Due to the decrease in the supply of high-quality films, the "small year" for the film and television industry this year is now a foregone conclusion.

Data shows that in the first three quarters of this year, the total domestic box office reached 34.633 billion yuan, with a total attendance of 813 million, both down by double-digit percentages from the same period last year.

The sluggish performance of the film market has also affected the performance of film and television companies. In the third-quarter reports this year, more than half of domestic film and television companies reported losses, with revenue and net profit declining being a true portrayal of most film and television companies.

However, Alibaba Pictures, which just released its 2024/25 half-year results, has demonstrated strong development resilience, with an overall impressive performance. The financial report shows that as of September 30, 2024, Alibaba Pictures achieved revenue of approximately 3.051 billion yuan, an increase of 17% year-on-year; adjusted EBITA profit was approximately 642 million yuan, an increase of 39% year-on-year, and net profit also reached 337 million yuan.

Faced with changes in the industry cycle, how does Alibaba Pictures maintain stable growth resilience? What is the business logic behind it?

01

Sticking to the Core, Continuously Releasing the Value of Content Capabilities

Over the years, significant changes have occurred in the film market, audience demographics, viewing habits, and the film industry chain. However, content innovation remains paramount. For the film and television industry to achieve sustainable development, it is essential to maintain high-quality content production. For Alibaba Pictures, its adherence to high-quality content and innovation across the entire industry chain have continuously empowered its overall performance through its content capabilities.

On the one hand, from content selection, investment, to promotion and distribution, Alibaba Pictures continues to penetrate the content production field, ensuring the quality of film content to meet the viewing needs of different groups and enhance the willingness of audiences of all ages to attend.

According to the "2024 China Film Audience Trends Report" released jointly by the China Film Association and Lighthouse Research Institute , in terms of content preferences, in 2024, audiences favored comedies, thrillers, science fiction, and action films. The supply of comedy films and their box office contributions were prominent. Audiences desire eye-catching stories, extreme emotional releases, and films with strong thematic resonance.

It is understood that Alibaba Pictures has approximately 70-80 film projects under rolling development each year. By actively expanding its self-produced and co-produced capabilities, it has a comprehensive layout across multiple genres such as comedies, science fiction, thrillers, and realism, providing a rich selection for audiences. Even facing the cyclical changes in the film market this year, Alibaba Pictures has maintained stable output.

During the reporting period, Alibaba Pictures participated in the production and distribution of 47 films, including "Doll Catcher," "Silent Kill," "How Do You Want to Live Your Life?," "Peacekeeping Anti-Riot Squad," "A Little Grocery Store by the Clouds," "Grandma's Grandson," "Lisbon Maru Sinks," and many other excellent works. The cumulative box office accounted for nearly 60% of the total box office. Some imported films also performed well, such as the Japanese animated film "How Do You Want to Live Your Life?" and the Thai film "Grandma's Grandson," both of which achieved box office results far exceeding their local performance with the assistance of Alibaba Pictures, capturing the largest global box office in the mainland Chinese film market.

Currently, Alibaba Pictures has a sufficient number of films in reserve. Among the 70 reserved films, "The Sequel to The Investiture of the Gods: Battle of Xiqi," "Dongji Island," "The Time When Stars Shine," "Catching a Spy," "Bodyguard: The Wind Rises in the Desert," "Welcome to Dragon Restaurant," "Accidental Killing 3," "Teenage Song Walk," "Maverick," and other films will be released successively based on market conditions. Among them, "Good Stuff," produced by Alibaba Pictures, has received overwhelming praise, achieving the double first place in the same session for preview attendance and average attendance per screening. Currently with a Douban score of 9.1, it will be officially released on November 22. According to the professional version of lighthouse , the total box office is expected to exceed 400 million yuan.

