Science Fiction Industry Observation | Has science fiction derivatives become the new favorite of investment?

The recent news that the crowdfunding derivatives of "The Wandering Earth 2" have exceeded 100 million yuan on the hot search list has suddenly broken through the circle of science fiction derivatives supplier - Saifan Science Fiction Space, and single handedly brought domestic film derivatives to a new height. As of January 31st, the crowdfunding amount for the model merchandise authorized by "Wandering Earth 2" and produced by Saifan has exceeded 120 million yuan, with over 530000 transactions, which is 1200 times the initial crowdfunding target of 100000 yuan. Saifan once issued a message calling on movie fans to consume rationally, stating that the crowdfunding amount far exceeded expectations, and decided to cut off the sale after selling out this year's production capacity.

Movie derivatives refer to products developed based on characters, scenes, props, logos, etc. in movies, including image authorization, toys, clothing, accessories, movie audio and video products, games, books, daily necessities, and even theme parks that increase downstream output value in the film and television industry. One crucial aspect is to license and collect copyright fees for movies and TV shows as an IP. A well operated IP will have a higher premium and is often considered a profitable investment opportunity.

In this regard, the development of American science fiction film derivatives, such as the Star Wars series from 1977 to 2019, earned $6.49 billion in box office worldwide, but the revenue from derivatives reached as high as $32 billion. Of the $11.3 billion in revenue generated by Frozen, $9.575 billion came from sales of derivative products, accounting for 85% of the total, which is seven times the box office of the movie. It may be difficult for domestic audiences to imagine this, as the vast majority of movies in China generate over 90% of their revenue from box office. The lack of derivative development not only lacks a huge profit point, but also makes investment risks in the film and television industry high - once the box office or ratings fail miserably, producers often suffer heavy losses due to the lack of channels to share risks.

Previously, most people's impression of derivative products still remained at the stage of "promotional materials" and "gifts", far from being "commodities". In addition, due to the serious piracy situation, many genuine movie derivative products have value but no market, and only circulate among a small group of people. But the essence of derivatives is a 'fan economy', where fans not only pay money, but also attach emotional value to it. Targeting core fans, regular fans, and casual viewers, based on their level of preference for IP, corresponding to different consumption abilities and habits. Looking at the global cultural and creative IP field, any IP with sci-fi elements has a high degree of overlap between its core fans, models, and toy circles. Therefore, it is very common for copyright owners to design derivative products that cover high, medium, and low prices and multiple categories.

Since the total crowdfunding amount of nearly 20 million yuan for "Journey to the West: The Monkey King Returns" in 2015, the domestic film derivatives market has continuously explored the explosive power of derivative development in the Chinese entertainment industry, with film IPs entering the derivative field. The vast majority of derivative development achievements for cultural and creative IPs are in the millions or tens of millions. The crowdfunding amount of over 100 million yuan for the derivative products of "Wandering Earth 2" has once again amazed the entire industry.

There are also companies in the US market that have emerged in the capital market by operating derivatives. ThinkGeek is known for selling creative products such as movies and video games, winning consumers' favor through the fun and whimsical nature of its products. For example, the "Traveler's Shield Backpack" in "The Legend of Zelda: Breath of the Wild" released in 2017 sparked a heated discussion on social media. ThinkGeek has been acquired by GameStop (GME), the world's largest video game and entertainment software retail giant headquartered in Texas, USA.

In addition, Zing Pop Culture, a subsidiary of the company, specializes in providing technology enthusiasts or gamers with their favorite clothing, electronics, toys, collectibles, or other trinkets. It includes classic children's toys from Pok é mon or Disney, as well as hardcore collectibles from Marvel or Star Wars. These companies provide creative derivatives or products for vertical customer groups, and also offer market exploration and development reference paths for similar domestic institutions in the segmented fields of derivatives.

In theory, the development of mature cultural and creative IP derivatives should revolve around different content in film and television, designing derivatives that cover various levels and price ranges. However, the specific content should be used to develop what type of derivatives, which is actually a question that needs to be considered in the content creation process. This year, the crowdfunding campaign of Saifan went viral and cut off orders. From the perspective of professional observers, it is likely that the content design was not well prepared in the early stage. The supply chain management issues in the later stage of the epidemic coincided with the Spring Festival holiday, which led to concerns about the delivery time and quality of derivative crowdfunding launched by various authorized institutions at that time.

