Wanda’s Cultural Industry – The Wanda Way

Wanda’s
Cultural Industry

21 March, 2012 – Shanghai Cultural Industry
Development Lecture Course

Today, I would like to introduce Wanda’s cultural industry to you. In 2006 Wanda set foot in the cultural industry and as of now it has been involved in the cultural tourism city, the film industry, performing arts, film technology entertainment, theme parks, children’s entertainment chains, wholesale KTV chains, newspapers, and art collections, among other fields. In 2012 the Cultural Industry Group was incorporated in Beijing, and the cultural industry’s revenue surpassed 10 billion yuan. In 2013 the revenue was 25.5 billion yuan, and it was announced by the Central Propaganda Department that the Cultural Industry Group was the first among the top 30 national cultural industries. This year Wanda Cultural Group’s revenue target is 32 billion yuan, but it is estimated that we will beat this. Wanda Cultural Industry’s revenue has annual growth of the order of magnitude of 10 billion yuan and our target is to enter the world’s top ten cultural enterprises by 2020 with 80 billion yuan in revenue. How does Wanda develop its cultural industry? I will give you an introduction to four aspects:

I. Why the cultural industry?

1. Transform and Upgrade Requirements

When Wanda was established in Dalian, the main business was real estate, and during 27 years of existence, four big changes have occurred. Each was an active transformation. The first was in 1993 with cross-regional development from Dalian to Guangzhou. Later development moved throughout the whole country, and Wanda was the nation’s first private enterprise to develop inter-regionally. In 2000, Wanda transitioned from residential to immovable property and entered the cultural industry in 2006. In 2012, Wanda implemented transnational development. Entering the cultural industry was essential to Wanda’s transformation and upgrade.

Wanda’s earliest cultural industry was cinema. Because cinema was a very important consumer experience in a Wanda Plaza, it was a format that had to be configured at all Wanda Plazas. At that time Wanda signed a strategic cooperation agreement with SVA (Group) Co., Ltd. They were willing to follow Wanda’s development and manage where cinemas were built. Later SVA Group’s leader was replaced, and the new leader did not think the cooperation had prospects and terminated the contract. Then Wanda, already with a dozen cinemas open or soon to open, had to take over for itself. You could say that Wanda entered the cultural industry and was driven to desperate action. It never expected to become the world’s number one cinema chain by accident, but Wanda has undertaken, of its own accord, this whole-scale transformation towards the cultural industry. It has become fully culturally conscious, and it has expanded into many areas of the cultural industry.

2. Establishing a New Competitive Advantage

In business, no matter the industry, the strategy, or the operations, the ultimate goal is to establish a core competitive advantage and to obtain greater profits. Back in 1993, when Wanda was in Dalian, revenue had already surpassed two billion yuan and accounted for about a quarter of real estate sales in Dalian, but space to expand in Dalian was limited. In order to become large-scale, Wanda decided on cross-regional development, and practice has proven that this step was quite right. If, at that time, we had not had the bravery to step out, then today’s Wanda would not exist.

Around 2000 the Chinese residential real estate market was flourishing, and supply did not meet demand, but I think the residential real estate industrial model was flawed. First, residential real estate is a cyclical industry. Globally, when a country’s urbanization rate reaches 70-80%, the residential real estate market will atrophy, and though trading volume remains, the vast majority is second-hand houses. Secondly, the cash flow of residential real estate is unstable. If items are sold there is a cash flow, but if items aren’t sold the cash flow is cut off. In order for the business to maintain sustainable development and pursue long-term and stable cash flows, Wanda decided to transition to commercial real estate. Now we have been going at it for 14 years and have not yet come across any true nationwide competitors.

Each year Wanda Commercial Real Estate’s start volume is more than ten million square meters, and completed openings are several million square meters. Moreover, the opening area has annual growth of the order of magnitude of a million square meters. Last year, 4.1 million square meters were opened; this year more than 5 million square meters; and next year more than 6 million square meters. But commercial real estate is still cyclical, and after China’s urbanization is complete there will no longer be major growth. Now there are many commercial real estate imitators, and local overheating has emerged. The media has written articles saying that Wanda is entering cultural tourism and transnational development to dig a business “moat.” To put it bluntly, it is to establish a new competitive advantage. For Wanda, cultural tourism, especially large-scale culture and tourism projects, means that it is more difficult to have imitators and competitors because the key factors in culture and tourism are not capital and land. The core is creativity, technology and talent.

