A government-backed investment fund is one of several waiting in the wings for a chance to support – and profit from – China's fast-growing performing arts and film companies.
The Chinese Cultural Industry Investment Fund (CCIIF) plans to invest 20 billion yuan in businesses that together at the box office took in almost 30 billion yuan nationwide in 2012.
Moviegoers spent around 16 billion yuan last year, according to the fund's director, Chen Hang, while combined ticket sales for live theater performances, concerts and various tourist shows reached 13 billion yuan.
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Private investors in recent years have financed the entertainment industry to the tune of several hundred thousand to tens of millions of yuan per target, said drama director Wang Xiaoxin. Some tourist productions have been backed by investments in the hundreds of millions of yuan.
But the two-year-old CCIIF is aiming higher, especially in light of discussions emphasizing entertainment business and cultural development growth held during economic planning sessions at the Communist Party's 18th National Congress last fall.
The fund's backers include the Ministry of Finance, Bank of China International, a China Central Television (CCTV) subsidiary called China International Television Corp., and the Shenzhen International Cultural Industries Fair.
CCIIF has finalized investment in news portal Xinhuanet.com, China Publishing and Media Co., and several other media companies. Last May, CCIIF signed a preliminary agreement to invest an undisclosed amount in Mahua FunAge Production Co., one of China's most successful theater producers, said Chen. He said monetary levels and equity stakes have yet to be worked out.
In addition, Chen said, the fund is looking at giving financial support to theater companies that specialize in musicals, stage show and a financial news provider.
Caixin learned that one musical producer eyed by the fund is United Asia Live Entertainment, which staged Chinese-language versions of Cats and Mama Mia. United Asia was formed in 2010 with backing from Shanghai Media Group, China Arts and Entertainment Group, and South Korea's CJ E&M.
Mahua, founded in 2003, is a private production company that introduced what are now popular comedies staged annually around Chinese New Year. Since its launch, the company has staged more than 1,500 performances of 19 plays in Beijing and other big cities.
"We were the leader in theater shows nationwide in 2011," said Mahua FunAge President Liu Hongtao. "We put on a total 337 plays for more than 300,000 people.
"We were also No. 1 in box office revenues," said Liu, whose shows command average ticket prices of about 250 yuan. "Revenue growth has exceeded 50 percent for the last three years."
Mahua's shows accounted for about 10 percent of what the Daolue Center for Culture Industry Research said was 630 million yuan in nationwide ticket revenue for theater performances in 2011.
Venture capital firms first contacted Mahua about buying a piece of the action in early 2011, said Liu. "But we were unfamiliar with capital operations," he said, "and we're cautious."
About a year later, CCIIF stepped on stage and successfully wooed Mahua executives as "the only central government-backed" entertainment business investment fund, Liu said. Ultimately, he said, Mahua is aiming for a public listing on the stock market.
If the fund-raiser succeeds, Liu said, most of the money would go toward production of stage shows. But Mahua also plans to branch out by making "television dramas and low-cost movies" including comedy films, which are rare in China, he said.
A budget movie can be less expensive to produce than a play, Liu said, which can cost millions of yuan to start.
Chen sees huge profit potential for China's entertainment industry. But another investor said companies like Mahua with stable profits, rapid growth and good cash flow are few and far between.
Indeed, another investor said the market may be "overheated."