When the 24th Hong Kong Film Awards pay their annual tribute to the film industry next month, the drop in the number of movies produced in the SAR in 2004 would be on everyone's mind. What was once among the most prolific filmmaking centres is facing perhaps its biggest challenge, for film productions are projected to fall further from last year's dismal 60.

But does that mean the end of Hong Kong films? Not necessarily, says Woody Tsung, chief executive of Hong Kong, Kowloon and New Territories Motion Picture Industry Association. On the contrary, the situation is "good", he says. Though focused on the health and future of HK films, Tsung surprisingly is not that worried about the falling numbers, for he says it's a natural result of the changes in people's lifestyle. And he refuses to blame the economic downturn or the SARS outbreak for that.

"Hong Kong can weather this storm, but we definitely need some changes to help it survive," he says. "Over the years, Hong Kong has changed a lot and the nature of the film industry too has to change... No longer can studios rely on an audience that accepts anything they churn out. People today have so many entertainment choices: the Internet, video and online games, karaoke. Or, they can go to Shenzhen for shopping."

Also, he says, "people today have more money... They go abroad, get exposed to other cultures and ideas. These raise their expectations... and they demand better quality." Films such as "Star Wars" and "Day After Tomorrow" have raised the bar, driving local audience's tastes for Hollywood movies. "Now HK films have to fight with these big budget Hollywood films. So it means we have to raise our standards."

While industry figures from the 70s and 80s, when Hong Kong regularly made more than 200 films a year, look impressive, the quality of most of them left a lot to be desired, says Tsung. "In the old days, Hong Kong had a manufacturing base. There were no computers, no Internet, so most people didn't know as much about what was going on in other countries. Also, they didn't speak a lot of English. So for them movies in their own language were the main form of entertainment. That's why local films were very popular."

Film studios minted money. "People would flock to the cinemas, irrespective of the quality of the films. So there was no incentive to do something new," he says. But now higher audience expectations "force studios to make better films", instead of run-of-the-mill productions or copies of successful foreign films.

Tsung says: "After 'Infernal Affairs', many films tried to make money by copying its formula. But that strategy doesn't work anymore." Local filmmakers should make bigger and better films on their own.

The fall in the number of films can be partly explained by the studios' present-day tendency to make fewer, but better, movies. They are putting more of their money into big productions such as the groundbreaking "Kung Fu Hustle". Many films still may be badly written or marred by bad acting, but "they have the right attitude... and are trying something new."

Raising of standards apart, the biggest hurdle for Hong Kong films is finance for promotion and distribution. A relatively big budget - say HK$40-million - film can do a lot with a 10-per-cent advertising budget. Such an amount is sufficient to draw enough viewers to rake in a profit. But a 10-per-cent ad budget would give a HK$4-million film only HK$400,000 for publicity. "How much advertising will that get you?", Tsung says. Not enough to draw people to the cinemas. "Medium-budget films don't attract investors, for fear of not being able to make money."

The lack of diversity is another problem plaguing our films, for they tend to focus on some recurring themes to capitalize on the commercial appeal of their Hollywood counterparts. In a city with a relatively small movie-going population, studios need to pay more attention to cinegoers' mindset, Tsung says.

"Art house films would never be popular in Hong Kong not because Hongkongers cannot appreciate such movies, but because there's no culture to support them. We need to have this if we want to diversify the kind of movies we make."

While other Asian cities may be busy raising the profile of their film industries, the reverse is true of Hong Kong. Its movies have always been popular in the region, especially in Taiwan and in countries such as Malaysia, but "what we need to worry about is the shrinking of these traditional markets".

The reason for this is piracy, he says. Since many HK films earn the majority of their revenue from outside the SAR, rampant piracy is costing the industry untold losses. Films that in the past could have been counted on to make money are under attack in the overseas market, Tsung says. "A pirated copy in Taiwan or Malaysia can be bought very cheap", so why should people pay to see it in the cinema? Copyright infringements cause huge losses to the industry, and piracy is an issue that "cannot be resolved". For, strategies like improving security or technology to prevent piracy wouldn't eliminate the problem.

"Piracy is here to stay. Softwares such as Bit Torrent (BT) make it impossible to stop it," Tsung says, referring to the peer-to-peer (P2P) data transfer technology that allows users to share files without logging on to a central server. Because the data is not transferred through a third party, there's no way to stop unauthorized copying of copyright materials such as films.

The only way to end piracy, he says, is by educating the public. "People need to see that buying pirated copies is a bad thing." But that is an uphill task - because it is the better educated, according to a recent survey, who are more likely to buy pirated copies or download contents illegally. But despite that, educating people is still the best option, feels Tsung. There's a need for a clear framework for protection of intellectual property and that can be achieved only through government action.

On the other hand, the mainland's film industry appears to be headed in the opposite direction. A record 212 movies were made in 2004, compared with 140 in the previous year, earning 1.5 billion yuan (US$182 million) in revenue. The mainland market offers a huge potential to HK film-makers, he says, but HK films still have a long way to go before being confident of turning a profit there.

Some sectors such as financial services are justifiably upbeat about the prospects offered by the Closer Economic Partnership Arrangement (CEPA). But the challenge for HK films is not trying go open up the mainland market, but to know what happens when they get there. Under CEPA, HK films are not subject to a quota on the mainland because they are treated as domestic productions. But what is needed for the mainland to salvage HK films is the right distribution infrastructure. And, says Tsung, "that has not happened yet".

The small number of firms authorized to release films on the mainland is another obstacle. Given the bottleneck, many HK films may not even make it to the mainland screen. The low penetration of cinemas and the exercise of releasing films in smaller towns and cities often mean having to deal with local mainland authorities, and that makes the process more complex, he says.

The wide income disparity between cities, especially in the eastern provinces, and rural areas, where cinema ticket is a luxury, is another major problem. The true potential of the mainland can only be realized when wealth is more equally distributed, Tsung believes.

Overcoming these difficulties is "not impossible, but the mainland market is not there yet". Despite the challenges, however, Tsung is optimistic that the HK film industry will survive. "HK movies will never die. Despite a great number of Hollywood movies and their success, local audiences will always want to watch something in their native language that tell stories about things that they know about."

(HK Edition 03/01/2005 page4)