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An Industry Analysis - Desk Research report on

Submitted in partial fulfillment of the requirements

For the degree of Master of Business Administration

To

By

Name of Students PRN NO.

1- Gaziyani Md. Hasnain Md. Khalid ----------------------------

2- Ansari Abu Swaleh Rafeeque Ah. ----------------------------

3- Rahul O. Bhandari ----------------------------

4- Khushboo Mutha ----------------------------

5- Bhagyashree Mankar ----------------------------

Under the guidance of

HON. HOD. PROF. MR. U.S. KASAR

In the Year-2013-14

Through

S.N.J.B’s Late Sau. K.B.Jain College of Engineering, Neminagar, Tal- Chandwad, Dist-Nasik, (M.S)

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DECLARATION BY THE STUDENT

I hereby declare that this Project Report titled ENTERTAINMENT AND MEDIA

INDUSTRY Submitted by me is based on actual work carried out by me under the guidance and

Supervision of PROF. MR. U.S. KASAR any reference to work done by any other person

Or institution or any material obtained from other sources have been duly cited and

Referenced. It is further to state that this work is not submitted anywhere else for any

Examination.

Date:

Name of Students: Signature of the Students

1- Gaziyani Md. Hasnain Md. Khalid

2- Ansari Abu Swaleh Rafeeque Ah.

3- Rahul O. Bhandari

4- Khushboo Mutha

5- Bhagyashree Mankar

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ACKNOWLEDGEMENT

We would like to thank the almighty for his constant grace showered on us

and his increasing gift of knowledge and strength that has relentlessly prevailed

our life through the entire project work.

It was such an honor and privilege for us to collect information for the

companies and share with the class. We would have not completed our project

without their immense help and co-operation.

Our sincere gratitude goes to Mr. and for guiding us

and helping to collect data and constantly counseling us through their undertaking.

We acknowledge our sincere thanks to Prof. Kasar Umesh S for his guidance

that made us this project materialized. Finally, we are also thankful to our parents

and friends for their encouragement and support.

We would like to thank SNJB’s KBJ COE dept of MBA and our principal

Dr.V.J.Gond for the exposure and support provided during the project.

Names of students

1- Gaziyani Md. Hasnain

Md. Khalid

2- Abu Swaleh Rafeeque

Ah.

3- Rahul O. Bhandari

4- Khushboo Mutha

5- Bhagyashree Mankar

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Entertainment and media Industry

The words that come to our mind when we think of entertainment are

Pleasure, Fun and Relaxation. Entertainment exists from the time man exists. He

always found some way or the other to entertain himself. Though the methods and

sources of entertainment differed the essence remained the same that was to get

pleasure. We would say a lot has changed over the years in other words everything

is getting more and more modernized. But, yet the truth is that the basic mode of

entertainment yet remains the same. Earlier the scope of entertainment was

narrower unlike today. Now services are available to entertain us in other words it

is commercialized.

All, young & old, rich & poor, man & woman, require entertainment. Every

individual needs some sort of entertainment in his life. Entertainment provides

some sort of a change from the normal course of life.

Modern age, man has been found facing a number of problems. They are

supposed to follow the busy schedule to earn more and at the same time also

required to be a high performer. Management of a family is also important. This

necessitates entertainment. The changes in the taste and temperament in the

masses, increasing disposable income, the changing lifestyle due to corporate

changes has paved the way for the development of healthy entertainment

facilities. Opening of new air-conditioned cinema halls, open-air theatres, drama

centers, music centers, pub, club, art and handicraft and painting centers have

been found gaining popularity. Many entrepreneurs have been seen promoting

entertainment services. By doing this, they not only entertain the masses but also

inculcate awareness, promote education, and develop knowledge. The focus today is

on development of entertainment services in a right fashion. In the Indian

perspective, where majority of the population is illiterate, it is the responsibility

of the entertainment services to inculcate awareness even in the rural areas of the

country.

The entertainment industry in India has outperformed the economy and is

one of the fastest growing sectors in India. However, it registered a moderate

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growth of over 15 per cent in 2003. The FICCI-Ernst and Young Study titled "The

Indian Entertainment Industry: Emerging Trends and Opportunities", scheduled to

be unveiled during FICCI-FRAMES 2004 - the Global Convention on the Business of

Entertainment on 15th of this month at Mumbai, has projected that the industry

will grow from Rs.19,200 crores in 2003 to Rs. 42,300 crores in 2008, at a

compounded annual growth rate of 17 per cent.

(SOURCE: ERNST AND YOUNG STUDY)

ZEE TELEFILMS HAS SECURED TOP POSITION IN INDIAN ENTERTAINMENT

INDUSTRY WITH A MARKET CAP OF RS 4,739 CRORE AND NO ONE COMES ANYWHERE

NEAR. MEDIA MATRIX WORLDWIDE, AT NO 2, IS WAY BEHIND WITH RS 406

CRORE.

Top 5 Companies By Market Cap

Sector

Rank Company MARKET CAP

(RS CRORE)

1 Zee Telefilms 4,739

2 MediaMatrix Worldwide 406

3 Sahara India Mass Communications 387

4 Balaji Telefilms 357

5 Pentamedia Graphics 161

19.20022.608

26.94531.634

36.690

42.300

05

1015202530354045

2003 2004 2005 2006 2007 2008

(in crores)

Years

Estimated Turnover of Entertainment Industry

Estimated Turnov er

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Top 5 Media Companies By Net Profit

Sector

Rank Company Net Profit (Rs Crore)

1 Zee Telefilms 87

2 Balaji Telefilms 57

3 Padmalaya Telefilms 17

4 Adlabs Films 17

5 ETC Networks 14

(SOURCE: ECONOMICTIMES.COM) ENTERTAINMENT SECTOR IS DIVIDED INTO MANY SEGMENTS. SOME OF THE

SEGMENTS ARE AS FOLLOWS:

Amusement parks

The roots of the amusement park industry go back to medieval Europe when

pleasure gardens began to spring up on the outskirts of major European cities. These

gardens were a forerunner of today's amusement parks, featuring live entertainment,

fireworks, dancing, games, and even primitive amusement rides. Today the amusement park

remains an international favorite. Many developing nations are experiencing the joys of the

amusement park for the first time, while the older, more established amusement parks

continue to search for new and different ways to keep their customers happy. Rides are

taking advantage of technology to reach heights and speeds that thrill seekers only

dreamt about not too long ago.

ESSEL WORLD: ESSEL WORLD OFFERS OVER THIRTY-FOUR THRILLING AND

SCINTILLATING RIDES, GAMES AND AMUSEMENTS, GUARANTEED TO PEP YOU UP.

WATER KINGDOM: THE WATER KINGDOM IS ASIA'S LARGEST THEME WATER

PARK. SET AMIDST AN EXOTIC JUNGLE, COMPLETE WITH QUAINT SCULPTURES, RUINS

AND TROPICAL VEGETATION, THE WATER KINGDOM HAS SEVERAL INNOVATIVE

ATTRACTIONS - THE WORLDS BIGGEST WAVE POOL, ACTIVITY POOLS, RIVER ADVENTURE

CRUISES AND LOTS MORE.

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Radio

Radio is a theater to the mind. Radio is also a mass medium. It is only an audio

medium. It is best suitable for local advertising followed by spot and then by network.

Unlike print media, a radio set can accommodate a group of individuals all at the same time.

Listening does, however, usually compel all or almost all the individual's attention. No doubt

housewives turn to radio and listen. Some household jobs or activities can be combined

satisfactorily with radio listening.

Radio had great response in the beginning but with the higher penetration of

television, the radios was out shadowed in other words people preferred tantalizing both

their senses.

Just a few 3 - 4 years back listening to the radio was not looked upon. Thanks to

the revolution brought about in 2001 with the entry of lots of private radio stations and

cheap handsets in the metros number of people harping on radio as a source of

entertainment has zoomed up again.

Radio covers 90% of India and entertains about 98.81% of population

through programmes broadcasted by AIR. Many private players are now plunging

into this industry giving the listeners a world of choices namely Radio City, Radio

Mirchi, Go, Win and RED. These five players in Mumbai spent an estimated Rs 500

million last year; the aggregate revenues did not amount to more than Rs 260

million. The high licenses, that came into effect after a blistering bidding process

three years ago, are killing the fledgling private FM players. www.indiantelevision.com/headlines/y2k3/may/may211.htm

The temporary closure of Win 94.6 due to alleged non-payment of license fees

for the current year is bad news for the entire radio industry. The growth rate of

private FM is directly proportional to the number of stations in a city. Disruptions

and closures will only add to the woes of the industry and not help matters. www.studio-

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Televisions

Unlike radio TV was a great source of entertainment right from the

beginning. This aspect is now changing. Apart from being entertaining it is also a

great source of information now as well as a source of education. Earlier it was only

for those lucky few, as everyone could not afford it. Now it’s become like a

necessity (common commodity), which has grabbed the attention of all age groups.

Television is broadcast and electronic medium. Television combines three attributes

like sound, picture and motion. Television broadcasts audio-visual programmes. Television is

a theatre of the home. Receiving a television set is a glamorous family medium. No other

medium can compare with television for its great penetration of the market. Print media

like newspapers and magazines are hard on the eyes to read and understand. The problem

of illiteracy is also there. The readers have to put in a lot of effort on reading and

understanding the message. In case of television broadcasting it is just enough if the

viewer keeps his or her eyes open. Commercials are broadcast only during breaks, and cuts

are usually only for a few seconds and require no efforts to view. It is an entertainment

and information mass medium possessing all the qualities essential for a mass medium.

Television was introduced in India, as an experimental service in September 1959,

with a limited transmission three days a week. There have been two ignition points: the

first in the eighties when colour TV was introduced by state-owned broadcaster

Doordarshan (DD) during the 1982 Asian Games. It then proceeded to install transmitters

nationwide rapidly for terrestrial broadcasting. In this period no private enterprise was

allowed to set up TV stations or to transmit TV signals.

The second spark came in the early nineties with the broadcast of satellite TV by

foreign programmers like CNN followed by Star TV and a little later by domestic channels

such as Zee TV and Sun TV into Indian homes. Prior to this, Indian viewers had to make do

with DD's chosen fare which was dull, non-commercial in nature, directed towards only

education and socio-economic development. www.indiantelevision.com/indianbrodcast/history/historyoftele.htm

The initial success of the channels had a snowball effect: more foreign

programmers and Indian entrepreneurs flagged off their own versions. From two

channels prior to 1991, Indian viewers were exposed to more than 90 channels by

2002.

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Today cable TV has become so addictive that previously where women’s were more

toward their household work now its different, they now make sure they complete their

chores before their favorite serial starts and they can relax. Two main revenue streams

of TV are Advertisement (A) and Subscription (S) revenues.

Cable penetration has increased in leaps and bounds. Cable connectivity is

provided by small and unorganized as well as large, corporate players. Cable

operations are regulated by Cable Televisions Networks (Regulation) Act, 1995.

Sports

What entertains one the most playing a particular sport or watching a particular

sport? Well the answer is obvious, watching. Earlier in India we had sports like gulli danda

and kabadi but now there is cricket, hockey, football, etc.

Adventure sports:

Sports generates a win and loose relationship where as adventure sports generates a win

and win relationship. India Offers a wide range of adventure sports for tourists.

Trekking and Skiing in the Himalayas, White Water Rafting on the Ganges and Beas,

Camel and Jeep safaris in the deserts of Rajasthan, Paragliding in Himachal, are just some

of the options available to the adventure seeking tourists.