At the same time, to fully develop IPs and enhance film content production capabilities, Alibaba Pictures has also launched a producer studio cooperation plan. As of now, multiple projects have been launched or completed and are ready to be gradually introduced to the market. Additionally, the Haina International Young Director Development Program has recruited 38 outstanding directors and established the "Alibaba Pictures Haina Program Scholarship" at Hong Kong Baptist University, focusing on promoting film and television project cooperation.

On the other hand, Alibaba Pictures has a deep layout in full-category entertainment content, promoting the synergy of film, performance, and drama IPs and continuously outputting high-quality works to the market to expand the value of content IPs.

During the reporting period, the film "How Do You Want to Live Your Life?" produced by Japan's Studio Ghibli, introduced by China Film Group Corporation, and assisted in promotion by Alibaba Pictures, won the box office champion during the Qingming Festival period. Meanwhile, based on the film cooperation, Damai also co-produced the Ghibli Studio Immersive Art Exhibition with Studio Ghibli, realizing IP resonance between films and exhibitions. In this year's National Day film schedule, Alibaba Pictures participated in the production and joint distribution of the film "Only Green," adapted from the homonymous dance-drama film, realizing a deep integrated promotion and distribution model across both film and performance business scenarios. This is also one of the rare projects in the market that explores the in-depth excavation of IP value.

Some analysts have pointed out that in 2024, the production cycles of multiple high-profile projects could not catch up with the year's release schedule, leading to industry-wide insufficient production capacity throughout the year. From this perspective, this year belongs to a "small year" for films. The vast majority of these potential projects will be concentrated in 2025, and it is expected that the pressure faced by the film industry in 2024 will improve to some extent next year.

02

Diversified Revenue Drives Business Certainty and Growth

From this financial report, it can be seen that Alibaba Pictures' three major business segments—content, ticketing and technology platforms, and IP derivatives and other businesses—have more diversified and balanced revenue, accounting for 40%, 40%, and 20% of total revenue, respectively. In particular, the ticketing and technology platform segment achieved revenue of 1.23 billion yuan, an increase of 710 million yuan from the same period last year. After the acquisition of Damai, the synergy and scale of Alibaba Pictures' ticketing and technology platform segment have been further amplified.

In the ticketing and technology platform segment, Alibaba Pictures' membership business has been steadily progressing, with the benefits and brand influence of Taopiaopiao VIP membership continuing to expand. User activity and loyalty in purchasing tickets on both the Taopiaopiao and Damai platforms have continued to increase. In terms of films, the Phoenix Cloud Intelligence business has continued to maintain the top position in national ticket sales and attendance, while also focusing on Hong Kong, Macao, and overseas markets. After gathering the B and C-end product matrix of Taopiaopiao, Phoenix Cloud Intelligence, and Damai, Alibaba Pictures has successfully created an offline entertainment flagship platform. The positive "chemical reaction" generated by subsequent internal business synergy will bring more positive feedback to the company's financial reports.

Additionally, in the technology business, Alibaba Pictures continues to increase investment in innovative technology areas such as AI, digital humans, and virtual shooting, seeking solutions for standardization, process automation, and digital intelligence in film and television production, and promoting the application of new technologies in the industrial production of film and television. During the reporting period, Alibaba Pictures has deployed virtual studios in various locations and begun applying virtual shooting technology in some film and drama projects. In the area of digital humans, five digital humans, including Li Li and Anzhen'er, have been launched. Among them, Li Li has signed with Damai to officially enter the music industry as a virtual musician while continuing to develop endorsement, film and television, and other businesses. The Beacon AI has been connected to the Tongyi Qianwen large model, capable of understanding and accurately answering various general questions such as film distribution and scheduling analysis, enhancing promotional efficiency.

Domestically, leading players such as China Film, Alibaba Pictures, and Maoyan are focusing on AI video creation and digital marketing, which will effectively promote the application of films in content creation, post-production, virtual shooting, market analysis and optimization, and automated management. Technology will once again give films wings, achieving stable growth in long-term box office revenue.

