THE INDIAN FILM INDUSTRY Films are the most popular form of entertainment. India is now the largest producer of films in the world. Since 1931, the film industry has produced more than 67,000 films in more than 30 different languages and dialects. The film industry recorded a loss of Rs. 3 billion and gross revenues of Rs 39 billion have been recorded in 2002. But, it is expected to grow annually by 19 per cent to reach Rs. 93 billion by 2007. The industry produced 1200 films in 2002, and 1,013 films in 2001, up from 855 films in 2000. While Hindi films continued to be the largest segment in 2001 (23 per cent share), south Indian language films (Telegu, Tamil and Malayalam) have seen a considerable growth. Last year’s actual revenue was only Rs. 39 billion. High- profile movies from 2002 such as Devdas and Mr. And Mrs. Iyer did not bring in as much cash as expected. The number of films made annually is expected to fall, leading to an increase in the average revenue per movie. Problems faced: Shortage of cinema halls 1
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THE INDIAN FILM INDUSTRY
Films are the most popular form of entertainment. India is now the largest producer of films in the world.
Since 1931, the film industry has produced more than 67,000 films in more than 30 different languages and
dialects.
The film industry recorded a loss of Rs. 3 billion and gross revenues of Rs 39 billion have been recorded in
2002. But, it is expected to grow annually by 19 per cent to reach Rs. 93 billion by 2007. The industry
produced 1200 films in 2002, and 1,013 films in 2001, up from 855 films in 2000. While Hindi films
continued to be the largest segment in 2001 (23 per cent share), south Indian language films (Telegu, Tamil
and Malayalam) have seen a considerable growth.
Last year’s actual revenue was only Rs. 39 billion. High- profile movies from 2002 such as Devdas and Mr.
And Mrs. Iyer did not bring in as much cash as expected. The number of films made annually is expected to
fall, leading to an increase in the average revenue per movie.
Problems faced:
Shortage of cinema halls
India has around 12900 cinema screens (a UN Study). This leads to a serious shortage of screening facilities
in India. Even the existing screens aren’t technically upto the standards required. Many of them are being
shutdown or sold off. The economics for a multiplex works better. The success rate for movies has gone down
drastically since the last year. States like Rajasthan, Maharashtra, Haryana, Uttar Pradesh and Madhya
Pradesh have been given tax breaks for multiplexes. Halls with smaller capacities also are better for niche
films.
The government has in recognition of this fact, given tax breaks to multiplexes built in the rural areas and
non-metros.
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Tax structure
India has a very lop sided entertainment tax structure. Though SIMCON has recommended a maximum of
60% in each state, in states like Gujarat, it is as high as 100%.
Improvement of existing movie theatres
The cinema halls need to be renovated so that more viewers are attracted to watch films there. As per the
current market trend most hall owners don’t earn enough to be able to upgrade their theatres. The solution to
this could be flexible ticket pricing. Black marketing of tickets is a common feature in India. A system could
perhaps be introduced whereby the film industry, or the theatre owners derive this advantage. This can
possibly be achieved by introducing the concept of flexible pricing of tickets. Theatres should be allowed to
collect higher revenues for more popular movies by temporarily increasing or decreasing the ticket prices, as
the case maybe. This would generate higher revenues for the industry, which in turn would encourage them to
spend more to upgrade the standards.
Lack of adequate infrastructure for movie production There is a serious dearth of movie production facilities in India. Most of the movies are produced at shoestring
budget. Though there are adequate creative ideas, implementation is poor. The primary cause is lack of
facilities. Examples like Ramoji Rao City Studio in Hyderabad, Whistling Woods from the house of Mukta
Arts are recent examples of where the country is headed.
Financing
In terms of volume, India produces the largest number of movies in the world. But the Film industry structure
has been highly non-corporatised till date. It has generally been family run companies with no access to
institutional finance. Finance is tapped from family friends and other sources with high rate of interest (upto
40%) being charged.
