Indywood The Indian Film Industry September 2016 - Deloitte

 
Indywood The Indian Film Industry September 2016 - Deloitte
Indywood
The Indian Film Industry
September 2016
Indywood The Indian Film Industry September 2016 - Deloitte
Indywood |
          The Indian Film Industry

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Indywood The Indian Film Industry September 2016 - Deloitte
Indywood | The Indian Film Industry

Contents
Foreword                                                     3
Executive Summary                                            5
Make in India Initiative and the Film Industry               6
   India’s Film Industry                                     6
   Industry Overview                                         7
   Key Trends in the Indian Film Industry                  10
   Growth Drivers and Opportunities                        15
   Key Challenges in the Industry                          17
Key Focus Areas for the Film Industry                      21
Technological Advancements in the Film Industry            24
Skill Development in the Film Industry                     32
Film Tourism in India                                      34
   Background and Global Perspective                       34
   Film Tourism in India: An Overview                      40
   Recent initiatives to Improve Film Tourism              40
   Next Steps and Initiatives                              46
International Best Practices: Case Studies                 50
   Case Study: Film Tourism in the UK                      50
   Case Study: Film Tourism in New Zealand                 54
Shooting of Foreign Films in India – Tax Aspects           59
Authors, Acknowledgments and Contacts                      62

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Indywood The Indian Film Industry September 2016 - Deloitte
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          The Indian Film Industry

Foreword
Welcome to the Indian Film Industry Report      critical to remain at the forefront of global
for the Indywood Film Carnival taking place     trends. The report analyses the methods to
during September 24 – 27, 2016 in Ramoji        achieve this including technology transfers,
Film City, Hyderabad. The film industry         collaboration with international studios and
has been earmarked as a key sector in the       development of technical skills in-country.
Make in India campaign. As part of this,        Another endeavour of the Make in India
the Government of India is taking several       campaign has been to develop technical
initiatives to effect growth in the sector      skills for film production, post production
as well as promote foreign film shootings       and VFX. Given the low labour cost, this
locally. Deloitte India’s objective with this   could be a key factor in attracting foreign
publication is to provide an overview of        filmmakers to the country. The report
                                                                                                  Hemant Joshi
the film sector in India and analyse the key    elucidates the current initiatives being
trends impacting the sector today.              taken by the Government of India under
                                                the Make in India campaign to improve
Our endeavour is to provide a considered        availability of skill and talent in filmmaking.
point of view on key initiatives required       The report also analyses other actions
going forward in the film industry to propel    that can have an impact on increasing
growth and promote film tourism. In order       availability of skills locally.
to do so, the report delves into the current
state of the industry to identify key focus     In this report, the international best
areas and requirements to increase box          practices in thriving film sectors globally
office realizations, improve occupancy and      have been studied including initiatives
address the infrastructure constraints.         taken by various regions to attract foreign
                                                film shooting. The report also includes
                                                                                                  Ashesh Jani
As the Indian film industry moves into the      case studies on the UK and New Zealand,
next phase of growth, it is imperative to       countries that have successfully been
keep pace with the global technological         able to position themselves as key filming
advances and innovation. Historically,          destinations as was witnessed by the Harry
the Indian film sector has lagged behind        Potter Series and Lord of the Rings Trilogy.
in its counterparts in the deployment of
emerging technologies such as virtual           Deloitte hopes that you and your
reality, augmented reality, drone shootings,    colleagues find this report a useful
etc. The development and deployment             stimulant in your strategic thinking.
of key technologies in Indian films will be

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Indywood The Indian Film Industry September 2016 - Deloitte
Indywood | The Indian Film Industry

Executive Summary
                                             of the total industry. Cable and satellite
                                             rights and online/digital aggregation
produced with between 1,500 to 2,000         revenues are the fastest growing
                                             segments, and expected to grow at a
20 languages. In terms of revenue, the       CAGR of about 15% over the period FY15

of $2.1 billion which is expected to grow    is dominated by Bollywood, the Hindi
at 11% CAGR reaching $3.7 billion by 2020.
The key growth drivers for the industry      revenue while regional and international
are:

• Increasing per capita income and
                                             currently a small, but growing segment,
  growing middle class
                                             driven by rising numbers of English and
• Demand from Tier 2 and Tier 3 cities       other foreign languagespeakers, as well
                                             as rising numbers of international movies
• Diversifying into international markets
                                             witnessing dubbed releases across the
• Releasing the potential of digitization    country. Other key recent trends in the
                                             industry include:
• Upside from ancillary revenue streams
                                             • Entry of international studios through
•
                                               acquisitions and collaborations
    in movies
                                             • Rise of regional cinema
produced in India, the industry gross        • Digital adoption across the value chain
realization has been substantially lower
than its global counterparts. For example,   • Organic and inorganic growth in
                                               multiplexes
Canada stand at $11 billion whereas          • Emergence of alternative streams of
                                               revenue

                                             Going forward, the industry needs to
                                             focus on the following factors to ensure

• Low infrastructure penetration
                                             • Film tourism
• Slow growth in average ticket price
  (ATP)                                      • Skill enhancement

• Complicated tax regime                     • Shortening window of release through
                                               better planning
• Rising costs and lack of access
  to funding                                 • Updating current technology

• Piracy                                     • Countering piracy

• Multiple layers of bureaucracy             • Growth of multiplexes

• Prevailing strict censorship norms

majority of the revenue, representing 74%

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Indywood The Indian Film Industry September 2016 - Deloitte
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          The Indian Film Industry

Make in India
Initiative and the
Film Industry

Overview of the Make in India                  Make in India initiative. Till now, several
Campaign                                       steps have been taken in the sector
The Make in India campaign, launched           to improve investments and increase
by Prime Minister Narendra Modi in             business opportunities. The following
September 2014, is aimed at enhancing          steps, specific to the film segment, have
local manufacturing, fostering innovation,     been initiated under the campaign:
and facilitating investments in the Indian     •• A Film Facilitation Office has been
industries. The initiative is being led by         established under the operatorship
the Department of Industrial Policy and            of the National Film Development
Promotion (DIPP) and the Department                Corporation (NFDC) for facilitation of film
of Commerce and Industry and covers                shooting in India and promotion of India
25 key sectors, including media and                as a destination for foreign production
entertainment.                                     houses.

The Make in India programme endeavours         •• Media and Entertainment Skills Council
to create additional employment                    (MESC) is being promoted by Federation
opportunities through improving business           of Indian Chambers of Commerce and
opportunities and positioning India as             Industry (FICCI) with financial support by
a destination for manufacturing and                National Skill Development Corporation
services. The programme also aims to               (NSDC) to create 1.2 million skilled
facilitate businesses and entry of new             workforce by 2022 in the media and
players in India by instating clear and            entertainment sector across 74 job
transparent processes, enabling Ease of            profiles.
Doing Business, and simplifying laws and       •• Additional film treaties are being explored
regulations. Since the inception of the           by the Government of India, having
Make in India program, there has been             recently entered into film treaties with
a significant increase in Foreign Direct          China and South Korea, to not only avail
Investment (FDI) owing to the growing             film production benefits but also widen
positive perception of India in the global        the reach of Indian cinema.
scenario.
                                               The Make in India campaign for the film
Objectives and Initiatives in the Film         sector aims at driving growth and creating
Sector                                         employment opportunities in the sector as
Media and entertainment has been               well as making India one of the leading film
identified as one of the key sectors for the   tourism destinations globally.

