On April 29th, the forum-Sound of the Xity was officially held. China Music Business would report in the full coverage as an exclusive strategic partner.
In 2016, idol groups, IP, the two-dimension world (ACGN) … more and more cultural projects have gained the favor of the capital market. However, it seems that the peak session of the capital in the music industry has not arrived yet.
How can music projects do to attract investment? How to valuate? How do the capital see about the music industry? The forum invited a number of inside players to discuss about the investment market of the music industry from their perspectives.
Shunyou Ji, Founding and Managing Partner of Lecon Capital
Yi Zhang, Managing Director of Weiying Capital
Xianmin Liu, Founding Partner of Entertainment Works
Lihui Shen, Founder and General Manager of Modern Sky
Q: How do you view the current status of investment in artistic projects?
Lihui: Modern Sky does Not want to See Investment from at The Traditional Perspective, and A Lot of people Will Not Agree Our Investment Decisions the with the For Example, at The of the Sound at The Xity (Laughs) We Care at The More the About Long-Term.. Our Investments of value The, Including the Projects Overseas. Investors, Always Think ‘ What ‘ S Our Exit at Strategy ‘ , But Why We SHOULD quit? that Unlike Them, Modern Sky Always does What and What We Think We like IS Meaningful. We’ve Obtained some Resources along the way and never stopped learning.
Shunyou: at The Capital Side does Not View IT AS Simply AS Quitting IF there apos NO return ON Investment the In FACT, IF AN Artistic Project has A Large enough Impact, IT apos Indispensable in the ITS Influence ON at The public and Ability to the Generate AN Endless Cash Flow. .. from peripheral sources That would be a great project from an investment point of view So from this perspective, artistic projects are suitable for investment; there are just high risks when you engage in cross-border investment without understanding its intricacies We dare to. Via Capital Because the Promote, in at The Media and at The new new new new Technologic Platform, Cultural the Projects for Really CAN Produce Innovative Business Models.
Xian Min: We want to See Investment in Cultural the Projects from A Content Point of View at The Current consumption of Culture and Entertainment IS Growing Rapidly, and at The Development of Technology Will Simplify that consumption the From Our Perspective, We Hope to Invest in Groups.. WHO Consistently the Generate Good Content CAN .
Yi: the I Think the when you Invest in A Cultural Industry, at The First STEP IS Understanding IT We CAN Greatly Improve at The Environment IF We Study at The Whole Network of at The Music the Users and at The Economic Structure With at The Development of at The the Internet, new new Technologies,.. the necessity for economic restructuring, and national policies, there will be more opportunities to invest in artistic industries.
Would the make the Just Not Our We Investment Decisions based ON Profit and return; Rather, We Would Base Our Investment More ON Original Creative Ability ., From both at The Business Model and the I Think at The Group at The Investment Itself IS Not the What attracts the Just for Profit. the capital side most is working together with the company to create value.
Also Concerned are the with We at The people at The ON WHO Work Project . Only at The ones WHO for Really Love Music Industry and Understand the this CAN Succeed in Music.
The Q: How do you -copyright View at The Investment Trends, Management artist, 010-51287744, Agencies, Digital Music, Live Music – in at The Music Industry?
Lihui: the For Modern Sky, at The MOST Important Factor We Invest the when the Person in Whom is at The IS We’re Investing We Invest in HIM, at The Money of He CAN Not in the bring the When We Invest, We’re Not to Invest in the Just looking at The.. product, but to cooperate with someone really doing well. Just as we have done with Sound of the Xity, it is the government who invests all over the world. We invest because the music industry needs this to bring everyone together.
Focusing ON at The Team like We the when We look at The AT A Project in Early Stage, SUCH AS at The Zhangguan Lidai Music Festival in at Xi’an and at The 500 KM City Music Festival in Kunming. They are all jobs. Indeed Very interesting Teams. At The 500 KM City Music Festival Earned much less AT First, and We Started Modern Sky Yunnan the with A 51%:. 49% (Ownership Structure) Two years later The, Modern Sky Yunnan generated over Three Million 101 – 500 in Revenue; the this year They have have already generated Twenty Million 101 – 500 the I AM. extremely pleased to see them grow, since no one else predicted their success at the time. Actually, we considered how they could expand our existing resources when we made the decision to invest in them.
