Jun 8, 2009
Gen X recommends new upcoming corporate houses in Bollywood
The global credit crisis has hit the Indian entertainment industry as well, contrary to the popular opinion and consensus that entertainment and gaming industry are actually recession proof. And now an interesting theme is emerging out of all this in Bollywood.
After getting the industry status in 1998, Bollywood saw some big corporate houses(Reliance ventured in to Adlabs, Big Pictures, Big Music etc) taking some serious interest in this industry and a host of production companies(PNC, Percept Pictures, Excel Entertainment, Sahara) and distributors came into existence. As a result the industry saw a structural shift, giving rise to companies that could now produce more films in a year, could distribute them on their own and making good margins. This lifted Bollywood out of the shambles that it was in just decade ago. The effect being that Hollywood studios like Disney, Pixar, Fox want to co-produce, and invest in Indian cinema. This will automatically lead to increase in overseas sales which currently contribute roughly 10% of the total revenues.
Bollywood has also grown in size as the producers don’t need to depend on theatrical releases alone in order to recover their investment. Home videos and satellite rights were also contributing significantly to their top and bottom lines.
The studio model and an idea of having a production house was pioneered by none other than Yash Chopra himself, the biggest name in Indian cinema who has given some memorable movies like Chandni, Silsila, Kabhi kabhi etc. However, the recent years haven’t been very profitable for the company. With a host of films like Tashan, Tara Rum Pum, Kabul Express, Roadside Romeo(animated movie,co-produced by Walt Disney), Thoda Pyaar Thodi Magic all failed to perform well at the box office even after having A-list actors in their kitty for every project. The only projects that did well at the box office were noth SRK starrer ‘Chak De India’ and ‘Rab ne bana di jodi’.
YRF seems to be in serious trouble now. They recently laid-off 20 people; apparently they were executive producers. They are also stepping back from the distribution business now, as they are now turning extremely risk-averse. Due to this, Karan Johar(owner of Dharma Productions)who literally admires Yash Chopra’s work and contribution to cinema and is a close family friend, had to find new distributors(UTV Software Communications) for his upcoming releases Ranbir Kapoor starrer ‘Wake up Sid’ and Multi-starrer film ‘New York’. KJo managed to sell both his movies for a whopping Rs 78 cr.
But in my opinion the biggest cause of YRF’s troubles is not recession(which came in only later) but bad choice of scripts and high cost of production. They also marketed the product in a wrong way, projecting an image of something which was not the true essence of the movie, like Tashan. I guess they did take risks by giving chances to new directors and script-writers but they failed to execute things well. Some of the bets paid off well like Chak De India. But we all know that a company can’t depend on 2-3 break out successes. They have to be consistent in performance and have to market the product for what it is. And these days the ‘word of mouth’ travels 10x faster than before, Therefore a bad movie will die out more rapidly, with box office collections falling sharply in a couple of days time, with bad reviews floating all the over the internet with blogs and discussions dissecting the movie and performances, as opposed to a week’s time earlier on.
I see a leader emerging out of all this chaos though. Progressing gradually and carefully, UTV Software Communications(listed in AIM/BSE in 2005) is now one of the biggest names in the industry challenging established players in scale and box office success across different genres and budgets. They gave a bunch of hits in 2008, like Fashion, Oye Lucky Lucky Oye, Jodha Akbar and Race. Although Race and JA contributed 30% to the kitty, the company’s business model is to produce a mixed range of films, including small and big budget movies, signing the best talent and bringing efficiency in production costs.
UTV seems to be diversifying their portfolio of movies/IPRs pretty well, producing movies on new and old themes in order to cater to the tastes of diverse and demanding Indian audiences. They are actually carving out a niche for themselves, where people have started associating quality with their name. Although recession has hit them equally, they are not going to scale back this year. They are actually hoping to see some rationalization is their cost structure, which seems difficult, as bulk of the costs are ‘Star Costs’. If they manage to get that correction, then probably they could also get a better ROI(Return on Investment). I guess another big chunk of expenditure is marketing costs, and this has actually increased as a % of total budget of the movie, because pictures are promoted as brands these days and hence involve more investments in marketing them.
In 2008 they produced 10 movies, and this year the pipeline contains 15-16 odd films. The next big one I am really waiting for is Vishal Bharadwaj’s Kaminey starring Shahid Kapoor and Priyanka Chopra expected sometime in June 2009.
As a result of the economic slowdown, I can see a serious shift towards good content, efficient capital allocation and correction in star prices(Akshay Kumar charged Rs 20 cr for Tasveer, and it grossed Rs 16cr at the box office)which was making it difficult to recover costs most of the times. I guess only the strongest and the most versatile can weather this storm and one day an Indian movie produced, directed, distributed and performed by Indian artists, based on an Indian subject would get an Oscar.
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