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Indywood The Indian Film Industry September 2016 - Deloitte
Indywood | The Indian Film Industry

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Indywood The Indian Film Industry September 2016 - Deloitte
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          The Indian Film Industry

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Indywood The Indian Film Industry September 2016 - Deloitte
Indywood | The Indian Film Industry

              India’s Film Industry
              Industry Overview                                   Historically, the film industry in India              15% over the period FY15 – FY20,
              The Indian film industry is the largest             has grown at a CAGR of over 10%.                      driven by rising demand for movies
              in the world in terms of number of                  Currently, the film industry grosses                  on TV and increasing smartphone
              films produced with around 1,500 to                 total revenue of INR 138 billion ($2.1                penetration across the country
              2,000 films produced every year in                  billion). Going forward, the industry                 respectively. On the other hand,
              more than 20 languages. The industry                is expected to grow at 11.5% year-on-                 home videos have been shrinking
              also had the second highest footfalls               year reaching total gross realization                 due to increasing piracy and growing
              in the world in 2015 (over 2.1 billion)             of INR 238 billion ($3.7 billion) by                  popularity of digital platforms. Home
              following China (almost 2.2 billion).               2020. The key growth drivers are                      video has lost share to Video on
              Despite the large number of films                   expansion of multiplexes in smaller                   Demand (VOD) through Direct-to-home
              and theatre admissions, the industry                cities, investments by foreign studios                (DTH) operators and Over-the-top
              continues to remain small with respect              in domestic and regional productions,                 (OTT) platforms.
              to other global industries in terms of              growing popularity of niche movies,
              revenue. In India, the film industries              and the emergence of digital and                      The Indian film industry is dominated
              gross realization stands at $2.1 billion            ancillary revenue streams.                            by Bollywood, the Hindi film industry,
              versus gross realization of $11 billion                                                                   contributing 43% of the revenue
              in the US and Canada which produces                 The domestic box office contributes                   while regional and international films
              significantly lower number of films                 to the majority of the revenue,                       contribute the remaining 50% and
              (approximately 700 films).1 This is                 representing 74% of the total industry.               7% respectively. Within the regional
              mainly due to low ticket realizations               Cable and satellite rights and online/                film industry, Tamil and Telugu are
              and occupancy levels, lack of quality               digital aggregation revenues are the                  the largest segments comprising
              content, and rampant piracy.                        fastest growing segments, and are                     approximately 36% of net box
                                                                  expected to grow at a CAGR of about                   office revenues followed by Bengali,

Figure 1: Film Industry Revenues                                                                Figure 2: Category-wise Break-up of Revenue
(INR billion)
                                                                        238
                                                                                                                                    Anncillary
                                                              214                                                                   Revenue
                            CAGR                                                                                         Home
                                                     193                                                                             Streams
                            10.5%                                                                           Cable &      Videos
                                                                                                            Satellite                   5%
                                          173                                                                              1%
                                                                                                             Rights
                               155                                                                            13%
                     138
    125    126
                                                                                               Oveaseas
                                                                                               Box Office
                                                                                                  7%

                                                                                                                                                        Domestic
                                                                                                                                                        Box Office
                                                                                                                                                          74%

    2013   2014      2015      2016      2017      2018      2019      2020

Source: Deloitte Report - Economic Contribution of the Indian Motion Picture and Television Industry

PVR Analyst Report
1

                                                                                                                                                                     9
Indywood The Indian Film Industry September 2016 - Deloitte
Indywood |
          The Indian Film Industry

Kannada, and Malayalam films. Currently,                 realization, rising urbanization, and
international films is a small, but growing              growing disposable incomes.
segment, driven by rising numbers                      Entry of international studios through
of English and other foreign language                  acquisitions and collaborations: Several
speakers, as well as rising numbers of                 international film studios such as Warner
international movies witnessing dubbed                 Bros., Disney, Fox, and Dreamworks have
releases across the country.                           not only set up distribution houses in India,
                                                       but have also entered into partnerships
Key Trends in the Indian Film Industry                 with local film production houses
                                                       through acquisitions and co-production
1. Film Production Segmen                              agreements. For example:

International/foreign films gaining                    •• Walt Disney acquired a 50% stake in UTV
share in the Indian industry:                             and now has a controlling stake in UTV
International films is a growing segment in               Software Communications.
the Indian film industry, having increased
                                                       •• Viacom18, a JV between Viacom and
its box office share from almost 5% a few
                                                          Network 18, was the first studio model
years ago to approximately 7% today. This
                                                          based production house. Viacom18
is mainly due to:
                                                          engages in production, syndication,
•• Dubbing of international films in                      marketing, and worldwide film distribution.
   regional languages: The number
   of foreign films dubbed into Indian                 Additionally, a key example of collaboration
   languages has doubled over the past 5               has been Fox Star joining hands with
   years. These films are being dubbed into            Dharma Productions in a deal worth INR
   Hindi, Tamil, and Telugu which has helped           5,000 million. Fox has produced almost 30
   them reach audiences beyond Tier 1                  Bollywood films, as well as a few Tamil and
   cities.                                             Malayalam language films.

•• Rise of multiplexes: Multiplexes have
                                                       Local film production can leverage the
    witnessed significant growth across major
                                                       experience of these international studios
    Indian cities and continued penetration in
                                                       to expand their international reach and
    smaller towns. Investments in multiplexes
                                                       incorporate enhanced project planning and
    is mainly driven by improved per-ticket
                                                       cost controls.

Figure 3: Box Office Revenue Split by Language

                                International,
                                     7%

                 Other
                Regional,
                  14%

                                                                 Hindi, 43%

          Telugu, 17%

                                  Tamil, 19%

Source: Deloitte Report - Economic Contribution of the Indian Motion Picture and Television Industry

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Indywood | The Indian Film Industry

                     Rise of regional cinema: While
                     mainstream Bollywood dominates the
                     Indian film industry, regional cinema has
                     been witnessing a surge in investments
                     from major film studios to tap the potential
                     of underpenetrated markets. Large
                     national producers such as Reliance
                     Entertainment, Eros, Disney, Viacom 18
                     Motion Pictures, Fox Star Studios as well
                     as independent producers like Emmay
                     Entertainment (Nikhil Advani), Akshay
                     Kumar, and Grazing Goat Productions
                     plan to spend 20% of their annual budgets
                     on regional cinema. This is not only due
                     to the relatively untapped nature of the
                     market but also because of cheaper cost
                     of production of regional movies. The
                     average cost of producing a commercial
                     Hindi film is INR 150 million versus a cost of
                     INR 40 million for a Marathi or Punjabi film.

                     •• South Indian film industry is very vibrant
                        with revenue expected to grow at a CAGR
                        of 12% reaching over INR 42 billion over
                        by 2017. This segment is dominated by
                        Tamil and Telugu films (90%) with 365
                        films released in 2015. However, the
                        profitability of these films has been low
                        with only 30% recovering production
                        costs.2 While big budget films continue
PVR Analyst Report
1                       to account for a large share of revenue
                        (approximately 40%), smaller budget films
                        with strong content have been gaining
                        popularity. Further, Tamil and Telegu films
                        have started to gain nation-wide and
                        international popularity

                     •• Malayalam film industry has witnessed
                        high growth and profitability driven
                        by strong content and large audience
                        in 2015. Over 140 films were released
                        during the year in Malayalam. High
                        profitability was demonstrated by films
                        with good content making over INR
                        500 million at the box office over movie
                        budgets of INR 120–150 million.

