Pessimism abounds in Hong Kong

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Well, it seems pretty dark.

All must look dim under the shadow of the global financial crisis, not least the once thriving Hong Kong film industry. Even before the financial tsunami hit, pessimism permeated the industry. The market for local films continues to shrink, while studios with big budget flicks look northward for bigger box office returns. The number of productions has fallen with the number of releases, which is not helped by the delays caused by the limited slots for film releases before and after the Beijing Olympics in August, and the Chinese authorities' lengthened script and release approval process that the Hong Kong-China co-productions must be subject to. To date, no less than three listed studios -- Universe Films, Mei Ah Entertainment and Mandarin Films -- have recorded losses for the first six months of the year. It doesn't look bright for the Hong Kong filmmaking community.

In 2007, filming of 56 local productions or co-productions took place in Hong Kong; up to October 22, 2008, the number has fallen to 31, according to the government-run Film Services Office. Local releases dropped from 60 in 2007 to 43, up to the third week of October . However, total boxoffice intake has increased 11%, from HK$860 million ($111 million) to HK$893 million ($115 million) for the same period from 2007 to 2008, according to the Hong Kong Kowloon and New Territories Motion Picture Industry Association (MPIA).

The boxoffice champion so far in 2008, Warner Bros.' $7.4 million-earning "The Dark Knight," has already surpassed last year's winner, "Spider-Man 3," which took in $7.1 million.

The Reality: More people are going to the cinema, but not to see locally-made films.
"Hong Kong's film industry is still healthy, but just the market share of Hong Kong films is shrinking," says Ricky Tse, head of distribution, Media Asia Distribution Ltd, which is bringing to this year's AFM, "Lady Cop and Papa Crook" by "Infernal Affairs" screenwriters Alan Mak and Felix Chong, among others.

Indeed, of the ten top highest-grossing films so far in 2008, only two -- "CJ7" and "Red Cliff" -- were Hong Kong co-productions that had involved the region's production personnel or investment. The rest were all Hollywood exports. With a $6.6 million boxoffice take, Stephen Chow's "CJ7's" place as the highest grossing Chinese-language film of 2008 seems unlikely to be challenged, especially with imported potential blockbusters such as the new James Bond film "Quantum of Solace" waiting in the wings, poised to bump other local films off the top ten list. The $80 million John Woo epic "Red Cliff," which now places ninth on the top ten list, earned $3.1 million in the special administrative region, a sum that pales in comparison to the record-breaking $44.1 million it took in China.

It is no secret that the Hong Kong studios see the billion-yuan Chinese market as a lifeline for the local film industry. At present, at least five Hong Kong-invested co-productions are shooting in China. Yet, the limited slots available for promotion and launch of new releases before and after the Beijing Olympics, as well as the stricter and slower script and approval process imposed by the Chinese authorities this year, has caused delays for numerous Hong Kong-China co-productions. "This affects the release and delivery of the films and the turnover from the investment," remarks Tse.

"The Hong Kong film industry has already experienced a very hard time during the past decade," adds Alvina Wong, director of Mandarin Films and daughter of founder/chairman Raymond Wong. "It will become even worse since the current global financial crisis is only beginning. There will be even fewer Hong Kong films made that could lure audience back to cinemas."

However, some industry insiders believe that the Hong Kong and China film industries will emerge relatively unscathed from the present world financial quagmire. "The film industry in Hong Kong and China will certainly be affected by the financial crisis, but not to the extent faced by U.S. and Europe, especially since the Chinese market is growing," says Nansun Shi, veteran producer and managing director of Irresistible Films, which has produced two directorial debuts -- Ivy Ho's "Claustrophobia" and Chris Chow's "Strawberry Cliff," repped by Edko Films at the AFM. In the past few years, U.S. studio and independent films were financed by hedge funds, but it's certainly a different scene now since Hong Kong and Chinese films are usually backed by equity financing. Moreover, "the Chinese market remains liquid," she adds.



Some are even more ambitious. "Chinese investments will remain plentiful, whereas the decrease in funding available to film productions in the U.S. will lead to fewer U.S. film releases in the next few years," says Fred Wang, chairman of Salon Films, the region's oldest equipment and post-production company. "As the number of U.S. production decreases, distributors will look for products elsewhere. We can supply for that demand," he states.

A grand statement indeed, but in order to satisfy that demand, new talents are crucial. "There is a fault line in the industry. We have to be able to create stars. The industry is facing a big problem with lack of successors," Shi says. To that end, one of the targets of Irresistible Films is to discover and nurture new talents, both in front of and behind the camera. Focus Films is also launching an initiative named "Focus Fights" that aims at finding new directors. The $5.2 million project is set to produce six martial arts-themed films with commercial potential in the next three years. Nevertheless, both the scope of Irresistible Films and the "Focus Fight" are not limited to Hong Kong but also include Asian talents.

Certainly, for Hong Kong filmmakers to think outside the box means to think outside of the territory. Cross border joint ventures such as Irresistible Films is essentially a $16.75 million fund formed by the Hong Kong-based producer of "Lust, Caution" and Edko Films boss Bill Kong, Japan's Avex Entertainment and Hong Kong financier Hugh Simon; Media Asia has formed with Avex Entertainment and Avex Asia the $50 million Pamiem film fund to produce films in the next five years. Salon is now partnering with Australia's AMPCO films to co-produce the family-oriented fantasy "The Last Dragon," directed by Australia helmer Mario Andreacchio, and is forming alliances with production companies, talent agencies and studios in Japan, Korea, Taiwan and Singapore for a future slate.

Finding money from out of town is one way, but the other is to bring money to other towns -- a move made by Emperor Motion Pictures (EMP) when they invested in Oliver Stone's Bush biopic "W," which in turn brought higher international returns as well as visibility to the Hong Kong studio. EMP, whose earlier release "Connected" was one of the few local films to pass the HK$10 million ($1.3 million) mark, will handle the distribution of "W" in Hong Kong.

Popularity of Hollywood exports continues to eclipse local products in the region, a fact that is beneficial to leading distributors such as Intercontinental Films Distribution. Four of the boxoffice top ten hits so far this year were releases of Intercontinental -- which represents majors including Paramount, Buena Vista International, and Dreamworks Animation -- namely, "Kung Fu Panda," "Enchanted," "Indiana Jones and the Kingdom of the Crystal Skull" and "The Chronicles of Narnia: Prince Caspian." The company foresees little negative effects of the gloomy economy, says Perry Yung, Senior Director Sales and Marketing of Intercontinental Group. "The slates from the U.S. majors are very strong in 2008-09," explains Yung. "From experience, whenever there is a downturn in the financial market, film exhibition business improves, especially for Hollywood films. When the economy is good, people travel or go to karaoke; but when the economy is down, more people go to the cinema because it's a relatively cheap form of entertainment."

The distributor is now trying to bring its expertise to local productions. It has released the Gordon Chan-directed "Painted Skin," Hong Kong's contender for Academy Award for Best Foreign Language Film, and has scheduled Tsui Hark's "All About Women" for December. "As a member of the Hong Kong film industry, we're trying to help the local filmmakers. A part of our new strategy is to package and market local productions the same way we do for Hollywood pictures, as well as to release them through our exhibition network," Yung says. Intercontinental's sister company Multiplex Cinema Ltd (MCL) currently operates 30 screens in Hong Kong.

During this challenging year, the Hong Kong film industry needs all the help it can get.
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