The perennial challenge of the Himalayas for mountaineers. Coniferous forests and

flower meadows welcome the trekker. And the rapids of snow-fed rivers are ideal for

white water rafting.

Lakshadweep offers excellent wind surfing, snorkelling and scuba diving in the

crystal clear waters of the lagoons which surround each island.

This particular source of entertainment is gaining momentum because of the

changing outlook of the people and even because of the safety facilities provided with

each adventure sport.

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Music

Until the 1990s, the Indian music industry was synonymous with Indian film

music. Music cassettes and radio (run by All India Radio) were the only delivery

media to the music listener. However, over the years, the industry has undergone a

transformation. Non-film genres, such as international music, Indi-pop and regional

music have become significant despite the continuing dominance of film music.

International music has gained popularity owing to the promotional effects of

satellite music television and the entry of global music majors like Sony Music and

Universal. Besides, old genres of Indian music such as classical and devotional music

have received renewed focus and commercial attention.

This metamorphosis of the industry has been in tandem with changes such as

the retail revolution in music distribution (with the emergence of music retailing

outlets), increasing penetration of Compact Discs (CDs), and emerging distribution

channels such as the Internet. These factors, coupled with the increased

affordability of quality music hardware.www.screenindia.com/20010413/mcover.html

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BRIEF HISTORY OF INDIAN FILM INDUSTRY

The Beginnings

In 1886 the Lumiere Brothers Cinematographe unveiled six soundless short films at

Bombay's Watson's Hotel. Soon after, Hiralal Sen

and H.S. Bhatavdekar started making films in

Calcutta and Bombay, respectively. Like Lumiere

Brothers Bhatavdekar made India's first actuality

films in 1899. Tough there were efforts at filming

stage plays earlier India's first feature film Raja

Harishchandra was made in 1913 by Dadasaheb Phalke

who is known as the Father of Indian Cinema. This

was a silent movie.By 1920 there was a regular

industry bringing out films starting with 27 per year and reaching 207 films in 1931.

Advent of Sound

By the time of the First World War, and the phenomenal expansion of Hollywood, 85% of

feature films shown in India were American. But

the introduction of sound made an immediate

difference. In 1931, India's first talkie, Alam Ara,

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was released, dubbed into Hindi and Urdu. As the talkies emerged over the next decade,

so too did a new series of issues. The most prominent of these, of course, was language,

and language markets; alongside, there are considerations of regional identity, of the

different places that separately and together make up India. Many films of the time were

produced both in the regional language (Bengali, Marathi), and in Hindi, so that they could

be oriented to the larger Hindi-speaking market. The Indian public quite naturally

preferred to see films made in their own language and the more songs they had the better.

In those days, the films made had upto 40 songs.

The 1950s

By the start of the 1950s, Calcutta became the

vanguard of the art cinema, with the

emergence of the film society movement at the

end of the 1940s and Satyajit Ray's Pather

Panchali/Song of the Road, produced with

West Bengal state government support in 1955. International recognition came

with Satyajit Ray's Pather Panchali in 1955. Satyajit Ray is considered as one of

the greatest directors of all times. Post-independence, despite a relatively

sympathetic government enquiry in 1951, the industry became the object of

considerable moral scrutiny and criticism, and was subject to severe taxation. A

covert consensus emerged between proponents of art cinema and the state, all

focussing on the imperative to create a "better" cinema. The Film and Television

Institute of India was established at Pune in 1959 to develop technical skills for an

industry seen to be lacking in this field. However, active support for parallel

cinema, as it came to be called, only really took off at the end of the 1960s, under

the aegis of the government's Film Finance Corporation, set up in 1961 to support

new film-makers.

Ironically, this pressure and vocal criticism occurred at a time when arguably some

of the most interesting work in popular cinema was being produced. Radical cultural

organizations, loosely associated with the Indian Communist Party, had organized

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themselves as the All India Progressive Writers Association and the Indian

People's Theatre Association (IPTA). The latter had produced Dharti ke Lal/Sons

of the Soil (KA Abbas; 1943), and its impact on the industry can be seen in the

work of radical writers such as Abbas, lyricists such as Sahir Ludhianvi, and

directors such as Bimal Roy and Zia Sarhady.

In addition, directors such as Raj Kapoor, Guru Dutt and Mehboob Khan, while not

directly involved with IPTA, created films that reflected a passionate concern for

questions of social justice. Largely studio-based, the films of this era nevertheless

incorporated vivid stylistic experimentation, influenced by international currents in

film-making. Such effects are evident in Awara/The Vagabond (Raj Kapoor, 1951,

script by KA Abbas), Awaaz/The Call (Zia Sarhady; 1956) and Pyaasa/Craving (Guru

Dutt; 1957).

The First International Film Festival, held in Bombay in 1951, showed Italian works

for the first time in India. The influence of Neorealism can be seen in films such

as Do Bigha Zamin/Two Measures of Land (Bimal Roy, 1953), a portrait of father

and son eking out a living in Calcutta that strongly echoes the narrative of Vittorio

de Sica's Bicycle Thief (1948). Mehboob Khan's Andaz/Style (1949), an upperclass

love triangle founded on a tragic misunderstanding, draws on codes of psychological

representation - hallucinations and dreams that feature strongly in 1940s

Hollywood melodrama. Mehboob's tendency to make a visual spectacle of his

material, and his involvement with populist themes and issues make him a good

example of popular cinema of the time.

The Indian Popular Cinema and the Superstars

During the 1960s, popular cinema had shifted its social concerns towards more

romantic genres, showcasing such new stars as Shammi Kapoor - a kind of Indian

Elvis - and later, Rajesh Khanna, a soft, romantic hero. The period is also notable

for a more assertive Indian nationalism. Following the Indo-Pakistan wars of 1962

and 1965, the Indian officer came to be a rallying point for the national imagination

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in films such as Sangam/Meeting of Hearts (Raj Kapoor, 1964) and

Aradhana/Adoration (Shakti Samanta; 1969).

However, the political and economic upheaval of the

following decade saw a return to social questions across the

board, in both the art and popular cinemas. The accepted

turning point in the popular film was the angry, violent

Zanjeer/The Chain (Prakash Mehra; 1973), which fed into

the anxieties and frustrations generated by the

quickening but lopsided pace of industrialization and

urbanization. Establishing Amitabh Bachchan as the

biggest star of the next decade, its policeman hero is

ousted from service through a conspiracy, and takes the law into his own hands to

render justice and to avenge his deceased parents.

The considerable political turmoil of the next few years, including the railway

strike of 1974 and the Nav Nirman movement led by JP Narayan in Bihar and

Gujarat, ultimately led to the declaration of Indira Gandhi's Emergency in 1975. It

was as if the state and the people had split apart. As the cities grew, so did the

audiences. The popular cinema generated an ambiguous figure to express this

alienation. At the level of images, there was a greater investment in the stresses

of everyday life and, unlike the 1950s, in location shooting. In Zanjeer, the casual

killing of a witness on Bombay's commuter trains conjures up the perils of life in

the metropolis. This is echoed in images of the dockyard, taxi-rank, railtrack and

construction site in Deewar/The Wall (Yash Chopra; 1975), also starring Amitabh

Bachchan.

The recurrent narrative of these films, of protagonists uprooted from small town

and rural families to the perils of the city, is shared by the street children

researched by professional sociologists in Mira Nair's Salaam Bombay (1988). The

Bombay films' very excesses, their grand gestures, and the priority given to

emotion and excitement may more truly reflect the dominant rhythms of urban life

in India. At the level of plot and character, however, the Bombay films

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simultaneously simplify and collapse our sense of India, reducing the enormous

variety of identity - social, regional, ethnic and religious - that makes up Indian

society. Where these identities appear, they do so as caricatures and objects of

fun.

The Art Cinema of the 80s

To counter this, the art cinema of the 1980s diversified from its Bengali moorings

of the earlier period under the aegis of the Film Finance Corporation. Works by

Shyam Benegal, Gautam Ghose, Saeed Mirza, BV Karanth, Girish Kasaravaili, Mrinal

Sen, MS Sathyu, Ray, and Kundan Shah, among others,

actively addressed questions of social injustice: problems of

landlord exploitation, bonded labour, untouchability, urban

power, corruption and criminal extortion, the oppression of

women, and political manipulation. Ghatak in particular had

addressed many of these issues earlier, but never had there

been such an outpouring of the social conscience, nor such a

flowing of new images - of regional landscapes, cultures, and

social structures. Many of the films may seem didactic and uncomplex,

undercutting the attention to form that had marked the earlier period - but not

all. Benegal's first two films indicate an unusual concern with the psychology of

domination and subordination. Ankur/The Seedling (1974), starring Shabana Azmi,

is particularly striking not only for this but also for the open, fluid way it captures

the countryside. Among Kannada directors, working in south India, Kasaravalli in

Ghattashradha (1981) effected an intimate vision of the oppression of widows

through the view of a child. And special mention must be made of Kundan Shah's

Jaane Bhi Do Yaaron/Let Sleeping Dogs Lie (1984), a wonderful exercise in farce

and slapstick that is also a brilliant portrait of Bombay.

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The South

The most notable of the directors who speak specifically about their own cultures,

and about the possibilities of change, are Adoor Gopalakrishnan and Aravindan

from Kerala. A key to their productivity was the overall development of film

culture in Kerala, India's most literate state. In his films Gopalakrishnan

transformed the lush countryside, busy towns and animated culture of Kerala into a

strange, dissociated place, fraught with communicative gaps, menacing, inexplicable

characters, and an overall sense of the impenetrable. Subjects range from the

mounting tragedies that beset a young couple in the city (Swayamvaram/One's Own

Choice; 1972), and the effete authoritarianism of a declining feudal landlord

(Elippathayam/The Rat-Trap; 1984), to the mysterious spiritual decline of a popular

communist activist (Mukha Mukham/Face to Face; 1987).

The late Aravindan, sometime cartoonist and employee of the Kerala Rubber Board,

had something of the mystic in him, but went through a range of styles, including a

cinemaverite approach, as in Thampu/The Circus Tent (1978), in which circus

performers speak direct to the camera. His episode from the Ramayana, Kanchana

Sita/Golden Sita, places the action against the grain of the high Hindu tradition by

situating it among tribes in the verdant landscape of the Kerala forests. At his

best, his narrative style refuses a didactic approach, generating a whimsical sense

of how destinies are shaped.

Full circle The

90's saw the Indian Cinema come to a full

circle with Hum Aapke Hain Kaun

turning out to be the biggest grosser

ever.

Indian cinema has come a long way from the

shaky flickering images and grating noises and

sounds to a very sophisticated state-of-the-art technology for creation and

projection of image and sound track. The film industry has grown multi-

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dimensionally with unique blend of commerce, art, craft, star glamour, social

communication, literary adjuncts, artistic expression, performing arts, folk forms

and above all a wide-ranging and abiding appeal to the heart, the mind and the

conscience. www.meadev.nic.in/earthquake/culture/films/intro.htm

Current Scenario

Film entertainment is the most popular form of entertainment and it is this

undiminished passion through the decades that has driven India to become the

largest producer of films in the world. Since 1931, when talkies were introduced in

the country, the film industry has produced more than 67,000 films in more than

30 different languages and dialects.

