Chinese producer-distributor Yu Dong has become one of the leading independent figures in the Chinese industry. He tells Sen-lun Yu how he has done it.
From its origins as a Chinese distributor to becoming a fully fledged private film studio, the growth of Yu Dong’s Polybona represents a new era in the development of the Chinese film industry.
“Losing two major films made me realise the need to be involved in production and investment.”
Yu Dong, Chinese producer-distributor, Polybona
Back in 2005, Beijing-based Polybona Film Distribution was majority-owned by Poly Group, the commercial arm of the People’s Liberation Army (PLA). Its business model was acquiring Hong Kong films on a minimum-guarantee basis for mainland distribution.
Business was good — in 2005 the company had a 25% market share — but Yu felt the pressure of rising competition. In 2006, two Chinese companies secured mainland distribution rights to Tsui Hark’s Seven Swords and Jackie Chan vehicle Rob-B-Hood because they were also investors in those films.
“Losing two major films made me realise the need to be involved in production and investment,” says Yu.
This required money, but Poly Group was reluctant to increase its investment as its other entertainment businesses were struggling. So Yu took the ambitious step of seeking venture capital, even though there was little private equity in the Chinese film business at the time.
He met Tim Gong of SIG Asia Investment and Neil Shen of Sequoia Capital China who both expressed immediate interest. “Film distribution is less risky than film production. And given Polybona’s scale of distributing 20 films a year, the investors believed they were able to balance the risks,” says Wang Ran, CEO of financial consulting firm eCapital.
In 2007, SIG and Sequoia agreed to invest $10m in the company, which in the meantime had been restructured by Yu and new COO Jeffrey Chan. They established a Hong Kong holding company registered in the British Virgin Islands, Bona International Film Group (Bifg), as a platform to attract foreign funding and to eventually launch an overseas IPO. In the process, Poly Group’s share in Polybona was diluted to 10%.
It was fortuitous timing — in mid-2007, a new regulation clamped down on special-purpose vehicles based offshore and no Chinese media company has since been approved for an overseas listing. If all goes well, Yu plans an overseas stock market flotation in 2011.
Since that nifty corporate restructuring, Yu has been building on his links to leading Hong Kong industry figures. In 2008, Bifg established Bona Yinglong Artist Management with Emperor Motion Pictures and Jackie Chan’s JC Group, and international sales outfit Distribution Workshop, with Jeffrey Chan and veteran producer Nansun Shi.
In early 2009, he also established Cinema Popular (see above), a joint venture with Peter Chan and Huang Jianxin’s We Pictures.
According to Yu, Bifg plans to produce 16 films in the coming year and is in the midst of second-round fund-raising. “Now I look back,” says Yu, “if I had not made those big changes in 2006, today my company may well just be a distribution department of a big entertainment company.”