Recently, the hottest topic in China's entertainment industry has been whether leading film stars Zhou Xun, Huang Xiaoming and Li Bingbing will extend their contracts with Huayi Brothers media group, or defect to other studios. If the celebrities stay with Huayi Brothers, what form will their new relationships take? If they don't, will the Huayi Brothers stock price tumble?

Since Huayi Brothers is China's only privately owned listed film and TV production company, any piece of entertainment news about the media group is no longer just a hot topic for young fans in the Chinese-speaking world. The major stock analysts also base their reports on such news.

Flashback in time one month.

With movie ticket sales of 660 million renminbi, the Huayi Brothers disaster drama Aftershock by Chinese film director Feng Xiaogang claimed the Chinese box office record for the second time, surpassing Feng's own 2008 romantic comedy If You Are The One. Yet as everyone discusses the "Feng Xiaogang phenomenon" – shooting one blockbuster after the other, skillfully handling both drama and comedy – the master director himself modestly remarks, "I'm not an artist. I'm an ordinary person. I want to see the feelings of normal people and don't distance myself from the masses. So I'm usually not too off the mark in judging the audience when picking a movie script."

China's Largest Movie Star Factory

Huayi Brothers expects to see 50-percent revenue growth for the first three quarters of this year in its three major business segments: film production, TV series production, and artist management. And when Huayi Brothers' No. 1 actress Zhou Xun decided not to extend her contract with the company, it did not have much of an impact. On the day when Huayi Brothers president Wang Zhonglei, who founded the company with his older brother Wang Zhongjun in 1994, announced the news of Zhou's departure, the company's share price even rose 1.2 percent.

"My main goal is cultivating new people. We're a movie star factory, like a fortified military camp where soldiers come and go," says Huayi Brothers chairman and CEO Wang Zhongjun, a former soldier. While the turnover rate of artists at his studio is high, he insists he is not the least perturbed. Already in 2005 Huayi Brothers top talent agent Wang Jinghua defected with a number of movie stars to found her own talent agency. "Back then I didn't make a big deal about it. It's only normal that people want to found their own business," says Wang Zhongjun.

That the CEO is now so completely relaxed about the situation shows that the Huayi Brothers Media Group has already established a very stable footing in the industry. Big stars help boost brand value. But because Huayi Brothers produces hundreds of TV drama episodes and several blockbuster movies every year, its hundreds of contracted artists have plenty of opportunities to become the next megastar.

Amy Shi, administrative general manager of Huayi Brothers Times Culture Agency, notes that the departure of Wang Jinghua changed the nature of Huayi Brothers' talent management. Shi, who has a background in corporate finance and took the helm of the talent agency five years ago, explains that in former times Wang Jinghua used to be the company's only super agent, whereas the 150-people agency now has eight management teams to spread risk. "This strategy is called ‘a good tree with many branches," Shi relates.

The company started out in 1994 as an advertisement agency. After the Wang brothers had made their first bucket of money, they began to invest in the movie projects of directors Feng Xiaogang and Jiang Wen some twelve years ago. Back then few privately owned movie companies were to be found in China. Wang Zhongjun was in charge of fundraising, while the younger Wang Zhonglei produced the films, and Feng Xiaogang directed them. The three-man team built a name for Huayi Brothers in the movie production business, and success at the box office continued to rise with growing brand effect.

"For me, Huayi's way of doing business is attractive, because first of all they are very trustworthy, and I'm a trustworthy person too," remarks Feng Xiaogang, explaining his long-term relationship with Huayi Brothers and his role as their exclusive director. "First, I won't exceed my budget. I take overspending very seriously, because if you promise people a certain budget, then you leave the investor out on a limb if you overspend."

Feng Xiaogang admires Wang Zhongjun's strong decision-making abilities. "When we talk about shooting a movie, he sometimes makes a decision after just two hours of discussions. It could be about an investment of 100 million renminbi or 20 million renminbi. Wang Zhonglei has a very good executive ability. Zhongjun is the one who nails things down, and Zhonglei will realize them beautifully."

Five years ago Taiwanese film director Chen Kuo-fu, a former head of the production unit of the Asian branch of Columbia Pictures, joined this exclusive clique.

"I'm more emotional, while Kuo-fu is more rational. He's a movie expert. That's why I hold his opinion in high esteem," says Feng. With the addition of Chen Kuo-fu, the company's four-man core has become a complete line-up, able to assess creative proposals and produce movies.