                     •• Bengali film industry has seen a slump
                        in the recent years as poor content, shift
                        of audience to English and Hindi cinema,
                        and lack of infrastructure became
                        growing challenges in the sector. Single
                        screen theatres have been successively

                     2
                      Deloitte FICCI Report: The Digital March Media and
                     Entertainment in South India

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Indywood |
          The Indian Film Industry

  shutting down in the state with over
  100 screens closed in the last one and a
  half years.

•• Marathi film industry has re-emerged
   over the last few years owing to strong
   content, lower budgets, and government
   support. The segment has shown
   40–45% growth in 2015 reaching INR 1.5
   billion in revenue. The state government
   has bolstered sector growth through
   mandating screening of at least one show
   of a Marathi film in a multiplex.

•• Gujarati film industry is showing
   indications of coming out of a long slump
   due to production of urban centric films
   and higher investments in the sector.
   There has been a considerable jump in
   box office collections reaching INR 550
   million last year from INR 70 million in
   2014.

•• Punjabi film industry experienced
   a strong growth of 15–20% over the
   previous year.

2. Marketing, Distribution and
Exhibition

Digital adoption across the value
chain: Real Image and UFO Moviez have
facilitated the digitization of movies
enabling wider distribution of films across
various regions and curbing piracy. Key
benefits of digitization can be witnessed
across the value chain:

•• Film makers: Digital printing costs 80%
   less than conventional printing which
   allows producers to scale up to 5 times
   the number of screens than originally in
   the same budget. Due to this, digitization
   has enabled the penetration of content
   to smaller cities and towns. In the
   current scenario, over 60% of box office
   collections are realized in the first week of
   a movie’s release. Increased penetration,
   simultaneous release across theatres,
   and front-ending of revenue has resulted
   in a drastic increase in number of films

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Indywood | The Indian Film Industry

  generating over INR 1 billion in box office            Digital cinema has also helped in
  revenues.                                              addressing piracy as well. With the advent
                                                         of digital technologies, piracy of films and
•• Distributors and exhibitors: Digitization
                                                         songs has decreased tremendously. With
   of content has resulted in the reduction
                                                         digital distribution, movies are released
   of costs of physical transportation and
                                                         on the same day in all places and checks
   print manufacturing. Digital content
                                                         can be kept on where movies are showing
   is delivered by way of satellite or hard
                                                         and how many times they are screened,
   drive adding convenience and cost
                                                         resulting in reduction in the scope
   effectiveness to the process. Nearly all
                                                         for piracy.
   theatres have adopted digital technology
   resulting in shift from large-sized
                                                         Organic and inorganic growth in
   projection systems to smaller and more
                                                         multiplexes: Multiplexes have shown
   efficient digital projection systems.
                                                         a growth rate of 15% in Indian cities,
   Although digital projection systems have
                                                         increasing from 925 in 2009 to 2,100 in
   a heavy initial investment, the running
                                                         2015. Over 2,000 single screen cinemas
   costs as opposed to analog are minimal.
                                                         have been shut down or converted to
•• Consumers: Digital projection in the                  multiplexes in the last year mainly due
   cinemas has superior quality of images                to greater cost of operations (higher
   which are not subject to deterioration                entertainment taxes, increase in
   with the passage of time. It has also given           distributors’ share, and lower ticket prices),
   viewers access to technologies such as                non-viability of running on a standalone
   VFX, animation, and 3D films.                         basis and low occupancy rate. Multiplexes

Figure 4: Number of Movies Grossing over INR 1 billion

                                                                                   3
                                                                       2
                                                                                               2

                                                            9

                                                                       6           6
                                                5                                              5

                                  2
       1             1
     2008         2009          2010        2011          2012        2013       2014         2015

                                       INR 1 bn +      INR 2 bn +

Source: Analyst Report - India Film Exhibition – Blockbuster year

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          The Indian Film Industry

currently account for approximately 26%                  Figure 5: Number of Screens in India
market share of the screens; however,
they contribute more than 40% of box
                                                                   9,710
office collections. Wider content and                                       9,308          9,121
                                                                                                         8,685      8,451
programming flexibility result in higher                                                                                        8,002
occupancy and hence profitability of
multiplexes. With comparison to growing
                                                                                                                                          6,000
economies, India has a low penetration of
multiplexes with a potential to have almost
7,500–10,000 multiplex screens across the
nation. Going forward, the key multiplex
                                                                                                                                             2,100
operators such as PVR, Inox, Cinepolis,                                                       1,225       1,350      1,500         1630
                                                                              1,075
and Carnival Cinemas have aggressive                                  925

expansion plans in the coming three years.3
                                                                   2009     2010        2011            2012        2013        2014       2015
Industry leaders in the film exhibition
                                                                            Single screens            Multiplexes
segment have grown not only through
organic screen additions, but also                       Source: INOX Investor Presentation February 2016
through acquisition of smaller regional
multiplex chains and single screen players.
Consolidation of the multiplex segment has               Table 1: Consolidation in the Multiplex Segment
resulted in the top four cinema operators
(PVR, Inox, Carnival, and Cinepolis)                     Acquirer                     Target                             Year                      Number of
controlling almost 70% of the market.                                                                                                              Screens Acquired

                                                         PVR                          DT                                 2015                      39
Emergence of alternative streams of
revenue: Other sources of revenue have                   Carnival                     Glitz                              2015                      30
started to make an increasing contribution
                                                         Carnival                     Broadway                           2014                      10
to the film industry realizations. In the
last few years, the window available to                  Inox                         Satyam (Delhi)                     2014                      38
monetize a film’s revenues at the box office
                                                         Cinepolis                    Fun Cinemas                        2014                      83
has shortened considerably. This is driving
film studios to exploit ancillary streams of             Carnival                     Big Cinemas                        2014                      250
revenue such as the following:
                                                         PVR                          Cinemax                            2012                      135
•• In-cinema advertising: In 2015, the
                                                         Inox                         Fame Cinemas                       2011                      95
   in-cinema advertising revenues reached
                                                         Source: Business Standard4

Figure 6: Expansion plans of the top-four multiplex operators
                          1,000                                                                                  1,000

                                                                     557
                493
                                                                                                                                                         400
                                                        372                                        341

                                                                                                                                           193

                   PVR + DT                                   Inox                                       Carnival                                 Cnepolis
                                                                            2015      2018E
Source: Analyst Report: India Film Exhibition – Blockbuster year

Source: Inox Investor Presentation, Feb 2016
3

http://www.business-standard.com/article/companies/coming-soon-multiplex-boom-across-india-115021101507_1.html
4

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Indywood | The Indian Film Industry

    approximately INR 6.3 billion exhibiting a            •• Mobile and online platforms: Revenue
    28% growth over the previous year. This                  from new media, including mobile and
    is mainly due to increased digitization of               online rights, is expected to increase with
    ads, shift from public sector advertising                the high penetration and accessibility of
    to corporate advertising, and higher ad                  3G services by mobile operators. Further,
    durations in multiplexes. Going forward,                 film production houses can reduce their
    ad revenues are expected to grow at 18-                  dependence on theatrical performance
    20% over FY16-20 and play an important                   by monetizing content through gaming
    role in growth of revenues.                              on mobile and online platforms.

