During Chinese New Year (commonly called Spring Festival in China), people typically travel to their hometown and gather with family and friends. In recent years, going to the cinema has become a popular activity – tickets for the 7 day holidays are typically sold out.

And of course, this is a golden opportunity for film production and distribution companies, with typically a few major releases during the New Year break.

However, the recent outbreak of coronavirus changed everything. The city of Wuhan, which has 11 million residents, has been locked down by authorities trying to contain the spread of the virus. Across the country, the government has been encourage people to stay at home rather than going to crowded places.

Doomsday for the New Year films – the distributors have to pull them out of cinemas. These films include Jiongma (囧妈), a CNY217 million (US$ 31 million) production.

A treat for everyone in China

However, a deal is very quickly struck with ByteDance, owner of popular apps including TikTok and Toutiao. ByteDance will pay the production company, Huanxi Media, CNY630 million (US$91 million) for the rights to broadcast the film through its video and news platforms.

So the otherwise cinemagoing public would be able to watch the film for free from the first day of the Chinese New Year. Huanxi in the meantime will also broadcast on its own streaming site, for free as well.

In order to do this, Huanxi terminated the distribution agreement with Hengdian Entertainment, where the latter guaranteed a box office of CNY2.4 billion (US$346 million).

Friends from Xigua (another short video app owned by ByteDance) said that the technical team worked over night to load the film and test for mass release.

Changing the content landscape 

We thought this is a very interesting (and audacious move), with potentially the following intentions/consequences:

  1. ByteDance becomes Netflix: ByteDance has always been strong on short form videos, but it has so far not managed to breakthrough long form videos. With this opportunity, it will get a lot of initial customers for a test;
  2. Huanxi avoids sharing the proceeds with its distribution channel – typically cinema chains will get a large chunk of the proceeds; Huanxi might offend some of the distributors and cinema groups but it gets the chance to test its own streaming platform;
  3. Iqiyi, Tenent Video and Youku, the three major streaming platforms in China, will respond by trying to secure the rights of other films.
  4. Kuaishou, a major competitor of ByteDance in the arena of short form videos, spent billions of Yuan to bid for the exclusively partnership with CCTV’s annual New Year Gala; now ByteDance is probably stealing the limelight with a much lower budget.

Overall, the next few days will be a good test on some of the content platforms in China. When people can’t socialise in crowded places, they turn their attention to their mobile screen.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.