Hong Kong financier retreats from film business

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For some, the sun shines brightly over entertainment ventures here in Asia, but others may see a dark moon rising.

Though the MPAA recently released a report which said international box office increased 13% last year, with the largest growth in the Asia/Pacific region (21%), Standard Chartered Bank has shuttered its Hong Kong-based film-financing unit. The U.K.-registered bank, which established the film-financing unit in 2006, seems to have taken an about-face. Valerie Tay, manager, corporate affairs, group wholesale banking, told Film Journal International, “Standard Chartered Bank maintains a client-led strategy which focuses on solutions that cater to our clients’ needs. Film financing is not a key business area for existing clients in our footprint across Asia, Africa and the Middle East.”

And while bank profits after taxes jumped 29% to $4.2 billion last year from $3.3 billion in 2009, Standard Chartered apparently did not like the risk ratio involved in a business where Asian producers are slow to adopt gap financing, instead relying on a combination of their own cash flow, regional pre-sales and private equity from investors outside the entertainment industry.

It's a pity: This leaves the gap-finance business to U.S. banks that have little understanding of the Asian filmmaking market and little stamina to teach Asian producers about new financial instruments, especially in China, which accounted for 40% of Asia/Pacific box-office growth.

Indonesia Faces Tax Crisis
The big story this month in Southeast Asia is the film situation in Indonesia.

While both the Indonesian government and the MPAA are being tight-lipped about the situation due to the sensitivity of negotiations, it seems that there is a real danger of MPAA members withholding films from Indonesian screens if a little-enforced tax (enacted in 1995) is slapped on imported films.
Noorca Masardi, spokesperson for 21 Cineplex, Indonesia's largest exhibition chain, claims that imported films already pay a 23.75% excise duty, a 10% tax to the central government, and another 10 to 15% of the profit from ticket sales to regional governments.

"If the government imposes the import tax, it will kill the cinema industry in Indonesia,” Masardi said. “If no solution is found, Indonesian cinemas will close down one by one.”

Indonesia’s film industry has declined recently. Last year, 81 Indonesian films were released, slightly down from 83 films in 2009, and a bigger decline from 91 releases in 2008. In 2009, six local films sold more than a million tickets each at the box office. In 2010, only one movie broke the million threshold.

With only about 500 screens in a country of 237.6 million people, a loss of imported films would be devastating to the industry.

A statement released on Feb. 22 by Mike Ellis, president and managing director of the Motion Picture Association (MPA), Asia/Pacific, said, “Historically, Indonesia has followed internationally accepted practices by assessing import duties, if at all, on the basis of the physical carrier medium, on a per-meter-of-film print rate. This practice has been adopted by major film markets across the world.

“A recent regulation clarifying that import duties and related taxes are to instead be based against the royalties payable to the overseas distributors was implemented by the Customs authorities. Such proceeds are already subjected to entertainment (box office), income and withholding tax. This regulation has a significant detrimental impact on the cost of bringing a film into Indonesia and has introduced substantial market uncertainties.

“The MPA and its member companies have been in discussions with Indonesian Government officials for the past three months on this matter. These discussions remain ongoing and we are hopeful of a positive outcome.

“The MPA would like to clarify that there have been no joint commercial decisions discussed or undertaken. Decisions on the release of films in any market across the world are always individually determined by each studio member of the MPA based on their respective business concerns and in response to current market conditions, including any applicable import duties.

“The MPA is not involved in or responsible for the distribution of its member companies' films."

MPAA/MPA member companies include Paramount Pictures, Sony Pictures Entertainment, Twentieth Century Fox Film Corp., Universal Studios, Walt Disney Studios Motion Pictures and Warner Bros. Entertainment.

Popcorn Dispute Ends in Fatal Shhoting
And finally, from the theatre of the absurd, please be careful who you sit next to in the cinema and be quiet when you eat your popcorn.

At a screening of Black Swan in the Latvian capital Riga, a 42-year-old man was shot and killed for chomping on his popcorn too loudly during the screening. Arrested and charged with murder was a 27-year-old man who had argued with the older man during the screening, asking him to chew quietly. The madness depicted onscreen seems tame compared to this terrible incident.

Stay tuned next month for an exclusive interview with the MPA’s Mike Ellis, in which he talks about new business models for entertainment here in Asia.

Contact Scott Rosenberg with relevant news stories at prdivision@gmail.com. You may also follow him on Twitter @scott_cos or on Facebook at D Scott Rosenberg.