Huayu: Starting from joining the mainstream entertainment industry in 96

Chapter 137, Section 135: A Table-Flipping Negotiation
Monday, July 14, 1997.

The article in China Youth Daily titled "Wang Sheng: 'Making Up for Lessons' Amidst the Tide of the Market" was like adding a few drops of water to boiling oil during a heated debate, producing an unexpected effect.

It did not directly refute either side, but by showcasing Wang Sheng's self-reflection and foresight as the figure at the center of the storm, it cleverly shifted some of the focus, diverting public attention from the struggle over "who is right and who is wrong" to thinking about "how to move forward in the future."

Coupled with the film studio alliance's well-reasoned and data-driven counterattack in the early stages, the public opinion war that lasted for nearly half a month, although not completely subsided, has clearly eased the tense and accusatory atmosphere.

However, everyone understands that the media frenzy is just a prelude; the real contest takes place in the halls of power.

At 9:00 a.m. sharp, the atmosphere in a conference room of the Radio, Film and Television Department was so heavy it could be squeezed out of the skin.

This was a high-level internal coordination meeting.

The meeting was chaired by a deputy minister in charge of film affairs, an elderly man with a lean face and sharp eyes, known for his pragmatic style and ability to coordinate complex conflicts.

To his left sat the director of the Film Bureau, heads of relevant departments, and several experts in charge of policy research and market research.

Their expressions were serious, clearly indicating that they were well aware of the thorny issues involved in this meeting.

To the right of the vice minister, two groups of people sat in a clear distinction.

One group consisted of representatives from the film studio alliance, led by Han Sanping. In addition to Han Sanping, there were several directors from Pearl River Film Studio, Changchun Film Studio, and Xi'an Film Studio. They all had solemn expressions and eyes filled with the determination to fight a desperate battle.

Wang Sheng, as the promoter of the alliance's specific business and a key figure in the "TV movie" model, was also among them, but in a relatively low position, indicating that he was mainly accompanying and listening today.

The other group consisted of executives from provincial film companies in major box office regions such as East China, South China, and North China.

Most of them were older, well-dressed, and carried a sense of pride that came from long-standing privilege and a hint of barely perceptible anxiety on their faces.

Among them, Zhu Yongde, the general manager of Shanghai Film Company, stands out the most.

Shanghai Film & Television (Group) Co., Ltd. was formed by the merger of Yongle Co., Ltd., Shanghai Film Studio, and other entities.
Yongle Co., Ltd. was transformed from Shanghai Film Distribution and Exhibition Company in 1993 and is one of the earliest cinema chains.

This company was also the predecessor of Shanghai Film Group.

Zhu Yongde's hair was neatly combed, and his eyes were sharp and wary, clearly indicating that he was a key figure in the provincial company.

At the start of the meeting, the vice minister cut straight to the point without much small talk, his voice calm yet carrying an undeniable authority:
"Comrades, there has been a lot of discussion and a lot of voice recently about the film distribution and exhibition system, especially the new business model of television films. The Ministry is paying close attention to this. The purpose of inviting you all here today is not to judge who is right and who is wrong, but to face reality and solve problems. For Chinese films to develop, all aspects of production, distribution, and exhibition need to work together, rather than engaging in mutual friction."

He paused, his gaze sweeping over the people on both sides before finally settling on the heads of the provincial companies: "The core issue today is clear: Under the current framework, can provincial film companies give film studios more room for support in terms of the revenue sharing ratio for domestic films? Or, is it possible to establish a revenue sharing mechanism that is more inclined to encourage the creation of domestic films and is more fair and transparent? Mr. Zhu, you can share your thoughts first."

The pressure was put on the provincial companies.

Zhu Yongde cleared his throat and spoke first, his tone calm and unhurried: "Minister Sun, distinguished leaders. First of all, we fully support the Ministry's determination to develop China's film industry. Our provincial companies have always attached great importance to and devoted our full support to domestic films. This can be seen from the number of screenings of domestic films we arrange each year and the publicity resources we invest."

