Now don’t push your chairs back to watch a movie cos..

Its got strategy too...

History of Bollywood• Raja Harishchandra (1913), by Dadasaheb

Phalke, was the first silent feature film made in India.

• By the 1930s, the industry was producing over 200 films per annum

• The period from the late 1940s to the 1960s are regarded by film historians as the "Golden Age" of Hindi cinema.

History of Bollywood• The 1960s and early 1970s were of romantic movies

and action films with big star actors.

• During the late 1980s and early 1990s, the pendulum swung back toward family-centric romantic musicals

• The 2000s saw a growth in Bollywood's popularity in the world. This led the nation's filmmaking to new heights in terms of quality, cinematography and innovative story lines as well as technical advances in areas such as special effects, animation, etc

Facts• The movie industry is one of the most exciting

and fastest-growing businesses in the world.

• Bollywood, the world's largest film industryby ticket sales and no. of movies made, isworth about Rs.8500 crore (as of 2007)($2.15 billion) and is forecast to more thandouble to Rs.17500 crore ($4.43 billion) by2011. (recession not taken into account)

Some facts

• World’s biggest movie industry• 1000 movies annually• Technology of film making one of the best.• Employs more than 6 million people (most

contract workers)• India’s movie industry- highly informal,

personality oriented and family dominated.

Yet its revenue earned is only 4% of Hollywood.

Revenue can reach $1 bn and worldwide gross revenues are now over $40 bn annually for the global film industry.

Growth of Bollywood

Today Bollywood is growing at a rate of 9%p.a. and has a current business of Rs.11,000 crores

If Bollywood maintains this rate then soon by the end of 2013 it will cover the business of worth Rs.19,000 crores.

translating into a healthy CAGR of 18%.

Production Houses

Some well-known Indian film production houses based in India are

• AGPPL - Ashutosh Gowariker Productions Private Limited

• AKP Films - Aamir Khan Production Films-

• Mukta Arts• Red Chillies Entertainment• Percept Picture Company• Yash Raj Films• Roopesh Rai Production• White Feather Films• Key Sera Sera Films• Adlabs Studios• Vishesh Films• Devgan Films• UTV Motion Pictures• Dharma Productions• Pritish Nandy Communications• Popcorn Entertainment

• Base Industries Group• BR Films• Balaji Telefilms• Rajshri Films• Super Cassettes Industries Ltd (T-Series)• Shree Ashtavinayak Cinevision Ltd• Madras Talkies• J P Films• Filmkraft Productions• Excel Films• Ram Gopal Varma Productions• Kaleidoscope Films• India Showbiz Network Limited• Diya Productions• Excel Films• IDream P• Suresh Productions• Sahara One Productions

Foreign tie-ups• The Reliance Anil Dhirubhai Ambani Group has

sealed its $825-million deal with StevenSpielberg’s DreamWorks Studios withinvestment banker JP Morgan syndicating $325million debt, the two groups announced lateMonday

• Walt Disney Studios that will handle themarketing and distribution of films made byDreamWorks in markets outside India

Why you should Invest?

High Potential Returns

Accelerated Industry Growth

Stardust In Your Portfolio

A Natural Hedge

Multiple Revenue Opportunities

Production costs• In a Rs 40-crore Bollywood film, the

production cost would be hardly Rs 15 crore and the rest goes for paying the cast

37%

63%

Cost of producing movies

production cost Cast charges

It is estimated that Indian domestic film industry will by

2010 be worth Rs.400 bn.

According to Associated Chambers of Commerce and Industry of India (Assocham)

the Indian film industry already earns 100 million U.S. dollars in foreign exchange.

The Birth of a Star

Script Director Producer

Source: Confidential- with inputs from Mandre Productions, Govind Rai andRohit Jaisingh Vaid, Contilloe Films

The Cycle of Events

• Based on relationships

• Brand value

• Profit sharing

Casting

• NFBC

• IDBI

• Conventional moneylenders

• The Underworld mafia

Plough funds• Editing- Adlabs

• Trial run

• Censorship

• Print type

The makeover

The media to get there- Single Screen

Digital

UFO, Qube

-Show times are uniform

Costs just Rs.10,000

Could have been done in Ten lakh

rupees

Analog

Normal projector prints

-Showtime can be strategically planned

Runs into crores

Eg: Ghajini spent Rs. 6 cr.

