Biz goes wrong in Hong Kong

Downloading, other woes lead to production downturn

HONG KONG — The film industry here is looking more and more like a shooting star.

In its heyday — the late ’70s to early ’90s — there were 300 films a year being produced in this territory of 7 million people. These films flooded the region and were seen as the trendsetter for Asian cinema.

Hong Kong was once essentially the only major exporter of films in Southeast Asia, says Peter Tsi, exec director of the Hong Kong Film Fest Society.

Led by studios such as the Shaw Bros. and Golden Harvest, Hong Kong cinema made a name for itself not only in the region, but worldwide.

Fast-forward to 2005 and some industry insiders are predicting as few as 40 local film productions. Last year 64 local films were produced, including two digital video productions.

Piracy and lack of regulation of the video industry are causing the lion’s share of the problems. While forging closer ties to China could bolster the strength of the industry, there are several obstacles to that course.

It will take government intervention to deal with issues of rental rights and illegal uploading and downloading of movies.

Hong Kong copyright law doesn’t give rental protection to film, which makes it difficult to take action against shops that rent the consumer sell-through video as opposed to the licensed rental copy, says Woody Tsung, chief exec of Hong Kong’s Motion Picture Industry Assn.

As a result, the distributor doesn’t get money from the rental license; but this isn’t like piracy, Tsung says, because these stores are doing a legitimate business.

Peer-to-peer file sharing of movies through the Internet for no commercial gain also isn’t addressed by Hong Kong law.

Tsung estimates that 50% of the box office in Hong Kong is lost to this kind of downloading. “If the downloading phenomenon can’t be reversed, then even the Hollywood majors will have a problem,” he says.

An emergency taskforce of about 20 industry insiders convened in late November to discuss these issues with government officials. The industry plans to submit comments on these matters during the government’s public consultation period on copyright protection, says Nansun Shi, a senior adviser for Mandarin Entertainment and veteran producer.

The consultation period lasts until mid-February. The taskforce also plans to hold a seminar for the movie, music and television industries on Jan. 23 focusing on digital copyright content and how to protect it.

Another issue plaguing the industry is money. Investment dollars are difficult to come by because returns are low. As a result, films are made quickly with low budgets and result in low ticket sales.

Some companies, like Mandarin Entertainment, are shying away for the time being from small- to mid-size films to opt for bigger productions with a budget between $18 million and $25 million, which are expected to bring a higher return with broader international distribution.

Mandarin expects to release Tsui Hark’s “Seven Swords” in July. The $18 million martial-arts epic film is a Hong Kong/China/South Korea co-production and has been presold in most of the Asian markets. Fortissimo Films is handling sales outside Asia; and it’s selling very well, says co-chairman Wouter Barendrecht.

An example of big budget rising to the top is “Kung Fu Hustle,” helmed and written by Stephen Chow (“Shaolin Soccer”), who also stars in the action comedy. A Columbia Pictures investment, the pic dominated the local B.O. for 2004 after showing for just eight days. It has brought in $4.8 million to date.

There’s a lot of pressure on these big budget films to be well-crafted, since they show how the world sees Hong Kong cinema, says the film festival’s Tsi, who is also a director.

Applause’s Peter Chan agrees that to make money, you have to spend money, which leads to another problem — the platform for new talent to emerge is eroding as the industry cuts back. “The decline of any industry is the lack of new blood,” Chan says.

Barendrecht adds that there needs to be continuity of above and below the line talent, which requires a steady flow of films in order for talent to work full time as opposed to only doing one or two projects a year.

Historically, Hong Kong hasn’t had to deal with competition. But South Korea and Thailand have given Hong Kong a run for its money as their industries have taken off in recent years.

It’s difficult to talk about Hong Kong’s future without including China, especially as regional sales for Hong Kong are no longer a given. Distribution in China needs to open up more, says Barendrecht, echoing a common industry sentiment.

Lack of exhibition and distribution infrastructure on the Mainland, differing sensibilities and censorship are several problems blocking the development of a pan-Chinese film industry. Audiences have become wary of Hong-Kong/China co-productions, which are often watered down and end up pleasing no one.