Survival Skills at China Animation Trade Show

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At most western animation trade shows, you can arrange meetings in advance. At a recent China animation trade show I went to (one of the largest animation trade show, outsourcing & investment event for IP – tv/film, animation, games, comics, toys etc), I realise in China, they do not seems to have a practice of arranging meetings in advance at animation trade show.

It wasn’t easy for someone new like me who do not know anyone there. It’s like a fan hunting for your superstar. (The top executive from an important organization) But the best part of the game is you do not know who is the superstar. So you need to do your research. Find out which talk your superstar is attending. It could be a press conference of an animated series they have invested in. During such an event, pay attention to the host when he made an introduction to the VIP at the event. Normally the VIPs sit in front. They are part of the evaluation panelist for project being pitched. The host will announced who the VIP are. Once the event is over, you need to go straight to him asap as many will do the same. And when you meet the VIP. Getting the namecard is not enough. You need to scan his WeChat account so that you can get in touch with the top executive from these big companies. You have to do this as email is not sufficient to reach them. They hardly read their emails. At the event, many will be there, crowding around the VIP.  It’s like you are a fan hunting for the autograph of the superstar.

Another opportunity is during networking party. Walk around. See if you can hijack into others conversation. (Sorry. I know it sounds horrible. Seems like this is the mode of survival there at the market)

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At the one to one business matching, I was told that Chinese companies do not like to have a schedule of appointments every 30 mins like what we used to do in Western market. So it is really like a market place. You walk from table to table to look for the buyer. (They will put a badge on the table) You do not know which company (buyer) is there at the table before hand. And the buyer is different in the morning and afternoon. So you need to walk around. When you see a good buyer, you need to circle around the table like a vulture. ha ha Once you see a vacancy, put your yourself on the seat immediately ha ha. Else someone else would.

I know it all sounds crazy. Its a world of cowboy. If you are shy, you might end up going home empty-handed. I felt uneasy at first. But there is no choice. In order to survive, one must seize every opportunity. Once you get the attention and interest, do your best as this is the only chance to impress them. I guess once you have established your connections, you do not need to do all these in future. Its all about connections and relationships.

Coming to China is really a good training for survival.

 

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Co Productions with China

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Something I learnt from my recent trip. If a country has a co-production treaty with China, the film made may be considered as China/Domestic film. Hence not restricted by the foreign films quota of 34 films a year. In order to qualify for the co-production treaty, 50% of the film investment and production must involve a China company。The topic of the film must have elements of China. And there are a couple more things.

So far, China has entered into film co-production agreements with 14 countries
http://www.cfcc-film.com.cn/policeg/content/id/2.html

(Singapore and China do have this co-production treaty.)


China Film Co-Production Corporation (CFCC)

Founded in 1979, China Film Co-Production Corporation (CFCC) is a special organization solely authorized by the State Administration of Press, Publication, Radio, Film and Television to administer affairs relating to Chinese-foreign film co-productions. We are always ready to provide filmmakers wishing to film in mainland China with all-round information related to co-production policies, industry landscape and co-production resources. We are committed to deal with any inquiry regarding filming in mainland China in a timely, authoritative manner.

As administrator and supporter of international co-production, we encourage domestic filmmakers to film overseas, and also support overseas filmmakers to film in China. Throughout the past decades, we have been dedicated to bringing together domestic and overseas film organizations and production houses, and enjoyed working with internationally established filmmakers including Steven Spielberg, Bernardo Bertolucci, Jean Jacques Annaud, John Woo, Wong Karwai, Ang Lee, Chen Kaige, Zhang Yimou and Feng Xiaogang, among many others. We are proud to have made our contributions to the growth of international co-production and the drive of Chinese cinema to go global.

