MEDIA: China Entertainment Draws Billions From Fox, Others

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Bottom line: Chinese video- and entertainment-related companies will continue to attract big investments and valuations over the next year due to their strong growth potential, even as sentiment cools towards other new media companies.

Mango TV eyes major new funding

Investor sentiment may be rapidly cooling towards many Internet areas in China, but entertainment is one that still remains quite popular. That’s my latest read on the markets, following news of major new financing for 2 companies and a new Sino-foreign co-production deal in the hot video and movie-making sectors.

Up-and-coming online video operator Mango TV is at the center of the biggest news in terms of value, with media reporting it’s aiming to raise a hefty 20 billion yuan ($3.2 billion) in just its second funding round. Movie ticket booking app Weiying Shidai is in a smaller but still sizable fund-raising headline, with reports that it has just raised 1.5 billion yuan in its third funding round. Last but not least is word of a film co-production deal between local studio Huace (Shenzhen: 300133) and global giant Twenty-First Century Fox (Nasdaq: FOX).

All of these deals are in some way related to China’s booming video market, which includes both a booming box office and also a thriving market for movies and TV shows delivered over the Internet. The sector’s continued ability to attract big funds contrasts sharply with other areas like smartphones and online-to-offline (O2O) services, where rapidly cooling sentiment has forced several major mergers and acquisitions this year.

We’ll begin this entertainment investment round-up with Mango TV, which is one of the few state-backed players in China’s fast-evolving market for online video services. The company is a unit of Hunan Broadcasting, one of China’s most innovative and aggressive state-run TV broadcasters. It raised a relatively large 1 billion yuan in its first funding round earlier this year. (previous post)

I had previously said that Mango was likely to return to market later this year for more funds, though even I’m a bit surprised by the massive 20 billion yuan the company is reportedly now seeking. (English article; Chinese article) It sounds like the fund-raising is still in the road-show stages, with reports saying that more than 40 people attended a meeting for potential investors in Hunan last week.

I do suspect the 20 billion yuan figure may be somewhat inflated, since Mango is quite young. But even 10 billion yuan would be an impressive total, and reflects the market’s huge potential as Mango vies for audience with older private names like Youku Tudou (NYSE: YOKU), LeTV (Shenzhen: 300104) and Baidu’s (Nasdaq: BIDU) iQiyi.

Selling Movie Tickets

Next there’s Weiying Shidai, which has landed its latest 1.5 billion yuan in funding from a relatively impressive group of domestic investors that includes Internet giant Tencent (HKEx: 700) and real estate and entertainment conglomerate Dalian Wanda. (English article) Weiying Shidai operates the movie ticketing service called WePiao, but says it will use the new funding partly to move into other related areas.

Last but not least there’s the co-production tie-up that will see Huace team with Fox International Productions, the local-language production arm of Fox. (English article; Chinese article) There’s no money value in the reports on this particular deal, but I expect it’s probably valued in the $100-$200 million range and will see the pair team up to make 3-4 films for the China market. Such films are considered domestic productions, and thus are exempt from a strict quota that limits the number of foreign movies that can be imported to China each year.

The co-production tie-up is just the latest in a similar string of deals aimed at a China box office that grew nearly 50 percent in the first 8 months of the year to around $5 billion, second in size only to the US. I do expect we’ll see more such deal being signed, and also that funding for entertainment-related projects will stay strong for at least the next year, even as other areas struggle due to inflated valuations and overheated competition.

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