SHANGHAI - Senior Chinese film industry leaders face many new challenges to their still maturing business models, executives in Shanghai were told on Sunday.

"Traditional film companies have much to reflect on," said Yu Dong, chairman and CEO of Bona Film Group at a Variety-sponsored film finance conference organised by Winston Baker, in partnership with the Shanghai International Film Festival. "How can they move forward?"

But the challenges he referred to were largely digital and demographic, rather than governmental and regulatory as has so often been the case in China's past.

Yu said that the last year had ushered in the 'era of the small screen' in China, something which has fragmented and "submerged" the theatrical industry. He said that, as a consequence, the future theatrical experience will increasingly be reserved for IMAX and experience-based movies. He noted that the share of online ticket sales could hit 40% this year, up from 20% last year, and warned that Wanda's online booking service may dominate. And when many of 2013 and 2014's hit movies were made on budgets less than $3 million, Yu asked whether it was still worth investing in big movie stars and directors.

"Dad, Where Are We Going?" a quasi-documentary version of a TV reality show this year grossed $51 million and will go into sequel in time for Chinese New Year 2015.

"Young people are choosing different ways," Yu said.

"We are in a revolutionary period," said Ren Zhonglun, head of the Shanghai Film Group, which this year celebrates its 65th anniversary. "The movie majors are being replaced by newcomers with little experience. What these companies have is proximity to the market."

"[Internet author turned film maker] Guo Jingming and [celebrity blogger] Han Han will change the traditional film profession. They represent a new way of life, not just a new way of making film," said Ren.

He also pointed to the examples of Korean electronics giant Samsung and U.S. movie studio Disney as examples of conglomerates which are making, or re-editing, short-form content adapted for a multi-screen environment.

Alibaba's Liu Chunning predicted that non-theatrical revenues are set for imminent take-off. "Payment models, copyright issues and a lack of content have until now held this back. But smart phones, smart TV, and digital set top boxes will all usher in new payment models," he said. "Consumers will have greater access to content, and will drive up the value of content, but to succeed that content will have to be different to what consumers have now from feature films or TV."

"The only advantage [traditional film companies] will have is scale. We need to build up our activities quickly," said Yu by way of response to the hurdles he anticipates.

Yu earned a cheer from the Shanghai Festival audience when he argued that the new era also required a relaxation of China's movie import quotas.
Other panel discussions at the one-day event focussed on co-productions and the challenge of selling Chinese-language content overseas.

Speakers took a distinctly dimmer view of Sino-international co-productions than was generally the case a year or two ago. Several cited major problems of distrust between Chinese and U.S. companies, while others highlighted the very substantial and ongoing differences between business practices on either side of the Pacific Ocean and make for misunderstanding.

Leslie Chen, China-based senior sales executive for IM Global, said that as the Chinese industry evolves and becomes more successful at satisfying local Chinese audiences, production is trending away from the more readily exportable kung fu genre and towards romantic comedies and social satires that have less likelihood of travelling far afield. Though she noted that there is a growing interest in Chinese content in nearby South Korea.
David U. Lee, of Chinese distributor Leeding Media, united the day's discussions by predicting that China's New Media giants - Baidu, Alibaba and Tencent - may be operating on the scale of Google within five years.

Quite what that paradigm holds for the Chinese film industry is likely to be discussed at many future conferences.

2014 Variety Media, LLC, a subsidiary of Penske Business Media; Distributed by Tribune Content Agency, LLC