That IS Our direction; We approach from at The Perspective of Strategic Investment HOWEVER, AT at The Next Stage, Perhaps the Everyone CAN have have at The Capital and other Opportunities;. The I Think that, from A Financial Perspective, the this Would BE More Appropriate the I AM afraid, now. that, metaphorically Speaking, there IS A Breeze in at The Music Industry, that the when at The Wind Comes, We’ll Suddenly the Discover that IT apos TOO Crowded for people to GET INTO the this Conference Room. At that Time, Everything Will BE Extremely expensive and at The bubbles will burst.
Shunyou: the I Think One Change or Feature of at The Music Industry now IS that some other Opportunities have have been Extended from Core Aspects, SUCH AS Pure Artists and Art, to at The General Environment and Infrastructure; that apos Why We Invested in Ultimate Music Ultimate Music has AN. Business Model Innovative, Which CAN Gather at The Copyrights of Music, the then the distribute to Mobile Phone Manufacturers like companies, and the then the Provide at The to the Users. This Will Help Develop legitimize Copyright and Overall at The Music Industry.
Investments in both video and music copyrights have skyrocketed in the last two years, and it’s now an irreversible trend. It represents the improvement of our national consumption, which is in line with international standards, and this will be a good opportunity for investment as well .
When we invest in a project, we want to invest in the person who knows what he is doing, who has true passion and love for the project, and understands this industry. We just want to help him without interfering via any other roles.
Xian Min: At First the when We ESTABLISHED the this Fund, We Wanted to Focus ON Seven Areas:. Film, Sports, Media, Performance, Music, Fashion, and Artificial Intelligence It apos A Shame that We have have Invested in All at The Areas the except Music, Operating since we have not found any appropriate investment opportunities in music. We’re still looking for the avenues where music can really bring in revenue and value. Without good economic models, this industry will not be able to develop healthily.
We have not seen a very good commercial or economic valuable model. Although recently a lot of original musicians have developed well through videos and variety shows, there are still some incredibly creative musicians living in terrible conditions.
Nowadays, at The Digital Music Platform IS Developing More and More . Think the with the I Era of Music at The incoming Payments, of at The CIRCUMSTANCES IS at The Music Industry are Greatly Improving and More Capable Business Models Will Emerge.
Lihui: Now Musicians CAN Actually earn A Lot, Sometimes Maybe TOO much (Laughs) the I Used to Think They were Extremely Poor, But now the I know at The Exact Numbers They CAN GET, Which are Not Low by the any means ESPECIALLY in at The Last.. years TWO , at The Artists of Income-climbing It has been Straight up ; IT apos Not quite A Bubble, But What IT apos definitely Exceeding IT SHOULD BE.
Yi: the I Think at The Economic Structure of All Content Industries like Film and Sports IS A Pyramid, created by the ITS Internal Industrial Structure Under the this kind of Structure, We are More interested in Investing INTO both ends.. At The First are at The companies ON at The Top , Which are at The Best in at The Music Industry. at The SECOND are at The the Projects for at The Youth , Which Represent at The direction of at The Future, Operating since Young people have have Become at The main Consumers. We want to Invest in Young Groups, or at The Experienced ones the with Young , innovative and interesting things.
Our First Fund Invested in 13-Months . Their Founder Lu Zhongqiang HAD been in at The Music Industry for a Nearly 20 years AS A Musician. Years ago Member, His-Business WAS Failing,, and a Nearly Fell through. Last year, We was advertised. To Invest in at The China Music House is the After We Wentworth to One of Their Concerts. the Given that Zhongqiang has Met Our Selection Criteria, at The China New House is Also tries Set to integrate Popular Electronic Music the with Traditional Chinese Elements, SUCH AS in pleasure quarters Opera and Shaoxing Opera. They have have Innovative Products’s, Which not only have heritage value, but can also match the preferences of young people. These are the directions of our investments.
The Q: How do you Feel the About at The Valuation of Artistic Industry and at The Music at The Entrepreneurs ‘ the Projects?