KEY ROLES

Our major responsibility is to assess and approve international co-production applications, conduct reviews of completed co-production films, supervise the performance of co-production agreement between the co-producing parties, provide relevant services, and assist in negotiations of governmental agreement on film co-production between China and other countries. The precise roles are as follows:

1) Read and assess proposed co-production scripts;

2) Examine applying documents from co-producing parties;

3) Review completed co-production films;

4) Deal with inquiry regarding industry policies, rules and regulations and co-production procedures;

5) Bridge domestic and overseas co-producers;

6) Facilitate entry visas for foreign crews participating in co-productions;

7) Facilitate customs clearance for filming equipment, film stocks and materials to be used in co-productions;

8) Process applications and provide related services for overseas crews to shoot short films in Mainland China.

 

 

Tax Issues for Servicing Work

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More and more China studios are shifting from providing outsource services to foreign companies to creating their own IP. Based on our recent observations, there seems to be more and more China studios looking at outsourcing their work.

In fact, due to the weak euros and also the decline of western economy, we might see growing opportunities coming from China than the West in next few years.

One thing to take note about getting service work from China is withholding tax.  In the past, many countries outsource their work to China tapping on its low labour cost. However things are changing now. Chinese Companies have started to look at outsourcing their work as labour cost is raising in Beijing and Shanghai. This is all new. No one exactly know how much withholding tax they must hold back if they were to outsource their work to foreign companies. So on the safe side, some will just hold back the maximum. Which is 17%. This is based on our own experience. E.g if your client ask you to do a job at $1000. They might withhold up to 17%. Meaning they might eventually pay you only $830.

If the value is high, you might want to seek a tax advisor for help. Singapore has many companies in Shanghai. Hence many of them are familiar with the tax issue. IE has introduced me to the following company who has served many Singapore companies in China. They have offices in various part of China. This is important as different province has a slight different tax regulations. http://www.sbasf.com/

What they will do is to help you look through your Chinese Contract. Advise you how to word it to protect yourself and also in a way easier for them to negotiate with the China Tax Department. You need to prove that the service work is not executed from China. From there, the tax consultant will discuss with the China tax department to lock down a rate. For my case, they help me to bring down from 17% to 6%. This is a huge saving.

Once the tax rate has been locked down, you can show the documentation to your client. So that your client cannot hold you at e.g 17%. I am not an expert in this. I can only share with you what we have gone through. Hope it helps you too.

Making Connection in China

wechat-logo1In most market, once I gotten the name card of that important person, I will be overjoyed. Thinking I have now gotten the person contact and I can start communicating.

In China, it is very different. You must get connected with that person via WeChat. (Very often you offer to let him scan your WeChat account or you scan his) That represents one step closer. I didn’t realise this initially and lost some good contacts. This is very important.  In other markets, we seldom do that as sometimes it feels like you are going into personal space. But in China, it is different. Its all about relationship.

For email, I realise many Chinese executive seldom check it. Or your Gmail might be blocked by their firewall or their company email at times cannot send or receive email outside China. Hence WeChat is crucial.

At times if that person do not offer to connect you via WeChat account. It almost feel like your relationship hasn’t reach the close level yet. Ha ha.

The Question of Being the First Mover

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A member of our group feedback to me about his thoughts on being the first mover in business. ” In businesses, first mover advantage often proves otherwise. The first one to do something usually fails. It’s more of a trap, really.

Usually, the followers observe and see what works and take out what doesn’t, then gain critical mass and soon people forget about the first mover while crowning the first one to gain critical mass. 2 cents.”

This is my answer below:
“You are right. I have another approach to this. I can only speak for my own experience.

When I said first mover, I don’t mean that you blindly go into it. One still need to evaluate the risk. My objective for being the first mover is for branding, publicity and awareness of our company. (Which is very important since we are a small company.) It is almost like jumping the queue. From no one knowing who you are to the global players pay attention to what you do.

A little case study of what we did. When I first discovered there is strong interest in stereoscopic 3D content, I start to evaluate if I should make our series into stereoscopic 3D format. There was some risk as the format at that time was not determined. Hence not many producers want to move into it.

I did some detail evaluation of the cost, the risk, the economical and technical viability before making the decision. I was weighting between money invested and potential returns.

