What Hit Hong Kong's Film Industry?

A stale formula, bored fans, and a dried-up cash stream are delivering body blows to yesterday's dynamo

It's been a demanding morning for Jackie Chan. The Hong Kong superstar has just finished filming a fight scene for Rush Hour, a $45 million film that will be his first starring role in Hollywood. As Chan walks into his cramped trailer outside a warehouse in Glendale, Calif., his tuxedo trousers covered with dirt, the 41-year-old star seems a bit lost, far from the familiar bustle of Hong Kong. Chan is the first to admit that California isn't ideal for him. "I really didn't want to come here," he concedes. "Back home, I have 120 people working for me. I control what goes into the film. That's what I like."

So why isn't the great kickmaster making his picture back in East Asia's movie capital? Simple. The Hong Kong film industry, says Chan, is in a downward spiral. Asian audiences are bored with Hong Kong movies. Accustomed to the dazzling effects that American pictures such as Titanic and Jurassic Park now deliver, moviegoers are staying away in record numbers from homegrown flicks. "Audiences are seeing the kind of quality that Hollywood can offer, so they aren't watching Hong Kong movies anymore," Chan sighs. That's why Chan has gone to Hollywood, to learn how Americans make films. Maybe, he says, he can use those skills to save the Hong Kong movie business.

It'll be tough, Jackie. When filmmakers from around the region converged on Hong Kong for the city's annual April film festival, they found the once-vibrant industry in a desperate state. Leading movie studio Golden Harvest has just announced a record loss. The number of movies in production has dropped dramatically. Producers are slashing budgets, hammered by the Asian crisis. The city's distributors are fighting a tidal wave of counterfeit video disks. The biggest names are defecting to Hollywood.

Many players are wondering how long the $500 million industry can hold on. "We don't have the money, we don't have the people, we don't have the support," says director Ringo Lam. For the first time ever, Hong Kong moviegoers spent more money on Hollywood flicks last year than on homegrown ones, and spending for local films was down 16%, to $74 million out of $150 million total.

QUICK KICK. If Hong Kong's film industry expires, Asia will lose a special piece of its popular culture. For countless people in Asia and the West who grew up on a diet of Enter the Dragon and Police Story, Hong Kong has long been home to dashing stuntmen, ribald comics, tough triads, and martial arts masters. Quentin Tarantino and other hip U.S. filmmakers draw on Hong Kong crime sagas for inspiration. The best Hong Kong filmmakers, such as art-house director Wong Kar-wai, win prizes at Cannes. Directors and stars such as John Woo, Michelle Yeoh, and Chow Yun-fat juice up Hollywood fare such as Face/Off and The Replacement Killers.

A dying film industry would also be a setback for Hong Kong's industrial policy. Chief Executive Tung Chee-hwa wants to steer Hong Kong away from low-tech manufacturing and into businesses that add more value. He has designated filmmaking as one of 14 key sectors for growth. A terminal decline would deal a blow to Hong Kong's ambitions of developing the expertise and resources necessary for related industries such as computer software. With Singapore, Malaysia, and Taiwan all offering tax incentives for the multimedia business, rivals are "stealing the march on Hong Kong," says Roderick W. Houng-lee of Price Waterhouse's entertainment and media unit.

The sorry state of Hong Kong movies is a shocking contrast to just a few years ago. In the early '90s, the industry was on its way to becoming a powerhouse. Its film studios, which introduced Bruce Lee to the world in the 1970s and Jackie Chan in the 1980s, were producing 230 movies a year. Cheap to make at a few million bucks apiece, a hit could gross up to $10 million. Producers made money on volume, with financing from distributors. They filmed quickly and often without sound, adding dialogue later in Cantonese, Mandarin, and Japanese.

Success had emboldened Hong Kong to try for bigger things. Production houses figured they would soon be showing movies to vast mainland Chinese audiences. The two top studios, Golden Harvest and China Star Entertainment, planned to build multiplexes and production facilities on the mainland. Companies such as Television Broadcasts Ltd., owned by mogul Sir Run Run Shaw, were ready to broadcast films to Chinese audiences worldwide. Lured by easy money, Chinese gangs, known as triads, muscled their way into the business.

Now, output has collapsed. This year, producers will be lucky to make 90 pictures. Movie fans enamored of Hollywood pyrotechnics are bored with low-tech chop-'em, sock-'em flicks and formulaic love stories. Some theaters have cut prices to lure audiences back to local movies, to no avail. "Chinese movies aren't produced that well," says 12-year-old Chang Ya-chin, the daughter of actress Siu Fong-fong, a big Hong Kong star of the 1970s. "The plots are pointless, and the camera work is dizzy."