He then changed the subject: "However, support does not mean ignoring market principles. Films are commodities, and ultimately they must be judged by the audience. It is an indisputable fact that the overall competitiveness of domestic films is currently relatively weak."

If audiences don't like the film and attendance is low, even if we offer a higher revenue share, the film studio may only receive a limited amount of money. In fact, scheduling domestic films could crowd out films with greater market potential, leading to a decline in overall revenue and impacting the company's normal operations and workforce stability.

A manager from the Lingnan Provincial Company next to him immediately chimed in, "Mr. Zhu is right. It's not that we don't want to support them, it's just that even a skilled cook can't cook without rice. The operating costs of cinemas are getting higher and higher these days—equipment upgrades, staff salaries, rent, utilities—everything costs money."

If the revenue-sharing ratio is too heavily skewed towards the production companies, our profit margins in the distribution and exhibition环节 will be severely squeezed, and many small and medium-sized cinemas may really have to go out of business. In that case, the entire film market's exhibition terminals will suffer, and ultimately, all filmmakers, including film studios, will be the victims.

Another executive from a major northern province pointed the finger at the film studio itself: "When it comes to support, we hope that the film studio can make more down-to-earth films like 'Crazy Lottery' and 'Wedding Dress' that are popular with audiences."

Instead of always focusing on those so-called 'art films' that are critically acclaimed but commercially unsuccessful and out of touch with the masses.

If the film itself has a market, we are naturally willing to offer better terms.

The problem is, there are too few films like this! Shouldn't film studios also reflect on their creative direction and market understanding?

The provincial company representatives' speeches had a clear core message: they emphasized the market difficulties, highlighted their own operational pressures, attributed the problems to the poor quality of domestic films and the deviation in the creative direction of film studios, and their attitude towards "profit concessions" was ambiguous, but in reality, they were resistant.

When it was the film studio alliance's turn to speak, Han Sanping did not immediately refute their argument about difficulties. Instead, he signaled to his staff to distribute a pre-prepared document.

"Minister Sun, distinguished leaders," Han Sanping's voice boomed, tinged with suppressed anger, "This is a summary of the final revenue-sharing data for twenty domestically produced films with certain market expectations, which were produced in cooperation with the provincial companies of the ten major film studios within the alliance over the past three years."

The materials are clearly listed: film title, total box office revenue, and the final amount received by the film studio.

At a glance, the actual amount received is generally around 30%.

Meanwhile, for some imported blockbusters, the production company's share of the profits often approaches 40%, or even more through other means.

"I would like to ask Mr. Zhu to explain this to everyone,"

Han Sanping stared intently at the head of the Shanghai Film Company: "Why is the revenue share for domestic films 10 percentage points lower than that for imported films, even though they are both shown in Chinese cinemas? Is this what you call 'high importance and full support'? Is this the law of the market? Or is this itself a discriminatory and unfair clause?" Zhu Yongde remained unchanged and said calmly: "Director Han, the operation mode for imported films is different, involving many complex factors such as foreign exchange and copyright, so it cannot be simply compared."

Moreover, imported films often bring in higher absolute box office revenue, and even if the proportion is the same, the actual profit for film studios may be higher... Of course, this is only a theoretical possibility.

The current head of China Film Group is someone from their Shanghai circle, and he's not intimidated by Beijing officials.

"Theory?" The director of the Pearl River Film Studio couldn't help but slam his fist on the table and stand up: "Old Zhu! Don't pretend you don't know! Our studio's film 'Hero Without Regret' grossed over eight million at your box office last year, but we only received less than two and a half million! You took a cut at every level, with all sorts of advertising and management fees, and in the end it became a mess! Is this also the law of the market?"

The director of Changchun Film Studio also angrily said, "There's the issue of scheduling! Many of our films have very few prime-time screenings on their opening weekend, and you've given them all to films with higher profit margins! Is this what you call giving domestic films a chance? Is this what you call support? I think this is murder!"

The meeting room was instantly filled with tension.