With blessings, eventually it pays off.  With this decision, we manage to penetrate US by selling our Stereoscopic 3d series to the first 3d channel.  After we have sold our series to US, we started to create awareness. Today, Dream Defenders have sold to 5 platforms in the US in total. That deal also leads to another one with Cartoon Network where we get the chance to work on Award Winning Ben 10 Destroy All Aliens in normal format and Stereoscopic 3d format.

Now 3DTV is dead. So was it a wrong decision? Not exactly. We have achieved what we needed above which is creating awareness for the company and help us penetrate US. On top of that, it creates opportunities for some outsource projects for us.

After that we move on to work auto stereoscopic 3d content. (Stereoscopic 3d with no glasses) Then AR and now VR. Next will be MR. At every stage, the knowledge gained actually brought us forward to higher grounds.

Our current VR venture has given us an advantage. We are not just doing VR. Something more of a breakthrough that solves the current VR commercial viability issues. In the US, I have gotten many major players excited. So we will see where it lead us to next.

In conclusion, my main reason for being first mover is meant to create publicity, branding and awareness for our company.  I must emphasize that you need to evaluate the risk. In business, there is always risk.  With this move, Tiny Island has now known to be innovative and forefront; always ahead of the curve in the global market. This is useful for our future growth in consultation business.”

When you are small, how do you keep yourself alive.

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Met a friend in LA today. He used to be a senior management in a major studio. He asked me today. How did you manage to survive? The market situation back home is so bad. Regional countries provide cheaper services. You do not have huge investor’s money to back you up. Your company is so small. “

This is my answer.
” At times, I do ask myself whether this is my last month. ha ha.

I applied some of the principles of how our late Prime Minister build Singapore.

1) Build strong relations and connections with major players in North America and in Asia. Make yourself useful to others. As long as you are a useful chess piece to others. You will become important though you are small.

2) Identify new trends that can propagate. Move into new areas and take advantage of first mover. Provide unique services that others cannot provide.

3) Anticipate changes. Prepare new business model and adapt fast to the change.”

The challenges you should know in producing an animated series these days

(The following is written based on my own experience. It is meant to give independent producers a clear view of the current market situation. The following does not apply to big studios who has deep pockets or with strong commercial channels)

I have attended a Children TV Trade Show in the US recently. At the event, I have met a couple of independent producers. When they presented their IP to me, I am quite surprised that they are still trapped in the old system; expecting the TV licensing fee alone to cover the production cost. (Covering production cost is hard these days. Not to even mention profit. Even DVD market is dead.) One really need a licensing/merchandising strategy. It is no long an option. It is really hard to create an animated TV series or IP just to tell story without a commercial strategy in mind. I know it sounds horrible in a creative stand point. It is really not easy to raise funds these days.

I hope the numbers below will help you. When I first started, I was looking all over for such facts. Its not easy to locate them. This is first hand experience.

When I first step into the US, I heard that you can sell a half an hour episode at USD$50k. In 2007, (my personal experience) I sold at USD$25k per half hour  episode. In 2010, it drops to USD$15k per half hour episode. Now I have buyer in the US asking for free. I am not joking. The market kept changing for the past

Assuming your full production budget is about USD$5M (When I first got into the market, I was told that this budget should be able to recoup just by TV sales) and you are able to sell the TV series to 80 to 100 countries (which is not easy for indie producer) The TV licensing fees add up for these countries  can only cover between 1/4 to 1/5 of your production cost. I have seen independent producers still looking at producing it at USD$7M to USD$9M at the recent trade show. Its going to be very risky.

I am not saying there is no exceptional case. If you have a strong executive producer to back you up, hopefully it could be more. I am just being conservative. Last I heard is that some US OTT channel is looking for original content . They can finance up to 60% of the production cost. This does not include additional dubbing cost of 20 languages. Payment is made in every 3 months and can only come in after you have delivered the entire series. It takes up to 1 year to pay you back the 60%.

