Indies fuel historic surge for local pix

Total industry rev increased 66% to almost $435 mil in 2004

SHANGHAI — Last year, for the first time in decades, China produced more than 200 movies. The surge came on the back of new regs allowing producers to work with independent production companies rather than state-run studios. Despite half of those films never making it into a cinema, box office receipts jumped dramatically, too.

If you add in DVDs and TV rights to the B.O., total industry rev increased 66% to almost $435 million.

A couple of films, Zhang Yimou’s “House of Flying Daggers” and Stephen Chow’s “Kung Fu Hustle,” are primed to cross $100 million soon on the back of healthy numbers at home and abroad. (Zhang’s “Hero” broke the century mark in 2004.)

Chinese stars are becoming hot properties overseas, too. That Rob Marshall picked three ethnically Chinese actresses — Gong Li, Ziyi Zhang and Michelle Yeoh — to play Japanese characters in “Memoirs of a Geisha” says a lot for the newfound pulling power of the Middle Kingdom and its top performers.

“Films are at least partly about putting famous people onscreen,” says Wang Zhongjun, chairman of Hua Yi Bros Film Investment Co., the largest independent production house in China. “So, putting Zhang Ziyi in an American film means that she is now a star in the U.S., too. This is an important moment for China.”

These are good times for Chinese cinema, though a number of issues bubble below the surface, threatening to sour the milk. First among these is piracy, a problem that despite tougher laws and greater government vigilance appears to be getting worse.

Close to 95% of films watched in China are estimated to be on pirated discs (either DVD or its older, and lower-quality cousin VCD). The Motion Picture Assn. of America estimates that losses to its member companies in 2004 were close to $280 million, a sizable chunk of the $896 million it estimates was lost in the Asia-Pacific region as a whole.

“The Chinese government has made it very, very clear that intellectual property rights protection is an important priority, and last Aug. 27, vice premier Wu Yi announced the launch of a special IPR protection campaign covering 15 key provinces and cities,” explains Dan Glickman, MPAA president.

“That said, clearly China has not made substantial progress toward a significant reduction in copyright infringement levels and has not met its (World Trade Organization) commitment to provide effective enforcement, and particularly criminal enforcement against piracy ‘on a commercial scale’ ”

However, with cinema screens in China still numbering less than 2,500, and a quota of 20 films set on imported pics, some studios joke privately that without the pirated discs, none of their films would be seen in China.

Figuring that the market, and not just the government, has a role in controlling pirates, Warner Bros. launched a major homevideo distribution and marketing arm in China in February.

With 125 titles released initially, and an additional 150 or so due by the end of the year, the move represents a brave step for a U.S. studio — home entertainment has not been thought of as a major potential breadwinner in the Chinese market in the past.

Prices are very low, with most titles available for around $3: still a lot more than the 90¢ or so a pirated disc costs, but much less than the $10 or more previously charged for legitimate discs.

Columbia Pictures also is battling the illegal trade. Legal DVD copies of its pic “Kung Fu Hustle” were on sale in major stores like Carrefour and Wal-Mart within days of the film’s bigscreen release, before pirates had a chance to get their copies out on the streets.

Last summer, the State Administration of Radio, Film and Television undertook a campaign of its own to protect local product, mandating that “House of Flying Daggers” play uncontested at local cinemas. Throughout that crucial holiday period, imported films were banned from the bigscreen. Net result: For the first time since 1994, when foreign films started getting screen time, domestic films took more than 50% of total B.O. in that period.