The film industry grossed a turnover of Rs 3,900 crore (Rs 39 billion) in 2002. The

current worth of the industry is pegged at Rs 4,500 crore. A market survey conducted in

march by accounting firm Ernst and Young has predicted that the film industry is

expected to grow at the rate of 18 per cent annually to gross Rs 10,000 crore in the next

four years. The Indian film industry is the largest in the world in terms of number of films

produced and also in the number of tickets sold.The industry produced 1200 films in 2002,

and 1,013 films in 2001, up from 855 films in 2000. Bollywood’s annual ticket sales world

wide are 3.8 billion as compared to Hollywood 2.8 billion. But Hollywood's revenue is much

higher because ticket rates in india are among the lowest in the world. While Hindi films

continued to be the largest segment in 2001 (23 per cent share), south Indian language

films (Telegu, Tamil and Malyalam) have seen growth in their shares. Times of India

India’s movie industry 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 profligacy, is yet to acquire the character of professionalism

on a large scale.

According to the FICCI report on the Indian Entertainment Industry for 2002, the

Indian film industry employs more than 6 million people, most of whom are contract

workers as opposed to regular employees. This 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.

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SIZE OF THE INDUSTRY

A FICCI report 2002 on the Indian Entertainment Industry prepared by

Arthur Andersen India Ltd. states that it is difficult to accurately determine the

size of the Indian film industry because unlike in the developed economies such as

the U.S. and U.K., costs and revenues for films in India are not monitored by any

nodal agency. Therefore, the size of the industry has been estimated using two

different approaches – estimation of total costs and estimation of total revenues.

Cost and Revenue figures for the film industry for 2002

Average

Number of

Movies

Total

Gross

Value

INR

Billion

Less: Theatre

Share –

distribution

Commission

INR billion

Net

Revenues

INR

Total

Costs

INR

Hindi

mainstream 75 16.5 6.4 10.1 12.8

Cross-over

Hindi 15 0.9 0.4 0.5 0.4

Foreign

movies 15 0.8 0.4 0.4 NA

Malayalam 93 3.7 1.8 1.9 2.3

Tamil

mainstream 84 5.9 2.8 3.1 3.3

Telegu

mainstream 74 5.9 2.8 3.1 3.3

Bengali 50 0.5 0.2 0.3 0.3

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Other Films 150 0.9 0.4 0.5 0.5

Others 640 3.2 1.5 1.7 1.6

*US $ 1 = INR (Indian Rupees 48)

(Source: KPMG and FICCI Report – Indian Entertainment Sector in the Spotlight.)

COST-BASED APPROACH

This comprises artists’ remuneration, production expenses, technicians expenses,

marketing expenses, studio charges, and other fixed costs.

REVENUES BASED APPROACH

The revenue models of Indian film makers have undergone a fundamental

shift in the future with a higher probability of exploiting alternate revenue

streams as opposed to relying on domestic theatre viewership revenue stream.

Some of the new revenue possibilitie are overseas theatre viewership, home video

segment, satellite rights, music rights and in-cinema advertising amongst others.

The Indian films can be sold for fewer territories than a typical US film.

While the domestic theatrical rights can be sold for five to ten different sub-

territories, for a fixed time period, the overseas, music, and C&S TV rights are

usually sold to a single distributor respectively. Unlike the U.S. where home video

distribution contributes 32 per cent of the total revenue, an Indian

film generates negligible revenue from this source because of the unorganised rental/

state market and piracy.

Overseas Rights

Overseas rights include overseas theatrical rights as well as overseas video and

television rights, which are presently sold by film producers as a package to overseas

distributors. The last few years have seen Indian movies gain immense popularity overseas.

The major export destinations continue to be the U.S.A., Canada, and the U.K., countries

such as Japan, South Africa, Mauritius, Australia, New Zealand and the Middle East are

fast becoming important export markets for Indian films.

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Music Rights

The music industry whose fortunes are closely interlinked with the film

industry is likely to grow at approximately Rs 16.4 billion by 2007. As per industry

sources, sale of music rights contributed Rs 1.5 billion to film industry revenues.

Music rights include the domestic and international music rights of a film, which

are sold by the film producer exclusively to music companies. As new film music

contributes more than 4 per cent of the music industry revenues, music companies

compete to procure the music rights of new films from reputed production houses.

Cost of Music rights of some films

Music Company Producer Cost

(Rs mn) Films

Sa Re Ga Ma Yash Chopra 15

For 3 films - Saathiyan,

Mere Yaar Ki Shaadi hai,

Mujhse Dosti Karoge

Tips Mukta Arts 85 Yaadein

Sony

Karan Johar

Aamir Khan

Dreamz

Unlimited

120

60

60

Kabhie Khushi Kabhie Gham

Lagaan

Asoka

Universal Sanjay Leela

Bhansali 120 Devdas

(Source: FICCI Report 2002 - Indian Entertainment Industry)

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Telecasting and video rights

In the near future, the home entertainment segment, broadcast TV, DVD and VCD

is expected to increase its share, even as multiplexes emerge as a strong distribution

platform. The share of satellite rights in the consolidated revenue pie has grown from 4

per cent to 14 per cent between 1999-2002. Even channels have started a new trend by

acquiring and broadcasting new titles at exorbitant prices, within 3 to 4 months of their

release. As telecasting blockbuster films is an effective way of driving up viewership,

there is a demand for these channels to acquire television rights of hit films.

Corporate Sponsorships and Merchandising:

Corporates have also started marketing their products through films. And in

exchange film makers get additional revenue in the form of Corporate Sponsorships. For

example, Mukta Arts had earned Rs 35 million from Coke, Pass Pass and Hero Cycles for

product endorsements in Yaadein. Today revenues are also generated from the sale of

Internet rights and merchandising. FICCI Report 2002- Indian Entertainment Industry

Revenue Break up segment wise

(Rs. bn)

Domestic theatrical sales 36.00

Overseas theatrical rights 5.25

Music rights 1.50

Telecasting and video rights 2.00

Corporate Sponsorship/ Merchandising 0.10

Total 44.85

Source: FICCI Report 2002 - Indian Entertainment Industry

Domestic theatricalsales

Overseas theatricalrights

Music rights

Telecasting and videorights

22

Source: FICCI Report 2002 - Indian Entertainment Industry

EXTERNAL ENVIRONMENT OF FILM INDUSTRY

(I) POLITICAL ENVIRONMENT

SUPPORT AND PROMOTION BY DIFFERENT GOVERNMENT BODIES

Films Division

The Ministry of Information and Broadcasting over the last 47 years

through an exclusive Films Division, set up in 1948, has been securing the active

participation of the public in nation building activities, through the medium of film.

The largest agency dedicated to the production, and distribution of documentaries

and news agencies, the Films Division produces news magazines from its

headquarters at Mumbai, films on agriculture, defence and family welfare from

Delhi and featurettes from its regional centres at Calcutta and Bangalore. The

Division caters to more than 12,911 cinema theatres allover India and to non -

theatrical circuits like units of the Directorate of Field Publicity, mobile units of

the State Governments, Doordarshan, field units of the Department of Family

Welfare, educational institutions and voluntary organisations. The Division's films

are also screened abroad through the Indian embassies, television networks,

Government departments, educational, cultural, and social organisations as well.

The Division aims to foster the growth of the documentary film movement - which

is essential to the realms of information, communication and integration.

23

The Division has been given the responsibility of organising the Mumbai

International Film Festival for Documentary, Short and Animation films, which is a

biennial event.

National Film Development Corporation Limited

The National Film Development Corporation Limited set up on 11 April, 1980

aims at bringing an overall improvement in the quality of Indian cinema and also

increasing its access. As films constitute a vital segment of audio - visual culture,

NFDC covers a large gamut of activities - production of films, export of Indian

films, import of foreign films, import and distribution of raw stock, construction of

cinema theatres and development of technology. The Corporation promotes the

concept of low - budget yet high quality films, which is a possible solution to the

financial problems faced by the film - makers of the country. The Corporation

imports about 20 to 30 films annually for theatrical release. India exports films to

over 100 countries. It participates in various international film markets to promote

Indian cinema and also plays host to a number of buyers from various countries.

NFDC's main objective is to expose the Indian audience to a plethora of fine films

from various countries, however due to limited resources the emphasis is on good

quality family entertainers.

To fight video piracy, NFDC, in collaboration with the Indian film industry

has set up an anti - piracy body, Indian Federation Against Copyright Theft

(INFACT), which is registered as a company under the Companies Act. The Theatre

Financing Scheme was launched by NFDC to ensure the creation of additional

seating capacity in India and to provide outlets for fine cinema.

Directorate of Film Festivals

The Directorate of Film Festivals was set up in 1973, under the Ministry of

Information and Broadcasting, to help promote Indian films of aesthetic and

technical excellence, both within India and abroad. Since then, the Directorate has

supplied a platform for the best in Indian cinema by holding the National Film

24

Festival every year. The Directorate has been successfully promoting Indian

cinema abroad and also given a chance for Indians to appreciate some of the finest

works of international cinema. Within the country, it has made the newest trends

in international cinema accessible to the general public.

The Directorate was brought under the NFDC in July 1981, and in July 1988,

it was again transferred to the Ministry of Information and Broadcasting.

National Film Awards

The National Awards for films, known as state awards till 1966, were set up

in 1953, for promoting the country's film art by acknowledging the outstanding

achievements in various fields of film - making.

The Dadasaheb Phalke Award is decided by the Government of India, and

the entries for the National Awards are judged by two national juries, one for the

feature films and the other for short films.

National Film Archive of India

The National Film Archive of India ( NFAI ) was established in February

1964, as a media unit of the Ministry of Information and Broadcasting. Its

objective is to acquire, preserve and restore the rich heritage of national cinema,

and the cream of international cinema. The archive has made significant progress in

the preservation of films, audio and video material, documentation, research and

dissemination of film culture in India.

The archive functions as the main repository for Indian and foreign

research workers for viewing film classics, relating to their research projects.

National Centre of Films for Children and Young People

25

The National Centre of Films for Children and Young People ( N'CYP ), earlier

known as Children's Film Society, was established in 1955, as an autonomous unit

with an aim to provide children value - based entertainment through the medium of

films, and is engaged in production, acquisition, distribution and exhibition of

children's films. N'CYP conducts ' International Film Festivals for Children and

Young People' every two years. The Centre produces feature films, television

serials, short featurettes and short animation films for children and young people.

It also purchases the rights of foreign films and presents them in the country

after dubbing in Indian languages. The films produced by N'CYP are entered in

several National and International Film Festivals and have won many awards.

Film and Television Institute of India

The Film and Television Institute of India ( FTII ) located at Pune, imparts

technical training in the art of film - making and also gives in - service training to

the personnel of Doordarshan. The FTII conducts 3 - year specialisation courses in

motion picture photography, cinematography, film direction, sound recording and

sound engineering with one - year integrated training.

The TV wing of the Institute primarily caters to the training requirements

of various production and technical staff of Doordarshan. Television training is

given in TV programme production, studio technical operations, TV films and TV

graphics and design. The Institute regularly sends its students' films in national

and international film festivals, in order to give exposure to students' work, not

only on the national, but the international level.

Federation of Film Societies of India

The Federation of Film Societies, an apex body of the film societies in India,

is provided grants - in - aid by the Ministry of Information and Broadcasting to

spread film awareness and development of audience taste in the realm of cinema.

These Film Societies aim at nurturing and developing film culture in the country. www.meadev.nic.in/media/films.htm

26

FDI POLICY

100% foreign direct investment (“FDI”) is permitted in the film sector.

