy, and the subject matter is limited to comedy, reality, patriotism, etc.

All these have led to the loss of young audiences, and watching movies as a form of entertainment is no longer a must-have in daily life.

And this is just the internal cause.

In terms of external factors, policy supervision will begin to experience a transition from chaos and unnecessary to reshaping and tightening in the future.

Tax standardization, stricter content review, and tighter capital supervision will all be problems that Chinese film, television and entertainment companies will face in the future.

Therefore, from 2016 onwards, entertainment companies will see shrinking market capitalization, reduced financing, withdrawal of hot money, and delisting and bankruptcy.

In this regard, Wang Hao often mentioned it in various department meetings within the Galaxy Group and in the summary reports of Nian Di's work tasks, and repeatedly reminded and constantly sounded the alarm for company employees and senior leaders, reminding them to pay attention to the upcoming economic downturn cycle and to be cautious in company operations and decision-making.

Fortunately, as for the cold winter of the film and television industry, Xinghe Group has Wang Hao, a reborn person, at the helm, and has made a lot of preparations in advance.

For example, the large number of IP copyrights that began to be accumulated ten years ago, high-value key projects such as the "Galaxy Cinematic Universe", "Shushan Cinematic Universe", "Fengshen Animation Universe", and the "Black Myth" series, a complete film industrialization system, a full industrial chain from front-end to back-end, sufficient cash flow, a good and active corporate culture, united employees under high welfare conditions, and a wise leader.

It can be said that Galaxy Group will also face various industry problems brought about by economic cycles in the future, but compared with other peers, it will undoubtedly be much more calm.

It's like when the wind is blowing, even pigs can fly to the sky, but only when the tide recedes can you tell who is swimming naked.

Not only did the Galaxy Group not swim naked, it had also already built a relatively sturdy ship and stored enough food on it.

What they need to do now is to take advantage of this opportunity of receding tide to develop counter-cyclically, salvage the equipment and wealth of those who are drowning while swimming naked (enterprises), further consolidate their foundation, make up for their shortcomings, and prepare for the future resurgence.

(End of this chapter)