Indian Film Industry Essays

Indian Film Industry Essays Indian Film Industry Essay Indian Film Industry Essay The Indian Film Industry has been one of the oldest segments of the Indian entertainment industry. The Lumiere Brothers brought motion pictures to India in 1896, and since then there has been no looking back. Today, India has the worlds biggest movie industry that churns out around one thousand movies each year. The Indian Film Industry is witnessing mark improvements on all spheres from the technology used in making films to the themes of the movies, exhibition, finance and marketing and even in its business environment. There is no doubt that the Indian Film Industry is finally getting corporatized in that sense. 2005 was a watershed year for the industry. Indian Film Producers are also looking overseas for co-production. And the future looks immensely bright with a number of theatres poised to go digital. The Television industry is also witnessing the mushrooming of more niche channels. Here again, emerging technologies such as broadband, Direct-To-Home (DTH), Direct-To-Theatre (DTT), Internet Protocol Television (IPTV) and digitalization will bring about more growth. The Indian Film Industry is expected to grow by 13% over the next years, i. e. to Rs. 176 billion in 2012. This projection speaks volumes as regards the potential of the Indian Film Industry. The Indian Film Industry is the largest in the world in terms of number of films produced and the number of movie goers in a year. Approximately around 1000, as part of the films is produced every year in different languages, out of which 70% are produced in the Hindi language. Ironically, the revenue realized from these films is almost negligible compared to other global markets. The investment level in 2007 was in the order of Rs. 10,000 crores and a 19% p. a. growth is projected during the period 2007-2012. One of the major policy initiatives has been the Government of India granting industry status to the entertainment sector in India including the film sector in 2001. This allows the sector to access institutional finance and clean credit for new projects. Industrial Development Bank of India (IDBI) was the first to enter with a funding of Rs. 100 million with 16% p. a. interest rate. However, banking and institutional finance has not been forthcoming to the film industry even today. A trend towards increased viewership abroad has been observed in countries like Japan, Malaysia, Singapore and Middle East. In the recent past, as part of the cultural diplomacy, growing presence in prestigious film festivals and markets internationally has been encouraged and continued efforts are required in this direction for the film industry to -readily go global. The movement towards corporatization was inter alia the multiplex revolution, organized funding, foray of corporate, international co-productions, new marketing and revenue techniques. The multiplex revolution changed the entire concept of viewing cinema. PVR Limited was one of the pioneers of this revolution in India in 1997, with the launch of the concept multiple choice of movies under one roof. This furthered by interior decor of international standard and state-of-the-art sound and technology witnessed new revenues at the box office. Financing, exhibition and distribution were directly affected. It also led to more organized and transparent box-office reporting. It is pertinent to note that even though the number of multiplexes is on the rise, the average number of screens is abysmally low when compared to other mature markets in the West. This segment has seen an influx of major private players like Adlabs, Inox, E-City Entertainment, Wave Cinemas etc. In 2005-06, Shringar Cinemas, PVR Limited and Inox went public and together, a sum of Rs. 4,144. 45 million was raised during this period. Adlabs foray into the entire value chain of the film industry was a significant development in the Indian entertainment and media industry. The biggest crisis plaguing the industry is the distortionary rate of entertainment tax within states in India. For instance, in Andhra Pradesh and Tamil Nadu, the tax rate is low and hence these states have witnessed huge investments in cinema infrastructure. This has however not been the case with the rest of the states in India. Therefore, to avoid market fragmentation and distortions, a uniform and rational tax structure is required for the growth of the film industry. The funding of films either through non-banking finance companies, venture funds, corporate funds or through corporate finance, was a significant shift from the traditional film- financing model. IDBI was the first to start funding film production, that too, to big banners, big names and established film-personalities. The traditional model used amongst others distributors funds, personal finances of producers, money lenders. Obviously, there were inherent drawbacks attached to these modes of financing. Moreover, even banks are not forthcoming in financing film projects. Therefore, venture capital and private equity investment was clearly seen as a solution based on their appetite for risk and a conducive legal framework. Under the applicable law in India, there is no restriction on private equity investment into film making directly, without routing it, via venture capital regulations as venture capital. However, there are issues involved with such direct (non venture capital regulations routed) investment, which they could avoid by operating via applicable venture capital regulations. Corporatization of the Indian Film Industry has led to increased international collaborations for co-production ventures, multiplexes, film financing etc. Recently there has been interest in industry in India from international film companies and studios. For instance, Warner Bros. Entered into an agreement with Ramesh sippy, film producer, to fund three of his films: Saawaryia was co-produced internationally with SPE Films India Pvt. Ltd. Important co-production ventures include Percept Picture Company and Michael Douglas production company. Further Films and Sahara One tied-up with a Hollywood producer, Donald Rosenfeld. Adlabs tied-up with Hyperion, a Hollywood