The market is awash with a variety of cinema companies, each hoping to open between 20 to 1,000 new cineplexes over the next 5 years. The list includes state-owned players (Zhongying, Shangying ) who plan to upgrade their existing locations and open new ones, private local players such as (Jingyi, Dadi, Stellar), joint-ventures led by operators from the region (Korea's CGV, Megabox, and Hong Kong's Golden Harvest), foreign-funded joint-ventures (APEX), as well as local media companies (Huayi Borhters) that plan to start operating their own venues, such as Huayi Brothers Media.
Each of the operators has its strengths and weaknesses, but all of them
seem eager to sign new deals, often without any specific operational
plans and with limited attention to critical details. So eager, in
fact, that one must wonder if they actually plan to make money from the
cinemas, or have something else in mind. A closer look reveals that
many of these new cinema operations are backed by entertainment REITs
(Real Estate Investment Trusts) and venture capital firms.
During the good old days of China's housing boom, plenty of Chinese real estate developers raised billions of dollars in Shanghai, Shenzhen, and Hong Kong's stock exchange. The trick was simple: build a few decent projects, purchase plenty of land, go public and get an inflated valuation based on your "Land Bank" and future profits. This way, plenty of local developers made a lot of money, not by building and selling apartments, but by floating their "Land Banks" in capital markets.
It looks like the next big thing is "Secured Cineplexes" - lease agreements for the operation of cinemas. Operators will sign as many lease agreements as possible, develop a few of them to prove the validity of their concept, list their companies in Shanghai and Hong Kong, and make lots of money.
Quality cinemas are indeed in short supply in China, and the public seems to respond well to the ones that are properly designed and operated. Still, my bet is that many of the new cinemas, especially those owned by funds and financial investors (as opposed to genuine entertainment and production companies), will not longer be around in a few years time.
During the good old days of China's housing boom, plenty of Chinese real estate developers raised billions of dollars in Shanghai, Shenzhen, and Hong Kong's stock exchange. The trick was simple: build a few decent projects, purchase plenty of land, go public and get an inflated valuation based on your "Land Bank" and future profits. This way, plenty of local developers made a lot of money, not by building and selling apartments, but by floating their "Land Banks" in capital markets.
It looks like the next big thing is "Secured Cineplexes" - lease agreements for the operation of cinemas. Operators will sign as many lease agreements as possible, develop a few of them to prove the validity of their concept, list their companies in Shanghai and Hong Kong, and make lots of money.
Quality cinemas are indeed in short supply in China, and the public seems to respond well to the ones that are properly designed and operated. Still, my bet is that many of the new cinemas, especially those owned by funds and financial investors (as opposed to genuine entertainment and production companies), will not longer be around in a few years time.
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