Now don’t push your chairs back to

watch a movie cos..

Its got strategy too...
 History of Bollywood
• Raja Harishchandra (1913), by Dadasaheb
Phalke, was the first silent feature film made
in India.
• By the 1930s, the industry was producing
over 200 films per annum
• The period from the late 1940s to the 1960s
are regarded by film historians as the "Golden
Age" of Hindi cinema.
 History of Bollywood
• The 1960s and early 1970s were of romantic movies
and action films with big star actors.

• During the late 1980s and early 1990s, the pendulum

swung back toward family-centric romantic musicals

• The 2000s saw a growth in Bollywood's popularity in

the world. This led the nation's filmmaking to new
heights in terms of quality, cinematography and
innovative story lines as well as technical advances in
areas such as special effects, animation, etc
 Facts
• The movie industry is one of the most exciting
and fastest-growing businesses in the world.

• Bollywood, the world's largest film industry

by ticket sales and no. of movies made, is
worth about Rs.8500 crore (as of 2007)
($2.15 billion) and is forecast to more than
double to Rs.17500 crore ($4.43 billion) by
2011. (recession not taken into account)
 Some facts

• World’s biggest movie industry

• 1000 movies annually
• Technology of film making one of the best.
• Employs more than 6 million people (most
contract workers)
• India’s movie industry- highly informal,
personality oriented and family dominated.
Yet its revenue earned is only 4% of Hollywood.

Revenue can reach $1 bn and worldwide gross

revenues are now over $40 bn annually for the global
film industry.
Growth of Bollywood

Today Bollywood is growing at a rate of 9%p.a.

and has a current business of Rs.11,000 crores

If Bollywood maintains this rate then soon by

the end of 2013 it will cover the business of
worth Rs.19,000 crores.
translating into a healthy CAGR of 18%.
Production Houses
 Some well-known Indian film
production houses based in India are
• AGPPL - Ashutosh Gowariker Productions • Base Industries Group
Private Limited • BR Films
• AKP Films - Aamir Khan Production • Balaji Telefilms
Films- • Rajshri Films
• Mukta Arts • Super Cassettes Industries Ltd (T-Series)
• Red Chillies Entertainment • Shree Ashtavinayak Cinevision Ltd
• Percept Picture Company • Madras Talkies
• Yash Raj Films • J P Films
• Roopesh Rai Production • Filmkraft Productions
• White Feather Films • Excel Films
• Key Sera Sera Films • Ram Gopal Varma Productions
• Adlabs Studios • Kaleidoscope Films
• Vishesh Films • India Showbiz Network Limited
• Devgan Films • Diya Productions
• UTV Motion Pictures • Excel Films
• Dharma Productions • IDream P
• Pritish Nandy Communications • Suresh Productions
• Popcorn Entertainment • Sahara One Productions
 Foreign tie-ups
• The Reliance Anil Dhirubhai Ambani Group has
sealed its $825-million deal with Steven
Spielberg’s DreamWorks Studios with
investment banker JP Morgan syndicating $325
million debt, the two groups announced late
Monday

• Walt Disney Studios that will handle the

marketing and distribution of films made by
DreamWorks in markets outside India
Why you should Invest?

High Potential Returns

Accelerated Industry Growth

Stardust In Your Portfolio

A Natural Hedge

Multiple Revenue
Opportunities
 Production costs
• In a Rs 40-crore Bollywood film, the
production cost would be hardly Rs 15 crore
and the rest goes for paying the cast

Cost of producing movies

production cost Cast charges

37%

63%
 According to Associated
Chambers of Commerce and
It is estimated that Indian
Industry of India (Assocham)
domestic film industry will by
the Indian film industry
2010 be worth Rs.400 bn.
already earns 100 million U.S.
dollars in foreign exchange.
 The Birth of a Star

Script Director Producer

Source: Confidential- with inputs from Mandre Productions, Govind Rai and
Rohit Jaisingh Vaid, Contilloe Films
 The Cycle of Events

• Based on • Editing- Adlabs

relationships Plough funds • Trial run
• Brand value • Censorship
• Profit sharing • NFBC
• Print type
• IDBI
• Conventional
moneylenders
Casting • The Underworld mafia The makeover
The media to get there- Single Screen