Meanwhile, Alibaba Fish, the IP trading and innovation platform under Alibaba Pictures, has built a vast and rich IP matrix, with steady improvement in IP business efficiency. In the IP derivatives and other business segments, Alibaba Fish's licensed IP product retail sales have increased significantly year-on-year, driving an over 40% year-on-year increase in Alibaba Fish's revenue. It continues to explore offline IP interaction activities, providing consumers with a more complete IP experience. As of now, Jinli Naqu has independently developed and signed 10 fashion toy and anime IPs, collaborating on over 40 film and television content projects. From this perspective, Alibaba Pictures is expected to drive the integrated development of film, television, and cultural consumption with content as the core, enhancing IP conversion rates and expanding IP value realization through business licensing, derivatives, cultural tourism consumption, and offline parks.

With the deep integration of content and technology, Alibaba Pictures' ticketing and technology revenue in this quarter has surpassed content revenue in scale, which once again confirms that for film and television enterprises to maintain sustained growth, while deeply cultivating content, they also need to expand the benefits of the industrial chain. A multi-level industrial chain layout will bring more business certainty.

03

"Film + Performance" Accumulates Strength for a Bright Future in Entertainment Consumption

Since the beginning of this year, the performance market has continued to heat up. According to data from the China Association of Performing Arts, in the first half of 2024, there were 251,700 commercial performances nationwide, an increase of 30.19% year-on-year, with an audience of 79.1013 million, an increase of 27.10% year-on-year. Among them, box office revenue from large-scale performances such as concerts and music festivals in the first half of the year increased by 134.73% year-on-year, and the number of audience members increased by 63.35% year-on-year.

On the one hand, with the rapid economic development, the proportion of people's cultural and entertainment expenditures is increasing, cultural consumption time is gradually increasing, and the selectivity of cultural products is also increasing. People are gradually shifting towards higher-level spiritual and cultural needs, and watching entertaining and influential performances has become one of the most common cultural pastimes for the public.

On the other hand, a series of policies have been successively introduced, providing effective guidance and strong support for the sustained growth and healthy development of the performance market. The "Notice on Further Strengthening the Management of the Performance Market and Regulating Order" issued in 2023 made safeguard arrangements for regulating the order of the performance ticketing market. This year's "Opinions of the State Council on Promoting High-Quality Development of Service Consumption" clearly stated that it is necessary to "expand the supply of the cultural performance market, improve the efficiency of approval, and increase the number of performances." Governments at all levels have also introduced supportive measures based on their respective advantages, providing policy impetus to further encourage creative production, stimulate market vitality, and improve operational efficiency.

Beyond films, the offline performance market, driven by both supply and demand increases and policy boosts, is also expected to continue to positively impact Alibaba Pictures' performance. As a leading player in the offline performance ticketing market, Damai has consistently maintained its leading position in the performance ticketing market. During the reporting period, it achieved a total transaction value (GMV) growth rate of over 50%. It is expected that Alibaba Pictures will continue to deeply benefit from the vigorous development of China's performance market. According to iiMedia Research data, the scale of China's performance market is expected to reach 101.703 billion yuan by 2026.

Under the new model of entertainment consumption combining "film + performance," Alibaba Pictures can consolidate its scale advantage and competitive barriers by expanding Damai's influence upstream in the value chain of the live entertainment industry, such as offline entertainment event hosting, promotion, venue operation, and artist management, further enhancing its brand awareness in the offline entertainment business. Based on this, Alibaba Pictures' business layout will also span the three mainstream cultural and entertainment sectors of film, performance, and drama. Its diversified business structure and stable strategic direction will form a sustainable development impetus.

Conclusion

As the third-quarter results are gradually disclosed, the market's pessimism about the flat box office since the summer and National Day holidays has gradually dissipated. The logic of the film industry being driven by demand for high-quality content remains unchanged, which also means that Alibaba Pictures will continue to have vast development space in the future. With the release of films reserved by major companies and the successive scheduling of key films, viewing demand will be reactivated, potentially driving box office elasticity during the 2025 Spring Festival holidays and boosting industry confidence.