3. The Branding Influence is Huge

Concerning the cultural industry, I once said that the vast majority of industries have ceilings, with the exception of the cultural industry, one which has no ceilings. Having no ceilings has two implications: first, the brand influence has no ceilings. A piece of work may have a very profound and long-lasting influence, even so much as to bring about a revolution in some respect. For example, the movie “Avatar,” not only had a large branding influence, but also drove the promotion of IMAX movie technology. IMAX technology appeared in 1963, but because of the cost, film sources and a variety of other reasons, the promotion of IMAX never got off the ground. With the screening of “Avatar,” everybody experienced particularly good IMAX 3D viewing effects, and that promoted the rapid growth of IMAX and changed the fate of this cinematic technology. Secondly, there is no profit ceiling. For Wanda Cinemas, for example, after-tax profit margins surpassed 10%, greatly exceeding what many people imagined. The Cinematic Technology Entertainment Project that Wanda is constructing in Wuhan has investments of 3.5 billion yuan, which is enormous. However, after the project opens it is expected to reach annual revenue of 1 billion yuan, an extremely impressive and long-duration profit.

II. The Content of Wanda Cultural Industry

Rather than merely setting about the content industry (which by the way still faces many restrictions), Wanda’s Cultural Industry is innovating in terms of technology and form. In so doing it is achieving a large scale and it is avoiding risk. For example, shooting a film: due to content review and restrictions on other aspects, it is very difficult to achieve rapid growth. Performing arts are the same; a play must be better. Revenue of 20 million yuan is extraordinary, but it takes 100 plays before one is able to top one Wuhan Cinema Park. Wanda Cultural Industry has given prominence to amusement and entertainment businesses, made the chain, and created the scale effect. Wanda's Cultural Industry is involved in the following areas:

1. The Cultural Tourism City

The Cultural Tourism City is the epitome of Wanda Cultural Industry. Wanda Group, with many years of accumulating rich experience accumulated in business, culture, and the tourism industry, blazed new trails to form the world’s first comprehensive, large-scale cultural tourism business project. It is the sole creation of its kind in the world, the design team is assembled of masters, and Wanda possesses the property rights to the three main characteristics. The total investment of each Wanda Culture and Tourism City exceeded 20 billion yuan, and includes a super-sized Wanda Plaza, a large outdoor theme park, a hotel group, a large stage show, a bar street and so on. Now Wanda Changbai Mountain International Resort has opened, two major cultural projects of Wuhan Central Cultural District will open in the fourth quarter, and then the project will be complete. Next year Xishuangbanna International Resort will open, and then there will be two or more cultural tourism projects opening annually. Wanda already has nine of the planned 12-15 cultural tourism cities that will spread across the nation: Wuhan, Changbai Mountain, Xishuangbanna, Harbin, Qingdao, Nanchang, Hefei, Wuxi, and Guilin.

2. Cinematic Industry

Wanda’s film industry has a complete industry chain, including everything from a movie and television base, production, distribution, screening and a film festival, making it the only one in the world. Although Wanda Film Production Company had a late start, the results are good. It was established last year, and this year it released two movies. The investment in these two movies was very small and the profits substantial. “Police Story 3,” which earned about 600 million yuan at the box office, had less than 100 million yuan invested in it, and “Beijing Love Story,” which earned about 400 million yuan at the box office, had an investment of 30 million. In the latter half of this year, Wanda still plans to release three or four more movies.

