Hong Kong's movie business breathed a sigh of relief as Chinese mainland blockbuster film Ne Zha 2 brought cheer to the battered industry with its widespread release on Feb 22.

The film raked in over HK$6 million ($771,870) on its first day in Hong Kong, outperforming Disney's 2019 hit Frozen II as the most popular animated movie in Hong Kong history. Within just five days of its release in Hong Kong, the film's cumulative box office takings have exceeded HK$16 million, placing it in the top spot this year.

Since its release on the mainland on Jan 29 — the first day of the Chinese New Year — Ne Zha 2, inspired by Chinese mythology, has done incredibly well at the global box office surpassing 13.5 billion yuan ($1.86 billion) as of Sunday, making it the eighth-highest-grossing film in global history.

At a recent premiere, Albert Yeung Sau-shing, chairman of Emperor Group - one of the movie's four distributors in the Hong Kong Special Administrative Region — revealed that the race to secure exclusive distribution rights had been brisk, reflecting confidence in the film's prospects.

Ne Zha 2 arrived amid lackluster interest in films released in the first days of the Year of the Snake. From Chinese New Year's Eve on Jan 28 to the fourth day of the festival, box office takings in Hong Kong were only HK$30.6 million — down more than 37 percent from the previous year — according to Hong Kong Box Office Ltd. Industry pundits are pinning their hopes on crowd-pleasers like Ne Zha 2 to inject life into the market.

Ne Zha 2 was released in Hong Kong 25 days after the film was first shown on the mainland. During the past five years, mainland box office blockbusters were typically released in Hong Kong 40 to 100 days later than on the mainland.

Crucindo Hung Cho-sing, chairman of the Hong Kong Motion Picture Industry Association, says he expects Ne Zha 2 to produce robust box office figures in the city that could bolster local distributors' faith in mainland films, and encourage them to take a more assertive approach to securing releases.

Renewing collaboration

Closer cross-boundary exchanges coincide with the implementation of the Second Agreement Concerning Amendment to the Mainland and Hong Kong Closer Economic Partnership Arrangement Agreement on Trade in Services (Amendment Agreement II). Set to take effect on March 1, the accord was signed by the Ministry of Commerce and the HKSAR government in October, aimed at lifting sectors in which Hong Kong has competitive advantages, including the movie industry.

The amendments will do away with the restrictions Hong Kong service providers currently face on investing in film production, and allow enterprises established by Hong Kong service suppliers and approved by the mainland authorities to distribute buy-out Hong Kong films.

Hung, who is also general manager of Delon International Film, describes the change as a "pivotal moment", saying he hopes it will inject vitality into the Hong Kong and mainland film industries that remain mired in a worldwide downturn.

"The first item of the amendments allows Hong Kong companies to invest in and produce films on the mainland with much greater flexibility," says Snowie Wong Suet-yi, a senior research officer at the Centre for Film and Creative Industries (CFCI) of Lingnan University.

She says, given the lower land and labor costs on the mainland, there will be more Hong Kong film companies shifting their production operations north.

Regarding the second item, Hung believes that lifting distribution curbs provides film companies with the latitude they need to promote their films on the mainland. Since the 1970s, Hong Kong film distributors have built up a strong global distribution network with world-class standards and a wealth of experience.

Since the main text of the Closer Economic Partnership Arrangement (CEPA) was signed in 2003, co-productions between Hong Kong and the mainland have enjoyed the same promotional and screening privileges as domestic films, removing the shackles of import quotas.

By late 2023, filmmakers from both sides had jointly produced 460 movies, averaging about 23 films annually — more than double the pre-CEPA rate of about 10 per year — according to the CFCI of Lingnan University.

Wong says the arrangement has facilitated the entry of Hong Kong films into the mainland market, and enabled the mainland to tap into Hong Kong's advanced production techniques and talent pool. "It's a 'win-win' relationship."

However, Tenky Tin Kai-man, spokesman for the Federation of Hong Kong Filmmakers, says industry insiders appear to have taken a wait-and-see stance regarding the upcoming agreement.

Wong says the SAR government hasn't given specific guidelines or convened briefings for industry stakeholders so far, "leaving many unsure about what they can do". There are also concerns that Hong Kong film producers and investors venturing into the mainland market will divert resources that might have supported local productions.