700 digital prints and 500 analog prints taken by a distributor

The Distribution Debate

Producer

Sub-Distributor

North

Sub-Distributor

South

Sub-Distributor

Mumbai et al

Distributor

North East and Central

DistributorDistributor

Overseas

Key Facts• The distribution and telecast rights are given for

a period of 5 years• The success of a Bollywood is dependent on the

profit / loss incurred by a Distributor• The promoters/ star/ directors have to carry out

marketing for the film, to safeguard their brand identity

• Distributors carry a higher risk- Strategy: monopolize the production and rights

• Largely distributors finance producers 50% of the movie, hence, the 50:50 sharing

Negotiating skills of producersProducers have good negotiating skills

SRK had turned down an offer of Rs 76 crore whichastounded industry sources.

It was auctioned for Rs 80 Crs where they made 30Crs Profit and production cost of Rs 50 Crs

Single Screen effect• 5 years free to run the movie as many times• 1st week theatre gets 30% while the Producer/ Distributor

gets 70%• 2nd and 3rd week revenues for theatre can / may increase• Theatre can sub-sell the movie to another in the same city• Strategy: A nexus between Theatre- Production House-

Distributor• Eg: Rex and Symphony theatre in Bangalore• Strategy: Make money on Snacks, Beverages,

Advertisements and Parking

The Bollywood-Multiplex tussle

Multiplex

• 45%

• 45%

• 60%

• 50%

• -2%

Producer/ Distributor

• 55%

• 55%

• 40%

• 50%

• +2%

When??

• OLD

• 1st week

• 2nd week onwards

• NEW

• Subsequent performance

Revenue Generation-Bollywood

Sources of RevenueThere are various sources from where the industry generates revenues:

The Domestic box office revenues

Home video revenues.

Overseas box office

revenues.

Ancillary revenues.

Sources of revenue

(Rs m) FY04 FY05 FY06 FY07 FY08E FY09E FY10F

Domestic 78% 76% 75% 69% 69% 68% 66%

Overseas 8% 9% 9% 9% 9% 9% 10%

Ancillary 8% 9% 9% 9% 9% 9% 10%

Home 6% 6% 7% 13% 13% 14% 14%

Growth of muliplexes• Film industry growing at 10% per annum

driven by multiplexes

• Key drivers of multiplexes growth– Favorable demographics – Tax exemptions– Quality locations such as malls

Source: Reuters 2009

3%

97%

No : of Indian Theatres

Multiplex Single screen theater

Revenue generated from ticket collection

37%

63%

Multiplex Single screen theatres

The economics• Supply side

– Growth in film industry– Improving real estate supply– Favorable tax exemptions

• Demand side– Favorable demographics– Rising income levels– Willingness of people to spend

Industry characteristics

Seasonality

Reducing shelf life of movies

Low screen density

Increasing average ticket prices

Revenue Generation-Bollywood • Hollywood commands more than 90% of the

global cinema market.• Bollywood contributes 3 to 5 percentage of

global film revenue• 240 to 300 films are produced in Hindi and

same number in Telugu• Hindi films account for about half of the total

revenue generated by cinema in India• Indian cinema found markets in over 90

countries where films from India are screened.

Revenue Generation• Many Bollywood Films earn between 10 %-

30% of their revenue from the overseas box-office depending on the budget of the film

• The total revenue that Bollywood earned in 2008 was Rs 10,900 crore with an overseas collection of Rs 977 crore

• Most of the times the size of the overseas market is directly related to the Asian population residing abroad

Major Overseas Markets• South Asia is a big market

• Bangladesh• Nepal• Pakistan • Sri Lanka

• Australia• Western Europe• U.S- earn around $100 million a year through

theatre screenings, video sales and the sale of movie soundtracks

Major overseas markets– U.K

• They frequently enter the UK top ten– Africa

• Greater westernization of Bollywood movies is diminishing the presence in the African market.

