In a Cutthroat Ticketing Market, How Gewara, the App That Sells "Temperament," Is Looking for a Way Out | Founders Speak

With BAT and other deep-pocketed players moving in, Gewara has lost its lead in market share. What new methods and strategies can it find?

Six years after its founding, if Gewara looks back at its early days, it will find that although it is still in the movie ticket business, the whole landscape has changed beyond recognition.

Six years ago, Gewara had just taken a 2 million yuan investment from Chen Tianqiao and Shanda. It was struggling to persuade cinemas to supply it with tickets, and worrying about competition from the group-buying sites then springing up everywhere.

Today Chen Tianqiao and Shanda have all but vanished from public life. Cinemas long ago opened up to online ticketing platforms. Even the group-buying sites that once competed with Gewara have disappeared entirely, swept away by the "Battle of the Hundred Groupons" and then the "Battle of the Thousand Groupons."

What now stands in front of Gewara is Baidu and its Baidu Nuomi, Alibaba and its Taobao Movies, Tencent and its WeChat movie tickets, and Meituan and its Maoyan. Zhang Xuejing, one of Gewara's founders and its co-CEO, calls them BATM: one letter more than the usual BAT.

Gewara's logo is a silhouette of the Cuban revolutionary Che Guevara

So the competition is fiercer than it used to be.

According to public disclosures, Gewara's last funding round came in July last year, when China Media Capital invested 200 million yuan. The round before that was US$20 million from CDH Investments in October 2013. The two rounds before that were only in the tens of millions of yuan.

By comparison, Weying, the company behind WeChat movie tickets, took US$100 million from Tencent and Wanda this year. Meituan's Series D raised US$700 million. Baidu has said it will spend 20 billion yuan to win the O2O market. And then there are Alibaba and Taobao Movies, with even more money to spend.

Because it has less capital, Gewara cannot join in on a large scale in the marketing tactics many online ticketing apps rely on, such as ticket subsidies.

In this latest boom in China's box office, it is hard to say how many moviegoers formed the habit of going to the cinema because of 9.9 yuan or 19.9 yuan tickets. But there is no doubt that cheap tickets are a powerful way for online ticketing apps to win users.

During last year's Double 11 shopping festival, Taobao and Sina jointly sold nearly 700,000 movie tickets at 19.8 yuan each. Then, during the New Year film season, Baidu's iQiyi bought out the non-IMAX midnight screenings of Gone with the Bullets and sold 300,000 tickets in a week. Baidu's budget for the New Year season and the Valentine's Day season together exceeded 70 million yuan.

A 70 million yuan subsidy means this is not a fight Gewara can easily join.

Staying out of the subsidy war has cost Gewara market share. According to Analysys, Gewara still ranked second in online ticketing at the end of 2014. Since then, Baidu Nuomi Movies, Taobao Movies and WeChat movie tickets have each at some point claimed second place in the industry.

The lost market share may be the smaller problem. Gewara's target users are white-collar, middle-class consumers in first- and second-tier cities, so its numbers are bound to trail somewhat. "What hurts us most (about ticket subsidies) is that the market has no way of recognizing what a movie ticket is worth. A lot of what we do gets wiped out by the huge gap in price," Zhang Xuejing said.

He means Gewara's efforts to improve the whole moviegoing experience. Where other ticketing apps can only link to a map app for directions, Gewara tells you which buses to take and where to get off; if you drive to the mall, where to park to be closer to the screening room; and even which restaurants and other services are nearby.

Zhang Xuejing calls these features "moviegoing companions": like a friend, they remind you how to get the most out of a trip to the cinema.

But if Gewara's tickets cost 30 or 50 yuan while other apps sell theirs for 9.9 or 19.9 yuan, who will pay the difference for a "moviegoing companion"?

Fighting BATM on ticket sales alone is clearly unwise for Gewara, so it wants to do more.

In the film industry, Gewara has been moving steadily upstream, into promotion and distribution and even into investing in production. On the promotion and distribution side, it has launched "New Screenings." "'New' means new forces in film, new subjects and new perspectives. We want to pick these things out and go see something new together with our audience," Zhang Xuejing said, explaining the idea.

New Screenings has worked on some big successes, such as Goodbye Mr. Loser and Go Away Mr. Tumor. After building word of mouth through large-scale preview screenings, both became dark horses this year, each grossing more than 1 billion yuan.

