the world's biggest movie industry in terms of the number of movies
produced (around 800 movies annually). It is a great sector for foreign
investment by corporatised entertainment companies. Though risks are high
on a per-movie basis, the risk spreads out across a number of films.
However, the domestic film-making industry, despite its prolificacy, is yet
to acquire the character of professionalism on a large scale.
BRIEF HISTORY OF INDIAN MOVIE INDUSTRY
Motion pictures came
to India in 1896, when the Lumière Brothers' Chinematographe unveiled
six soundless short films in Bombay (now Mumbai). This was just one
year after the Lumière brothers (inventors of cinematography) had
set up their company in Paris.
The first Indian on
record to make a movie was Harishchandra Sakharam Bhatvadekar
(nickname: Save Dada). He made one short film on a wrestling match at
the Hanging Gardens in Bombay, and another on the playfulness of
monkeys. Both these shorts were made in 1897 and were publicly
exhibited for the first time in 1899 using Edison's projecting
kinetoscope inside a tent which the film maker had himself erected.
India's first feature
film – named "King Harishchandra" – was released in
1913. It was made by Dhundiraj Govind Phalke (nickname: Dadasaheb
Phalke, 1817-1944). This was a silent movie.
By 1920, film making
had taken the shape of an industry.
The first talkie made
in India was "Alam Ara" (produced by Imperial Film Company)
released in 1931.
Until the 1960s,
film-making companies, many of whom owned studios, dominated
the film industry. Artistes and technicians were either their
employees or were contracted on long-term basis. Since the 1960s,
however, most performers went the freelance way, resulting in the star
system and huge escalations in film production costs. Financing
deals in the industry also started becoming murkier and murkier since
India has the world's
biggest movie industry in terms of the number of movies produced
(around 800 movies annually, mostly in the Hindi language. Tamil,
Telegu, Bengali and Malayalam are the languages in which most of the
non-Hindi films are made).
Today, the technology
of film-making in India is perhaps the best among all developing
countries though the films themselves remain mostly repetitive in
storyline and content. Superior movies, in thematic and creative
terms, are made in many developing countries with less sophisticated
unofficial estimates available in January 2001, the Indian film
industry has an annual turnover of Rs. 60 billion (approximately
US$1.33 billion). It employs more than 6 million people, most of whom
are contract workers as opposed to regular employees.
The above statistics
cannot however be used to calculate the movie industry's share in the
GDP or employment generation. This is because a vast proportion of the
turnover takes place outside the legal economy.
overall entertainment industry is taking on professional colours (with
the rise of TV production companies), India's movie industry per se
remains highly informal, personality-oriented and
Until the late 1990s,
it was not even recognised as an industry. Even though it has since been recognised as an industry, banks and other financial
institutions continue to avoid the industry due to the enormous risks
involved in the business. Two banks, Canara Bank and Indian Bank, have
reportedly lost heavily by financing films. However, the prospects of
bank financing and risk insurance are becoming brighter, albeit at a
slow rate (as explained further down this report).
As a result, the
financing of films in India often remains shrouded in mystery.
however, the oft-murky world of film industry’s finances has not tainted
the film industry’s perception in the general public eye or in the
government’s attitude. Even though many famous people from the movie
industry have risen to positions of political and social
responsibility, including seats in federal and state parliaments, none
of them have cared to reveal – or have been under pressure to reveal
– the truth about the industry's finances.
Some developments in
the years 2000 and 2001 – including the arrest of a leading
financier, Bharat Shah for his alleged links with a fugitive gangster
– have not yet brought to public knowledge the inside economics of
The rot or financial
amorality of India's film industry seems to have set in since the
1960s. Until the 1960s, film producers would get loans from film
distributors against a minimum guarantee: this meant that the
distributors had to ensure that the film was screened in cinemas for a
fixed minimum period. If this minimum guarantee was fulfilled, the
producers had no further liability. Profit or loss would be the
destiny of the distributors.
(There are exceptions,
however. India's most celebrated film-maker, the late Satyajit Ray, is
known to have pawned his wife's jewellery to part-finance his first film).
System: The financing pattern, centred on distributors, is suspected to have changed since the
1960s when the studio system collapsed and 'freelance' performers
emerged. This gave rise to the 'star system' in which actors and
actresses ceased to have long-term contractual obligations towards any
studio or film production firm (such as the now defunct Bombay
Talkies, New Theatres and Prabhat Studios). Rather,
they began to operate as freelancers commanding fees in proportion to
the box office performance of their recent films. This increased costs
of film production since the more successful actors and actresses
hogged major proportions of the producers' budget.
In the changed
system, distributors would pay 50 per cent of the film-making cost
leaving it to the producer to get the rest from other sources.
The 'other' sources
– conventional moneylenders (who lend at an interest rate of 36-40
per cent annually);
– non-conventional but corporate resources,
– promissory note system (locally called 'hundi' system): this is
the most widely prevalent source, and
– underworld money: about 5 per cent of the movies are suspected to
be financed by these sources.
Film production thus
became a risky business and the relationship with usurious
money-lenders strengthened over the years.
As at the start of
2001, a reasonable budget film in Hindi could cost US$1.75 million. A
low budget Hindi film can be made for even as low as Rs. 15 million.
A big budget Hindi movie can cost in excess of
US$30 million. The 'bigness' of the budget is attributable mainly to
the high fees paid to 'stars', celebrated music directors, high-end
technologies and expensive
travel costs to shoot in exotic locations worldwide.
At the time of
writing, it is believed that 'stars' like Shah Rukh Khan and Salman
Khan are paid Rs. 20 million (US$440,000) per film. In contrast,
script writers and film editors remain poorly paid. In an interview,
India's so-called 'superstar' Amitabh Bachchan (whose wax statue stands at
Madam Tussaud's in London) attributed the lack of strong storylines to the
poor money paid to writers.
India has a National
Film Development Corporation (NFDC) which finances some
films. A few film makers, who would find it hard to obtain finance
from the regular sources, have been financed by the NFDC. However,
NFDC cannot be considered to play a central role in the film industry
because it finances too few films which, too, are not of the type that
has made the Indian film industry so vibrant. It however goes to the
NFDC's credit that, without it, some of India's best film makers wouldn't
have got a break in the industry.
with the NFDC is that it funds films only at the production stage
while ignoring the just-as-important marketing stage.
The film industry is
currently losing unestimated volumes of revenue due to competition
from local cable operators who illegally beam newly released movies
into the drawing rooms of their subscribers.
This is not intended
to be a scare story, however. As mentioned above, the overall
entertainment industry in India is taking on professional colours and
this will change the culture of the film industry too. Some film
production companies, such as Mukta
Arts, have made public share issues, thus keeping out of the world
of murky financing.
The Film Federation
of India is actively seeking to make film financing a viable
proposition for banks. It is likely that films would also be insured
to offset possible losses for banks.
The granting of
industry status to the film industry will eventually allow overboard
financing of films, though this will result in production of fewer
films than at present.
of copyright law will help the film industry in its fight with cable
companies, with steady revenue streams, can do good business if they
invest in Hindi and other Indian language films. Despite high
risks on a per-movie basis, the risk spreads out across a number of