Wanda Cinemas, adopting Hollywood’s industrial model, shoots what a specialized decision-making team decides. Unlike many Chinese companies that rely on just one or two directors and one or two actors, Wanda does not sign directors and actors but takes the modern enterprise system of the film industry. With regards to film distribution, Wanda has a distribution company in America and has incorporated a distribution company in China. This distribution company will account for half of the shares of the Chinese film market, meaning from now on Wanda has a right to speak in the publishing field. Wanda has Wanda Cinemas in China, has acquired AMC in the United States Wanda, and is still looking for new acquisition opportunities in Europe and America. Currently, Wanda accounts for roughly 10% of global movie box office, and the goal is to reach 20% by 2020. In that year, global box offices are predicted to be worth approximately US$35-40 billion. If Wanda achieves its objective, it means that cinema revenues alone will reach US$7-8 billion. With total investment of nearly 50 billion yuan, Wanda is making the world’s largest film and television industrial park, bidding for the Qingdao International Film Festival, and planning to create a Chinese cultural brand with global reach and appeal.

3. Performing Arts

Wanda’s collection of performing arts contains stage shows, water shows, stage variations and high-tech integration, instead of traditional cinemas. Currently there are four projects under construction in Wuhan, Xishuangbanna, Qingdao and Wuxi. This year Wuhan’s “Han Show” will open, and will take the world’s performing arts to new heights.

4. Film Technology Entertainment

Wanda film technology entertainment is a collection of the world’s leading film technology and entertainment projects. Currently there are six projects under construction in Wuhan, Harbin, Nanchang, Hefei, Wuxi and Guilin. Wuhan Film Technology Park opens this year, and is the world’s only comprehensive film technology entertainment project. Using 3D film technology and a dynamic platform, people can be integrated into movie scenes and interactive games.

5. Theme Parks

The theme parks constructed by Wanda are world-class. Currently there are six projects under construction in Xishuangbanna, Harbin, Qingdao, Nanchang, Hefei and Guilin, of which both Xishuangbanna and Nanchang will be opened in 2015. Shanghai Disneyland is also currently being built, and while a single Wanda theme park is not necessarily better than Disney, “one good tiger is no match for a pack of wolves.” Wanda is building up more than a dozen theme parks in China, which will greatly reduce Disney’s market share in China.

6. Children’s Entertainment Chain

Wanda spent three to four years to research and develop the children entertainment chain’s completely new format, which relies mainly on children experiencing interactive content for play. It combines children’s education, retail, food and so on. Wanda Children’s Entertainment Chain is divided into two levels, a small area of roughly 5,000 square meters called “Baby King,” of which 11 projects will be opened this year and a large area around of 20,000 square meters called “Kids Park.” They are the first in the world, and it is believed that they will cause quite a stir when they hit the market.

Wanda commissioned and bought the intellectual property rights from the world’s five most famous companies who researched and developed 86 different products for children’s amusement. For example, children can experience the role of a fire fighter, from receiving the fire report to simulating a fire fighter driving to fight the fire. On the way there, there will be 3D simulation of fire effects. To prevent spraying people, the spray guns have a fixed orientation toward the simulated ignition point to put out the fire. The children’s education does not use traditional school education content, and is mainly made up of activities like dancing, playing the drums, ice skating, singing and so on.

7. Wholesale KTV Chain

There are currently 81 KTVs open, and this year 24 more will open. It is the largest-scale KTV operation globally.

8. Others

Wanda manages investments in the magazines “China Times,” a financial weekly, and “Popular Cinema.” Wanda is dedicated to collecting top quality paintings and calligraphy from contemporary Chinese artists, and has amassed a collection of 100 great masters and 1,000 museum collection-level artworks.

III. Characteristics of Wanda Cultural Industry

1. A Combination of Diverse Factors

Wanda's Cultural Industry will not simply compartmentalize with culture studying culture and tourism studying tourism. Wanda hits with the combination punches: the greater the combination of factors, the larger the scale, the stronger the power. Wanda cultural tourism project integrates technological, cultural, touristic, and commercial features to form a comprehensive cultural travel business, such as Wuhan Central Cultural District, which is the first Chinese city with a program called Central Cultural District. Inside ten cultural projects are set up, including the world’s first Film Technology Park and the Han Show, two significant cultural projects. The Chu River, which connects Sha Lake to East Lake, runs through the center of Wuhan Cultural District. Han Street, a commercial pedestrian street, runs along the river. Han Street Central has the Han Street Wanda Plaza, a five-star and a premier hotel, and more than one million square meters of offices and one million square meters of housing. Changbaishan International Resort is Wanda’s first cultural tourism project to open. It boasts Asia’s largest skiing area, totaling 43 slopes with a combined length of tens of kilometers. There are three world-class golf courses, nine hotels with more than 5,000 beds, and a 900 meter long commercial pedestrian street with more than 100 businesses, restaurants, bars, cinemas, karaoke, stage performances, spas and anything else one could think of.