•• Video on Demand (VOD): While on-
                                                          Growth Drivers and Opportunities
   demand services for video and audio
   form a small segment of the industry                   Increasing per capita income and
   (less than 5%), it is at the inflection                growing middle class: India’s per capita
   point in India. With the growing mobile                income has shown a steady increase in the
   and internet segment, an ecosystem                     last few years and is expected to reach INR
   around these services has developed                    100,000 (equivalent of $1,500) by FY17 on
   with content providers, aggregators,                   the back of a growing middle class which
   distribution channels, technology                      has grown by 150% since 2000 (versus
   platforms, advertising platforms,                      70% increase in Asia Pacific).5 By 2020,
   payment channels and marketing                         the Indian average household income is
   channels.                                              expected to reach $18,500 from $8,000

Middle-class wealth up 150% in India since 2000: report
5

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Indywood |
          The Indian Film Industry

currently exhibiting a 2x increase with                   mall development in Tier 1 cities has                 development of the digital channel. This
a corresponding middle class of over                      reached saturation point. At present,                 shift towards digital is expected in turn
90 million people.6 This level of median                  only 25% of malls are located in smaller              to give a thrust to the small budgeted
household income will drive discretionary                 cities and retail attractiveness of Tier 1            good content films which can then be
spending on leisure and entertainment.                    cities has been stagnant. Smaller cities              monetised through personal devices.
As a consequence, the film sector has                     and towns offer large and inexpensive                 Further, digitisation can result in creation of
huge potential in India with rapidly growing              spaces for infrastructure development                 new release windows by enabling studios
demand and increasing footfalls.                          with rising disposable income making                  to explore release of films through various
                                                          them attractive for investments. Further,             platforms with differentiated prices to
Further, India has around 500 million                     there are many small cities and towns that            consumers. Films are now available for
unique mobile users which is likely to                    have an appetite for cinema consumption,              home theatrical screening the day of
become 1.3 billion by 2020. Currently,                    but are still virgin pockets for multiplexes.         release and pay-per-view, with DTH, digital
around 200 million have access to internet                Over 50% of screen additions in FY15 by               cable and Internet Protocol television (IPTV)
and this number is set to increase with                   Inox and PVR has been in Tier 2 and 3                 distributors at prices as low as INR 50 per
the introduction of 4G services. The                      cities.7                                              screening.
proliferation of internet and smart phone
usage has opened up a new platform for                  Diversifying into international                         Upside from ancillary revenue
film distribution and viewing.                          markets: While domestic markets provide                 streams: : Apart from the box office
                                                        the Indian film sector with steady growth,              revenues, ancillary revenue streams can
Demand from Tier 1 and Tier 2 cities: In                diversifying to international markets can               provide an increasing share of the film
the recent years, there has been a change               provide a large upside in demand as well                revenues driven by digitisation, onset of
in the outlook of investors regarding future            as revenue. For example, Hollywood                      next generation networks and availability
prospects, with the focus shifting from the             currently derives almost two-thirds of its              of sophisticated devices to access media.
national to regional markets. As the Tier 1             revenue from overseas market versus                     Releasing the potential of these revenue
cities near saturation, growth of the film              15% overseas revenue collected by                       streams can provide a large upside to the
sector is expected to be driven by the Tier             the Indian film industry. Since only few                theatre related income. For example, Star
2 and Tier 3 cities:                                    international markets have an established               Wars grossed total revenues of $42 billion
                                                        film sector, Indian production houses                   while only $7.3 billion (approximately 17%)
•• Production of regional films: The
                                                        are well positioned to tap the domestic                 came from box office revenues. Home sales
   demand for films in non-metro cities
                                                        demand in these regions. This can be                    entertainment, toys and merchandise and
   with distinct cultures, languages and
                                                        realised through forming collaborations                 video games where the largest contributors
   content preferences is a rapidly growing
                                                        with local studios and talent for distribution          with $5.7 billion, $17 billion and $4.3 billion
   segment. This represents huge markets
                                                        of dubbed movies, co-production of local
   within markets and provide a variety of                                                                      respectively.
                                                        and international films. For example,
   opportunities to deliver localized and
                                                        Eros tied-up with three Chinese film and
   regional content. While many global film                                                                     Some ancillary sources of revenue that can
                                                        entertainment companies in May 2015 to
   studios have already entered regional                                                                        be explored in the Indian film industry are
                                                        co-produce, distribute and promote Sino-
   markets and are producing regional                                                                           as follows:
                                                        Indian films in both countries.8
   language content, this is expected to be a
                                                                                                                •• Merchandising: While merchandising
   key growth driver going forward.
                                                        Releasing the potential of digitization:                   currently contributes miniscule amount
•• Addition of screens: Currently, screen               Going forward, digitization is expected                    of revenue, it has immense potential
   distribution is largely skewed to Mumbai             to increase with digital becoming an                       with the development of Indian movie
   and Delhi/Uttar Pradesh which account                independent revenue stream, rather                         franchise and strong content. In order to
   for 60% of the box office collection                 than part of a bundle, and the entry of                    drive this stream of revenue, films require
   of films. However, the next wave of                  more international players in the film                     strong story lines, relatable characters,
   expansion of screens is expected to be               industry. Digital revenues are expected                    and innovative ways of engaging with
   driven by the Tier 2 and Tier 3 cities as            to grow significantly owing to the rapid                   the audience. For example, Ra.One was

6
 Top 5 Emerging Markets with the Best Middle Class Potential, Media and Entertainment (M&E) Industry: The Sunrise Sector Of India
7
 Analyst Report – India Film Exhibition
8
 Eros International Announces Deal with Major Chinese Film and Entertainment Companies

