Saturday, November 29, 2014
 
Columnist
Martin Hennecke
 
IMAGI INT'L
HKEx Stock Code : 00585 
 
Corporate Profile
Provision of marketing services on project licensing and acting as a full-service project management house in respect of CGI animation pictures.

Business Review - For the year ended December 31, 2012

The Group continued to aim at building a world class media and entertainment company by unlocking significant values of the Number 1 cartoon characters in China, namely the Pleasant Goat and Big Big Wolf. Partnering with our strategic partner Creative Power Entertaining Limited Liability Company (“CPE”) and our global master licensee Disney Enterprises, Inc. (“Disney” or “Master Licensee”) and other Disney affiliates, we continued to provide consumers the maximum interaction and memorable experiences in terms of contents across all lines of business and consumer products through merchandise licensing respectively.

Given that China is the most important market for the Group, the management has streamlined our operations and moved key business functions to mainland China. In 2012, the Group closed down the operation for production services on computer graphic imaging (“CGI”) animation pictures in Hong Kong and relocated the brand management team to Guangzhou, the PRC.

Consumer Products Licensing

Since 1 January 2011, the Group has worked closely with the Master Licensee under the Consumer Products and Related Use Agreement (“CPA”) to upgrade the quality of our sublicensees with a view to attracting and retaining those who are passionate with our brands, can meet our quality standards and commit resources to growing our brands. In 2012, Disney terminated 114 sub-licensees, renewed 20 contracts and signed up 29 new licensees with an aggregate minimum guaranteed licensing fee of HK$180.7 million spanning over three years. This is in line with Disney's policy to get reliable and reputable sub-licensees, so as to ensure the consumer products using the Group's brands are of high quality.

To further boost the sales performance and increase the brand exposure of Pleasant Goat and Big Big Wolf, various retail promotions in key accounts' outlets including Toys“R”Us and Walmart were held, especially during “Back to School” and Christmas periods. In addition, during the Chinese New Year holidays period, KFC Kids Meals were bundled with the licensed Pleasant Goat and Big Big Wolf Movie V's themed toys.

Disney has also opened up new markets. Pleasant Goat and Big Big Wolf consumer products were sold in Singapore and Thailand through local distributors covering a wide range of products including toys, stationery and publications.

Anti-Counterfeit Activities

To further strengthen the intellectual property rights of Pleasant Goat and Big Big Wolf, so as to increase the confidence of both consumers and licensees, Disney has launched a revised “Disney Licensed Merchandise” logo, which certifies that the product is licensed by Disney. In addition, the Group also launched two waves of anti-counterfeit campaigns on TV and paper media. In 2012, the Group worked on 172 IP infringement cases in which our intellectual property rights were violated.

E-Commerce

Vancl, one of the biggest online fashion and accessories E-commerce sites in China, introduced “Simple Life” T-shirt in last summer, which continued to be one of the top selling items since then.

Strategic Alliance with CPE

Under the Joint Brand Management Agreement (“JBMA”) entered into with our strategic partner, CPE, we have worked closely with CPE to extend the reach of the Pleasant Goat and Big Big Wolf brand by offering a range of products and services via CPE's multimedia platform including movies, TV episodes, live shows, mobile carnivals and new media contents. 2012 was another productive and fruitful year for CPE, producing 220 TV episodes of 15 minutes each and two movies, and getting involved in the production of a real action movie in a year, which amounted to a total animation production of over 3,500 minutes.

Movies

Pleasant Goat and Big Big Wolf movie IV “Mission Incredible: Adventure on the Dragon's Trail” (開心闖龍年) (“Movie IV”) launched at the beginning of 2012 (immediately prior to the Chinese New Year of Dragon) has recorded a breaking box office success of HK$207 million (RMB168 million). CPE launched another movie “Happy Family: Snowball the Memory Gobbler” (寶貝女兒好媽媽之吃記憶的大雪球) on 30 September 2012 and was involved in the production of a movie by Mr. Cartoon Pictures Industry Co., Ltd based on animation brands owned by the Group, namely “I Love Wolffy” (我愛灰太狼), which was launched on 10 August 2012. “I Love Wolffy” achieved total box office revenue of over HK$90 million (RMB73 million) and “Happy Family” received a lot of applauses among fans and animation commentators. This is a major leap for the Group to be involved in three movie productions in a year.