studio for an Indian film. iDream Productions launched their operations in U. K. ith three films already being made. The year 2008 saw the biggest deal between Bollywood and Hollywood, with Anil Ambani signing the deal with Steven Spielbergs DreamWorks for stabilizing a production studio in Los Angeles. The studio intends to produce six films in a year. India has signed several international co-production treaties with France, Brazil, Italy, Germany and Britain. The Audio-vi sual treaty, signed in 2007 with Brazil and Germany is expected to facilitate collaboration between film producers in each other s country. TAAL was the first film to be insured in India in 1998. Traditionally, film insurance covered only property damage and accidents, but today, the coverage of the package insurance policy has been expanded to include insurance cover for the cast of the film, any physical loss or damage to the negative or videotape, material or facilities insurance, technical equipment insurance, props, sets and wardrobe insurance, production office content insurance, money insurance, travel insurance, public liability insurance. The concept of Completion Bond insurance has also been introduced into the Indian Market. Under this format, any additional cost over and above the budget drawn is funded through this cover. The policy holder is the guarantor in this case. Given the wide-ranging nature of covers available in the insurance industry, today, what forms a critical part is the evaluation of the cover and scrutiny of the present and future liabilities. With the industry riding high on corporatization, insurance is essential for film producers and film financiers. However, the insurance industry for this sector in India is yet to take off in the true sense. Apart from the availability of pirated copies of latest films, the dismal condition of theatres is the main reason for low occupancy levels in theatres in India. Therefore, the mantra adopted by the Indian film industry was going digital. Digital cinema enables delivery of films through hard disks or electronic transmission, i. e. satellite. Further, digital prints apart from being cheaper are also less prone to duplication. Hence, to take advantage of this, it is important to implement the plan of digital cinema across India. Hence, the untapped business opportunity for digital cinema is vast. Traditionally, at the time of release, the film is used to first get released in A class cities and thereafter circulation used to take place in B and C class cities. In this interlude, pirated copies were obtained to cater to audiences in B and C class cities. With wide spread digitalization, a movie can be released simultaneously across all cities; it also helps in limiting piracy. The concept of revenue generation over and above box office collections marked a vital shift in the filmed entertainment business. These emerging avenues for generating revenue helped in two ways, firstly in de-risking the business of films and secondly in attracting Indian and overseas corporate. The convergence of technology has fuelled growth in the Indian film industry as well. Internet and mobile technology are both converging with films. Today, both mobiles and internet technology have greater penetrations when compared to other platforms. Therefore, film producers, realizing the criticality of this partnership, are busy tying up with mobile companies and broadcasters on the internet. Music download, movie download, video-on demand etc are gaining in popularity. Home video rights also emerged as a key revenue stream for producers, coupled with rising disposable incomes, affordable DVD and home theatre systems and a shorter-video-release window. Re-make rights, internet rights, mobile rights emerged as other alternative options, which made films an attractive investment for domestic and overseas corporates. Though the share of box office collections is declining, it still contributes the maximum to the revenues of the film industry. In 2007, a supplementary revenue generating scheme namely, Television Rights surfaced for Indian film producers. The reason for this was the variety of new channels being launched each year, the revenue generated by telecasting a film on television therefore increased in a significant manner. The overseas market is beginning to form a critical fraction of the revenue collections. This market was until recently yet another untapped territory as producers were neither inclined towards investing in more prints nor in adopting effective marketing plans. The collections from overseas are estimated to reach Rs. 0 million in 2012 and on a per film basis; the share is expected to rise to 16% in 2012. Other marketing techniques also surfaced with the maturing of the film industry. These included sale of mobile rights, ringtones, movie wallpapers, movie blogs, websites etc. Marketing spends on films have also seen a clear increase. For instance, in 2005, approximately Rs. 400 million was spent on innovative marketing techniques for the film Mangal Pandey. Piracy is the act of making available counterfeit products of a product in which a persons intellectual property right vests. With the digital revolution, piracy has increased many fold in India, giving pirates access to technologies facilitating mass reproduction at much cheaper costs. The Indian entertainment industry, boosted by a rapid growth in the number of digital consumers, will earn as much as US$28. 9 billion by 2012. Study shows that the Indian entertainment industry grew 17% in 2007 – a slight improvement on the 15% forecast, reaching US$12. 82 billion, up from $10. 