It is difficult for physical cinemas to make profits. Can Alibaba Pictures help them survive the winter?

With the growing enthusiasm of consumers for entertainment consumption, my country's film market has achieved rapid growth in box office revenue for many consecutive years, and more and more social capital has begun to flow into the Chinese film industry.

However, in the context of the booming industry, most physical cinema chains are operating at a loss. A practitioner in Chongqing said that a medium-sized cinema needs to have an annual box office revenue of about 10 million yuan to basically break even, "and it cannot be located in a prime location, otherwise the venue rental alone will be too much for the cinema to breathe."

The unknown status of the cinema market

The rapid development of the Chinese film market and the substantial increase in the overall box office market have not led to an increase in cinema revenue. According to statistics from the media, 851 new cinemas opened nationwide in 2012, 70% of which were in a loss-making state in 2013, while the total box office revenue in the country increased from 17.073 billion yuan to 21.769 billion yuan from 2012 to 2013.

This situation has not changed this year. In the first half of 2015, the national box office exceeded 20.3 billion yuan, an increase of 48% over the same period last year. The total number of cinemas in the country reached more than 5,400, of which the top 500 cinemas accounted for 42.8% of the national box office. The average box office revenue of the remaining nearly 5,000 cinemas in the first half of the year was only about 2 million yuan.

According to the current distribution ratio among peers in the industry, after deducting 5% of the special fund for film development and 3.3% of business tax and surcharges from the box office revenue, the remaining portion is divided between the film company and the cinema in a ratio of 43:57, so the cinema's net distribution income accounts for about 52% of the box office.

This means that if a cinema's box office revenue in half a year is 2 million yuan, its net share income is only 1.04 million yuan. This money may not be enough to pay for the venue rental, not to mention other costs such as water and electricity bills, labor costs, and equipment depreciation.

In first-tier cities such as Beijing, Shanghai and Guangzhou, although the number of moviegoers is relatively large, the operating conditions of cinemas are not optimistic due to the large number of cinemas, fierce market competition and high venue rentals. In the first half of this year, the number of newly opened cinemas in Shanghai and Beijing decreased from 17 to 6 and from 14 to 7 respectively compared with the same period last year.

This runs counter to the development of the film industry, and the problem of physical theaters' difficulty in making profits needs to be solved urgently.

Facing cinema losses, what will Alibaba Pictures do?

In April this year, Alibaba Pictures acquired Yueke Software for 830 million yuan, aiming to strengthen its online ticketing capabilities. However, some analysts believe that Alibaba Pictures' acquisition of Yueke, a ticketing system, is more conceptual than substantial.

In fact, there is also a "license" management in the domestic movie ticketing system . In order to ensure the authenticity of the box office, the "Office of the National Film Development Special Fund Management Committee", a direct unit of the State Administration of Radio, Film and Television, requires cinemas to use a designated ticketing system.

At present, there are only 6 designated ticketing systems, including Phoenix Jiaying, Dingxin, Flamingo, Mantianxing, VISTA, and Chenxing, of which VISTA is an imported software. It is understood that Yueke Software, which was wholly acquired by Alibaba Pictures, was established in 1997 and has become one of the largest cinema ticketing system providers in China. Its independently developed Phoenix Jiaying cinema ticketing software accounts for 60% of cinema customers with box office of more than 10 million in the country.

After acquiring Guangdong Science and Technology Software, Alibaba Pictures officially stated that "the integration of Guangdong Science and Technology Software and Alibaba Pictures at the capital level will enable theaters to directly connect with Alibaba Group's existing hundreds of millions of user groups, expand theaters' customer base to a stable e-commerce user group with purchasing power, create more cooperation space between e-commerce and movies, and bring theaters rich sources of income in addition to box office revenue, and use the Internet to provide effective and extensive open platform services to the entire industry based on big data."

This time, Guangdong Science and Technology Software and Capital Cinema launched the first smart cinema in Beijing Financial Street, which is the first answer sheet after joining Alibaba Pictures. The so-called smart cinema is to enable the audience to realize self-service and electronic viewing through technological means such as "electronic ticket checking" mode, Phoenix Jiaying "Movie Cloud", and online ticket change, thereby reducing the labor cost of physical theaters and turning some time-consuming and complicated manual operations into automated operations.

Taking Phoenix Film's "Movie Cloud" as an example, its central management platform can analyze the data of theater operations and provide reference for managers. As digitalization becomes an inevitable trend in the development of the film industry, it can significantly improve the efficiency of marketing and operations. For example, theaters can analyze the sales data of counter merchandise to find out which merchandise is more popular, and can also adjust marketing strategies and efforts based on the sales of movie tickets.

Judging from the series of initiatives launched so far, Alibaba Pictures' layout in the cinema chain is not only to strengthen the online ticketing capabilities of products like Taobao Movies, but also to promote cinema operation innovation through systematic technical means. This is especially significant for small and medium-sized cinema chains that have been in losses for many years, and will help solve the current situation of low operating efficiency and single income structure of physical cinema chains.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.