(II) ECONOMIC ENVIRONMENT

Purchasing Power Parity (PPP) in India has increased from $300 in 1992 to $ 1600

in 1997 and from $ 1600 to $ 2660 in 2002-03. So today people have more money

to spend on entertainment which leads to increase in turnover of the industy. http://www.theodora.com/wfb/

Interest rate: As there is a fall in interest rate in last several years, film

producers get funds at low rate. This encourages people to venture into the

business of film production.

(III) SOCIO-CULTURE ENVIRONMENT

Bollywood is perceived to be ‘The Place where Dreams come true’. Every

Indian would wish to be like, look like, see like or talk like a particular actor/

actress from this magic world. Imagine the level of etching this industry has on

the hearts and minds of people.

The Indian film industry has moulded itself very perfectly with the ongoing

traditions, values, beliefs and lifestyle. A flashback into the history of the country

and its people would reveal the impact it had on the industry.

Just after India broke from the shackles of dependency, patriotism was

deep down there in the hearts of the people. To serve the country better, there

27

were thinkers and actors like Manoj Kumar who had come with films like Kranti,

Roti Kapda Makan, Purab Paschim, etc.

Next came in the phase of action and drama where our very own Mr.

Amitabh Bachan was aptly called the Angry Young Man. He worked in the movies

like Zanjeer, Sholay, Deewar , etc.

The present era inspired by westernisation with more broader mindsets and

a complete shift in paradigm has resulted in movies like Dil Chahta Hai, Murder,

Julie, etc.

From hairstyles to costumes, from beliefs to lifestyle, from house concepts

to the toy in the hands of a kid, every thing which is seen in the daily cores is

reflected on the Silver Screen.

(IV) LEGAL ENVIRONMENT

THE FILM INDUSTRY AND COPYRIGHT LAWS

The Threat

The film industry in India today is facing its biggest threat, that of piracy.

This includes, cable piracy, VCR piracy and its new avatars, VCD piracy. The

development of these new forms (VCDs and now DVDs) are a double edged sword.

Whereas, on the one hand they provide for additional sources for commercial

exploitation of the film, on the other hand, the ease with which they can be copied,

reproduced and disseminated to the public, is giving the film industry nightmares.

Films appear on cable without any authority whatsoever, almost as soon as they are

released in the theatres, sometimes even prior to their theatrical release.

Overseas rights of Indian films are sold almost simultaneously along with the

release in India.

Copyright Laws in India

28

With the advancement of technology, Copyright laws in India have also been

changing to keep pace with the times. The Copyright Act, 1957 was enacted and

came into force on the 21st of January 1958. In its Objects and Reasons the

legislature recognized that "new and advanced means of communications like

broadcasting, litho-photography, etc." call for certain amendments in the existing

laws (Copyright Act, 1911). The legislature also commented that "adequate

provisions have to be made for fulfillment of international obligations in the field

of copyright which India must accept". It is in this year (1957) that cinematograph

films derived separate copyrights apart from its various components, namely,

story, music etc.

The laws have thereafter been subjected to certain changes. It was

Amending Act 65 of 1984 which specifically addressed the issue of piracy. The

Statement of Objects and Reasons to the amendment acknowledged piracy as a

"global problem due to the rapid advances in technology". Besides addressing the

loss in the form of royalties to the legitimate copyright owners, the legislature

also realized the losses to the exchequer by way of tax evasion. Certain relevant

portions from the Object and Reasons for the amendment are reproduced below :

"….recorded music and video cassettes of films and TV programmes are

reproduced, distributed and sold on a massive scale in many parts of the world

without any remuneration to the authors, artistes, publishers and producers

concerned. The emergence of new techniques of recordings, fixation and

reproduction of audio programmes, combined with the advent of video

technology have greatly helped the pirates. It is estimated that the losses to

the film producers and other owners of copyright amount to several crores of

rupees. The loss to Government in terms of tax evasion also amounts to crores

of rupees. In addition, because of the recent video boom in the country, there

are reports that uncertified video films are being exhibited on a large scale. A

large number of video parlours have also sprung up all over the country and they

exhibit such films recorded on video tapes by charging admission fees from

their clients. In view of these circumstances, it is proposed to amend the

29

Copyright Act, 1957, suitably to combat effectively the piracy that is prevalent

in the country"

In its effort to address the above issues, by way of the amendments, the following

changes were incorporated in the Act, namely: -

i. The punishment provided for the infringement of the copyright was enhanced to

a maximum of three years, with a minimum punishment of imprisonment of six

months, and a fine upto to Rs. 2 lakhs, with a minimum of Rs. 50,000/-.; An

enhanced punishment in the case of second and subsequent convictions was also

provided for;

ii. The provisions of the Act were now specifically made applicable to video films

and compute programes;

iii. The producers of records and video films were now under a statutory obligation

to display certain information in the records, video films and containers thereof,

which included the name of the copyright owner, year of first publication etc.

India's new copyright law, passed in June 1994, became effective on May 10,

1995 and establishes an entirely new potential for reducing piracy in India.

According to the Statement of Object and Reasons, the legislature recognized

that "effective copyright protection promotes and rewards human creativity and

is, in modern society, an indispensable support for intellectual, cultural and

economic activity. The legislature further recognized that copyright law promotes

the creation of literary, artistic, dramatic and musical works, cinematograph films

and sound recordings by providing certain exclusive rights to their authors and

creators. It was felt that the present Act needs revamping on the following

grounds:

to extend more effective protection to owners of copyright and related rights

in the context of technological developments affecting the reproduction of

words by, inter alia, bringing within the scope of copyright the subsequent hire

30

or sale of copies of cinematograph films, computer programmes and sound

recordings.

to further clarify the law in respect of cable, satellite and other means of

simultaneous communication of works to more than one household or private

place of residence, including the residential rooms of a hotel or a hostel.

to make provisions for licenses whereby the reproduction of works by

reprographic equipment or by means of devices such as tape recorders and

video cassette recorders, where such reproduction would not under the existing

law be infringement of copyright, shall be subject to payment or remuneration

to copyright owners by means of a levy on such equipment.

The law protects cinematograph films as a distinct work, giving the producer of the

film the exclusive rights

i. to make a copy of the film, including a photograph of any image forming part

thereof;

ii. to sell or give on hire, or offer for sale or hire, any copy of the film

regardless of whether such copy has been sold or given on hire on earlier

occasions;

iii. to communicate the film to the public

India, being a member of two of the major copyright conventions of the

world (The Berne Convention and The Universal Copyright Convention), Indian

works and works of Indian authors are accorded copyright protection in all major

countries of the world. Likewise, foreign works and works of foreign authors are

accorded the same protection as Indian works.

In addition to the law bringing India newly into compliance with its

substantive TRIPS obligations in the copyright area, the law provides for new

minimum criminal penalties including a mandatory minimum jail term which, if

implemented, will go far to controlling piracy.

31

The government has initiated some measures for better enforcement of copyright

laws. A summary of some of these measures is given below :

The Department of Education, Ministry of Human resource Development,

Government of India has constituted a Copyright Enforcement Advisory Council

(CEAC). The CEAC is reconstituted from time to time to review periodically the

progress of enforcement of the Copyright Act and to advise the government on

measures for improving the enforcement.

Creation of separate cells in state police headquarters. Special cells for

copyright enforcement have so far been set up in the following 23 States and

Union Territories: These are the States / Union Territories of Andhra Pradesh,

Assam, A &N Islands, Chandigarh, Dadra & Nagar Haveli, Daman & Due, Delhi,

Goa, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala,

Madhya Pradesh, Meghalaya, Orissa, Pondicherry, Punjab, Sikkim, Tamil Nadu,

Tripura and West Bengal. States have also been advised to designate a nodal

officer for copyright enforcement to facilitate easy interaction by copyright

industry organizations and copyright owners.

Encouraging setting up of collective administration societies and organization of

seminars and workshops to create greater awareness about copyright law among

the enforcement personnel and the general public. For collective administration

of copyright, copyright societies are set up for different classes of works. At

present there are three registered copyright societies. These are the Society

for Copyright Regulations of Indian Producers of Films & Television (SCRIPT)

for cinematographic films, Indian Performing Rights Society Limited (IPRS) for

musical works and Phonographic Performance Limited (PPL) for sound

recordings.

There is now an urgent need for all the constituent parts, i.e. the rights owners,

the government, the enforcement agencies and the judiciary, to work jointly in

eradicating the menace of piracy. www.filmpiracy.com/artic.html#a

FILM CERTIFICATION

32

All films meant for public exhibition, irrespective of their length, whether in

celluloid or video or CD or DVD version are subjected to censorship. Programmes

produced exclusively for broadcasting through the Television are excluded.

"Film censorship becomes necessary because a film motivates thought and action and

assures a high degree of attention and retention as compared to the printed word. The

combination of act and speech, sight and sound in semi darkness of the theatre with

elimination of all distracting ideas will have a strong impact on the minds of the viewers

and can affect emotions. Therefore, it has as much potential for evil as it has for good

and has an equal potential to instill or cultivate violent or good behaviour. It cannot be

equated with other modes of communication. Censorship by prior restraint is, therefore,

not only desirable but also necessary"

SUPREME COURT OF INDIA

Film Censorship In India

The Cinematograph Act 1952, apart from including provisions relating to

constitution and functioning of the Central Board of Film Certification (then called

the Central Board of Film Censors), also lays down the guidelines to be followed for

certifying films. Initially, there were only two categories of certificates "U"

(Universal exhibition) and "A" (restricted to adult audiences), but two other

categories were added in June 1983 "UA" for unrestricted public exhibition

subject to parental guidance for children below the age of twelve and "S" films for

public exhibition restricted to specialized audiences such as doctors. The 1952 Act

has been amended to bring it up-to-date, and the last amendments were in 1981

and 1984. The present censorship of films is governed by the 1952 Act, the

Cinematograph (Certification) Rules promulgates in 1983 and the guidelines issued

from time to time, The guidelines are issued under section 5(B) of the Act.

Legislation

The censorship of films is governed by the The Cinematograph Act,1952, the

Cinematograph (Certification) Rules promulgated in 1983 and the guidelines issued on

December 6, 1991. The guidelines are issued under Section 5B of the Act. This section

33

says that ' a film shall not be certified for public exhibition, if, in the opinion of the

authority competent to grant the certificate, the film or any part of it is against the

interests of the sovereignty and integrity of India, the security of the States, friendly

relations with foreign States, public order, decency or morality or involves defamation or

contempt of court or is likely to incite the commission of any offence.

Enforcement

a. Introduction

1. The Central Board of Film Certification is responsible mainly for certifying

films. The enforcement of the penal provisions of the Cinematograph Act, 1952

is with the State Governments /Union Territory Administrations, since

exhibition of films is a State subject...

2. The CBFC does not have any enforcement agency or manpower directly under

its control. It has to depend on the local police force for enforcement of laws.

3. There are various forms of violations which often go unchecked because there

are no checks and no complaints from either the law enforcement agencies or

members of the public.

b. Violations of Cinematograph act

The following are the major violations that agitate the minds of the public:

(a) exhibition of an 'A' certified film to a non-adult

(b) exhibition of an 'S' certified film to persons other than those for whom it is

meant;

(c) exhibition of a film in a form other than the one in which it was certified. Such

violations are known as interpolations. Interpolations can be described as follows:

(i) re-insertion in prints of a film for exhibition those portions which were

deleted by the Board before certification of the film

(ii) insertion in prints of a film, portions which were never shown to the Board

for certification;

34

(iii) exhibition of 'bits' unconnected with the certified film.