Huge amounts of capital are required to shoot a motion picture. It has been said of Wang Zhongjun, the Group's financial wizard, that he "doesn't worship famous brands, he only worships numbers." But asking the high-paid Chen Kuo-fu to join the company still somewhat tested his resolve. "We talked about how Kuo-fu had worked in an American company and that his salary was higher than that of the boss, my younger brother. But I felt he was worth the money. It's people that are most important. In the creative industries, particularly, people are the core," notes Wang Zhongjun.

Before Chen Kuo-fu joined Huayi Brothers, the company operated very much like other production companies. Usually a director would approach the company with a project, soliciting investment. If Huayi Brothers felt the project was doable, they decided to shoot the movie even if it's market prospects were hard to predict.

"I encourage a certain mode of assessment. Sometimes we ourselves are even the ones proposing creative ideas, tackling the screenwriting, searching for a director and technical teams to make a film project," Chen Kuo-fu says, noting that that this is the typical approach in the United States, but it is rare in the Chinese-language film world.

When it comes to movie production, Huayi Brothers is increasingly moving toward Hollywood-style "collective creativity."

"The director is great, but it's creativity that supports this greatness," Wang Zhonglei insists. When a movie company is creative, the screenplay and ideas will easily strike a chord with the director, which makes for the best possible combination of talent even before the project begins.

Huayi Brothers' latest film Detective Dee and the Mystery of the Phantom Flame is an example for how creativity can be put to work even under a political system that allows only limited freedom. The movie is based on a script that Chen Kuo-fu conceived some ten years ago. Chen asked young Taiwanese screenwriter Chang Chia Lu to complete the script and hired Hong Kong film director Tsui Hark to direct the movie. Detective Dee was the only Chinese-language film that made it into the international competition of feature films at this year's Venice Film Festival.

Wang Zhonglei says that Huayi Brothers hopes to promote Detective Dee as an Eastern Sherlock Holmes, paving the way for a number of sequels. "The movie is set in olden times to get around censorship restrictions that apply to real-world cop-and-gangster movies," he explains.

Making movies is an exciting, risky business that does not come with a mechanism for foolproof judgment. Now that business is growing rapidly with the burgeoning movie market, Wang Zhongjun regards security as the most important condition for further corporate development. Therefore, he eagerly cooperates with a wide array of movie and TV production talent. Early on he accurately understood how important it is to capture the hearts of celebrity actors, star directors and famous producers.

Four or five years ago Wang Zhongjun began to incorporate TV drama production, a market segment with stable demand, into the Huayi Brothers portfolio. He lured famous martial arts TV drama series producers such as Zhang Jizhong into the Huayi fold by offering them producer's studios.

In the past China did not have large production companies that specialize in TV drama series, but only small companies run by individual directors. However, following several years of hard work, Huayi Brothers successfully built up its TV production business, which meanwhile comprises 11 producer's studios. With an annual production of 500 to 600 TV drama episodes, Huayi Brothers has become China's largest TV series producer.

At Huayi Brothers each TV producer is allowed to shoot a maximum of two TV series per year to ensure quality. Budget controls and sales targets are also part of the set-up. The TV production business unit is run like an independent company, doing everything from finding and obtaining scripts to shooting films to marketing them.

On top of that Huayi Brothers is in the process of adding related fields to its business empire such as new media, mobile entertainment, online games, the performing arts market, movie theater chains, and animation. "Our present strategy is to get rid of the ‘movie and TV' concept and instead march toward the broader concept of culture in general, because we want to expand the scope of what we're doing, for greater security," says Wang Zhongjun.

Last year Huayi Brothers reached another milestone, when the company went public on the Shenzhen stock exchange, with its actors, actresses and producers becoming shareholders. The IPO was not just a financial maneuver. Through the share-awarding scheme the company hopes to retain its big-name artists and producers, while also enticing promising talent with an interest in the entertainment industry to join the group.

Already Huayi Brothers, which racked up revenue of more than 200 million renminbi in the first half of this year, is being dubbed the Warner Brothers of the Chinese-speaking world, not least because of the compelling name similarity. (The name Warner is pronounced Huana in Chinese.)

"The company name is actually entirely coincidental. When I founded my own business after returning from the United States, I took over an advertisement agency called Huayi Advertising. When I registered the company, the State Administration for Industry and Commerce demanded that two characters be added to the name because the shareholders had changed. I thought, well, the company belongs to me and my younger brother, so let's add a ‘brothers'," says Wang Zhongjun with a laugh.

In the movie business Huayi Brothers certainly is a fitting name due to the automatic association with the much bigger Warner Brothers film studio. But while the company has received a lot of attention in the Chinese market due to its name, its track record is still entirely owed to the painstaking efforts of the brothers Wang.

Translated from the Chinese by Susanne Ganz