Chapter 186: Annual Harvest

Everything went smoothly. Under Wei Dongling’s control, each subsidiary adjusted its strategic goals slightly. Take Shuxiang for example—its publishing houses were working hard to find ways to bridge Eastern and Western cultures, so as to promote Chinese culture in Europe and help Chinese-language films gain a stronger foothold there.

In short, the Shadow Group and all its subsidiaries were centered around one thing: movies. To expand creative ideas and themes, Shuxiang even established an award covering comics and novels of various genres. It was comprehensive, yet the categories were finely detailed.

Wei Dongling was clearly much happier than Xiao Ran, as he had successfully extorted a Rolls-Royce from Xiao Ran—no, from Lin Qingxia. This made Xiao Ran feel quite resentful, but of course he didn’t complain to Wei Dongling.

Finally, the 1990s arrived. Xiao Ran reflected on everything that had happened the previous year. Last year, Warner Communications and Time Inc. merged to form Warner Time. Not much actually happened last year, but for Xiao Ran, the most critical thing was that it hadn’t happened at all. Moreover, many of last year’s events had little to do with Hong Kong, exerting even less influence on him.

For Xiao Ran, the biggest achievement last year was securing Industrial Light & Magic and Skywalker Sound, under the pretense of opening branches, and transferring a significant number of talents to Hong Kong. At the end of the year, he also helped Fang Xiaoqiang make a fortune in European finance during the reunification of East and West Germany. As for Tianxia Fund, it was even more aggressive, investing almost all of its funds and earning over two billion.

Of course, Pixar and Dolby Laboratories were also involved. However, Xiao Ran didn’t touch Pixar for now; he only sent animation team members to communicate with them. Of course, Pixar wasn’t called that at the time, but we can call it that for now.

Having defeated Hailie and become the leader in the film industry, Shadow had a smooth time in 1989 as it hadn’t encountered any rivals yet. This was also the main reason why Xiao Ran’s story in 1989 was so brief. But who knows what tomorrow will bring? Xiao Ran never dared to predict when a strong competitor might appear.

The first three years of the 1990s were the peak of Hong Kong cinema, as well as the era when Hollywood movies dominated the world. The confrontation between Shadow and Hollywood had just begun beneath the surface, didn’t it? That’s what Xiao Ran thought!

The battle has just started. You may have an absolute advantage now, but that doesn’t mean I can’t be the one to win in the end! That was Xiao Ran’s thinking. Right now, Shadow held the first step in the history of computer graphics. With this technology in its hands, all it needed to do was wait patiently. Before gaining control of the mainland market, trying to compete with Hollywood would be extremely dangerous—Xiao Ran’s intelligence and sense of reason led him to this conclusion.

Not long after the beginning of the year, the branch offices first submitted their annual reports. In terms of performance, Japan and South Korea invested in a few films each and managed to turn a slight profit, not to mention the profits from distribution. Only the U.S. branch lost money—after investing in two films, it incurred a loss of ten million dollars.

Xiao Ran had anticipated this outcome. Hollywood would not tolerate outsiders making money from their films. If it weren’t for his need to attract some promising Western actors and demonstrate his capabilities, there would have been no need to waste money on investments. Nevertheless, the U.S. branch did bring in six or seven quite good actors, three of whom could speak Chinese.

Last year, the European branch, led by Ge Wenqiu, made every effort to distribute twenty-one Hong Kong films across Europe. Although many of these films were not released throughout all of Europe, the results were still quite impressive. It should be noted, however, that except for the European branch, the other branches of Shadow had no more than ten full-time employees each.

In Shadow’s headquarters meeting room, Xiao Ran sat at the head of the table, with Wei Dongling sitting slightly to his right. Of course, Fang Xiaoqiang, one of the shareholders, was also present. Fang Xiaoqiang had contributed significantly to Shadow; without such a sharp securities expert, many of Shadow’s transactions might not have succeeded.

The first to give a report was, of course, the distribution department. It was well known throughout the company that Xiao Ran was most concerned with films, not just profits. Lan Hua had been in his position for some time, but this was his first time attending a round-table meeting, so he felt a bit excited.

Being here meant he had entered the ranks of Shadow’s senior management. He himself knew very well that the company valued distribution the most. Having become the manager of the distribution department, he naturally belonged to the company’s upper echelons. “In 1989, the distribution department released sixty-seven films in Southeast Asia, Europe, and the Americas. Seven of these were films from before last year, excluding those that were sold out. So, last year the company released sixty films. As of now, the total box office revenue in Southeast Asia is 4.17 billion, and in Europe it’s 1.3 billion!”

By “as of now,” it meant that some films were still in theaters, so exact box office figures couldn’t be determined yet. The high box office revenue in Europe was mainly due to “Ghost,” which earned over 600 million there. But on average, the other films performed rather poorly.

At this point, Lan Hua couldn’t help but feel a bit discouraged, as “Ghost” accounted for nearly half of that total. Although it was much better than the previous year, the results were still not ideal!

Glancing at his colleagues waiting for him, Lan Hua took a deep breath and continued, “Last year, the distribution department’s profits in Southeast Asia, including the Chinese mainland, were 1.34 billion. Profits in Europe were 350 million, for a total profit of 1.69 billion!”

Xiao Ran and Wei Dongling exchanged a glance and both nodded silently. Lan Hua sometimes lacked confidence, so it seemed necessary to talk to him and boost his morale. However, Xiao Ran was very satisfied with the figures from the distribution department, indicating that Phantom’s market presence in Southeast Asia was expanding. The only thing that disappointed him was the European market.

