Box office hits


  • Corporate News
  • Saturday, 03 Aug 2019

THERE’S no business like show business... and for a one particular company listed on the Singapore Stock Exchange (SGX), this appeared to be the case when it was first floated a couple of years ago.

mm2 Entertainment was one of the hottest stocks on the SGX when the movie-making company kicked off its journey with founder Melvin Ang, who once served as Media Prima Bhd’s executive adviser between July 2007 and December 2008.

He was told he was destined for bigger things and left and set up mm2 in Kuala Lumpur to produce and distribute Chinese language content for Malaysian consumption. Now, the company is headquartered in Singapore.

What started as a small company turned into a regional dynamo by making hit movies and ventured into anything that was celluloid-based, be it movies, TV dramas, web series, short commercial films or telemovies focusing on the Asian market.

Its voyage created immense value for shareholders as the share price rose seven-fold, making it the darling of investors.

In the process, it showed that the burgeoning film-making industry in Asia had a bright future and that is proof, judging by the numbers the movie industry is generating in Malaysia.

Action!

The movie industry clapperboard has started to show that the scene within the domestic movie industry in Malaysia has been all action. The year 2018 was a record year, with cinema ticket sales for local and foreign movies surpassing the RM1bil mark. Ticket sales have risen 31% from five years ago.

Historic uptrend: Isaac calls the rise in ticket sales truly historic.Historic uptrend: Isaac calls the rise in ticket sales truly historic. Datuk Hans Isaac, the newly appointed Finas (National Film Development Corp Malaysia) chairman, calls the rise “truly historic’’.

The top-three Bahasa Malaysia or Malay language films – Munafik-2, Hantu Kak Limah and Paskal – earned over RM100mil in ticket sales. Of the RM1.04bil in ticket sales, local movies raked in RM170mil, double that of five years ago.

The origin of the local cinema dates back to 1933 and the feature films produced and shot in Malaysia are in English, Tamil, Bahasa Malaysia and Chinese (Mandarin and Cantonese). About 60 feature films are made annually besides 300-400 TV dramas and serials a year.

A total of 70 feature films were produced last year, mostly in Bahasa Malaysia.

Isaac is hoping the “momentum will be sustained’’ this year, though the market “is a bit soft’’.

“If we can exceed RM1.1bil in ticket sales in 2019, it would be fantastic,’’ he adds. He was an actor for 25 years before being hand-picked four months ago to revamp Finas.

All this is no comparison to the ticket sales of Hollywood or Bollywood films. The global box office was worth US$41.7bil last year, and including box office and home entertainment revenue, the global film industry was worth US$136bil.

Ticket sales for The Lion King released just three weeks ago have crossed US$1bil.

Still, local production houses are optimistic that next year will be better.

“There are many more releases planned for 2020, given the spate of activities on the shooting and production side,’’ says Gayatri Su-Lin Pillai, the executive producer of Infinitus Entertainment (M) Sdn Bhd. She is a lawyer by profession who prefers the glitzy world of “lights-camera-action” as opposed to courtroom battles.

She adds that the success of the recent movies and the continued investment by studios into making films for local consumption shows that Malaysian audiences believe in Malaysian content. If producers make relevant content and there is enough marketing and promotion, the audience will come and see their work.

What seems to work for now is family dramas, horror, comedy and action movies.

Potential hit: Gayatri hopes Sangkar will be another blockbuster hit, given the creative story line.Potential hit: Gayatri hopes Sangkar will be another blockbuster hit, given the creative story line. But success is subjective and a lot depends on the story line, promotion and marketing, production and effects, although funding is of utmost importance. The launch date is critical and should not coincidence with an international blockbuster or producers will see empty cinema halls. Finas normally sets the release dates for local movies.

An aspect often ignored is marketing and promotion, but increasingly, producers are collaborating with broadcasting houses such as ASTRO Shaw Sdn Bhd (a unit of Astro Malaysia Holdings Bhd), Primeworks Studios (Media Prima Bhd) and even cinema companies such as Golden Screen Cinemas.

“The budget for promotion and marketing of a movie can be close to that of making a movie and that is often ignored by some producers,’’ says local film icon Datuk Yusof Haslam of Skop Productions Sdn Bhd.

