Huayi Brothers and the new business of Chinese blockbusters
- 24 November 2011
- From the section Business
The rapid growth that China has experienced over the past 30 years has been mirrored in many of the individual industries that make up the country's economy.
But while most of the focus up until now has been on manufacturing, the service sector has been catching up fast.
One industry that has been revolutionised is entertainment. Cinema, TV, internet and other media are now all witnessing strong growth.
The entrepreneur Wang Zhongjun can claim to have played a key role in this transformation. In the mid-1990s, he and his brother Wang Zhonglei founded a small company that has now grown into one of China's largest media conglomerates, with interests which include film and TV production and distribution.
Wang Zhongjun began his career in art and graphic design, and he spent several years living and working in the US.
On his return to China, he became interested in the idea of starting an advertising agency. There were no private equity firms or business angels around to help with start-up capital, so he and his brother invested their savings in the venture.
"The first year was not very smooth," says Mr Wang.
In order to create a good impression for prospective clients and investors, he rented a big office and hired 30 staff - despite the fact that he only had enough money to pay his employees for six months. "I was under great pressure," he recalls.
The breakthrough for the company came about in a surprising way. One day, Wang Zhongjun remembered the signs advertising the McDonalds hamburger chain that he'd seen almost everywhere he went in America.
He wondered whether he could bring the Western approach to branding to China, and offer professional-looking signs to Chinese businesses. He investigated further, and discovered that the signs used to advertise shops and restaurants in the US were made of high quality materials that seemed to be difficult to obtain in China.
Another problem was there didn't seem to be many chain stores in China, which might have been the best potential customers. However there were a number of Chinese banks with lots of branches, so Mr Wang decided to concentrate on these.
He imported raw materials, and set up facilities to make the signs, whilst at the same time continuing negotiations with prospective clients. He ended up focusing on one main customer, which helped to keep the company busy for almost two years.
"We made $5m," Wang Zhongjun remembers. His friends back in America were astonished to learn that he'd made so much money in such a short space of time.
Expansion into film
The firm now had access to capital to expand, and in the late 1990s it moved into TV and film production.
The company hired some of China's best-known directors to make its first few films.
Wang Zhongjun says that although they didn't make much money at this stage, the success of the films helped to establish their reputation in the industry.
Since then the company has gone on to make more than 30 movies, grossing hundreds of millions of dollars.
In an echo of the Hollywood studio system of the 20th Century, Huayi Brothers has also become involved in other parts of the movie-making ecology, such as talent representation and cinema management.
Creativity and censorship
In China there is strict official censorship of movies. Doesn't this present an obstacle to the growth of the business?
Wang Zhongjun says not. He points out that, to a greater or lesser degree, film censorship exists in many countries around the world. He adds that it's important for all businesses to understand and abide by the regulations controlling the industry they operate in - and movie-making is no different.
A bigger concern for him is whether they can actually succeed in producing movies that will appeal to audiences. The key to this, he says, lies in maintaining good relations with the producers, directors and acting talent at the heart of the creative process.
Wang Zhongjun believes that there are good prospects for future expansion for the entertainment industry in China, particularly if the strong economic growth in the country and the Asia-Pacific region continues. He wants his company to take full advantage of the opportunities he see ahead; his dream is for Huayi Brothers to become "a film-making giant".