16
Indywood | The Indian Film Industry

Figure 7: Star Wars Franchise- Revenue Split                  used by the visual media in India in three
                   Miscellaneous                              categories, i.e., movies, TV shows and
                        9%          Box Office                advertisements. In India, the VFX segment
                                      17%                     is currently in its nascent stages with low
 Intellectual
  Property                                                    domestic consumption; most of the work
     10%                                                      comes from outsourced projects from the
Video
                                                 Home         USA and the UK. However, with viewers
                                             Entertainment    becoming increasingly sophisticated, the
Games
                                                 Sales
 10%
                                                  14%
                                                              domestic market is seeing bigger budget
                                                              movies and ad campaigns leading to a
                                                              rise in VFX spend. Currently, India has
                                                              nearly 300 animation and 40 VFX studios,
                                            Source:
                                                              employing more than 10,000 professionals.
                                            Fortune
                 Toys and Merchandise
                                            News
                         40%
                                                              The film sector has been increasing its
                                                              usage of VFX and visual effects is expected
                one of the first Indian film to be launched   to play a bigger part in Indian cinema
                with an overall campaign. It had over 25      going forward. This can also be seen in the
                brands associated with the film covering      regional films where VFX is a growing trend;
                merchandising, licensing, publishing,         for example, the Marathi film Mitwa used a
                video games, board games and figurines.       total of 325 VFX shots. In 2015, the Indian
                                                              film industry saw a number of VFX heavy
           •• Licensing content for games and mobile
                                                              films such as Baahubali, Bajirao Mastani, I,
              apps: Consumption of media and
                                                              Dilwale, Bombay Velvet, Bajrangi Bhaijaan,
              entertainment related mobile content,
                                                              Baby, amongst others. The industry
              such as songs, games and mobile
                                                              (including post-production) is expected
              themes, accounts for almost 30% of
                                                              to grow rapidly in the coming 5 years.
              overall VAS revenues in India. Developing
                                                              However, the VFX industry is still inhibited
              bandwidth-light games and apps that
                                                              by cost constraints and skill gaps in the
              engage consumers can significantly
                                                              country leading to slow adoption.
              increase recall and add value to the
              movie brand while bringing in additional
                                                              To tap into the growing VFX space,
              revenues.
                                                              production houses in India are setting up
           •• Web-based home entertainment: The               their in-house VFX divisions. For example,
              home movies market had been steadily            Yash Raj Films (YRF) has commenced an
              declining over the last few years owing         independent VFX division, titled yFX, which
              to relatively high pricing and piracy. This     released its first film in July 2016.9
              has led to large repositories of movies
              being underutilised after release. With         Key Challenges in the Industry
              the proliferation of 4G and broadband
                                                              Low infrastructure penetration: While
              services, the home entertainment can be
                                                              the Tier 1 cities and metros are reaching
              revived through online delivery of movies
                                                              saturation, the Tier 2 and Tier 3 areas lack
              over PCs, mobile phones and tablets. To
                                                              the required infrastructure such as malls,
              fully capture this segment, there is a need
                                                              access to low-cost power, etc. This lack of
              to develop effective distribution channels
                                                              availability of exhibition infrastructure is
              and invest in digitising and meta-tagging
                                                              a key impediment for the growth of the
              content for digital delivery.
                                                              sector. The addition of screens has not kept up
                                                              with demand with increments of only 150-200
           Upcoming use of Visual Effects (VFX)
                                                              new screens per year. Further, India is severely
           in movies: VFX involves the creation of
                                                              behind the globe in screen penetration with 6
           live action imagery by using computer-
                                                              per million, versus 23 per million in China and
           generated effects. It is being increasingly
                                                              126 per million in the US.10

                                                              Source: Yash Raj Films to have its own VFX studio yFX
                                                              9

                                                                                                                17
Indywood |
          The Indian Film Industry

                                                            Single screen theatres have historically had      of these taxes are applicable on program
Figure 8: Screen Penetration
                                                            low occupancy, low ticket realisations, and,      production, in-film placements, grant
(per million population)
                                                            hence, low profitability. This has led to shut    of various rights such as distribution
         US                                           126   down of single screen cinemas especially          rights, theatrical rights, cable and satellite
     France                               85                in small and rural towns which have               rights, sale of airtime for advertisement
                                                            experienced a decline from approximately          purposes, recording/editing of program,
       Spain                              82
                                                            10,000 screens in 2009 to 6,000 currently.        sale/lease of program content, etc. These
         UK                        61                       While multiplexes are being added in              taxes are increasingly being disputed with
Germany                      45                             the Tier 2 and Tier 3 towns, the pace of          authorities. Complications in taxation in the
       Japan           26                                   additions is one-third of the pace at which       film industry have arisen due to interplay
                                                            the single screen theatres are shutting           of multiple indirect taxes and frequent
      China            23
                                                            down. Without faster addition of screens,         changes in taxation law and judicial rulings.
       India     6                                          especially in small towns and rural areas,        Further, entertainment tax varies across
Source: PVR Investor Presentation, February 2016
                                                            the growth of the film industry will be           states in India and is one of the rates
                                                            stunted. India needs to have at least 20,000      levied globally. Recently, some states have
                                                            screens to fully realise the potential of films   granted exemption from entertainment tax
Figure 9: ATP across Screen Types - 2015                    produced in the country.                          for regional films to promote the sector.
        239
                                                            Slow growth in average ticket price               Rising costs and lack of access to
                                                            (ATP): In India, the growth in ATP has been       funding: The film sector in India suffers
                                                            slow rising from INR 150–160 in 2011 to           from lack of access to funding across
                      127                                   INR 175–200 in 2015, marking a CAGR of            the value chain due to high tax rates and
                                    95                      approximately 4%. This growth has been            complex taxation.
                                                            mainly driven by increase in multiplex
                                                 56
                                                            screens, priced at more than 100% to              •• Film production is facing severe shortage
                                                            single screens and rising number of 3D               of funds while costs are rising with only
                                                            movies which continue to be priced at a              studios as a source of capital for most
  High end Multiplexes             Single      Low end
 Multiplexes                       screen       screen      premium of 15-20% over regular movies.               films. The biggest cost inflation factor
                                                            ATP also varies regionally; for example, Tier        is employment of talent, which can
 Source: MOSL INOX Initiating Coverage
                                                            1 cities command an ATP of approximately             charge up to 40% of a film’s budget, the
                                                            INR 200 versus INR 160 and INR 100 in Tier           highest globally, wherein the cost of
Figure 10: Global ATP Comparison - 2015
                                                            2 and Tier 3 cities. Meanwhile, the ATP in           talent does not exceed 15–20% of the
                                                 10.7       the US and China are $8.4 (approximately             film budget. Further, marketing costs
                                                            INR 570) and $5.5 (approximately INR                 of films have risen to 30-50% of a film's
                                    8.4                     385) respectively. In order to improve               budget depending on the size of the
                                                            performance of Indian cinemas, keeping in            film, from 15-25% in 2010.12 Costs have
                                                            mind the average occupancy rate of 35%,              to be controlled through lowering of
                      5.5                                   ATP will have to drive towards global rates.         talent costs (hiring of younger stars and
                                                                                                                 providing share of profits rather than
                                                            Complicated tax regime: Several levies,              upfront fee) and efficient marketing
        2.0                                                 central as well as state, are charged in the         strategies (move towards social and
                                                            media and entertainment industry with                digital platforms of marketing).
                                                            central levies being Central Excise duty,         
       India         China          US            UK        Customs duty and Service Tax and State               While the bank support has been
     Source: Business Standard11
                                                            levies being state-VAT and Entertainment             extended to films after the industry status
                                                            tax. The Service Tax and state-VAT or one            was accorded to the film sector in 2000,

 PVR Investor Presentation, Feb 2016
10

 http://www.business-standard.com/article/companies/india-s-box-office-growth-runs-into-a-screen-problem-116011801209_1.html
11

