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12.01 2017

Capital Aesthetics, Diversified Pattern of Film and Television Financing

Recently, the Fourth Silk Road International Film Festival kicked off in Fuzhou. The forum at the film festival attracted attention from all walks of life as an important section of the festival. Ms. Yang Yunong, co-founder and executive vice president of I Do Culture Corporation, was invited to attend the forum The Relationship between Film Industry and Financial Capital and delivered a keynote speech entitled "Capital aesthetics, diversified pattern of film and television".

Other guest speakers at the forum included Yan Pin, deputy director of August First Film Studio of the People's Liberation Army, Sun Yadan, general manager of Culture and Consumer Industry Investment Department of Jiuding Capital, Yang Shuo, chairman of Beijing QiTaiYuanYang Cultural Media Co., Ltd., Ji Yatai, deputy office director of Beijing Film Institute, among others.

Yang Yunong, co-founder and executive vice president of I Do Culture Corporation, delivers a keynote speech

Cultural confidence

Highlights the tension of Chinese market

At 6:57 pm on November 20, 2017, the annual box office in China hit RMB 50 billion, surpassing the 50 billion yuan mark for the first time in 324 days. The audience surpassed 200 million and 13 films surpassed 1 billion yuan of box office. Viewing person-time reached 1.448 billion, with a year-on-year increase of 19%.

In 2017, the investment scale of film and television market reached about 46 billion, including 25.8 billion in networks, 19.8 billion television stations and 500 million overseas. According to estimates, the total market size of the network terminal is expected to reach 70 billion, the television terminal is expected to reach 30 billion, and overseas market space is 10-15 billion, with the total issue market size of more than 110 billion, which is 2.4 times the current investment market.

"Behind the data is the market tension in negotiations with Hollywood and the attractiveness of the Chinese market to all countries in the world." At the just-concluded forum of young filmmakers, Zhang Hongsen, member of the party committee and deputy director of SAPPRFT, made a profound exposition of the market prospects of the current Chinese cultural industry.

Deep in the film and television industry, Yang Yu’nong deeply feels the rapid development of film and television industry in recent years, and she said in her speech: "Over just 14 years since the reform of China's film industry in 2003, the Chinese film market has expanded by 50 times! I have the honor to become a practitioner in the film industry, and I am very proud."

Forum site

Strategic bundling

I Do Culture Corporation sets off

Generally speaking, the financing businesses of film and television companies are mainly divided into equity financing and project financing of companies. Equity financing of companies includes early equity financing of film companies, mergers and acquisitions financing, listing and financing. Film and television project financing sources are generally divided into internal funds and external funds. For the current film and television industry, about 90% of the funding sources are internal funds.

"I Do Culture Corporation and C2M Media are 'strategic bundling' partners. This year, I Do Culture Corporation participates in the investment in the three films of C2M Media: The One, Peace Breaker, Till the End of the World. The benefit of such cooperation mode is that both parties share benefits and risks together." Yang Yu’nong said, "The packaging cooperation between I Do Culture Corporation and C2M Media in the three projects is to reduce the risk of cooperation in a single projectin essence, and the two parties can integrate advantages of resources and complement each other. Of course, there is a more sentiment reason that I Do Culture Corporation wants to get off via this.”

Investment Case

In the Name of People profits over 100%

The TV play In the Name of People called as “Exposure of the Official World in TV circle” by netizens is a highlight in Yang Yu’nong's personal investment career. As a TV play exclusively broadcast on HNTV in the first half of 2017, In the Name of People was like as a dark horse that got extremely hot on screen. From the market performance, its ratings soared since the start of broadcasting, and the peak of CSM52 city data surpassed 8, setting new high ratings, and which made it the highest-rated TV play so far in the 21st century. As the first anti-corruption TV play in 10 years, audiences were very enjoyable and the ratings were spectacular, with a double harvest of ratings and reputation. According to network big data calculation, its accumulated broadcast volume on video site reached 35 billion, and the pageviews of Sina Weibo topic # In the Name of People # reached 2.46 billion.

However, the investment of In the Name of People was not smooth at the beginning of preparations. Director Li Lu said frankly that they contacted dozens of large-scale investment companies but all failed cooperation because of the sensitive theme. At that time, Yang Yu’nong was still serving as the vice president of Desen Media, "when the project party came to me, we made make a decision and chimed in easily, which can even described as 'spotting a TV play wisely'. We signed the investment agreement after only about two weeks and became a powerful promoter of this play. From the current results, the rate of return of In the Name of People has been as high as 100%."