The provincial company executives defended themselves, emphasizing that film scheduling should be adjusted in real time according to market demand, and criticizing the film studio for not understanding the actual operation of cinemas, etc.

The focus of the debate gradually shifted from "whether to give up profits" to two more specific and difficult issues: "whether the historical revenue sharing was fair" and "whether the film scheduling was just."

Both sides have their own reasons, leading to a stalemate.

The vice minister intervened several times to mediate, urging everyone to remain calm and discuss the matter objectively.

Throughout the process, Wang Sheng sat quietly in the back row, listening attentively and quickly taking notes of the key points in his notebook.

He observed that although the department leaders tried to remain neutral, they were clearly somewhat dissatisfied with the provincial companies' attitude of emphasizing difficulties rather than proposing solutions.

When Han Sanping presented the specific data, the eyes of the experts from several ministries became noticeably more serious.

The debate lasted for more than an hour, and it seemed unlikely that a consensus could be reached.

The deputy minister spoke again, his tone becoming more forceful:
"Comrades, arguing won't solve anything. Past scores can't be settled in a short time, but new rules are needed for the future. I have a directional suggestion: could we consider implementing a more protective and higher guaranteed revenue sharing ratio for key domestic projects controlled by film studio alliances that have certain market expectations? At the same time, could we make a minimum commitment to the screening rate during prime time? Of course, the specific ratio and details need to be discussed in detail by both of you."

This proposal is clearly intended to break the deadlock and tilt the film studio alliance in favor of the alliance.

The provincial company executives looked at each other, their expressions not very pleasant.

Zhu Yongde pondered for a moment before speaking, "Minister Sun, we will resolutely carry out your instructions. However, if the distribution and screening环节 (distribution and screening环节) are to relinquish profits, shouldn't the production环节 (production环节) also make some concessions?"

The film studio alliance has made huge profits through new businesses such as TV movies. Could it consider giving back to traditional theatrical distribution?
For example, significantly increasing the price of broadcasting rights for TV movies, or delaying their broadcast time on television, could prevent an excessive impact on box office revenue. This would demonstrate a spirit of 'working together'.

This undoubtedly puts the film studio alliance in a difficult position.

They demanded that the film studio alliance "make concessions" on its fastest-growing businesses in exchange for "support" from traditional distribution channels.

All eyes were on Han Sanping.

Han Sanping sneered inwardly, knowing this was the other party's bottom line retaliation, and also a test. Without any hesitation, he answered decisively:

"Absolutely impossible!"

The voice was not loud, but it was resounding.

"The television film business is a bloody path that our film studio's thousands of employees forged through their own efforts when the old ways were no longer viable! It targets television viewers and supplements television time slots, and it is a completely different market from the cinema!"

Its success proves precisely that content is king, and that our film studio has the ability to produce products that audiences love! Now, are we supposed to cripple ourselves and cater to an old system that once drove us to a dead end? Sorry, I, Han Sanping, cannot do it, and the thousands of employees in the film studio alliance will absolutely not agree to it!

He glanced around at the provincial company executives opposite him, his tone somber and resolute: "If you continue to have the mentality of 'dividing the cake' rather than 'making the cake bigger,' if you continue to think that supporting domestic films is charity rather than a win-win situation, then there is no need to continue this meeting. The film studio alliance will continue to follow the market-oriented path that we believe in! At worst, we'll go our separate ways!"

Han Sanping's tough stance instantly silenced the meeting room.

Zhu Yongde and the provincial company executives looked displeased.

The vice minister's brows were also furrowed.

He realized that the grievances and conflicts of interest between the two sides were too deep-rooted, and it was unrealistic to expect a satisfactory agreement to be reached in one meeting.

Forcing a compromise may backfire.

Ultimately, this highly anticipated coordination meeting ended abruptly without any concrete agreement being reached.

The vice minister summarized the meeting, urging both sides to remain calm, continue contact, and seek possible points of consensus. He also emphasized that the ministry would conduct in-depth research and strive to issue guiding opinions as soon as possible.

(End of this chapter)