Filmed Entertainment – Industry overview
Bollywood, as the Hindi film industry is popularly known, is the largest contributor to the industry’s revenue, followed by the South Indian movie industry and other language cinema industries. Although the country’s filmed entertainment industry is the largest in the world in terms of the number of films it produces (around 900) and its theatrical admissions (around 3 billion), it continues to be small in size in terms of revenue, mainly due to low ticket realization and occupancy levels. Moreover, lack of quality content and rising competition from Hollywood films continue to affect it.
The following are the key trends witnessed in this industry:
1. Emergence of new sources of revenue: Although revenues from the theater segment constitute around 60% of the overall revenue generated for a movie, other revenue streams have begun to make a meaningful contribution. The trend of pre-selling satellite and home-video rights has enabled producers to de-risk their business models. In addition, film production houses have the opportunity to monetize their content through gaming on mobile and online platforms. New sources of revenue will reduce a movie’s dependence on its theatrical performance for it to achieve success and is expected to enable fuller exploitation of content.
2. Collaboration with international studios: International film studios such as Warner Bros., Disney, Fox and Dreamworks have entered collaborations with local film production houses to develop Hindi and regional movies. Local film production can leverage the experience of these international studios to expand their international reach and incorporate enhanced project planning and cost controls.
3. Rise of 3D cinema: 3D was a prominent theme in 2010 and has amply demonstrated its significant potential with benefits such as enhanced audience engagement, increased ticket prices and the exclusivity of the medium, i.e, the theaters. The success of Avatar has taken 3D movie-making to new heights. Multiplexes could look at the feasibility of investing larger amounts on 3D screens to meet the growing demand to view 3D. A new window of opportunity could open if Bollywood is able to produce high quality 3D content. Releasing movies with spectacular special effects, such as in Avatar, could be the answer to bringing people back to the theater.
4. Rationalizing the movie slate: In line with the global trend, Indian movie production houses have cut down on the number of movies they release every year, mainly due to rising movie production costs, which is leading to difficulties in securing funding of projects. A shift toward a portfolio approach for movies with small, medium and large budgets is a positive development in the sector.
5. Resurgence of regional cinema: of late, regional cinema has been witnessing a surge in investments from major film studios to tap the potential of underpenetrated markets. This segment, which is dominated by South Indian cinema, has pushed the boundaries with the main growth being witnessed in Marathi, Punjabi, Bhojpuri and Bengali cinema. In December 2009, DAR Capital, an asset management company, earmarked INR1.5 to 2 billion to fund regional cinema projects over the next three years. Richer content, to cater to the preferences of local audiences, as well as the increasing uptake of such movies by mainstream audiences, has attracted studios such as Eros, Disney and Reliance to regional cinema. Studios are also releasing dubbed versions of popular Hollywood films, while multiplexes are increasing their number of shows of regional movies.
6. Focus on niche movies: Recent success of small budget movies like No one killed Jessica, Peepli live, well done Abba and Dhobi Ghat has re-emphasized the importance of content-driven films. While these movies are produced on tight budgets, strong content and word-of-mouth marketing can bring high returns to studios. In addition, refined audience tastes and the advent of miniplexes to cater to the tastes of targeted audiences is likely to drive the production of more such movies, which is in sync with the portfolio approach adopted of late by studios.
7. Advent of digital cinema and the growth of multiplexes: The growth of multiplexes has improved the movie-going experience for Indian audiences and has led to increased per-ticket realization. Companies such as Real Image and UFO Moviez have facilitated digitization of movies, which curbs piracy and enables increased release of films across the country — a game-changing phenomenon whereby 60% of box-office collections are realized in the first week of release of a movie. Thereby, a big-budget Hindi movie, which would have been released earlier with 400–500 prints, now enjoys a wider release with almost 1,000–1,500 prints being distributed. The average number of screens per million in India is 12, as compared to the global average of 54. The number of multiplex screens in India is expected to increase from 1,000 in 2010 to around 1,405 by 2013.
Shortening of release windowsShortening of release windows: In the last few years, the window available to a film to monetize revenues at the box office has come down sharply as far as Hindi films are concerned. Therefore, distributors flood the market with prints, looking to garner as high revenues as possible during the opening weekend of a release. The implication of this trend from the point of view of the industry is that the largest chunk of the revenues generated by a film flows into the value chain within the first three days of its release. This necessitates monetization of content across all media and platforms, including broadcast and new media rights, merchandizing and gaming revenue.
Lack of transparent data:Frequently, large foreign studios or investors indicate that they do not want to invest in the Indian film industry because there is no way of verifying or validating the data made available in the public domain about the amount a film has grossed and its profitability. It is difficult to procure reliable data relating to box office collections and it is even more difficult to gauge the producer and distributor’s share. While film experts may know and can provide numbers based on their experience and network, there needs to be a more transparent and reliable method to collect and make this data public.
Planning process::A Hollywood film typically takes 36 months to plan and 12 months to execute, where as an Indian film takes 6 months in planning and 18 months in execution. While one can suitably discount the differences due to the scale of Hollywood projects, the gap is still significant. Indian film makers say that what they lose out in planning, they make up on account of time and cost-efficient execution. However, this can be refuted by pointing out that efficiency can be achieved and revenues generated by being equally diligent at the planning stage.
Intellectual property::The Indian film industry has gradually woken up to the relevance and importance of IP in the work it creates — prequels, sequels, remakes, copyright or trademark for catchphrases, superheroes, etc. More work, however, is needed, since as an industry, we are still lagging far behind from defining and implementing a process whereby IP is developed and nurtured in a systematic manner and results in creation of an IP bank.
Interaction with emerging technologies::Industry players would do well to update themselves with new technologies and trends, and prepare themselves to ride the wave. Increasingly, we are moving toward a multiple-screen world with each screen having the ability to consume the same mass of IP in different forms. It is also imperative that the industry recognizes the importance of valuable IP to which it has rights and needs to carefully apply itself before making this IP available on the public media for an additional sum of money and focus on the big picture
Film Industry in India : New Horizons (2012)