Of course, not every film becomes a hit like that. Take the recent The Coffin in the Mountain (《心迷宫》) and River Road (《家在水草丰茂的地方》). The first, made for 1.7 million yuan, won critical praise and nearly 10 million yuan at the box office. The second, an arthouse film through and through, deserves credit for taking 650,000 yuan in China's film market.

In fact, the box office matters less. What Gewara values more is the chance New Screenings gives these films. "Gewara does New Screenings to give new directors and talent a chance. For many directors, the wish when they make a film is simply to see it on the big screen. So New Screenings is good for the industry and good for directors."

Judged purely by what it earns, promotion and distribution is an even better business for Gewara. "Right now, the revenue share Gewara earns from promotion and distribution already exceeds its ticketing revenue," Zhang Xuejing told QDaily.

Gewara does not want to give up on film production either. "Before the end of this year, Gewara will set up a film and television production fund and work with other partners to back some newcomers," Zhang Xuejing said.

Beyond film, Gewara is also trying to push its business into other areas. In July 2014, after closing its Series C+ round, Gewara announced it would expand into entertainment and lifestyle services such as live performances and sports.

At the recently concluded Wuzhen Theatre Festival, Gewara, as exclusive ticketing agent, did well: 12,000 tickets sold out quickly on the first day of sales, and more than 40% of the festival's tickets went within 24 hours.

Wuzhen Theatre Festival

Before the Wuzhen Theatre Festival, Gewara had also staged several exhibitions, including a Van Gogh show and Rain Room, and signed fairly long-term deals with a number of performance companies. Revenue from live performances is growing steadily and now makes up about 20% of Gewara's total.

Sports, by comparison, is weak. Zhang Xuejing told QDaily: "Sports doesn't really fit Gewara's brand image, so Gewara is considering spinning off the sports business."

While it keeps expanding, Gewara is also working harder to protect its brand image: the online ticketing app that outsiders see as artsy and thoughtful, in short "small and beautiful." But Zhang Xuejing does not like the word "artsy" for Gewara. "It's not so much that we lean artsy. Personally, I'd say we lean toward treating film culture as part of one's life."

Asked how Gewara attracts users who treat movies as part of life, Zhang Xuejing said: "I think it's easier to connect with people who are like you. The kind of person I am means our users share the same temperament as us. The issues you care about are the issues the users you attract will care about too. So rather than saying our users are picky, it's more accurate to say we ourselves are picky."

In the Gewara app, this pickiness shows up as a richer product.

Besides the moviegoing companion, Gewara offers trailers, stills and even film soundtracks. In the future, Gewara also wants to sort cinemas into categories, so that the right films play in the right screening rooms to the right audiences.

New Screenings counts too. Users who treat movies as a way of life are not satisfied with Hollywood blockbusters alone; they need the good but less popular films New Screenings recommends.

Then there is the community Zhang Xuejing is so proud of. There, people who have seen the same film, or even the same screening, can swap their impressions. Because users gather there through the same purchase, discussion of the film itself comes more easily.

"Wala" film reviews are an important part of the Gewara community

"Gewara wants to serve better the people who treat film as a way of life, people who can appreciate film," Zhang Xuejing said.

Throughout our conversation, Zhang Xuejing kept returning to the phrase "way of life." Now and then he stressed that Gewara's full name is Gewara Lifestyle Network, a lifestyle company. "Everything we make is about cultural lifestyle, so that in everyday life people have products for consuming culture."

Zhang Xuejing even floated the idea of Gewara building a cultural complex, though he quickly added that for now it was only a very rough idea.

This stress on lifestyle means Gewara does not see itself simply as a ticket seller, but as serving a particular group of users who love film, live performance and cultural life.

To do that better, Zhang Xuejing said, Gewara will hire more people who understand film and live performance for its New Screenings and performance teams, to plan projects together.

Gewara's ambition is plain to see. But as it pursues all this, the problem in front of it is still a shortage of capital and resources.

Zhang Xuejing told QDaily that Gewara is not yet profitable. Neither the promotion and distribution income from New Screenings nor the service fees from ticketing can, for now, keep pace with Gewara's expansion.

