Much like last year, the first half of 2009 hasn’t seen too many big hits from Bollywood. The IPL and other cricket tournaments apart, there was also the spat between film distributors and exhibitors that left theatres empty for nearly three months. It hasn’t been all gloom though — the ADAG group’s Big Entertainment made it to the headlines when it finally hammered out an $825 million agreement with Steven Spielberg’s DreamWorks to make movies which would be distributed by Walt Disney globally.
While the Indian film industry has been getting corporatised for some time now—there are listed companies that produce films—the ADAG-DreamWorks deal signals the arrival of the big Indian producer. So far, most Hindi films have been made by smaller production houses, some belonging to the old school like Yashraj, and some new-generation studios like UTV. And the bigger distributors have been foreign names like Sony—now Fox is believed to have paid Rs 100 crore for the distribution rights of an SRK film co-produced by Karan Johar’s Dharma productions.
Despite some amount of corporatisation, the industry is actually slowing down. At 11.5 per cent in 2008 to Rs 10,700 crore (source: PricewaterhouseCoopers), the growth was lower than the17 per cent reported in the previous year and half the rate posted in 2006. In fact, PwC was actually expecting a much higher number, at close to 15 per cent for 2008. But in the last four years, ie between 2004 and 2008, the industry has managed just 15.6 per cent. What’s worse, KPMG’s Rajesh Jain is forecasting a de-growth in the current year of at least 5 per cent. That’s not exciting given that, at Rs 11,000 crore, the industry is pretty much a minnow; the US filmed entertainment industry is estimated to be worth $84 billion.
KPMG estimates that the industry would have slipped into the red last year as a result of which much of the foreign money that was supposed to flow into the filmed entertainment space, around $2 billion, hasn’t materialised. Apart from a few private equity funds such as JPMorgan and ICICI Ventures, which were investors in the space, no one has really put in too much money. The losses seem to have put off investors.
For the Hindi film industry to start grossing more revenues, it needs to deliver more hits and for that to happen the content has to improve. Both at home and on foreign shores, films have flopped not because they weren’t sold well but because the storyline wasn’t strong enough. Exotic locations and big stars aren’t enough to pull in crowds, as Chandni Chowk to China showed us. So if producers want to make more money they need to focus on themes that appeal to wider audiences. Unless corporatisation manages to unearth and showcase more talent of which there is no dearth in the industry, it wouldn’t serve the purpose. Ultimately the industry needs to produce more hits, otherwise money won’t come in.
In fact, very often films that are declared to be big grossers may not actually be so. Timmy Kandhari, who heads the entertainment and media space at PwC, says the box office collections put out by the trade when films are released are something of a ‘mystery’. That the trade seeks to play up box office collections is not surprising given that even now the success of a film depends on the theatrical collections which account for nearly three-fourths of the revenues. While the dispute between the exhibitors and distributors may have been resolved, it’s a fact that multiplex operators aren’t really raking it in; high real estate costs are eating into profits and occupancies aren’t high enough for them to be able to increase the price of tickets beyond a point. The success at theatres determines the fortunes of the film in other spaces such as television or home video. Already satellite rights fetch far less than they did earlier partly because the economy has been in a bit of a downturn. And while home videos are selling, they still account for a small portion of the pickings.
Of course, there is a bit of a weak link in the distribution piece, especially for the overseas markets. If films are screened in more theatres, not necessarily with very large catchments of non-resident Indians, overseas revenues — currently pegged at around $250 million — can be scaled up considerably. For that to happen marketing spends need to be upped—it won’t do to spend just 15-20 per cent of the budget, the current industry benchmark in the home market. But at the end of the day, it’s the content alone that can deliver the goods. The storyline needs to change.