Digital Analog
Normal projector
UFO, Qube
prints
-Show times are
-Showtime can be
uniform
strategically planned

Costs just Rs.10,000

Runs into crores
Could have been
Eg: Ghajini spent Rs.
done in Ten lakh
6 cr.
rupees

700 digital prints and 500 analog prints taken by a distributor

 The Distribution Debate

Producer

Distributor
Distributor
Overseas

Distributor
Sub-Distributor Sub-Distributor Sub-Distributor
North East and
North South Mumbai et al
Central
 Key Facts
• The distribution and telecast rights are given for
a period of 5 years
• The success of a Bollywood is dependent on the
profit / loss incurred by a Distributor
• The promoters/ star/ directors have to carry out
marketing for the film, to safeguard their brand
identity
• Distributors carry a higher risk- Strategy:
monopolize the production and rights
• Largely distributors finance producers 50% of
the movie, hence, the 50:50 sharing
Negotiating skills of producers
Producers have good negotiating skills

SRK had turned down an offer of Rs 76 crore which

astounded industry sources.

It was auctioned for Rs 80 Crs where they made 30Crs

Profit and production cost of Rs 50 Crs
 Single Screen effect
• 5 years free to run the movie as many times
• 1st week theatre gets 30% while the Producer/ Distributor
gets 70%
• 2nd and 3rd week revenues for theatre can / may increase
• Theatre can sub-sell the movie to another in the same city
• Strategy: A nexus between Theatre- Production House-
Distributor
• Eg: Rex and Symphony theatre in Bangalore
• Strategy: Make money on Snacks, Beverages,
Advertisements and Parking
 The Bollywood-Multiplex tussle
Producer/
Multiplex When??
Distributor
• 45% • 55% • OLD
• 45% • 55% • 1st week
• 60% • 40% • 2nd week
onwards
• 50% • 50% • NEW

• -2% • +2% • Subsequent

performance
Revenue Generation-Bollywood
 Sources of Revenue
There are various sources from where the industry generates
revenues:

The Domestic
Home video
box office
revenues.
revenues

Overseas box
Ancillary
office
revenues.
revenues.
 Sources of revenue

(Rs m) FY04 FY05 FY06 FY07 FY08E FY09E FY10F

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

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

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

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

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

• Key drivers of multiplexes growth

– Favorable demographics
– Tax exemptions
– Quality locations such as malls
 No : of Indian Theatres
Multiplex Single screen theater
3%

97%

Source: Reuters 2009

Revenue generated from ticket
collection
Multiplex Single screen theatres

37%

63%
 The economics
• Supply side
– Growth in film industry
– Improving real estate supply
– Favorable tax exemptions

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

Seasonality

Reducing shelf life of movies

Low screen density

Increasing average ticket prices

 Revenue Generation-Bollywood
• Hollywood commands more than 90% of the
global cinema market.
• Bollywood contributes 3 to 5 percentage of
global film revenue
• 240 to 300 films are produced in Hindi and
same number in Telugu
• Hindi films account for about half of the total
revenue generated by cinema in India
• Indian cinema found markets in over 90
countries where films from India are screened.
 Revenue Generation
• Many Bollywood Films earn between 10 %-
30% of their revenue from the overseas box-
office depending on the budget of the film
• The total revenue that Bollywood earned in
2008 was Rs 10,900 crore with an overseas
collection of Rs 977 crore
• Most of the times the size of the overseas
market is directly related to the Asian
population residing abroad
 Major Overseas Markets
• South Asia is a big market
• Bangladesh
• Nepal
• Pakistan
• Sri Lanka
• Australia
• Western Europe
• U.S- earn around $100 million a year through
theatre screenings, video sales and the sale of
movie soundtracks
 Major overseas markets
– U.K
• They frequently enter the UK top ten
– Africa
• Greater westernization of Bollywood movies is
diminishing the presence in the African market.
– Russian Market
• Bollywood films are particularly popular in the former
Soviet Union.
 Indian Film Industry = bollywood??
Films Released Films Released
2004 2006
Hindi 241 223
Telugu 202 245
Tamil 130 162
Malayalam 71 77
Bhojpuri 21 76
Kannada 75 75
Marathi 56 73
Other 134 160
Total 931 1091
Present Film Production Trend

