Chinese Entertainment: Starting from 1996

Chapter 524 Cinema Profits and Sales

In fact, Golden Harvest Cinemas has a pretty good scale in China, and its 3% screen share ranks it among the top 15.

Moreover, with eight luxurious and advanced international cinemas located in the four first-tier cities, the annual box office generated by Golden Harvest Cinemas can even rank among the top ten of the year.

However, compared with the market value of Golden Harvest Group, this data is indeed not impressive enough.

In fact, the main delay was in the past two years. While other cinema chains were expanding frantically, Golden Harvest Cinemas was buying land.

But everyone in Jiahe knows that this is worth it. After all, land prices in the country have begun to soar, with the price changing every day. Stockpiling land in advance can save a lot of money in the future.

Since the second half of last year, after completing the land transaction, Golden Harvest Cinemas has completely focused on the construction of cinemas.

It has been half a year now, and the specific construction location of the Golden Harvest Cinemas still depends on Gao Jun, who is the general manager of Golden Harvest Cinemas.

"Mr. Gao, what's the situation of Golden Harvest Cinemas?" Liu Zhou asked.

When Gao Jun saw that Liu Zhou finally asked him, he also took a deep breath.

I just saw that several other branches of the group have achieved very good results and contributed huge profits to the company, but Golden Harvest Cinemas is still investing.

Although he knew that this was a joint decision of the group and an inevitable process of development, and that Golden Harvest Cinemas could not become a big fat man in one bite, to be honest, he still felt a little uncomfortable.

Although Golden Harvest Cinemas did not make a profit, at least it did a lot last year, so it was confident in answering Liu Zhou's questions.

"Mr. Liu, last year, Golden Harvest Cinema Line put into operation a total of 5.2 cinemas with screens, and created an annual total box office of million.

We at Golden Harvest Cinemas can get half of the 5.2 million box office revenue, which is 2.6 million. After deducting operating expenses, the profit is as high as 1.4 million.

Then there are popcorn, drinks and other snacks, plus some movie peripherals and some advertising revenue, the total profit is nearly 50 million.

So last year, the total profit of Golden Harvest Cinema Line was 1.9 million, of course, this does not include the investment outside these cinemas.”

"Yes, I remember that the total domestic box office last year exceeded 10 billion."

"That's right. The number of screens in Golden Harvest Cinemas accounts for only 3% of the total, but the box office revenue it generates accounts for 5% of the total annual box office revenue, ranking ninth among all domestic cinema chains."

"Are the operating costs of a cinema so high? It's as high as 1.2 million." Zeng Jia suddenly asked.

She was not questioning anything, but was indeed very surprised. She didn't understand why the operating costs of just 18 cinemas would be more than 100 million.

Gao Jun also understood Zeng Jia's meaning, so he explained:

“The operating expenses of a cinema chain are not just about staff salaries and the placement of some simple film promotional materials, but in fact, this is still a small part of the cost.

The biggest expense is still the maintenance and repair of the projection equipment. Our cinemas are almost all relatively advanced, and the projection equipment is all imported from overseas.

Whether it is 2D, 3D or IMAX screens and related projection equipment, they are all first-class in the country.

These devices are relatively expensive and require overseas companies to be hired for maintenance.

There are also some large screening rooms in luxury cinemas, and more investment in other aspects, which adds up to this much.”

"So that's how it is. I didn't expect there are so many tricks in a cinema chain." Zeng Jia said in a daze.

Liu Zhou had some understanding of this, as he was the one who contacted most of the cinema's various projection equipment.

Although he doesn't know much about this area, he is a director, and the equipment used in shooting movies and showing movies actually have some similarities.

As a commercial director who is also good at using special effects, he is very concerned about various advanced technologies related to movies.

Therefore, he has a better idea of ​​which international company's projection equipment is more advanced, and he also has more channels to learn more.

In order to avoid being cheated, he also spent some time on this matter. After all, it was a considerable investment.

But using foreign equipment is good in all other aspects except that it is a bit expensive, and maintenance and repairs must be done by the original manufacturer's team.

There is no way around it. 2D screens and projection equipment are still okay, but we are stuck with the lack of domestic technology for 3D and imax.

Although China Film Corporation has already developed its giant screen, it also built the country's first giant screen theater in the China Science and Technology Museum in 2009.

