Corporates,
with Their Greenbucks, Go for
a Kill in Bollywood
MUMBAI:
Change is in the air in the tinsel town.
Bollywood is going corporate, inviting a star-struck
public to come on board its glitzy ship and
take a hand at steering the multi-billion
dollar industry. The Indian corporate world
seems to have woken up to the power of cinema
to push sales and capture the attention of
the consumer.
Until now, Indian businesses typically considered
sponsorship deals with sports such as cricket,
but the huge box office success of some recent
films like Lagaan, Gadar-Ek Prem Katha , Dil
Chahta Hai and Raaz have made them sit up
and take notice of Bollywood as a business
and sales promotion avenue.
This
move promises to increase the flow of clean
money into the film industry and bring down
the curtains on private financing and the
underworld nexus in the backdrop of reports
of extortion and the tightening grip of foreign-based
mafia over the industry.
With the Government recently giving industry
status to the film world and the Reserve Bank
of India issuing guidelines to banks for financing
films, the filmwallahs have got what they
wanted. With everything in place, it now depends
on the producers to avail themselves of this
opportunity and get on with the show.
Under
the existing financing practices followed
in the industry, the producers normally bring
in about 25 per cent of the cost of production
of a film and the balance 75 per cent is met
by way of advance payments from distributors
and private financiers. Banks can provide
finance to film producers (corporate as well
as non-corporate entities) with a good record
of accomplishment in the relative field.
A
few established corporates, including the
venerable house of Tatas, are now venturing
into the production, lured by its glamour
and the high returns. Retail clothes house
Pantaloon, under the banner of PFH Entertainment
Ltd, has recently released its first film,
Na tum jaano na hum, on a budget of Rs 11
cr.
Corporate
funds will contribute as much as Rs. 300 cr
to as many as 50 films this year from the
stable of old film companies like Mukta Arts,
Rajshree Productions and Tips. A clutch of
new corporate players have also entered the
fray - Tata Infomedia and Mettalight productions,
to name a few. Distribution and exhibition
companies like Shringar Films and Adlabs have
also been attracted by the prospects of film-making.
As with any industry, there are some inherent
risk factors with financing the film industry.
The most common of them is the production
completion risk. To mitigate this risk, it
would be necessary for banks and corporates
to carefully appraise the projects having
due regard to the record of accomplishment
of the producers as also the distributors.
There is a serious dearth of movie production
facilities in India. Most of the movies are
produced on shoestring budget. Though there
are adequate creative ideas, implementation
is poor. The primary cause is lack of facilities
and proper infrastructure.In terms of volume,
India produces the largest number of movies
in the world, 800 on an average annually,
but the industry infrastructure has been highly
non-corporatised till date. It has generally
been financed by family-run companies with
no access to institutional finance. Finance
is tapped from family friends and other sources
with high rate of interest, which can go up
to a whopping 40 per cent.
However, with corporate money pouring in,
it would also result in the following:
1. Documented scripts in place;
2. Legally enforceable contracts with the
artists and technicians;
3. The entire time schedule documented; and
4. The producer making sure the filming activity
is completed on time and there are no time
and cost overruns.
While warning against over-kill, analysts
say this new relationship between the cinema
and industry is likely to become stronger
as both sides realise the benefits. Trade
analysts say the Government must intervene
to revive the faith of business houses in
the entertainment industry that is plagued
with threats from the underworld, cash crunch
and rampant piracy. They point out that corporatisation
of the fragmented industry would bring transparency
and professionalism into business dealings.
Media is the next sunshine industry and the
business is expected to grow to about Rs 6,000
cr in the next five years. So film production
is indeed no passing whim. The corporates
want to be the dominant player at every point
along the value chain of cinema right down
to the consumer. And their coming is good
news for an industry desperately trying to
shake off allegations of having links with
the mafia and using underworld money to finance
films.
October 9, 2002
