It's generally known that Asia's consumption for TV & film content is exploding. The Chinese market in particular is undergoing a pent-up release of demand for filmed content, and even the most passive listeners will probably have heard about Western productions trying to penetrate this coveted market.
But what is less known is that the box-office business in China has become incredibly competitive and increasingly soft. Asian companies invested whole hog into expansive studios, based upon the box-office recoupment model of one-off, mega-budget productions north of $100 million. While some of these projects make money, there are undeniable trends in the industry today that threaten this traditional business model.
New media consumers in the developing world and younger demographics are demanding local, serialized content, and the method of this consumption is shifting from the very big to the very small screen. These trends show no signs of abating, and continued replication of the Hollywood box-office model in Asia brings to mind the quotation often attributed to Sun Tzu: ''Every battle is won or lost before it's ever fought.''
It's all about the ecosystem
If you've talked to anyone at Cameron Thomson you'll probably know about our recent investments in Asia. What you might not know is how we are investing.
As CEO of Taiwan's Huallywood Film Studio, Cameron Thomson president Ron Thomson not only manages the studio and its accompanying film fund in conjunction with Taiwan Land Development Corporation, but he also leads Huallywood's film & TV ecosystem.
This ecosystem has one mission: to bring the world's best entertainment industry talent & tech into Asia.
While the soundstages are currently under construction, the ecosystem is already thriving. International deals have been freshly inked with industry specialists, including Swiss-based WCP Media's cloud-based distribution software, Europe-based Kiwi Digital's cinematography and DIT solutions, and Rome-based Augustus Colour, which is installing a remastering laboratory at Huallywood.
These early international partnerships are matched with regional additions to the ecosystem, including Xiangshan Film Studios in Ningbo, China, which will provide Huallywood productions with additional capacity, and utilize the ecosystem to attract financed and ready Western projects.
In essence, Huallywood is a bridge with a two-way street between Asia and the West, and roughly 50% of productions are coming from each region. Projects which take this street benefit from top-tier service providers that deliver high-production value, cost-effective expenses unique to Asia, and global distribution channels managed by industry veterans.
New content and new mediums
So while all the big studios in the West and Asia go for broke with 'tentpole' films - $100M superhero movies backstopped with gargantuan marketing budgets -- Cameron Thomson's analysis shows that this model is in fact risky business. No amount of spend guarantees success in our evolving industry because today's media consumers are increasingly young, or have never enjoyed filmed content before. And quite interestingly, what they want overwhelmingly is on-demand, serialized, substantive storytelling.
In China, this demand is paired with a cultural appreciation for stories about family, values, and the overcoming of personal and societal challenges. This is another major benefit of Huallywood's positioning in Taiwan. When China's film industry underwent the Cultural Revolution, Taiwan honed its filmmaking craft, and today hosts a lesser-known but just as robust, end-to-end production capability as South Korea or Japan. This capability is arguably more focused and fiscally-prudent than the big industry players in mainland China and the West. And as opposed to South Korea or Philippines or Malaysia, Taiwan is Chinese and offers more capability to create the type of quality content desired by the region's 900 pound gorilla.
This is the type of showbusiness that Huallywood's $25M film fund is committed to: incremental growth vs. elusive windfall. We are targeting a $10-35M sweet spot for feature films and serialized television which already has soft financing and distribution opportunities. This doesn't mean Huallywood won't support special-effects thrillers, it just means our ecosystem aims to create repetitive high-volume with high-potential for recoupment.
In our analysis, a healthy and self-sustaining production ecosystem depends on these low to midrange productions. This is borne out by the proliferation of original series produced abroad, which employ top talent and attract co-production partners from multiple jurisdictions. Production centres which have adopted this strategy of balancing serialized content with the occasional tentpole production have seen their revenues double in the last three years.
Another benefit of the ecosystem is integration with the new Over-the-Top (OTT) and Streaming-Video-On-Demand (SVOD) mediums. You'll likely know about the revolutionary impact of Netflix with its instant on-demand serials and unlimited buffet of feature films, all for the price of a movie theatre ticket. Amusingly, this new medium has infused itself so deep into the daily routine and lexicon of young demographics that Netflix is commonly used a verb, or proposition for romance (i.e. 'netflix and chill').
These new mediums have also opened access to high-quality filmed content for developing nations and rural regions. In places such as Indonesia or the Chinese interior, infrastructure has skipped cable and proceeded directly to cost-effective mobile. We're talking about populations where over 90% of internet usage is mobile based.
An integral part of the Huallywood ecosystem is the development of distribution partnerships with OTT and SVOD providers. And this isn't as easy as picking up the phone and calling Netflix or Amazon. Each market in Asia has unique cultural and political environments, and homegrown services have actually outmaneuvered Western streaming platforms in new user acquisition.
Furthermore, you can have a great film or series but if it's marketed the wrong way within or outside Asia, it may end up being a total flop. Huallywood's ecosystem also attracts hyper-local distributors, with marketing insights that are much deeper than even the savvy mobile steaming services. And before the film is even made, Huallywood's Film Fund requires production budgets to have a sizeable promotions and advertising component in order to ensure control of marketing, and assure films and series attract the highest number of viewers in each market.
So this is what Cameron Thomson is doing in Asia and at Huallywood Film Studios. We believe there is a major opportunity to build an Asian-based centre of excellence for film & TV creation and monetization. The ecosystem is very techy and quality-focused, and the studio management is extremely sensitive to cultural trends and financial risk. We're not rolling the dice, we're adapting to a game that's changing.
Over the coming months Cameron Thomson will have some exciting announcements to share out of Asia, and in the meantime, we'll continue strengthening the Huallywood bridge between East and West. In the coming years, we strongly suspect that this new showbusiness model will have generated content with Asian-centric themes and Western production value, and produced incredible art in the process.
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