 Film industry battles high costs and low revenues
12

18
Indywood | The Indian Film Industry

Table 2: Entertainment Tax across States                                                                        of conversion has been stalled by lack
                                                                                                                of cash flow and access to funds by
State                                                    Entertainment Tax                                      the single screen operators. Financing
                                                                                                                support can be provided through tax
Andhra Pradesh                                           20% (15% for Telugu Films)
                                                                                                                holidays for operators retrofitting their
Himachal Pradesh, Punjab                                 Nil                                                    properties, allowing single screen owners
                                                                                                                to have extra floor space index that can
Bihar                                                    50%
                                                                                                                then finance the retrofit, introducing
Delhi                                                    40%                                                    a public private partnership model for
Gujarat                                                  20%                                                    conversion of single screens and access
                                                                                                                to government capital at lower interest
Haryana                                                  20%                                                    rates.15
Karnataka                                                30% (Nil for Kannada Films)
                                                                                                               Piracy: Despite the ongoing digitization
Kerala                                                   30%                                                   of the film industry, piracy continues to
Maharashtra                                              45% (Nil for Marathi Films)                           be a key issue resulting in industry losses
                                                                                                               of INR 190 billion a year. Over 150 sites
Tamil Nadu                                               15% (Nil for Tamil Films)                             thrive on piracy where content is stolen
West Bengal                                              30% (2% for Bengali Films)                            from Indian movies, quick copies are made
                                                                                                               and distributed globally. Nearly half of
Source: Deloitte Analysis                                                                                      the 150 are from the US, followed by 11
                                                                                                               from Canada, 9 from Panama and 6 from
     the stringent norms for lending have                      to invest INR 3 billion in South Indian films
                                                                                                               Pakistan. The top 100 sites make INR 35
     resulted in difficulty in accessing capital.              and TV.14
                                                                                                               billion ($510 million) highlighting the extent
     Especially affected are the small players
                                                           •• Exhibition: Several single screens in India      of the issue.
     and independent filmmakers which
                                                              are severely dilapidated and in need of
     typically do not get access to bank finance.
                                                              maintenance. However, owing to low               The problem is exacerbated for regional
     Further, while several film funds have been
                                                              revenues and occupancy, investments on           films. For example, Baahubali, which
     founded such as Third Eye, Cinema Capital
                                                              renovation are not feasible. This has been       had one of the highest budgets in the
     Venture Fund, Vistaar Religare Film Fund,
                                                              witnessed in the Bengali film industry           film industry, was pirated on the day
     and Dar Capital, their success has been
                                                              which is suffering from lack of profitable       of its release. About 1.6 million people
     intermittent. This is mainly as investments
                                                              and sustainable exhibition infrastructure        downloaded the movie and another 1
     are made in smaller productions which
                                                              resulting in shut down of several theatres.      million people watched it illegally through
     carry higher risk.13 With the growing focus
                                                                                                               1,500 links. Additionally, the Telugu film
     on content, improvement in scale, and
                                                               The conversion of single screen cinemas         industry lost about INR 3.6 billion in 2015
     corporatization of the industry, film funds
                                                               to multiplexes is essential not only to         due to online piracy through 18 million
     to investing in Indian content may gain
                                                               increase the number of screens in India         downloads or web streaming.16
     prominence going forward. For example,
                                                               but also to improve the profitability of the
     Bend It Media fund, with a corpus of INR
                                                               sector. However, retrofitting or turning
     1.8 billion, has been launched to invest in
                                                               single screens into two or three screen
     Hollywood, Indian films and TV. Cinema
                                                               multiplexes costs INR 4-7.5 million at the
     Capital has been instated to invest INR 1.7
                                                               low-end to INR 10 million (non-metro)– 25
     billion in Bollywood films and Indus Media
                                                               million (metro) per screen for three or
     Cinema fund has been recently created
                                                               more screen multiplexes. This process

13
  India film funding: Bollywood bets
14
  This is for reel
15
  India's box office growth runs into a screen problem
16
  How online piracy ‘industry’ is a box-office wrecker
                                                                                                                                                             19
Indywood |
          The Indian Film Industry

Multiple layers of bureaucracy: There is                Prevailing strict censorship norms:                     was released within 48 hours of the Court's
no single window to provide all clearances              The censoring of films by the Central                   decision.18
needed to shoot in India. Producers                     Board of Film Certification (CBFC) prior to
need to approach several institutions to                public screening in India is mandatory for              Further, several Hollywood films releasing
understand the required permissions.                    filmmakers as per the provisions of the                 in India are subject to edits prior to public
At times filmmakers need to obtain over                 Cinematograph Act, 1952. In this process,               screening. This leads to delays in public
70 permissions and licenses for a shoot                 films are viewed before public screening                viewing and often discourages viewers in
in the country without any pre-defined                  by CBFC which in turn takes a decision                  watching the movies in a cinema resulting
turnaround time.17 For example:                         of whether or not it should be screened                 in challenges to release Hollywood films
                                                        publicly as is, with restricted access, or              in India. As a key growth segment in the
•• Central clearances: Shooting of foreign
                                                        with certain cuts and alterations. This has             Indian film sector, Hollywood films should
   feature films in India requires the prior
                                                        been a major impediment for the Indian                  be subject to minimal censorship and
   approval of the Ministry of Information
                                                        film industry not only due to the extended              delays to capture the growing audience and
   and Broadcasting (MIB) whereas in the
                                                        time to monetization but also due to risk of            potential of this segment.
   case of a documentary, approval of
                                                        reduction of good content.
   the Ministry of External Affairs (MEA) is
   required. The script of the film has to
                                                        As larger sections of the audience have
   be approved by the MIB which is a time
                                                        become more receptive to films which
   consuming process; the Ministry may also
                                                        tackle serious issues, filmmakers have
   depute a liaison officer to facilitate the
                                                        become more experimental as they seek to
   shooting.
                                                        make better content and progressive films.
•• Location specific permissions:                       However, constant battles for certification
   Film makers require approvals from                   without edits with CBFC are a dampener
   authorities in specific locations prior to           to the industry. For example, the CBFC
   shooting.                                            demanded 89 edits in the recent movie,
•• Other approvals: Filmmakers also                     Udta Punjab, a film on the growing problem
   need to adhere to certain local laws                 of drug addiction in Punjab. The ensuing
   of the region where shooting is to                   legal battle has become a precedent for
   take place in India. The regulators                  the industry and CBFC, as the Bombay High
   may be various Municipalities and                    Court ruled in favour of Udta Punjab which
   Municipal Corporations, associations of
   cinematographer, make-up, hair-dresser,
   etc., and state legislations.

Often, foreign producers are faced                      Table 3: Approvals Required for Film Shooting
with unclear rules and regulations in
                                                        Location                                              Relevant Authority
terms of obtaining permissions making
the process inefficient and expensive.                  Sensitive areas of Jammu and Kashmir,
                                                                                                              Ministry of Home Affairs
However, the Indian film sector, along                  North-east India or border belts
with the Government of India and various
                                                        City/town/village                                     District Magistrate and Police authorities
state governments, is revamping its
approvals process as well as looking to                 Forest                                                State Forest Department
incentivise local film making through
                                                        Historical Site                                       Archaeological Survey of India
the establishment of an India Film
Commissions and the Film Facilitation                   Defence Area                                          Ministry of Defence
Office. Both these initiatives have been                Airport                                               Airport Director
recently announced as part of the Make in
India campaign in the film sector.                      Railway station/Train                                 Railway Board and State Railway Zone

 Deloitte Report: Single window clearance: Making India easier for filmmakers Way forward for Indian Film Commission
17

