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Xiaomi's Movie Business Faces Crisis

| Feb 06, 2017 06:00 AM EST

The “Internet Plus” model helped Xiaomi achieve the company’s goals of increasing operations efficiency as well as developing better products and innovative solutions.

Xiaomi Inc., one of China's best-known startup success stories, is facing serious crisis with its filmmaking business.

Smoke first came out after Hugo Barra announced his resignation as Xiaomi's vice president. This was followed by local reports on Xiaomi's plans to axe the marketing department of its filmmaking arm, Xiaomi Pictures. Such plans will allow the company to refocus on smartphones, according to insiders interviewed by Sina.com and reported by Asia Times.

In addition, Xiaomi is also said to be ceasing all production activities although it will continue to invest in movie productions. This "partial retreat" from the filmmaking business signals that China's movie industry is undergoing a correction, Asia Times said.

Domestic ticket sales jumped a measly 2.4 percent last year, compared to the 49 percent increase recorded in 2015, said Asia Times, citing Entgroup. Overall ticket sales closed at RMB 45.7 billion, falling short of analysts' expectations.

Meanwhile, Xiaomi has also been overhauling its business for quite some time in face of stiff competitions against local and foreign brands. The company's core smartphones business used to bank on high-quality but affordable units--a formula that was emulated by fellow Chinese players Oppo and Vivo. The presence of other local brands added to the rivalry, and China's saturated smartphones market did not help.

Xiaomi, tagged as the "Apple of the East," reportedly lost $40 billion on the back of a 40 percent decline in smartphones sales in the second quarter of 2016, according to the International Business Times.

While Xiaomi, being a private company, does not disclose its finances in public, CounterPoint Research estimated that about 85 percent of its revenue comes from smartphones. Hence, a huge blow on this particular segment is also a huge blow on the company overall.

The company's other ventures include smart home appliances and wearables.

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