CONTRACT thrillers

Why the studio system is making a comeback in the Hindi film industry (or why Adlabs paid Hrithik Roshan a rumoured Rs 35 crore)

This story actually began in the early 1920s in the US. It was the Golden Age of Hollywood, when large motion-picture studios such as MGM, Paramount, Fox and Warner Bros entered into long-term contracts with actors, writers and directors.

There was another angle to the "studio system" "" the studios not only made the movies, they also controlled theatres and film distributors in a neat bit of vertical integration. Around the same time, and up to a few decades later, the studio system dominated the Indian film industry as well "" actors were contracted to studios and drew monthly salaries for their work.

Now, you could perhaps call it The Return of the Studio. Eighty years after its genesis in Hollywood, the Indian film industry is rediscovering the advantages of the studio system.

In October 2005, Anil Ambani-backed Adlabs Films signed on film-maker Ram Gopal Varma to direct 12 films, investing a little over Rs 80 crore in the deal. A year later, in December 2006, Adlabs brought on board producer-director Rakesh Roshan and actor Hrithik Roshan for a three-movie deal, at an estimated Rs 35 crore.

The deal followed the father-son duo's success with Krrish , which earned more than Rs 100 crore in box office returns in India and overseas. Adlabs is now looking for similar multi-movie deals with other stars "" the names doing the rounds include John Abraham and Akshay Kumar.

Meanwhile, other corporate production houses are looking for formal contracts with movie stars, too. Percept Pictures, Sahara One Motion Pictures and UTV all confirm that they are searching for the right people with whom to initiate "long-term partnerships".

While Percept already has informal "understandings" with directors Madhur Bhandarkar and Nagesh Kukunoor, it is now hunting for actors (again, Abraham and Kumar are the most-cited names). Sahara too is on the prowl.

"There is no denying that we intend to sign on multi-movie deals with directors and actors," confirms Sarang Sharma, business head, Sahara One Motion Pictures. Ronnie Screwvala, CEO, UTV, throws some more light.

"Nobody in the industry is looking at locking or blocking talent. It is just that since the industry is evolving faster, there is a lot of planning and pre-planning that is now required. To plan better, companies are looking at long-term relationships with actors and directors," he says.

It isn't a case of just follow-the-leader. Across the film industry, experts believe that studio-actor deals may well be the way forward. Why is it such a big deal? Why would studios be willing to pay higher-than-market rates to get the stars on their rosters? the strategist takes a closer look.

Flashback

Some background information first. It's been a very good year for the Hindi film industry. Collections were 30 per cent higher than the previous year and at least 10 films were superhits. In 2004, the top 25 movies collected Rs 419 crore.

The figure climbed to Rs 491 crore the following year and crossed Rs 650 crore in 2006 (source: boxofficeindia.com). The film industry is expected to grow over 23 per cent this year to Rs 9,700 crore, and to cross Rs 15,300 crore by 2010.

Look closer, though, and you can see the cracks in the picture. The Indian film industry is plagued by the same problem as India Inc: an acute talent shortage. While every actor and wannabe, from Sohail Khan to Sophie Chaudhary, claims to be an A-list celebrity, very few are true crowdpullers.

Quips Adlabs Chairman and Managing Director Manmohan Shetty, "Forget shortage, there is no fresh talent. All our superstars are over 40 now." And these superstars (Shah Rukh Khan, Salman Khan, Aamir Khan and Hrithik Roshan) typically make only two or three films a year, which again are big-banner releases. In 2006, for instance, the Khan trio was seen in just two movies each.

Now, compare that with the grand plans of the production houses. Percept Pictures will be releasing 12 movies in 2007. Adlabs plans to make around eight and Sahara One Motion Pictures will back 10. Clearly, finding actors who will please the box office is going to be tough.

"There are very few big actors and getting dates is a problem," agrees producer-director Rakesh Roshan. By signing on actors for multi-movie deals, then, production houses ensure they will have stars on tap. The contracts typically grant the production house either bulk dates or exclusive access to the star for the duration of the contract.

Although most production houses usually have only one script in hand while signing on the actor, sufficient dates are blocked for two or three films, for which the script and directors are decided later. "In forward-looking deals that extend beyond a year, we don't usually have scripts ready," agrees Shetty.

For the record, it isn't only the corporate-backed production houses that are opting for this strategy. "Most big-ticket producers are going star shopping. We will see more such deals in the future," predicts trade analyst Tarun Adarsh.

And where studios such as Yash Raj Films and Dharma Productions (manned by celebrity-filmmaker Karan Johar) can depend on their reputations to draw in stars, the newcomers have been banking on their financial clout to achieve the same result.

"Banners like Yash Raj and Dharma are established names and can pick actors at will. However, the other production houses need to pay better and use deals like these to get their stars," agrees Navin Shah, the chief executive officer of movie marketing agency P9.

The plot thickens

Are the stars really worth the multiple-crore deals being offered them by the corporate studios? You'd better believe it. Not only does an A-list actor increase the chances of the movie being accepted in Indian theatres, he also "" perhaps more importantly "" ensures the film's success in overseas markets.

