according to Wanda Movie According to the semi annual reports over the years, the number of hospital lines increased rapidly from 191 at the end of June 2015 to 552 at the end of June 2018, an increase of 289%; At the same time, the gross profit margin of film screening business dropped rapidly from 22.06% to 14.46%, down by about 65.55%. This means that when the average number of cinemas increases by one, the gross profit margin of the film screening business decreases by about 0.21%.
Article/Ling Xianjing, reporter of Sina Finance TMT
Although the transaction of Wanda Film and Television's 10.6 billion yuan injection into Wanda Film is still in the process of modification, the outside world is very concerned because of the film and television layout of Wanda Group and the leading position of Wanda Cinema Line.
At the same time, after 17 months of trading suspension, the trading resumed again. Wanda's share price has been in a downward limit since Monday. Today, it has been in a downward limit for three consecutive days, and its total market value has dropped by more than 15 billion yuan. The market anxiety is still spreading. Everyone is concerned about when Wanda movies can be launched?
In order to release goodwill information to the market, Wanda Cinema held an investor exchange meeting yesterday, explaining to more than 200 institutional investors the development plan of Wanda Cinema, as well as the impact of the version number of Wanda's film and television game business, and the downturn in the market for the film business. Although the activity lasted for a short time, the information disclosed to the public was not very sufficient, But Sina Finance still read some details from it and viewed the transaction from the side.
First, the overall membership of Wanda Cinema has reached 120 million people.
Since 2015, in order to cope with the impact of online ticketing, many traditional cinemas have set up a membership model, hoping to attract audiences in the form of membership discounts, so as to gain some initiative in the game with online ticketing. However, no matter whether it is local small cinemas or the traditional large theater lines such as Dadi, they have not done a good job in membership, Lost an important fortress.
However, the number of 120 million members announced by Wanda Movie this time is still amazing to the outside world, which shows that Wanda Movie has achieved phased success in the construction of its membership system. As the cancellation of ticket subsidy is about to become a reality from hearsay, the publicity of the film industry will rely more on the membership system of the cinema, and the value of Wanda Film as a member asset will be further improved.
Secondly, Wanda Cinema is expected to open 80-100 new cinemas every year.
This issue is directly related to whether Wanda Cinema needs so many cinemas or not, or more importantly, whether the rapid expansion plan of Wanda Cinema is realistic in the downturn of the theater industry.
According to the data, in October this year, the total number of cinemas nationwide decreased by 100, with 60 new cinemas, and 160 closed in October; At the same time, since this year, with the concentrated outbreak of the problem of salary arrears and bankruptcy of the Star Art Theater, the consequences of the previous blind expansion of the film and television industry have begun to appear: a large number of middle and low rise cinemas operate miserably and are on the verge of life and death.
Wanda Cinema's semi annual report shows that as of June 30, 2018, the company has 552 direct operated cinemas, including 497 domestic cinemas, which means that if 80-100 new cinemas are opened every year in the future, the expansion speed will reach 16% - 20%.
This means that the gross profit rate of Wanda Cinema line business will further decline. According to the annual semi annual reports of Wanda Cinema, the number of hospital lines increased rapidly from 191 at the end of June 2015 to 552 at the end of June 2018, with an increase of 289%; At the same time, the gross profit margin of film screening business dropped rapidly from 22.06% to 14.46%, down by about 65.55%.
This means that when the average number of cinemas increases by one, the gross profit margin of the film screening business will decline by about 0.21%. If the annual expansion rate remains around 80-100, the gross profit margin of Wanda's film screening business will fall below 10%, and the profitability of the film screening business will further decline.
Appendix: Q&A Minutes of the Investor Exchange Meeting:
Q: After this asset injection, how does Wanda Film position its future business? What's the plan?
A: The overall positioning of the company in the future is to create a film ecosystem.
1) It will continue to invest in the construction of cinemas to expand the advantages of offline cinemas;
2) Strengthen the construction of content in the ecosystem. In recent years, the profit source of Wanda Movie&TV has expanded from a single film business to film+TV series. Among them, the number of TV dramas that Wanda Pictures is currently shooting has reached 12. The film sector will continue to create some series of films, such as the "Chinatown Detective" series, the "Take My Brother Away" series, and the "Dragon Hunting Code" series. In addition, the company also has some large IPs to ensure the company's advantages in the content industry.