In fact, there is another science fiction animation "Boonie Bears" worth paying attention to during this year's Spring Festival. As of 0:00 on February 14th, the box office of the film "Boonie Bears" has exceeded 1.35 billion yuan, breaking the previous record of 977 million yuan set by the same series "Return to Earth" last year and setting a new high for the box office of a single animated film in the "Boonie Bears" series. So far, the cumulative box office of the "Boonie Bears" animated film series has exceeded 5.5 billion yuan, becoming the first animated film series in China to break through 5 billion yuan. The derivative products of the "Boonie Bears" series are designed around the three main characters of "Boonie Bears", "Boonie Bears", and "Bald Head Strong". Currently, the "Boonie Bears" IP has collaborated with more than 300 well-known brands, launched more than 30 categories of products, and has a brand subscription power of over 3.5 billion yuan. The categories include milk, snacks, toys, stationery, clothing, bags, toiletries, games, books, etc., making it the most diverse film brand in terms of derivative categories in China.

Based on the two different derivative operation models of "Wandering Earth" and "Boonie Bears", it can be seen that there is a difference from "cultural consumption" to "retail consumption". "Fan economy" is essentially cultural consumption, while "Boonie Bears" authorized products are retail consumption. The comparison of revenue and influence is evident for breaking the circle, as two movies with science fiction content produce derivative products with different attributes.

Crowdfunding is safer for operators compared to mass production, as it can predict output, control costs, and reduce inventory during the production phase. It is an effective operational model for the development of cultural and creative IP derivatives; But at the same time, it also faces problems such as delayed delivery and impulsive consumer returns.

In this round of crowdfunding for the derivatives of "Wandering Earth 2", Saifan Science Fiction is far ahead, with a staggering 190000 assembled versions that have amazed the domestic entertainment industry and consumer market; 52Toys Universal Box has raised over 40000 crowdfunding funds; The spot sales of SenseTime Intelligent Building Blocks have exceeded 5000 units. Their prices range from laptops and canvas bags priced at less than 60 yuan to smart building blocks priced at 899 yuan, and models priced around 2000 yuan. Of course, there are also "sky high" products that can be ordered and picked up directly without crowdfunding. A wearable collectible item designed by a company called Killerbody in Shenzhen is priced at tens of thousands of yuan, which looks very hardcore from the outside. Although it is not popular enough, it has a lot of buzz among the core group.

In the foreseeable future, domestic science fiction derivatives will rapidly grow, based on the judgment that the market cultivation has entered a turning point of explosive growth. But this still requires companies involved in the derivatives field to make early deployment. Derivative product development should be deployed in the script creation and conceptual design stages. Disney has already considered the subsequent product development when designing the character's appearance and clothing, so that there can be dresses and dolls that sell out like Frozen.

Emphasize the scene sales of offline derivatives. Although online sales are well-developed in China, movie fans often impulsively purchase derivative products when they leave the cinema. If they buy online after watching the movie, the number of buyers has already been discounted. If Wandering Earth 2 could have started offline cinema sales earlier, it would definitely not have been comparable to crowdfunding 120 million yuan. With the help of the cinema environment, it can stimulate the audience's perception and recognition of IP, and also become a "marketplace" for derivative products.

Establish a complete industrial chain for the development of derivative products. At present, there is always a feeling of going it alone in the industry when it comes to the operation of derivatives. There are still many gaps in the industry regarding how to design, who to collaborate with, and how to promote after cooperation. It is entirely possible to explore the establishment of an industry alliance or mutual aid organization to integrate scattered film and television resources, creative design resources, and supply chain management resources for cooperation, open up cooperation channels, and reduce business risks.

On the basis of consolidating the story content, actively cultivate the awareness of derivative product development, consciously implant the "foreshadowing" of derivative product development in the script development stage, and launch derivative products as soon as the film and television series are released to enhance the value of the film and television IP.

Ms. Xiu Huiyuan, who has been providing creative product design and supply chain management services overseas for a long time, believes that the scale of China's film derivatives market is showing an upward trend year by year, but compared with the Hollywood film and television industry, it is still in its infancy in terms of design and management. In particular, the lack of product research and development talents and the immaturity of the derivatives industry chain are hindering the development of the industry.

Ms. Shen Xueqin, who invests in Wanwu, stated that it is necessary to not only see the phenomenon of good movie IPs becoming popular in the short term, but also to create a long tail effect that can be released. In the future, the space of the derivative industry chain will be more challenging, which requires differentiation in story quality and related products to meet market demand.