Mumbai: The financial crisis is forcing cutbacks, consolidation and greater efficiency in a business known for its love of excess—the Indian film industry.
In Mumbai, home to Bollywood, as India’s movie industry is known, several productions have been shelved, marketing budgets slashed and stars asked to renegotiate pay packages. “Fewer movies will be made and released in the coming months,” said Siddharth Roy Kapur, chief executive of UTV Motion Pictures, a unit of UTV Software Communications Ltd, which has done “a very sharp review” of its investment plans to cut costs, and is consolidating its television broadcast business. “We are going to see a rationalization of costs across the board. We all want to make money, so we need to be prudent—even the stars understand that.”
The film entertainment business in India is forecast to grow at the fastest rate for any country in the Asia-Pacific region, expanding at about 15% a year to nearly $4 billion (Rs20,000 crore) by 2012, PricewaterhouseCoopers (PwC) predicts.
The industry churns out about 1,000 movies a year, but profit margins are thin because of low ticket prices, the high cost of production and distribution, and rampant piracy.
“Costs had gotten completely out of whack in the last couple of years as money was not a constraint,” said Vijay Singh, chief executive of Fox Star Studios, a joint venture of News Corp.’s Twentieth Century Fox and broadcaster Star. “Now, it’s coming back to bite them.”
The industry has, in recent years, been moving from a family-based to a more corporate structure in finance, production and distribution, modelling itself along Hollywood.
That has brought more investors, including Hollywood studios. UTV Motion Pictures has co-production deals with The Walt Disney Co., Fox Searchlight and Will Smith’s Overbrook Entertainment Inc.
Reliance Entertainment, a unit of the Reliance-Anil Dhirubhai Ambani Group, earlier this year signed deals with eight Hollywood production houses, including those of George Clooney, Tom Hanks and Brad Pitt, to develop and co-finance films. It recently also struck an estimated $1.5 billion deal with Steven Spielberg for a new studio to produce 30-35 films.
These deals may now face the heat of limited funding options, with turbulent markets and banks wary of lending.
Also, several big-budget Bollywood flicks tanked at the box office this year, hitting production houses that get nearly 80% of their revenues from ticket sales in movie-mad India. That may force faster consolidation in an industry that, despite the recent trends, still has dozens of small producers.
“It will be survival of the fittest, and that is healthy,” said Singh. “But we will see a bit of a bloodbath first.”
Shilpa Jamkhandikar contributed to this story.