Typically, there are only about 6 countries who are able to pay between 4 to 5 digits per half hour episode. Or if you are lucky, you can get a couple of pan regional deals (e.g Pan Asia or Pan Europe Deal) which will also pay about 4 digits per half hour. The rest of the world is paying only 3 digits per half hour especially in Asia. If you add all these numbers up, you will know it is not easy to cover more than USD $4M of your production cost.

Currently, some of the countries that you might be able to get subsidy or investment to offset your cost is Canada, France, Ireland, Malaysia, Korea and China. The rest of the world is not that easy.

One need to have a strategy in place. Your IP needs to be able to engage the sophisticated audience not just on TV. But also on all new digital platforms. Your concept and designs probably needs to have Toys, Computer Games and Themeparks (China) in mind. (Now even Netflix has started to look at Toys now.) There are some  strategic investors looking for good IP to feed their business. These strategic investors will come in right from the beginning. No longer after the release of the series.

Korean producers are very savvy and focus. You will see many of them armed with concept based on the needs of strategic investors. The only challenge is you might end up having too many similar concepts. Hence to challenge your creativity, you need to find a way to create a concept that stands out from the rest.

Don’t get me wrong. I am not discouraging indie producers NOT to work on your own IP. In fact, if your primary survival is servicing (outsource work), you should work on your own IP as competing in prices in outsource work is not the way to go for long term survival. What I am trying to put across here is to change your strategy. Know the market. Build your connections. Get yourself updated with the latest trend. The world economy and technology is shifting its place. In business, there will always be a change. As long as you move with the change. You will survive.

Something I wrote previously. Hope you find it useful as well.
https://entrepreneurshipinanimation.wordpress.com/2016/05/14/various-potential-strategic-investors-for-animation/

 

Lessons learnt in Leadership

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One of my staff asked me the following question :
“Sometimes what is sad is after training someone to be a good leader, they will go away and move on. Isn’t it tiring to keep training new ones?”

Here are my answer.
“If you are a good leader. Your disciple will stay. If he choose to go, it could be because he does not fully understand the true meaning of the leader’s work. It’s a transition and growing up. Sometimes when he goes out there to see the world and experience himself, he might slowly appreciate what he has learnt from his previous leader. And maybe someday he will return.

If he does not return, then I can only say that I have to work harder as a leader to deserve him. That is how I consistently improve myself.”

Her Second Question:
“When you give a connection to people, do you feel afraid that they will take that potential job away from you?”

Here are my answer.
“In business and entrepreneurship, it’s all about relations and trust. If one is afraid of everything and do not trust anyone, one cannot get things done.

It’s all about integrity of your disciple and the client you choose. And most of all, the values you bring together in a company. I am selective over my long-term clients and most of them became my friends. That is how I run my business.

If your disciple can easily steal your client. Then you know that you are weak in your business relationship and you are weak in evaluating the right person to be chosen as a leader. So you have to pay for the price. The more mistakes you make. The sharper you will be.

Treat people with your heart and sincerity. You will attract the same kind of people to you. (Both client and employee) With this, no one can steal anything from you.”

Even if you are not a rich kid, you still can be successful.

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During the peak, we grew up to 120 artists with no external investment

Recently I have come across 2 articles. After reading them, I started reflecting my own journey.
“Entrepreneurs Aren’t A Special Breed – They’re Mostly Rich Kids”
“Entrepreneurs don’t have a special gene for risk—they come from families with money”

These are from my own experience. Hope it encourages you. Sometimes the more you have, the more you are afraid to lose. Its only when I lost almost everything. (My bank went zero a few times) Only then I have more courage to do what I am doing. When you are hungry, you will fight to survive. So not being rich is not a disadvantage. It helps you understand some valuable lessons in life.

I didn’t come from a well to do family. My dad was a taxi driver. I didn’t take a single cent from my parents or myself or investor to start my business.
“Reference: How did I first started the studio without external investment?”