Pleasant Goat and Big Big Wolf movie V “The Mythical Ark: Adventures in Love & Happiness” (喜氣羊羊過蛇年) (“Movie V”) was released on 24 January 2013 and recorded box office of approximately HK$154 million (RMB122 million). During this year's Lunar New Year holiday, blockbusters released in China included “007 Skyfall” and two other Chinese local animation productions, namely “Roco kingdom: the desire of dragon” (洛克王 國2聖龍的心願) and “Balala the Fairies” (巴啦啦小魔仙). Among the five Pleasant Goat and Big Big Wolf movies ever launched by CPE, Movie V has faced the toughest competition. Analysis of the box office results for Movie V provides food for thought. On one hand, CPE is very pleased that it has consistently maintained its leadership position in the “Top 10 Chart of Local Cartoon Movies in China”, in which the top five hits are CPE's movies featuring “Pleasant Goat and Big Big Wolf”. On the other hand, heightened competition and rapid market changes entail more creativity and better responsiveness to consumer's needs in order to maintain Pleasant Goat and Big Big Wolf's leading position in the animation industry.

TV Series Broadcast Performance

CPE continued to be one of the strongest animation producers and distributors of TV episodes in the Greater China region. In 2012, total production of CPE reached 220 episodes, including two series of Pleasant Goat and Big Big Wolf, namely The Athletic Carousel (競技大聯盟) and Happy Diary (開心日記) , and one series of Happy Family (寶貝女兒好媽媽), namely Family of Joy (快樂的家庭) . TV ratings of Pleasant Goat and Big Big Wolf: Smart Dodging (奇思妙想喜羊羊) received the highest ratings amongst 4–14 years old (China nationwide) at 3.30% in the 3rd quarter of 2012, while that of The Athletic Carousel was 3.27% in the 4th quarter of 2012.

Publications

188 titles were developed and more than 7.3 million copies of Pleasant Goat and Big Big Wolf publications (books and magazines) were sold in 2012.

New publication products were developed, including interactive reading books which intended to enhance the learning pace and explore different talents of kids.

Stage Shows and Carnivals

The third sequel, Wilie's Cherished Desire (小灰灰的心願), was launched in April 2012 with 69 shows performed in the year. Together with the first two sequels, a total of 134 shows were performed in 2012.

In Taiwan, Jinho Communication Co., Ltd, our stage show partner, ran 12 Pleasant Goat and Big Big Wolf stage shows in 2012 and has undertaken to perform six shows in early 2013.

Overseas Activities

In Taiwan, Weslie and Wolffy of Pleasant Goat and Big Big Wolf attended the balloon parade festival “Open Your Dream” (夢時代大汽球遊行) orgainsed by Uni-President Group (統一企 業集團) during the Christmas holidays, which attracted over 300,000 visitors.

Buena Vista International, an affiliate of Disney, introduced Movie IV and The Athletic Carousel in Disney Channel and Eastern Broadcasting Company's ETTV (東森電視) in Taiwan.

In Hong Kong, CPE entered into a contract with TVB to show The Athletic Carousel and Happy Diary in TVB Jade, followed by Smart Dodging in TVB's paid Kids Channel.

In Singapore, CPE entered into another contract with MediaCorp's Channel 8 to show more Pleasant Goat and Big Big Wolf episodes. During the Easter holidays in 2012, MediaCorp partnered with the Group in the Singapore Book Fair 2012 to hold a quiz competition via its TV platform and a prize ceremony in the venue of the book fair.

In Thailand, a new contract was signed with TrueVisions to broadcast Pleasant Goat and Big Big Wolf TV episodes. Concurrently, our Meet and Greet mascots were introduced for the first time in Thailand, to create the interactive experience with the local fans.

In Macau, Pleasant Goat and Big Big Wolf images were used to decorate a public library named Wong Ieng Kuan Children's Library (黃營均兒童圖書館) located in Areia Preta Urban Park (黑沙環公園). Macau government officials participated in an opening ceremony held on 1 December 2012. This is the first time the images of Pleasant Goat and Big Big Wolf were used in the design of a public facility.

Business Outlook - For the year ended December 31, 2012

To enhance the value and popularity of the key franchising brand Pleasant Goat and Big Big Wolf, the Group continues its various strategies to uplift the brand position and penetrate into different age segments.

Contents Development and Distribution

(1) TV Episodes and Movies

CPE plans to produce at least 3,300 minutes of movies and TV episodes in 2013. Two Pleasant Goat and Big Big Wolf TV series will be produced and released, one of which will be the first Pleasant Goat and Big Big Wolf TV series with duration of 30 minutes per episode, compared to the previous ones of 15 minutes each.