SHENZEN'S GAIN. Not only local moviegoers are giving the industry a pass. From Singapore to South Korea, once-loyal fans are voting thumbs down. "Koreans are bored with Hong Kong films as they rarely come up with new subject matter," says a spokesman for Dong-A Export Co., a Seoul film distributor that has stopped ordering Hong Kong films entirely after finding them big losers at the box office.

As a result of these trends, Golden Harvest lost $6 million in the first half of fiscal 1998, compared with earnings of $677,000 in the same period last year. Shares of Golden Harvest's distribution arm are down 53%, to just 7 cents now. "It's more and more difficult to make money," says studio head Raymond Chow. Studios Shaw Brothers and China Star are stuck in the doldrums as well.

Asia's economic crisis is making the problem far worse. The second-largest exporter of films worldwide after Hollywood, Hong Kong has long relied on financing from South Korea, Taiwan, and Southeast Asia. Now, those sources of cash are drying up as distributors there contend with far weaker currencies and economies.

Wellington Fung, general manager of Media Asia Group, which produces five films a year, knows how bad the impact has been. He had to cut the budget of his latest picture, a police action-comedy with rising star Michael Wong, by 20%. Beast Cop originally had a budget of $2.3 million. But then the producer started getting calls and faxes from financially strapped Asian partners backing off from their original commitments.

Hong Kong's government is alarmed. In naming filmmaking a key industry, it is committing its most precious resource: land. In March, the government designated 30,000 square meters in the New Territories for construction of a film studio. But some question the logic. "Why should I go to a studio in Hong Kong?" wonders Fung. "I can just go across the border to Shenzhen" where production costs are cheaper. Others call for direct government support. "We have to go back to the basic problem," says Casey Lai-Ying Chan, managing director of Golden Harbour International Films. "We don't have the money."

Catching up with Hollywood's financial strength would be a huge undertaking. Ringo Lam directed his first Hollywood picture, the Jean-Claude Van Damme vehicle Maximum Risk, in 1997, and had a budget of $30 million--10 times that of a well-financed Hong Kong picture. The extra money bought Lam the location shots and special effects he could only dream about in Hong Kong.

At home, filming on location is a perilous adventure. Like most filmmakers, Lam can't get police permission to shoot a scene in the city. Instead, he has to resort to tricks. "There's no way the government will allow you to block the streets," says Lam. "So I just learn to steal shots." He films quickly--and illegally--rushing to finish before the police arrive. Inevitably, quality suffers.

If the Hong Kong government wants to help, a good place to start would be cracking down on counterfeit videos. "If we could have half of the income of the pirates," says Golden Harvest's Chow, "this would be a damn good industry to be in." Counterfeiters can churn out high-quality copies on video compact disks for sale on street corners just a day after the film's release at a fraction of the price of a ticket, robbing millions in potential theater sales. "I can buy four movies for $13," admits a slightly embarrassed hotel executive. They are so cheap, she adds, "when I'm done I can just throw them away."

While a crackdown might solve some immediate problems, the only way Hong Kong can compete against Hollywood over the long term is by making bigger-budget pictures with higher production values. And the only way that can happen is by grabbing a bigger market.

So Hong Kong producers look enviously at China's huge population. The potential is attracting newcomers. Citicorp has a partnership with Golden Harvest, U.S. insurer Metropolitan Life, and Temasak Holdings, owned by Singapore, to produce about 25 movies in China. In 1996, some 200 million Chinese went to the movies, a number that can only grow. Golden Harvest has already opened several theaters in Shanghai and plans dozens more.

STILL OUTSIDERS. Yet for now, Beijing is maintaining a strict quota on the number of foreign movies allowed into the country--and Hong Kong movies still count as foreign, regardless of the fact that Hong Kong is now part of China. "Everybody was hoping China would open up," says producer Hoi Wong, managing director of First Distributors (H.K.). "But it seems the system will remain the same."

The censors also interfere. Citi's first movie, The Soong Sisters, which focused on the famous siblings who married Sun Yat-sen and Chiang Kai-shek, was filmed in China with the help of a Chinese studio. Still, propaganda commissars ordered cuts in the movie. As a result, "people are staying away from co-productions in China," says Wong.

Despite the problems, the production houses soldier on and hope for recovery. Golden Harvest, for example, has a new joint venture with Taiwanese computer giant Acer Inc. to provide content for video games based on movie characters. Yet it's hard not to be pessimistic. "In our industry, once you have lost a fan, it's difficult to get him back," says Chow. Unless the studios can turn things around, those fans will be harder and harder to find.

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