Huanxi Media shares skyrocket as Douyin’s parent pays 630 million yuan to stream its movies as Wuhan virus forces Chinese cinemas to close

Lam Ka-sing

Huanxi Media Group’s shares surged after it announced Douyin’s parent ByteDance would pay it at least 630 million yuan (US$90.8 million) for new movies and dramas to stream on its top video platforms as a viral outbreak in mainland China forces cinemas to close.

They include Lost in Russia, which Huanxi produced, one of seven films pulled from cinemas during Lunar New Year as China grapples with a coronavirus that has already claimed more than 20 lives.

The full movie will now be streamed on Douyin, Toutiao, Xigua Video and Huoshan, which are all news and video applications owned by ByteDance, as well as on Huanxi Media’s app, huanxi.com, on January 25, the first day of the Year of the Rat, according to an announcement on the Douyin app.

China delays blockbusters as cinemas empty out amid Wuhan virus outbreak

The Hong-Kong listed shares of Huanxi Media shot up 43 per cent to HK$1.96 on Friday morning. However, the joy may be short-lived as the price is likely to come under downward pressure as soon as the news dies down, said Avis Mak, head of investment advisory at the brokerage Shenwan Hongyuan.

“It is risky to buy at a high level,” said Mak. “It is not really worth the risk to enter the market now.”

She said online streaming channels like Douyin may be targets of speculative bets this year, especially as the market thinks ByteDance may list in Hong Kong this year.

The Guangdong government ordered all cinemas in the southern Chinese province to close for the entire Lunar New Year holiday and refund ticket holders. Screens in Wuhan, the centre of the outbreak, have also shut down as the government considers a countrywide closure of theatres starting tomorrow, according to media reports. Many more have closed their doors voluntarily.

Cities across China are in lockdown as the authorities try to contain the epidemic.

“The pneumonia problem may affect the income of cinemas,” added Mak. “To content providers, the impact is not as significant. But if this problem keeps rolling on in coming months, the negative impact will be reflected in the results of the first quarter of this year. These shares have high volatility so investors interested should be more cautious.”

The deal will help satisfy increased demand for online entertainment as consumers are forced to stay at home amid the viral outbreak, said Sam Chi-yung, an independent commentator.

“This is good. At least the finished films can be released,” added Sam.

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