Text | Mirror Entertainment, Author | Chestnut wine
Recently, film and television companies have successively released their financial reports for the first quarter of 2024, with varying performances. Among the 16 film and television companies counted by Mirror Entertainment, 8 had a year-on-year increase in net profit, accounting for half, of which Bona Films, Baina Qiancheng and other companies turned losses into profits.
It is worth noting that compared with the overall performance, although the revenue of Wanda Film, Guangguang Media, and China Film has reached more than 1 billion, on the whole, the financial situation of film and television companies in the first quarter is not surprising. From a numerical point of view alone, although many companies are profitable, there are as many as 10 companies with a net profit of less than 50 million, especially among the film and television companies that focus on drama creation, due to the lack of drama hits in the first quarter of this year, almost none of the related companies have too bright performance.
Guangguang relied on "Article 20" to earn more than 700 million, but betting on the explosion did not necessarily boost performance
Judging from the financial report data, since in the first quarter, the Spring Festival file was the largest box office in the reporting period, and the box office performance of the Spring Festival film also had a greater impact on the performance of each company.
On the one hand, companies such as Wanda Film, Hengdian Film and Television, which mainly focus on cinema revenue, have achieved good results under the normalized development of the industry. Among them, Wanda Film's revenue in the first quarter exceeded 3.8 billion, much higher than the revenue performance of other companies in the same period. However, due to the fact that the overall market did not grow much, and the corresponding performance was more stable, during the reporting period, Wanda Film's revenue and net profit were almost the same as the same period last year.
The emergence of such a trend once again reflects the weakness of Wanda Films in terms of content in the past two years. According to the 2023 financial report released at the same time, the company's theater-related revenue from ticketing, advertising, and merchandise sales accounted for nearly 80%, while revenue from film production accounted for only 2.29%. However, this situation is likely to improve with Wanda's change of ownership, and in 2023, China Confucianism, which will take over Wanda, will rely on the layout of "Disappearing Her" and "The Annual Meeting Can't Stop!" "Keep You Safe" and other films, the net profit reached 690 million yuan, and the chemical reaction generated by the strong alliance between the two sides is expected to be more obvious in the performance of the two companies in 2024.
On the other hand, the performance of Guangguang Media in the first quarter is really eye-catching, during the reporting period, the company's revenue reached 1.07 billion yuan, and the net profit was as high as 425 million, a year-on-year increase of 248.01%, and its performance growth was mainly due to its Spring Festival layout of the movie "Article 20".
According to Guangguang's previous announcement, when the box office of the film reached 1.342 billion, the company's expected revenue range was 4-460 million yuan, according to this calculation, the final box office of "Article 20" fell at 2.454 billion yuan, and the income of Guangguang from the film was about 731-841 million yuan. In other words, a hit movie supported about 70% of Ray's revenue in the first quarter.
In contrast, other film and television companies that have laid out Spring Festival files have not had such a strong explosive effect. In the same quarter, the revenue of Chinese films was almost the same as that of the light, and during the Spring Festival, the company also participated in 4 films, including "Hot and Hot", "Flying Life 2", "Bear Infested: Reversing Time and Space" and "Article 20", but the net profit generated by it was only 97 million yuan, which opened a big gap with the light. The main reason for this is that China Film has focused on the route of "casting a wide net" in the past two years, participating in a large area but not having many main controls, which has correspondingly lowered the profit margin, and its revenue is more dependent on the distribution and exhibition business, according to the 2023 financial report, the company's gross profit margin from the creation sector is only 0.53%, much lower than that of other business segments.
The revenue of drama series is affected by cyclicality, and the business model is further becoming market-oriented
Affected by the volatility of the development of the industry, it has become very common for film companies to deploy dramas and drama companies to participate in films.
In 2023, Wanda Film's drama content will accelerate the landing, and according to the financial report data, the company will produce dramas such as "The Three Teams", "Who is He", and "The Most Brilliant Us", and the corresponding drama production revenue will increase by 388.51% year-on-year. In the first quarter of 2024, Wanda's layout of dramas is still continuing, and in addition to the recently aired "My Altay", there are also "Dislocation", "Sifang Pavilion", "Positive Youth" and so on.
Guangguang Media's quarterly report also clearly mentioned that the company's TV drama/online drama business revenue and profit have achieved substantial growth. Among them, the web drama "Dali Temple Shaoqing Tour", adapted from the popular comic "Dali Temple Diary", has been broadcast during the reporting period, and dramas such as "Whisk Jade Saddle" and "Mountain and River Pillow" are also in reserve.
