Chapter 46: Negotiations with Theatrical Chains

Liu Hua’s “Magic Jade” was currently in theaters, competing directly with “The Female Warrior”. Xiao Ran was extremely busy, almost to the point of collapse. He had to shoot films during the day and prepare for his new company at night. Sometimes he even had to attend parties organized by celebrities, though he declined most of them. Few people realized the significance of Xiao Ran’s existence; mostly, it was his friends in the industry.

He was in a desperate situation! If he had to describe just how desperate he was, Xiao Ran thought it could compare to chicken wings. These days, his constant refrain was, “It’s terrible! I’m making hundreds of thousands per second…”

Feng Mianheng, one of the creators of the hilarious line from “Shaolin Soccer”, and Tian Qiwen, who portrayed it, still hadn’t achieved any fame. The former hadn’t even entered the industry yet, while the latter was only doing minor roles. So, Xiao Ran didn’t have to worry about being accused of plagiarism.

These days, privately, Xiao Ran often had an extremely extreme idea: he imagined cursing Fang Ruohai, who dumped all the work on him, just like the old woman in Hong Kong horror movies slapping a human-shaped paper with a cloth shoe—“I’ll hit you, you wretch! I’ll hit you, you scoundrel…”

Unfortunately, Xiao Ran never carried out this vicious idea because… he didn’t have time. Right now, for example, he was going to meet Lei Kaitai to discuss matters related to theatrical chains.

Hong Kong currently had five major theatrical chains—Shaw Brothers, Cathay-Keris, and New Art City, each controlling one. However, New Art City’s Golden Princess chain was actually under Lei Kaitai’s control. Golden Princess had initially been an unremarkable art-house chain. After being acquired by Lei Kaitai, it merged many independent cinemas, and together with New Art City’s films, it quickly became the most powerful theatrical chain in Hong Kong. Golden Princess had as many as 43 cinemas, the highest number among the five major chains, covering every bustling area in Hong Kong.

In 1984, Deppa and Cathay-Keris tried to counter the rising influence of New Art City by uniting their own chains to suppress it, but they still lost to New Art City, allowing it to win the annual box office title once again. Golden Princess’s chain played a crucial role in this competition.

The other two chains were Yonggao and Xinbao. Xiao Ran wasn’t very familiar with Xinbao, but he knew a bit about Yonggao. He knew that Yonggao later established a film company to produce movies, though he couldn’t remember exactly which ones.

According to Xiao Ran, distribution, production, and financing should all be part of a unified business model. Just like in Hollywood, they allow foreign investment but find it hard to permit foreign production companies to produce films on their own. Separating production from distribution is definitely not a good idea—the current system for Hong Kong film companies is utterly unreasonable. If Xiao Ran had enough strength and capital, he would take control of production, financing, and distribution, and at least one theatrical chain locally. Overseas, he would need to establish a solid distribution network and related merchandise to maximize profits.

Put simply, it’s quite easy. A film company of this scale must have a production department similar to those in Hollywood, which helps avoid investment mistakes. Once the production department approves a script, it starts looking for suitable directors, actors, and crew members, while also preparing a budget—this is thorough and proper preliminary planning.

Once everything is ready, it’s handed over to the production company for filming. After filming is complete, it’s passed to another department responsible for voiceovers and special effects—this is the very important post-production stage. Once the film is finally edited, copies are given to the department in charge of theaters to arrange release dates.

At the same time, the department responsible for overseas distribution can start working on selling the film abroad, while another department handles the production of related products. Of course, a month after the film is completed, the audio and video distribution department begins producing VHS tapes and distributing them globally through a vast and well-established network.

This is the structure Xiao Ran envisioned—this is why a major Hollywood film can earn thousands or even hundreds of millions of dollars. It’s because they maximize the film’s potential value, whereas Hong Kong film companies lack even a similar structure; the only one with a rudimentary form is Cathay-Keris.

In Xiao Ran’s plan, once the company grows into such a large group, its various departments can be spun off and listed publicly. After raising money from investors, the company can continue to develop further—even spin off more departments and list them again!

However, for now, it’s all just an illusion, beautiful ideas that make Xiao Ran sigh with longing. He isn’t a Harvard graduate, nor is he particularly skilled in management. But after coming here and forming such an almost fanciful vision, he knew he had to learn something.

So, after taking some time to read books on business and combining that with his own future plans, it wasn’t difficult for him to devise such a structure. When he met the legendary figure Lei Kaitai, Lei encouraged him greatly: “Twenty years from now, you’ll still be a legend!”

Lei Kaitai’s legendry didn’t stem from his rise to fame but from his investments in films. To be honest, if it weren’t for Lei Kaitai’s investment in New Art City, Xiao Ran might not even know who he was. It seems one must always leave something behind for others to remember.

Before meeting Lei Kaitai, Xiao Ran imagined him to be a burly man from Shandong, given his fame. Unfortunately, reality often differs greatly from imagination. Lei Kaitai wasn’t tall or broad—he was even shorter than Xiao Ran. The only thing matching his name was his loud voice; perhaps that’s why he got such a powerful name.