And competitors are watching closely. In film promotion, distribution and production, Alibaba has Alibaba Pictures, and Tencent has Penguin Pictures and Tencent Pictures. In live performance, WeChat movie tickets has started to move in: at the Shanghai Jazz Festival, which ended not long ago, Weipiao'er was the general ticketing agent.

Facing this competition, Zhang Xuejing remains fairly optimistic. "We are relatively ahead of the market. Our users and our products are ahead of the market. As long as a company creates value, it will get the return it deserves."

QDaily spoke with Zhang Xuejing about how Gewara sees its own position and how it plans to handle fierce market competition.

Q: QDaily

Z: Zhang Xuejing

Q: Gewara recently added a film soundtrack feature to its app. What was the idea behind it?

Z: Gewara's users are pickier than other users when they watch films, so like us they notice things in a film, such as the songs. Gewara wants to serve better the people who treat film as a way of life, so they can appreciate the sound of a film too.

Q: Is Gewara deliberately going after these "pickier" users?

Z: Our users share the same temperament as us. Rather than saying our users are picky, it's more accurate to say we ourselves are picky.

Q: Where exactly does your pickiness show?

Z: First, we have to provide good after-sales service. A few small examples: say I can never work out which exit to take at a subway station. Can you tell me the exit number, so I don't have to read the signs? Second, the film itself: for instance, we use stills as screensavers, and we tell users when a film has a post-credits scene. Third, it starts from friends. Many of my friends ask me what's good at the cinema lately. We recommend films for different groups of people. Those are the three main areas right now.

Q: So these three areas are why people think Gewara leans artsy?

Z: It's not really that we lean artsy. Personally, I'd say we lean toward treating film culture as part of one's life. The people Gewara reaches already treat film as part of life; it's a habit for them. So they're pickier when they watch films, and the pickier they are, the more attention they pay to films. So they pay more attention to award-winning and niche films, and that's why they feel Gewara is more artsy.

Q: The features you've mentioned are all easy to build. Aren't you worried they'll be copied quickly?

Z: Very likely. There are almost no technical barriers on the internet now, and intellectual property protection in China isn't strong enough. So all we can do is move faster.

Q: If your features keep getting copied, where does Gewara's competitive advantage lie?

Z: Gewara's real advantage is that it's a group of people who love film doing things for people who love film. That feeling, that value, can be passed on. Others can copy small features, but even if the features are similar, the overall feel is different.

Q: For most people, film may still be just entertainment, not something as important as a "way of life." Will Gewara's users only ever be a small group like this?

Z: The film market has changed fast over these five years. Five years ago, most audiences probably went mainly for entertainment. Five years on, a market like Shanghai is already very mature, and for many people film has become part of life. Looking at how things are moving, Gewara's market prospects will grow, because once audiences go to the cinema more often, they start to develop their own style and taste.

Q: You're now pushing "New Screenings" hard, recommending small films like The Coffin in the Mountain and River Road. What was the original intention?

Z: The "new" in New Screenings means new forces in film, new subjects, new perspectives. After all these years of Chinese film development, the number and variety of films released hasn't grown. Dark horses keep appearing now, which really means the market is hungry and needs something new. Gewara does New Screenings to give new directors and talent a chance, and to "pick" the new things out.

Q: That sounds more like a vision. In practice, what does Gewara actually do?

Z: A very important thing New Screenings does is break the rules. Before, it was large-scale media promotion, big directors, big casts, and media attention passed on to consumers. New Screenings films need to be nurtured: a first group of people sees them and is moved, that group decides it's a good film, and then the film breaks out.

Concretely, Gewara has a preview-screener system, a system for building word of mouth, and an alliance of self-media accounts. We no longer look at films from our own point of view but from the audience's. We get the word out through the voices of media and self-media, because we believe the audience's own voice is the most powerful.

Q: Much of what you describe is the promotion and distribution side of film.

Z: From the user's side it's service; from the studio's side it's promotion and distribution. I help good films get out there by serving the audience. That's how Gewara does promotion and distribution.

Q: So Gewara will move further up the industry chain and do more promotion and distribution, right?

Z: We have to. If 800 million people treat film as part of their life, more talent has to emerge. Hollywood has 20 film genres; in China only 4 are mature.

Q: What concrete plans does Gewara have here?