However, the giant screen technology is not yet very mature and cannot be promoted on a large scale. It will have to wait until the domestic giant screen movie DMAX system is put into use next year before the giant screen can be fully rolled out in China.

Except for a small number of advanced 3D and IMAX screens, all others have been replaced with China Film Giant Screens.

The China Film Giant Screen is not only much cheaper, but its picture quality and viewing experience are no worse than those of the IMAX screen. The cost of equipment maintenance and servicing is greatly reduced, and there are not so many other troubles.

Otherwise, major domestic cinema chains would not be competing to replace their cinema screens with China Film Giant Screens because it can save the cinema companies a lot of money.

Therefore, if we want to significantly reduce the cost in this area, we can only wait until China Film’s giant screen technology is fully mature next year.

In fact, Golden Harvest Cinemas is relatively good because all its cinemas are owned by the company and do not have to pay rent. If they have to pay rent, it will be a major expense.

In the future, various equipment costs will be reduced, but rental costs will become increasingly higher, becoming the largest cost component for cinema companies.

Don’t think that cinema companies can secure 50% of the movie box office. If the film market is good, they can still make money. But if the market is not so good, they are almost working for the landlord.

Therefore, after the introduction of masks, many cinema chains closed due to the pressure of rent. For example, the biggest bankruptcy was caused by Dadi Cinema, which once became the largest cinema chain in the country and almost went bankrupt.

The main reason is that the cinema properties under its umbrella are all rented, and many of the Dadi Cinemas in third- and fourth-tier cities are franchised.

It was fine when the market was good and they could make money, but once they could no longer make money or even made less money, Dadi Cinemas became unstable internally, and the mask incident almost caused it to fall apart.

By the way, the owner of Dadi Cinemas is Yu Pinghai, who was selected by Jin Yong and then Ming Pao was sold to him.

To be honest, Yu Pinghai is actually quite awesome. He made his first fortune by talking, and then won the favor of Jin Yong by packaging himself with his talk.

After Jin Yong decided to retire, he entrusted his life's work to Yu Pinghai, but unfortunately Jin Yong still misjudged him and entrusted the wrong person. Later, Yu Pinghai began to move to the mainland in the late 1990s and also achieved success. The Nanhai Development he founded is also a well-known investment company in the industry.

Then, Dadi Cinemas was established and expanded rapidly through franchising, mainly in third- and fourth-tier cities, taking the path of surrounding the cities from the countryside.

It can be said that his vision is very accurate. The substantial growth of the domestic film market is mainly in third- and fourth-tier cities, while first- and second-tier cities are almost saturated.

But everyone's attention is still on the first- and second-tier cities, so much so that due to inertia of thinking, they think that third- and fourth-tier cities cannot generate much box office revenue at all.

At that time, only Dadi Cinemas was expanding on a large scale in third- and fourth-tier cities.

Later, the film market in third- and fourth-tier cities began to soar, and their box office contributions exceeded those of first- and second-tier cities, which also allowed Dadi Cinema to reap the biggest benefits.

While other cinema companies were rushing to build cinemas, others had already completed their layout.

At its peak, the box office revenue generated by Dadi Cinemas surpassed that of Wanda Cinemas, becoming the number one cinema chain in China. It also expanded overseas and acquired all of Golden Harvest Group's cinema chains and cinemas in Southeast Asia.

At that time, it should have been called Chengtian Jiahe. It had such a good foundation, but Wu Kebo did not make good use of it or did not know how to manage it, and directly led Chengtian Jiahe to bankruptcy.

After it could no longer operate, it kept selling off its assets, but at that time, the only valuable asset of Golden Harvest was its cinema chain, which was the legacy left by Golden Harvest.

However, just when Dadi Cinemas was ambitiously planning to expand overseas, the accident with masks suddenly interrupted its momentum.

Even because it had joined a large number of cinemas of varying quality in order to expand rapidly, its foundation was not solid, so when an accident occurred, the Dadi Cinema Chain almost collapsed.

Liu Zhou is well aware of the box office potential of third- and fourth-tier cities, so he will definitely not let Dadi Cinemas take the lead.

Many of the plots of land purchased this time were in third- and fourth-tier cities in preparation for the future.

Golden Harvest Cinemas are self-built and self-operated cinemas, so they will not have the same weak foundation and other problems as Dadi Cinemas.