Hindi Telugu Tamil Others

20%
30%

20%

30%
Market Share of Various Film
Industries
Share of Revenue
Hindi Telugu Tamil Others Hollywood

5%

15%

45%

15%

20%
 Where does the money come from

Components of Revenue
Amount (in
Source of billions) Domestic Box office Overseas Collection
Income (2008) % Home Video Ancilliary Revnue
Domestic Box
office
Collection Rs.81.2 71% 15%
5%
Overseas
Collection Rs. 10 9%
9%
Home Video Rs.5.8 5%
Ancilliary 71%
Revnue Rs. 18 15%
Total Rs. 115 100
 Hollywood Story in India
• Jurrasic Park (1993) dubbed into Hindi
followed by the hits Speed (1994) and
Dunston Check In (1995)
• 2005 : 55 Films
• 2006 : 75 Films
• At present Hollywood has 4-5% share in the
Indian Film Industry
 Regional movies
• Out of 1,000 movies released in India every
year, Bollywood constitutes only 30%.

• South Indian films—Telugu and Tamil—

constitute almost 50%. The rest is made up of
other language films.
 South Indian Market
• Tollywood makes equal No of movies as
Bollywood
• Last 2 years 30 Telugu movies are dubbed and
released in Kerala (expanding Tollywood?)
• Tamil movies have a ready market in Kerala
and dubbed into Kannada and Telugu
• Biggest hit of 2009??
 UTV Case
• UTV Motion Pictures, wants to increase
revenues from regional cinema from 5% to
20% in the next two years. “It would be
foolish to ignore regional cinema,” .
 Why go regional ??
• A big-budget, star-studded Bollywood film could cost
anywhere between Rs 20 crore and Rs 60 crore.

• On the other hand, most regional films with the most

state-of-the-art production techniques would cost only Rs
3–4 crore.

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

higher.
 Why go regional ?
• Investing in a basket of regional films may
diversify risks better than putting all the money
in a high-budget Bollywood flick.
• Diversifying risk can help improve valuations.
“More the titles, the better valuation will they
get,” says Patnaik of Beyond Dreams
• Most regional markets have strong local
distributors. They have control over theatres and
it becomes crucial for the Bollywood companies
to get the local players involved
 Other sources of income
• In 2008, Red Chillies introduced and bought
Kolkata Knight Riders Cricket franchise in
BCCI new venture Indian Premier League.
They have also ventured into television
content production and their show 'The first
ladies' was aired on NDTV Good times.
Other source of income
Problem Definition
 Hollywood a threat
• Indian’s perceive watching Hollywood as
“cool”??
• A century old industry unaffected- future??
• Walt Disney’s entry
• Will Bollywood suffer like the Japanese and
European Film industries?
• Target Audience of Hollywood is gigantic
 Can Hollywood Swallow Bollywood?

• Bigger menu
• Technology
• Investments
• Infrastructure
• Systematic
• High Entry barriers
 Can Bollywood bite into the
Regional Film Industry?
• Massive size of movie markets in the South

• Movie culture more prevalent in the South

• 60% of the movie halls are located in South

 Piracy
• Piracy causes $400 million in revenue loss-
India.
• Worldwide- 6 billion $ (average annually)
• In India piracy is a parallel industry that runs
with financial support from the underworld
and grey market.
• Job dependency of the lower class of the
society is high (child labour).
Source - US India Business Council - Ernst & Young 2008 report on 'The Effects
of Counterfeiting and Piracy on India's Entertainment Industry
 Consequence

• Loss in revenue - media houses, theatres and

distributors.
• Loss of nearly 80000 jobs that this industry
could generate annually.
• Lower contribution to GDP.
• Attitude of people towards purchasing pirated
versions.
 How is it done?
• Camcord into theatres – available on streets
and telecasted on TV by operators.

