A year ago, Huanxi Media sent shock waves through the industry when it suddenly decided to cancel theatre screenings and debut the hotly anticipated flick Lost in Russia free online instead, as the onset of the deadly coronavirus forced Chinese cinemas to close.
That was on the first day of the Year of the Rat, when few could have predicted the carnage that was to follow as the virus grew to global pandemic proportions, gutting just about every industry that is not web-based .
As the Year of the Ox gets under way, the studio’s bet looks sound as movie streaming services have gone from strength to strength amid plummeting box-office revenues.
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Huanxi’s chairman has taken the opportunity to unveil the extent of his ambitions – to build the movie streaming platform into China’s answer to Disney+.
“Our revenue from the theatre box-office is top-notch, but it is not our goal. We are using the money we raked in from theatre distribution to grow our movie streaming platform Huanxi.com. Our ultimate goal is to become China’s Disney+,” said Dong Ping, who co-produced the Oscar-winning movie Crouching Tiger, Hidden Dragon .
“When the streaming site is fully geared up to be profitable, we will not pay much attention to how much we can make in the cinemas any more.”
The Hong Kong-listed studio, founded by Dong and directors Xu Zheng and Ning Hao in 2015, contributed two of the top five box-office hits last year in China, which overtook the US as the world’s biggest cinema market for the first time.
Among its shareholders it counts some household names of the Chinese film industry, including Zhang Yimou, Wong Kar-wai and Peter Chan Ho-sun, which means these directors’ films are exclusive to the firm. But its goals go far beyond competing for higher cinema receipts.
“Streaming online will be the future. Internet and tech has spilled over to every aspect of our lives, from retail to cars, and the film sector will not be the exception,” Dong told the Post. “Huanxi wants to be the best platform, streaming the best films our directors make and that we select.”
This dedication to the cause became clear when it chose to stream its Spring-festival blockbusters last year on Huanxi.com and several online platforms operated by ByteDance, including Tik Tok, free of charge.
The titles included Lost in Russia, which Huanxi produced, one of seven films pulled from cinemas during Lunar New Year 2020 as China grappled with the coronavirus and cinemas were forced to close.
Huanxi received 630 million yuan (US$97.5 million) from ByteDance, a long way short of the estimated 2.4 billion yuan it might have fetched in theatres.
“We can always make more money from top-notch films later, but the chance to show Huanxi.com to the public is one of a kind. Covid-19 accelerated our plan to move forward on our streaming platform,” said Dong.
Huanxi’s gamble has paid off. On the back of the traffic brought by Lost in Russia, Huanxi.com saw its downloads soar to 27 million last year, over 10 times the number in 2019. It hosts some 5 million paid members, up by 170 per cent year on year.
Huanxi reported a net profit of HK$20.3 million (HK$2.62 million) in the six months to June last year thanks to its streaming business when all theatres were shut because of Covid-19. Most giant studios, like Huayi Brothers, lost millions in the same period.
China’s box office revenue shrank nearly 70 per cent to US$3.06 billion in 2020. PwC expected the figure would only recover to US$8 billion by 2024, and “would take a longer time to return to levels seen before the pandemic”.
While the pandemic has been a disaster for cinemas, it has benefited movie streaming platforms enormously. Revenue from subscription videos on demand hit nearly US$10 billion in 2020, for the first time surpassing box-office spend in China, and is expected to reach US$16 billion by 2024, according to PwC.
The same thing is happening globally, even faster.
The world’s largest movie maker, Warner Bros, announced in December that it will release all 17 of its 2021 films on HBO Max while simultaneously showing them in theatres. Disney said its widely expected Raya and the Last Dragon will debut in theatres and on Disney+ at the same time on March 5.
“[The trend of] films going to streaming platforms is irreversible, particularly after Covid-19. In the future, we may not even use box office receipts to describe how successful a movie is because tickets sold in the theatre booths are no longer the major revenue generator,” said Wilson Chow, global technology, media and telecommunications leader at PwC.
“For a movie studio, the earlier it embraces streaming, the better position it is in.”
Huanxi seems to be the early bird in China.
In 2020, it added 500 hours of new films to its streaming platform, Huanxi.com, translating to roughly one new movie every two days. It aims to offer a new film every day, and to boost its loyal paid members up to 50 million in the next two to three years.
“People like to describe Huanxi as China’s Netflix. I would say we are heading towards Disney+. We are building a boutique store with exquisite content, rather than a supermarket with a huge variety of things, like Netflix,” said Dong.
“We only target 50 million people out of 1.4 billion people in China because we have a clear and niche target – well-educated movie fans, who like to pay for good films or pay for film festivals or documentaries.”
Its progress was accelerated when Bilibili – seen as China’s answer to YouTube – bought a nearly 10 per cent share in Huanxi Media for HK$66 million last August to release some exclusive films simultaneously on both Bilibili and Huanxi.com. The move helped Huanxi reach a younger Chinese audience.
One Second, the latest film from China’s most famous director, Zhang Yimou, for example, was available within a month on both Huanxi.com and Bilibili after being released in the theatres.
“It will not be long before we see the next Crouching Tiger, Hidden Dragon born on a streaming platform, and that could be on Huanxi.com,” said Dong.
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