Smart Cinema launched in China to expand audience and tackle piracy

[Len]

The company is headed and partly financed by Gao, alongside an array of private investors. Executives include Luke Xiang, who previously headed WeChat Movies, a forerunner of today's ubiquitous online ticketing businesses.

Jack Gao, the former senior VP at Dalian Wanda and former interim head of Legendary Entertainment, has reemerged at the head of a company that could massively expand the Chinese box office.

Gao is set as CEO of Smart Cinema, which will stream new release movies to hundreds of millions of mobile devices, within the theatrical window. Revenues will be considered as part of box office earnings.

The 'mobile exhibition' system is also capable of carrying library and speciality titles, all delivered in a DCI-compliant 2K image. The technology was developed in association with CRISFT, part of China's entertainment industry regulatory body SARFT, and the company maintains close to 100 software engineers.

The company is headed and partly financed by Gao, alongside an array of private investors. Executives include Luke Xiang, who previously headed WeChat Movies, a forerunner of today's ubiquitous online ticketing businesses. Xiang is now set as head of content.

Gao, who previously held executive roles with Microsoft and News Corp., ran his own investment company after leaving News Corp. and before joining Wanda. During that time he was an early backer of WeChat Movies. "Smart Cinema is now my full-time commitment," Gao told Variety.

The objective is to break through some of the many bottlenecks in the Chinese distribution and exhibition systems, and to expand the available audience. Although the country now has some 50,000 cinema screens, there are still hundreds of small towns and counties with zero or only minimal cinema penetration. Similarly, while China is now producing some 900 movies per year, less than half find enough screens for a theatrical release.

Smart Cinema's proposition potentially expands the first run exhibition landscape to more than a billion venues. It also equates to a theatrical-on-demand system, where users' intentions shape the pattern of delivery.

"Smart Cinema gives consumers more choice, and creators more opportunities to monetize," Gao said. Consumers access the service through an app. They pay the full ticket price and use China's highly-developed mobile payment systems, such as Alipay and WeChat Wallet, to complete the transactions and receive a KDM valid for one-time screening. End-to-end encryption is designed to avoid piracy.

"Smart Cinema can act as a valuable supplement to the existing Chinese traditional distribution and exhibition system, contributing to the growth of domestic box office," said Gao. "Market segmentation and targeted distribution for a movie will be quite feasible and efficient. This is an open platform encouraging producers and studios to create competent quality contents, meanwhile nourishing Chinese audiences' demand and sophistication."

Gao told Variety that no studio or distributor will be obliged to use Smart Cinema. Instead, distribution terms, such as hold-backs or ticket prices, remain under the control of studios. They can be negotiated, tailored to individual requirements, and specified according to contract.

Despite its potential to disrupt the traditional exhibition system, the company launch on Wednesday in Shenzhen appeared to receive a high level of official and government support.

Attendees included La Peikang, head of China Film Group, Zhang Wei, director of CRISFT, Wang Fuqiang, director of National Motion Picture Digital Content Management Center, Fu Ruoqing, board director of Huaxia Distribution, Liang Ge, VP of the Chinese Association of Film Distributors & Exhibitors. The China head of Hollywood's Motion Picture Association was also present.

"We believe that this offers an incremental gain, and that cinema in China is not a zero-sum game," Gao said.