2. High Technological Content

Wanda Cultural Industry’s most prominent distinctive feature is its high technological content. For example, in Qingdao Wanda put on the “Ultimate Car Show,” which is a completely innovative and high-tech project. This project has been under research and development for many years and is having its global premiere in the first half of 2017. The Ultimate Car Show and the Han Show are very different; the Han Show focuses on cultural tastes, and the Ultimate Car Show provokes a thrill. The show has a circular track and a multitude of electric vehicles doing stunts at 120 kilometers per hour and above. The combination with the performing arts is breathtaking. Wanda’s shows challenge the human body to the extreme, so performers are hard to cultivate, and their performance life cycle is short. Once beyond a certain age, they can no longer perform. Wanda places a lot of consideration on technological equipment; the Han Show has dozens of devices, there are 14 sets of equipment just for underwater. The high-tech content makes for even more dazzling effects.

3. The Integration of Global Resources

The cultural industry is a creative industry; the most important things are creativity and talent. Only by integrating global resources can world-class innovation be achieved. Take the Han Show, for example. The construction and stage equipment were ideas from the world’s top architectural and art design master, Mr. Mark Fisher, who was the artistic director for the opening and closing ceremonies of the Beijing Olympics, the Guangzhou Asian Games and the London Olympics. The program is by creative director Mr. Franco Dragone, one of the world’s best stage artists and a renowned master. He directed Las Vegas’ “O” and “La Rêve” as well as Macau’s “The House of Dancing Water.” Wanda Cultural Tourism Planning and Research Institute has over 300 people, half of whom are foreign, and many of whom are top global players in their industries. In particular the theme park Chief Packaging Officer, the Chief Theatre Designer, the Chief of Film Special Effects and six other chiefs are among the biggest industry names in the world. This kind of top talent is difficult to cultivate alone, so Wanda relies on high salaries to lure them in. If they are really unwilling to join the company, Wanda signs exclusive cooperation agreements with their companies or buys their intellectual property rights.

4. Prominent Chinese Elements

Wanda has made cultural tourism an important development direction for the future, as the main industry must reflect Chinese culture and cannot rely on photocopying foreign things. Take the Han Show for example: the architecture is modeled after a traditional Chinese red lantern; the program is called the Han Show, “Han” referring to the Chinese Han ethnicity, or going further referring to the ancient Chinese legend of Chu and Han, or even referring to the city of Wuhan; the story is also a Chinese story. Wanda hopes to create many theme parks throughout the country, and each place’s theme park designer will integrate local cultural characteristics. If all parks follow the same pattern, then people will not want to travel to Wanda’s parks in other locations. For instance, Xishuangbanna’s park areas are designed as a tropical rain forest, an ancient tea route, a butterfly kingdom, an aquatic park and more, all of which reflect rich characteristics ingrained in the local culture. Wanda also requires that all theme parks have several large one-of-a-kind rides. To do so, Wanda and the world’s two best theme park equipment-manufacturing companies have reached an agreement, in which important equipment can be customized while Wanda possesses the intellectual property rights to ensure that others cannot imitate.

The advantages of Wanda Cultural Project’s prominent Chinese elements, reflection of local characteristics, and exclusive customized equipment will gradually become apparent in future operations. When the Wuxi Wanda City Project began, Wanda “declared war” with Shanghai Disney. We have surpassed Shanghai Disney on two core indexes with a grasp on park visits and operating revenue. This is due to Disney having only one theme park and not having changed the model in decades. Not only does Wuxi Wanda City have an outdoor theme park, but it also has an enormous indoor Wanda Plaza. Inside there are numerous rides as well as large stage shows, hotels, bars, etc. Altogether, these are more attractive, leading to more park visits and naturally rising revenues. Wuxi Wanda City is located at the heart of the Yangtze River Delta, an excellent location.

