Setting the bottom line

Indian cinema, especially Bollywood, needs to get its streamlining in order to have a bigger share of the pie

June this year could become a major landmark for India’s cinema business. Not only is Hrhitik Roshan set to take flight as India’s first superhero in Krrish, a new range of relatively low-priced multiplexes is also set to open that month.

They will provide “a premium movie-going experience” to price-conscious audiences, mainly in small towns like Aurangabad and Latur, according to the scheme’s promoter, Ajay Bijli. The owner of the PVR brand of multiplexes says tickets at the new range of multiplexes will be priced at around Rs 40. He says the difference between these and his established PVR multiplexes will be like that between Big Bazaar and Pantaloon stores, both of which are owned by industrialist Kishore Bayani.

Already, the number of multiplexes in India has mushroomed to near a hundred (close to 300 screens) since tax incentives were offered in 2001, particularly the 50 per cent corporate tax break for multiplexes in non-metros that was announced in Budget 2002-03. Plans are now in place to almost double the number of multiplex screens in the country over the next couple of years.

This will broaden the consumption base for quality cinema entertainment. Since multiplexes ride the consumption lifestyle associated with malls and leisure destinations, only three of the 73 multiplexes in India a year ago were in the east, 42 in the west and 23 in the north.

Although only 0.8 per cent of India’s 11,000 screens were in multiplexes in 2002, according to global market trends recorded by the organisers of the 2005 Cannes Film Festival, Bollywood producers, financiers and distributors now focus sharply on the multiplex market. That is not surprising. Multiplex ticket charges mean they contribute a larger share of the revenue pie than the numbers of seats in them would indicate. Plus, multiplexes spin off a huge lifestyle market – not only malls, snack bars and stretch sofa-seats priced at Rs 500 each in some theatres, but also character- or theme-based merchandising.

Krrish could be path-breaking for India’s cinema business on another front. Its producers have tied up for a range of merchandise that will tap into the popularity of the Spiderman-type character among children. Spiderman 2 did exceptionally well in India. Between them, its original and dubbed versions made Rs 34.2 crore – more than Murder and Hum Tum, which were also released in 2004.

It is “a great retail opportunity,” says Bijli, but adds that the product “must stand the test of time.” He points out that Disney still sells merchandise associated with films it made years ago, such as The Lion King, Shrek or Snow White.

Aamir Khan Productions and indiatimes.com had tied up with Archies to market several products associated with Lagaan but merchandising has a long way to go in India. Consider some vignettes. Fact one: Disney made deals with 130 companies for 101 Dalmations, including cross-promotional deals with McDonald’s and Frito-Lay. Fact two: after a child in ET shared some Reese’s pieces with a friendly alien, Reese’s sales shot up 65 per cent. Fact three: the 007 Store stocks 550 products, all related to the James Bond character.

Indian films have already taken to in-film advertising, but audiences complain that the way products are flaunted is often far from smooth. Nothing, for example, like what Cast Away did for courier company, FedEx. Indian producers are pleased nevertheless. Current annual takings are no less than Rs 10 crore, according to the industry grapevine. Indeed, Bollywood insiders say Subhash Ghai recovered production costs from Coke and other products even before the release of films like Yaadein and Taal. And they say YashRaj Films got a tidy sum for Shah Rukh to sip and then mention Stroh’s beer in Dilwale Dulhaniya Le Jayenge.

The sobering fact is that, leave alone merchandising and in-film advertising, it is only recently that Indian filmmakers have become aware of just how short of the potential they are even in the core of their business. A study completed last year by KPMG for the Confederation of Indian Industry (CII) points out that, although India produces more films than any other country in the world, its share of global cinema revenue is a dismal one per cent. The US takes the lion’s share, sixty per cent, but India’s takings are well behind Japan, the UK and France too.

Projecting 16 per cent annual growth, the KPMG study estimates that the Indian industry could cross Rs 10,000 crore in revenue next year and Rs 14,300 crore by 2010. Given the pull factor of the emerging young audience and the access that more and more multiplexes will provide, that could well happen – so long as the current consumer binge lasts.

