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The Heart of Asia’s Film Business

Backed by its rich cinematic history, Hong Kong can capitalise on the digital era by adapting new models to film financing, says entertainment lawyer Tom Ara. The legal expert from leading US law firm, Greenberg Traurig LLP, spoke at last month’s Hong Kong International Film & TV Market (FILMART), 23-26 March.

Mr Ara told participants at a seminar on business opportunities amid the age of media convergence that there has never been a better time for content creators, thanks to the digital era.

What’s your assessment of the film industry’s investment environment?
I think the environment is generally a very healthy one, particularly because the number of buyers of content such as film or episodic programming, is growing. Whether it is buyers of online content or cable in the US, or satellite services in Asia, there are many more buyers of content today than there have ever been historically.

In terms of financing film projects, there are some stark differences from what the business model was 10 years ago. In the US market, for example, studios that are traditionally focused on the domestic markets were the primary source of revenues. In fact, maybe 60 per cent of the revenues for any given US film projects were domestic. We are now seeing that has been flipped – almost 70 per cent of the revenue come from foreign markets and 30 per cent from domestic markets.

How can online content producers overcome challenges such as protection of intellectual property?
I think technology is the best and worst thing that happened to copyright. It permitted piracy, and that was because the content was not otherwise available legally. However as tides are turning and more content is going online, people are willing to pay if it’s good quality.

The savior of online content distribution model would be to make sure that content owners find ways to make it available at the right price point, which will encourage users not to download it illegally. It certainly has been the case when Napster came out and iTunes followed. People are willing to pay 99 US cents for a song and stop downloading illegally because they worry about downloading viruses, not to mention that they would be violating the law. I think audio content consumers feel the same way.

Do you foresee online content overtaking the traditional market?
Digitalisation has had an important impact as it’s been opening markets like China, which has been a major player in buying American content. Transformer was the biggest film on China’s film release box-office-wise. And I think that is an important aspect on the decision on how films are now made in the US, what audiences are targeted, surely studios would want films that have a much broader appeal than just the US market. The decisions being made by studio executives and producers in general are on these bigger budgets, big-scale event movies that have international appeal.

I think FILMART has a real base for [networks] to be cultivated and grow. It’s a great platform not only for China, but also Singapore, Malaysia. This really is the heart, in my view, of the historical film business.

What is Hong Kong’s role in bridging the US and China markets?
Hong Kong is very important for several reasons, particularly for mainland Chinese companies that are seeking to invest in the US. Hong Kong typically tends to be the location from which financing is sourced or where the financing is held because of certain challenges of expatriating money from the mainland. Hong Kong works as a conduit of source for the transition of funds from Chinese companies to US projects. China has an incredible opportunity to grow its own industry, but it would require some regulatory changes in China for Chinese companies not to have to rely on Hong Kong as a conduit.

The city’s entertainment industry has many of the elements that Hollywood has had; the grand studios, and talent under contracts for multiple projects. You only have to look back to the history of Hong Kong’s filmmakers such as the Shaw Brothers, Golden Harvest and many more. I think Hong Kong now has to transition to the digital era and adapt the creative model in film financing.

Hong Kong takes centre stage when it comes to IP in many fields, is it the same for the entertainment industry?
Copyright goes to the heart of content creation. China has had the challenge to copyright protection, and I think the environment in Hong Kong has been more favourable to content owners historically and it gives the city a distinctive advantage. Content creators, wherever they would be located, have to focus on the ownership of that content and protecting that copyright because that is all they have. If there is no protection for it, as valuable as the content may be and the cost that went into creating it, piracy will diminish all of that.

What role does FILMART play in terms of creating and financing films?
I think it’s a great venue for people from all over Asia to get together and talk about the need to change the environment in filmmaking and film distribution. The lines have been blurred in all of these film conferences around the world, and I think FILMART is a good example of that.

It’s not just film buyers and film sellers going to these conferences, but people who are in the television business are coming to these conferences to look for films to buy for their various channels, and television content creators are also coming to sell as well. I think FILMART has a real base for all of that to be cultivated and grow. It’s a great platform not only for China, but also Singapore, Malaysia. This really is the heart, in my view, of the historical film business.

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