Profit Model of China Animation Industry

2012/1/9 14:25:00(Beijing Time)    by: EntGroup Consulting

According to EntGroup’s “China Animation Industry Investment Research Report”, the “cultural industrialization” model is a development model under which creativity is the core, animation brand images with social influence are formed through planning and production of animation content, and mature commercial means or external industrial resources are used to carry out copyright trading and image authorization of derivative products. Based on market opportunity and effort in resource integration, cultural industrialization has different development models. Among them, the model of an all-round animation industry chain established by Disney and the masterpiece model adopted by Pixar are most representative.

Taking the United States for example, the United States is the birthplace of animation industry. In early 20th century, animated films emerged in the United States and later formed an industry. In 1950s-1960s, animation industry entered a period of boom. In the past more than 80 years, by relying on advanced economic power, solid creative and technical force and sound market-based organizations, American animation industry has always been in a leading position in the world and maintained a strong development momentum. 
 

 Business scope of main cultural, entertainment and media companies in the USA

In the course of development of American animation industry, a few large animation monopoly business groups such as: Disney, Paramount, Timer-Warner and DreamWorks were formed, and a business model under which large groups lead the upstream and downstream of the industry was established. The large groups adopt large investment, large production, large output and large operation of animation products. By giving consideration to both domestic and foreign markets, they always lead the development of international animation industry, enable American animations to obtain maximal and lasting market interests and provide huge market and capital support to the healthy development of animation industry.

Among these large groups, Disney undoubtedly is the most typical representative. Disney is the first company which discovered the economic value of animation images. Meanwhile, by relying efficient business operation, Disney has spread the model of “cartoon – joy - profit” to almost all consumption fields through film, disk, authorized commodities, theme park and other channels and built up a gigantic industrial cluster called "animation industry chain”.

Revenue of Disney and contribution from main businesses in 2008-2010

Chinese model of Disney
The Disney theme parks in the world adopt a few models. The first is the model of sole investment and management adopted by Disney in the United States. The second is the model of joint investment by the two sides and sole management by Disney as adopted in Paris. The third is the model of franchise adopted by Tokyo Disney Park. Disney inputs technology and grants authorization, while Japanese side makes investment and manages the park.

Disney adopts an unprecedented model of joint investment and joint management for its Shanghai project.  Walt Disney and Shanghai Shendi Group jointly invest in Shanghai Disney Resort. The two parties set up an owner company with Shendi holding 57% of the stock and Disney holding 43% of the stock. Besides, they also set up a joint venture management company with Disney holding 70% of the stock and Shendi holding 30% of the stock.

Development plan of Disney consumer goods business in China
Disney began to tap the market of tier-3 Chinese cities in 2010 and plans to open 500 shops in tier-3 cities and authorize four core product series: "Mickey, Pooh, Disney Princess and Cars”.

From 2005 to 2010, Disney China concentrated its effort to cover the department stores and shopping centers in tier-1 and tier-2 cities. The difference of the new concept from the existing concept is that the product pricing strategy shall conform to the actual condition of tier-3 cities. The exhibition focuses on four core figure series: “Mickey, Pooh, Disney Princess and Cars”. The products include clothes, stationery, toys and so on.

In tier-3 Chinese cities, Disney will adopt an operating rule different from that adopted in tier-1 and tier-2 cities. In about 2009, Disney began to discuss with its largest agent Zhongwei on the possibility of entering tier-3 cities. After discussion, Disney decided to open 500 shops in tier-3 cities. It named this model as “Toonsland”, and authorized four core product series: “Mickey, Pooh, Disney Princess and Cars”. The products include clothes, stationery, toys and so on.

Two-way drive of industrial culturalization and cultural industrialization
The “industrial culturalization” model is a development model which regards marketization as the core, is guided by industrialization, and integrates animation content creation with industrial operation through closely combining the planning and production of animation content with the design and development of derivative products. In this model, animation serves and promotes industrial upgrading and development. In return, the industry will support the growth of animation with the profit it earns, thus promoting the development of animation derivative sector and realizing mutual aid and circulation of all links of the animation industry. Japanese Bandai and Alpha Animation are representatives of this model. 

Features of “industrial culturalization” model and “cultural industrialization” model

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