 Udta Punjab, and Bollywood's battle with the censors
18

20
Indywood | The Indian Film Industry

Key Focus Areas for
                                                                                                            cost Sony Entertainment $150 million. This
                                                                                                            further percolated into generation of $44
                                                                                                            million in wages to New York residents, $4.5
                                                                                                            million in taxes to the state, $1.9 million

the Film Industry
                                                                                                            for catering, $4 million for site fees and
                                                                                                            $5.7 million for hotels. Similarly, the recent
                                                                                                            production of Teenage Mutant Ninja Turtles
                                                                                                            by Paramount Pictures and Nickelodeon
                                                                                                            Movies was completed over 70 days in New
                                                                                                            York State resulting in a spend of over $55
                                                      Film tourism: A key untapped area in
                                                                                                            million in local economies, including $30
                                                      the Indian film sectors is promoting film
                                                                                                            million in wages and $3.2 million in taxes
                                                      tourism and encouraging global players
                                                                                                            paid to the state.19
                                                      to shoot and produce films locally (i.e., in
                                                      India). India can offer various benefits to
                                                                                                            Skill enhancement: Approximately
                                                      film makers such as scenic and diverse
                                                                                                            160,800 people are required by the film
                                                      locations, cost-efficiency benefits, skilled
                                                                                                            industry to produce 1,600 films in a year
                                                      yet inexpensive manpower, and local talent.
                                                                                                            corresponding to a crew of 100-150 people
                                                      Further, film tourism can result in a number
                                                                                                            per film. On the basis of an increase in the
                                                      of benefits to the country as well including:
                                                                                                            number of films expected to be released
                                                      •• Promotion of tourism industry                      in the next few years, the resource
                                                                                                            requirement in the industry is expected to
                                                      •• Boost to local film production
                                                                                                            grow at 12% year on year reaching almost
                                                      •• Creation of employment                             250,000 by 2017. Majority of the resource
                                                                                                            requirement is for set crafts, acting and
                                                      •• Transfer of technology
                                                                                                            voiceover professionals and support staff.20
                                                      •• Inflow of foreign currency
                                                                                                            Although close to 200,000 people are
                                                      For example, in 2014, the production of               employed by the film industry in India,
                                                      The Amazing Spider-Man 2 in New York                  close to 90% of the workforce has been

             Figure 11: Employment in the Film Industry, 2013-17                      Figure 12: Split of Demand for Skill
                                                                                                                 Direction    Others
                                                                 248,600                       Hair & Dance
                                                                                                                    2%         4%
                                                      222,900                            Grip  makeup 3%
                                                                                                3%                                 Set Crafts
                                        199,900                                          3%
                                                                                                                                     20%
                             179,300                                                   Camera
                160,800                                                                  3%
                                                                                             Sound
                                                                                               4%                                       Acting /
                                                                                          Costume
                                                                                                                                       Voiceover
                                                                                             4%
                                                                                                                                          19%
                                                                                             Post
                                                                                         production                                  Support
                                                                                              7%                                       Staff
                                                                                             Lighting                                (Drivers,
                                                                                                7%                                  Spot Boys)
                                                                                                        Production
                  2013         2014        2015        2016         2017                                   10%                         11%

            Source: MESC Report: Skills Gap Study for the Media and Entertainment Sector

 Benefits Of Film Tourism In Media By LA India Film Council Launched
19

 MESC Report: Skills Gap Study for the Media and Entertainment Sector
20

                                                                                                                                                          21
Indywood |
          The Indian Film Industry

trained on the job rather than through                  traditional means of finance in the form        to increased competition for acquiring
formal trainings resulting in non-                      of film incentives, brand finance, pre-sale     movie rights and a new revenue stream
standardised skill sets.21 Even candidates              based bridge finance and revenues through       for film producers along with a channel to
recruited from media schools lack technical             alternative sources pre-release amongst         monetise older and archived films.23
and practical training on how to apply                  others.22
theoretical concepts to live situations.                                                                Countering piracy: Piracy is a key issue
With the increasingly technical nature of               Updating current technology: The Indian         plaguing the Indian film industry with large
the industry, technicians will require to               film industry is behind the global industry     revenues being lost annually. Despite
be formally trained in new and evolving                 in terms of adoption of new technologies        various efforts to arrest piracy, this remains
technologies for Indian films to move to                and trends. Going forward, greater focus        a key issue requiring proactive measures
the next level. While film schools such as              should be updating existing technology and      being implemented by state governments
                                                        embracing emerging technologies which are
Satyajit Ray Film and Television Institute,                                                             through initiatives such as spreading
                                                        being deployed globally.
Kolkata and Film and Television Institute                                                               awareness against piracy and the formation
of India, Pune exist, a concerted effort by                                                             of anti-piracy cells as have been created
                                                        In the production segment, keeping up with
the government and industry is required to                                                              by Tamil Nadu and Maharashtra. Further,
                                                        new and emerging technologies can help
develop skill in India.                                                                                 since almost 67% of website services
                                                        the industry in unlocking new revenues,
                                                                                                        offering pirated version of Indian films are
                                                        catering to the wider international markets,
Further development of formal training                                                                  located abroad, the film industry is unable
                                                        and adopting methods to prevent piracy.
schools and high skill course will be                                                                   to take action. In order to counter this, state
                                                        For example, uptake in production of
imperative for the Indian film sector to                                                                governments need to consider tie ups and
                                                        3D movies in Hollywood has generated
come on par with the global industry.                                                                   bilateral agreement with the US. Such an
                                                        higher returns for studios by allowing
Collaboration with foreign film schools to                                                              agreement is being negotiated by the anti-
                                                        theatres to charge a premium to audiences
set up specific courses in various aspects                                                              piracy wing of the Telugu Film Chamber of
                                                        and helped curb piracy by maintaining
of film making can be explored.                                                                         Commerce (TFCC) and the CID of Telangana
                                                        exclusive distribution to technology -
                                                                                                        police to coordinate with the authorities in
                                                        enabled theatres. 3D films usually generate
Shortening window of release through                                                                    the US and Europe.24
                                                        about 66% higher revenues than 2D films
better planning: Due to increasing                      resulting in more investments. The Indian
digitization and expanding reach of movies,             film sector is considerably behind in           Adopting emerging encryption
the window available to a film to monetize              production of 3D films with few successful      technologies to safeguard the film content
revenues at the box office has sharply                  films made in 3D. The first 3D film was         in all stages of release and distribution is
reduced. During the opening weekend,                    made in India in 1984 called Chota Chetan.      becoming imperative. Digital Compliant
distributors flood the market with prints               Following this, over 40 other 3D films have     Digital Cinema Initiatives, LLC (DCI) was
in order to ramp up high revenues. In                   been developed which is significantly           created in March, 2002, and is a joint
the current scenario, over 60% of box                   behind the global trend.                        venture of Disney, Fox, Paramount, Sony
office collections are realized in the first                                                            Pictures Entertainment, Universal and
week of a movie’s release. As a result,                 Further, adoption of emerging technologies      Warner Bros. Studios to establish and
focus needs to shift towards shortening                 and platforms for distribution can unlock       document voluntary specifications for an
of release windows and quick reach to                   new revenue channels. For example, the          open architecture for digital cinema. A
audience across the nation to monetise                  pay-per-view (PPV) market is an emerging        secured DCI Compliant distribution model
film investments.                                       source of revenue for the Indian film           can be established to ensure that the film
                                                        industry. Growth in PPV market is directly      content is safeguarded at every stage of
Further, Indian films face a long lead time             linked to the growth in the direct-to-home      its release process including certification,
in planning and execution of films. Better              (DTH) segment. Through DTH service              supplies to global distributors and Indian
planning and management of film projects                providers PPV films are available for a price   digital operators.25
can help in bringing cost efficiencies and              of $0.5 – 1. With all four metros and many
savings to the project as well as improving             others cities moving towards digitisation       Along with stricter legislation and
the bankability of the film. Planning at                and DTH services, the demand for PPV            repercussions for users of pirated
an early stage can also facilitate non-                 films is expected to increase. This will lead   content, there is also a need to create

