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Scene: 2010 Take: Revival

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 The Indian film industry has had a worse year than what was forecast. The Ficci-KPMG report released in February this year forecast a 7.4 per cent growth for 2009 for the Rs 10,900-crore film industry, down from 13.4 per cent recorded last year. But performance has been so poor that the ‘flat’ prediction itself may be an over-estimation.

The reasons are not difficult to fathom. The industry remained strike-bound for over two months between March and May following a spat between film producers and multiplex chains. When Bollywood began releasing movies, barely half a dozen films did well. Multiplexes, which earlier accounted for 30 per cent of the revenue, outpriced themselves with ticket prices of Rs 250 and higher. As a result occupancy has been an unsustainable 30 per cent average through the year. Veteran film producer Manmohan Shetty attributes this to bad content and recessionary conditions. “It has been a bad year for the movie industry. Producers concentrated on incresing the spend of films, and not the content. And in a recessionary period, people are choosy about the films they see,” he says. “We are expecting a de-growth for the film industry,” agrees Rajesh Jain, KPMG’s national director for information, communication and entertainment.
High costs have made projects unsustainable. The 2007-08 boom pushed star costs to unbelievable levels. Industry buzz has it that Hrithik Roshan and Akshay Kumar demanded over Rs 20 crore for a movie, when projecting revenues at Rs 70-80 crore. Shah Rukh Khan demanded equity in the region of 50 per cent for single-movie projects. Advertising and marketing costs have skyrocketed. “The cost of production and fees of stars had driven the films budgets to unsustainable levels in previous months. There was no way the revenue generated could match these numbers,” says Sanjay Bhattacharji, promoter of Cinema Capital Ventures.
In 2010, there will be cost-cutting, but the size of the films may not shrink. “There will be the occasional small-budget success like A Wednesday, and DTH (direct to home) now offers a ready platform for these projects too. However, people have got used to a certain size and grandeur on the big screen, and that cannot be changed,” points out Shetty.
Funds have also become scarce for film projects. Network18’s Indian Film Company, which was backing the distribution of Vipul Shah’s London Dreams, dropped out. Manmohan Shetty’s Walkwater Media, which was expected to launch a film fund, seems to be having trouble achieving closure. Reliance Big Entertainment, which had announced plans to launch as many as 50-60 movies over two years, has managed to produce just half a dozen titles. But as veteran filmmaker Vipul Shah says wryly: “Just because some corporates are backing off, it does not mean Bollywood will stop producing movies.”
There is hope for next year as a slew of film funds have just launched or are about to launch. The model of corporate groups setting up production houses to invest in films seems to be giving way to more focused film funds that typically enter as partners in production or provide debt on fixed-return terms. With investments in the range of 20-50 per cent in a film project, these funds lower their risk by spreading their investments over a wider portfolio.
The Vistaar Religare Film Fund has already got going with a war chest of Rs 500 crore, Cinema Capital Ventures with Rs 200 crore had some success with the film All The Best, and the Dubai-based Dar Capital is investing Rs 150-200 crore over the next two years in a slew of mid-budget films. These hopefully will introduce a more professional and transparent culture; but for some time to come Bollywood for finance will have to live with both the new and the old.
Television Battles 
KPMG’s projections nine months ago pegged television as a Rs 22,000-crore industry and forecast it would double its size to Rs 43,000 crore by 2013. But television has been strapped this year due to poor ad sales. However, the opening up of new markets is expected to compensate that shortfall in 2010. “Ad revenues have been worse than expected in the past six months, but the new regional markets and tier-2 and tier-3 towns hold out hope,” says KPMG’s Jain. Interestingly, as entertainment television channels ramp up their subscription revenues — now accounting for 30-35 per cent for channels such as Colors, Star Plus and Zee TV — the dependence on ad sales has been reduced.
In entertainment television, this year was marked by Viacom18’s Colors dethroning Star Plus after a nine-year reign. But will Colors be able to maintain the lead in 2010? Viacom18’s CEO Rajesh Kamat thinks the battle is far from over. “It is going to be sharper competition and with Sony gaining ground, no one can be 
written off,” he says.
The fratricide has already taken a toll with NDTV selling its flagship entertainment channel NDTV Imagine to Time Warner for $75 million. Time Warner subsidiary Turner Broadcasting has announced $50 million in funding and more is in the pipeline. With this backing, NDTV Imagine is expected to challenge the front-rankers — Colors and Star Plus. India is likely to see a full play of giants such as News Corp., Sony Pictures Entertainment, Viacom and Time Warner in a slugfest for the Indian market.
The direct-to-home (DTH) market — with seven operators — is abuzz too. In a short period of two-three years, DTH subscribers have surpassed 20 million, which is 25 per cent of the cable-delivery homes. The competition has lowered subscription rates for users, but has caused DTH operators to suffer operating losses of over Rs 400 crore annually. But entertainment and media content now has more options with DTH offering pay-per-view movies and film producers having the choice of releasing small-budget movies specifically for TV homes.
A Radio Boom Waiting To Happen
Initial start-up investments in broadcasting towers, copyright fees for music content and high licence fees has pushed the nascent radio industry through traumatic times. Industry observers estimate the combined losses of the big radio stations — Radio City, Big FM, Red FM — in the region of Rs 2,600 crore. This has led the broadcasters to demand that the 10-year licence fees be extended by another five years. “If the situation is not rectified speedily, a number of players will stop investing in their stations and give up their licences,” says Tariq Ansari, managing director of Mid-Day Multimedia.
KPMG’s Jain is hopeful, though. Broadcasters holding multiple licences in a city will soon be a reality so the licences of those wanting to exit will be up for grabs, he said. Multiple channel broadcasting will give economies of scale. The information and broadcasting ministry is also considering allowing news broadcasting on radio. The long-delayed Phase 3 of FM radio licences is expected to be put on the auction block next year. This will mean 700 frequencies across 90 cities adding to the existing radio waves. With this reach, radio advertising will get a whole new meaning. If the Centre presses the right buttons, a revolution in mass communication is waiting to happen.
gurbir(dot)singh(at)abp(dot)in
(This story was published in Businessworld Issue Dated 11-01-2010)