To further increase the brand's awareness outside mainland China, CPE has entered into a new contract with Momo Kids Channel in Taiwan to broadcast the Happy Diary series in 2013.

Outside Greater China, Pleasant Goat and Big Big Wolf will be introduced into Indonesia and 22 Arabic countries in 2013. The cartoon series will be dubbed in Arabic language.

Apart from traditional TV series production, CPE has scheduled to produce Pleasant Goat and Big Big Wolf Mandarin learning series. CPE plans to distribute this Mandarin learning series outside China.

Production of Movies VI and VII has already commenced. Movie VII, which will be shown in 2015, will be our key focus as 2015 is the Year of Goat as well as the Pleasant Goat and Big Big Wolf brand's 10th anniversary.

(2) Stage Shows and Carnivals

A newly featured stage show with musical elements will be introduced to China this summer. This 90-minute musical stage show, Pleasant Goat and Big Big Wolf Amazing Music Tour (喜羊羊與灰太狼之奇幻音樂之旅), will combine drama, dancing and singing, bringing out all the sound tracks from the Pleasant Goat and Big Big Wolf TV series and movies.

To further expand into overseas market, CPE plans to bring the stage shows to Singapore and Thailand.

(3) Publications

“Babies” images of Pleasant Goat and Big Big Wolf will be used in infants and pre-school learning materials published by a new licensee in Taiwan.

Licensing and Strategic Marketing Initiatives

(1) Expansion of Core Franchise

After the Chinese New Year promotion event held in Hong Kong Langham Place in early 2012, “Simple Life”, the new image of Pleasant Goat and Big Big Wolf, has become more popular. Many shopping malls in China have shown their interest in organising similar event in 2013. With the success of its initial launch, the Group will collaborate with Disney to launch fashion events, so as to further expand the brand into the Teens and Young Adults segments. Disney continues to explore licensing opportunity to uplift the brand status and increase market share. A crossover project with a famous fashion brand in China will be launched this summer on apparels and accessories, as well as contents (being micro film and music).

Leveraging the Pleasant Goat and Big Big Wolf brand's solid foundation based on families with children from 4 to 14 years old, the Group is extending its core brand to capture revenue opportunities in adjacent segments including babies, teens and young adults. The Group's key target consumer product categories include food, fashion and home products, toys and stationary. Despite the current disruption in the growth of licensing income caused by the adoption of a strategy to upscale sub-licensees, the Directors believe that the future prospects for the Group's licensing business are promising.

(2) Interactive Media Initiatives

Following the success of “Where's My Water?” launched by Disney Mobile, Pleasant Goat and Big Big Wolf will also have its own version of “Where's My XYY?” (abbreviation of Xi Yang Yang, being the Chinese name of Pleasant Goat) developed by Disney Mobile. This will be the first collaboration between a Chinese animation brand and a successful international mobile game.

In view of the importance and long term demand of education in China, the Group plans to extend its business to the education sector. The Group is currently working with a leading educational courseware provider to develop Pleasant Goat and Big Big Wolf online learning programs in the Greater China and South East Asia regions. The Group is also evaluating the feasibility of investing in, and/or partnering with experienced companies or organizations to operate, schools or learning centers using the Pleasant Goat and Big Big Wolf brand. The Directors believe that this is a sustainable business with stable income.

E-Commerce

To diversify and expand the revenue stream, a flagship store selling consumer products carrying the Pleasant Goat and Big Big Wolf brand will be opened in Tmall of Taobao by mid 2013. This is to provide fans and customers an easy shopping experience. By providing sublicensees with more sales channels, the Directors believe e-commence will bring in more licensing income, as well as enhance the customers' loyalty towards the brand.

In 2012, the Group completed the restructuring of its operations with the termination of the Discontinued Operation. The loss of HK$12.4 million attributable to the Discontinued Operation and the retrenchment costs of HK$6.0 million incurred by the Continuing Operations for the Year under Review will not recur in the future. The Group now is operated under a leaner but more efficient structure. All in all, the Group will focus its resources on extending its target audience to include infants, teens and young adults, increasing its target consumer's brand loyalty, driving distribution, enhancing marketing and ensuring flawless execution to deliver results for stakeholders.

Source: Imagi Int'l (00585) Annual Results Announcement
Chairman Leung Pak To Issued Capital (shares) 10,020M
Par Value HKD 0.001 Market Capitalisation (HKD) 852M
 
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