If TV Ever Becomes as Market-Driven as Film, Enlight Will Be Back

Wang Changtian once compared running a company to keeping a hen: "You raise it into a hen, then you feed it and let it lay its own eggs. The hen is really the business model." Whether Enlight "dissolved" its TV business or "restructured" it, the company is now keeping a different breed of hen.

At the end of October 2014, China Is Listening, a variety show produced by Enlight Media, premiered on CCTV-3.

The music competition was adapted from Israel's Rising Star, and Enlight president Wang Changtian had high hopes for it. At the launch event he declared that "there is no cap on production spending," and he adopted several tactics the company "didn't really touch before": big-name celebrities to carry the show, live broadcast, and an advertising revenue split with CCTV. He hoped these changes would lift the show into the top tier of fourth-quarter ratings.

It fell short. The premiere night went wrong in several ways. A few hours before airtime, the team suddenly received an order from the State Administration of Radio and Television to switch from a live broadcast to a two-hour delay, which forced them to cancel the real-time interaction with viewers they had planned.

But policy interference was not the only reason for the poor ratings. At 8 p.m. on October 31, Wang Changtian reposted a Weibo post about China Is Listening, noting that the show was airing on CCTV-3. Viewers soon flooded his post to vent about the show, from the hosts' speaking speed to the performance of celebrity judges such as Jolin Tsai and Li Jian.

The first episode drew a rating of just 0.88%, against 2.14% for Running Man the same day.

Enlight's TV division had already felt the crisis coming. In 2013, Mengniu stopped sponsoring Music Billboard through its Suan Suan Ru yogurt drink and moved the advertising budget to Hunan TV's talent contest China's Strongest Voice. In 2014, Best Live and Film and TV Billboard went off the air, and more than 100 people left within six months. In 2015, the flagship show China Entertainment Report announced it would move online, but the announcement meant nothing in practice; its last episode aired on January 5.

In 2014, China's TV advertising revenue shrank for the first time. Dad, Where Are We Going?, Running Man, and Super Brain split 1 billion yuan of Yili's money, yet Yili cut its overall TV advertising spending by 16%. Internet advertising, meanwhile, kept growing at 30%.

In 2014, Enlight's total revenue reached 1.2 billion yuan, up 35.19% from 2013, but net profit rose only 0.22%. Film revenue grew sharply while profits from both TV programs and TV dramas fell. From January to September 2014, Enlight's revenue from program production and advertising was 109 million yuan, down 52.67% from 2013.

At the end of June 2015, the media noticed that Enlight "no longer had the patience to play along with TV," and the news that "Enlight is dissolving its TV business" spread quickly online.

Zhang Hang, president of Enlight's TV division and also the bestselling author known as "Dingding Zhang," then confirmed the news in a statement on Weibo. He added that he had already moved to Youth Enlight at the start of 2015. That division, together with Enlight Pictures, Coloroom Pictures, the Enlight video website, and Enlight Music, would form Enlight Media's most important content lineup for the next five years.

Wang Changtian once compared running a company to keeping a hen: "You raise it into a hen, then you feed it and let it lay its own eggs. The hen is really the business model."

Call it "dissolution" or "restructuring": Zhang Hang's statement means Enlight is now keeping a different breed of hen.

The four celebrity judges of China Is Listening

Enlight went public in August 2011, after Huayi Brothers and China Huace had already listed. In an interview, Wang Changtian still stressed how Enlight differed from film and TV production companies: "I am a media company in the true sense, not purely an entertainment company."

"Cash flow in the entertainment business fluctuates and takes a lot of capital. Cash flow in the media business is stable: once you build a channel and establish a brand, all you do each day is keep filling it with new content," Wang said.

By 2013, his line was that Enlight balanced a media company and an entertainment company. "A film company may suddenly need a lot of cash, say 100 million yuan put in all at once, so its cash flow swings. MGM, for example, went it alone, and a few years ago it went bankrupt and was acquired because a few of its films failed. A media company, by contrast, builds a channel and then loads content into it, and that brings in fees; it's a continuous operation. So when you bind the two kinds of company together, the whole company is steadier."

By Wang Changtian's own definitions, what Enlight went through from 2011 to 2015, the years after its listing, was a shift from a media company to an entertainment company, the opposite of what he had once favored. In 2010, program production and advertising made up 57% of Enlight's total revenue.

Sixteen years ago, in November 1999, the General Office of the State Council forwarded Document No. 82, which the TV industry read as a signal that production would be separated from broadcasting. Around 2000, private TV production companies sprang up, and four of them, Enlight, Pegasus Taihe, Happy, and Tanglong, were jokingly called the industry's "Four Young Lords of the private sector."

