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Sustainable Filmmaking: Create in India, sell to the world

Author | Ajit Andhare | Saturday, Sep 27,2014 9:57 AM

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Sustainable Filmmaking: Create in India, sell to the world

Remember playing passing the parcel as a kid? You know, the game where you keep passing an object - and whoever’s holding it when the music stops, is out of the game.

Now imagine a slight variation: When the music stops and one player leaves, another replaces him in the game. What will happen in this version eventually? The game goes on infinitely. No one ever wins.

This second variation of the game sums up the state of the film industry today. Players come and leave, the ‘show’, as it were, of course goes on. But, is anyone winning... or ever will?


Over the last few years, a whole generation of stand-alone film producers has found itself replaced by corporate studios. As we speak corporate balance sheets- often MNC balance sheets- are funding a bulk of the Indian film industry.

But have we addressed the fundamentals yet?

For any industry to move forward and gain holistically, money needs to be reinvested. For money to be reinvested- it needs to be earned first- particularly by those who supply it in the first place. Creativity and passion form the bedrock of our business. However, for us to create a sustainable, healthy industry, returns have to accrue to the supplier of capital - the investor - who fuels market growth. But where are the returns on capital invested?

Consider another risky industry - venture capital. VCs invest in a portfolio of startups and share the risk to the extent of their investment along with the startup. Some startups fail - others break-even, and some out-perform. The VC invests despite the underlying risk in these startups because on balance, the incentives are aligned. Similarly for film projects anywhere in the world - the underlying risk can never be eliminated completely.

But are our incentives aligned to the extent of risk taken?

Unlike an independent producer, a full-service corporate studio adds substantial value in marketing, distributing and monetising a film. Despite matching the creativity of the originator with this value addition, one still needs to share a large chunk of the IP with the originator for a lifetime. This is how the risk reward equation gets heavily skewed against the studio.

The other proverbial elephant in the room

Today is yesterday’s future. Yesterday, the story was about the bright future ahead of us. The driving factor was valuation. Today, it revolves around the P&L imperative – one that cannot be ignored. Markets expand, new markets open up, and ticket prices increase. New avenues for monetisation are developing, but why do all of these contributing factors now reflect in the P&L? This is because; a large part of this growth is actually accruing to the factors of production, without the commensurate risk being shared.

I recently met a senior official from what is the equivalent of the Chinese I&B Ministry. He asked me about how many movies we (Indian Film Industry) churn out annually. I replied- over 1500. His instant reaction was of sheer awe. He then asked me the cost-to-box office ratio for some of our leading films. I responded with an approximate 1:5. He switched from Chinese to English immediate, brushing his translator aside: “Ours is 1:16.”

So clearly, aligning the cost to returns fairly and building sustainability through risk adjusted return is the only way forward.

What we are doing right

In the last two to three years, we have witnessed a trend of high-content, story-driven films achieving box office success. It’s not a new phenomenon. Only, of late, its occurrence is far more frequent. Queen, Lunchbox, Madras Café, Kahaani, Vicky Donor, Bhaag Milkha Bhaag, Mary Kom - all these are high-content films that have achieved commercial success.  We at Viacom 18 Motion Pictures have consciously endeavoured to push this trend forward and hope to build on it in the years to come. Studios have to abandon the pursuit of scale in favour of the pursuit of profitability.

In pursuit of profitability

While Hollywood addresses a 40-billion dollar market our big screen adds up to a mere 2 billion USD. If we began making universal products in addition to purely cultural products, we’d be able to address a much larger non-diaspora market. Lunchbox crossed 17 million USD across 25 international territories and did wonders for brand India. We must tap into this trend. Non-diaspora markets are an essential piece of the monetisation puzzle. We need to ‘Create IN India, SELL to the world’.

Solving the puzzle

A key regulatory hurdle for us is the imposition of an inconsistent, exorbitant entertainment tax. If we can’t do away with it completely, can we at least ensure that it is fully subsumed under GST?

With the right risk-reward construct, a genuine effort towards building business sustainability, a fair tax regime and a focus on high-content film that open new markets can really help us address monetisation in a fundamental and not incremental manner.


I began this piece with the analogy of a game that no one can win. I’d like to conclude on a more hopeful note. We need to set right the rules of the game as we move forward in this decade. If all of us take it upon ourselves to work towards a new sustainability paradigm, with the right rules and intent, winning will be the natural consequence.

The author is COO, Viacom18 Motion Pictures Ltd
 

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