(d) exhibition of a film which was refused a certificate (or 'banned' in common

parlance)

(e) exhibition of uncensored films with forged certificates of other films.

(f) exhibition of films without censor certificates.

C. Penalties

1. Offences with regard to violations of censorship provisions are Cognizable.

Furthermore, they are non-bailable.

2. Section 7 of the Cinematograph Act provides penalties for violation of

censorship provisions. Penalty can also be imposed for failure to comply with

section 6A which requires that any person delivering a film to an exhibitor or a

distributor will also give to him details of all cuts, certification, title, length and

conditions of certification.

3. A person guilty of violation while exhibiting celluloid films is punishable with

imprisonment for a term which may extend to Three years, or with fine which

may extend to Rs.1/-lakh, or with both, and with a further fine up to Rs.20,000

for each day for a continuing offence. Similarly, Showing of video films which

violate the rules in the manner prescribed in this section will attract

imprisonment of not less than three months but which may extend to three

years and a fine of not less than Rs.20,000 but which may extend to Rs.1/-lakh

and a further fine up to Rs.20,000 for each day for a continuing offence.

4. Furthermore, the trial court can direct that the offending film be forfeited to

the Government. Under Section 7A, any police officer can enter a hall where an

offending film is being screened, search the premises and seize the print. Films

can also be seized when they are likely to be exhibited in violation of

Cinematograph Act.

Who Does Film Censorship?

In keeping with this responsibility, the Central Board of Film Certification

known till June 1, 1983 as the Central Board of Film Censors) was set up in Mumbai,

35

with regional offices in some other cities (at present there are nine such offices in

Mumbai, Calcutta, Chennai, Bangalore, Hyderabad, Thiruvananthapuram, New Delhi,

Cuttack, and Guwahati). A Film Certification Appellate Tribunal (FCAT) has also

been constituted under section 5D of the 1952 Act for hearing appeals against any

order of the CBFC. While the work of certification of films is a central subject,

the states have to enforce these censorship provisions and bring any violations to

the notice of the CBFC. The organizational structure of the CBFC is based on the

provisions of the 1952 Act and the Cinematograph (Certification) Rules 1983. The

Chairman and members are appointed for a term of three years or till such time as

the Government may direct. They comprise eminent persons from different walks

of life such as social sciences, law, education, art, film and so on, thus representing

a cross-section of society.The CBFC is assisted by the Advisory Panel in various

regional offices which are headed by Regional Officers. The members of these

panels are also representative of cross-section of society and interests. These

members hold office till such time as the Government may direct but not

exceeding two years. However, the members can be re-appointed. The CBFC has

divided itself into Examining and Revising Committees to provide a two-tier system

for certification of films in the event of the applicant or the Chairman himself not

being satisfied with the decision of the Examining Committee. The certification

rules also apply to foreign films imported into India, dubbed films, and video films.

In the case of dubbed films, the Board does not have any fresh censorship for the

visuals in general cases. The Certification does not apply to films made specifically

for Doordarshan, since Doordarshan has its own system of examining such films.

The Process of Certification

- Examination

1. The Cinematograph (Certification) Rules, 1983 have laid down the procedure

that a producer must go through to get his celluloid, video, CD or DVD film

certified.

2. The film, document specified in rule21, censor fee and cess fee have to be

submitted to the regional officer of the concerned regional centre. The

36

regional officer will form an Examining Committee to view the film. This

Examining Committee, in the case of a short film, will consist of an officer of

the CBFC and one member of advisory panel either of whom shall be a woman,

and in the case of a long film/feature film, one officer of the CBFC and four

members of the advisory panel of whom two persons shall be women. After the

film has been previewed, a report indicating the recommendations of EC along

with the category of certificate recommended and deletions / modifications as

deemed necessary is prepared and given to the Chairman of CBFC who may

approve the decision of the examination committee and ask the regional officer

to initiate further actions necessary to issue the certificate.

-Appeal

3. However, if the Chairman, on his own motion or on the request of the applicant,

so feels, he may refer the film to a Revising Committee. The Revising

Committee will consist of the Chairman, in his absence, a Board member, and not

more than nine members, drawn either from the Board or the advisory panel,

provided none of them was on the Examining Committee. The Revising

Committee will view the same film print shown to the Examining Committee

without any changes, and each member will be required to record his verdict

before leaving the theatre. If the Chairman is not in agreement with the

majority view, he may direct another Revising Committee to see the film.

4. After the applicant is apprised of the decision of the Board, he will delete or

modify any portions (if so directed) and submit them to the regional officer

along with one copy of the film (in video cassette format) as certified.

5. Before any order prejudicially affecting the applicant of a film is passed by the

Board, he is given an opportunity to represent his views in the matter.

-Appeal in Tribunal

6. An applicant aggrieved by the order of the Board can go on appeal to Film

Certification Appellate Tribunal.

37

7. If the matter goes in appeal to the Film Certification Appellate Tribunal which

is headed by a retired judge as Chairperson and not more than four other

members, the FCAT may view the film and hear both the applicant and the CBFC

before coming to its judgement.

8. Certificate is finally issued by the concerned Regional Officer on behalf of the

Board. www.cbfcindia.tn.nic.in

AN OVERVIEW OF FILMS CERTIFIED

(From 1.1.2003 to 31.12.2003)

U UA A S TOTAL

INDIAN FEATURE FILMS 479 198 200 - 877

FOREIGN FEATURE FILMS 34 67 181 - 282

INDIAN SHORT FILMS 1056 64 57 - 1177

FOREIGN SHORT FILMS 47 109 72 - 228

INDIAN LONG FILMS OTHER

THAN FEATURE - - - - -

FOREIGN LONG FILMS OTHER

THAN FEATURE - - - - -

TOTAL 1616 438 510 - 2564

(Source: Central Board of Film Certification)

ENTERTAINMENT TAX

Films are a huge source of government receipts on account of the high rate of entertainment tax which stands at an average of 25 per cent for the country as a

whole. In fact, in Maharashtra, it is as high as 60 per cent. Gujarat has an incidence of 100 per cent, while Madhya Pradesh has a tax rate of 75 percent. Andhra Pradesh has

low tax rate of only12 percent. Texemption for export earnings raised abroad according to Section 80HHF is 20%.

Tax benefits to multiplex construction companies : 50% of the profits and gains derived from the business of building, owning and

operating multiplex theatres are allowed as a tax deduction. In order to avail of this

deduction, the theatre must have been constructed during the period between April 1,

2002 and March 31, 2005 and must not be situated in Mumbai, Kolkatta, Chennai and

38

Delhi. The deduction is available for five (5) consecutive assessment years beginning

from the first assessment year.

(Section 80IB(7A) of the Income-tax Act, 1961). www.incometaxindia.gov.in

(V) TECHNOLOGY ENVIRONMENT

The Indian film industry is increasingly adopting digital technology in its processes.

The cameras that are being used in India are the same as those used in Hollywood today.

Digital breakthroughs and digital creation of scenes is increasingly becoming part of

Indian cinema. There is marked improvement on the technical side such as dolby sound,

computerized editing, special effects etc. It is expected that digital technology will bring

a sea change in the film production.

Areas which need to be addressed are in the Digital Space are:

- Animation: Currently the global outsourcing in the animation space is being done in the

Philippines, Taiwan and Korea. There are more than 50,000 animation specialists working in

this space. In India, there are just four major studios and about 2,000 to 3,000

professionals are available. The scope for providing training in Animation and creating

opportunities for outsourcing from India is untapped and huge. Individuals with basic

drawing and visualization skills can be easily trained in animation.

- Special Effects: It requires very high capital investments. Large IT players have the

opportunity to enter this space and can also provide high-end consultancy.

- Digital Cinema: Infrastructure

FICCI has tied with NASSCOM which can be called as “ e-Entertainment Alliance”.

This Alliance will establish:

1. A forum to create ‘Human Capital’ from India in the creative and performing arts and

related technologies, provide young and budding entrepreneurs opportunities to compete

globally in the technology space in animation, special effects, digitization etc. and produce

39

winners in the International arena. Training Programs and workshops are to be organized

for both IT as well as entertainment techies.

2. Every possible form of media will be covered in the e-entertainment space be it print,

radio, TV, electronic/internet based, films, sports, … … the opportunity lies in developing

the abilities to digitize the contents.

3. There is a need to Create an ‘Advanced Institute for Digital Arts ‘ (AIDA) in Mumbai.

4. The source of funding in the Hollywood film industry generally comes from Germany

through the “Completion guarantors” and not through the Venture Capital Funds at this

point of time. Hence eE@ needs to research and develop alternate sources of funding.

5. Better interaction with International Bodies like Motion Pictures Association, USA etc.

6. Leveraging the TiE network in bridging the gap between Hollywood & Bollywood and

getting marketing support from the Indian Community abroad.

7. Working closely with the Investor community in India and abroad.

8. Lobbying with the Govt. in technology related issues benefiting the entertainment

industry. FICCI Report 2002- Indian Entertainment Industry

40

Michael Porter’s 5 Forces

1. Threat of Subsititute:

There is no threat of substitute for film industry as no other sector can give

entermainment to people in a way film industry provides. But inside the film industry there

can be threat of new advanced technology, in near future, which will eliminate the work of

film processing units. In USA and UK, experiments on new technology have been started.

2. Threat of New Entrant:

For an industry threat can be sport like cricket world cup which comes once in 4 years.

During world cup theatres incurs the loss of many unsold seats. But this threat is

temporary one. Inside the industry one threat can be an entry of prevailing international

players into the Indian market with the concepts like Spider man, Anaconda etc. which are

totally different from Indian movies.

3. Bargaining Power of Buyers:

a. Producers: For film producers, buyers are distributors. In case of reputed film

producers like Yashraj Films, Dharma Production, Sanjay Leela Bhanshali etc. who

have a track record of delivering successful films, bargaining power of distributors

is very less. So there is less bargaining power of distributors. Distributors have to

buy the rights of film at high price as said by the company. Where in case of other

films distributors have high bargaining power and films are sold at low price or

below the expectation level of the producers.

b. Distributors: For distributors theatres are buyers. There is less amount of

bargaining as prices are generally fixed and more or less same depending upon the

contract and the mutual understanding.

c. Theatres: For theatres, buyers are public who can not bargain for the prices of

tickets. But in many states, government has put some restriction on the prices of

tickets.

41

4. Bargaining Power of Supplier:

Big suppliers like film-processing units, camera and equipments suppliers, actors etc.

generally have the fixed rate in the market. So less bargaining prevails.

5. Intensity of Competition:

Film industry faces competition from other entertainment segments like amusement

parks sports, television etc. In order to compete with them industry has come up with

Video Games Section, Art Gallery, Music Station and Trendy Cafeterias inside the

theatres which provides a complete family entertainment. And inside the industry the

intensity of competition among producers is less but high in case of directors, actors, film

processing units etc.

42

REVENUE CONTENT AUDIENCE CERTIFICATION

PRODUCT

CLASSIFICATION

PRODUCTS

Domestic Sales

Overseas Sales

Music Rights

Telecasting and

Video Rights

Corporate

Sponsorships and

Merchandising

Romantic

Comedy

Social

Thriller

Horror

Patriotic

Science Fiction

Animation

Kids

Youth

Family

Niche Market

Universal

Adult

Universal Adult

Specified

Audience

43

Process Flowchart

Output

Output

Story Writer /Script

Director

Producer

Hiring of Technicians, actors, actress etc.

