China Entertainment: Starting from 07 Kuainan

Chapter 205 Star Media’s theater plan

Eight o'clock in the morning.

Ye Ning, general manager of Wanda Cinemas, led his team to Star Media, and the investment intentions of both parties have basically been finalized.

The difference is only the size of the investment share.

Since the end of last year, Wanda has had plans to invest in movies, and the little money invested in "Cohabitation in Time and Space" is just to test the waters.

"Source Code" is a true collaboration.

Not long after the two met, they determined the investment share.

Wanda invested US$400 million and received 10% of the investment quota.

Although this was different from what Wanda expected, and the share was a little smaller, their bargaining power against Lu Yuan was not large.

Because Xingchen Media is not short of money.

of course.

Boss Lu also promised that if there is additional investment in the future, Wanda’s investment amount will still be 10%.

If China Film, Huayi, Enlight, and Hurray are unwilling to invest, their quotas can also be absorbed by Wanda.

After deducting the quota allocated to Wanda, Star Media’s investment share is only 37.5%.

That’s an investment of $500 million.

Converted into RMB, it’s about a little over [-] million.

Although Lu Yuan is confident that "Source Code" will not lose money or even make a small profit, it is indeed difficult to replicate the miracle of "Cohabitation in Time and Space".

The investment agreement has been signed, and the investment in "Source Code" has been fully confirmed.

There are four domestic investors, Wangda, Hurray, Huayi, and Guangguang Sifang, with a total quota of 25%, totaling US$1000 million.

At a 50% or 100% rate of return, in about a year and a half, you can earn up to $1000 million.

This speed of making money is considered a money grab.

But compared to investing in theaters, a 100% rate of return is a bit unsatisfactory.

Now, the aftermath of the economic crisis has been transmitted to the country, and the mainland's real estate market has also experienced significant fluctuations.

Lu Yuan plans to use the 1000 million US dollars to buy bargain-hunting theaters.

Generally speaking, when theater chains invest in building cinemas, they usually use leasing.

Very few theater chains will buy land or buildings to build cinemas.

Because that is too inefficient and too risky.

The asset-heavy model is certainly more stable, but its development speed is too slow and the payback cycle is longer.

Others can build a hundred theaters with 400 screens, but you can only build ten with 40 screens.

Ten times the difference!

As for the rental issue of movie theaters, it is not the focus of the theater chain's consideration.

Cinemas and shopping malls, or property holders, basically sign an account sharing agreement and divide the box office accounts according to proportion.

In 02, the rent of real estate theaters was about 5% of the box office share.

In the past seven years, the rent share ratio has tripled, rising to about 17%. Higher-end property owners may even ask for a 20% share (in core business districts).

If the theater shares 50% of the box office and the real estate owner shares 17%, the property owner directly takes 34% of the theater's income.

After deducting the labor, equipment, operation and other costs of the theater, the room for the theater to make money will naturally be compressed a lot.

If the box office output is dismal, the cycle for theaters to recover costs will be greatly extended, and they may even lose money.

After all, building a movie theater isn't cheap.

Based on the current market conditions, the construction cost of a standard modern cinema is approximately RMB 1 to RMB 1 per seat.To invest in and build a cinema with 2 screening rooms and 8 seats, the one-time investment cost will be 1500 million to 1500 million, even if the rent is excluded.

Calculated based on six movie shows per day, ticket price is 30 yuan, and average attendance is 30%.

一家院电影院一年的票房产出=1500个座位*30元票价*30%上座率*365天=2956万元。

The theater’s box office share = 2956*50% = 1478 million.

Rent = 2956*17% share = 502 million.

Theater gross profit margin = 1478-502 = 975 million.

(PS: The attendance rate of 30% throughout the day is not low, and it is every day. In fact, this is a relatively ideal figure. On weekdays, or during low box office periods, or in theaters in remote areas, it is difficult to achieve 30% throughout the day. attendance rate)

After deducting operating costs such as labor, water, electricity, and losses, the cinema's annual income is only about 600 million.

Based on an investment of 2000 million, it will take three to four years to recover the cost.

However, a theater usually needs a renovation after operating for about five years, so investing in a theater is a business with a long payback period.

And it’s not a guaranteed profit.

In recent years, state-owned capital and private capital have invested in the construction of cinema chains. It is also common for there to be two to three cinemas within one kilometer in the core business districts of key cities.

Competition among movie theaters, especially those in first-tier cities, is particularly fierce. If the average attendance rate is too low, it is normal to lose money and go bankrupt.

Especially after the economic crisis, theater chains and movie theaters went bankrupt and closed across the country.

Star Media's strategy for entering theaters is to have one or two theaters with independent properties in first-tier cities, such as Beijing, Shanghai, Guangzhou and Shenzhen.

The remaining theaters are mainly for rental.

The strategy for second- and third-tier cities is to buy land and build buildings if they can, but never to buy properties; and if they can buy properties, never rent them.

After deducting film investment, TV drama investment, and business operating costs, Lu Yuan has approximately US$2500 million in available funds.

Converted into RMB, it’s about 1.75 million.

This amount of money is definitely not enough, so Xingchen Media is preparing to raise funds and borrow 1.25 million from the bank, making up the total of [-] million.

All of these [-] million will be invested in theater construction.

In 2009, Star Media's goal is to build 50 self-owned cinemas, including two to three five-star cinemas and 8 conventional cinemas in Beijing, Shanghai, Guangzhou and Shenzhen.

The other 39 theaters are all located in second-tier cities.

The countryside surrounds the city!

Investing in theaters is just one part of Star Media’s investment plan.

When the mobile Internet era comes, Xingchen Media will make full use of the theater chains that are already in operation to promote the online ticketing platform.

Taking 12 years as the time point, there are only 3 years left for Xingchen Media.

In three years, we will invest in the construction of 300 directly operated cinemas, attract 100-200 franchise cinemas, and then use the cinema chain as the foundation to break out of the online movie ticketing platform!
From upstream film production and artist management, to midstream film distribution, to downstream theater screening.

Star Media wants them all!

The investment in cinema chains will be operated in the form of a joint venture. Star Media and a subsidiary of Morningstar Fund will jointly invest in the establishment of a new company to invest in the cinema market in the name of Star Cinemas.

Boss Lu planned this mainly to prepare for future asset divestitures.

In addition to the first investment, the main investment in Xingchen Cinema Line in the future will be Morningstar's funds, with more and more funds injected by Morningstar Fund.

Star Media’s shares will slowly be diluted.

In the end, Star Media's shareholding ratio will not exceed 20%, or even lower, and only a small amount of shares will be retained. Then, Star Cinema will be independently split into a new company.

After the two companies split, both Xingchen Media and Xingchen Cinemas can decide whether to go public for financing depending on the situation.

One listed company and two listed companies are completely different concepts, and their size is not the same thing.

(End of this chapter)