The biggest financial cinema news of the week was not at the CinemaCon trade show in Las Vegas. Demonstrating instead the importance of China to the cinema business, e-commerce giant Alibaba paid 840 million yuan (USD $134 million) for cinema ticketing software company Yueke Software Engineering Company, known to cosumers in China under the Finixx brand name.
The deal was done by Alibaba Pictures Group acquiring Yueke/Finixx on 20 April through an open bid at China’s Southern Assets & Equity Exchange. While few people outside China have heard of Yueke/Finixx it is one of six companies that is approved to provide on-line cinema ticketing systems. The use of these systems have been mandated by Chinese media regulators to combat fradulent box office transactions.
Yueke/Finixx is deployed in more than 1,000 Mainland cinemas, while also providing the software interface with over 30 online and smartphone cinema tickets platforms, such as Cat’s Eye, Alipay, Tencent’s QQ and the Groupon-like Meituan.
Demonstrating the frenzied investment taking place in China at the nexus of mobile commerce and cinema, Yueke’s revenue for 2014 was 51.8 million yuan (USD $8.4 million) with a profit of just 11.3 million yuan (USD 1.8 million). This means that the deal was done at a multiple of more than 16 times revenue and almost 75 times profit.
Sources with insight into the deal told Celluloid Junkie that the price was driven up by bidding by four different entities, with Alibaba emerging victorious, though at a high price.
The deal allows Alibaba Pictures to gather data about cinema going habits in China, which could be used to hep steer its film production efforts. The news sent Hong Kong-listed Alibaba Pictures’ shares soarng by 14.9% when trading in the company resumed on Wednesday. The deal also gives Alibaba a strong position visa-a-vis the plethora of Chinese smartphone app operators that sell cinema tickets, often at a significant discount.
While the news has hardly caused a ripple at the CinemaCon trade show, it is worth noting that one out of six major cinema ticketing software providers in China has been valued at five to ten times the amount that the new joint Deluxe-Technicolor digital cinema joint venture is worth. As the sun sets on commoditized cinema services in the West it rises on cinema e-commerce and smartphone operations in the East.