Shooting Exposed Negative

Film Laboratory Positive / Rush Print

Final Positive Editing

44

Output

Output

PROCESS EXPLANATION

The story writer provides story to director. Initially only the concept of the

story is explained. Then director approaches the producer to

finance the film. The making of film starts as soon as

producer gets ready to finance. Story writer and director sit

Dubbing

Backgroung Music

Sound Effects etc.

Final Negative Cutting

Re-cording Mixed Sound

Negative

Release Prints

Film Certification Marketing

Distributors

Cinema Halls

45

together to prepare the script which is made up of number of scenes. Sometimes it

also happens that the same person acts as a story writer and a director. At the

same time the director and the producer hire the actors, actress, technicians etc.

And Shooting starts.

After the completion of shooting, film roll is sent to film laboratory. The film roll

undergoes a series of processes in the lab. The lab develops exposed negative along with

rush print which is also called as positive. This positive is then delivered to editor but the

negative is kept in the lab only. Editor also receives sound negative from sound recordist

and assembles it with positive. And then he starts his work of sorting, cutting and editing

the positive. He makes the film of two and half hours from 4 to 5 hours. And now final

positive is ready. This final positive is sent to the lab for final negative cutting. Then the

works of dubbing, background music and sound effects start. Re-corder mixes all sound

effects and develops mixed sound negative which is also sent to the lab. The lab liaises

with sound correction and editing positive resulting in the final or release print for the

film. This film is then pre-viewed in a pre-view theatre as a form of quality check. One

release print is then sent to the Central Board of Film Certification (also called the

Central Board of Film Censors) in order to get film certificate. Then duplicate prints are

made in lab. Side by side promotion activities are carried on by producer. The duplicate

release prints are then passed on to distributors and from distributors to cinema halls at

the time of launch of the film.

COMPONENTS

Producer Animal Suppliers Art Directors

Art Printers Artificial Plants Artists

46

Dubbing Artists Costume Suppliers Singers

Actors Auditorium Cameramen

Cine Equipment Editing Rooms/Editors Colour Film Processing

Costume Designers Satellite Televisions Dance Directors

Directors Distributors Preview Theatres

Story Writers Gun & Bomb Suppliers Hair Dressers

Home & Mini Theatres Light & Light Fittings Lyricists

Graphics & Special

Effects Stunt Artists

Make-up

Artists/Materials

Video Cassette

Conversion

Music

Composers/Directors Stunt Directors

Orchestras Outdoor units Public Relation Officer

Raw Film Suppliers Film Training Institutions Rain & Fog Machines

Shooting Houses &

Locations

Recording Studio

Equipment

Sound & Light Equipment

- Rentals

Film Trade Bodies &

Associations

Projection & Sound

Equipment Production Managers etc.

(Source: www.filmplusindia.com/categ.html)

47

5 MAJOR COMPONENTS

1. Direction

The Director is responsible for executing the shooting process on the floor.

His responsibility does not begin or end with shooting. He is

responsible for converting the ideas which are in the form of

words into visuals. The storywriter and the screenplay writer

may be different persons but the Director must be good in

this department as well. The director is chiefly responsible for shot-taking which

he executes through his cameraman, thus making it imperative for the director to

have basic knowledge of camera, lighting and the visuals in general.

The actors are made to perform in front of the camera and with the help of

body language and dialogues, reveal the story to the audience. The director learns

the art of handling the actors. The whole story shot in bits and pieces are

assembled together in accordance with the syntax of the film grammar with the

help of the editor.

In the selection of sound and music, the director has to make some

conscious decisions and hence his knowledge of these are essential too. The

director brings out everyone’s talent and puts them together to make a worthwhile

programme.

The field of Direction is vast. It ranges from Directing Documentary films,

News & Current Affair programmes, educational and instructional films,

advertisement and corporate films, entertainment, fictions, soap operas and of

course, feature films too.

48

2. Camera & Lighting Technique

The painter paints his canvas and his

tools are pigments and brushes. The

cinematographer paints his canvas with

lights and records on film or video.

Though the tools are different yet the end

results have striking similarities.

Photography has it roots in science,

technology, art and aesthetics. Physics,

chemistry, engineering technology are the means to achieve the end, that is, the

aesthetics. Such a subject needs serious studies to achieve high-end results.

The Film and Television technology is growing rapidly and every other day a

new equipment is released in the field. Therefore, people with camera should be

prepared for latest developments in the field. The purpose of artistic lighting

expands beyond merely illuminating the subject for exposure level. A good lighting

can make the subject appear better than what it meets the eye and good subject

may look ordinary if the lighting lacks aesthetics.

3. Video Editing & Sound Recording

The word Editor must not

necessarily to taken as reference to

the technician working in a cutting

room. It simply refers to the person

who is responsible for the particular

editing decision being discussed. The

process of editing is usually a far

wide responsibility involving the

syntax of the film and television grammar. Editing is not merely cutting and joining.

49

In fact, the shoot material which are shot in pieces needs to be put in order and

joined together abiding by the rules of the film and television grammar to convey

the visual and aural message to the viewer authentically.

4. Acting & Presentation

In almost all Film and Television programmes there is

hardly any programme where no actor is involved. It is

through the actors the director conveys his message or

idea to the audience. The role of an actor cannot be

underestimated at any cost. Observation, imagination, body language, emoting

capabilities, verbal and non-verbal communications are the tools of an actor, which

is more important than the superficial beauty and glamour.

Acting for Film and Television is highly technical. The actor doesn’t perform

in isolation and is directly bonded to the camera, lights and microphone. Besides,

his time and pace criteria are totally related to the editing parameters. This makes

it compulsory for a Film & Television performer to have the basic knowledge of

cinematography, editing and the Film grammar. It is this technology that makes

Film and Television acting so different from theatre. http://www.filminstituteindia.com/

50

CORPORATIZATION AND FINANCING

The film industry is one sector in India, operations of which have always remained

under cloud, mystery and suspicion. While producers dependence on underworld and hawala

money (money transferred unofficially) for financing has always been a known fact, it’s a

different story that all Hindi films ultimately end with the victory of “Good” and enemies

of the nation, “Evil”, destroyed! The Film Industry on the whole has always worked like

small scale industries in the unorganized sector. For over five decades of its existence,

the industry did not produce any “Corporate Entity” worth its name.

While the bosses at the film industry have kept demanding more support from the

government, policy & regulatory framework and clean money from institutions for

financing, they did little work in cleaning up their balance sheets, income tax returns,

disclosures and above all, incorporating their businesses. But the last few years have seen

some change.

The famed actor, Amitabh Bachchan called the Big B who promoted Amitabh

Bachchan Corporation Limited (ABCL) took the lead towards Corporatization of film

industry in India. Though still an unlisted company with shareholders and whatever its fate

may be, ABCL set the example for others in film industry, that things can be done in a

little more organized way. Globalization, Software technology, TV programming and the

Music boom in India have since prompted several traditional players and industry majors to

make their operations more transparent and hence CORPORATIZE.

51

Scores of film producers, financers, distributors and associates, have now

converted their businesses into “Companies” under law. Some have already raised capital

from the public and are now listed at major stock exchanges, while several others propose

to do the same.

Besides Zee Telefilms, some others who have successfully corporatized includes

music leader Tips Industries, Jitendra promoted Balaji Telefilms, Dheeraj Kumar’s

Creative Eye, Sri Adhikari Brothers, RPG’s Saregama, Pritish Nandi Communications and of

course Subhash Ghai’s Mukta Arts.

Films Produced By Corporate Production Houses

Production House Film

Aamir Khan Productions Private Limited Lagaan

Zee Telefilms Limited The Hero

Balaji Telefilms Limited Krishna Cottage

Mukta Arts Limited Yaadein

Yashraj Films Private Limited Dhoom

Padmalaya Telefilms Limited Suryavansh

Tips Industries Limited Fida

Venus Tapes & Cassettes Private Limited Josh

Devgan Entertainment Private Limited Raju Chacha

(Source: FICCI Report 2002 - Indian Entertainment Industry)

Still not many Film companies have availed finance from these sources. This

is because corporate structure in place is a pre requisite for such a venture. This

means that the company has to clearly define the following:

Documented scripts in place

52

Legally enforceable contracts with the artists and technicians

The entire time schedule documented

The producer has to make sure the filming activity is completed in time and there

are no time and cost overruns.

Apart from these corporatised players and a few reputed film producers who have

a track record of delivering successful films, other film-makers have to rely heavily on

arranging financing for their films from the unorganised market comprising “friends”,

“relatives” and “private financiers” which is also difficult and involves high cost of

interest.

BANK FINANCING FOR INDIAN FILMS

Earlier, banks were wary of funding films, and producers borrowed money

from private investors at interest rates as high as 25 to 35 %. The scenario has

now changed, and financial institutions are more than willing to lend to film

projects at the much lower rate of 16 to 17 percent.

Industrial Development Bank of India was the first institution to make an allocation

of Rs 1 billion for the film industry for 2001-2002 and it sanctioned film financing to the

tune of Rs 635 million in 2001 spread over seven projects floated by the likes of Crest

Communication, Padimini Telemedia, VR Projects and D. Raama Naidu, which rose to Rs. 995

million in 2002.

FILM PRODUCERS SANCTIONED BY IDBI

Producer Amount sanctioned (Rs mn)

Suresh Production 40

Crest Communications 200

Rajshree Productions 200

V.R. Pictures 70

F.K. Films 50

Alu Entertainment 25

53

Padmini Telemedia 50

(Source: IDBI)

For instance, Canara Bank, which had earlier funded Gayab, is also bankrolling K Sera

Sera Production’ forthcoming venture James. The movie has a budget of about Rs. 7 crore,

80% of which was funded by the bank.

LONG TERM PROSPECTS

The long term prospects for the industry look bright. Though nascent at this stage,

companies promoted by serious promoters will also command a good valuation at the

market. While domestic and international investors have got an opportunity to invest in the

sector, strong and positive signals have been sent to banks and financial institutions that

the industry is changing. CII & CRISIL are also working at developing a financing model

that would enable the banks to weigh the risks in this industry.

It is now hoped that the ensuing restructuring and corporatization will usher in a

new era in corporate India and industry will flourish by producing quality products for its

audience. The Indo-Italian Chamber of Commerce and Industry

54

INFRASTRUCTURE

The infrastructure for films comprises of production, post-production and

exhibition infrastructure. Production & Post-Production Infrastructure here includes

studio floors, film cities, laboratories and post-production facilities. In 2002, India has 25

studios and three film cities. Studios are enclosed structures where sets can be built for

shooting. A studio floor should have the necessary dimensions to allow building of these

sets and provide the necessary acoustics for shooting. Mumbai being the hub of film

production in the country has the maximum number of studios.

However, most of the studios are not maintained due to lack of funds. Many like

Famous Studios at Andheri and Ranjeet Studio at Dadar in Mumbai have closed down.

Besides, the studio floors are very small and do not allow building of huge sets. For

example, an average studio floor size in India is 100 feet by 150 feet versus the

international standard of 220 feet by 350 feet. An Indian studio is spread over 5 acres

and has one or two studio floors whereas an

international studio is spread over a minimum of 500 acres and has more than 6-10 studio

floors and hundreds of locations. In fact, an international studio is akin to a film city in

India.

Indian films cities do not come even close to international ones. For example, the

Mumbai and Noida film cities are spread over barely 40-50 acres of land and have only 20

locations each.

Perhaps the only international grade studio in the country is the Ramoji Rao Studio

in Hyderabad, with six studio floors. The film city is spread over 2,800 acres, of which

1,500 acres is developed and has over 100 shooting locations.