The good news is that the Indian market is most insular, giving foreign films only two per cent of its Rs 5,900 crore estimated current annual revenue. Forty-three per cent goes to mainstream Hindi films, 17 per cent to Tamil and 15 to Telugu films. However, Hollywood appears determined to pierce that insularity. Not only Spiderman 2, dubbed versions of other films with spectacular special effects like Titanic and King Kong did extremely well in India’s small towns.

The Indian industry has become aware of the reverse challenge: to sell in the global market. Nor, in an age of globalisation, can it afford to limit itself to what filmmaker Sudhir Mishra calls “the homesickness market” – although KPMG estimates the Indian diaspora at 20 million, with a combined wealth of US$ 300 billion. Already, the industry has tasted success abroad. While Dilwale Dulhaniya Le Jayenge is estimated to have collected Rs 20 crore abroad in 1994-95, Rang de Basanti collected Rs 24 crore abroad in just six weeks.

Britain-based “crossover” films such as Bend it Like Beckham and East is East have done well enough, developing a niche audience in many countries, but those are basically foreign films. There is much greater potential in collaborations of the sort common in East Asia. Market statistics compiled for last year’s Cannes Film Festival showed that 16 of the 20 biggest Asian successes in Europe between 1996 and 2004 were joint ventures. Six of the top seven included a US partner. Two Pokemon films and Crouching Tiger, Hidden Dragon led the chart.

Not one of the twenty had even an Indian partner. Bijli is nevertheless optimistic. “I don’t see it taking very long for Brad Pitt and Hrithik Roshan to star together in a cop buddy movie,” he says with a laugh.

However, Bollywood will have to pull up its socks on at least time management if it wants to be competitive. KPMG’s study points out that Hollywood takes three years on average to develop an idea and script, a year each on pre- and post-production and just half a year on production, the most costly part of the exercise. In contrast, Bollywood often spends just half-a-year each on developing the project and on pre-production, a year-and-a-half on production and, as it hurries to recover costs, just a couple of months on post-production. The study holds that more efficient systems could save Indian films ten per cent in costs, which have been known to touch Rs 300 crore and are often around Rs 50 crore.

The other sobering fact the study points to is that Hollywood spends 40 per cent of a film budget on marketing against Bollywood’s 17 per cent. Instead, some filmmakers complain, distributors have been known to print posters advertising a super-hit before a release and put them up a week after the opening.

KPMG emphasises the need to integrate the value chain, so that studios with several projects on hand could raise funds in the market on a corporate level instead of each film scrounging separately. It recommends that well-equipped studios hire fine professionals so that they can simultaneously work on several films.

As things stand, established Indian producers often demand very high minimum guarantees to finance films they have not developed from start, skewing the risk-returns sharing.

Since the government declared cinema an industry in 2001, even an institution like the Industrial Development Bank of India (IDBI) has set up a unit to finance films. The contribution of such ventures is still relatively small. The total corporate finance that went into films in 2004 was Rs 700 crore. But filmmakers have begun to adopt ratings, insurance and completion guarantees to make their projects more attractive. KPMG predicts that the resultant weeding will reduce the number of productions and that perhaps half the films made by 2010 will get corporate finance.

Fewer films might not be good enough, however. As Shringar Films’ head Shyam Shroff points out, the repeat audiences that used to fill the front stalls of small town theatres are petering out. Indeed, the basic logic of a multiplex is to offer fresh choices. Shroff talks of the possibility of more dubbed films from Europe, Iran, etc. and from other Indian languages if demand outstrips Bollywood’s supply.

Another recommendation of the KPMG study is vertical integration. This has already begun. Telecom leader Anil Ambani bought a stake in Adlabs Studios just a couple of months ago. Such companies have begun to invest in multiplexes and multiplex owners in distribution and even production. “We’ll be in exhibition, funding and filmmaking, and film processing continues to be our core,” says Manmohan Shetty, who heads Adlabs. The company even bought 46 licenses for FM radio recently.