Furthermore, Wanda has national marketing capabilities through the acquisition of nationwide travel agencies. Through the establishment and perfection of the tourism industry chain, in the future a large number of tourists can be transported for the Wanda Cultural Tourism Project.

5. Independent Intellectual Property Rights

Wanda's Cultural Industry Project emphasizes independent creation and manufacturing. If Wanda cannot do it themselves, they will need to commission the design and buy out the intellectual property rights. Once in America, I saw a program combining the live actions of a real person with 3-D. The collaboration was between a software company and Disney and used a split method, but Wanda cannot accept this style. In the cultural industry Wanda develops like a chain, and discussing cooperation divisions one by one is not only troublesome but also makes us vulnerable to the control of others. For the purpose of scale development, Wanda would rather spend more money and obtain the independent intellectual property rights. To buy the intellectual property rights of the Qingdao Ultimate Car Show Wanda spent US$10 million.

When Mr. Fisher just began coming up with ideas for the Han Show’s moving light-emitting diode (LED) lights, many people said they couldn’t be done, but we didn’t give up. At last, with the support of the Mechanical Institution of the People’s Liberation Army (PLA) General Armament Department and after numerous modifications and tests we finally succeeded. Now the equipment is installed. Each weighs 200 tons and has the freedom of movement to shift angles and directions. This enables infinite variety for the stage background and gives the program director more room for creativity.

IV. The Prospects for Wanda Cultural Industry

1. The Profits of Opened Industry

What is industry? Industry is operating according to market mechanisms and one’s own ability to form cyclic production capacity. Industry is definitely not relying on government subsidies to maintain existence. In the cultural industry, Wanda’s most basic requirement is that it is profitable; it will never be keeping up appearances. All of the cultural industry projects that Wanda has already opened are profitable, and the profitability is satisfactory. In 2012 Wanda took over the world’s second-largest cinema chain, AMC, American Movie Company. Pre-purchase, AMC had suffered losses for several years, but after Wanda took over they achieved profitability. Then, last December on the New York Stock Exchange, the listing was successful. Wanda’s acquisition of AMC was an actual investment of roughly US$700 million, plus we assumed AMC’s debt of US$1.9 billion. Last year, not only did the listing raise US400 million in cash, but the market value of the AMC stock held by Wanda was also twice the value of the original investment, and recently stocks were up nearly three times.

Why wasn’t AMC profitable under American operation for so many years, but when Wanda took over it became profitable? The key factor is that before Wanda took over there was no real owner, just five shareholders acting as funds and only thinking about how to sell the company for a good price. AMC’s CEO told me that within one year he received more than 100 buyers. Under such circumstances, how could the management team operate carefully? Wanda’s acquisition of AMC is the opposite. First, they spoke with the core management level. After Wanda’s acquisition they signed a five-year work contract, established an incentive mechanism, and came up with a shared profits reward for management. Only after all of these were negotiated did Wanda talk with shareholders about buying the company. This move awakened the initiative of the management level, and AMC quickly reversed losses and achieved profitability. Meanwhile, Wanda adopted control measures to monitor in real-time each individual AMC cinema’s daily income and costs. In the end, there were no obstacles to our targets.

2. Good Expectations for Unopened Projects

On June 20 of this year, Wuhan’s Han Show and Movie Technology Park, two projects that represent the future direction of Wanda Cultural Industry, will transfer operations, begin worldwide ticket sales, and officially premiere in December. We expect that show tickets within the first six months will be sold out in a flash. In other words, customers that hear that the story in the Han Show is good and want to go see the performance will have to buy tickets six months in advance. Wuxi Wanda City, on opening, is expected to have an annual flow of around 20 million people and an annual income of three to five billion yuan, certainly more than Shanghai Disney. Through practice, Wanda wants to tell Chinese people that American companies are not necessarily stronger than Chinese ones.

3. Become a World-Class Cultural Enterprise

Each year, the world famous strategy consultant Roland Berger releases the “Top 50 Global Culture Industry Players Study.” In 2012 Wanda ranked 38, and in 2013 the ranking is likely to be even closer to the top. Wanda’s 2016 objective for the Cultural Industry is to push revenue to 40 billion yuan and enter into the world’s top 20; Wanda’s 2020 objective is to raise revenue to 80 billion yuan and enter into the world’s top ten. Looking at the current implementation, Wanda will certainly achieve the goal ahead of schedule and become a world-class cultural enterprise.