Several new films are set for release in the coming months and they include Boboiboy-2, Sangkar, Kron, Wangi, Warkah, Suatu Ketika Dulu, Hero-Jangan Bikin Panas.

Gayatri hopes Sangkar (a mixed martial arts film) will be another blockbuster hit, given the creative story line. Sangkar is the outcome of a collaboration between Astro Shaw, Primeworks Studios, Infinitus Gold and mm2 Entertainment.

“We hope to set a new benchmark in the local industry with Sangkar. The cumulative experience and creative expertise of all parties involved have enabled us to produce a film of high entertainment value matched by a comprehensive marketing campaign,’’ adds head of Astro Shaw, Jastina Arshad.

A new asset class

Not all of Ang’s movies are blockbusters and they are not produced in Hollywood or Bollywood. The films are shot in Asia.

With ticket sales hitting a record high and showing solid growth, new entrants and even high-net-worth individuals are willing to bet their money on it.

Making a feature film here can cost anything from RM1mil to RM4mil, depending on the story, effects, production, cast and promotion. In Hollywood, the blockbusters cost anything from US$100mil to US$300mil, but smaller films are still produced at US$1mil to US$3mil.

The trend is to team up with partners to share the cost. Of course, Finas gives out grants for producers to make their films, but Isaac says to avoid depletion of funds, he wants the movie-makers to give back a portion of their profits, so the revolving fund is topped up to help with future films. The quantum of a share of the profits from films is yet to be finalised.

By teaming up, studios are trading off a large share of their profits to defray a large part of their cost of making a movie.

“Show business is a tough and unpredictable business. You must have a strong business strategy in place, including for marketing and promotion. It is therefore good to have partners to spread the risk,’’ says Yusof.

Yusof started off as an actor more than four decades ago and turned producer with several blockbusters under his resume. Today, his sons are also producers.

His eldest son, Syamsul Yusof, produced last year’s top Malay language film – Munafik-2 (a supernatural horror film), earning RM37.73mil in ticket sales. Munafik-2 is a sequel to Munafik, produced in 2016 with gross takings of RM17.4mil.

Yusof’s other son, Syafiq Yusof, produced the fifth top movie, KL Special Force, with takings of RM12.2mil in 2018.

The comedy horror movie Hantu Kak Limah produced by Infinitus earned the second spot in the box office last year with RM36.23mil in takings. Infinitus is a unit of Hong Kong icon Andy Lau’s Focus Films Ltd and business tycoon Datuk Seri Robin Tan.

“It makes sense to have multiple shareholders, as that is the (model) we look at for every film we want to work on and it must be lucrative for all,’’ says Gayatri. She is talking about the minimum return on investment (ROI) of about 20%.

Experts claim that if the cost of making a feature film is RM1mil, then the breakeven should be about RM3mil.

For every film, there is a 25% entertainment tax excluding service tax for big-screen screenings. The remaining 75% is shared between the cinemas and the producers-investors on the basis of 57.5%:42.5%, respectively, depending on the number of screening days and ticket sales. The equation may vary for each movie.

One interesting personality who is also the new kid on the block in the local film industry is Datuk Iskandar Mizal Mahmood.

Following his last job of managing the creative and media assets of Khazanah Nasional Bhd via Granatum Ventures, Iskandar has ventured out on his own to create more content after finding success in this last work.

While at Granatum as its group CEO, Iskandar helped bring together a group of stellar investors to fund the making of Paskal the movie, an action thriller which was the third-highest grossing movie with takings of RM30mil.

Hot streak: Ang’s firm has turned into a regional dynamo by making hit movies.Hot streak: Ang’s firm has turned into a regional dynamo by making hit movies. “Movie-making is not just about the red carpet. It is about the script (story), production, direction, actors, crew, promotion and marketing and funding,’’ says Iskandar.

“Previously, movie-making was driven by directors, but it has shifted to producers-players-investors,’’ Iskandar adds.

Since Paskal made RM30mil in ticket sales, Iskandar lays claim to returning a healthy payment to the investors, which included a consortium of Asia Tropical Film, Golden Screen Cinemas, Multimedia Entertainment, Granatum Ventures and Astro Shaw. The movie also got a RM1mil grant from Finas and the cost of production was RM10mil.