Wang Changtian graduated from Fudan University's journalism department in 1988 and spent a few years as a financial reporter. In 1995 he joined Beijing TV, where he made a well-received financial news program, Beijing Express.

Three years later, in 1998, he founded Enlight Media. China Entertainment Report (later Entertainment Live) launched in 1999 and was carried by 50 stations by its August premiere. Over the next few years came a string of information programs: China Music Billboard, China Internet Report, Entertainment Personalities Weekly, and others.

At its peak, Entertainment Live aired daily on nearly 150 TV stations nationwide and reached more than 315 million viewers. It owed that reach to the "TV syndication network" Enlight pioneered on the model of America's major networks: Enlight supplied programs to affiliated stations, took the ad time within those slots, and split the revenue with the stations.

By the end of 2010, the network covered 142 TV stations and 307 channels, mostly terrestrial ones. Regulations then allowed 20% advertising in a 30-minute program, or 6 minutes. Enlight took one to two of those minutes and the station took four to five. Enlight pooled the ad time it held at stations across the country and sold it as a package. The market was substantial: China's TV advertising revenue in 2009 exceeded 65 billion yuan, and prefecture-level channels took 25% of it.

Enlight also saw channels as more than television. In 2009, its programs were playing at more than 200 leading universities, on more than 240 train routes, in more than 40 airports, in more than 3,000 pharmacies and hospitals, and on more than 1,500 buses. It called this the new-media syndication network.

Within the network, Enlight played three roles. It was a program production company. It was an advertising agency, drawing up marketing plans for clients and helping carry them out. And it was a PR firm, helping clients with promotion.

TV stations still expect private companies to play these roles today. Peng Kan, director of research and consulting at Lezheng Media and a TV producer, told QDaily that TV differs from film because advertisers mainly foot the bill. "When I go to a TV station to pitch a program, I have to ask not only about production but also about sponsorship and advertising. That's why a group of advertising companies are thriving this year. TV is not as market-driven as film. The power lies with the station's leadership, and their demands on outside companies are harsh."

Soni, the first lead host of Entertainment Live; Liu Yan and Xie Nan came later

Xu Tian was editor-in-chief of Entertainment Live from 2009 to 2011. Before that she worked on Beijing TV's Daily Entertainment Report, where she and her colleagues discussed every day how the two programs handled news differently. It came down to "the difference between state-owned and private."

Xu Tian left to start her own business in 2011 and now runs PIU Studio, which has made video featurettes for films such as American Dreams in China, Beijing Meets Seattle, and Love Is Not Blind. She has not worked with her old employer, though, because Enlight has its own team and rarely outsources. Many on that team came from the TV division. Xu Tian told QDaily: "TV became the place where Enlight trains new people. Through brutal training they learn to direct, and then they're sent on to the more demanding film division. Even with China Is Listening, the show itself didn't work, but I suspect another batch of new people was hammered into shape behind the scenes."

After moving to Enlight, she marveled at how fired up many of her young staff were. One young woman, a fan of Entertainment Live since school, joined the show determined to work there despite a modest salary, and went a week without going home. Asked how she washed her hair, she said she made do with water from the restroom.

As editor-in-chief, Xu Tian did not have to stay up late editing footage herself. Her biggest daily headache was "fighting with the education channel." Entertainment Live aired on Beijing TV's education channel, which objected every day to details such as how far the news could go. Beijing TV's Daily Entertainment Report is still on the air. Xu Tian summed up the difference between it and Entertainment Live in one line: "One was born to its own mother; the other was raised by a stepmother."

Because it was the stepchild, Enlight chose cautiously. Next to news and information programs that "do big things on a small budget," variety shows, especially the satellite channels' "blockbuster variety shows," carried costs and risks it feared. In 2011, Enlight worked with Liaoning TV on Passionate Singing, a Chinese version of the British talent show X-Factor, but only for a production fee, and the response was lukewarm. In 2012, Canxing Productions, part of Star China Media, partnered with Zhejiang TV on The Voice of China and took a direct share of Zhejiang TV's advertising revenue, on condition that Canxing paid all up-front production costs, including equipment, production, and the director team's labor.

For Dream Choir, Dream Star Partners, Super Weight-Loss King, and other shows Enlight made with CCTV, it also mostly worked for a production fee.