Thank you everyone.

Q & A

Q: I have two questions. You just introduced so many Wanda Cultural Tourism Property Projects. First, what will be the on-going operational management practices with so many projects beginning construction each year? Second, when developing the cultural industry, what is Wanda’s thinking with regards to the mobile Internet? Is there a specific strategy?

Wang Jianlin: Actually, no matter how well it is designed and how well it is built, the final key is operations. This is the only key to whether or not you can earn money. I often say, of course the level of technique is important, but the key is the path, and what is the path? Do not assume it is a strategy or an innovation. Wrong, it is people. From my own experience and from Wanda’s development, I deeply appreciate that. People are the money and the cause, so talent is decisive. We just spoke about cultural tourism having hundreds of innovators with a number of foreigners. These are not Wanda employees but Wanda’s cooperative partners and cannot become fixed cooperative partners. In that case, I buy out the intellectual property rights and commission the development. Usually when the project starts, we establish a completely international operations team. The Chinese talent for projects such as Wuhan’s Han Show and Film Technology Park is still scarce. The CEOs are all hired abroad. Take theme parks: for example, our theme park management team requested the Vice President of Disney International, and the theme park department requested the Chairman of Hong Kong Disney. We are also in talent development; the Wanda Institute in the China Institute of Business is definitely number one. We ask those teachers to attend class. However, talent development is slow, and what is there to do when it is too late? Dig, headhunt, and dig. I now have cooperation with more than 50 headhunting companies, close to 20 of which are international. Take Qingdao Oriental Movie Metropolis for example, the project has now just begun, but Qingdao Industrial Park’s CEO candidates will soon be put into position. The opening is only in 2017, so why position them this early? The CEO, COO, and CTO will all be placed first; I am not afraid of spending on these management costs because after spending time with the design team and the construction team, they will have a grasp on many things. For my film festival we also found a globally known CEO; this person will probably be put into position in May. The film festival will only be set up in 2016 or 2017, but they will still be put into position just as early. For each position we require a Chinese and foreign pair-up; if the CEO is a foreigner, then there will certainly be a Chinese person (or at least an ethnic Chinese) as Executive VP. Currently we are blazing trails for many new projects. Depending on our own training alone is really quite slow, so if you go to Wanda you will see that it is very international. In the elevators there are often foreigners, but we have one condition. Generally, those able to speak Chinese have priority in recruitment. I push for employees to speak Chinese because of circumstances. For instance, if a foreign employee went to a meeting with me but the boss did not speak English, I would not be able to anticipate what would happen. If, worldwide, there were ten thousand Chinese companies like Wanda, the promotion of the Chinese language would be much easier.

Second, It is now the age of the Internet. Although Ma Yun and I have a bet, it is just a joke, and although it is a joke, it actually represents two types of thought and two ways of thinking about how to view the Internet. I had to represent traditional industry, but in reality I am not engaged in retail. Therefore, I can tell him the Internet is good, but who will talk about bricks-and-mortar commerce?

Within Wanda, I already require that all companies develop on the Internet, and must have an Internet line of thought. Wanda’s own O2O (online-to-offline) e-commerce company has already done online tests in six plazas. At the end of this year, this will be extended to 110 Wanda Plazas and all hotels. Our e-commerce has most of its own features. If the Internet is not combined with offline, the “O” is not complete. The Internet is just the upper half of the circle. My point of view is that in ten years there will be no pure bricks-and-mortar enterprises, nor will there be pure Internet companies, but there will certainly be a combination of online and offline. As for the Internet, how does one ultimately move in that direction? It is surely through integration. Do not assume that e-commerce companies only engage in e-commerce; they can also engage in culture and videos, why? Because it is a developmental necessity, if one does not engage in the Internet it probably becomes more terrifying. This is unlike us. A new subversive technology appears, and this business could instantaneously go from being a 100 billion yuan business to 10 billion. The Internet industry is also not like real industry. In real industry if the cash flow is good, the method advances. With a long-term, stable cash flow, it’s possible that valuation is not too high and development speed is not fast, but the thinking is also not very fast. I believe the ultimate development trend is integration; there is no single completely distinctive Internet company. That is my opinion.

