Information infrastructure advisory committee




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IIAC Paper No. 4/2001


INFORMATION INFRASTRUCTURE ADVISORY COMMITTEE

Development of the Digital Entertainment Industry in Hong Kong


Introduction

This paper sets out the background information on the digital entertainment industry, the measures taken by the Government to facilitate its development in Hong Kong and invite Members’ comments on how to support and facilitate the further development of the industry.


Digital Entertainment
2. Digital entertainment in general refers to entertainment that involves the use of digital technologies such as computer graphics and interactive techniques. The most common form of digital entertainment is games played in arcades and game rooms, and games played via television, computer or the Internet. Edu-tainment software and traditional forms of entertainment like films, television programmes and animations that employ digital technologies in the production process are also regarded as digital entertainment.
3. The digital entertainment industry is a new industry and it cuts across various service and production sectors1. The industry includes not only the creative artists who employ digital technologies to produce visual and sound effects, but also the people engaged in the hardware and software development, production and distribution, as well as packaging, marketing and retailing2 of digital entertainment products.

International Trends

4. The digital entertainment industry is growing fast in the world. Focusing on the games sector alone, it is estimated that around half of all Japanese households, one third of the American ones and one fifth of the British have at least one game console of some kind at home. The global game business is estimated to be worth US$20 billion a year3. To illustrate the growing importance of the digital entertainment industry, some figures about the US, the UK and South Korea are quoted below –




  • In the US, the survey results released by the Interactive Digital Software Association (the trade group representing American computer and video game publishers) in 2001 indicated that 60% of all Americans aged six or above, i.e. about 145 million people, routinely play computer or video games. In 2000 alone, US$6 billion worth of entertainment software was sold in the US. Not only has the sale of computer and video games in the US recorded double-digit growth for the four consecutive years since 19964, the game industry has also been growing faster than any other sector of the entertainment business (e.g. music and movies)5.




  • The game software market of the UK is the biggest in Europe. It was recently valued at £1 billion. On a per-head basis, the UK is second only to Japan in the purchase of game software6.




  • In South Korea, on-line games are gaining popularity as a result of the availability of broadband networks. While the sale of computer, video, arcade and on-line games jumped from some HK$3.8 billion in 1998 to some HK$6.4 billion in 2000 (+68%), the sale of on line games alone has grown by 1 550% during the same period7.

5. For film production, it is now a widespread practice to employ digital technologies to enhance entertainment value. Recent examples include “Mummy 2”, “Jurassic Park III” and “Planet of the Apes” and 3 D animation “Shrek”. Two recent Hollywood productions were even developed from popular computer games, i.e. “Lara Croft: Tomb Raider”, and “Final Fantasy: The Spirit Within”, which featured computer generated photo realistic characters.


Hong Kong’s Potential
6. In the 1998 Policy Address, the Chief Executive emphasized that Hong Kong should position itself to be, among other things, a regional centre for multimedia based information and entertainment services. The digital entertainment industry is both technology driven and manpower intensive. It requires skills and creativity. Hong Kong, with its advanced information infrastructure and a dynamic and innovative workforce, is geared to ride on the fast evolving digital entertainment wave.
7. Hong Kong has a very robust cluster of original equipment manufacturers of video games and electronic games. Between 1998 and 2000, import of electronic games increased by 49% from HK$4.02 billion to HK$5.97 billion. Export during the same period increased by 33% from HK$5.92 billion to HK$7.86 billion. As for video games and related products, import between 1998 and 2000 increased by 168% from HK$2.32 billion to HK$6.22 billion. Exports8 during the same period jumped from HK$1.05 billion to HK$4.60 billion, representing an increase of 338%9. The rapid and significant increase over the last three years demonstrates the growing potential of the games market in Hong Kong. Furthermore, with about 40% of the households connected to the Internet, on-line entertainment has high potential in Hong Kong. Internet games have already become very popular.
8. On the film production side, the use of digital special effects is getting more and more popular in Hong Kong. Back in 1998, “StormRiders (風雲)” stunned the audience with its digital visual effects. It became a box-office success and went on to win the 1998 Golden Horse Award (Taiwan) for Best Visual Effects. Recent summer hits like “Shaolin Soccer (少林足球)” and “Legend of Zu (蜀山傳)” also employed extensive digital visual effects. In fact, Hong Kong computer graphics production houses have been winning awards locally and overseas with their special effects works in film and advertising productions for years. Recently, some have also ventured beyond the traditional application of digital technologies in advertising and films into the production of computer games and edu-tainment software.
9. Although we do not have ready figures on the size of the digital entertainment industry in Hong Kong, according to the Hong Kong Productivity Council, there are at present around 30 computer graphics production houses in Hong Kong with some 600 animators. And according to Census and Statistics Department, there were 437 game centres in Hong Kong in 1999, estimated to have contributed to 0.03% of the GDP.
10. The above information demonstrates the potential of the digital entertainment industry in Hong Kong. To promote its development, the Government sees its role as a facilitator in providing the infrastructure and developing human resources to enable the industry to take root and flourish. The measures taken by the Government to support the development of the industry are outlined below.