On content, Enlight's variety shows also generated less buzz than The Voice of China, Dad, Where Are We Going?, and Running Man. Wang Changtian said: "I regret this too. The highly interactive shows that get people talking also tend to come from the satellite channels. Since our programs all air on CCTV, generating buzz isn't our first concern. Our first concern is whether the quality of the program suits CCTV and the target audience. But I'm actively adjusting now, starting with more interaction with viewers."

In 2014, Enlight reorganized its TV division: it abolished the variety and events departments and set up four studios led by four core producers, Su Ming, Luo Xia, Huang Jin, and Liu Tong. Huang Jin's specialty had been large-scale events, such as Anhui TV's annual TV Drama Awards.

China Is Listening was treated as a last throw of the dice. It tried to "interact" with viewers through live broadcast and voting, but neither the regulator nor the audience bought it. "Looking back, Enlight really was conservative. If we had gone all in at the time, things might be different now," Zhang Hang once told the media.

"Conservative" showed in the production model and the choice of platform, and more directly in one thing: spending. After the 2012 phenomenon The Voice of China, the TV industry's expectations for star power and production spending shot up overnight. Production costs jumped from several hundred thousand yuan an episode to a million, even tens of millions. Enlight would not accept that.

Canxing ran its variety shows the way the foreign format owners did: a professional team that knew audience tastes, celebrity guests who fit the show's image, and emotional back stories crafted for the leading contestants. All of this was possible because, in its bargaining with TV stations, Canxing spent heavily to keep control of the show.

Enlight had long prized value for money, and nimble business models had always delivered it. In today's fiercely competitive blockbuster-variety market, that approach no longer works so easily.

Season four of The Voice of China got Jay Chou as a mentor

From 2006 to 2010, China's box office grew from 2.046 billion yuan to 10.172 billion yuan. Growth took off around 2008: up 46% year on year in 2009 and about 60% in 2010.

Enlight Pictures distributed its first film at the end of 2006: Confession of Pain, produced by Applause Pictures and directed by Andrew Lau and Alan Mak, which took 60 million yuan at the box office. By 2010, Enlight Media had distributed 20 films, and its total box office grew from 51 million yuan in 2008 to 314 million yuan in 2010, more than fivefold in three years.

In its TV days, Enlight had worked with Mengniu and Wahaha. Watching these two partners and their enormously powerful sales networks, Wang Changtian realized how much a network mattered. He asked a Mengniu executive: "Should we build a marketing system like this for ourselves in film?" The answer: "Absolutely." The executive then taught him how.

In 2008, Wang Changtian hired forty or fifty new university graduates and built a distribution network across more than 80 cities.

The new hires dealt directly with cinemas and kept track of their screening schedules. That broke the rules of the game. The theater chains resisted at first but eventually gave way. "After all, apart from powerful chains like Wanda, most chains only give their cinemas guidance on scheduling."

Wang Changtian believed that entering film through distribution was "the right choice": "Most film companies start with production, but that model is very risky. It's also hard to scale: each company makes two or three, at most three or four, films a year, and you can't become a big company that way. That's true of film companies everywhere." Starting as a distributor let Enlight share risk with theater chains and with the media outlets that buy rights, and build closer ties with them.

But once distribution reaches a certain scale, investing in production follows naturally. Wang Changtian once told the media: "If you don't invest in production, you can't get good films, so you have to invest. When your distribution is strong enough to support investing in production, you still hold the initiative."

Tony Leung in Confession of Pain

Wang Changtian does not like to gamble. Before Enlight went public in 2011, it had been in business for 12 years without raising outside money. He once described himself this way: "I'm fairly pragmatic, sometimes even a bit conservative."

TV was not why Enlight decided to go public. Wang Changtian called his business a "camel company," one that for a long time absorbed its own problems: "First, Enlight has never really been short of money. When the market was good, we stored up a lot of reserves, so in hard times we had cash. Second, in a very bad market, what can money do for you? There aren't many businesses to expand into, and expanding doesn't necessarily take much money. In TV, how else could I grow? I felt I'd already taken it as far as it could go, and the other factors weren't up to me."

He continued: "If I invested in something else, film, say, the film market wasn't mature back then, so there was no market. TV dramas I was already making, but I've always had doubts about their business model. It's a B2B model that depends on TV stations, which control both what a drama is worth and when you get paid. And there are too many competitors: there are at least several hundred fairly active drama production companies now, and the barrier to entry is low. So putting too much money there means taking a big risk. Only about 50% of TV dramas break even or make money."

TV was beyond his control. Film was different.