With the Film industry being granted the official ‘industry status’, it has propelled companies like Mukta Arts to go in for institutional sources. Still not many Film
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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
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.
Companies like Hinduja TMT, which has earmarked Rs 20 crores for Film financing this year, and UTV
which made Fiza, are entering this arena while the emerging finance sources encourage corporates to invest:
These sources of finance are available only to companies and not to individuals, thus the need for
corporatisation.
CII & CRISIL are also working at developing a financing model that would enable the banks to weigh the
risks in this industry.
Gloabalisation:
Globalization of the industry can be achieved in the following ways:
Production: India has a large resource pool of talent, esp. for animation. Another area where India stands at
an advantage is providing locations for shooting. The cost advantage and the technical expertise for offer can
act as comparative advantages for India.
Market: Indian films have always found market in Singapore, Malaysia, Indonesia and Europe. Success of
films like Monsoon Wedding and international recognition of Lagaan is just some examples.
Technology: while the technological capabilities and expertise are improving, the costs are decreasing. India
can act as a hub for postproduction development of films.
The requirements to achieve them would be to improve infrastructure for institutional funding and improve
the infrastructural set up in the country. Government’s help would be required in improving the facilities in
the form of better policies and improved access to funding. Right now a bank would approve a loan for a
film in six months’ time during which a movie may be complete.
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Piracy:
Indian film industry loses about Rs.300 crores annually to piracy. While efforts are on to curb the menace, the
technological evolution is making it increasingly difficult to keep pace with the anti piracy measures.
Indian Film CDs (pirated) reach India just on or even before the official release of the movie in India. These
originate outside India, mainly in Dubai where they are sent a week before the release for the Censorship
Board’s approval. This is the point of leak and one master copy is enough for supply all across the country.
The industry is worried that while the avenues of piracy are increasing at an alarming rate and the laws are
either inadequate and where they aren’t, the problem is enforcement. The fines paid when caught are
inadequate and so is the punishment. They also cite the non-cooperation of cable operators as a major
handicap in their efforts to curb piracy.
The cable industry on the other hand finds it difficult to check it on its own. The nature of piracy in the
Entertainment industry is such that since the consumer demands the pirated product, the administration finds
it difficult to check it. The cable operators cite this reason among others as to why it is difficult for them to
control it. If one operator does not showcase a pirated movie, the consumer switches to the other. And since
there isn’t strict enforcement of the laws, there is not disincentive for anyone to stop showing such movies.
The operators claim that even the film industry is not clear as to which rights are to be given to the cable
operators and how to distinguish them from satellite rights of movies.
The need of the hour is thus a single platform where the stakeholders, policy makers and consumers’
representatives can sit across a table and discuss solutions. The enforcement of laws has to be made stricter
and where the laws are inadequate, they need to be put in place. Public campaign condemning piracy needs to
be carried out. And piracy has to be made a prohibitive activity to carry out in terms of punishment.
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The Movie IndustryMovie studios makes movies. The movie studio then relies on a third party for distribution, for most of
the marketing and, in some cases, for finance and investment. The first step from studio to market is
bridged by international sales companies. They buy the rights for a film and license it to domestic
distributors, who then oversee the final step to cinema or TV screen.
The Challenge
The range of choices made available by technology and market diversity present sales companies with
limitless opportunities for licensing. A full return on an investment is only achieved if this licensing
process is as flexible as it is thorough. A sales company cannot afford to return from a film market
only to find that a third of its library of 150 films was underexploited because the administrative task
of issuing multiple licenses was overwhelming.With this administrative hurdle cleared, the respite
from paperwork is all too brief, as royalty statements from the licensed films start to arrive. Each
statement based on a different contract, with a unique combination of territories, distribution channels
and time frames, with income offset against advances paid by the licensees. Collection societies like
those
who streamline the music industry’s royalty process simply don’t exist in the movie world.