Measures to Support the Digital Entertainment Industry



Infrastructure

11. We have liberalised the telecommunications market to enhance competition, consumers’ choice and quality of service. Under this liberal environment, investment in the telecommunications sector has been substantially increased and we now have developed an advanced telecommunications infrastructure. The telecommunications networks are fully digitalised and the broadband coverage reaches practically all commercial buildings and over 95% of households. This advanced infrastructure gives Hong Kong an advantage in developing digital technologies; and the availability of broadband networks paves the way for the further development of on-line entertainment.


12. We will license broadband third-generation mobile networks by the end of 2001. The operators of these networks have to meet the “open network access” obligation which enables competing service providers to market their content and applications to end users using the capacity of the networks. This “open network access” requirement, coupled with a broad customer base for mobile users (Hong Kong is one of the cities with the highest mobile penetration in the world), provides an excellent platform to launch digital entertainment services to mobile users.
13. The Government has also initiated the connection to the Internet2 network for conducting research on fast speed links. Other initiatives are in hand to expand the infrastructure which will benefit the digital entertainment industry, such as the launch of digital terrestrial television, digitalisation of the cable television network, etc.
14. The Government is building at Telegraph Bay the Cyberport, an information infrastructure for companies specialising in IT applications, information services and multimedia content creation. It will provide high speed broadband connection, a full range of shared facilities such as multimedia laboratory and studios, and a CyberCentre (with entertainment, educational and retail facilities). The Cyberport will provide a niche environment for many companies including those working on digital entertainment. The facilities provided there will support the development of the local digital entertainment industry.
15. To encourage infrastructural investment in film production, the Government has made available two sites in Tseung Kwan O in 1998 and 2000 respectively for film production facilities. Advanced and digitalised post production facilities will be provided in the studios, including sound dubbing and sound effects studios and post-production suites for graphics, animation and digital effects, which the local digital entertainment industry can make use of.

Human Resources Development

16. At present, there is a wide array of courses covering digital graphics, multimedia design and computer animation at the tertiary level. (A list is at Annex.) Many of these courses are new, reflecting that local institutions are responding to industry demands.


17. In addition, the number of research postgraduate students has increased by about 20% in the current triennium. Tertiary institutions have ample opportunity to increase research postgraduate places in support of the digital entertainment industry and a lot of latitude in redistributing taught postgraduate numbers to emerging disciplines such as digital entertainment.
18. To enable local students to tap the expertise overseas, a pilot scheme will be launched to support local students to pursue post-secondary programmes outside Hong Kong. The pilot scheme will initially cover, inter alia, creative media to meet manpower needs in this area. Local institutions are encouraged to offer joint programmes with overseas institutions through partnership or exchange arrangements. They can partner with prestigious institutions abroad in the digital entertainment arena to provide courses on the subject.
19. Apart from training at the tertiary level, the Vocational Training Council has been running the New Technology Training Scheme (NTTS) since 1992. The scheme provides financial assistance to employers for training their staff, locally or overseas, in new technology. A capital sum of HK$105 million was injected by the Government to set up the NTT Fund. The NTTS has since run on interest income from the capital injection. According to statistics of NTTS on the approved applications from April 2000 to March 2001, applications from IT companies (the closest category to include digital entertainment) accounted for 9.6% of the successful applications. Applications for IT related programmes accounted for 33.2% of the successful applications. Competing applications for NTTS funding came from other sectors like banking and finance, chemical, electrical and mechanical, electronics, metal and light engineering, etc. As NTTS selects applications by a point-scale system on the basis of merits, worthwhile training programmes for digital entertainment will have a fair chance of gaining support from the Scheme.
20. Furthermore, we are now working on an academic plan for the Cyberport. We will explore whether and what market-driven digital entertainment training can be included in the Cyberport academic plan to help train manpower in this area.
Other Supports for SMEs
21. Small and medium enterprises (SMEs) in the digital entertainment industry may, upon the launching of the HK$400 million SME Training Fund (the Training Fund) as recommended by the SME Committee10, apply for funding to provide relevant training for both employers and employees. The maximum amount that an SME can apply for employers’ training is HK$5,000, and on a dollar to dollar matching basis, an SME can apply for HK$10,000 in maximum for employees’ training.
22. SMEs in the digital entertainment industry may also, upon the launching of the HK$500 million SME Business Installations and Equipment Loan Guarantee Scheme (the Loan Guarantee Scheme) as recommended by the SME Committee, secure finance from banks and financial institutions for procuring necessary equipment and other business installations. The SME Committee has proposed that, under the Loan Guarantee Scheme, Government would provide guarantee of up to 50% of the loan amount approved by banks or financial institutions, or HK$500,000 per company, whichever is the less.
23. The local digital entertainment industry may, upon the launching of the proposed HK$200 million SME Development Fund (the Development Fund) as recommended by the SME Committee, also seek support under the Fund to carry out projects that will benefit the industry in general. Under the Development Fund, projects can be submitted through non-profit making trade and industry organisations, support organisations, professional bodies and research institutes. The maximum amount an approved project can obtain is HK$2 million.

