For China’s Studios, Movies Have Lost Their Magic

All but one of the 13 listed Chinese film studios that had released first-half earnings forecasts by Tuesday expect to see either their profits fall or sink into the red amid tighter government scrutiny over the industry. Among the 13 studios, seven said they expect to report a first-half loss and five expect to see lower profits for the period.

The companies include Shenzhen-listed Huayi Brothers Media Corp., one of the country’s biggest movie studios, which forecast a loss between 325 million ($47 million) and 330 million yuan, compared with a net profit of 277 million yuan in the same period last year. Beijing Enlight Media Co. Ltd., another Shenzhen-listed rival, expects its profit for the same six-month period to drop at least 95% to as little as 85 million yuan.

The only company among the 13 that forecast that its profit will rise is Perfect World Holding Group Co. Ltd., which anticipates an increase of up to 27.9% to as much as 1 billion yuan.

The studios’ poor expectations mirror the performance of China’s box office in the first half. Ticket sales fell 2.7% to 31.17 billion yuan, the first year-on-year decline in eight years, according to industry data provider Entgroup.

Last year, Beijing launched a campaign against tax evasion in the TV and film industry following a high-profile case involving A-list actress Fan Bingbing, who was accused of using dual contracts to hide some of her income from the taxman.

The scrutiny caused some investors to hesitate about putting money into new movies, said an industry expert who asked to remain anonymous because he is not allowed to speak to media without his company’s permission.

Many of the movies that made it to theaters in the first half were made before the government’s crackdown last year, according to one Chinese studio executive. The industry could come under even greater pressure in the coming months if investors remain aloof.


– This article originally appeared on Caixin Global.