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Report on Hindi film industry envisions key structural changes

07-April-2005
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Report on Hindi film industry envisions key structural changes

'The Hindi film industry -- Business trends and Structural perspectives,' a report authored by Sunil Khetarpal, Country Manager, Entertainment and Media Banking, Yes Bank, is to be released by the end of this month. The report gives an interesting insight into upcoming trends in the Hindi film industry.

The report includes key trends in production aspects, film financing, collection trends as also emerging revenue streams through home entertainment and in film placements.

Since 2001, there has been an increase of 8 per cent and 48 per cent in number of releases per week for all Hindi films and high-grade films respectively. High-grade films (with budgets greater than Rs 20 m) constitute the most relevant Hindi film group as it contributes more than 90 per cent of total business generated by the industry.

Film financing has seen interesting trends, with Non-Traditional Financing Sources (NTFS) gaining ground. Within high-grade films, proportion of films financed from NTFS has increased from 8 per cent in 2001 to 42 per cent in 2004. Also, several investors contributing NTFS for film production are new entrants, which explain their higher propensity to fund films with smaller budgets or smaller capital outlays. Co-productions have seen a rise from 3 in 2001 to 15 in 2004.

With regard to collection trends, films today, are often released on a large number of prints to extract maximum revenue possible in the first few days of release. There has been an appreciable increase in collections from foreign films dubbed in Indian languages and it is estimated that almost 35-40 per cent of total box office collections of foreign films was contributed by dubbed films in 2004 as compared to approximately 25 per cent in 2001.

In the home entertainment arena, average realization to producers for home video rights has increased by almost 100 per cent in the last two years from about Rs 2 m to Rs 4 m for Top 50 Hindi films.

The report expects revenue proportion to increase from overseas rights, TV Rights and home video. Proportion of revenues coming from domestic theatrical distribution may decrease though absolute realizations are expected to grow due to effective marketing and growth of multiplexes. The key driver for structuring Pay Per View (PPV) release window in India will be flexibility of distributors for other media platforms in view of potential cannibalization of home video and Pay TV revenues and number of potential viewers, which will be a function of subscriber base of the DTH service provider.

As far as film marketing goes, the table below show media specific marketing spends for Hindi Films in 2001 and 2004.

Media
2001
2004
2006E
Average Marketing Cost (Top 50 Films)
INR 5.2 mn
INR 8.8 mn
>INR 10 mn
Print
5-7%
7-10%
12-15%
Terrestrial TV
2-5%
Negligible
Negligible
C&S TV
~80%
~75%
60-65%
Internet / Online, Trailers, Radio
Negligible
< 2%
5-7%
Hoardings, Publicity Design & Posters
8-10%
10-12%
12-15%
Events
Negligible
< 2%
3-5%


Spends on print media are expected to rise due to increase in local newspapers, which facilitate regional & city-specific targeting. Ad-spend share of C&S TV will come down by almost 10 per cent over the next 18 to 24 months namely due to proliferation of other media and realization of sub-optimal effectiveness of C&S TV platform.

Over the next 18 to 24 months, use of Product Placement and Brand Promotions (PPBP) in Hindi films is expected to grow further towards Rs 1000 million, from it's current share.

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