Research and Development (R&D)

24. The setting up of the Innovation Technology Commission (ITC) is a sustained initiative to support and promote R&D in Hong Kong. One of the major objectives of the Innovation and Technology Fund is to turn up stream R&D projects with commercial potential to marketable products.


25. A project from the Hong Kong Polytechnic University and the Hong Kong Digital Entertainment Association11 was approved last year to support the growth of the digital entertainment industry in Hong Kong. The objective of the project is to establish Hong Kong as the regional capital for developing digital entertainment products. The project comprises the organisation of a game developers conference and an Expo, the development of a resource centre, the holding of a series of training workshops (including a certificate programme that will introduce new technologies and techniques to professionals and university students), and the launching of a weekly on line news web site that reports events and provide industry-related statistics, market reports, and trends.
26. The Game Technology Conference and the Interactive, Digital and Electronic Entertainment Expo Asia 2001 were held in January 2001 in Hong Kong. Many of the participants were from overseas, including representatives from major digital entertainment associations such as the US’ Interactive Digital Software Association, the European Leisure Software Publishers Association and SIGGRAPH, an international special interest group on computer graphics. A web site has been constructed at http://www.hkdea.com and a resource centre has been established. A training program also started last year. All these represent industry led initiatives to promote the development of the industry.
27. Another project approved in 1999, from the City University of Hong Kong, was to provide funding for the acquisition of the necessary up to date equipment for the university to run courses in computer animation and digital effects in its School of Continuing and Professional Education. It is anticipated that about 750 professional 3D animators will be trained in these courses within a period of 30 months. In 1999, it was estimated that there were only 100 trained professionals in computer animation working in the industry. The ITC is open to considering funding more projects to promote the development of digital entertainment.
Intellectual Property Right Protection
28. Intellectual property protection in Hong Kong is compatible with the prevailing international standards and norms, such as the WTO Agreement on Trade Related Aspects of Intellectual Property Rights. The intellectual property legal framework in Hong Kong provides a legal environment favourable to those who engage in research and development, creative productions and commercial distribution. This is crucial for the creative digital entertainment industry to develop and flourish. Copyright protects computer programmes; dramatic, musical and artistic works; sound recordings; films, broadcast and cable programmes.
29. In the area of digital entertainment, the Registrar of Designs register designs for, e.g. controller for game machine, electronic game machine, joystick, steering wheel and pedal for TV games, and video game machine. Innovative digital entertainment products are well protected by patents.
30. Trade marks are also well protected in Hong Kong. Trade marks are signs or logos which can be used by business to identify the goods they trade. Such goods may include arcade games, computer game programmes, games adapted for use with television receivers, hand held computer games and video game programmes in the digital entertainment industry. Trade marks for services are also protected. Such services include electronic games services provided by means of the Internet, production of animated programmes for use on television and cable, and production of artwork for animated films.
Market Information
31. The Hong Kong Trade Development Council (HKTDC) promotes Hong Kong’s merchandise trade and services exports through a wide range of promotional events, as well as information and business services.
32. As regards the digital entertainment industry, the HKTDC does not have dedicated web site, publications or reports, but relevant market information can be found in the HKTDC’s trade portal under the webpage on the electronics industry. The HKTDC also has an electronics magazine that often features digital entertainment products.
33. The promotion of digital entertainment products is usually included in the HKTDC’s promotional activities for electronics and film industries. For example, during the HKTDC’s anchor event for the film industry, Filmart, in 2000, the HKTDC co-organised a seminar on “Digital Distribution in the New Millenium – How this electronic pipeline is affecting today’s theatrical marketplace”. Separately, the HKTDC also held seminars on “Digital Production”, and workshops on “High Definition Production” and “Digital Cinema Presentation”. The HKTDC has also participated in overseas events like the film markets at Cannes and Shanghai to promote Hong Kong films that featured special digital effects. In addition, the Hong Kong Electronic Fair co-organised by the HKTDC also features digital entertainment products such as MDs, DVDs and games.