Z: We want to set up a fund dedicated to helping these new film talents finish their work and bring it to market. Film or stage plays, we hope to build this kind of market for both. I've approached Li Shaohong, hoping they would run a mentorship program so that at least a first work gets made. I've also approached Tian Qinxin, Meng Jinghui and Stan Lai, hoping to set up a new program to support directors, bring on new film talent and make the whole market more diverse.

Q: What's the timetable?

Z: Very soon. We'll definitely do these things within this year. China doesn't lack money. What it lacks is a model: building a platform and finding more people to get it done.

Q: In the two years since BAT entered movie ticketing, Gewara's competitors Maoyan and WeChat movie tickets have grown very fast. How has Gewara responded?

Z: The competition between Gewara and BAT comes down to a difference in temperament. BATM sells movies as commodities. We sell and serve movies as cultural products. What Gewara does will certainly be more refined, and many of Gewara's features start from Gewara's own point of view, because we're more focused, I suppose.

Q: Is not being as rich as BAT a disadvantage?

Z: Yes, but it depends how you look at it. Every company has its strengths and weaknesses, and its own market positioning. This is the road we chose from the start.

Q: Realistically, competitors backed by big capital growing fast on ticket subsidies must be a big problem for Gewara.

Z: Yes, that's what hurts us most. Specifically, the harm is that this market has no way of recognizing what a movie ticket is worth. A lot of what we do gets wiped out by the huge gap in price. But I think the market itself will improve.

Q: Why are you so optimistic about the market?

Z: In the end it comes back to each company's market positioning being different. It's hard to say right now. We're still sticking to our own path, and we still have a fairly loyal group of users coming along with us. That group keeps growing, though not as fast as it might seem it should; after all, the price issue is there.

Q: Beyond film, Gewara seems to be putting a lot of effort into live performance, including this Wuzhen Theatre Festival.

Z: Live performance is indeed something we put effort into, because this market is growing especially fast and demand is strong. In live performance we focus mainly on exhibitions, then drama and stage plays, and finally music festivals. You'll notice these categories have something in common: they all belong to lifestyle. We haven't made concerts a focus, because concerts to some extent are about fan effects and the fan economy.

Q: Will you move upstream there too, as in film?

Z: We've thought about it. Gewara would bring some of its own strengths: our view of the market, our understanding of users. But as with film, production isn't something we're good at, so we would only take part.

Q: Besides film and live performance, Gewara has another business: sports.

Z: Actually, sports doesn't really fit the cultural products Gewara builds. We're considering whether to spin it off.

Q: How would the spin-off work?

Z: There are two ways. One is to take it out from under the Gewara brand; the other is to run it independently.

Q: How should we understand the word "Lifestyle" in Gewara Lifestyle Network?

Z: Our focus is still cultural life. Everything we make is about cultural lifestyle, so that in everyday life people have products for consuming culture. We never meant to be just a ticket sales platform. If we were only doing ticketing, our thinking would be completely different.

Q: Where will Gewara focus in the future?

Z: On giving the market more film and live performance content. Pushing content forward. That's how New Screenings and live performance both work.

Q: Is Gewara profitable at the moment?

Z: Still not profitable.

Q: Roughly what are Gewara's user numbers and sales right now?

Z: 35 million users, growing steadily every month, though the growth rate varies with the release schedule and the type of film. Sales this year should reach about 5 billion yuan.

Q: Those numbers trail some of the others, don't they?

Z: Our main focus is still the white-collar, middle-class market in first- and second-tier cities. In the numbers we are indeed a little weaker than the others.

Q: Is funding a worry for Gewara?

Z: Yes. Mainly we're thinking about changing the model; finding a way to make a profit as soon as possible is crucial.

Q: If I remember correctly, Gewara's latest funding round was in July last year. Are there new funding plans?

Z: Gewara is starting a new round of financing now. Because it's in progress, I can't say much.

Q: Do you want to keep raising round after round, or is an acquisition something Gewara might consider?

Z: In our hearts, the Gewara brand still has some influence in the market, but competition is quite brutal, even though our positioning is different. Let's first make sure this brand survives.

Q: How does Gewara define its place in the film industry?

Z: This one is really interesting. Let me first tell you how others define us. A while ago, a friend told us Gewara is China's Miramax (the well-known American independent film company). But we don't want to be that niche. What we share with Miramax is that it also pushes new things and new models. But we want to position ourselves as a pioneer: looking at the market, finding the markets that can grow in the future, placing our bets early and building something.