– Russian Market • Bollywood films are particularly popular in the former

Soviet Union.

Indian Film Industry = bollywood??Films Released

2004

Films Released

2006

Hindi 241 223

Telugu 202 245

Tamil 130 162

Malayalam 71 77

Bhojpuri 21 76

Kannada 75 75

Marathi 56 73

Other 134 160

Total 931 1091

Present Film Production Trend

30%

30%

20%

20%

Hindi Telugu Tamil Others

Market Share of Various Film Industries

45%

20%

15%

15%

5%

Share of Revenue Hindi Telugu Tamil Others Hollywood

Where does the money come from

71%

9%

5%15%

Components of Revenue

Domestic Box office Overseas Collection

Home Video Ancilliary Revnue

Source of Income

Amount (in billions) (2008) %

Domestic Box office Collection Rs.81.2 71%

Overseas Collection Rs. 10 9%

Home Video Rs.5.8 5%

Ancilliary Revnue Rs. 18 15%

Total Rs. 115 100

Hollywood Story in India• Jurrasic Park (1993) dubbed into Hindi

followed by the hits Speed (1994) and Dunston Check In (1995)

• 2005 : 55 Films• 2006 : 75 Films• At present Hollywood has 4-5% share in the

Indian Film Industry

Regional movies• Out of 1,000 movies released in India every

year, Bollywood constitutes only 30%.

• South Indian films—Telugu and Tamil—constitute almost 50%. The rest is made up of other language films.

South Indian Market• Tollywood makes equal No of movies as

Bollywood• Last 2 years 30 Telugu movies are dubbed and

released in Kerala (expanding Tollywood?)• Tamil movies have a ready market in Kerala

and dubbed into Kannada and Telugu• Biggest hit of 2009??

UTV Case • UTV Motion Pictures, wants to increase

revenues from regional cinema from 5% to 20% in the next two years. “It would be foolish to ignore regional cinema,” .

Why go regional ??• A big-budget, star-studded Bollywood film could cost

anywhere between Rs 20 crore and Rs 60 crore.

• On the other hand, most regional films with the most state-of-the-art production techniques would cost only Rs 3–4 crore.

• The return on investment (ROI) in a regional film is also higher.

Why go regional ?• Investing in a basket of regional films may

diversify risks better than putting all the money in a high-budget Bollywood flick.

• Diversifying risk can help improve valuations. “More the titles, the better valuation will they get,” says Patnaik of Beyond Dreams

• Most regional markets have strong local distributors. They have control over theatres and it becomes crucial for the Bollywood companies to get the local players involved

Other sources of income• In 2008, Red Chillies introduced and bought

Kolkata Knight Riders Cricket franchise in BCCI new venture Indian Premier League. They have also ventured into television content production and their show 'The first ladies' was aired on NDTV Good times.

Other source of income

Problem Definition

Hollywood a threat • Indian’s perceive watching Hollywood as

“cool”??• A century old industry unaffected- future??• Walt Disney’s entry• Will Bollywood suffer like the Japanese and

European Film industries?• Target Audience of Hollywood is gigantic

Can Hollywood Swallow Bollywood?

• Bigger menu• Technology• Investments• Infrastructure• Systematic• High Entry barriers

Can Bollywood bite into the Regional Film Industry?

• Massive size of movie markets in the South

• Movie culture more prevalent in the South

• 60% of the movie halls are located in South

Piracy

• Piracy causes $400 million in revenue loss-India.

• Worldwide- 6 billion $ (average annually)

• In India piracy is a parallel industry that runs with financial support from the underworld and grey market.

• Job dependency of the lower class of the society is high (child labour).

Source - US India Business Council - Ernst & Young 2008 report on 'The Effects

of Counterfeiting and Piracy on India's Entertainment Industry

Consequence

• Loss in revenue - media houses, theatres and distributors.

• Loss of nearly 80000 jobs that this industry could generate annually.

• Lower contribution to GDP.

• Attitude of people towards purchasing pirated versions.

How is it done?

• Camcord into theatres – available on streets and telecasted on TV by operators.

