China Listed Film Company out of Funds for Production
Chinese authorities pledged to crack down on tax fraud in the entertainment industry in the wake of Fan Bingbing’s tax evasion scandal. Individuals and companies in the entertainment industry are required to launch self-inspection of their tax payment practices. Investors pull the plug on new productions. Business is slack at the ever bustling Hengdian World Studios.
From an advertising firm to media company, Yinji Entertainment & Media (002143.SZ), DMG's Beijing-based affiliate announced that it would cease investment activities in entertainment and film due to shortage of funds in a reply to the Sichuan Securities Regulatory Commission on 27 October. DMG is the first listed company in China to announce that its mounting financial woes have denied funds for filmmaking.
DMG Entertainment is an reputable advertising firm in Mainland China with operations in motion pictures. The studio funded films including “The Founding of a Republic” (2009), “Go Lala Go!” (2010), and Marvel’s “Iron Man 3” (2013); and TV series including “All Quiet in Peking” (2014), “Diamond Lover” (2015) and “The Advisors Alliance” (2018).
DMG Entertainment, the self-proclaimed gatekeeper between Beijing and Hollywood, is said to boast an impressive roster of local and international media resources, and an established team of Hollywood scriptwriters with whom the company has collaborated with for over a decade. As for capital, DMG entered the stock exchange through a backdoor listing with Sichuan Gaojin Foods in 2014. Its valuation surpassed RMB 40 billion at its peak, rivalling with leading film studios such as Huayi Brothers and Beijing Enlight Media. Poised for big plans in 2018, DMG announced a list of 20 upcoming web series in February this year, including historical epic “Shang Gong”, and Valiant Comics superhero series. Little did anyone expect that eight months later the forward-thinking DMG would announce to put a halt on motion pictures production.
An Inquiry Letter from the Securities Regulatory Commission was issued on 20 September. A reply, detailing the company’s key problems in terms of financial statement and senior management was not made until 26 October. It stated that the company cash flow had been suffering due to long payment collection periods in the entertainment industry. Investment activities in entertainment and film were put on halt. Collecting the accounts receivable would be the top priority at the moment. An Independent Director of Yinji revealed the unusual practice of the company seniors remotely managing operations from overseas all year long. 250 employees resigned from January to 21 September this year, which accounted for 63.45% of working staff as of 31 December 2017. What does the future hold for a company with constant waves of departures?
Financial difficulties aside, the ceasing of television and film productions is also largely attributed to a slowdown in the entire industry. DMG is the first listed media company in Mainland China to fall from grace.