Post-production infrastructure like editing and dubbing suites are given as part of

the overall package to the production houses. Till recently, most of the equipment used in

India was largely outdated. Now, several specialised post-production studios like Empire

Studio, Crest Communications, CMM and Pentamedia Graphics have been set up which

offer modern technology to producers. Players like Ramoji Rao and Rama Naidu have

already set up or are in the process of setting or investing in post-production facilities.

They are positioning themselves as end-to-end providers, wherein a producer can just

55

come with a script and can take away a readymade film from the studio, which is how it is

done internationally.

Post-production facilities have to keep pace with fast changing technology. Avid

Editing Suites are rapidly replacing the old Steinbeck editing systems. In fact, even Avid

Suites are becoming obsolete and are being replaced by computer-based editing suites like

Adobe Premier.

Exhibition Infrastructure:

The number of theatres has not increased with a speed it should be

increased in the last three years. This is due to the high degree of piracy, low

ticket rates, high incidence of taxes and levies, low collections of theatre owners

which prevent them from spending on renovation. Alternative profitable options for

real estate like retailing has led many theatres in Mumbai to be converted into

shopping complexes and departmental stores.

Another reason for the poor infrastructure is the high incidence of

entertainment tax, which stands at an average of 25 per cent for the country as a

whole. In fact, in Maharashtra, it is as high as 60 per cent. Gujarat has an

incidence of 100 per cent, while Madhya Pradesh has a tax rate of 75 percent. If

one were to reduce the entertainment tax, one would easily see the improvement in

exhibition infrastructure. Andhra Pradesh is such an example. With 12 percent

average entertainment tax rate, the state has the highest number of theatres and

a very flourishing film industry notes Uday Singh, Managing Director, Colombia

Tristar Films of India. Even a country like China, which has a highly regulated

market and produces far less films than India, has 65,000 theatres.

Entertainment Tax Rates In Asian Countries

Country Percentage

Honk Kong 0.00

Indonesia 25 – 30

56

Japan 3.00

Korea 16.60

Malasia 30.90

Phillipines 33.00

Singapore 3.00

Taiwan 7.62

Thailand 7.00

Source: FICCI Report 2002 - Indian Entertainment Industry

SCREENS

As compared to approximately 36,000 screens in the U.S., there are around 13,000

cinema screens in India. Most of the cinema halls in India operate in an unorganised

environment and are owned by individual businessmen. More than 95 per cent theatres are

single screen and stand-alone. However, the industry has recently seen the entry of

organised corporate players.

Priya Village Roadshow Ltd., a joint venture between the New Delhi based Bijli

Group and Australian media and entertainment conglomerate, Village Roadshow Ltd., was

the first organised corporate player in this space. E-City Entertainment India Limted,

Inox Leisure Ltd. and Adlabs Ltd. are other corporates who have ventured into this space

in 2001.

Till 1997, the concept of housing more than two screens in one theatre was non

existent in India. Priya Village Roadshow Ltd. pioneered the concept of world class multiple

screen cinema halls in India by opening their flagship property, Anupam-PVR, in New Delhi

in 1997.

In the last two years, the state governments of Gujarat, Rajasthan, West Bengal

and Maharashtra have announced entertainment tax exemptions on new multiplexes which

has resulted in an increase in the development of multiplexes in these states.

57

With a population totalling more than 1 billion, 13,000 screens translates into a

measly 13 screens per million of the population. This is far below global averages.

India has witnessed a sharp decline in cinema attendance in the last 10-15 years due

to three reasons, namely poor cinema content, poor film exhibition infrastructure and

rampant piracy.

However, the film exhibition industry in India is expected to grow rapidly

over the coming years due to continuous positive developments in the area of film

content (which is improving), film exhibition space (which is witnessing development

of multiplexes with as many as 200 multiplex screens planned in the near future)

and a sustained clampdown on piracy (which is likely to result in a decline in the

frequency of watching films in homes through alternative media platforms). These

three factors are likely to lead to higher cinema

attendance in India.

CONTENT OF FILMS

Indian producers and directors are increasingly spending more time on the

development phase of the film and have started toying with experimental ideas. The film

makers have also started paying attention to the packaging of the film, which goes a long

way in improving the final product.

Some of the changes that the Indian film industry has witnessed recently include

shooting in long schedules for a sense of uniformity and timely and efficient completion (

Lagaan, Dil Chahta Hai), use of technology through better cameras and synchronous sound

( Lagaan, Dil Chahta Hai), focus on packaging and marketing ( Kabhi Khushi Kabi Gham,

Mujhe Kuch Kehna Hai, Gadar, Ek Prem Katha, Kasoor, Style, Ajnabee, Pyaar Tune Kya

Kiya), production

of small budget niche films ( Bollywood Calling, Monsoon Wedding, Tum Bin) and

experimentation of characters and novel story lines ( Zubeidaa, Dil Chahta Hai, Asoka,

Lagaan, Aks, Chandni Bar and Astitva).

58

Indian cinema has also arrived on the global stage with “Lagaan” securing an Oscar

nomination, “Monsoon Wedding” winning the Golden Lion at Venice and Ismail Merchant

honoured by the Bafta Academy.

FILM INSURANCE

Most of the developmental work that has happened in the introduction of insurance cover

for Indian films is attributable to Mr. Ajit Gupta, Development Officer of United India

Insurance (UII), who is credited with pioneering this concept in the India film industry.

The credit is also due to film makers like Subhash Ghai and Bobby Bedi, who have been the

forerunners and proponents of taking insurance cover for film production. The importance

of insurance cover assumes significant importance in view of the concerns of institutional

lenders, who want to mitigate risks associated with the film production process from

multiple entities.

Taal (1998) was the first Indian film to be insured for covering risks associated

with the film during the production period. Since then, United India Insurance has insured

more than 20 films with total production outlay in excess of Rs 1 billion.

Till date, UII has settled four claims out of the films insured by it. The first claim

was from Yash Raj Films India Ltd. for a month’s delay in the completion of its film,

Mohabattein, due to postponement of shooting caused by an injury to the heroine,

Aishwarya Rai. Other films that have received compensation for production delays include

Dil Chahta Hai (unseasonal rains in Australia), Saathiyaan (camera malfunctioning) and

Badhai Ho Badhai (Anil Kapoor had to hospitalised due to a leg injury). The Economic Times

Entertainment Report

59

OVERSEAS MARKET

Mr. Supran Sen, Secretary, Film Federation of India speaking about the export

market for Indian films says that the U.S. and Canada are major markets for Indian films

accounting for 30 per cent of exports, followed by the U.K. accounting for 25 per cent,

Mauritius for 10 per cent, Dubai for 10 per cent and other countries accounting for the

remaining 25 per cent. The U.S. market is specially good for sentimental films, as well as

China and the East European countries like Hungary and Czechoslovakia. Russia is another

major market for Indian films.

Co-production is also an important new feature of the industry with a few U.S.

companies showing interest in co-production as well as the U.K., Canada and Singapore.

Speaking about the export market, an important aspect of the internationalisation

of the Indian film industry, Mr. Nandkumar Bele, Secretary of the Indian Film Exporters

Association, says that exports started way back in the early sixties and the Association

was set up in 1963 to facilitate exports. The major exporters he named, are Eros

Multimedia which is the biggest exporter of Hindi films followed by CA Corporation, Fair

Deal International Pvt Ltd. and other exporters like Venus Records and Tapes PL, Tips

Exporters and Yash Raj Films. The bulk market is in the U.S. the U.K. and Canada and films

are also regularly exported to Mauritius, Fiji, New Zealand, Australia, Malaysia, Indonesia,

Singapore, Hongkong, Dubai, Tanzania and Kenya. Some exporters such as Eros, Yash Raj

Films and Fair Deal have offices abroad.

Rajnikant is a super hero in Japan and his film, Muthu was a super hit in Japan and

was subtitled in Japanese. The Chinese market is also an interested market and the

Chinese who have a strict censorship board are mainly interested in family films and

romantic films.

The South African film makers are interested in co-producing with Indian film

producers and the South African Government is offering various facilities for shooting of

Indian films in that country.

There are two problems faced by exporters which come in the way of

Internationalization. A major problem is piracy with the emergence of the latest

technology tools like Digital Versatile Discs (DVD). For instance 30,000 copies of DVDs

appeared in the American market barely a week after the theatrical release of the film

Devdas there. Similarly, pirated cassettes of Indian films appear in the Pakistani market

60

barely 2 or 3 days after they are released internationally. Malaysia is another big centre

for piracy of Indian films. This phenomenon is a major dent in export revenues for film

exporters.

Another problem is that of income tax. Earlier, the film makers used to get

exemption for export earnings raised abroad under Section 80 HHC of the Income

Tax Act of 1960. An interpretation put forward by an Income Tax Officer that

this exemption does not apply to exports of films because the rights of the films

are given on lease and thus they are not outright sales (this section applies to

sales) and since the rights in the film assigned are intangible and not on a par with

other foods or merchandise, was made the basis of the removal of this exemption

since 1995. Assessed and completed cases were thus opened up and many

exporters had to pay income tax for 5 to 7 years along with penalties. This was a

major setback for several exporters whose liability was high as well as for small

exporters who were badly hit by this interpretation.

After representation by the industry to the Government, while this provision was

no longer made applicable, the new provision under Section 80HHF introduced and allowed

tax exemption of 100 per cent in 1999-2000, 80 per cent in 2000-2001, 60 per cent in

2001-2002, 40 per cent in 2002-2003 and 20 per cent in 2003-2004.

While the Government on the one hand wants to encourage exports of Indian films,

on the other hand it wants to tax it heavily. The concessions for instance given to the IT

industry are not given to the film industry, even though the Government has recently given

it industry status.

Mr. Mohan Chhabria, Director, Fair Deal Exports Pvt. Ltd., a leading exporter of

Hindi films says in the last three to four years there have been two developments that

have helped with the internationalisation and exports of films. One is that the Indian

industry has technically reached the standards of America and secondly content wise, the

films are now getting into subjects which are universally liked.

Mr. Chhabria states that if you have a good product, the middlemen and importers

in the business, mostly people of Indian origin settled abroad approach the exporters

themselves. Recently, Australian TV approached Fair Deal for buying the films Dil Chatha

Hai and Hum Dil Chuke Sanam.

61

Sometimes the suppliers meet the buyers at festivals. New markets are also often

opened up by participating in festivals. However, the cast of the films is important and

certain stars like Shah Rukh Khan, Salman Khan, Amir Khan, Hrithik Roshan, Amitabh

Bachchan and Sanjay Dutt are more in demand abroad. The Indo-Italian Chamber of Commerce and Industry

According to Pravinder Bhatia, assistant vice - president, corporate finance,

Ernst & Young, the overseas market is more lucrative than the Indian one. For

instant, Kal Ho Na Ho grossed nearly Rs 20,000 crores and Lakshya about Rs 8

crores in ticket sales alone in the UK & US. And then there is the additional

revenue generated by the sale of audio & video CDs. Times of India

62

REGIONAL FILMS

According to the Economic Times Entertainment Report 2001-2002 after Hindi

films, the Telegu film industry is perhaps the biggest, followed by the Tamil film industry

in terms of revenue generation, though in number of films released, Tamil outranks Telegu.

Together, they are called the “Tollywood” film industry. What sets this segment apart

from the rest of the industry is its high degree of discipline. The average time for making

these films is 4-9 months.

