042016 Rewind Networks
042016 Rewind Networks
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China,Investors

CMC Takes On Longer-Term Bets

Ever-expanding opportunity and scale in China has encouraged plenty of local investors and entrepreneurs to chase enticing deals in media and entertainment, at home and abroad.

China Media Capital (CMC), the country’s first media-oriented VC firm, is keen to stay at the forefront of these changes, building a portfolio of assets that span production and distribution ecosystems across entertainment, movies and sports.

Pictured (from left): Li Ruigang, Thomas Hui, Alex Chen

“The market is booming,” CMC’s founding chairman, Li Ruigang, remarked in an on-stage panel discussion at this year’s APOS conference. “For us, we just need to focus.”

Li’s company, which made its first investment five years ago, a majority stake in Star China, recently split into two divisions to better cover the market.

CMC Capital Partners will continue to look for private equity stakes, while CMC Holdings, also backed by internet giants Alibaba and Tencent, will focus its attentions on longer-term greenfield opportunities. Sometimes, both will invest together.

The company is also organized around distinct verticals, including data services and location-based entertainment, as well as TV, movies and sports. CMC’s portfolio has grown after its first investment in Star China five years ago, to more than 50 assets today.

“There is a huge demand from the domestic market, with upgrades in consumption and urbanization. More than half of the box office comes from the lower-tier cities, compared with mostly from the major cities in the past,” Li noted.

“On the supply side, the government continues to privatize some assets and promote the local media and entertainment sector. Internet and mobile are also playing a very significant role to create a new infrastructure for media development in China,” he added.

Sports opens up

Until recently, sports was a relatively closed area, where leagues and teams were government-owned and national broadcaster CCTV controlled most of the rights. 

Now the government is adopting a more commercial approach, opening up opportunities to bring fresh capital into sports. Having invested in rights, CMC is also looking to manage local talent, leagues and stadiums, while developing specific assets in production and distribution.

“We are not going to make quick money from media rights,” Li said. “Hopefully in the future we can make a return from this sports ecosystem.”

CMC has made a big bet on football, in particular. It has bought rights for grassroots leagues and the men and women’s national teams in addition to the main domestic tournament, the Chinese Super League (CSL), which was opened up to commercial bidding last year.

It also already recouped a significant portion of its CSL investment, a precipitous price rise on the last cycle, by selling two years of streaming rights to LeEco, in another multi-billion RMB deal.

Content also remains key for CMC, building on the success of its first deal: transforming Star China into a production business, which made over RMB100 million (US$16.2 million) last year.

CMC now counts around 20 program makers and film studios in its portfolio, to create IP for its own platforms as well as others in the market, where prices for quality content continue to rise.

One particular focus is leveraging the talent and production capabilities of Hong Kong broadcaster TVB, via a bigger slate of original Mandarin content together with a bigger footprint in online distribution.

Talent and TVB

The company has operated a mainland-focused JV with TVB for over three years, overseeing licensing and content, as well as the channels business in Guangdong province, where TVB has landing rights. Li is also part of a consortium that bought a 26% stake in the Hong Kong TV company last year.

Since then, TVB has joined Flagship Entertainment, a film studio JV with CMC and Warner Bros, after announcing plans to create new movies under the revived Shaw Brothers brand.

Hong Kong creative talent lies behind some of China’s biggest box-office hits, pointed out Thomas Hui, MD of CMC investment vehicle Gravity and a non-executive director on TVB’s board. 

“TVB has access to Hong Kong talent,” Hui said. “Through the Shaw Brothers brand and its own ecosystem, we believe this is a winning formula to continue to produce the mega-hits we have seen in the movie market.”

CMC is also interested in exporting TVB’s streaming service, revamped as MyTV Super earlier this year, into mainland China as well as Southeast Asia, once the new platform has found its footing at home in Hong Kong.

Overseas distribution is becoming increasingly important for CMC as a whole, as it continues to build out its library of IP at home.

The company is exploring ways to distribute its content in Southeast Asia, potentially with local partners, said CMC Capital Partners MD, Alex Chen.

“We know the China market very well, we know Chinese-language content very well, and there is increasing demand by the Chinese-speaking demo in Southeast Asia for this content,” he explained.  

“We want to leverage that content power to have a meaningful presence in Southeast Asia from a platform standpoint.”

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