The study points out another major area for growth: outsourcing. Hyderabad-based Ramoji Rao Studios has hired equipment and post-production services for at least seven Hollywood films, including Gladiator. And India has cost-effective manpower and technology to generate special effects. NASSCOM estimates that India’s animation industry alone is worth Rs 2,500 crore. And of course, the government could promote Indian shoot locations with tariff incentives.

The DVD, satellite pay channel and other television-based segments of the market too have huge growth potential. Hollywood already gets only 35 per cent of its revenues from theatres. On the other hand, 57 per cent of India’s film revenue comes from domestic theatres, another 12 per cent from foreign theatres. Since nine per cent of the remainder comes from satellite and DTH, which is generally sold clubbed with foreign theatre rights, only four per cent comes from DVD and VCD sales and another two per cent from music. Piracy takes most of what is left of that pie.

Much needs to be done to restrain piracy but that is not the industry’s biggest corporate headache, for digital technology will sort that out sooner or later. Having only studied its real problems last year, it is still on the starting block of a race not just to maximise profits but to optimise growth.

The other India

Corporatisation has toned up the film industry, tautening its business sinews, but that very muscle could threaten the creativity of the industry’s minds and the empathy of filmmakers’ hearts.

Companies like Adlabs, UTV and Nimbus have enough financial muscle to ensure that, once they take on a project, they can back it to completion. Conversely, they have the commanding position to put in a relatively small amount when a film is stuck, half-finished, and take over all the rights.

There is an ever bigger threat: such companies employ executives who, armed with slick charts of market segmentation and revenue targets, take decisions regarding the plethora of new, untested ideas that young writers and directors bring them. Their corporate methods could throw up roadblocks against the discovery of innovative, socially transformative art.

Even Shyam Shroff, whose Mumbai-based distribution and exhibition company focuses largely on running multiplexes, warns that the industry thinks “only of urban India, not the real India out there”. Shyam Benegal puts it more starkly: whereas there was some money for what was termed the parallel cinema in the 1970s, there is “now no money for those who have fallen off the map”. Saying that even a proven filmmaker like he cannot get money “to give them a voice”, Benegal rues the fact that films do not focus on Naxalite movements and more generally on those who cannot consume.

“The only way is to prove that it works in the market,” he says. For the nonce, it would appear that poverty does not sell. Javed Akhtar points out, “For 12-15 years, the hero has ceased to be poor.” Rather, he drives expensive motorcycles and cars and lives in plush villas in Switzerland or New Zealand. Even the group of boys in Rang de Basanti, although they are far more rooted than Karan Johar’s heroes, have enough family wealth to while away time having fun with friends. That includes the character played by Aamir Khan, whose mother’s income from a dhaba allows him to hang around university years after he ought to have completed his course.

Anurag Kashyap, who has faced many hurdles in depicting the 1993 Mumbai blasts in Black Friday, says that “anything in this country that is based on reality is banned. Too many people have too much power.” He reveals that he had to fictionalise the insurgent setting for Gulal when he realised that the establishment would block a film that focused up-front on strife-torn Kashmir or Assam. He adds that, although he wrote the initial script of Mission Kashmir, he walked out after the second schedule of the shoot.

Ironically, some prominent filmmakers acknowledge in this context that they miss state funding. While it could of course limit enterprise, the state is beyond market constraints. Filmmakers tend to agree that the National Film Development Corporation is dead but Sudhir Mishra points out that, in its time, NFDC allowed a Vidhu Vinod Chopra to grow. Stressing the need to “protect the other voice,” he says – as a large visual of Che Guevara stares down from the opposite wall in his Bandra apartment – that “you cannot ask for a disappearance of the state”.

The silver lining is that many successful filmmakers are acutely aware of “the other India”. Prakash Jha bridles at what he perceives as a pejorative reference to Bihar. Bhavani Iyer speaks animatedly of Black having had good runs in small towns like Satara and in interior Karnataka. And Ram Gopal Verma made Satya as soon as the success of Rangeela gave him the elbow room. However unhappy they may be over not being able to focus on the other India then, hope lies in the determination of filmmakers to get around every hurdle.