In comparison, the performance of drama companies is mediocre. In the first quarter of 2024, the revenue of Huace Film and Television and Ciwen Media both declined in both directions, and the decline rate was almost more than 80%. On the one hand, the main reason is related to the number of hit dramas, for example, in the same period last year, "Going to a Windy Place" produced by Great Aim became an annual hit, but this year it did not produce dramas with the same influence. On the other hand, the sales of dramas are mainly based on pre-sales, and there is a certain cycle from drama creation, sales, scheduling to revenue recognition, and the content sales of film and television companies are relatively concentrated, and the decrease in the number of projects that recognize revenue during the reporting period will also lead to cyclical fluctuations in the company's performance.
Although the net profit of Huanrui Century, Tangde Film and Television, Baina Qiancheng, etc. has increased significantly, the performance is not eye-catching. In terms of the overall performance of drama companies, the layout of each company around the movie has not had a great impact on the performance, which may be related to the two business models with different contents.
Movies that are mainly based on box office revenue have a higher profit ceiling and are more risky, while dramas sold to TV stations and video platforms are more likely to generate stable income. However, as the membership scale of the video platform continues to expand, the sales model of dramas is also tending to be market-oriented.
In the first quarterly report, Baina Qiancheng once again emphasized a change in the company's agreement: Baina Qiancheng, Dongyang Colorful and Sunshine Mutual Entertainment, a subsidiary of Mango Media, signed the "Supplemental Agreement", agreeing to change the authorized royalty of drama D from the previous total amount of 135 million yuan including tax to 95 million yuan of guaranteed royalty for dramas, and adopt the settlement model of increasing the tiered royalty.
According to the current public information, the show is likely to be a three-way cooperation "Orphans of Mars", and after this adjustment, Baina Qiancheng may lose 5 million to 23 million episode income. This also reflects that with the emergence of more models such as customization, account sharing, and ladder authorization, the sales model of "fixed price" in the drama industry is still further weakened.
PropNex is trying to find a new direction, looking for a "second curve" as the main trend
Whether it is a drama company entering the film market, or a film company diverting its energy to enter the drama market, in essence, film and television companies are actively adjusting their revenue structure in the face of changes in the general environment to enhance their ability to resist risks.
Since 2022, Bona Films' performance has not been satisfactory, especially in 2023, the company's net profit will also show a large loss of 550 million. In the face of such a trend, in the first quarter report of 2024, Bona Film tried to adjust the direction of content creation, "retain the theme projects that the company is good at, suspend projects that do not meet market demand, and actively explore new themes and new types of projects", so far, Bona Film has nearly 15 projects under development. However, for the new strategic adjustment, the company's cash flow is not optimistic, during the reporting period, the net cash flow generated by its operating activities was a loss of 75.58 million yuan, a sharp decline of 503.25% year-on-year.
What is more noteworthy is that compared with adjusting the development direction of the main business, more is actively exploring the "second curve" that drives performance growth.
Judging from the current progress of each family, after China Ruyi acquired Wanda Films, the layout of the two games has shown a new imagination; Huayi Brothers, Hengdian Film and Television, etc., continue to focus on their own live entertainment projects; Compared with these differentiated plays, more film and television companies will focus on the exploration of short dramas and AIGC in the future.
According to the disclosure in the first quarterly report, Huayi Brothers' shareholding structure has undergone a new round of changes, Tencent has become the company's fifth largest shareholder, and according to the latest cooperation between the two parties, Huayi Brothers and China Literature Group jointly produced the short drama "Hongtian Shenzun", which is expected to start production in May 2024. Based on the new equity relationship, the cooperation between the two parties on short dramas may be more in-depth in the future.
On the other hand, the cooperation between Great Aim and Douyin around short dramas is also deepening. During the Spring Festival this year, the short drama "My Way Home" has a total of more than 200 million views on Douyin, and "The Man Who Keeps Time" and "My Homecoming Wind 2" are also in production, and the cooperation between the two sides is still continuing. Since the beginning of this year, Perfect World has aired three short dramas, "The Great New Year", "The Bright Moon and the Fire" and "The Shining Sister", among which "The Bright Moon and the Fire" has been listed in the TOP1 of Youku's short drama popularity list.
In contrast, there has not been much substantive progress in the exploration of AIGC. At present, companies such as China Film, Guangguang, and Great Aim are increasing their investment in the research and development of AI-related technologies, and in the future, more works created by AI will be launched into the market one after another. According to Bona Films' plan, the film "Legend", starring Jackie Chan and applying AI technology, will be released in 2024. Guangguang also mentioned in a quarterly report that the rapid development of new technologies such as AI has provided a strong blessing for the production capacity of animated films. In a short period of time, the impact of relevant exploration on the industry is still very limited, but one step at a time, we might as well wait for some more time.