• Rackets – Example, “What’s your Rashee” fine

print given by Business development manager
with Adlabsand associate vice president
(operations and digital mastering) with UFO
Moviez gave to Pakistani counter part by two
channels.
 Reasons for piracy
• Weak law enforcement –
Breach of copyright laws is punishable by prison
for up to three years, but most pirates get
away paying a nominal fine.

So caught and get away to start newly in

another city in India.
Strategies for Bollywood
 Strategy 1:
Encouraging to open more number of multiplexes in
India.

– As the revenue generated is more

500

450

400

350

300

250

200

150

100

50

0
cost of indian ticket cost US ticket
 Advantages
• Revenue is more from the multiplex
• Will de-risk the industry
• Attract more corporate houses which will
make Bollywood more organized
• Much more quality jobs generated in
multiplexes
• Compete with Hollywood as we will gain more
money power
 Strategy 2:
Entering into the Southern Markets
• High quality dubbed Bollywood
movies to be released in South
India

• Incorporating South Indian

Actors into Bollywood.

• Aggressive marketing campaigns

for South Indian markets
 Strategy 3:
Overseas Market
• Concentrate more on the South Asian
population abroad.(which is currently done)

• Indian English movies which cater to the

Western Audience
 Strategy 4
Strategy to Curb Piracy
1. Camcord in theatres
Tactics – PVR cinemas and other major players
started a “Make a difference” campaign -
training to cinema employees check and
capture camcord in theatres.
 Strategy to Curb Piracy
Laws to be made stringent
• Presently breach of copyright laws gives a
punishment of 3 years or fine amount of Rs.
50000. So acussed gets away with fine easily.

Hence the fine amount should be increased

further 2 lakhs or more so as to restrict it.

• Controlling piracy by frequent police raids-

road side selling of pirated CDs and DVDs.
 Strategy to Curb Piracy
• Encouragement to DTH satellite, easy
availability of cinemas to people, so reduced
demand for pirated movies by local TV
operators.
• Enhancement in technology-
The media houses should try and follow the
UFO method for transacting with theatres.
This will reduce the risks of breakage of value
chain.
 Strategy to Curb Piracy

Like any other industry the entire value chain

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

Hence the FCCI entertainment committee

should look forward towards making it
corporatized.
 Red Chillies Entertainment

•Started in 2002 as a Film Production Company

• Headed by Shah Rukh Khan and Gauri Khan
•The company produced lots of hit movies like
Main Hoon Na, Om Shanti Om etc
•Later Branched out to Post Production,
TV Commercial and Advertising , Television, IPL
and Equipments
 Diversification of Business
• Movies
• Vfx – Special Effect Studio
• TV commercials and Ads
• IPL Kolkata Knight Riders
• Idiot Box (TV program prodution)
• Equipment Renting
 VFX – The Special Effects Studio
• Post Production unit
• Specializing in Visual Effects
• State of the art facilities
• 10,000 sq ft Studio
• Technical Collaboration with HP
• Won several Awards
 TV Commercial Division
• In house team of Directors, Writers, Stylists
and Creative Producers
• Pizzazz is the Ad division which gives access to
Bollywood directors
• Present Clients : Airtel, Pepsi, ITC, ICICI,
Hyndai, Videocon, Hero Honda
 IPL- Kolkata Knight Riders
• Bought the team Kolkata Knight Riders for 5
years.
• Ambitious plans to venture into other sports
such as hockey and football
 TV and Equipment
• Idiot Box is the TV programme division
• Ventured into TV programme production in
2009.

• Equipment Renting is another venture where

state of the art equipments are provided to
other players in media industry.
 No business like Show business
• Leveraging the “Khan” image to the maximum
• Making use of Shah Rukh Khans Friends
Network.
• Red Chillies major clients in the advertising
have Shah Rukh Khan as Brand Ambassador
(Pepsi, ICICI, ITC, Hyundai etc)
• All the new divisions of Red Chilly is directly
linked to Show Business
 Strategy
• Red Chillies Group even after venturing into
multiple verticals of entertainment industry
should always should not loose focus on its
core competencies and at times outsource
work if they find the core competencies don’t
lie with them.
• Red Chillies should slowly try to distance itself
from brand “Shah Rukh Khan” to a Production
House with “independent identity”.
The End