Entrepreneurship has taught me some valuable lesson in life. It has taught me to stay clam during crisis. Stay focus, make fast decision and solve problems. Most importantly is the will to keep fighting until you reach your goal.
Reference: It’s the journey that matters. Not the destination.”

I am not saying all rich kids cannot make it. But I have witnessed quite a few in the following situation. When they do not understand the value of money, they tend to anyhow burn their resources. When they face crisis, they tend to give up and go back to their rich parents for more money easily. When they fail, they will just wait to inherit their family business. As they are not hungry enough to fight. When crisis come, their family business will go down with them. So not being rich might sometimes better prepare you for the journey.

In business, not everyday is Sunday. There is always a wind of change. It’s a cycle. One must remain clam. Focus. Hold on tight and fight on through this change. If not, they will be wiped out. Look at the situation now. The current Digital Disruption is changing how business has been running. Those who do not change their business model, will probably have to shut down eventually. (E.g e commerce killing shopping mall etc.)

When I first started, I only manage to borrow a room from my brother’s back office that fits 4 freelancers. In 2007, we eventually move to a 2000 square feet office. One year later, we were fortunate to be able to expand and move to a 10,000 square feet office. From 4 artists, we grew to 120 artists during the peak with no external investment. I am not saying it is easy. I am not saying we are successful. In business, we go up and down like a roller coaster. We have come a long way. But it is possible if you are persistent.

Next year will be our 10th year. The last 10 years, this is what I have learnt. Investment is not what matters most. It’s the strategy, the persistence to hold on and the core team who has the same values to fight side by side with you. (And not to forget a supportive family) Strategy is the key. This reminds me of a Chinese Chancellor (or prime minister) in the Romance of the 3 Kingdoms period known as Zhuge Liang (Kong Ming)  I have learnt a lot from his stories and applied in my business at times. His victory proves one point. Size does not matter. It’s all about strategy. This is how we have come this far.

Hope what I wrote encourages you. Even if you are not a rich kid, you still can be successful. Don’t give up your dreams.

(An abstract from the movie Red Cliff  and the part on Zhuge Liang using his intelligence to win the enemy of a much larger size)

Getting Kickstarter Right With Crowd Funding Tips

https://www.kickstarter.com/projects/13978330/masquerada-songs-and-shadows

Thanks James Phang (Tiny Island Productions – Business Development Manager) for the documentation. Kudos to UCreative and e2i for organizing it! As it is not easy to locate it on facebook group later. I have decided to archive the documentation here since quite a number of people asking it.

Fantastic Sharing Session by Ian Gregory Tan of Witching Hour Studios, which successfully crowdfunded Masquerada: Songs and Shadows to 133% of their Kickstarter target in only 14 days.

Some of the pointers to take note:

1) The most important part of your Kickstarter campaign is actually the pre-campaign. They spent close to a year on that before launching the kickstarter.

2) Get people ready to open their wallets right when the campaign starts. Aim to hit 40% of your goal within 3 days.

3) Get evangelists to promote your game for you. Aim to get major news sites cover your project. Build your fans in the right channels. (In their case, Reddit, NeoGAF and RPGWatch)

4) Look for similar projects to “cross-pollinate”: You talk about their projects, and they talk about yours in updates. Backers are more likely to fund something that falls within the same area of interest.

4) At the end of the campaign, convey your gratitude as personally and sincerely as possible, and keep the updates going. This builds continual goodwill.

5) Even if you fail, there is actually a silver lining: A comeback kid story can work well for your your next kickstarter.

6) Indiegogo is good for raising smaller amounts, and they are more active and aggressive in helping you make sure your campaign succeeds

ADDITIONAL:
Met Ian Gregory Tan of Witching Hour Studios today. A good tip he shared. Something I experience myself as well.

For Singaporeans, its better to register a UK company over US company for kickstarter. This is due to the 30% withholding tax.

When you do a service work for a US company, there is no withholding tax. But if you make money from royalty. (Like Kickstarter) you will be tax 30%. For Uk company. There is no 30% withholding tax. Believe we have some agreement with UK.

Something good to note.