21
  Cinema is to be learnt
22
  Film financing in India
23
  IBEF Report: Corporatization of the Indian Film Industry
24
  Telangana govt mulls deal with USA to curb film piracy
25
  Guild Initiative To Curb Piracy Of Upcoming Film Dishoom
22
Indywood | The Indian Film Industry

public awareness on the damage done by                   Table 4: Comparison of Multiplexes to Single Screen Cinemas28
piracy and bust the common perception
that piracy is a victimless crime. State                                                     Multiplex                  Single Screen
governments and movie guilds should                      Number of screens                   2,100                      6,000
undertake initiatives to launch large scale
campaigns and create awareness is all                    Seats per screen                    250                        750
segments of society.                                     Shows per day                       5.5                        5.0

The following initiatives have been                      Occupancy rate (%)                  27%                        19.5%
proposed by the MIB to counter piracy:26                 Footfalls (million)                 271                        1888
•• Dissemination of multi-media campaigns                Average ticket prices               183                        75
   on piracy
                                                         Contribution to box office
                                                                                             40%                        60%
•• Training programmes and workshops to                  revenue
   sensitize police, judicial, administrative
                                                         Growth in revenue since 2010        20%                        2%
   officials, multiplex and cinema hall
   owners about the Copyright Act
                                                         higher occupancy rate to break even. Along      addition of multiplexes in the country in a
•• Research on the effects of piracy and
                                                         with higher revenue share to distributors,      cost effective manner. Such retrofits cost
   formulation and implementation of
                                                         low ticket prices, advertising revenue          about INR 400,000–750,000 at the lower
   public-private strategies to combat piracy
                                                         potential and limited food and beverage         end and can be encouraged through tax
•• Formation of a dedicated web portal                   income make economics of single screen          holidays/subsidies or allowing single screen
                                                         challenging. Multiplexes, on the other hand,    owners to have extra floor space index to
•• Engaging with the Human Resource
                                                         have improved economics due to higher           assist in financing. Conversion of 75% of
   Department (HRD) to include anti-piracy
                                                         ticket prices, advertising revenue potential    the existing 6,000 single screens into two
   awareness material in the curriculum of
                                                         and food and beverage sales.                    screen multiplexes can unlock revenues
   the schools and colleges
                                                                                                         of INR 40 – 50 billion for the film industry
                                                         Retrofitting of existing single screen          through higher ATPs, occupancy rate
Growth of Multiplexes: India has a
                                                         cinemas into two or three screen                and advertising and food and beverage
multiplex density of 6 multiplex screens per
                                                         multiplexes can lead to a significant           revenues.29
million people which is significantly lower
than that of developed countries. Further,
multiplexes account for only 15% of the
total market share while the remaining is
still controlled by single screen cinemas. In
comparison, 90% of the screens in the US
are multiplexes. In India, multiplexes are
expected to gain significant market share
going forward with expanding presence
in Tier 2 and Tier 3 regions as well as the
steady decline in single screen cinemas
due to unfavourable economics. Further,
India has a potential for 7,500 to 10,000
multiplex screens compared to the 2,100
currently established.27 Given this, the
share of multiplexes in total screens is
expected to increase to 25% by 2018.28

A typical single screen theatre houses 700-
1,000 seats compared with 100-250 seats
per screen for a multiplex, hence, requiring

26
  India at Cannes
27
  Coming soon: Multiplex boom across India
28
  PVR Ltd. – Analyst Reports
29
  India's box office growth runs into a screen problem
                                                                                                                                                      23
Indywood |
          The Indian Film Industry

Technological Advancements
in the Film Industry
                                      Global Scenario and Emerging                      etc. The world of cinema has remained
                                      Technologies                                      ceaselessly dedicated to technological
                                                                                        advances throughout time. With the
                                      In the 120 years since its origin, the global
                                                                                        recent proliferation of digital platforms
                                      movie industry has continuously developed
                                      and grown through technological advances.         and computer-based innovations, the
                                      Both mechanical and digital innovationw s         film industry is continuously pushing the
                                      have influenced everything from equipment         technological boundary even further. For
                                      to exhibition, changing how films are made,       example, 24 frames per second has been
                                      edited, distributed, and consumed. The film       an industry standard, however, due to
                                      sector has seen a flurry of technological         major advances in filming technologies, The
                                      advancements that have revolutionised             Hobbit was the first movie made with 48
                                      the industry time and again such as 3D,           frames per second resulting in making of a
                                      green screens, IMAX, Computer Generated           more immersive and visually stunning film
                                      Images (CGI), digital filming and distribution,   than ever before.

24
Indywood | The Indian Film Industry

Figure 13: Evolution of the Film Industry

                            1925
                            Development of
                            non-fiction films
                            in Soviet Russia
                            such as Battleship                                                                                   2002
                            Potemkin and The                                                                                     Blue-ray discs
                                                                                                        1982
                            Man with the Movie                                                                                   announced
                                                                                                        Compact Disc
1907                        Camera                                                                      commercially             Russian Ark, the
Invention of The                                                                                        released                 first single take
                            1926-27
Dolly, i.e., placing                                                                                                             film, 96-min long
                            Move from silent                                                            1986
camera on wheels                                                                                                                 shot, using the
                            to sound films and                                    1969                  First permanent
to move along                                                                                                                    steadicam
                            black and white to                                    Start of recording    IMAX 3D theatre
tracks for getting          colour                                                onto memory                                    2006
                                                                                                        built in Vancouver,
sweeping shots                                                                    cards and internal                             Disney buys Pixar
                            Standardization                                                             Canada
1908                        of the Hollywood                                      storage                                        for $7.4 bn
                                                                                                        Steve Jobs
First movie to have         studio system                                         1970                  acquires Graphics        2007
a score specifically        The Jazz Singer first                                 Tiger Child,          Group division of        RED One Camera
written for it (The         film with recorded           1946                     first IMAX film       Lucasfilm - became       enabling high
Assassination of the        dialogue and first           First Film Festival in   demonstrated in       Pixar Animation          quality digital films
Duke of Guise)              musical                      Cannes                   Osaka, Japan          Studios for $10 mn       shoots

         1900-20                    1920-40                     1940-60                1960-80             1980-2000                  2000-15

                            1929                         1960                     1973                  1995                     2009
                            On with the Show             French New               Computer–             DVD technology           Nicon D90, first
                            first feature film in        Wave films using         Generated Imagery     released                 DSLR to film at 24
                            colour and sound             lightweight /            (CGI)used in film     Toy Story                frames per second
                                                         portable shooting        Westworld             revolutionizes           in HD video
                            1932
                                                         equipment                                      animated films with      Avatar, first full
                            First film festival in                                1975
                            Venice                                                Steven Sasson         box office earnings      length movie with
                                                                                  invents the digital   of $192 mn               photo-realistic 3D
                            1939                                                                                                 characters and
                                                                                  camera                1997
                            Wizard of Oz first                                                                                   featuring a fully CG
                            film the using                                                              The introduction of
                                                                                                                                 3D photo-realistic
                            Technicolour                                                                HDCAM recorders
                                                                                                                                 world
                                                                                                        and 1920x1080
                            1940                                                                        pixel digital video      2011
                            The Thief of Bagdad,                                                        cameras based on         HMZ–T1 Sony
                            first film to use                                                           CCD technology           personal HD & 3D
                            Blue-Screen effect                                                                                   viewer invented
                            Fantasia first film
                                                                                                                                 The Hobbit released
                            with surround
                                                                                                                                 with 48 frames per
                            sound
                                                                                                                                 second

Source: Public Report - The Evolution & Future of the Film Industry

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