Checking each contract, clause by clause, dollar by dollar is often an impossible task. Many movie
companies are forced to rely on random audits to check license compliancy. Domestic distributors
undertake the lion’s share of promotion and marketing – money that has to be offset against receipts –
as well as the manufacture of videos and DVDs. They will also seek out and negotiate sub-licenses to
TV networks. Month by month, receipts stream in and need to be tallied, checked and paid onwards as
royalties. While their counterparts in the record industry enjoy the relative comfort of drawing up
artists contracts on their own familiar and relatively standard terms, a domestic film distributor may be
dealing with tens, even hundreds, of sales companies with very different ideas about how and when
royalties
are payable. Some may involve advance payments triggered by events scattered
throughout the lifetime of a film’s release. In some cases it only takes the emergence of a new
distribution medium — like DVD — to topple an already complicated structure of contracts and
payables. Finally, all the players must contend with a film’s all-too-frequent changing of hands, as
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libraries and companies both domestic and international are split up, rebranded and resold.
23. Operational Risks
a) Reduction in costs of CDs/VCDs.
With fall in prices of CD/VCD players, consumers increasingly prefer to view new films on
CD/VCDs. The illegal screening of new films by cable operators has worsened the matter.
However, recent enactment of Anti-Piracy law by the Tamil Nadu Government, which can
book an offender under Goondas Act,1982 may provide some added protection against piracy
and may bring higher numbers of viewers to the theatre.
b) Competition from other segments of entertainment sector.
In recent years, new types of entertainment like amusement parks, bowling alleys, go-karting,
water sports, resorts etc. have emerged as alternative sources of entertainment and may
threaten viewer ship of films.
c) Piracy
Pirated movies represents more than half of industry off-take since it is a cheaper
alternative to the Company’s original products. This phenomenon is hurting the industry not
only in India but worldwide. Indian Industry is working closely with local law enforcement
agencies and has been successful in organizing many raids and seizures. The Government
Authorities are also increasingly becoming conscious about this menace. Recently, the State
Government of Tamil Nadu has covered such piracy under the Goondas Act, 1982 acting as
effective deterrent to the pirated products. Notwithstanding this, the consumers have become
aware of the hazards using such pirated products.
d) Competition from developer of similar technology for webcasting
Company is dependent on the technology developed and owned by Drushya Entertainment
Broadcast Streams Limited (Drushya) for webcasting of films. Any development adversely
affecting its technology and its rights may also adversely affect future business of the
Company.
Management would keep its options open for a tie up with a superior technology developer in
such an eventuality
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CURRENT SCENARIO OF FILM INDUSTRY. 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
Revenues
INR
Total
Costs
INR
Hindi
mainstream75 16.5 6.4 10.1 12.8
Cross-over
Hindi15 0.9 0.4 0.5 0.4
Foreign
movies15 0.8 0.4 0.4 NA
Malayalam 93 3.7 1.8 1.9 2.3
Tamil
mainstream84 5.9 2.8 3.1 3.3
Telegu
mainstream74 5.9 2.8 3.1 3.3
Bengali 50 0.5 0.2 0.3 0.3
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.)
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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 ProducerCost
(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
UniversalSanjay Leela
Bhansali120 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
Source: FICCI Report 2002 - Indian Entertainment Industry
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TYPE OF FILMS.
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.
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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, 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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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, 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.
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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 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
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
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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
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
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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 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.
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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;
(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.
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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.
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, 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
43
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 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
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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.
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.
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AN OVERVIEW OF FILMS CERTIFIED
(From 1.1.2003 to 31.12.2003)U UA A S TOTAL
INDIAN FEATURE FILMS 479 198 200 - 877FOREIGN FEATURE FILMS 34 67 181 - 282INDIAN SHORT FILMS 1056 64 57 - 1177FOREIGN SHORT FILMS 47 109 72 - 228INDIAN 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 :
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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 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
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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 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.