In April 2012, Enlight held a launch event for its upcoming films. It cut back on distributing Hong Kong films and added more small and mid-budget mainland films and films by new directors. Xu Zheng's Lost in Thailand was one of them.

A few months earlier, Xu Zheng had come to Wang Changtian's office without a script and acted out the whole story, playing every role himself. Wang decided to invest. Lost in Thailand, made for no more than 30 million yuan, opened in mainland China on December 12, 2012. It took 310 million yuan in its first week, a first-week record for a Chinese-language film, and finished at 1.267 billion yuan, becoming the highest-grossing Chinese-language film in Chinese film history.

During the release, the distribution network Enlight had worked so hard to build proved its worth. "When others go to a city, they don't know the place or the people. Our people were based there. Others really can't match this marketing system. They found that our system could lift box office by 30%."

"The company had been at it for 13 or 14 years, and this turned out to be my moment of greatest glory," Wang Changtian told the media.

Xu Zheng and Zhao Wei at the launch event for Lost in Hong Kong, the sequel to Lost in Thailand

In a speech at the end of 2014, Wang Changtian said: "China's two richest men, Jack Ma and Wang Jianlin, are both getting into film. I now spend 60 to 70 percent of my time on film, which is twice the working hours of many people. Why am I so busy with film? I expect China's box office this year to be 31 billion yuan, next year (2015) around 40 billion, and the year after (2016) 50 billion, and around 2017 or 2018 it will overtake North America's US$10 billion box office."

In 2015, China's box office was on track toward Wang Changtian's figures. As of June 30, the mainland box office for the first half stood at 20.242 billion yuan, up 48.82% year on year: 9.602 billion in the first quarter and 10.640 billion in the second, with 42 films passing 100 million yuan.

Ranked by box office from the films they invested in and distributed, private film and TV companies stood as follows. Bona came first, with more than 2.13 billion yuan from 10 films including The Taking of Tiger Mountain (released December 23, 2014), From Vegas to Macau II, and SPL 2. Huayi, Enlight, LeEco, and Wanda ranked second to fifth, with 749 million, 709 million, 676 million, and 391 million yuan respectively.

In that speech Wang Changtian listed the fields he believed would grow alongside the film market: TV (the movie channel), talent management, online video, theme parks, electronic media, social commerce, publishing, and cinemas. Film companies name all of these when they talk about strategy.

In early 2015, Alibaba invested 2.4 billion yuan in Enlight Media.

Wang Changtian said: "I met Jack Ma twice. He said that, as a rule, he doesn't need to meet the company for any investment under 3 billion yuan; his investment committee decides. He said the reason he was meeting me was that he was interested in one thing, how Chinese film could reach 300 billion yuan. He said he wasn't very interested in which films you make or how you make them." In other words, he cared about box office, not reviews.

Alibaba Pictures, Alibaba's own film arm, lost 400 million yuan in 2014. Allying with Enlight and Huayi fills Alibaba's gap in production, and the 8 to 10 films Alibaba Pictures plans each year can also use Enlight's distribution network.

For Enlight, the first gain is Alibaba's deep pockets, which secure the cash flow an entertainment company needs. The second is access to products such as Yulebao and Taobao Movies. Over the long run, Wang Changtian also had his eye on the e-commerce giant's ability to develop merchandise.

As early as 2011, after the listing, Wang Changtian said the first 1 billion yuan of excess IPO proceeds would go toward trying new e-commerce models, and he raised the possibility of taking a stake in, or even buying, a video website.

Wang Changtian and Deng Chao; Enlight's 2014 film Breakup Buddies took 660 million yuan at the box office

On December 24, 2014, Enlight Media announced a joint venture with the internet company Qihoo 360 to set up Kuaikan, a video website focused on film. Enlight put in 48 million yuan, 40% of the registered capital. Kuaikan was due to launch in the second half of 2015 on a pay-to-watch model, aiming to become China's Netflix, possibly with paid online premieres of new films on the same day they open in cinemas.

Other video sites are also pushing paid models hard. iQiyi staggered the release of The Lost Tomb: the first five episodes were free, and from episode six on, VIP members could watch the whole season. When all episodes went live on July 3, play requests hit 160 million within five minutes and VIP sign-up requests topped 2.6 million. iQiyi's system crashed, and 70% of VIP members could not watch.

But projects like The Lost Tomb are rare. How many more Lost Tombs Enlight and 360 can find, how many viewers will pay, and how the revenue will be split are all questions the site has to answer.

