Emergence of AIGC and MR Expected to Drive Dual Improvement in Performance and Valuation of Film Industry - Competitive Analysis of Animated Film Sector
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According to Lighthouse Pro data, the New Year's Day box office period (December 30-January 1) achieved a total revenue of 1.311 billion yuan, surpassing the 2021 record of 1.303 billion yuan and setting a new historical high for China's New Year's Day box office.
Essence Securities stated that next year's film lineup looks promising, with sequels to several blockbuster films scheduled for release, indicating continued recovery in the film market. It is expected that the supply side of the film and television industry will continue to improve, further digesting the backlog from previous years while benefiting from increased production and project filings in 2023.
Essence Securities believes that the emergence of AIGC (AI-generated content) and MR (Mixed Reality) could drive dual improvement in both performance and valuation of the film industry. 2024 will mark the actual application phase of AIGC and the initial shipment of Apple's MR devices, bringing multiple benefits to the film industry: First, AI is expected to enhance efficiency in scriptwriting, special effects production, post-production editing, and marketing, thereby increasing production capacity for film companies. The film industry presents an ideal application scenario for generative AI. Second, due to the need for large model training, OpenAI recently signed a cooperation agreement with Axel Springer, suggesting that paid training data for large models may become a trend. Companies with rich IP or film content resources will benefit from this development.
Regarding specific companies, according to disclosures on listed companies' interactive platforms: China Film participated in producing the New Year film "Johnny Keep Walking!". Huayi Brothers is one of the producers of the film "Shining for One Thing".
Animated films refer to movies created through animation techniques. Since the 18th National Congress of the Communist Party of China, the government has introduced a series of policies to support animated film production. China's animated film sector has seen continuous influx of innovative forces, ongoing optimization of production models, and gradual improvement in industry ecology. In the new era, Chinese animated films demonstrate strong industrial development momentum and distinctive artistic originality, exhibiting unprecedented vitality and vigor.
China's National Day holiday box office in 2023 reached 2.734 billion yuan. Among them, 'Under the Light' led with 883 million yuan, followed by 'The Ex-Files 4: Marriage Plan', 'The Volunteers: To the War', 'Moscow Mission', and 'Lose to Win' ranking second to fifth on the box office chart.
The family-friendly National Day holiday season wouldn't be complete without animated films suitable for all ages. This year's holiday lineup included multiple animated movies such as 'PAW Patrol: The Mighty Movie', 'Backkom Bear: Mars Mission', and 'I Am Nezha 2: Hero Returns'.
Among them, 'PAW Patrol: The Mighty Movie' and 'Backkom Bear: Mars Mission' are new installments of well-known animated IPs. The former tells the adventure story of the PAW Patrol team after gaining superpowers, while the latter follows Backkom Bear's accidental journey into a magical realm on Mars. Both films combine elements of animation, comedy, and adventure to enrich the viewing experience.
Overall, this year's Mid-Autumn Festival and National Day holidays overlapped, resulting in a slightly longer break than usual, which prompted the concentrated release of multiple animated films.
Compared to live-action films, animated movies may not be as realistic or detailed in character design, movement, and environmental presentation. However, their strength lies in their boundless imagination and creative freedom. Therefore, animated films rarely aim to recreate history or depict reality as their artistic goal. Instead, they focus more on completing unrestrained visual storytelling through exaggerated character designs and movements, bizarre spatial environments, and magical character experiences.
In the 1980s and 1990s, the themes of Chinese animated films were primarily derived from ancient Chinese literary works, myths, legends, and folk tales. The adaptation approach was relatively orthodox, focusing on faithfully recreating the original stories through animation.
For a country like China, with its long and splendid civilization, the source material for animated films is virtually inexhaustible. However, lingering too much in the realms of "history" and "folklore" can be somewhat limiting and self-restrictive.
For a long time, animated films were considered exclusively for children, a notion that influenced the creative direction of Chinese animation. The negative effects of this were prominently reflected in the "juvenile-oriented" nature of animated works and the resulting younger audience demographic.
The 2015 summer blockbuster Monkey King: Hero is Back broke box office records and opened new horizons for family-friendly animated films. As a well-known IP, Monkey King: Hero is Back featured a subversive character setup, offering audiences a fresh experience.
Today, animated films are no longer synonymous with being "juvenile" or "only suitable for children." In recent years, animated films have gradually shed the label of juvenile aesthetics, diversifying in themes and genres. The attributes of being "all-age" and "family-friendly" have strengthened, making them stand out remarkably.
Market Status and Future Prospects of China's Animated Film Industry
The animated film industry chain is divided into four segments: upstream, mid-upstream, midstream, and downstream. The upstream segment consists of content providers, including original animation companies and IP providers. The mid-upstream segment involves the production of animated films, encompassing original animation production companies and outsourced animation production enterprises. The midstream segment focuses on the distribution and broadcasting channels of animated works, which include cinema chains, online video platforms, and television stations. The downstream segment primarily comprises IP licensing agencies and IP derivative development companies.
China's animated film market has long been dominated by foreign works. However, in recent years, with the continuous improvement in domestic animation production quality, Chinese animated films have begun to gain visibility among audiences. The emergence and success of works such as Ne Zha: The Devil's Birth and White Snake: The Origin in terms of both reputation and box office performance highlight the thriving development of domestic animation.
According to data from the Cultural Trade Blue Book, although the proportion of domestic animated films in China decreased overall from 2015 to 2020, their box office share showed an upward trend. This indicates that domestic animation is gradually replacing imported content in terms of demand. Under the impact of the pandemic, 33 animated films were released in China in 2020, with a total box office revenue of 3.038 billion yuan. Among these, domestic animated films accounted for 54.55% in quantity and 56.85% in box office share, a significant increase compared to the 18.74% share in 2016.
China's film industry has seen improvements in both supply and demand, with a recovery speed exceeding expectations. The competitiveness of high-quality films has strengthened, and the demand for premium content remains robust in the long term. The proportion of top-tier films is expected to continue rising. Additionally, high-quality films are well-suited for theatrical releases, and the demand for cinema experiences persists.
Among these, animated films are adapting to cyclical recovery. Firstly, animated films have relatively lower production costs that are easier to control, longer lifecycles, and greater potential for serialization. Secondly, animated films demonstrate strong commercialization effects, with derivative product sales providing additional revenue streams.
With the emergence of a series of outstanding Chinese animated films, the creative landscape of Chinese animation has developed diversified characteristics. The animated film sector has gained widespread attention and focus, presenting new industrial development patterns characterized by industrialization, IP adaptation, and digitalization in creative approaches.
In this fiercely competitive market, the ability of enterprises and investors to make timely and effective market decisions becomes the key to success. Reports that accurately identify unmet market demands and trends can effectively mitigate industry investment risks, more efficiently consolidate or expand strategic target markets, and firmly grasp the initiative in industry competition.