Bona Posts 2010 Revenue Gain But Net Loss

Q4 earnings fell on disappointing performances of recent films coupled with project delays.

BEIJING -- Bona Film Group, China’s largest non-state film distributor, posted a loss in net revenues in the quarter ended December 31, and despite higher full-year revenues, a loss for that period too, the company said in its first earnings report since a lackluster Nasdaq listing and the delay or disappointing performance of a few key films.

Co-producer of the underperforming What Women Want remake starring Gong Li and Andy Lau, Beijing-based Bona posted fourth quarter net revenues of $17.8 million, down 22.2% from Q4 2009 net of $22.9 million. Fourth quarter net income was $3.1 million, down 21.5% when compared with the $4 million netted in Q4 2009.

The company’s command of a 15% share of the box office gross generated by Chinese-language films in 2010, including the Hong Kong hit Triple Tap, helped Bona post a 37.6% gain in full-year 2010 net revenues, up to $52.8 million, from 2009 net of the $38.4 million.


However, Bona, which is investing in all segments of the movie business -- from talent management and film production to distribution and cinemas -- posted a full year 2010 net income loss of $4.2 million, well below its 2009 net gain of $5.5 million.

China’s total box office take, including from Hollywood imports, rose 64% in 2010 to $1.5 billion, boosted by a steady rise in ticket prices, the expansion of 3D and IMAX theaters that can charge a premium, and by a steady demand for variety in entertainment from the country’s roughly 200 million regular filmgoers.

Looking ahead, Bona CEO Yu Dong said in an earnings statement that Bona sees “exciting opportunities in 2011, as we target to expand the number of high-quality film projects we invest in, produce and distribute.”

The completion of one of those projects, Wong Kar Wai’s The Grandmasters, starring actress Zhang Ziyi (Memoirs of a Geisha), has been delayed until the fourth quarter.

Addressing queries about another delayed picture, Mulan, Bona’s planned English-language international co-production of the story of China’s most famous woman warrior, Bona CFO Mason Xu told The Hollywood Reporter: “Yu Dong our CEO is now talking with potential investors both from China and overseas.”

Revealed by The Hollywood Reporter in September with Zhang as the lead under the direction of Hollywood hitmaker Jan de Bont (Speed), Bona’s Mulan at first gathered momentum and backing from Movie Plus Productions of Canada and Global Film Finance of the U.K. William Morris Endeavor, which represents Zhang in Hollywood, was set to handle North American rights.

But the project’s finance fell apart just before Mulan was due to go into production outside Shanghai last fall, members of the production team told The Hollywood Reporter on condition of anonymity. One described how they had been asked to gather at Hengdian Studios then all been sent home.

As Hollywood gears up to compete with the likes of Bona and local competitors Huayi Brothers and Enlight, China is meant to address the World Trade Organization by March 19 to explain how it will open to greater foreign participation in film distribution.

CFO Xu said Bona was well placed to compete if China does raise the annual 20-film cap on imported films allowed to share in the box office or opens the largely state-controlled distribution sector to the likes of the Hollywood studios.

“We think that domestic films enjoy a competitive advantage and will allow us to maintain an eight to ten percent share of the overall box office,” Xu told The Hollywood Reporter.

In a Wednesday earnings call posted to Bona’s website, Xu told analysts and reporters that the company plans to buy its way into the cinema business and to own or operate 30 to 40 mature multiplexes by the end of 2014.

"Exhibition expansion is to supplement the core distribution business, it is not about turning the company into a cinema management business,” Xu said.

Wall Street analysts’ opinions were mixed about Bona’s first quarter as a U.S.-listed company.

Bona’s share price closed down 3% in New York on Wednesday at $7.21, well below its December 9 initial public offering price of $8.50 each. Since that IPO, Bona’s shares have traded in thin volume between $5.18 and $7.44.

Piper Jaffray analyst James Marsh wrote in a note that while Bona’s projection of $1.8-$2.2 million in net income in the first quarter was significantly below the investment bank’s estimate of $5.2 million, the company’s expected full year 2010 net income of about $20 million was ahead of Piper's estimate of $19.3 million.

“Piper Jaffray continues to believe BONA is well positioned to benefit from a growing filmed entertainment market in China. Increased investment in the sector will likely drive more film production and theater construction which should in turn attract Chinese consumers with an appetite and disposable income for entertainment,” Marsh said.