3) The company will make use of platform advantages to open up online and offline. Wanda Movie has its own online platform ranking high, and its advantages are further expanding. The company will create more film derivatives around the advantages of content industry and offline cinema in the future. The company has the opportunity to sell more than 300 million yuan of derivatives, and will continue to expand its advantages in the future.
Q: Whether it is cinemas, games or films and television, they are now affected by policy adjustment. At the same time, these are the assets of the project system. How to interpret the impact of these two?
A: First, after the reorganization, the company will reach the "channel+content" mode, reducing the impact of project system on the fluctuation of the company's profits. Secondly, Wanda Film and Television invests in a large number of film and TV series projects every year, covering comedy, action, adventure and other diverse themes. The diversity of the number of films and the richness of film types can disperse the risks of the project system. After the reorganization, the company will be built into an ecological company, with channels and content. At the same time, due to the diversity of content, the fluctuation of performance can be effectively reduced.
Q: How does Wanda Film integrate resources to help these M&A assets better integrate into the company's ecosystem and reduce the risk of goodwill impairment?
A: In the past, the company acquired both asset heavy cinemas and asset light companies, with good integration effect. For example, the annual advertising revenue of Wanda Media has grown from more than 200 million to about 1.2 billion after M&A. The integration effect is obvious. After M&A, Time.com turned losses into profits, and its profitability also improved significantly. Generally speaking, the impairment risk of goodwill is small.
Q: How to evaluate the current trends in the film industry?
A: The feature of films is that the content determines the box office. The content of the eleven films this year is a little poor. It is normal for the films to decline in a single month. It is not possible to judge the overall situation from the decline of the box office in a certain month.
In the long run, the box office is expected to maintain a growth rate of 10% - 15% in the future. As the industry becomes more rational, the last companies will be eliminated, which is conducive to the integration of leading companies. The industry will be shuffled rapidly in the next few years. Both cinemas and content companies will change, and leading companies will become more and more powerful.
Q: What is the company's expansion plan in terms of channels?
A: In the next few years, the company will maintain an annual expansion rate of 80-100. The primary goal of the company is to ensure the advantage of market share. The company has selected some well-established, large-scale, whole system cinemas to join, including CGV, Bona, Yaolai, etc., to enhance the advantages of Wanda Cinema in the channel side. In terms of cinema distribution, about 50% of cinemas will be located in new tier one and second tier cities, while paying attention to the development opportunities of tier four and five cities.
Q: How to interpret the decline of advertising revenue in the third quarter of the company?
A: The advertising business is highly related to the box office scale. The decline in advertising revenue in the third quarter was due to the decline in box office scale, and advertising was based on individual films. With the increase of imported films in November and the opening of the New Year festival, the theater advertising business has also received renewed attention from advertisers. The trend of advertising has not changed, and the macro-economy is also improving.
Q: What are the company's plans for self construction and M&A in the future?
A: In the last year or two, it will focus on self built studios. With the development of the industry, it will choose the right time to conduct mergers and acquisitions. In the next few years, the company will maintain an expansion number of about 80-100 every year, including about 40-50 movie theaters of Wanda Property. The company has also made a large number of project reserves and strengthened cooperation with other developers.
Q: How to view the change of ticket subsidy in the industry?
A: In the long run, the ticket subsidy association will gradually withdraw from the historical stage. After the cancellation of ticket subsidy, the film ticket price may increase slightly, about 3% - 5% every year. This trend should be the same as that in North America, where the annual increase of ticket price is about 2% - 5%. Cancellation of ticket subsidy is beneficial to the film industry in the long run, which can reduce the marketing expenses used for film promotion in the upstream and control the overall cost of film investment.
Q: How much does the game version policy affect our game distribution business?
A: First, the policy of the game version has not had a great impact on the income of this year. Because mutual love and interaction, a distribution company, has a lot of reserves in the past. In addition, it also has a relatively large number of classic projects, especially sports projects, such as CSL games. Its long tail effect is very obvious.
Second, since the launch of overseas game distribution last year, many games have gone overseas this year and achieved good results.
In the long run, it will not have much impact, because mutual love interaction itself is a game publishing company. At the same time, this year, it has increased the layout of offline e-sports games and combined them with offline scenes. In this way, we not only have overseas distribution, but also newly increased the distribution of offline scene games, which will offset part of the impact of the policy.
Q: In October, the total number of cinemas in the country decreased by 100, and 60 cinemas were added, which means 160 cinemas closed down in October. What do you think?
A: At present, there are more than 10000 cinemas in China, and at least 20% of them have box office output of less than 2 million every year. In the future, in order to increase profitability, each theater line will close the cinemas that rank very low and have lower ticket properties.
