Chapter 159: Rapid Expansion

Don’t think Xiao Ran acted so cool when with Fang Ruohai; in private, to secure this victory, he had bragged to Wei Dongling and Brother Fa countless times. This stark contrast in behavior almost made Yangguang and Houzi lose all judgment. Eventually, they both agreed that Xiao Ran’s behavior was a case of “severe schizophrenia.”
Of course, Xiao Ran was unaware of Yangguang and Houzi’s opinions, but he wanted to figure out one thing: whether Lu Can would still betray him. After all, Lu Can was right in front of him, waiting to be tested. After pondering for a while, Xiao Ran walked to the window and gazed quietly at the skyscrapers outside, his thoughts in turmoil.
Emotionally, he truly couldn’t tolerate Lu Can’s betrayal. Yet, Hailulu and the others stubbornly stayed at Hailede, with only Lu Can returning. Lu Can was a talent—he knew that well; otherwise, he wouldn’t have been promoted. Given Lu Can’s abilities and insight, it was actually a good thing to have him back.
Lu Can’s mood sank as he saw Xiao Ran’s silent expression. He thought perhaps it was truly hard to tolerate traitors in business, especially those who betrayed their former employer for the rival company. At that thought, he suddenly felt hopeless.
Just then, Xiao Ran smiled gently. What was there to forgive? If he could let Fang Ruohai go, why care about Lu Can? Looking out the window, he said quietly, “How many people are in those buildings outside? How many of them aren’t striving for money? But I think, beyond money, people should also have some aspirations. Acan, tomorrow when you meet A Dong, he’ll arrange a job for you!”
Lu Can couldn’t believe it and showed extreme joy. The reason he had braved humiliation and come here was because he had heard rumors that Xiao Ran intended to drive out all traitors like them. He knew well that Hong Kong would soon belong to Shadow, leaving him with no choice. As he expected, Hailulu and the others couldn’t survive in Hong Kong and had to leave.
“Spy Change” sold very well in Europe, and taking advantage of this momentum, Xiao Ran assigned the distribution rights in France to Leo Company. Shadow naturally established a branch in France to handle distribution and investment in Europe, with Ge Wenqiu as its head.
Europe, especially France, was known for its strong cultural protection, but it wasn’t as resistant to Eastern culture as it was to Hollywood. Thus, Shadow’s branch, leveraging the success of “Spy Change,” secured distribution rights in several smaller countries and sold the first-run and video rights to European companies.
According to the distribution department’s research, Europe’s annual box office revenue was $4 billion, with approximately 1.8 billion moviegoers. Shadow’s several outstanding films performed well in Europe, making it a very important market.

In Xiao Ran’s vision for his entertainment empire, the mainland market is currently in the development stage but will eventually become an important base for Phantom. Southeast Asia (including Japan) is his top priority at present, with Europe coming in second; dominating Europe would mean completely outshining Hollywood. The third step is to target North America, and the fourth step is to establish a global distribution network to penetrate every corner of the market.

However, in Xiao Ran’s memory, the decline of the European market was not only due to poor local films but also for another important reason: neglect of screening facilities and environments. The number of cinemas in Europe dropped from over 40,000 at their peak in 1960 to less than 20,000 by 1995, while the total number of seats decreased from 18 million to 4 million.

In comparison, the number of cinemas in the United States increased from 18,000 in 1960 to 26,000 by 1995. Although the number of seats per theater decreased from 600 to 200, more investment was put into equipment and facilities.

With such examples, it’s no wonder Xiao Ran places great emphasis on upgrading cinemas. In the second half of the year, he used shares of Leo Company as collateral to secure a loan in France to acquire a cinema chain. After renovation, its equipment and comfort clearly surpassed those of other chains, and it naturally generated substantial revenue for Phantom.

The Haisen Group finally couldn’t hold on. The Hailue Group was ordered to undergo restructuring, and it was only a step away from being shut down. The reason was simple: Xiao Ran had orchestrated the fake box office sales, and now, with the supermarket general manager exposing the truth, Hailue Group’s reputation was completely ruined.

Normally, such cases would result in heavy fines (why do I always feel the Hong Kong-British government took this opportunity to enrich itself?). But under the pressure from the four major companies, the Hong Kong-British government quickly imposed the harshest penalties. Under these circumstances, it would have been foolish for Wen Bowen not to sell his shares.

The four major companies received their allocated shares at relatively low prices as agreed. Wen Bowen was somewhat dissatisfied, but compared to the wealth gained by the acquiring parties, his share was much smaller.

Xiao Ran not only acquired ATV but also several artists from New Art Treasure, such as the band Beyond. Most importantly, he instructed Tianxia Fund to take over the Golden Princess Cinema Chain, which it then sold to Phantom at a price 10% higher than the purchase cost. After investing heavily in renovating the chain and upgrading its equipment, Golden Princess officially became part of the Yinghua Cinema Chain, becoming the largest cinema chain in Hong Kong.

