Two of China's biggest private media and entertainment companies saw shares fluctuate recently over individual new releases, which demonstrates that China's film market is far from maturity, insiders told the Global Times Sunday.
During the past week, shares of Enlight Media Co surged by over 10 percent thanks to its comedy Lost in Thailand, released on December 12.
"We expect the film to generate more than 600 million yuan ($96 million) at the box office," Wang Hongtian, brand director of Enlight Media, told the Global Times Sunday, noting that the company's shares have benefited a lot from the small-budget film, which cost 30 million yuan to produce.
Huayi Brothers Media Corporation's November 29 release Back to 1942, with a 210 million yuan budget, was expected to gross 800 million yuan at the box office. But by December 16, it had earned just 345 million yuan, according to reports from the official China Film News.
In China, production companies usually get 43 percent of box office revenue, while theaters get the remaining 57 percent - meaning Back to 1942 was purely a loss for Huayi Brothers.
Between the film's debut and December 14, Huayi Brothers witnessed a steady stock decline of about 20 percent. Several securities companies downgraded its ratings during that period, and on December 7 the company even posted an impromptu statement in response to the falling shares.
"But for film companies' shares to fluctuate so much over a single film signals that our film market still has a long way to go before it matures," movie critic Li Zhong told the Global Times, adding that such fluctuations can greatly harm retail investors.
Li said that in more developed film markets, shares of entertainment companies, such as DreamWorks Animation, usually remain stable.
"They usually have several projects going at the same time, with very professional teams making sure the work pays off, as a way to reduce their risks on any one film," said Li, noting that Chinese film companies are too small in comparison, which can magnify the impact of a single film's revenue on the production company as a whole.
An anonymous insider at a film production company told the Global Times that Chinese production companies usually do not have diverse enough businesses to hedge their investments into film production.
"Therefore, the box office failure of one film can be catastrophic to a film production company," said the insider.
Wang said that Enlight Media has other major businesses besides film production, including entertainment events and TV production and distribution, "but the film business is the most attention-getting, another reason market investors are so sensitive to our film performances."
Around the upcoming Chinese New Year festival, China will import some major international film releases, including The Hobbit and the Bond movie Skyfall.
Li said he expects those films to put huge pressure on domestic competitors that release during the period.