In fact, the risks are increasing because the stakes are getting bigger. It's not just production expenses or fees for actors that are soaring, spends on marketing and promotions, that are a must to be able to cut through the clutter, can be as high as 15-20 per cent of the production budget. But investors seem willing to take a chance; with the industry getting corporatised, money is pouring in. That's why Eros International, that raised money from markets overseas, could afford to pay Rs 75 crore for Om Shanti Om. In June last year, The India Film Company raised $109 million through an AIM listing in London. Goldman Sachs estimates that in the first half of 2008 alone, potential deals worth nearly $2 billion have been struck between Indian and foreign production houses or financial investors to make films over the next 18 months. PVR Pictures, for instance, has inked a deal with ICICI Ventures and a JP Morgan outfit for Rs 120 crore.
Films are not just being produced with big budgets, distributors are also picking them up for exorbitant amounts. With cash in the bank, some distributors appear to have ended up overpaying. For instance, industry insiders say that UTV, that picked up the film Race for Rs 60 crore, could lose money on the deal despite the film having been a big hit.
Investors believe that the business has become less risky because now there are other revenue streams that can be tapped. That is a fair assessment.
Ernst & Young estimates the overseas market for Hindi films at around $200 million and growing at 20 per cent a year ; Guru grossed $22 million of which $4 million came from overseas. The contribution of the overseas market is usually far lower, at round 8 per cent, but often films that don't do well at home turn out to be money spinners abroad.The home video market is picking up because prices are down and films are available on disc relatively soon