He wanted to do something different. When film producer Wang Zhongjun started working on the film "Cellphone" in 2003, he felt he needed to do something innovative to ensure profitability. Product placement seemed like a good way to go.

Wang, president of Huayi Brothers Taihe Film Investment Co, eventually won sponsorships from telecoms operator China Mobile, mobile phone maker Motorola, and auto manufacturer BMW.

These three firms' logos appear repeatedly in the film, directed by Feng Xiaogang. It seemed like a great idea at the time, but the final product didn't come out exactly as planned. It all looked a bit embarrassing.

Yet Wang needed the partnerships to survive, mainly because piracy is a huge problem in China. Even when people go to the cinema, they usually show little interest in domestically made films.

Before the film was shown, Huayi clinched a small deal with MTone Wireless, a domestic wireless valued-added service provider (SP). Under the agreement, MTone developed an SMS-based (short messaging service) mobile phone game with the same title as the film by paying Huayi Brothers millions of yuan. It was the first multimedia mobile game in China.

It was a small deal, but "it amounted to the same revenues (that we could generate) from box office sales in a mid-sized city in China," says Wang.

"Cellphone" went on to become a huge hit in China, with revenues exceeding 50 million yuan (US$6.3 million), a fairly high figure in the country's relatively small film market.

Wang later produced another film, "Love Message", with sponsorship from telecoms firm NEC, Internet portal Sohu.com, and cellular operator China Mobile.

The project was not a box office hit because it was a purely commercial film dedicated to promoting the sponsors' images and brands, but Huayi still made some money off another deal with Mtone.

Wang says wireless value-added companies can provide sustainable revenue streams.

"We will not produce films solely for sponsorships any more, but Huayi will always seek co-operation with SPs."

Huayi later sold all the rights related to mobile phones to Mtone when it released the blockbuster "A World Without Thieves" and the recent comedy "A Chinese Tall Story".

"We set a precedent (by teaming up with Mtone) for co-operation between film producers and SPs," says Wang.

Such deals underline how Chinese wireless SPs are creating a new business model to gain better access to the country's rapidly growing wireless value-added service sector, particularly the mobile gaming market.

"The good thing is that I can get the money before the films are shown," Wang adds.

"Mobile phone games definitely benefit advertising, marketing and distribution, but the co-operative agreements don't necessarily boost the numbers at the box office."

Revenues generated by China's struggling film industry stood at 4 billion yuan (US$500 million) in 2004, according to Wang's estimates. The losses caused by piracy could amount to 40 billion yuan (US$5 billion). This is why all revenue sources are important to film producers.

Before the films were shot, Wang gave the scripts to Mtone to help it develop wireless offerings that could attract mobile phone users to go to cinemas.

Wang is not the only one benefiting from co-operative agreements with Chinese SPs. Hong Kong actor and director Stephen Chow struck a similar deal with NASDAQ-listed Kongzhong Corp when he released "Kung Fu Hustle" in December 2004.

Wang estimates that 10 to 20 of the approximately 200 films produced in China every year are now using similar deals with SPs. He recently struck another deal with Mtone for the upcoming film "Banquet", also directed by Feng Xiaogang.

"A Promise", a big budget film directed by Chen Kaige, also has a tie-in with a mobile game developer.

Wang Weijia, chief executive officer of Mtone, says more than 90 mobile phone models available in China now support Java games. This is fuelling the popularity of mobile gaming.

Traditional wireless application protocol (WAP) games have to be played on mobile networks, but Java games can be downloaded, meaning users do not have to stay online to play them.

Shanghai-based research firm iResearch estimates that there were 13.91 million mobile gamers in 2005, and says the figure could reach 31.69 million by 2008. China now has about 390 million mobile phone subscribers.

Revenues from China's mobile gaming market are forecast to hit 1.4 billion yuan (US$180 million) in 2005, up 79 per cent year-on-year, according to Beijing-based research house Analysys International. The sector is projected to reach 5.9 billion yuan (US$733 million) by 2008.

Deals between film producers and SPs are not only about mobile gaming, however. Wang Weijia says Mtone has developed a number of wireless services such as SMS, MMS (multimedia messaging services), ringtones related to the films, and even downloadable previews.

Mobile phone users can download film soundtracks and use them as ringtones or colour ring back tones (CRBT).

"We are creating more added value for the films," says Wang Weijia.

Both Wang Zhongjun and Wang Weijia have high expectations for 3G (third generation) mobile services, which will offer much higher downloading speeds.

"With 3G, wireless offerings will be more media-rich," says Wang Weijia.

Wang Zhongjun does not expect SPs to act as a significant revenue source in the short-term, but he sees deals with SPs as major marketing tools for his films. 3G technology, however, could give rise to significant revenue contributions from SPs over the long term, he says.

The Chinese Government is widely expected to grant licences to operators to build 3G networks this year, which will have a major effect on the wireless value-added service sector.

The producer of "A Promise" is also working with several companies to develop online games related to the film.

Film producers' increasing interest in mobile phones and the Internet will help further expand China's wireless and online value-added service sector, says a report by Analysys International.

"Wireless valued-added services were previously limited to entertainment content," says the report.

They have since become a major marketing tool for film producers, however. Yet foreign film producers might not be able to cash in on deals with Chinese SPs.

"We need to simultaneously develop mobile games and other offerings with the production of the films," says Wang Weijia.

"It's hard for us to collaborate with foreign film producers, and imported films are largely limited within cinemas. There are no well-defined rules for collaborations between foreign film makers and SPs outside the cinemas."

(China Daily 01/16/2006 page3)