Discussion Between Wang Jianlin and Forbes

The sixteenth Forbes Global CEO Conference was held on November 29 in Jakarta, Indonesia, at which the Malcolm Forbes Lifetime Achievement Award was presented to the chairman of Wanda Group, Wang Jianlin. This is the first mainland Chinese entrepreneur to have ever won the award. President of Forbes Media Group, Steve Forbes, presented the award to Wang Jianlin, with both parties engaging in an outstanding discussion based on the theme of the conference "Rising to the Challenge".

Forbes: Why did you leave the army to do business? This is a big change.

Wang Jianlin: To earn money, and because at that time, Chinese households all dreamed of having 10 thousand RMB, or approximately 1500 US dollars. Moreover, Deng Xiaoping proposed the disarmament of 100,000 soldiers and the army was being reduced. I chose to go into business because of these two reasons.

Forbes: As the largest commercial real estate business, can you share why your commercial real estate model has been so successful?

Wang Jianlin: This is actually due to the fact that we capitalized from China's reform and opening-up and urbanization. When we engaged in real estate, China's urbanization rate was only 13%, and it has now increased by 40% to 55%. Alongside this, there was a huge need for housing, particularly commercial centers. We were just a few years earlier than others. Most enterprises in China only need to work in the real estate industry to earn money. It is only because we were just a few years earlier than others and were slightly better at executing that we have become first in real estate around the world. To put it simply, we just implemented a few years earlier.

Forbes: You are experiencing great success in real estates. Why did you decide to enter the film and entertainment industries, which look attractive but are actually risky and very easy to lose money in?

Wang Jianlin: We should thank the American people for helping us enter the film and entertainment industries. In 2003, we wanted to have cinemas in shopping centers, and an American company promised to help us manage our cinemas. However, they gave up cooperation later due to various reasons, perhaps it was partly due to the policies in China, or maybe they made a wrong decision. After that, we signed an agreement with a Chinese state-owned enterprise, but they gave up cooperation in the end too. How could this happen? The reason is that the yearly box office in China was just a little more than 100 million US dollars at that time, which was 800 million RMB. Many people thought this industry was not profitable at all so nobody wanted to engage in it. But we already had more than a dozen cinemas built, so I was forced to enter this industry. We suffered losses in the first three years. However, in the fourth year, the “Golden Decade” in Chinese film industry started. In the ten years, the average annual rate of growth was 35 percent. We hit a lucky spot with the sudden and dramatic increase. That’s how I passively entered the entertainment industry. But since we have entered this industry, we have gradually discovered that this industry is actually very profitable, and the PE ratio is very high. Therefore, we actively turned into developing the industry. At first, we shifted from playing films to producing and releasing films, and we had a vision to become an international film company. With this vision, we purchased an American company and the biggest cinema line in Europe this year. Now an individual company, Wanda has more than a 10 percent share of the global box office. Our current target is to occupy a 20 percent share of the global box office in four years.

Forbes: How can you make sure that your movies do not lose money?

Wang Jianlin: The film industry is actually a high-risk industry. For one single movie, nobody can be 100% sure about its profitability. However, if you consider it as a size-investment, if you invest in ten movies at the same time, maybe you can make a profit. Most people haven’t realized this principle yet, and they think all movies are lucrative. But the fact is that even in China, where the film industry is growing amazingly fast, 50% to 70% of film companies are losing money. Only few companies really take in earnings. I think it is the same situation in all industries. This is the famous Pareto Principle that it is always the minority who is actually making money or making big money, while the majority make no profits or even suffer losses.

Forbes: This sounds like risk investment. You have used a lot of successful approaches to make it profitable. How do you evaluate success and failure?

Wang Jianlin: Yes. People tend to only remember the winners and ignore the losers. However, the fact is that when starting or developing a business, losers are the majority while winners are the minority. It is the rarity that makes it more precious or honorable, and that’s why people only remember the winners.

Forbes: You also invest in sports, such as the Ironman Triathlon. Why are you interested in this industry?

Wang Jianlin: In terms of the scale of revenue, Wanda Sports is already the largest sports company in the world. The development of Wanda Sports mainly depends on merger and acquisition. We have purchased European, American, and French companies, and we have obtained IPs and established cooperation with international sports organizations through the acquisitions. Then, we held great sports events in China to make a profit and develop ourselves. Why am I interested in the sports industry? It's because I am a sports fan. I am a super fan of football, and I am very keen on football. During almost all the World Cups, I got up at the midnight to watch the matches, except for the one that took place in Japan and South Korea when I didn’t need to suffer the time difference.

I am a sports fan now. I exercise and go to gym every day. I became interested in this industry because of my personal hobby. Afterwards, I realized that the rules of consumption in China are the same as the ones of the world. Living needs must be satisfied first, and then the economy can increase. After that, people start to develop the entertainment industry, followed by tourism, which is on a higher level in the hierarchy. While at last, sports consumption is at the top. In China, we call sports consumption as “paying for suffering”, which means you spend money to make yourself suffer. But why do people still love it? The reason is that it makes you feel satisfied both mentally and physically. That’s why I believe this industry is very promising in China.

We were forward-looking as you said, and we are lucky. The sports industry in China has been witnessing an explosive growth in the past three years. It is growing at several times its rate instead of in small percentages. I believe the next wave of development in China will take place in the tourism and sports industries.

Forbes: What's your favorite sport? You mentioned football.

Wang Jianlin: Football, that's right. That's why we (perhaps it's because that's my hobby) are one of the six top-tier sponsors of FIFA, as well as the sole agent for FIFA in Asia. We are also involved in operating many football matches in China.
  
Forbes: Have you ever thought of introducing American football into China?

Wang Jianlin: It's true that US American football really wants to enter China. A very famous US football club owner, Robert Kraft, specially invited me to a game, and taught me the rules and to appreciate the game. I didn't used to understand it, but he taught me. He too hopes to bring American football into China, but regrettably, a