According to his plan, after building the cinema on the purchased land, the operation and expansion focus of Golden Harvest Cinemas will still be on third- and fourth-tier cities.

It would be impossible for you to catch up with Wanda Cinemas in first-, second- and third-tier cities. Wanda Cinemas is expanding too fast along with Wanda Plaza, especially in the next few years, at a rate of nearly one hundred screens per year.

If Golden Harvest Cinemas wants to overtake Wanda Cinemas, it can only wait until the film market in third- and fourth-tier cities takes off.

However, this will take several years, and Liu Zhou doesn't know at this time that Wanda Cinemas will no longer be a rival to Golden Harvest Cinemas, because Wanda Group has packaged and sold Wanda Films.

To get back to the point, in fact, Liu Zhou does not care much about the current operating expenses of Golden Harvest Cinemas, because he knows that this is an unnecessary expense, and other cinema chains are similar, and it will only take more than a year to reduce it.

After listening to Gao Jun's story, he was more interested in the income from snacks such as popcorn and movie-related products.

Although popcorn may not seem very eye-catching, the profit margins in this area are very high.

A serving of popcorn at the cinema costs twenty or thirty yuan, which is not much cheaper than the movie itself, and many people buy it in batches of two.

The cost of popcorn is shockingly low. A serving of twenty or thirty popcorn may cost less than a dollar.

In the future, a cinema in a second- or third-tier city could make millions a year just by selling popcorn.

Sometimes the biggest source of profit for a cinema company is not from showing movies, but from selling popcorn, snacks, and peripheral products.

Therefore, the profit potential in this area is huge. Even now, the profit of nearly 50 million from 18 cinemas is very considerable.

"Mr. Gao, I think the non-box office revenues like popcorn are not small. I think we need to focus on this area and see if we can dig deeper into it. I think it has more potential than that."

Gao Jun didn't expect that Liu Zhou's focus was here, but his ideas coincided with his own, and he also felt that this area had great potential.

He has been immersed in the cinema and theater industry for more than ten years and knows very well that the revenue in this sector has been growing, and has been growing rapidly in the past two years.

"I understand, Mr. Liu."

"How are the overseas cinemas handling the situation?" Liu Zhou continued to ask.

In the 1980s and 1990s, Golden Harvest Group built many cinemas in Southeast Asia. At that time, Hong Kong films were popular throughout Asia, and Southeast Asia was a major box office for Hong Kong films.

Especially in Singapore, Malaysia and Thailand, as the regions with the largest Chinese population and relatively developed regions in Southeast Asia, they contributed the most box office.

Therefore, Golden Harvest began building cinemas in Southeast Asia in the 1980s and 1990s, with the largest number in Singapore, Malaysia and Thailand. A total of 18 cinemas were built, and a self-operated cinema chain was established.

Moreover, half of the properties of these 18 cinemas belong to Golden Harvest. You should know that these cinemas are almost all located in big cities such as Singapore, Kuala Lumpur and Bangkok, and the prices are very high now.

In addition, Golden Harvest has also built cinemas in the Philippines, Indonesia, South Vietnam and other regions. Although not as many as in Singapore, Malaysia and Thailand, there are nearly ten in total.

However, these cinemas have all joined local cinema chains rather than operating independently.

Originally, overseas distribution and cinema chains belonged to Golden Harvest International. After Liu Zhou acquired the Golden Harvest Group, while regaining overseas channels, he also modernized these Nanyang cinemas.

Otherwise it would be too backward and difficult to attract audiences.

However, as soon as Golden Harvest International completed the renovation of its cinema in Nanyang, it was allocated to Golden Harvest Cinemas by the group.

This is not to weaken the power of Golden Harvest International, but Liu Zhou is preparing to sell all overseas cinema chains.

On the one hand, the cost of operating overseas cinema chains and cinemas is getting higher and higher, and local policies are becoming more and more stringent.

Secondly, Golden Harvest International’s distribution capabilities in Asia can be said to be completely mature. Even if there are no cinemas and theater chains in Southeast Asia, it will not affect its distribution capabilities in the slightest.

Therefore, there is no need to continue operating these cinemas in Nanyang, and the focus of cinema operations will be on the mainland.

Wanwan and Xiangjiang will remain unchanged. Golden Harvest Cinemas will only focus on the domestic market in the future and will not go overseas.

(End of this chapter)