O' Brothers

Brotherhood may be one of the most popular movie themes and like the Warner brothers, Hong Kong's Shaw brothers, and more recently Joel and Ethan Coen, the bond can also forge a successful movie making business.

Wang Zhongjun, 48, and his 38-year-old brother Wang Zhonglei found a similar passion and in 14 years turned their Huayi Brothers Media Group from a small advertising firm into China's largest privately-owned film and TV production and distribution company. The brothers have diverse interests in everything from movies and TV production and distribution to talent management, music production and operating movie theatres.

The ambitious brothers say they aspire to be "the Chinese Warner Brothers". The counterpart is one of the world's largest film and TV entertainment producers founded by four brothers more than eight decades ago.

But why Huayi Brothers, rather than Wang Brothers? Hua means China, yi means friendship and Wang Zhongjun has said the name was picked because it simply sounded good.

"Although we are already leading the domestic market, we still have a long way to go to match Warner Brothers," says Wang Zhongjun, chairman of Huayi Brothers.

"We may not realize this ambition in my generation, but our next generation could accomplish this. Given the speed of China's economic development and the fast growth of its movie market, a world-class Chinese entertainment and media group is sure to emerge in the near future."

China's box office revenue is expected to exceed 4 billion yuan this year, estimates the State Administration of Radio, Film and Television, the country's movie regulator. The country's movie market has grown 20 percent annually for six consecutive years.

Huayi Brothers is clearly a trailblazer as it has maintained an over 50-percent annual growth rate in sales and profits in the past three years and now controls 40 percent of China's domestic film production market and 30 percent of the distribution market.

The company produced more than 40 movies in the past decade since it invested in its first movie Sorry Baby (Meiwan Meiliao), directed by Feng Xiaogang in 1998. The film topped the domestic box office records with 30 million yuan in 1999. Since then Huayi Brothers has produced at least one blockbuster figured in the top 10 box office list every year. For example, in 2004 Huayi Brothers' four films, A World Without Thieves (Tianxia Wuzei), Kung Fu Hustle (Gong Fu), Kekexili: Mountain Patrol (Kekexili) and Breaking News (Dashijian), harvested more than 350 million yuan in box office receipts, a staggering 35 percent of the total sales in the Chinese film industry that year.

Forerunner

Some people say Wang Zhongjun is a hands-off boss who does not get too involved in his company's day-to-day operations.

"My brother started to work with me at 24. We are very good partners. We trust and rely on each other. It is very easy for us to communicate. That is our biggest advantage," says Wang Zhongjun.

As for the division of labor, he says he picks "the simplest part", while Wang Zhonglei does "the complicated job".

"I am responsible for setting our corporate strategies. Zhonglei, as the company's president, works with our CFO to try to fulfill the sales target of the board," says Wang Zhongjun. "I make decisions on whether to buy a company and whether to attract a new investor. He hardly gets involved in this process, but always supports me."

A major reason for Huayi Brothers' fast growth is its ability to finance film productions through various channels.

Wang Zhongjun is a forerunner among his peers in attracting private investments. Huayi Brothers has attracted more than 400 million yuan since 2000 from investors including Taihe Group, Li Ka-shing's TOM Group Ltd, Yahoo! China, Focus Media and China Equity. The brothers usually bought back shares from shareholders at a premium and then sold them to new investors, in a way to maintain their position as the largest shareholders and solve the cash flow problems that plague many Chinese film companies.

Among Chinese private media groups, Huayi Brothers is one of the first few to test the waters of East-West cooperation in film production and distribution, which not only lowers the company's investment in each movie but also helps distribute the movie in other places where the partners are based.

In as early as 2000, the brothers tried for the first time to team with Columbia Pictures Film Production Asia to produce Big Shot's Funeral (Da Wan). The two companies later cooperated again in Cellphone (Shou Ji), which was a box office champion in 2003. A World Without Thieves (Tianixa Wuzei) and The Banquet (Ye Yan), another two blockbusters, were co-produced by Huayi Brothers and Hong Kong's Media Asia Film Ltd. When producing Battle of Wits (Mo Gong), Huayi Brothers took a larger step by partnering with three companies headquartered in different regions. They co-invested in film production and were responsible for selling the film in their own regions.

The international cooperation not only brought capital but also helped Huayi Brothers learn detailed bookkeeping methods that are essential to cost control.

The burgeoning media conglomerate is also China's first film company to receive loans from banks without a third-party guarantor.

When Huayi Brothers planned The Assembly (Jijie Hao) in 2006, the movie was expected to cost 100 million yuan while the company had only half of the required capital. Wang Zhongjun got to know a senior company official from China Merchants Bank at a forum and raised the problem. Luckily the bank had been looking for new markets in financing.

Unlike the US, China does not have guarantor enterprises that help filmmakers get bank loans. China Merchants Bank listed three risks for offering the loan: whether the film would get a government production license; whether the production would be completed if the leading actors quit or were injured during the shooting; and whether the film would be a box office flop.

After a two-month due diligence review, the bank found the risks could be solved. First, the movie, about a retired army official seeking recognition for his dead soldiers, had a mainstream topic and would have no problem in getting government approval. Second, Huayi Brothers provided guarantees for completing the production. Third, Huayi Brother mortgaged its right to the movie's box office revenues to the bank.

Finally China Merchants Bank issued a 50 million-yuan loan to Huayi Brothers without a third-party guarantor. The bank sent staff workers to closely follow the whole process of the movie production. It turned out to be a wise investment as The Assembly was a box-office champion in 2007 with receipts of 260 million yuan.

Media mogul

At a recent forum organized by the China Entrepreneur Club and China Entrepreneur magazine, Wang Zhongjun appeared slightly different from his peers who are from more traditional industries such as steel, food, automobile, and electrical home appliances. Dressed in business casual, Wang Zhongjun said he had never expected to become a filmmaker.

Born in a military family in Beijing, Wang Zhongjun joined the army at 16 and later worked at the State Commodities Bureau. Deeply in love with painting and photography, he resigned from the government agency five years later and worked as a photographer. In 1989 he went to study in the US. He came back to Beijing in 1994 with $100,000 earned by doing part-time work. He opened an advertising company with his younger brother and later produced a few TV series.

The brothers entered the filmmaking business by chance. A friend was short of 5 million yuan while producing a movie. Wang Zhongjun helped him out by providing the funds. He invested 9 million yuan in total and at the same found a new passion for filmmaking.

"China's reform and opening up created a very special environment for business people. There are too many opportunities in front of us," Wang Zhongjun says.

Wang Zhongjun loves playing cards. He enjoys sitting around a table to play with friends such as Feng Xiaogang, who has directed a lot of blockbusters for Huayi Brothers.

Obsessed with imported BMW cars, Wang Zhongjun enjoys the mogul lifestyle, with an impressive collection of paintings and a stable of 60 horses.

(China Daily 11/24/2008 page12)