In Lei Kaitai’s office, the host had a beautiful secretary bring in coffee. Xiao Ran gently stirred his coffee and, with a slight smile, explained his purpose on the leather chair. Lei Kaitai was immediately surprised, as such matters shouldn’t have required coming directly to him—just talking to the theater manager would have sufficed.

Xiao Ran rubbed his nose, making it harder for him to say what came next. After thinking for a while, he still had to force himself to speak: “It’s like this, Mr. Lei. I’ve thought it over carefully. Now that you’ve invested in New Art City, the Film Studio, and Golden Princess, it’s likely difficult for your theater chain to handle films from three large production companies at the same time.”
Lei Kaitai nodded; he understood what Xiao Ran meant. It was simple—since New Art City and the Film Studio were under his direct control, things like prime screening slots would naturally go to them, leaving no chance for Xiao Ran.
This was exactly why Xiao Ran approached Lei Kaitai directly. The person in charge of the theater chain was on the same level as Huang Baiming and Xu Ke. If Xiao Ran could convince them to give up prime slots, Xu Ke and Huang Baiming would definitely object. So, the only one who could resolve this was Lei Kaitai.
Lei Kaitai closed his eyes and pondered for a moment before suddenly opening them and smiling. “I’m curious—how do you plan to convince me to give up those prime slots?”
Xiao Ran rubbed his nose while smiling. He had feared Lei Kaitai would refuse outright, but now he saw hope. With confidence, he gave an example: “Mr. Lei, you’re aware of how the profit is split when my company’s films are shown in your theaters. Between a New Art City film that earns ten million in box office revenue and one from my company that earns thirty million, which do you think would make you more money?”
The answer was obvious. The profit split between theaters and production companies generally fell into two categories. The first was a fixed percentage of the revenue, in addition to a fixed rent. The second was more common: in the first week of a film’s release, the production company got 70% of the total box office revenue, and the theater got 30%, with the percentages decreasing thereafter.
Based on such a split, it was easy to see which choice was better. Lei Kaitai frowned before relaxing and laughing heartily. “Do you really think you can outperform Huang Baiming and the others in terms of box office earnings? I think that’s very difficult!”
“It is indeed difficult!” Xiao Ran admitted frankly, his serious expression making one think he was an utterly honest person. “But I don’t intend to displace New Art City and the Film Studio. I doubt I even have the ability to do that. So all I want are two opportunities—one during the summer holiday season and one during the Spring Festival season!”
The summer holiday season was one thing, but the Spring Festival season was truly exceptional and highly competitive. Even Huang Baiming of New Art City had struggled for years to secure a slot during the Spring Festival, only for his film *Eight Stars Bring Good Luck* to achieve massive box office success. In short, it was common for a film to earn over twenty million in revenue during the prime Spring Festival season.
Hong Kong’s traditional Spring Festival season wasn’t as broad as what was later defined in the mainland. Back then, it basically referred to the month around the Spring Festival. Later, the mainland simply defined the entire period from just after New Year’s Day to nearly a month after the Spring Festival as the Spring Festival season.

What Xiao Ran wanted was not the Spring Festival season but the period one month before it, knowing he couldn’t compete with New Art City and Film Studios. Based on past New Year’s movies, the period from the Christmas season to just before Spring Festival was a great time for releases.
“It’s difficult—those two seasons are basically in the hands of Huang Bai Ming and Xu Ke!” Lei Kaitai said, half-jokingly and half-seriously. “If you try to snatch food from the tiger’s mouth now, even the tiger won’t agree!”
After some more back-and-forth, and after securing enough backing, Xiao Ran finally revealed his true intentions: “How about this, Mr. Lei? Since I can’t get the Spring Festival season, let’s settle for the one-month summer vacation period. Add to that the period from December 15th to Spring Festival, and I think they won’t object.”
“Well…” Lei Kaitai clearly didn’t see Xiao Ran’s ulterior motives. After pondering for a while and confirming it wouldn’t provoke Xu Ke’s opposition, he nodded and agreed with a smile. “No problem.”
“But in that case, the periods I get will be terrible—you know that!” Xiao Ran smiled sweetly, though what lay behind that sweetness remained unknown. “So, I hope to get some favorable terms in terms of profit sharing. Additionally, I’d like to propose a new profit-sharing plan!”
After Xiao Ran presented his second plan, Lei Kaitai agreed. Having built his business to where it is, he could easily see that this proposal was absolutely beneficial for both sides.
Of course, for Xiao Ran, he was the one truly gaining an advantage. He could get 75% of the profits in the first week, 65% in the second, and so on. Xiao Ran was sure that the longer the movie was shown, the more advantageous it would be for Lei Kaitai.
He was afraid the movie might end in less than a month, as even the best movies couldn’t generate much box office revenue then. With this strategy, he was confident that his new company’s movies would definitely make it onto next year’s top ten box office lists.
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