Q: I have three questions about the Han Show. First, approximately how many spectator seats are in the Red Lantern? Second, how much will tickets cost? Third, the use of water is important in this performance. I know that for a long period of time the temperature is quite high for the Las Vegas water shows and Macau’s “The House of Dancing Water.” Yet, Wuhan has a very long winter, which poses the problem of water temperatures. I believe the water temperature can be resolved, but this will increase costs. Also, the water in winter performances may bring mist. I would like to know, have you considered these issues?

Wang Jianlin: I was involved in the research and development for the Han Show and participated in probably more than 50 meetings. Now, my main focus at Wanda Group is to participate creatively. First, there are a little more than 2,000 seats and 140 VIP seats. There are approximately 400-450 performances annually. There are no performances on Mondays, and there is one added show on both Saturdays and Sundays. As for the tickets, in the initial six months of the show – the period for which we are basically sold out – all tickets are 500 yuan. A ticket price of 1,000 yuan could support our current investment, so after six months there may be a price increase. However, we will also consider China’s actual situation. We can calculate: if there are 400 performances per year, that is approximately more than 100 million people, with tickets priced at 1,000 yuan, it is more than one billion yuan in revenue.

And for the third question, how will we deal with water temperature and fog? The team’s building and machinery and equipment creator is Mr. Mark Fisher who is also the designer of “O,” “La Rêve” and Macau’s “House of Dancing Water.” The artistic director, Mr. Dragone, is also the founder of worldwide water shows, of which there are only three; the two in Las Vegas and the one in Macau, so I’m sure this issue has been considered.

Q: You put a great emphasis on technology, but would not like to enter into content. However, in this era, content is king. Have you heard of (the Korean television show) “My Love from the Star”?

Wang Jianlin: I know of it, but I haven’t seen it.

Q: But My Love from the Star has already had a profound impact on our youth, especially young women. How do you view this issue? Here you are talking about Wanda being international as a core concept, a one hundred-year enterprise. Apart from responsibility for themselves and shareholders, what more are you hoping to bring to our enterprises? Will there be content development, will content be improved to impact Europe and America and spread Chinese culture?

Wang Jianlin: It is impossible to not value the content, I am saying, “We shouldn’t compare content and innovation, and don’t place the content first.” What is the Han Show? Solely form? It is content. You wouldn’t say that theme parks are just roller coasters, right? Of course there is content, for instance Xishuangbanna’s several themes: the Ancient Tea Route, Butterfly Kingdom and the Rainforest. This in itself is content; it has a position, and every place is different, such as Heilongjiang’s Snow Village. I don’t think that the content you are talking about is the content of the cultural industry, merely the content of movies and television series. The saying “content is king” is not entirely correct. There is another saying you should not forget, “means are king,” and some people even say, “marketing is king.” I often visit Hollywood’s big television companies and movie companies. The basic investment is “442.” 40 percent is production costs, 40 percent for marketing and 20 percent is the cost of an actor. This point I thought was very strange and asked why would 20 percent of the total be for actors? I got the answer that it was a golden rule, and if the money the actor wanted exceeded 20 percent of the costs, they would find a different actor. This is the Hollywood industrial model with fixed costs. If you want more I won’t give it to you and will switch for a different person. China still hasn’t adopted the Hollywood industrial model, and the current model is flawed; 70-80 percent of the costs are taken by the actors, which definitely can’t result in good production. China still isn’t into the real film industrial era but is in the era of small workshops and self-employed films. Companies rely on hiring one or two directors and signing one or two well-known actors. Once our film industry develops to US$10 or US$20 billion, it will inevitably change. I’ll give an example; Beijing Love Story cost 30 million yuan. It did 400 million yuan at the box office, due in large part to marketing. Of course, when compared, content is certainly arranged first, but it cannot be said so simply. The reason we don’t stress the content is because we want to take in more and do it bigger.