Phantom then began another round of restructuring and division in line with its strength. The production division was renamed Phantom Imaging. The Yinghua Cinema Chain was also separated and became a wholly owned subsidiary of Phantom. Newspapers and magazines were merged and renamed Shuxiang Media.

Due to Xiao Ran’s high attention, Wei Dongling personally took charge of restructuring ATV, turning it into a wholly owned television station under Phantom, marking the start of its rivalry with TVB. The post-production department was also separated and named Siwei. The audio-visual department was made independent and named Sihai.

One of the departments that hadn’t yet been streamlined was the computer effects team, which spent money like water—just in the first half of the year, Phantom invested at least 300 million there. This frustrated Xiao Ran greatly, even making him doubt whether he had made a mistake or if it would have been better to simply acquire Magic Light. Well-known filmmakers like Xu Keji and Huang Baiming, along with some rising stars of the future, flocked to Phantom, and the twin sisters were about to release their first solo albums. For a time, Phantom’s influence far surpassed that of Cathay, seemingly on its way to becoming Hong Kong’s top film company. In the second half of the year, Phantom shot about 14 films, invested in 9 more, and released a total of 33 films. Among them were classics like “Faneiqing,” which helped boost the careers of many filmmakers and actors. Cathay, of course, was very upset, but aside from “Home Alone 2,” which succeeded Phantom at the box office by not being released during peak times, all its other films failed. In terms of distribution, Cathay couldn’t match Phantom’s reach, and any dissatisfaction had to be kept to itself. Phantom’s expansion progressed rapidly, entering a golden age. It successfully acquired a theater chain in South Korea and another in Taiwan and Singapore. Xiao Ran avoided smaller countries like Malaysia and the Philippines because it wasn’t cost-effective. Phantom also set up branches in Japan and South Korea to invest in local films. Employees who had been trained at the headquarters and proved capable were promoted to high positions or sent to other countries to enjoy the status of founding heroes. Employees who learned Xiao Ran’s innovative and advanced concepts performed well in their roles. For a time, Phantom spread like a virus… Finally, February 1989 arrived—a crucial year. Xiao Ran hoped to acquire a Hollywood film company and Magic Light that year. Magic Light, already listed on the stock market, wasn’t difficult to take over; Xiao Ran had Fang Xiaoqiang quietly work in the U.S. to try to secure control of this company, which would eventually handle over 70% of special effects production in the U.S. That year, Phantom’s departmental annual reports were released. First was Sihai Audio-Visual, which saw significant profits due to the large number of films it distributed last year and its expansion into the European market. In 1988, the total sales from all films distributed by Phantom reached 740 million. Since the video tape industry was highly profitable, the company made a total profit of 480 million. After accounting for nearly 80 million in losses from related products, it still made a profit of 400 million. Phantom Film Productions shot 26 films throughout the year, five of which hadn’t been released yet. The local box office revenue totaled 380 million, accounting for 35% of Hong Kong films’ total box office revenue that year, surpassing Cathay’s market share for the first time. The total box office in Southeast Asia exceeded 1 billion, while 7 films were released in Europe, generating a total box office revenue of 310 million.

Because in Southeast Asia and local markets, profits are generally shared equally among the producers, distributors, and exhibitors (except in the mainland), plus the profits distributed from the distribution department to the production department after releasing the films in Europe. As a result, for the entire past year, after deducting production costs of up to 200 million and bonuses of about 80 million, Phantom Images still made a profit of 270 million.

In terms of cinemas, aside from local cinemas, other cinemas were either under renovation or being acquired, resulting only in expenses with no profits—only local cinemas turned a profit. Yet even these figures are quite impressive, with a profit of 80 million.

Thinking Pictures, having recently split off, hasn’t yet achieved any profits, so it’s better to ignore it. As for the computer effects department, there’s no need to mention it at all—aside from some advertising work that barely covers losses, they spent at least 500 million on equipment and similar items throughout the year.

Shuxiang Media didn’t make much profit, so it’s better not to talk about it. The distribution department, on the other hand, was the most profitable—earning 730 million just from the first-round screening rights. If television broadcasting rights are added in, the total reaches 200 million. Tianlai Company made a profit of 120 million for the whole year.

The investment department, which hasn’t been separated, generated 530 million for the company throughout the year—this doesn’t include the stocks and companies designated by Xiao Ran. Asia Television, still in the process of restructuring, had roughly equal income and expenses. As for the marketing department, relying solely on advertising fees from Southeast Asia plus promotional expenses—which are generally separate from box office revenue—it still made a profit of nearly 20 million.