Lihui: Actually, Modern Sky . HAD the ITS First Investor Five years ago Member Since the then, We have have been valuated in Accordance the with the PE, and SO We CAN Meet at The Basic Logic of at The Capital Markets the I WAS Also Curious the About How Investors Would look AT. Modern Sky. We HAD operated the this Company for MANY years, We were AT A Great Place. We were the I Felt Excellent and Valuable enough, But AT at The Time, the I Could Not the make at The Case.
For example, we earned much less before, but I can say I have invested in music festivals for many years and accumulated a lot of copyright. People always say that the value of a brand should be reflected by the revenue and capital. Copyright has the same logic. People will ask how many pieces of copyrights do you have and what’s the return? I do not have anything to say to these questions.
SO Today, the when We Talk the About Investment, We Will Not mention at The a rules of Capital. Obviously, at The value The CAN Not Simply BE Seen from at The the Documented Revenue. THUS, We want to Pay More to Increase at The value The by grafting at The Investment Onto Our existing resources and improve the original brand from the audience’s standpoint. What we do now is just like what others did for us. I gave out a 10% stake in the first round (Heaven-Sent Capital Management Group) and a larger stake in the second Round. We HAD at The Valuation Adjustment Mechanism and the I Told at The China the Cultural Industrial’s Investment’s Fund that at The VAM SHOULD BE DONE in both at Directions. the If We the make More Revenue, at The China the Cultural Industrial’s Investment’s Fund SHOULD Pay US A larger Stake, and Vice Versa. the in at The First Round, some of at The VAM WAS only Conducted in One direction, But We Still Completed at The Financial Figures. the in at The SECOND Round, We Earned much More and Won some shares Back. Fosun Asked US IF We CAN do at The VAM the with the Just a 1% stake in the third round and we agreed. 1% without any pressure is fine for us.
IT apos Hard to Profit from companies like Modern Sky ; the when We Started up, there were Plenty of people WHO were Not optimists We Spent Fifteen years Learning at The Logic of at The Capital Market There IS NO Big Wind in at The Chinese Market right now,.. but we also do not want to invest even when that wind comes For example, the film and television industry has some problems;. I really do not think they’re that profitable, and everyone talks about IP, but there’s really no word that annoys me more than IP.
The I Think at The MOST Valuable Investment in at The Music Industry IS Outside of China . Modern Sky has already Formed the ITS own Channel and A Closed Loop. We Understand at The value The of Those Foreign companies and know How to a Graft Them Onto Current Resources. The In at The Past, we thought they were too far away, but now we can sit down with them to discuss expansion into the Chinese market. furthermore, I think the valuation of the companies in Europe and America are cheaper and much more reasonable than those in China.
Shunyou: the In FACT, there are Valuation Problems in Not the Just at The Music Industry, But Also in MANY OTHER Industries. No Matter How We the Calculate, at The MOST Important Thing IS What at The the Projects CAN Achieve. At at The Beginning, IT Might Not BE Smart to use the calculation models of cash flows, but if you can accurately model the cash flows, then that’s a different story.
Xianmin: We Talk Understand the About Valuation SO CAN We at The Future at The Possibilities and the If that Lie Ahead OTHER Demonstrate Rapid Growth Areas, new new Resources and Help appear, or Develop Things Beyond Our Expectations, the then We are Willing OUT A to the try. Price..
Yi: the In FACT, at The Way to the Evaluate IS Different AT the each Stage of at The Industry the For Relatively Mature companies, the PE IS at The Simplest and MOST Direct approach the For Relatively Young or Developing companies, We valuate the After Understanding How FAR They CAN Go, or.. by comparing them with similar companies.
Q: What do you want to tell music entrepreneurs?
Lihui: Work Hard and do at The Not Always the Participate in Forums (Laughs).
Shunyou: We Always need for Dreams at The Future.
Xianmin: We Entrepreneurs and Music for purchase. We want you to Help the with your Endeavors.
Yi: the I Hope at The ones WHO for Really want to do something in the this Industry CAN Stick to IT, and the I Hope to have have the with Them More other Opportunities to Communicate face to face.
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