Hung hopes the SAR authorities set up a dedicated task force to engage with stakeholders, and help establish connections between Hong Kong companies and mainland authorities to ensure the amendments can be implemented smoothly.

Collaboration between the Hong Kong and mainland film sectors has traditionally taken two main forms - personnel exchanges and financial partnerships. Personnel collaboration often sees Hong Kong film professionals contributing to mainland projects. Financial partnerships typically involve mainland firms investing in Hong Kong productions, such as the recent box office hit in the city, The Last Dance, which was backed by Alibaba Pictures.

Wong says strengthening ties with the mainland could help Hong Kong cinema overcome its two biggest hurdles — securing investment and innovating fresh narratives.

Investments from mainland companies can mitigate the financial risks faced by Hong Kong filmmakers, potentially bolstering their appetite for new projects, Wong says. Moreover, "the larger filming spaces available on the mainland will open the door for Hong Kong filmmakers to explore ambitious projects", she says, adding that producing movies like Marvel films that require expansive sets would be impractical in a more confined Hong Kong space.

Having the blues

Hong Kong's total box office receipts plummeted to HK$1.34 billion last year - the lowest in nearly 13 years and a 6.2-percent decline from 2023 — underscoring the dual challenges of dwindling demand and a lack of compelling supply.

On the demand side, the rapid rise of streaming platforms like YouTube and Netflix has shifted audience viewing habits. While specific figures for Hong Kong were not provided in Netflix's 2024 annual report, the overall growth in the Asia-Pacific offers a telling glimpse, with the company reporting revenues of $4.4 billion in the region — up 17 percent from 2023.

The COVID-19 pandemic has entrenched this trend, with audiences growing accustomed to home viewing during widespread cinema closures. A recent survey by Los Angeles-based strategy firm National Research Group shows that, prior to the pandemic, most Americans favored the cinematic experience. But, following the pandemic, 65 percent said they preferred watching films at home, leaving only 35 percent opting for theaters.

Hung says the current slump in the film business is a global issue. According to IMDb, an online film information database, the United States' box office in 2024 was $8.75 billion — down 3.3 percent from 2023 — the lowest it has been since 2005.

From the supply perspective, the lack of enticing film offerings has compounded the industry's woes. Following the groundbreaking success of Avatar in 2009, which drew nearly 300 million theatergoers worldwide and popularized 3D technology, expectations for visually stunning experiences have grown.

Tin says consumers generally see big-budget visual spectacles as better value than standard narrative films when they go to cinemas, but such blockbusters are becoming increasingly scarce globally.

Under the typical revenue-sharing model, cinemas take home 55 percent of ticket sales. With local box office takings of HK$1.34 billion last year, cinemas pocketed about HK$737 million. According to the Hong Kong Theatres Association, the city was home to 55 cinemas as of February, which meant an average estimated revenue of HK$13.4 million.

Nine cinemas in Hong Kong closed last year as the market continued to cool, including Cinema City in Mong Kok, which used to spend HK$5.78 million each month on rent. In factoring in overheads like labor and utilities, the financial strain on cinema operators becomes more evident.

Hung says these closures pose challenges for the film sector. "A diminished number of screens means films cannot be released in a timely manner that would extend the recovery period for investors, potentially stifling future investments."

Larger productions will likely receive priority for screenings, leaving smaller films struggling for visibility, Tin says. This could perpetuate a vicious cycle, making it increasingly difficult for emerging filmmakers to create low-budget projects.

In light of these hurdles, Tin says industry insiders need to explore unconventional release timelines rather than sticking to traditional peak seasons.

Last year, films like The Last Dance and Twilight of the Warriors: Walled In achieved impressive box office results outside peak periods. The former premiered on Nov 9 and, 29 days later, had earned more than HK$122 million, becoming the highest-grossing Chinese-language film in the city. Similarly, the latter debuted on May 1 and became the second Hong Kong film to attain the HK$100 million mark at the box office.

The success of these films can be attributed to strategic off-peak release schedules, enabling them to avoid fierce competition and secure extended screenings, says Tin.

While experts believe government support in boosting collaboration between the Hong Kong and mainland film sectors is important, it is equally critical for industry players to adopt a new, proactive strategy.

Contact the writer at irisli@chinadailyhk.com