In 1988, Phantom Images earned 1.8 billion in total profits, a figure that is truly exceptional. If making movies weren’t such a highly profitable industry in Hong Kong today, such outstanding results would be impossible.

A new year has begun, and Hong Kong’s media has started ranking the city’s richest people frantically. It is only then that the public realized with surprise that Xiao Ran’s wealth had skyrocketed significantly in just one year.

How much is Xiao Ran’s wealth now? Including Phantom Images and its subsidiaries, along with Shuxiang Media and Leo Company under its control, just the already-appreciated shares of Leo Company are worth 1 billion Hong Kong dollars. The distribution contracts controlled by Phantom Images are worth at least 1.5 billion, plus 1.5 billion in liquid assets. Including its cinemas and subsidiaries, professional accountants estimate that Phantom Images’ market value is at least 7 billion Hong Kong dollars.

This is the first time a film company in Hong Kong has reached such a market value, and it’s also the first time Phantom Images has surpassed Shaw Brothers and Cathay-Keris in terms of market value. This year, Phantom Images has set several records, such as breaking Shaw Brothers’ market share for the first time and becoming Hong Kong’s largest film company.

Xiao Ran owns 90% of Phantom Images, along with his appreciating Microsoft stocks, other stocks, and real estate. His wealth is at least 7 billion Hong Kong dollars, making him the most dazzling business genius in Hong Kong and ranking 77th among the city’s top 100 richest people. If his 1.3 billion Hong Kong dollar worth of Tianxia Fund is included, his ranking could rise by at least ten places.

Of course, Xiao Ran didn’t take it to heart. In this regard, he was only concerned about how much greater his influence had become. Although the magazine “Power,” founded under Xiao Ran’s guidance by Shuxiang Media, listed him as Hong Kong’s most powerful figure of the year in the film industry, Xiao Ran himself was well aware that the established companies like Cathay and Shaw Brothers were no joke.

“Power” was Xiao Ran’s idea—he believed it was essential to create such a high-quality celebrity magazine that could eventually be distributed globally. He also guided Shuxiang in launching another film industry magazine, “Influence,” which targeted a different audience from “Film Weekly” and was mainly distributed within the industry.

However, Xiao Ran was now thinking about the company’s issues. It had indeed been built into a budding film empire. But he believed there were problems with its revenue structure. The company’s box office earnings (including overseas sales) amounted to about one billion, accounting for 60% of its total film-related income—a very risky balance.

This meant that Shadow Company relied heavily on the huge profits from Hong Kong films to generate substantial earnings. If it lost its dominant position in box office revenue, Shadow Company would lose most of its profits.

Xiao Ran knew that in 1980, box office profits accounted for 50% of total film revenue, but now it had dropped to around 40%, and in ten years it might even be only 30%. About 20% of the revenue came from television, with the rest coming from the videotape market.

Shadow Company’s earnings from television were lower, and the videotape market contributed only slightly over 20% of its profits. This was a dangerous yet promising sign, indicating that there was still potential to grow in both the videotape market and television revenue.

“A Ran, why do you think box office revenue shouldn’t be the main source of film income?” Wei Dongling wasn’t quite sure, as box office revenue remained particularly crucial worldwide.

Xiao Ran pondered for a moment. This was a difficult question to explain. But he hoped to clarify it as much as possible. After choosing his words carefully, he said to Wei Dongling, who was eagerly awaiting an answer, “It’s simple. It’s inevitable to maximize the benefits of a product. If we classify audiences by level, we can roughly divide them into three markets.”

“The first market consists of those who like to go to the cinema to watch movies. After we’ve extracted enough money from them, it’s time for the second market—the videotape market. This market is mostly made up of loyal fans and those who are too lazy to go to the cinema, so there’s little overlap. The third market is television, which allows us to attract home viewers as well!”

Wei Dongling immediately understood Xiao Ran’s meaning, but Xiao Ran still hadn’t explained why it was important to focus on the proportion of video tape sales and television broadcast fees. Rubbing his nose, Xiao Ran sat at the table, gazing at Wei Dongling as he continued, “Entertainment options are becoming increasingly diverse, which will inevitably reduce box office revenue. Therefore, we can’t rely solely on box office earnings. With more and more video recorder users and television viewers, their share of the movie’s revenue will also increase. This means we can shift the box office revenue to video tape sales and broadcast fees to spread the risks.”

Wei Dongling pondered for a moment. He understood Xiao Ran’s point. After hesitating briefly, he made a decision and looked up at Xiao Ran, saying, “I agree. Meiying Yingxiang can definitely operate independently, and our main goal this year should be focused on distribution and these two aspects.”

Talking to smart people is truly hassle-free, Xiao Ran thought. When exactly would his dream of building an empire in the film industry come true? If he couldn’t stabilize the Asian market and expand there to reach the European market, the outcome might not be so favorable after all!