The current global economic slowdown is beginning to singe Bollywood's fortunes. With the over Rs 40 crore budget movies like Tashan, Love Story 2050, Drona, and Mission Istanbul bombing at the box office, media analysts are predicting a price-correction and reduction in film budgets.
With the liquidity crunch in the market, people now have less disposable income and are expected to spend less on luxury and entertainment, which implies the movie-going clientele will decrease and with it box-office collections will also decline. Some Bollywood companies are already in the cost-correction mode.
With 12-15 projects lined up for 2009, Percept Picture Company (the makers of Malamaal Weekly and Traffic Signal), for instance, has already started the process in terms of planning, concepts and pricing.
"We have already seen a correction in prices of digital, music and satellite rights, which have come down by 10-15 per cent and are further expected to slide up to 30 per cent," says Navin Shah, CEO, P9 Integrated (a division of Percept).
Shah also believes the next correction should be seen in the fees of top stars and the cost of the film budget, which cannot be more than the business potential of a movie in terms of theatrical collections and sale of rights.
Mihir Shah, media analyst, Prabhudas Lilladher, says that Bollywood is not nearing a situation where projects could be shelved indefinitely due to paucity of capital. However, he admits: "We do see a cut-back in production costs and film marketing revenues."
Producers, who generally borrow money from banks to make movies, are also in for troubled times as banks will not lend money easily as long as the current global financial instability continues. Smita Jha, associate director, PricewaterhouseCoopers, says: "It is possible that less money will now be available for film producers than what it was three months back, and the viability of any project would now be evaluated carefully."
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Larger players like Yash Raj Films, Karan Johar's Dharma Productions and Anil Ambani's Reliance Entertainment are tight-lipped. Rajesh Sawhney, president, Reliance Big Entertainment refused to comment on whether the company is shelving any projects due to the liquidity crunch.
Recently, Anil Ambani's Reliance Big Entertainment and Steven Spielberg's DreamWorks SKG inked a $1.5-billion deal to set up a new age studio in Los Angeles and produce six films every year for the next six years. This is not the time to take any "big budget" risks, believes Aditya Shastri, CEO of People Pictures, the films & entertainment division of People Group. "We have announced four films and they are on track. The first one is in post-production phase and we'll commence on the second project in January 2009 followed by another in March."
Is he feeling the heat? "We never had ambitious plans with our budgets. We believe in strong scripts and a starcast that may not be the costliest in the industry but would do justice to the film," he says. The reason why producers are hopeful is the sheer size of the filmed entertainment market in India, satellite rights, and music – which make for 25-30 per cent of the film's cost.
The reason why producers are hopeful is the sheer size of the filmed entertainment market in India. With 13,000 screens in India selling over 3.2 billion tickets and number of multiplexes expected to grow from 1,350 to over 5,000 screens by 2012, coupled with multiplex ticket prices already crossing the $3 barrier, the Indian filmed entertainment sector remains the most sought after by international studios like Disney, Warner, Sony Pictures among others.
Jha says, "In case of international financing drying up, then we could see a trimming in number of projects or budget corrections." Incidentally, Shah Of Prabhudhas Lilladher also foresees an increase in joint venture deals to minimise risks of the business. For instance, Eros International — a London-listed Indian media and entertainment company — has already announced a strategic alliance with Shri Ashtavinayak Cine Vision to co-distribute Subhash Ghai's magnum opus Yuvvraaj.
Sunil Lulla, president Eros International, India justifies the move: "The decision to release the film jointly in India has been a strategic call and Eros and Ashtavinayak will use both networks to get the best possible showcasing that a film of this calibre deserves. This collaboration is an effective way to minimise risk and maximise returns." Eros has committed to release over 60 films in 2009 and 2010. One can only wait and watch the developments.