Investing in In the Name of People is trust and more professional judgment. The reason for investment is also very simple, that is, people in the industry have a keen judgment on the project.

When recalling now, Yang Yu’nong still has a lot of feelings, "at that time, I also communicated with a few investment companies, and they all though that it was risky, and did not meet the conditions of fund lending, etc., which could not pass risk control. So at this time, it reflected the importance of internal funds."

Financing strategy

Expand external financing channels

The current film and television project financing is still dominated by their own funds; however, if most of the funds come from their own funds, it means a lot of pressure and high risk for film and television companies. Therefore, broadening project financing channels is the most important for film companies. The investment and financing team led by Yang Yu’nong also has a very important task, which is to expand external funds outside the industry, including funds, trusts, banks, factoring institutions and other capital injection outside the industry.

When Yang Yu’nong served as the vice president in Desen Media, she has realized the fund's role in allocating resources of cultural industries, so she actively explored the cooperation mode of film and television finance. She has established an investment fund of RMB 1 billion in film and TV with private fund MAIFUND, customized the corresponding asset allocation strategy and developed investment process, and combined with the development time of film and television to develop fund cycle, trading structure, risk control system, exit mechanism and so on, for further cooperation in the cultural investment field. After the establishment of the fund, Desen International’s United Fund successfully invested in projects such as Edge of Innocence, My Other Home, The One and Till the End of the World.

In recent years, the heat of guaranteed financing is also a very important way of financing. The so-called box office guarantee refers to the issuer's box office promise to producers - for promising films, issuers make early market forecasts and set a price that is acceptable to both parties. Even if the actual box office does not reach the guaranteed box office, the issuer still needs to divide the money in this figure to the producer, but the division ratio will be more favorable to the issuer if it surpasses the guaranteed figure.

The guarantee business of the annual hot film Wolf Warriors 2 this year is also a well-known successful case in the industry, which also sets off a climax that finance escorts films. Yang Yu’nong said frankly: "Missing Wolf Warriors 2 is my biggest regret in personal investment career so far, but perhaps this is the charm of capital games, where you can win fame in a single fight, but you may also lose everything."

From left to right, Ji Yatai, deputy office director of Beijing Film Institute, Yang Yunong, co-founder and executive vice president of I Do Culture Corporation, Yan Pin, deputy director of August First Film Studio of the People's Liberation Army, Sun Yadan, general manager of Culture and Consumer Industry Investment Department of Jiuding Capital, Yang Shuo, chairman of Beijing QiTaiYuanYang Cultural Media Co., Ltd.


Financiers should assist in film industry

In 2016, Yang Yu’nong formally joined I Do Culture Corporation. The arrival of her and her team accelerated the progress of I Do Culture Corporation entering the field of film culture. In more than a year, this intruder of the film industry won both applause and questioning. I Do Culture Corporation has always advocated crossover between financial capital and film and television industry, and has been working hard to explore how to position the relationship between content and capital. Yang Yu’nong has her own understanding and adherence: "The characteristics of the film industry decide that those who make decisions must understand the content, and financiers shall assist in it. When it comes to finance, the most direct label is norms and standards, whose significance is to minimize the risk, in fact, what I value more is to force the industrialization of the production process in the film industry through standards and standardized financial services, which is the most valuable to the industry."

"This year, we have a Hollywood epic animation film THE ARK & THE AARDVARK, which is the first Hollywood animation film mainly invested by China. Before that, there have been a large number of Chinese-American co-productions, but there are few cases in which Chinese enterprises serve as the main investor and hold the right to speak." Yang Yu’nong said, "We’ve found in the cooperation that such high-quality animation films in USA have very high standards for the process requirements in content R & D phase, the industrialization requirements in the content production phase, and the support role of financial chain in it."

The film and television industry should always value the content most. Both film and television financiers in the industry and crossover film and television financiers should know that love is restraint. Maybe we can achieve crossover, but if we do not cross the border, there will not be too strong financial atmosphere in this literary and artistic industry. Yang Yu’nong sighed with emotion, "The film and television financiers should not forget the original intention, and my original intention is that I love this industry, which is the closest to my dream. Films broaden the infinite possibilities for my limited life, and make my mission clearer. My partners and I will always cherish the respect of films to make a modest contribution to Chinese films, and go together with industry leaders and predecessors.”