Key problems for the capital operation of China's film industry

Although capital operation has become a necessary trend of China's film industry, the industry still confronts many difficulties, such as lack of fund, singleness of capital type and insufficiency of derivative development, on its way toward a real capital-centered development.

I Contradiction between capital demand and fund shortage

1. Lack of funds

First, most enterprises are insufficient in fund accumulation and in urgent need of fund but lack of capital operation ability. Although large state-owned film corporations and successful private companies like Huayi Bros. and New Pictures are active players in China's film market, most of China's film enterprises are still in the early development stage in general.

Second, capital shortage and idle capital coexist. On one hand, China's film industry is lack of fund. On the other hand, a great deal of social funds is idle. "In China's film industry, about 90% financial support comes from self-investment, 70% from governmental input and only 2% from social investment, a quite low proportion obviously."

In addition, overseas capital is eager to land China but still prudently observing the market. To date, foreign capital hasn't landed China, especially the film production field, in a large scale.

2. Reasons

(1) Ownership system is critical

Establishment of an ownership system is a critical point in China's film industrialization. In capital operation, ownership system is the main bottleneck for film enterprises, especially for large state-owned film enterprises, directly influencing the financing effort in the industry.

(2) Low investment return and high risks

Capital always flow to lucrative industries and avoid risks instinctively. In this sense, the activity of industrial capital market has a direct ratio with investment gains and an inverse ratio with risky degree. Currently, the profitability of China's film industry is not quite high. It is a main issue investigated by investors prior to their capital input. Due to the lack of derivative development, the profit of most films greatly relies on box office and video products, which are seriously cut by the monotonous theater chains and rampant pirates.

(3) Lack of consulting and assessing institutions

A certain introduction system is needed for the orderly entry and functioning of the capital from other industry or abroad into China's film industry. Establishment of such an introduction system greatly depends on the effort of corresponding consulting and assessing institutions. But, large and professional film investment consulting and operation institutions are still absent in Chinese mainland. Due to the absence of film fund management institutions with marketized operation system, many funds intended to film investment have no channels to enter the market and some investments to this industry are risky and aimless.

II Gaming between capital's dominance and monotonous genre

1. Monotonous genre

The films presented in China's market show that the film genre and proportion in 2010 had little change comparing that in 2009. In 2010, the 17 films with box office above 100 million yuan consists of 6 action films, 4 comedy films and 3 affectional films. The three genres accounted for 80% of the bestsellers. If following Hollywood's film classification, the absent genres of China's bestseller films include science fiction film, athletic film, war film, western film, adventure film, fantasy film, horror film, thriller film, documentary film, musical film, kid's film and film noir etc.

2. Reasons for insufficient genres

First, the blockbuster is a relatively mature genre in China's film market and a successful operation model for investors, reducing the uncertainty and risk of the investment returns.

Second, blockbuster's production is more exquisite. The grand views, having higher requirement to frame quality, draw audience from home watching (CD etc.) to theater enjoyment, easily obtaining visible box office. The stable gains attract most investment to blockbusters, causing the insufficient film genres to some degree. While activating the film market, blockbusters also hinder the diversification of China's film market.

Third, genre films originate from western countries. Hollywood's genre film, an icon in western film industry, is built on a gradually maturing film industry and market. Thus genre film is closely tied with commercial film. Chinese genre film is under a different situation. Even today, the low marketization is still a bottleneck for China's film industry.

III Co-existence of low profit ratio and resource waste

1. Status in quo of underdeveloped film derivatives

Recent years, some attempts were made for diversified development of the film industry, for example, The producer of the film Hero has taken back all the costs before its global featuring through different measures, for instance, 17.80 million yuan from the VCD and DVD copyright in the Chinese mainland; and 20 million yuan from the pre-movie advertisement from P&G, Toyota and China Mobile; 20 yuan per piece for the first 50,000 copies of the titular novel, and the revenue from comics, stamps and figurines and the game The Forgotten Legend. The mode of Hero is a successful attempt of derivative development. In addition to these two mature cases, China's film derivative development is just dilettante and there is a large blank to be filled while the revenue mainly comes from the box office.

2. Reasons for the underdevelopment of derivatives

First, it is the singleness of product development, mainly focusing on video products and books. On the contrary, the derivatives of Hollywood are all-inclusive, for example, the picture albums, ship models, playing cards, T-shirts, toys and theme parks.

Second, it is simpleness of marketing mode. The derivative marketing in China is excessively dependent on the film, rising and falling with the film together. Actually the film and derivatives are interactional. The featuring of the film will create a favorable environment for the derivative marketing, which in return will promote popularity of the film.

Third, it has no scale effect and low profits. Currently the motive of the film derivative development is to ensure the investment recovery instead of gaining maximum profits and consequently it can hardly create the scale effect and make large profits. On the contrary, Hollywood makes the derivative development an important ring of the profit chain of the film industry, which creates larger revenues than the box office.