Pointing at Han Long from the planning department, Xiao Ran said with a smile, “A Long, how are the results of the planning department?”

Han Long cleared his throat and stood up without even looking at the reports. Come on, would he still need to check those? Otherwise, wouldn’t his two or three years in the planning department have been in vain? He was after all a long-time employee of the company. “Last year, the planning department invested in fifty films, of which thirty-seven were produced by Phantom Imaging. The average investment per film was 15 million, resulting in a total investment of 620 million. The global box office revenue for these forty-one films averaged 3.74 billion, with a total profit of 780 million.”

While Han Long was reporting, An Yuxuan quickly calculated nearby to determine whether this ratio confirmed that the planning department’s investment projects were more profitable than market averages. She soon handed the results to Xiao Ran, who took a look and was satisfied.

Han Long was a veteran employee with excellent judgment when it came to film investments; otherwise, he wouldn’t have been able to hold that position for so long. In terms of investment-to-return ratios, the planning department’s investments yielded proportional returns, indicating that the ratio was quite high.

Liu Chun, the head of imaging, tried to hide her excitement. This annual report was a great opportunity for them to showcase their achievements. Standing up, she said, “Last year, we produced thirty-seven feature films, nine of which were shown only in art theaters, while the other twenty-eight were released in mainstream cinemas!”

By “feature films,” Liu Chun meant films with a runtime of around 90 minutes, as understood by everyone present. Reflecting on how Lu Can’s betrayal had led to her current position, she added that she had been one of Phantom’s early employees and never expected the company to grow so rapidly in just three years—now she was even the general manager of imaging.

“The global box office revenue for the nine art films was 200 million, while the twenty-eight commercial films generated 3.19 billion!” Liu Chun was thrilled. Phantom Imaging’s performance this year was definitely outstanding: “The total profit was 390 million!”

Xiao Ran and Wei Dongling both frowned. This figure was even lower than the planning department’s investment. Calculated proportionally, it meant Phantom Imaging’s profits barely matched the planning department’s investment amount. If that were the case, last year’s investments would have been a complete failure, resulting in losses. Fortunately, the majority of the planning department’s profits came from films produced by imaging.

Here, it’s impossible not to mention the issue of investments. Take Phantom Group, for example. If the planning department invested 30 million in a film produced by Phantom Imaging, there would naturally be a profit share. Since Phantom fully invested in imaging, the planning department would receive at least 50% of the profits, actually around 60%.

This means that the planning department gets its share after the distribution department and the exhibitors have taken their profits. Since they’re all part of the same company, there are no tricks or deceitful practices. They simply divide up the remaining profits. As a result, the planning department mainly invests in visual content, so most of the profits come from that.

That’s why Xiao Ran is so interested in this. He was originally considering whether to seek financing if last year’s return rate was low. Financing is an excellent way to avoid risks, and more importantly, it’s also a great means of risk transfer, which will be mentioned later.

Lin Wei, the head of Thinking, cleared his throat, took a sip of water, and then slowly stood up. This sight amused Xiao Ran greatly. Perhaps because post-production is a highly meticulous task, Lin Wei’s slow and careful personality was perfectly suited for it.

“Last year, Thinking handled post-production for 79 films across Hong Kong and rented out equipment to 64 film teams, including those involved in visual content!” Lin Wei glanced at Liu Chun, nodded, and then continued, “The turnover was 190 million. As for profits, after deducting administrative expenses and other costs, the total profit was 40 million!”

Xiao Ran nodded. This figure was quite impressive. After all, Thinking was now an independent company and had to cover many expenses on its own. In fact, Xiao Ran didn’t really need to be in charge of this department, as Hong Kong had professional post-production companies. But he still believed it was better to keep control of these matters himself.

Only Lin Qingxia and Wei Dongling somewhat understood Xiao Ran’s mindset. The reason he took care of everything related to movies was, first, that the company’s development goal was to become a fully independent entity that didn’t rely on any other company. Second, of course, it was due to Xiao Ran’s desire to keep everything under control for a sense of satisfaction.

Hearing Lin Wei’s words, Xiao Ran had an idea. Tianxia Fund was now also investing in the research of equipment and film for several companies. If Tianxia invested in Thinking or even took a controlling stake, it would allow them to bring over the developers from those companies legitimately. With this thought, he made up his mind.

Next was Peng Ge, the proud boss of Sihai. He was extremely pleased because, with the authorization from the headquarters, Sihai would be responsible for distributing videotapes and producing related products for all films produced by Shadow.

As a result, Sihai gradually became the leading videotape distribution company in Hong Kong over the course of the year. Its distribution network expanded to Southeast Asia, and it even started to enter Europe. Thanks to Sihai’s financial strength and distribution network, aside from Tianlai, another record company began to license its records to Sihai for distribution.

“Last year, Sihai’s sales from videotape distribution were 1.8 billion, with a loss of 240 million on related products. Adding in profits from record distribution and other developments of 170 million, and after deducting all expenses, the total profit was 850 million!” Peng Ge was not only proud but absolutely overjoyed. This was the highest ever record for audiovisual sales revenue.

Xiao Ran quickly did some calculations in his mind. Based on this year’s figures, the revenue from videotapes was accounting for an increasingly larger proportion, which was a good sign. Although it was still lower than the revenue from box offices (including distribution), it was on the rise. It didn’t seem like much time would be needed to reach an optimal ratio. However, thinking about the piracy situation in the mainland gave Xiao Ran a severe headache. Under such circumstances, the proportion would surely differ from that in Hollywood. The problem was that no solution had been found to deal with this damned piracy.