Advice Sought

34. As a facilitator, the Government has taken the above measures to enable the digital entertainment industry to take root and flourish. The Government will continue to support and facilitate the development of the digital entertainment industry. Members are invited to comment on how best the Government can support and facilitate further development of the industry in Hong Kong.



Information Technology and Broadcasting Bureau

September 2001

Annex



Tertiary Programmes on Creative Media/Digital Media

offered by UGC-funded Institutions


Institution

Programme

Topics covered




Associate of Arts in Media Technology

  • Multimedia

  • 2D and 3D animation

  • Video creation

  • Creative writing and writing for new media applications

  • Art theory and appreciation

  • Photography

City University of Hong Kong

BA (Hons) in Creative Media

  • Media aesthetics

  • Digital video production and post production

  • Digital sound recording and editing

  • Digital animation

  • Multimedia applications




Master of Fine Arts in Media Design and Technology

  • Digital audiovisual culture

  • Animation

  • Computer graphics

  • Interactive media

  • Virtual reality

  • Digital media and moving images

  • Business of new media

Hong Kong Baptist University





BSocSc(Hons) in Communication – Digital Graphic Communication Option

  • Graphic design theory

  • Digital imaging

  • Desk-top publishing

  • Interactive media design and production

  • 3D modeling and animation

  • Creative typography

  • Digital audio and video production

Chinese University of Hong Kong

BSocSc in Journalism and Communication (Professional Area in Multimedia and Telecommunications)

  • Photojournalism

  • Radio and TV production

  • Interactive multimedia design and development




Higher Diploma in Multimedia Design and Technology

Polytechnic University

BA(Hons) in Design (Option in Visual Communications Design)

  • Visual communications design

of Hong Kong

MSc in Multimedia and Entertainment Technology

  • Video games and on-line entertainment

  • Media design and production

  • Digital media technology

  • Electronic toys and consumer electronics

Hong Kong University of Science & Technology

BEng in Computer Science (Information Engineering) – Multimedia Computing Option

  • Media Computing

University of Hong Kong

BSc Computer Science and Information Systems (professional area in multimedia)

  • Artificial intelligence

  • Computer graphics

  • Multimedia



1 There is no standard statistical definition on digital entertainment industry in Hong Kong or in other statistically advanced countries. In Hong Kong, establishments engaging in the business of digital entertainment belong to different industries. For instance, computer graphics production houses dealing with animation are classified under the broad group of “motion picture film processing”, design of edu tainment software is under “printing, publishing and allied industries not elsewhere classified”.


22 By way of illustration, exhibitors at the Interactive, Digital and Electronic Entertainment Expo Asia 2001 held in January 2001 in Hong Kong (a trade show dedicated to the promotion of the digital entertainment industry) included those in the businesses of arcade games; computer games; electronic handheld games; video and Internet games; game and computer accessories; game console; animation design and production; digital visual effects for movies; software on education, entertainment and edu-tainment; interactive, Internet and cable television; multimedia technology development; hardware development; digital, electronic and Internet products and packaging services.


3 Estimates on the popularity of games in Japan, America and the UK and the global game market are from The Economist newspaper (5 Oct 2000) “Play to Win”.


4The Electronic Entertainment Expo (E3)’s web site (www.e3expo.com).


5 The Economist newspaper (5 Oct 2000) “Play to Win”.


6 The web site of the Department of Trade and Industry, UK (www.dti.gov.uk).


7 Ministry of Information and Communication, South Korea.


10 The SME Committee is a high-level advisory body to advise the Chief Executive on issues affecting the development of SMEs in Hong Kong. It submitted a report on support measures for SMEs to the Chief Executive in June this year. The key recommendations are to set up four funding schemes totalling HK$1.3 billion to help SMEs secure funds for procuring business installations and equipment, enhance human capital, expand markets, and enhance overall competitiveness. The recommendations are being considered by the Administration.



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