Another is our corporate philosophy, International Wanda, a centennial enterprise. The company’s slogan can’t be too long. If we put all this social responsibility and love for the workers into it, then it would become too long and nobody would remember. For 27 years, Wanda corporate culture’s core philosophy was eight characters long and has been updated three times. When I did business in 1988, in that time for business it was “you cheat me” and “I cheat you.” There was no way to know what to do, no contracts, no property titles, and no licenses. I think those days were very strange, so back then I proposed seven words for corporate culture, “conduct oneself honestly and handle matters astutely.” There is a well-known European proverb saying: Fool me once shame on you, fool me twice shame on me. Right? Handle matters astutely. A few years later, in 1998, the corporation earned some money and crossed regions. When I felt like I had a little money, I thought I should have a feeling of social responsibility, so at that time our corporate culture was updated to “creating wealth together, sharing with society.” In 2002, our corporation had our third cultural upgrade. I thought our horizons should internationalize, as the final objective is an international corporation, International Wanda, so we gave ourselves objective targets. By 2020 we must be in the World’s Top 100, have revenue of US$100 billion, and become a multinational corporation, for the nation but also to make ourselves proud. Again, it is a centennial enterprise and hopes for a little longevity. So you said there is no social responsibility; that is only the literal understanding. You also talked about the impact on Europe and America, does there need to be a cultural impact on Europe and America? Yes of course, but I think at the present stage we need to advance the cultural impact on China. Once I have managed this with Chinese people, then let’s speak again about doing it with foreigners.

Q: First, will AMC cinemas meet our expectations? Second, the homogeneity in domestic commercial cinemas is quite serious. Wanda Cinema has tried to bring forth many new ideas, including “I am a Singer” and “The Voice of China.” What are the operation’s future plans?

Wang Jianlin: First the question regarding AMC, since Chinese people bought it, it will surely have some effect. We operate with our original team and original model, yet with much interference, in particular last December when we were already listed on the market. We still must follow market rules. However, as a major shareholder, we can still raise requirements. For example, I require them to screen at least five Chinese films annually. I’ll give you some data: in 2012 we merged with AMC, and in that year we released eight Chinese films. In 2013, we released 13 Chinese films. This created a history of China in the United States. One year before this, just screening one Chinese movie was not bad, and that basically was not market-oriented – say, the state invested money to contract several cinemas to screen one movie twice, and at once it was returned. In past development of our cultural projects, comrade Li Changchun did a report for me and said four very vivid things: “Finance is the investment source, leadership is basically the audience, prize-winning is the main objective, and the warehouse is the final destination.” He said that the development of culture depends on industry, and central leadership awareness is a basis for our future development. We are entirely market-oriented; many films go out, and good ones may get more than US$10 million in the box office, like The Grandmaster. Inferior films may beunable to get even US$100,000 at the box office. And why don't Chinese movies have good results? First, they aren't English films; when Chinese people watch foreign films with subtitles it is good enough, we even do English subtitles. However, Americans did not respond as fast and said it is not OK. They were unwilling to spend on the production costs and asked how there could be good profits. For the future of Chinese film to be truly global there has to be English thinking, and films shot in English. Another is the need to market. We say the film is good, and we release it in the U.S. However, there is simply no thought of earning money or marketing in the U.S. No actor is even sent there. You just sell as many as you can. We may also have this attitude, so the results are not that great. But I believe this can change, and it is just a matter of time.

The second thing you talked about was Chinese film market innovation. Last year the box office of the Chinese film industry was just over 20 billion yuan. The box office of the world’s two largest markets (Europe and America) both surpassed US$10 billion. The worldwide box office was a little more than US$30 billion. In these developed markets, it is not possible that all cinemas release the same movie. Only China has this kind of special phenomenon; the whole country’s cinemas all release the same movie, and the discharge rate is high. This is an indication that the market is not developed. In developed markets, many cinemas buy the broadcasting rights or a few together, franchised or divided, etc. Therefore, apart from a few very large films that are US$200-300 million in production, it almost can’t be said that there is a unified film release. Wanda is also doing some innovation. According to my judgment, in 2018 our film market shares may pass those of the U.S., and surpass US$10 billion. So long as the scale of the market gets to that degree, leading cinemas, for example ours, can at that time set off from the viewpoint of supporting certain content and supporting the best directors, not excluding screenings of certain content that we customize or support.