• Rackets – Example, “What’s your Rashee” fine print given by Business development manager with Adlabsand associate vice president (operations and digital mastering) with UFO Moviez gave to Pakistani counter part by two channels.

Reasons for piracy

• Weak law enforcement –

Breach of copyright laws is punishable by prison for up to three years, but most pirates get away paying a nominal fine.

So caught and get away to start newly in another city in India.

Strategies for Bollywood

Strategy 1:Encouraging to open more number of multiplexes in

India.

– As the revenue generated is more

0

50

100

150

200

250

300

350

400

450

500

cost of indian ticket cost US ticket

Advantages

• Revenue is more from the multiplex

• Will de-risk the industry

• Attract more corporate houses which will make Bollywood more organized

• Much more quality jobs generated in multiplexes

• Compete with Hollywood as we will gain more money power

Strategy 2:Entering into the Southern Markets

• High quality dubbed Bollywood movies to be released in South India

• Incorporating South Indian Actors into Bollywood.

• Aggressive marketing campaigns for South Indian markets

Strategy 3:Overseas Market

• Concentrate more on the South Asian population abroad.(which is currently done)

• Indian English movies which cater to the Western Audience

1. Camcord in theatres

Tactics – PVR cinemas and other major players started a “Make a difference” campaign -training to cinema employees check and capture camcord in theatres.

Strategy 4Strategy to Curb Piracy

Laws to be made stringent

• Presently breach of copyright laws gives a punishment of 3 years or fine amount of Rs. 50000. So acussed gets away with fine easily.

Hence the fine amount should be increased further 2 lakhs or more so as to restrict it.

• Controlling piracy by frequent police raids-road side selling of pirated CDs and DVDs.

Strategy to Curb Piracy

• Encouragement to DTH satellite, easy availability of cinemas to people, so reduced demand for pirated movies by local TV operators.

• Enhancement in technology-

The media houses should try and follow the UFO method for transacting with theatres. This will reduce the risks of breakage of value chain.

Strategy to Curb Piracy

Like any other industry the entire value chain

is important even in the Indian entertainment business. But this suffers piracy because of less or no corporatization.

Hence the FCCI entertainment committee should look forward towards making it corporatized.

Strategy to Curb Piracy

Red Chillies Entertainment

•Started in 2002 as a Film Production Company

• Headed by Shah Rukh Khan and Gauri Khan

•The company produced lots of hit movies like Main Hoon Na, Om Shanti Om etc

•Later Branched out to Post Production, TV Commercial and Advertising , Television, IPL and Equipments

Diversification of Business

• Movies

• Vfx – Special Effect Studio

• TV commercials and Ads

• IPL Kolkata Knight Riders

• Idiot Box (TV program prodution)

• Equipment Renting

VFX – The Special Effects Studio

• Post Production unit

• Specializing in Visual Effects

• State of the art facilities

• 10,000 sq ft Studio

• Technical Collaboration with HP

• Won several Awards

TV Commercial Division

• In house team of Directors, Writers, Stylists and Creative Producers

• Pizzazz is the Ad division which gives access to Bollywood directors

• Present Clients : Airtel, Pepsi, ITC, ICICI, Hyndai, Videocon, Hero Honda

IPL- Kolkata Knight Riders

• Bought the team Kolkata Knight Riders for 5 years.

• Ambitious plans to venture into other sports such as hockey and football

TV and Equipment

• Idiot Box is the TV programme division

• Ventured into TV programme production in 2009.

• Equipment Renting is another venture where state of the art equipments are provided to other players in media industry.

No business like Show business

• Leveraging the “Khan” image to the maximum

• Making use of Shah Rukh Khans Friends Network.

• Red Chillies major clients in the advertising have Shah Rukh Khan as Brand Ambassador (Pepsi, ICICI, ITC, Hyundai etc)

• All the new divisions of Red Chilly is directly linked to Show Business

Strategy

• Red Chillies Group even after venturing into multiple verticals of entertainment industry should always should not loose focus on its core competencies and at times outsource work if they find the core competencies don’t lie with them.

• Red Chillies should slowly try to distance itself from brand “Shah Rukh Khan” to a Production House with “independent identity”.

The End