Low-budget movies have earned returns on investment of 300 per cent
Tamil Nadu’s smaller production houses, makers of low-budget films, are beginning to put their stamp on the state’s film industry which, according to the Associated Chambers of Commerce and Industry of India (Assocham), contributes one per cent of Tamil Nadu’s state domestic product, estimated at Rs 3,08,136 crore at constant prices in 2008-09.
Small-budget films are becoming popular with movie buffs, notes Kandaswamy Bharathan, chief executive officer of Kavithalayaa Products, which was founded by well-known producer K Balachander, who introduced actors like Rajanikanth and Kamala Haasan. Tamil movies account for 110-120 of the 850 films released annually in India.
In terms of budget size, Tamil films are categorised into small-budget (Rs 2-2.5 crore), medium-budget (Rs 4-10 crore) and big-budget (above Rs 10 crore) movies. Small-budget films currently constitute 40-50 per cent, medium-budget movies 30 per cent and big budget movies 10 per cent of the Tamil film industry.
The past six months have seen a sea change: Films with big budgets, big star casts and shot on foreign locations have done badly at the box-office, while some small- and medium-budget movies have earned returns on investment of 300 per cent.
One example of a successful low-budget movie is Nadodi, which was made at a cost of Rs 2.5 crore and earned a return of Rs 11.5 crore. Another is Subramaniyapuram, whose cost of production was around Rs 3 crore and the return around Rs 8 crore.
“This trend has proved that big stars are no guarantee of success and the mood of the audience is to look at the script rather than the artist. This is certainly a healthy trend,” said S Sridharan, a film analyst in Chennai, adding that technology has given small and medium producers new avenues to sell their content.
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Today, apart from traditional theatres and television channels, producers have avenues like mobile, internet and direct-to-home (DTH) and others. “Recouping the cost of production is almost guaranteed,” said Sridharan.
However, small producers have a host of problems to cope with, compared to their bigger counterparts. The first is difficulty in getting funding for making movies.
Second, Bharathan notes, they need big marketing budgets to promote their work and make it bankable. He notes that there is a new openness on the part of producers — who are known to be conservative — to the idea of joint ventures, and a readiness to part with equity.
The film industry in the state has also witnessed a few joint venture agreements between Tamil production houses and marketing companies in the northern region.
Small production houses, which earlier depended mainly on selling their rights to television channels and private individual funds, are now also looking at alternatives such as corporate funding and private equity. Kavithalayaa, for instance, is planning to sell some equity to a private equity fund.
The major attraction for corporate houses in investing, notes Bharathan, is the turnaround time of the investment, which is typically about 18 months for Tamil movies.
Equally interestingly, some big production houses are helping small and medium producers. Balachander’s production house said recently that it was planning to launch a venture capital (VC) fund to support small and medium film producers. Gautham Menon, a leading director, also said he was planning to launch a Rs 100 crore film fund.
The third challenge is reach. Typically, a movie’s release depends on the producer and his skill in getting the movie to reach the right set of distributors and exhibitors. A big movie would usually get sold out in most territories easily on the basis of its star cast and director, whereas this isn’t the case with low-budget films.