Therefore, the opening and closing of stores will be carried out at the same time in the future, and low-end cinemas will be closed, but there will also be some shopping centers with strong commercial competitiveness to build new cinemas. However, the total number of new screens in cinemas will decline every year, and the number of new screens will decline for the first time next year.
Q: In the third quarter, the company's sales expenses and administrative expenses decreased year on year. Please explain why?
A: In terms of cost reduction, the company has taken many measures. This year, a central control platform and technical service company were established. Through the remote control platform, the number of projection personnel in the cinema is reduced. This year, each cinema will retain one projectionist. Next year, the projectionists in the cinema will be basically canceled, and only technical service personnel will be provided in urban areas. Taken together, the headcount of nearly 1000 employees has been reduced this year.
At the same time, a financial sharing center has been built this year, which focuses the financial accounting and reimbursement functions in each movie theater on the financial sharing center. In view of the current more than 500 movie theaters, the overall labor cost has been reduced.
Q: What are the current business cooperation of Wanda's film and television sectors at home and abroad?
A: Since the end of last year, Wanda's film and television sector has begun to integrate global film resources and achieve business cooperation linkage among companies.
1) In terms of content, we recently talked with Netflix about packaging the domestic content and legendary content of Wanda Movie and TV, and also talking about the copyright of the legendary in overseas China and the film and TV content in China with the media, so as to enhance the premium ability of negotiation.
2) In terms of cinemas, there was linkage in terms of unified procurement. This year, the integration is more obvious. For example, IMAX service fees and the distribution ratio, as well as the purchase of goods for sale, have achieved a unified price globally, with a relatively large increase in quantity.
3) In terms of derivatives, Time Network is now uniformly responsible for the design and production of derivatives, and has established an overseas global supply platform for derivatives.
Q: What is the development of the company's membership system?
A: At present, the total number of members exceeds 120 million, with more than 2 million new members every month. In 2018, a set of precision marketing system for members was developed, which can be accurate to the competition index of each cinema and surrounding cinemas, and directly apply the data of members to the specific operation of cinemas. At the same time, we combined the data and content of members, such as Take My Brother Away. Through big data analysis, we believe that the core users of this film are middle school students and college students. Then we strengthened the connection with the characteristic groups in the members, and achieved 375 million box office.
Q: The development of the company's derivatives business?
A: In 2018, derivatives business grew by 100% year on year. It will also maintain a rapid growth rate in the next few years. Two measures have been taken:
1) IP copyright management is unified to one department, and negotiations with upstream are centralized;
2) There is a detailed planning system and process for the unified management of the design, production and logistics of derivatives. Before the film was released, the design and production of derivatives had been completed.
The next few years Chinese movie The derivative products of will develop very quickly, especially the combination of future movies and some traditional retail products, such as electronic products.
Q: How is the development of the company's special effects theater? Please introduce the progress of IMAX cooperation and the company's own special effects theater development plan.
A: The company's current mainstream brands of special halls include:
1) More than 280 IMAX;
2) More than 30 Dolby Cinemas have cooperated with Dolby;
3) Build a private brand, formerly called XLand, and upgrade to Prime brand this year. It is planned to have more than 100 such special halls in the next two or three years.
4) There are more than 100 4D halls in China, and two brands have been introduced: MX4D and 4DX.
In addition, the special theaters newly added this year, such as parent-child hall, couple hall and LED hall, will be featured in almost every cinema in the future. In the special effects hall, we will continue to invest to maintain the leading position in screening technology, and continue to provide members with special services, so that everyone can continue to watch movies in the cinema.
Q: In the medium and long term, what is the plan for future performance composition?
A: The film screening business is the main component of the current revenue, with a performance contribution of more than 50%.
In the future, the revenue and profit ratio of the company's content sector will continue to rise. At the same time, the proportion of profits contributed by derivative business, especially the business income of authorized commodities, will also continue to rise.
With the increase of our overall income and the increase of the profit scale of the whole company after the completion of the reorganization, the impact of a single film on the income and profit of the whole company will be gradually weakened, so in the long run, the income and profit of the company can have a relatively stable growth.
In the teleconference exchange, the company's receptionists had a full exchange and communication with the investors, and there was no disclosure of major information in strict accordance with the relevant regulations.
(The author of this article introduces: Sina Finance TMT reporter, who deeply interprets the financial report and disassembles the pan entertainment industry chain)
