Rising in the East

Asia's film sector shows resilience; all eyes on China

These days the answer to nearly every question about the Asian film industry is China. The awakening of the world's most populous nation and the ongoing steps toward it becoming a cinematic powerhouse are not only turning the global boxoffice charts on their heads, they're also redefining the meaning of the word "co-production" sucking in the once mighty Hong Kong industry and forcing film-makers around the region to grasp the nettle of a prickly, proud and politically unpredictable industry.

Nowhere is the conundrum of China's film industry better illustrated than at the top of this year's Chinese boxoffice charts. Released in late 2008 and playing strongly through January, "If You are the One" grabbed an astonishing RMB325 million ($47.7 million) to topple "Titanic" from the perch it has enjoyed for more than a decade. But only a few months later the new record was obliterated by the performance of "Transformers: Revenge of the Fallen."

Whether a result of smart decisions by individual producers or by clever central planning, the winter's crop of commercial Chinese movies looks set to be huge. According to China Film estimates, there are more than a dozen Chinese-language movies with the realistic potential to each top RMB100, the symbolic figure that only a couple of years back was barely passed by two or three movies. The slate also is a mash-up of films from China, Hong Kong talent working in China and even a Taiwanese film targeted at the mainland market. Hong Kong has seen several of its biggest name directors simply relocate to Beijing, the center of political influence and the capital of China's film industry. These include John Woo, Peter Chan, Tsui Hark and Gordon Chan. Still others including Teddy Chen and producer Raymond Wong are making big films in China.

This has led to an outbreak of worry that the former British colony has suddenly lost its place in Asian film. The truth is that its influence has been waning for several years as big studios like Golden Harvest withdrew from production and as old-school Cantonese-style pictures (that made a creative virtue out of working quickly on low budgets) have struggled to compete in Asian territories where tastes have become more sophisticated and globalized.

That said, a crumb of comfort is drawn from the summer's boxoffice performances. July and August saw 11 Hong Kong films or Hong Kong/China co-productions released, compared with five last year, and enjoy a combined gross that's up 80%. They included the impressive "Overheard" by Alan Mak and Felix Chong (two-thirds of the "Infernal Affairs" trio) and "Turning Point," the first film to bear a Shaw Brothers production logo in 22 years.

"Our 2008 work 'Lady Cop & Papa Crook' was an effort to adapt ourselves more to the Chinese movie market and win favor with Chinese audiences," Mak says. "However, we have returned to the Hong Kong style in 'Overheard,' and I think it is the way for us to go -- to adapt ourselves to new markets while keeping our style."

Things may be looking up at the boxoffice in South Korea as well. The country became a global cinematic powerhouse at the beginning of the decade, only for its fortunes to slump two years ago as budgets got out of control, hot money from venture-capital funds turned cool and its local and overseas audiences lost faith in the "Korean wave."

CJ Entertainment's disaster movie, "Haeundae" last month become only the fifth film in Korean history to surpass 10 million ticket sales and the first to do so in three years. Other major hits this year include "Take Off" (a Korean "Cool Runnings"-like film involving ski jumping that passed 5 million ticket sales), the light-hearted monster movie "Chaw," "Speedy Scandal" (8.3 million) and "My Girlfriend is an Agent" (4 million).

"We are feeling considerably happier now, and venture-capital firms are looking to reinvest," CJ head of international Mike Suh says. "But while boxoffice is improving, ancillaries are still weak."



Japan, long the world's second-largest entertainment market, is often written off as moribund and about to be overtaken by either China or India. But in the first half -- a year without a Hayao Miyazaki animated blockbuster -- theatrical boxoffice was up a healthy 17%. A strong crop of local titles last year lifted the market share of local films to roughly 60% and Hollywood movies again look set to sell less than one in two tickets.

This year's hits include "Rookies" ($85 million), the latest animated "Detective Conan" film ($37 million), "April Bride" ($33 million) "Crows Zero II" ($31 million) and "20th Century Boys" ($31 million.) The biggest overseas hit of the year is "Red Cliff: Part 2" ($58.5 million), which other territories released in 2008. The film was co-distributed with Avex, which also invested heavily in the film, making it a Chinese-language multinational co-venture and the most expensive Asian film ever made.

There are, however, signs that the Japanese market is now displaying some of the problems besetting the Korean business. These include a growing disparity between the huge success of the biggest films (in Japan this largely means those made with the tried and tested "manga-to-TV-drama-to-movie" formula) and the dismal performances of the hundreds of smaller local titles and imported indie films.

Film financing conditions within Asia have looked relatively stable during the past years compared with Europe and the U.S. (The financing crisis faced by the Korean industry predated October's global financial meltdown.) Films are getting made and, especially in the case of China, with big budgets, too.

The first explanation is Asian filmmakers' heavy reliance on equity funding and their only small use of bank finance, something which dried up elsewhere last year.

Nor does Asia have the widespread soft money (public sector subsidy or tax breaks) that is now being questioned by anxious finance ministries in Europe and the U.S. Singapore and Korea are the exceptions to that pattern. And in both countries tapping public money (from the Media Development Authority and the Korean Film Council) appears to be getting tougher.

The other explanation is the "China factor." Chinese film benefits and suffers from an unstructured pool of "angel" financing flowing from investors in other industries. Cinematically unsophisticated, these benefactors have repeatedly supported the making of films, but in many cases their interest has stopped there. Indeed, few "angel" investors have stuck around to build the film businesses.

Those Chinese companies that are in it for the long term -- such as Peter Chan's Cinema Popular, Enlight Media and the Shanghai Media Group -- appear to have a chance of making some real money.

June's Shanghai festival provided a dramatic example of the way that China has become the center of gravity in Asian cinema. A seminar on co-productions included a number of guest speakers from overseas, but again the discussion veered back to how Chinese filmmakers should open their horizons to include more money, talent and production skills from Hong Kong and Taiwan. There was no concept of a two-way street, one in which foreigners might invest in Chinese films and Chinese firms might back or co-produce non-Chinese stories.

The ability to produce, distribute and invest in the Chinese film market has become a sore point in relations between the U.S. and China to the extent that market access issues were the subject of a World Trade Organization investigation. The August ruling went largely in favor of the U.S. and called for more access for Hollywood to Chinese distribution.

But in the short term it will do little to ease the pressure. First, China says it will appeal the decision; more importantly, while China's domestic market is growing so fast, it has little need for reciprocity of access to the U.S. markets and feels its internal development is threatened by foreign invaders. Simply put, these days Hollywood needs China more than China needs Hollywood.

David Molner, managing director of financier Screen Capital International, says that without foreign investment this year, Hollywood may simply have to endure a slowdown because of the lack of capital. "Either the Asians lead the pack or we have a lull," he says. "Mostly because they're probably going to be the fastest out of the blocks as the economy recovers." It may only be a matter of time before a Korean or Chinese company follows the example of India's Reliance ADA Group and bids for a Hollywood studio.
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