India’s US$2.2 billion “Bollywood” film industry, as the Hindi movie-making business is called, is finding that its script is being rewritten as the world around it changes. A more professional, time-sensitive business rigor, driven by foreign and domestic institutional money, has replaced informal, bootstrap funding ways and drawn-out production processes. Foreign consumers are increasingly patronizing its offerings, adding to the industry’s already massive domestic audience. The new environment is calling for more refined business models that focus on untapped revenue streams, global and digitized distribution networks, improved filmmaking technology and ways to counter piracy.

This changing business landscape was the focus of a panel discussion titled, “Bollywood’s Silver Screen: Pursuit of the Golden Globe,” at the recent Wharton India Economic Forum held in Philadelphia. The panelists were film actors Abhishek Bachchan and Abhay Deol, director and producer Rohan Sippy, and film critic Rajeev Masand of CNN-IBN, who moderated the discussion.

‘Flashing Money Everywhere…’

In the past two years, foreign investors were “flashing money everywhere,” according to Sippy, a third-generation filmmaker who has watched the industry’s financing structures change up close. Up until about five years ago, the film industry had always been a shoe-string operation, and “suddenly all this money was coming in” from venture capitalists and corporations, he said. The current worldwide recession has tempered that enthusiasm to some degree. “It was going crazy, but that is over now.”

Bachchan, who incidentally dislikes the term “Bollywood” for its suggested connotation of aping Hollywood, said foreign investors have good reason to be drawn to his industry. A billion people watching films, “possibly more than once a week, are numbers you can’t ignore. India has the largest film industry in the world; we produce almost a thousand films a year, which is more than Hollywood.” Yet, the average ticket price for an Indian film is the equivalent of about 50 cents, as opposed to US$9 to US$11 in the United States. “You do the math,” he said.

Masand pointed to a 2009 FICCI-KPMG report on the Indian media and entertainment industry that tracked a steady annual growth of 17% to 18% over the past five years, with revenues of US$2.2 billion at the close of 2007. It projected an 18% cumulative growth for the industry over the next five years to reach nearly US$3.4 billion by 2013. The report also counted foreign investments of Rs. 8.5 billion (US$179 million) in the entire entertainment and media industry in 2007, up 21% over the previous year. That trend seems to be continuing: Last September, Reliance Big Entertainment formed a joint venture with Steven Spielberg’s Dreamworks studio, and earlier in 2008, billionaire investor George Soros invested US$100 million for a 3% stake in Reliance Entertainment Ltd., a film, Internet and TV broadcasting company.

In addition to the increasing number of foreign funding sources, the industry is also witnessing dramatic changes in how and from where it earns its revenues. Its intake from the domestic box office formed 80% of total revenues for 2007, according to the FICCI-KPMG report. Also, overseas theatrical distribution grew more than 22% to account for nearly 10% of total revenues the same year, the report added. More significant are the growth rates for the home video segment (26%) and cable and satellite rights (29%), according to KPMG.

Market Forces at Play

In that emerging scenario, the industry’s work ethic has ratcheted up, as one would expect. “The primary difference is in professionalism,” said Bachchan, adding, “…not to say that my dad’s generation was not professional — I don’t want to get into trouble here.” (His father is India’s premier matinee idol, Amitabh Bachchan.) Among the drivers are newer opportunities for film stars to make money, said Masand. “Stars are offered three and four films at a time,” he said, referring to one of the many changes that have come with the entry of corporations in the industry. “Also, a lot of actors have the opportunity to become producers themselves and therefore become partners and share in the business’s profits.”

Masand, however, added that actors “demand astronomical amounts” and wondered if their “unreasonable fees affect the balance” of a film’s economics. Sippy said the responsibility lies more with the producers of these films: “It is foolhardy [to offer such big fees],” he said. “But it has nothing to do with the actor; it is not the actor’s fault.” All things considered, he attributed the phenomenon of skyrocketing salaries to “market forces at play.”

The increasing opportunities for actors to work on various projects will ultimately be a benefit for audiences as well, Sippy added. “There is a plurality that comes in — a different kind of cinema … where [a film’s] concept comes to the forefront and there is a spectrum of choice.”

Bachchan pointed to another change — the way actors themselves view their role in the film industry. “With all due respect to our previous generation, we don’t take ourselves as seriously,” he said. “It is not any more about me, me, me. We understand that at the end of the day, it has never been about the star or the actors. It has always been about the film and the story.”

The concept of a “star-driven industry” has been unfairly promoted by the media, according to Bachchan. “You have had big films with a huge star cast that have not done well and you have had smaller films with no stars that have done superbly well,” he said. “Sixty years ago, five years ago or yesterday — it has always been the script that has worked and not the star. There hasn’t been one actor in the film industry that has managed to pull off a film by himself and has not been supported by a great script.”

