Wang Zhongjun and Wang Zhonglei, the brothers behind Huayi Brothers Media Corporation, are gradually losing control of their company. Recently, a portion of their shares in Huayi Brothers was auctioned off by court order. In another month, 5.5% of Wang Zhongjun's stake in the company will face judicial auction as well. Over 80% of their shares in Huayi Brothers have already been frozen. Further disposals could ultimately threaten their control over the company.
Three decades ago, they were among the pioneers of China's private film industry, nurturing the lucrative Lunar New Year film market—the most beautiful rose in the cinematic landscape. Today, after repeated setbacks, Huayi Brothers finds itself trapped in a vicious cycle with no easy escape. The question of who will take over presents yet another layer of challenges.
On November 7, Huayi Brothers disclosed that 154 million shares held by its controlling shareholder and actual controller, Wang Zhongjun, are set for judicial auction by the Beijing No. 3 Intermediate Court on December 8-9. These shares account for 48.19% of his holdings and 5.55% of the company’s total equity. This is not the first time his shares have been auctioned. In mid-October, several million of his shares were sold by the Suzhou Intermediate Court at an average price of 2.23 yuan per share.
If the larger December auction proceeds, Wang Zhongjun and Wang Zhonglei, acting in concert, will still hold 8.26% of the company, retaining their position as the largest shareholders. However, with Alibaba Entrepreneurship and Jack Ma, the second and third-largest shareholders, collectively holding 6.07%, the company faces potential instability in control.
More critically, over 80% of the controlling shareholders' stakes are frozen. If the Wang brothers fail to resolve their debt crisis and more shares are liquidated, their continued control of the company remains uncertain.
The plight of Huayi Brothers and its founders evokes market sympathy. After all, they were trailblazers in China’s private film industry. In 1994, Wang Zhongjun returned from the U.S. and co-founded an advertising company with his brother, securing major contracts like Bank of China’s branding and amassing their first fortune.
Through connections, Wang Zhongjun met Feng Xiaogang, then an emerging director, and began investing in films such as *Dream Factory*, *Be There or Be Square*, *Big Shot’s Funeral*, *Cell Phone*, *Assembly*, and *If You Are the One*. Their collaboration with Feng Xiaogang helped establish China’s Lunar New Year film market, with nearly every release achieving both critical and commercial success.
From 1998 to 2010, Feng Xiaogang released 12 films, mostly during the Lunar New Year season, with 11 ranking among the top three in annual box office. In 2009, Huayi Brothers went public on the Shenzhen Stock Exchange’s ChiNext board, becoming China’s first listed entertainment company.
The company peaked in 2010 with *Aftershock* and *If You Are the One 2* topping the box office charts. Riding high on success, Huayi Brothers envisioned itself as the "Chinese Disney," expanding into theme parks, internet ventures, and gaming.
Yet, crisis loomed. In 2015, Huayi Brothers acquired a 70% stake in Feng Xiaogang’s production company for 1.05 billion yuan, drawing market skepticism but proceeding nonetheless. The company’s market cap briefly soared to around 90 billion yuan.
However, 2016 marked the start of declining performance and the first net loss. By 2018, the controversy surrounding *Cell Phone 2* spiraled into an industry-wide upheaval, dragging Huayi Brothers into massive losses. Before recovery could begin, the pandemic devastated the film sector, compounding its struggles.
The core issue lies in product appeal. Feng Xiaogang’s recent films—*Only Cloud Knows*, *If You Are the One 3*, and *Sunflower*—underperformed, leaving Huayi Brothers without a viable alternative.
The film industry thrives on a virtuous cycle: capital funds quality content, attracting audiences and profits, which in turn fund more content. But Huayi Brothers, strapped for cash, sold stakes in Feng Xiaogang’s production company and gaming firm Hero Entertainment, missing out on the success of *Black Myth: Wukong*.
With limited funds, Huayi Brothers has only co-invested in select projects in recent years, losing market presence. Meanwhile, short-form dramas and other new entertainment formats have siphoned off audience attention, intensifying industry pressure.
Since 2018, Huayi Brothers has posted seven consecutive years of losses, totaling over 8.3 billion yuan. The company now pins hopes on upcoming releases like *The Mermaid 2* by Stephen Chow, *Little Soldier Zhang Ga*, and Feng Xiaogang’s *Catch the Spy*.
The film industry has already seen a shakeout, with former leaders like LeVision Pictures vanishing and others delisting or changing hands. Without a white knight, what fate awaits Huayi Brothers?
The industry’s unique dynamic means founder influence is pivotal. After losing key figures like Song Ge, Beijing Culture failed to replicate hits like *Wolf Warrior 2* and *Dying to Survive*. Similarly, without the Wang brothers and Feng Xiaogang, Huayi Brothers risks losing its soul.
Yet, under their leadership, the company struggles to break free from its downward spiral. Alibaba’s recent aggressive moves in entertainment, including potential acquisitions, keep market hopes alive for Huayi Brothers.
Ultimately, the Wang brothers may have to relinquish control, leaving the market to decide the company’s future.
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