The producers and directors, along with the artistes do a lot of homework before

making a film. The entire script of the film is usually ready before shooting begins and the

artistes know their roles clearly. Since the artistes are usually involved in filmmaking, they

give continuous dates to the producers. As a result, none of the South-based artistes take

up more than 2 films a year, as opposed to many Hindi artistes who make 4-6 films in a

year.

One more peculiarity of the Tamil and Telegu films is the increasing proportion of

integration in the industry. Ramoji Rao owns a studio and a post-production facilities in

Hyderabad. Many top production houses in the South are owned by artistes. Thus, unlike

the Hindi film industry, in A category films, the artistes have more clout and are involved

in the entire process of film making. These artistes also have a substantial control on the

script. Artistes like Rajnikant also control the theatres, albeit indirectly. The Tamil and

Telegu industry is more integrated than the Hindi industry in many ways, with fewer

players and the top players controlling the industry both in terms of value and volumes. In

this respect the Tamil and Telegu film industry is similar to international film production

houses.

One major difference between the Hindi and South based films is the extent of

star worship. Films are classified under the various categories mainly based on the star

cast. For example, in Telegu films in which famous actors like a Chiranjeevi or Nagarjuna

or Venkatesh or Balakrishna or Alu Arvind star would be rated as A category, irrespective

of the director and the film producer. The other top stars are Mohan Babu, Pavan Kalyal

and Mahesh Babu. Then there are a lot of other actors like Jagapati Babu, Srikanth,

63

Prakash Raj and Naveen, who are not as big and do one to two good films in a year. These

may be rated as B films.

Amongst the banners, Suresh Productions, run by D. Rama Naidu and his son Suresh

is one of the most respected. This production house has done more than 100 films for

which it has entered the Guiness Book of World Records. The other main production

houses are Usha Kiran Movies of Ramoji Rao, Anjana Productions of Chiranjeevi, Geeta Art

Films of Alu Arvind, Annapurna Studio Private Ltd of Nagarjuna and his father – the

legend and Nageshwar Rao, Padmalaya Production of Mahesh Babu and his father Krishna

and Laxmi Prasanna Productions of Mohan Babu.

In the South based film industry in general and the Telegu film based industry in

particular, the production houses are mainly owned by the top stars, who do at least one to

two films for their own production houses in a year. This trend is slowly entering the Hindi

film industry too. There are star directors like Raghavendra Rao, S.V. Krishan Reddy and B.

Gopal, whose films are A class. Finally, there are a number of independent films producers

like C. Ashwin Dutt and Subhiram Reddy who make big budget A grade movies.

In Tamil films, Rajnikant has a special category of his own. He falls perhaps in the

super A category. Rajnikant produces his own films. He works on the principle of selling a

film at areasonable profit so that everybody involved in the movie makes a winning. His

films usually carry the names of 4-5 producers, who are mainly needy people. His film

“Padiaappa” did a business of Rs 320-350 million. The entire film was made for Rs 60

million and was sold for close to RS 250 million. Of the film profits, he usually reserves

35-40 per cent for charity. The rest goes towards his fee for the film. With close to Rs

100 million per film, he is one of the highest paid actors in the country.

The other major banners in Tamil films are Supergood Films, which makes movies

under Oscar Movies Banner, Mani Ratnam who makes movies under Madras Talkies Banner

and Kamala Haasan’s home production. Shankar, who was a director till recently is the most

sought after and number one director in Tamil films.

Another aspect of the Telegu and Tamil films is the large inter-lingual market.

Films in either of the languages usually get dubbed in the other language.

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OTHER REGIONAL LANGUAGE FILM PRODUCTION

The other regional languages have not made a substantial dent in the market,

though they collectively total close to Rs 2 billion to Rs 3 billion. These films are similar to

B and C class films in Hindi, Telegu or Tamil languages, though their subject might be more

social and their appeal more universal. The reason for such low budget films is the low cost

of artistes and technicians. These films do not have special effects and graphics, they

usually use stock music, they have very few songs and hardly any outdoor shoots.

Moreover, these films cannot afford to have very high costs as their target audience is

only one or two states and they rarely have an overseas market. However, some Punjabi

films like “Shaheed Udham Singh” and “Guru Gobind Singh” have done reasonably well

internationally, but these are exceptions.

In terms of value, among the regional languages, the order is Kannada, Malyalam,

Bengali, Gujarati, Marathi, Punjabi, Oriya and others. Kannaada and Malyalam films have a

market in Middle East countries and the USA where a substantial population from the

respective regions resides. Most of these films have been made at very low budgets and in

most cases all these films have one or two artistes, who act in each of the films. These

artistes have a huge public

following and their films usually get a very good reception and make money.

In Bengali films, Devyank Arts owned by Dilip Karkaria is a renowned

production house having produced 8-10 films in the last 4-5 years. All these films

have cross-border appeal and have been dubbed in Bangladeshi Bengali. The biggest

actor in Bangla films is Prasenjit, son of Biswajeet, an icon of Hindi films in the

yesteryears. Similarly, in Gujarati, Mahesh and Naresh Kanodia and Upendra

Trivedi are popular artistes, while Govindbhai Patel is a well known producer. Unlike

Hindi, Tamil and Telegu films, the regional film industry is mainly dominated by one

or two artistes and production house, who make the bulk of the films. The Indo-Italian

Chamber of Commerce and Industry

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CASE STUDY : ADLABS FILMS LTD.

The promoters of the Company, Mr. Manmohan Shetty and Mr. Vasanji

Mamania, formed a partnership firm, M/s Adlabs in 1978 for processing of films.

Initially, they concentrated on processing of advertisement and documentary films.

The promoters then decided to form a Company in 1987, with a paid up capital of

Rs.20,000.

As on August 14, 2000, Mr. Manmohan Shetty and Mr. Vasanji Mamania along

with friends, relatives and associates together hold 1,71,00,600 equity shares of

the Company i.e. 100% of the pre-issue equity capital.

Processing documentaries and short films then became a part of Ad lab's growing

business. However, since those early days, Adlabs has continually strived to evolve and

reach out for higher horizons. A fact mirrored in its market leadership status in terms of

both quality and market share. Importantly, Adlabs has processed films for almost all

production companies in Mumbai. A tribute to the company's continual endeavor for

excellence has been the 4 national awards that they have received for the 'Best Motion

Picture Processing Laboratory'. Its main competitors are Film Lab and Ramnord in mumbai.

Today, Adlabs is venturing into the entertainment sector by bringing to India an

entirely new experience, the country's first IMAX Dome Theatre as well as a cinema

multiplex. It has added yet another Multiplex (besides Imax Adlabs) with four screens in

Mulund called R-Adlabs, which was opened to the Public on the 18th of July 2003. http://www.adlabsfilms.com/

Organisation Structure

Chairman & Managing Director Mr. Manmohan Shetty

Wholetime Directors Mr. Vasanji A. Mamania

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Miss Pooja M. Shetty

Other Directors Mr. Berjis M. Desai

Mr. Shyam G. Shroff

Mr. Pradeep K. Guha

Mr. Chandir G. Gidwani

Company Secretary Ms. Kirti V. Desai

Auditors H. O. Agarwal & Co.

Chartered Accountants

Bankers Bank of Baroda, Chakala

Branch, Mumbai

(Source: http://www.adlabsfilms.com/)

PROCESS

A film-processing laboratory is an integral component of film production-

exhibition value chain. It is an essential link between film production and film

exhibition. The filmmaker and the team provide creative inputs during the shooting

of the film. Basic film software is created at the end of shooting. The film-

software thus created, in this form, cannot be exhibited and it undergoes a

number of processes to render it fit for viewing. This is where a film-processing

laboratory comes into the picture. Adlabs provides technical inputs to the basic

film software created after the shooting of the film. The film roll undergoes a

series of processes in the lab. The lab liaises with sound correction and editing

cells resulting in the final print for the film. This film is then pre-viewed in a pre-

view theatre as a form of quality check. The film is then passed on to distributors.

Adlabs then provides a large number of prints to the distributors at the time of

launch of the film.

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IMAX ADLABS MULTIPLEX

Imax Adlabs Multiplex is a subsidiary of Adlabs Films Ltd.

8 P’S OF IMAX ADLABS

PRODUCT

Service Product / Service Package:

The Core Competency here is SCREENING OF MOVIES. The supplementary products /

services are enormous like the Video Games Section, Art Gallery, Music Station and

Trendy Cafeterias. The ambience is pleasant with centrally air conditioning, well-

illuminated layout. IMAX ADLABS is well known for its DOBLY DIGITAL SOUND.

PRICING

IMAX uses differential or flexible pricing for its Multiplex theatres. In the multiplex the

rates are generally between Rs. 80 & Rs.120 depending upon the box office performance

of the movies screened.

The prices are popularly estimated to be extremely fair prices for the complete

entertainment experience. Reasonable pricing is possible thanks to the government

policies regarding the partial wavier on the extremely high entertainment tax that

multiplex enjoy.

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PLACE

It is located at Bhakti Park, Anik Wadala Link Rd, Mumbai-65. It also provides its own Bus

Service for public.

PROMOTION

Initially hyped, IMAX attracted a lot of press attention and subsequently the public

flocked to Wadala to witness the spectacle. However after the initial hype died down

IMAX did not take a more aggressive role in promotion but instead took a back seat.

The most effective way of promotion is the daily advertisements in the paper,

which promote the movie, which is currently being screened in the theater, and

informs the public.

PEOPLE

Courteous and well-dressed people characterize the Multiplex.

The employees are highly motivated and trained and exude an aura of energy and

vibrancy as they perform their duty with a smile on their lips and a spring in their

step.

Whilst actually experiencing the movie, the sin-goers around us are just as

important as the employees that escort us to the theater. Therefore IMAX, which

attracts the upper strata of the society, SEC A++, is a very conducive atmosphere

and a pleasant environment to enjoy a movie with the entire family.

PHYSICAL EVIDENCE

Ambient factors

Air conditioning

Excellent ventilation

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Design factors

Uniform appearance

Extensive parking lot

Spacious interiors

Social factors

Well dressed employees

Courteous

Genial

Family atmosphere

PROCESS

The process is a sequence of actions to deliver the service to the customer. In this case

the following is the process followed by IMAX.

The customer arrives to IMAX by car and first goes to the ‘pay n park’ to park the car.

The customer then moves on to the ticket window to purchase the ticket for the movie he

is interested to watch.

Then the customer enters the building. Here the usher at the door checks for the tickets.

Then the customer will move on to the screening area and watch the movie.

In the interval the customer will mostly come out to eat or drink something from the

cafeteria.

The customer goes back to the screening area to continue the movie.

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PRODUCTIVITY & QUALITY

Undoubtedly, the IMAX caters to the crème de la crème of the crowd in the Mumbaikars

that patronize the theater. Therefore, these people are treated to the best of quality and

productivity by the employees. The customer is the King here.

The service for the multiplex goes as far as actually delivering the tickets to the client’s

home so as to limit the customer’s trouble in actually booking the tickets in advance. The

theater, keeping in mind, its limited accessibility is very considerate towards the people

that determine its success.

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CONCLUSION

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.

It is widely believed that 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.

There will be an increase in the number of screens and multiplexes.

Moreover, stricter enforcement of copyright law will help the film industry in its fight

with cable operators and piracy. If piracy is not curbed, trend of selling distribution rights

for Home Video and C&S TV within 6 months of the release of the film will prevail.

As 100% FDI is permitted in film sector, foreign entertainment companies, with steady

revenue streams, can do good business if they invest in Indian film industry.