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Coronavirus and its impact on the advertising business in China | 冠状病毒以及其对中国广告公司的影响


Since the outbreak became public in late January, COVID-19 virus has affected every aspect of life in China, on both personal and professional levels.  The commercial industry is no exception.  With consumers housebound and many fearful of spending amid the economic uncertainty, the lifeblood that flows down throughout each layer of production has been affected.  Meanwhile, the near total ban on shooting within Mainland China places limitations on possibilities open to creatives and production companies, and has clear knock-on effects for the post houses.  But beyond the obvious disruption and challenges, are there opportunities to be found?


In this three-part series we talk to top figures of companies from each part of the production process – agencies, production houses and post houses – to see how this situation is affecting their businesses and how they are handling these exceptional circumstances.


For this first part, we spoke with leading figures from six production companies based in Shanghai or Beijing, while some of them were working from home in China or still on prolonged forced “holidays” in Australia, Thailand and Brazil. We are thankful to all of them for their thoughts, ideas and insights. During these challenging times we all need to share, exchange and support each other.


Q:How has the “virus” situation affected your projects and your business so far? 目前“病毒”形势如何影响了你们的项目和公司?你仍在接到广告公司的创意简报吗?

Edmond Tao, Eagle Media鹰美广告:We had 5 projects confirmed in February that have been cancelled. We are pitching on several new projects, but nothing confirmed yet. We might loose approximately RMB 50 million of turnover for 2 to 3 months.


Chris Colman, Final Frontier 终极先锋:Some potential projects with China clients have been put on ice until further notice, but that has been offset by a spike in approaches from other clients that maybe wouldn’t have come under normal circumstances. In some cases that is because they are choosing to go with animation, and in others it’s because they know our studios are primarily based outside China so we never stopped working over CNY or during the virus.


Ali Ding, Filmplexe 普莱斯:We had several shoots scheduled for February, all of which had to be postponed. During this period we have received many boards from agencies but nothing confirmed yet.


Nick Dodet, PIG: The situation is extremely fluid. We are getting pitches from agencies and clients, and we did confirm one project; but several projects we had pitched on prior to CNY have been put on hold indefinitely. We have obviously lost revenue by not being able to service foreign companies shooting in China, but this has been mostly offset by a surge in animation projects. And the fact we have considerably reduced our overhead and debt exposure in the past 2 years allows us to be a lot leaner, and to sustain the situation for a few months.


Arthur Ma, Red Horse 赤马: Our business is OK because we mainly do international projects and for most clients it’s easier to shoot overseas now. We are shooting a few projects in Thailand. We receive boards from agencies every two or three days. We did have some shoots planned for China that we can’t shoot, including jobs featuring celebrities who are not easy to move out of China. For those we planned to shoot in New Zealand or the States, but we cannot shoot now because of the ban on flying.


Q:What solutions are you offering to clients?  你们给客户的解决办法是什么?

Chris Colman:The same as always, namely, making our extensive global animation network available to them. Obviously now is a good time to work in animation as it doesn’t require physical shooting, so we’re making sure clients are aware of that possibility and that we’re here for them.


Nick Dodet:We have no choice but to adapt. Trying to leverage our global network, we can offer clients to shoot in foreign countries where Chinese citizens are still welcome; we are also developing, with some of our tech partners, a live feed system straight out of the video tap, to allow agencies and clients to be watching live from China, while we shoot in any country; and we are pushing our 2D and 3D animation studio partners really hard, to offer an alternative to live action shoots.


Arthur Ma:The solutions are: one, shoot overseas; two, use previous footage to edit; three, we have a subsidiary (post house) company and many jobs go there.


Kingsley Chen:We keep in close contact with our partners located overseas to provide as many filming options as possible. Many of our executive producers went through filming during SARS, so they are prepared both psychologically and technically. If a client needs to film in China, in order to follow the government’s epidemic prevention and control regulations, we will apply to the local authorities, guarantee disinfection. Prevention and control measure would be taken by our staff, such as tracking the history of direct contact, monitoring temperatures, and distributing materials like masks, goggles, clinical gloves and so on.


Q:Are you worried about the impact on your business?  你们为公司受到的影响担心吗?

Kingsley Chen:We are not super worried, since we still have projects and, all of us are improving our professional skills at home. Regular video communication works for now, and clients’ needs are being met. While we cannot predict how long the epidemic will last, we can project how long we can hang in there. For now we don’t have to worry about the capital operation of the company.


Chris Colman:Because our model is primarily working with international directors and studios, business has continued as normal, if not increased due to the fact that more clients are choosing to go with animation and to work with overseas talent. Obviously with China on lockdown there has been less in terms of in-person client contact and BD, but at the same time that has allowed us to focus on developing new relationships across Asia and beyond. Generally, we’re seeing this time as an opportunity to reflect on the business, expand our artist network and optimise internal structures.


Arthur Ma:Business is of course not as we expected, but it’s the same for all the companies. And crisis breeds opportunity. This is a chance for us to consider new modes of working. Maybe we don’t need an office in the future to save money and pay better salaries. New technology is changing the industry, so maybe you don’t really need to go to locations to shoot, and we can just work with a small team in the studio. We are also discovering new, cheap countries with good locations and services for shooting. I experienced the 2003 SARS and I know if you have a strong mind, you are prepared for a lot. We have a good financial system, we have good relationships with banks, we do good things for clients. So overall, it’s not good, but it’s also not all bad, because it’s a chance to explore new things.


Q:How long do you think it will last? How different will industry be when it becomes active again?  你对现在形势的总体感受如何?你觉得还要持续多久?行业复苏后,它的变化有多大?

Nick Dodet: Chinese authorities are prioritising getting the manufacturing sector back on track, so we may not see much improvement in the service sector for several weeks. For production companies it all depends on how long the moratorium on shooting lasts. It is probably going to weed out quite a few in China, especially those with high overheads and/or high debt exposure. On a strictly business point of view, this is a good thing, as every industry needs a regular consolidation of resources in order to remain healthy. But it will be painful for the few who do not have the financial muscles to sustain a high level of revenue losses. They will start feeling the pain sometime in March as their cash reserves dry out. More importantly, crews will be the first affected, and are already feeling the brunt of it.


Ali Ding:At the beginning there was fear, but the government intervention has brought an increasing degree of confidence. We believe this won’t last too long and hope shoots in China will pick up in March. If we get this under control, I think the industry will fully recover in 3 months, by the end of May. Following a steep drop in production, things will pick up fairly quickly. If we don’t get this under control quickly, as the owner of a private company, I don’t know what the future will look like.


Chris Colman:Sometimes you encounter a reticence about working in animation because clients fear they will be detached from the process somehow. I guess being forced to go down that route and seeing how smooth the process and good the results can be, may give clients and creatives a nudge in this direction in their future thinking. To meet the demand, I know some live action production companies are increasingly bringing animation in to their offering. Those two factors combined should give a boost to animation in the China commercial market.


Nick Dodet:Once everything comes back to normal, I hope production companies will take a hard look at their business practices, especially when it comes to clients payment terms. We have created a pyramid scheme in which production outfits take on huge amounts of debt with very little ROI. I hope those who will weather this storm will rethink their business model to make sure industry practices improve in the future.



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