(Photo Source: Xinhua News)
“Have you watched Langya Bang (琅琊榜 Nirvana in Fire)?” I have been constantly harassed by my friends on this during the past month. Even earning 3.2 billion and 2.8 billion overall views on Iqiyi and Youku (Top 2 video streaming websites in China) respectively, I have no desire to watch it in the first place, mostly because Chinese drama in the past 5 years tend to be crudely made and quite error-prone. But after watching a couple of episodes, I am hooked – the storyline is intense and compact, while the production is detail-oriented and fascinating. It is undoubtedly one of the better works seen in years.
Based on a no.1-ranked online novel on qidian.com (起点文学网), Nirvana in Fire’s storyline can be characterised as the Chinese version of “Le Comte de Monte-Cristo”. The author blended the story with a strong Chinese historical and cultural flavour (the whole story was set during the Liang Dynasty, approximately 502-557 A.D) as well as twisted storylines of multiple revenges and internal court conflicts. The series has also been broadcasted fervently in Korea, Taiwan, Malaysia and Hong Kong since early November, and has caught the attention of North American viewers, rating it 9.1 out of 10 in the Asian Drama ranking website mydramalist.com. (http://mydramalist.com/9025-nirvana-in-fire).
(Nirvana in Fire in Korean subtitles)
Business impact – upstream to downstream
Despite its huge success within the audience base and drama critics, the business aspect of “Nirvana in Fire” has been more than fascinating. The author of the series, Hai Yan, used to work as an office lady for a Chengdu-based real estate company. Prior to selling the IP to its producers, the novel has already been a huge hit on qidian.com, gaining 4 million overall views and more than 1 million RMB a year in author royalties. Nirvana’s key producer, Shandong TV Production Limited, had some of the best dramas in China, i.e. Battle of Changsha (战长沙) and Journey to the Northeast (闯关东). Nirvana’s investor, Ruyi Films, also surfaced to become one of the hot shots in the TV/movie industry, attracting equity investment from Dalian Zeus Entertainment (002354-SZ), a Shenzhen-listed company originally focused on wood production. The investment valued the company at 2.7 billion RMB (425 million USD). So far this is not a bad bet at all- after Nirvana in Fire’s huge success, Zeus Entertainment’s stock has risen by more than 40% since early September.
Ruyi enjoyed a consistent track record of success during the past two years, betting on some of the hottest film and TV series in China, including box office favorites as “So Young”(致青春) and “Tiny Times 4”(小时代4). Its TV portfolio also earned wide acclaim- the most famous piece being “All Quiet in Beijing”(北平无战事). Before Nirvana in Fire, “All Quiet in Beijing” was heavily discussed in the Chinese social media as the main storyline coincides with the government’s anti-corruption campaign.
Astonishingly, Ruyi’s boss is hardly an industry veteran, but a former hedge fund manager. Ke Liming (柯利明) studied overseas in Australia at an early age and graduated from Griffith University, majoring in monetary economics. At the age of 26, he took over his brother’s advertisement company after a brief stint in a Hong-Kong-based hedge fund. Thanks to his background in finance, he took a rather “quantitative” and “risk-conscious” approach in assessing investment opportunities in the entertainment industry and his focus so far has been aggressively accumulating high-quality IPs. Ke is not alone in this category, as IP “war” within the TV industry has resulted in huge inflation in IP cost, i.e. successful internet novel may cost less than 100k RMB three years ago, but now valued at 10 times the original price.
Tighter Policy forces TV drama producers to change its approach
Earlier in April 2014, the SARFT (Administrator of publication and broadcasting in China) casted out a new rule that limits the simultaneous broadcasting of a TV series in local TV stations from four stations to two starting from 2015, also known as “one drama two satellites” (Yi Ju Liang Xin 一剧两星). The move was originally designed to diversify the options available to Chinese TV viewers; but for TV producers this is a salt on the wound, as revenue was squeezed by this single policy. On top of this, there is an additional 15% cap on number of overall episodes of Chinese traditional costume drama (guzhuangju 古装剧) as of total, further reducing likelihood of success for the likes of “Nirvana in Fire”. The industry consensus is that the policy forces investors to be more cautious in investments, and they start to look for value rather than quantity in production. Nirvana in Fire is a unique case though, as it actually got more royalty revenues from internet streaming websites Iqiyi and Youku. This can be viewed a turning point in the industry, as local TV stations’ bargaining power has shrunk (except some of the more successful ones, such as Hunan TV), while that of online video streaming websites has risen significantly. More importantly, the viewer landscape was fundamentally divided between offline and online, where most “post-80s” and “post-90s” fans watched TV shows online.
The policy has another unintended consequence – the consolidation within the TV industry. With unusually high proportion of production cost devoting to famous actors/actress’ paycheck, TV producers/investors have found it harder than ever to make money without better capital support/better cast members. As such, inevitable consolidation has already begun since early 2015, but industry veterans commented that it will take much longer to witness oligopolies, as smaller producers could still survive by minimising cost and concentrating on a handful of production. Arguably, Nirvana in Fire is a huge confidence boost among TV producers that quality IPs + strong cast + online streaming-focused can be a model for success, but winter is still coming for smaller producers and we can hardly imagine a nirvana for small players in the industry.