PRODUCT
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Have you ever had a hand in developing a product that was engineered for efficiency. Tested for performance.
Packaged for shipping. And had it sit on the shelf?
Today’s marketing ‘tude is about design as much as it is about product life cycle. A marketing attitude of
connecting people with people through a product and/or service is at the heart of every decision and process in
business. An attitude of identifying the audience/customers. An attitude of giving them more bang for their
buck. An attitude of getting their attention in a world of media clutter. An attitude of building value for your
company through smart business negotiations. All those choices and skills are elements of marketing.
A movie product consists of intellectual property than can be ported to a variety of deliverables: theatrical
exhibit, non-theatrical exhibit, video tapes, DVDs, CDs of the soundtrack, collectible editions, television and
cable broadcast, Internet-served, and then there is the split dimensions of domestic, foreign, and niche
markets. Not to mention ancillary products such as clothing, toys, games, posters and even restaurants for
successful franchises. Oh…and then there’s the franchise rights, endorsements, product placements…and a
host of offshoots that are bought and sold, leased and rented.
The digital cinema product is also a service. It’s a product that can be a valued collectible or a gift. It’s also
entertainment opportunities in a theater or in someone’s home. The movie biz is one of the most complex in
the communications industry because of its creativity, its diversity and its continual explosions of
technological delivery options.
Production value is a nice global term in product marketing of movies. Included in this catch-all basket are:
Strength of the story
Star power – promotional quality of actor, director and maybe, director of photography
Visual quality
Sound and Music quality
Deliverability: quality, on-budget, on-time and marketing materials
Marketing and Distribution Services
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Based on the Test Marketing analysis, a plan is made looking at the sets of audiences whom the film appeals
the most, & accordingly marketing budgets are allocated & publicity campaign is planned and launched, e.g.
according to test data, the film is intended to appeal to Hindi-speaking, college-going groups, then marketing
& publicity campaigns are focused on such segments. The objective is to target the right audience & to derive
maximum mileage from promoting & exploiting the product.
Methodology
The plan also aims at advising how many prints have to be put in the market at the time of release of the film.
Estimates are given for allocating these prints, circuit-wise.
Further, plans can be drafted for exploitation of any language film simultaneously with the release of the film
in following languages:
English
Tamil
Kannada
Malayalam
Telugu
Sinhalese for Srilanka
Bengali for Western India & Bangladesh
Out of the total number of prints, one can have at least 50% prints dubbed in the above languages, which
ensures very high reach and acceptability.
The plan also covers cost estimates to various media with publicity budgets. Budgets are separately made for
TV & cable publicity, Newspaper publicity, direct promotions, Outdoors publicity, etc.
Based on the above, hype is created in the market & a well-established distributor line up is ensured for
acquiring rights. In this bargain the rights holder gets better value for the product & sells on his terms.
Pricing & Distribution review is based for each major circuits & appox minimum + maximum pricing
estimate. Further estimates shall be provided on sale of different rights (audio + theatrical + home video +
cable) in the neighboring countries like Pakistan, Srilanka, Bangladesh & estimates for such rights in Indian
territories.
Advantages:
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Ensure that during the first 3-4 weeks, film is highly successful.
Create a cascading effect & get a better turnout at theatres.
Film is launched with right marketing appeal.
Getting better value of product.
Planning and implementing an expertly-drafted Promotion & Advertising plan can result in unexpected
profits, as in the case of Ek Chhotisi Love Story.
Intrinsic returns will increase with more yield on other rights such as satellite, television, etc.
Marketing a film· What films have you seen recently? What made you want to go and see
them?
Make a list of all the factors that influenced you and put them in order of
priority.
· Make a list of all the different ways in which you might hear about a film. Put
these in order as to which give you the most information. Now re-order them
to show which are the ones that make you really want to see a film. What
does this say about the way you personally make choices about your film
viewing? How does this compare with your friends?