Masand pointed out to Bachchan that “often, [Bollywood] films are put together after a star comes into a project, and then a script is found.” Bachchan agreed with that observation, but attributed that practice to relationships. “It is a relationship business; we in India are all about relationships,” he said. “There are certain films that do well and a name gets attached to it. But that can be said about the world of business as well.” A film with a budget of Rs. 50 crore (US$10 million) would need a star cast with the heft and profile to ensure a return on investment, Bachchan said. “You can’t [rely on] a bunch of newcomers.”

The Expanding Reach of Multiplexes

At the same time, the Indian film industry has developed the breadth to encourage relatively smaller filmmakers, and the depth to render viable business plans, according to Bachchan. The key to this is the emergence of multiplexes across India, he said. “The multiplex phenomenon has given the opportunity to young filmmakers to exhibit films that would not have gotten financing earlier.”

The relatively compact multiplexes with several screens under one roof offer filmmakers more cost-effective deals than the older, large movie halls. They focus on maximizing the “experience” of going to the movies, with food and beverage stalls serving combo deals, air conditioning that works and cleaner toilets, to list some features. Masand said that according to the KPMG report, the number of multiplex screens in India has grown from 340 in 2005 to 850 projected for 2009 and more than 1,400 by 2013.

“Audiences in India are spoilt for choice with television opening up, foreign films coming to India dubbed… and multiplexes coming in,” said Deol. These improvements in audience access have also contributed to professionalism within the industry, because filmmakers are focusing more on the quality of their content. “It’s gotten a little tighter,” noted Deol, whose recent film Dev. D has been cited for its cinematography, performances and music. “Until five years ago, people would approach me saying, ‘Sir, we have a bound script,’ like it was an achievement. Now, we’ve moved on to focusing on the content of some of those scripts.”

Watching Slumdog from the Sidelines

No discussion on the Indian film industry these days is without a reference to Danny Boyle’s Oscar-winning Slumdog Millionaire, which crept into the conversation when Masand brought up the growing role of so-called “crossover” films — films that work with audiences within and outside India, but appear to target the non-resident Indian. Sippy described the spate of such films as an “attempt to reach more people,” but also noted that “Western audiences are very different,” and that as a filmmaker, you eventually have to “put your eggs in one basket.” He felt the more specific a film’s content is, “the more rooted it is in its audience.”

Bachchan said he had a problem with calling them “crossover films,” and preferred to call them films made “in just another language.” He doesn’t see the phenomenon “as a comment on a film being exceptional … or on [the industry’s] globalization or anything of that sort.” Delhi-6, a film he acted in, was recently in the news for being sought after by four Hollywood film studios, including Fox and Sony, presumably for release in Western markets. “If a foreign studio based in Hollywood decides to pick up an Indian film, it has its reasons to do that,” he said. “They are not doing it for the love of Indian cinema. Maybe they feel there is a still a market out there which has not been tapped, which they feel with their infrastructure, in their native land, they could do a better job [of accessing].”

Are there takeaways for Bollywood filmmakers from Slumdog Millionaire‘s success? “Slumdog has done well … it is a recognized film and they’ve employed Indian talent which is being recognized in the West,” said Bachchan. But he also pointed out that it is an American film, not an Indian-made film, even though it included the trademark Bollywood song-and-dance sequence. “They showed Indian subjects, Indian actors and a rags-to-riches story. We have made thousands of such films — they made it in their context.” He said it would be incorrect to view the appeal to Western audiences of films like Delhi-6 as an indication that Bollywood’s filmmakers are about to break into their studio markets. “It’s not like we are [saying] that the rest of you people be damned, be prepared, we are coming.”

Pushed to Change the Model

To meet the new level of demand, Bollywood is under pressure to change its ways. “We have to really think hard. We have ask ourselves, ‘What does it take to get a person into a cinema and make him pay 50 [rupees] or 250 [rupees] to watch a film?'” according to Sippy.” That has always been a challenge, but now we have to find new ways to do it. The great thing is [that the] technology is out there, new models are out there.”

Bachchan noted that figuring out newer ways to distribute films, especially globally, is a challenge. “Currently, we are the only industry that does a worldwide release on the same day,” he said. “I wish we could come up with more models on how we can release films.” Two gathering trends underscore the need for a plan here: KPMG projects the home video market will grow from the current share of 8% of industry revenues to 10% by 2013, and overseas theatrical distribution from 9% to 11% in that same period.

Every dollar, or rupee, saved from pirates is as good as earned, and the panelists agreed that piracy is a major issue to contend with. Bachchan pointed out that in Western markets, film piracy “is almost negligible because of the laws that are in place.” “Pirates do their job better than the studios in distribution,” Sippy noted, adding that it is prevalent “because a demand exists.”

Sippy added that piracy eats up to 60% of the Indian film industry’s revenues every year. “That is a huge amount and nothing is being done about it,” he said. “What upsets me is that when somebody watches a pirated DVD, the audiences are being robbed of a chance to see the film the way it should be seen. I wish that would stop because you realize how much small things really matter — like good projection, good sound systems, good seating. All these make a movie going experience so much better.”