That is a market that has been proving extremely remunerative. Until about five years ago, overseas box office receipts contributed just 10-15 per cent to a film's earnings. Now, that figure is 25-30 per cent and higher.

Consider some 2006 releases: Kabhie Alvida Na Kehna made Rs 44.5 crore abroad and Rs 46 crore at home; Don earned close to Rs 32 crore in overseas markets, while earnings at home were Rs 50 crore. Fanaa's domestic revenues were Rs 53 crore, while international box office earnings were Rs 28 crore (see "Media centred", the strategist, 21 November 2006).

But not every movie that's a hit in domestic markets does equally well abroad "" the already-scant list of saleable stars is pruned even further when it comes to overseas crowd-pullers. Phir Hera Pheri, for instance, could be considered "star-studded", with top billings going to popular actors such as Akshay Kumar, Paresh Rawal and Suniel Shetty.

It earned over Rs 40 crore across Indian theatres, but couldn't cross the Rs 10 crore figure abroad. Similarly, Bhagam Bhag "" with actors like Govinda and Akshay Kumar "" brought in more than Rs 40 crore at home, but overseas revenues were a low Rs 11 crore.

Ernst & Young National Leader, media and entertainment practice, Farokh Balsara points to a further twist in the tale: while a female star may "" and it's a big "may" "" drive audiences to theatres within India, she has no such pulling power in overseas markets.

Which means that more than ever, studios need to get the stars under their arclights, as soon as possible. "The success ratio of movies without stars is very low. For a film to do well, you need star appeal," Balsara declares.

The extras

Given their deep pockets, corporate-backed production houses aren't stopping at star contracts to ensure maximum utility of their resources. While tying up with celebrity actors and directors for big-budget ventures, companies are also making small and medium budget movies with lesser-known stars and new faces. Here, they are shifting their attention to the marketing "" splurging on heavy promotions and advertising that helps drive audiences to theatres.

Sahara One Motion Pictures, for instance, made movies like Corporate and Malamaal Weekly for just around Rs 5-6 crore each, but spent nearly Rs 3 crore each on marketing and promotion activities.

The results? Corporate earned over Rs 10 crore, while Malamaal Weekly raked in Rs 25 crore. Produced at Rs 12 crore, Golmaal earned Rs 29 crore, thanks in part to high-decibel promotions.

Four of Sahara One's 10 upcoming movies will be made in under Rs 5 crore each but, says Sharma, "Increasingly, small budget films, when marketed well, perform well at the box office: Page 3 and Malamaal Weekly are clear examples. Also, the portfolio approach hedges risk better." Meanwhile, Adlabs, too, is working on Johnny Gaddar, a low-budget film.

The action isn't restricted only to the Hindi movie arena. Film companies are also turning their sights to the lucrative regional language movie markets. While Adlabs has tied up with Chennai-based production house Sujatha Cinearts to co-produce Kireedam in Tamil, Sahara One has made A Tale of Three Friends in Bengali.

UTV's strategy is slightly different: while the company is looking at entering the Tamil and Telugu markets, it is already involved in five international projects. Two of these, The Namesake and I Think I Love My Wife are to be released shortly.

"There is a growing market for crossover films. Indians abroad are a huge audience pool, Hence we are focusing more on international films," says Screwvala. Of course, Adlabs, too, has international collaborations for the making of Marigold and Asylum.

Hits and misses

The advantages of the studio system for the production house are obvious. Not only does the studio have access to a star who is contractually bound to give dates for shooting (and who is a safer bet at the box office), it also guards the price line. Even if the star hikes his asking rate, the studio will continue to pay the predetermined level.

For the actor, too, a contract with a production house is a guarantee of work and pay "" a hard-to-resist combination in the unpredictable film industry. "This is a win-win strategy and is a trend that will be increasingly used in the future," says Komal Nahta, editor, printer and publisher of trade journal Film Information.

Not everyone buys that argument, though. Pritish Nandy Communications Chairman Pritish Nandy believes the strategy lacks flexibility. "Star fortunes and star rates are fickle "" why lock them in advance? Stars can fall sick, hurt themselves, get into fights over non-issues, throw tantrums and even go to jail. As a producer, I need the flexibility to choose the actor I need when I need him, not when he will be available to me."

Rajjat Barjatya, managing director of Rajshri Media, agrees. "Ours is a character-driven industry, not actor-driven. Which is why we are not interested in multi-movie tieups with actors."

Adlabs' Shetty defends the studio approach, especially for listed companies such as Adlabs and UTV. "We promise returns to shareholders and need to plan our futures. This is the only way we can do that."

With corporate backing, Bollywood seems poised to have an entertaining year ahead, with strategies like studio-actor deals being only the start. Back in the 1950s, the studio system in the US ended "" ending with it the Golden Age of Hollywood "" after the Supreme Court ordered a federal anti-trust action that separated the production of films from its exhibition. Where will the Indian story end?