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India Inc buys into
Bollywood
By Shehla Raza Hasan
KOLKATA - Corporate heavyweights are tiptoeing
into the frenetic realm of India's film production and
financing, as the sector evolves away from its largely
domestic role into a truly global industry. Bollywood,
the fanciful name for the industry, is poised for 19
percent annual growth to US$2 billion by 2007 and is
attracting considerable funding from entrepreneurs and
television companies alike.
For starters,
Kumarmagalam Birla's movie production company Applause
Entertainment has signed with media mogul Rupert
Murdoch's 20th Century Fox to co-produce and distribute
Indian language movies globally. Applause has also
contracted with the United States-based Miracle
Entertainment to co-produce movies.
India's
United Breweries chief, the flamboyant Vijay Mallya,
something of a style icon himself, is joining with
popular Bollywood star Suniel Shetty and Prakash
Khubchandani of Popcorn Entertainment to produce his
first Hindi film. Popcorn also hopes to bring in
Purnendu Chatterjee's Chatterjee Group, an affiliate of
the New York-based Soros Fund Management, for a
multi-billion entertainment project that would include
leisure, fitness, sports and film exhibition businesses.
To add to this, Vijaypat Singhania, scion of an
industrial family with interests in textiles, hospitals,
educational institutions, animal husbandry and
publications, has just made a foray into film-making
with production of the Hindi movie "Woh Tera Naam Tha".
While the Indian film industry now expects
sustained growth, it is recovering from a debilitating
$65 million loss on gross revenues of $850 million
during 2002. In contrast, Bollywood's gross box office
collections between May and July of this year have risen
50 percent, adding $27 million to overall collections.
Film circles attribute the fall in revenues last
year to a string of unsuccessful films, high costs and
time overruns, increased piracy, combined with low
creativity.
Small screen to the rescue
Significantly, part of the fortunes of the film
industry this year are due to investments by television
companies. India's television industry last year did
well, growing by over 17 percent with revenues of $24
billion. (Rs 109.5 billion). Television connectivity
grew to 82 million households, of which cable TV
accounted for a little over 40 million, thus making
India the third-biggest market in the world after the US
and China in terms of cable subscribers.
The
industry's windfall is to be invested in films with an
estimated $76 million (Rs 3.5 billion) coming in from
two premium TV companies, Zee Telefilms and Sony
Entertainment Television. India's television behemoth,
the Subhash Chandra-owned Zee Telefilms, plans to invest
$54 million (Rs 2.5 billion) over the next two years for
production and acquisition of movies and put in place a
distribution network for films in India and overseas.
Zee expects the film division to become a separate
profit center.
Sony Entertainment Television is
planning to buy rights to anywhere between 30 and 50
Hindi blockbuster movies in 2003-04 at a cost estimated
at $22 million (Rs1 billion).
Corporatization
and globalization
According to research by
Nishith Desai Associates, entitled Transforming
Bollywood - A Legal Perspective, although the Indian
film industry is currently no comparison to Hollywood in
terms of revenues, it is gradually beginning to evolve
from a largely domestic market to a truly global
industry.
The dawn of global Bollywood, the
study says, is being marked by an increasing emphasis on
corporatization and growing professionalism. The Indian
government is playing a significant role in facilitating
policy measures such as the granting of industry status
to the film world, access to bank finance and reforming
taxation laws, thereby contributing to the growth of the
sector.
Recently, for instance, the government
agreed to 100 percent foreign direct investment in the
film industry. A prime example is the 50 million euro
fund by Investitionsbank Hessen AG, the state
development agency of the German state of Hesse.
Investitionsbank is out to woo Indian film makers into
co-production deals and encouraging shooting of films in
their country.
India's film industry produces
roughly 800 films each year, compared to Hollywood's
100-odd. Despite its productivity, the Indian film
industry only attracts a market share of $3.5 billion.
The global film industry is worth $300 billion.
According to the United Kingdom-based research
firm Dodona, production investment is forecast to rise
70 percent by 2006, with film industry export revenues
rising 120 percent over the same period, driving up
foreign films' theatrical rentals in India as well. The
market for Indian films is now crossing the non-resident
Indian lines to English-speaking audiences and to South
and West Asian markets as well. The growing popularity
of Indian films is expected by analysts to drive the
film entertainment business to $1.1 billion by 2006.
Insurance and finance
In another
indicator that India's film industry is poised for
better times, United Insurance Co, one of the leading
players in India's insurance market, nearly doubled the
size of its film insurance portfolio to 43 films, up
from 22 in April 2002. This is minuscule, however,
considering India's 800 films a year.
The
euphoria and optimism do need to be tempered, analysts
say. There is a need for the industry to collectively
adopt international business and legal practices.
Stringent measures need to be taken to curb piracy by
creating special courts. The government also needs to
relax foreign exchange laws to permit foreign investment
in individual film projects as opposed to investment in
film companies, and provide greater incentives to and
remove procedural hurdles faced by foreign film makers
to make and shoot films in India. Reduction of
entertainment tax remains a pressing problem.
These steps are considered by analysts to be
crucial for the industry to grow to a more prominent
place in the global firmament.
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Bollywood
Inc's Big Deals
Kumarmangalam Birla ties up co-production
ventures with Rupert Murdoch's 20th Century Fox
and the US-based Miracle Entertainment.
United Breweries chief Vijay Mallya ties up
with Suniel Shetty's Popcorn Entertainment for
production of Hindi films.
Purnendu Chatterjee, The Chatterjee Group
mulling over deal with Popcorn Entertainment for
multi-billion dollar entertainment project.
Zee Telefilms to pump $54 million into films
in 2003-04 Sony Entertainment to spend $22 million
to buy film rights.
Industry scion Vijaypat Singhania makes a
foray into film making.
A 50 million-euro corpus by Investitionsbank
Hessen AG out to two Indian film makers for
entering into co-production deals.
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