Iskandar now talks about how movies can potentially be a new asset class for investors for higher returns, but the caveat is that it must be a hit.

“We returned about 30% to the investors in a matter of two years. This is not easy to achieve for investors in today’s low interest rate climate. Hence, this is a new asset class worth exploring for investors.

“So essentially, investing in movie-making is a viable investment-grade proposition, but you need to have the right partners and the film must be accepted by the market,” Iskandar says.

He adds that “no other industry can dictate a faster way to get returns, the maximum is two years”.

However, Jastina of Shaw adds that like every other investment project, there are also risks associated with investing in a film.

“There is no guarantee of success with all our undertakings and it is impossible to assume the same rate of return across all our films. Generally, for our profitable ventures, the ROI would normally range from 5% to 20%,’’ says Jastina.

Astro Shaw has produced and co-produced more than 80 films since its inception in 1996 and its aim is to produce and co-produce around six to seven local and regional films each year in various languages, though it is important to strike a balance between quality and quantity.



The small screens

From big screens, producers have found a new way to monetise their films further by selling the rights to online streaming platform providers such as Netflix, dimsum, iflix, Vevo, Hulu, Amazon Video and many others.

This gives them another platform to screen their movies and earn income.

“It is all about how you negotiate to sell your rights of the film on different platforms. Sometimes, you get the payment upfront, or later,’’ says Iskandar. He managed to get Netflix to screen Paskal.

Gayatri adds that all this OTT players give them a “good avenue to get a bigger audience.’’ Dimsum chief marketing officer Lam Swee Kim says there are multiple revenue streams for movie producers to monetise their content and not necessarily restricted to an exclusive partner if they want their movies to travel beyond one platform.“In the event they want to do an exclusive deal because the revenue is lucrative, then they have to work closely with the partner to promote the movie. This close working relationship is important,’’ she adds.

Yusof: The budget for promotion and marketing can be close to that of making a movie.Yusof: The budget for promotion and marketing can be close to that of making a movie. It is every producer’s dream to make a global blockbuster, but thus far, the Malaysian films have only reached Brunei and even Indonesia.

Gayatri says Bollywood films have reached China and if we can do that with Malay films, it would be a big win.

Apart from ticket sales and selling rights for small-screen screenings, producers make money through merchandise branded for the movie such as toys, clothing, books and others. That trend has not caught up much locally as it is still the domain of global blockbusters.

Industry revamp

To help the film industry, there are suggestions that financial breaks are needed to help nurture the industry. Details are still sketchy at this stage but Finas’ Isaac is talking about tax rebates for corporations that sponsor or help in production or marketing to promote the local film industry. It could be a long shot since the government needs funds, but negotiations are underway and he remains confident.

“We are still proposing so that any company that helps with the growth of the industry can get some form of tax rebates,’’ he adds.

Up his sleeves is a long list of things to do, as he revamps the industry from the aspect of luring more investors to be part of the film-making business.

The reduction in taxes and even ensuring there is mandatory Employees Provident Fund (EPF) and Social Security Organisation (Socso) contributions and a blanket insurance coverage for film producers are proposals being worked on, and are at various stages of completion, he says.

“We are building from scratch and it has been my personal agenda since I was an actor to have EPF and Socso contributions. So, we are close to implementing it,’’ he adds.

While Isaac is trying to do his bidding, the industry has its own issues and one factor is the date of release. Sometimes, it coincides with an international release and naturally, the response to the local production could be lukewarm.

“But how many Thursdays and Fridays do you have in a month?’’ asks Isaac. Movies are released for late night shows on Thursdays and Fridays.

Identifying the right story and script for the target audience remains a challenge for every production studio.

“Malaysia is a small yet complex market. There is a scarcity of talent, both on and off-camera that needs to be addressed for us to scale. On top of our initiative to always be on the lookout for fresh talent, our strategic partnerships with local and international partners will remain important to give us experience in other markets and improve our production capabilities,” says Jastina.

Partnerships and collaboration may be good but Gayatri believes in the "balance between creativity and commercialism". In an earlier media report, she says that “every film we present to our audience must be something better than the last one we produced. We want to make films that people enjoy”.

However, piracy is one of biggest issues plaguing the industry as the earnings of producers and investors are affected by it. Experts believe more needs to be done to address this issue.

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