Enlight has also tried working with Hollywood, thanks to the boss's close friend Wu Zheng, husband of Yang Lan. The co-producers of the film Hollywood Adventures include Sun Seven Stars Entertainment, Wu Zheng and Yang Lan's company. Seven Stars also brokered the deal, reported last year, for Enlight to invest in the CBS series Scorpion. Wu Zheng is known for his wide Hollywood connections, and Hollywood Adventures drew on one of them: Justin Lin, director of Fast & Furious 6.

A film industry where "content is king" cannot escape box office risk. For Hollywood Adventures, Justin Lin called in every favor to bring in foreign stars. Zhao Wei said that if the film didn't reach 1 billion yuan, the partnership with Justin Lin should not continue. In the end it didn't even pass 300 million yuan, and its American-style comedy was the weakest part.

Still, Enlight had only guaranteed the film's bank loan and had not actually invested, and it still earned sizable promotion and distribution fees.

On June 29, Enlight announced it would buy a 25% stake in Longshi Media, whose owner is another of Wu Zheng's contacts, Avi Arad, former chairman of Marvel Studios. The deal brought the film adaptation and operating rights to the young-adult bestseller Rapid Angel. Other original projects include Rise of the Terracotta Warriors, Son of the Dragon King, Planet Z, Battle of the Kitchen Kings, and Dragon Hero.

Wang Changtian and Wu Zheng

The first film from Zhang Hang's Youth Pictures is Scarlet Heart: New Version, the film version of the TV drama, with Annie Chen replacing Liu Shishi. It opens on August 7.

Wang Changtian often says he wants to stay close to young people: "You can see I dress fairly young. I dress up as a young person so they'll accept me. That's the first thing. Second, when opinions differ, the young people's view wins, not mine. But usually my view isn't far from theirs, because I'm always watching them."

Enlight Media focuses on four kinds of film: comedy, youth films, fantasy, and animation, aimed at audiences born in the 1980s and 1990s. Dad, Where Are We Going? The Movie targeted those born after 2000. It was shot in just 4.5 days and reportedly cost only 3 million yuan, yet it took 700 million yuan at the box office. When the industry accused it of "violating film culture" and being a "cash grab," Wang Changtian said: "Every time I see these things, I tell myself: thank you for the reminder, but I choose to stand with young people."

Nor was it Enlight's first reality-show movie. Enlight also invested in The Voice of China: Turning Around for You in 2013, which took less than 2 million yuan at the box office. Nobody could call that a "cash grab."

Wang Changtian once said: "Even after going public and using other people's money, my habits haven't changed. I have a problem to solve: now that the money has come, how do I keep the risks under control, and how do I scale up quickly?"

And TV? Peng Kan's view is that if TV ever becomes as market-driven as film, Enlight may well come back.

Around 2000, when TV programs had almost no "entertainment flavor" and others were still slowly thinking it over, Enlight relied on a good idea, the old-fashioned kind of cleverness, and made a "small, fast, nimble" entertainment news show that met viewers' pressing demand. It supplied the show to prefecture-level stations that could not produce their own, and found a shortcut to success. But that success depended on TV entertainment as a whole being sluggish.

Wang Changtian calls Enlight a "camel company": when it reaches an oasis it eats fast, so it can survive the desert. He is used to working this way. The camel is a symbol of the laborer. In Wang Changtian's dealings with the market, when there is no market or the market is barren, he is always the first one in, seizing the opportunity and doing well. But once regulation tightens, or the market demands heavy investment, Enlight struggles to play the leading role.

From 2000 until its 2011 listing, Enlight chose to go 12 years without raising money. Wang went from turning down investors to entering the capital markets because he saw opportunity in film and the internet. These markets belong to the "entertainment business," which, unlike the steady "media business," needs heavy cash flow. That is not what the "conservative, thrifty" Wang Changtian and Enlight like, but it is what competing in the new markets requires.

What has changed is the company's core business, its attitude toward capital, and its shift from a "media company" to an "entertainment company." What has not changed is its feel for the market, its preference for "doing big things on a small budget," and its belief that a "business model" brings success.

The film market, and the fields Wang Changtian believes film will drive, such as video sites, merchandise, publishing, and real-world theme parks, will all move from rapid growth to white-hot competition. Enlight already holds a good position: in 2014 it ranked first among private companies, with 3.1 billion yuan at the box office.

This year Enlight's box office target is 4 billion yuan, but with half the year gone, its cumulative box office is still under 1.5 billion. To hit the target, or even to keep the top spot, Wang Changtian will need to put up more money and take on more risk. For him and for Enlight, that is no small challenge.