95 billion in 2006. Amid the growth phase has been the overriding menace of counterfeiting and piracy, which has engulfed the industry. The optical disc ease of access as a medium to transmit information with a simple computer has become a major source of piracy in India. It has been observed through international practice that the enactment of an optical disc legislation has resulted in considerable reduction of piracy. This is evident from the fact that one of the worlds leading software provider s is feeling the short end of the stick with rising number of piracy against its products in India. In India, counterfeiting and piracy costs the entertainment industry US$4billion and losses of approximately 800,000 jobs annually. What is therefore needed is to put together a holistic program to fight piracy drawing on the power of consumers, the judiciary and policy-makers. A much- needed impetus as regards import of pirated goods in India, the department of customs has notified the Intellectual Property Rights (imported Goods) Enforcement Rules, 2007 providing for enforcement of rights intellectual property by giving powers to the custom authority to seize goods and even initiate suo-motu action inn this regard. It is notable that the department has further issued instructions to give effect to the rules in an appropriate manner. This arms the authorities with more teeth than the earlier laws and even provides for the intellectual Property owner to issue a notice to the violating importer. The animation and gaming industry is one of the biggest areas of emerging opportunities in the Indian entertainment industry. The sector is growing fast with around 300 animation companies at present. In the year 2006, exports accounted for more than 70% of the revenues. The Gaming industry in 2007 grew at 32%, a rate higher than the animation industry, which was 24% in the same time period. With the global animation and gaming market projected at US $80 billion and US $42 billion respectively by 2010, and with India expected to account for less than 2% of the global pie in 2010, there is a huge untapped prospect for India in the future. However, the animation industry is plagued with several issues. Indian policy makers could take lessons from other countries. For example, Korea, China and Singapore have strong government support to promote their domestic industry. For instance, in Korea, tax breaks are provided to give an impetus to their domestic industry. Similar approach on the lines of tax holidays, exemption of service tax, sales tax on software, import duty on hardware etc are also sought to foster a robust domestic industry. The highly technology-driven entertainment industry is surely making the task of policy makers difficult and more challenging. With convergence and fast technological innovation, the industry is grappling with regulatory issues across every industry segment. In this scenario, it is central for policy makers to appreciate the need to outline a comprehensive entertainment policy in India. This comprehensive entertainment policy should seek to enable efficient inter-operability between various distribution platforms. In India, the Ministry of Information and Broadcasting is the apex body, which formulates and administers rules, regulations and law relating to information, broadcasting, the press and films. The Ministry also has the responsibility for international cooperation in mass media, films and broadcasting and interacts with its foreign counterparts on behalf of the Government of India. Telecom Regulatory Authority of India (TRAI) is the regulatory body with the prime objective of providing fair and transparent policy environment in the telecommunications, broadcasting and cable television services industry. TRAIs policy recommendations should primarily promote level-playing field and promote fair competition. Policy with regards to different sectors in telecom, media and entertainment segment are issued without any common thread leading to convergence in regulations. This leads to a distortionary structure, which does not ensure inter-linkages in todays world. This is an impediment as firstly it does not ensure fair play and hinders competition and overall growth of the industry. Hence, it may be useful to analyze the best practices in mature markets like the United States and European Union while examining the need for an entertainment in India. United States of America – The office of the Federal Communications Commission (FCC) has been entrusted with framing and envisioning the media policy for the United States. The US approach to media policy seems to emanate from the school of thought that deems it appropriate to provide specialist committees to undertake review and scrutiny of the various media factions with a single office entrusted with the responsibility of co-ordinating and synchronizing these policies and future goals. European Union (EU) – EU is the instrumentality that has been entrusted with the responsibility of making regulations and codes for the member states to align their respective domestic legislations and approach distinct issues in a streamlined manner, and provide the way forward as a common think tank. The EU approach to the media and entertainment industry is characterized by providing for oversight and guidance to the regulatory regime in member countries. The Audio Visual and Media Services directive covers all EU audiovisual media services (including on- demand services) in the digital age. It amends and renames the Television without Frontiers Directive, providing less detailed but more flexible regulation. And it modernizes TV advertising rules to better finance audiovisual content. The European policy towards media and entertainment is characterized by ‘light-touch regulatory approach along with sensitization to the increasing convergence across media platforms. On the contrary, to the aforementioned regulatory and industry best practices, in India, despite having identified the interdependency between each platform, each segment ends up competing against the other and this more often than not, results in distortionary market structures. Therefore, the entertainment policy in India following the likes of the United States and EU must move towards convergence both in its regulation as well as in its operations. In the converged world of today, each segment of the industry may be regulated by specialized offices. However, at the same time, an overarching body that ensures the regulatory framework of each segment of the industry does not impede the overall growth of the media and entertainment space must be established. This inclusive approach must be adopted to bring about a standardized policy and regulatory framework so that Indias forecasted opportunities do not remain a mere pipe dream.