· What cinemas are there in your local area? Are there any differences
between them? How do you find out details of what films are showing and
when? Visit the websites for several cinemas. How do the websites reflect the
different nature of the organisations?
FILM MARKETING STRATEGY
Via the implementation of a professional dedicated production team, the film story line will focus on a highly
targeted demography audience.
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Successful independent films made by first and/or second-time producers are predominantly made for
“targeted audiences”. A Hispanic American “targeted film” will assured success in this
market, (please see Hispanic American market research at the end of the presentation). An independent film is
typically a small, character driven movie that plays at selected theaters in urban markets. After their run in
theaters these movies become widely available for rental or sale at video stores and are seen on national cable
networks such as Showtime or HBO. Examples of this kind of movies are:
My Family, Mi Familia, El Norte, Sugar Hill, Amore Perros, tu, Mama Tambien La, La Puta Vida, Water for
chocolate
Distributors
Companies that buy films and present them in movie theaters are called distributors. Most large distributors
have a sister company or division that deals specifically with independent films.
Fox Searchlight Twentieth Century Fox Corporation
We have already made contact with these distributors and are currently developing relationships with them for
the distribution and purchase of the “Vampira project. Our full intention is to create, produce, and ultimately
sell “Vampira” for a maximized profit. We feel, that while we love our project, ultimately, it is the exposure
and sale of the film that will generate the publicity and profit that we require to continuing making films.
Film Festivals
Known to the public as film festivals, these international movie-industry gatherings are actually open markets
and trade shows where hundreds of distributors look for new films.
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Our intention is to enter our film in all the competitive festivals, simultaneously we will attend the major
markets in order to personally promote our film. These Film Festivals include:
The Sundance Film Festival
The American Film Market
The New York International Latino Film Festival
The Los Angeles Latino Film Festival and Market
The Miami Latino Film Festival
The New York Film Festival Uruguay International
Film Festival
The New Directors/New Film Series presented by the Film Society of Lincoln Center
The Film Festival of Punta del Este, (Uruguay)
As well as several South and central American Film Festivals.
We will put together an aggressive marketing plan of our product to be displayed at these venues. Vampirism
being a successful product in the film industry will guarantee a profit in the Hispanic market and the
international horror film market. We will attract attention to our film by directly approaching foreign and
domestic distributors and by winning awards. We expect our efforts to increase our chances of winning
awards and gain recognition.
ADVERTISING AND PROMOTION
The primary target market is the Hispanic American community.
The marketing communications activity will be focused on the Latino community to transact on the
“Vampira” film Hispanic will be reached through a broad based marketing channels:
Film Festivals
Trade Magazines and Print Publications
Media campaign: Radio and TV Promotion
On Line (Internet) Marketing
The primary target market is the Hispanic American community. The marketing communications activity will
53
be focused on the Latino community to transact on the “Vampira” film. Hispanics will be reached through a
broad based marketing channels:
Film Festivals
Trade Magazines and Print Publications
Media campaign: Radio and TV Promotion
On Line (Internet) Marketing
The nature of the storyline of “Vampira” will transcend to the Anglo market as well as Hispanic and the
vampirism/horror markets.
Budgeting Budgeting is the operation where each of the scenes of the script is broken down and analysed followed by a
financial assessment of the total cost of each scene. The total financial requirements for the film become the
sum of the budgets of each scene. This budget is used to attract finance and is scrutinised by investors. During
production, it is the yardstick whereby the producer, the crew and the investors can gauge the progress of the
productions and determine whether the shoot is on or behind budget.
AN INTRODUCTION TO FILM MARKETINGIn a crowded marketplace it is not easy to sell and promote a given film. In "An Introduction to Film
Marketing", Christian Kmiotek discusses some essential points of film marketing, shedding light on why it is
so very important, why film has to be considered as both art and product and why the film industry is a
product driven market. While acknowledging the uniqueness of each film, this introduction explains why and
how marketing can help to bring your film from script to screen and enhance its chances to be successful at