Mumbai-based visual entertainment services firm Prime Focus contributed a tenth of the special effects in James Cameron’s blockbuster film Avatar. Riding on that success, it wants to spread its wings globally by leveraging its Indian base, says its founder and global CEO Namit Malhotra. He spoke with India Knowledge at Wharton during the 2010 Wharton India Economic Forum in Philadelphia.

An edited transcript of the conversation follows.

India Knowledge at Wharton: Could you please explain to us what Prime Focus does?

Namit Malhotra: Prime Focus is a global visual entertainment services company servicing the feature film, broadcast, television, commercials, and new media businesses. We provide technical creative solutions, which is basically technology and creative solutions for any audiovisual content that needs to be made and we provide it in an integrated fashion across each of these areas of the entertainment business.

India Knowledge at Wharton: You now have facilities in Vancouver, London, and most recently, Hollywood, which you made through some acquisitions in the U.S.

Malhotra: That’s right.

India Knowledge at Wharton: It is interesting that your company has grown at a time when a lot of companies are shrinking. Could you explain that?

Malhotra: For the first 10 years since we started in 1995, we were an India-centric company. Up to 2005, we stayed in Indian territory. In 2006, we started to put together our international strategy on how we could leverage our learnings of the Indian market across the global marketplace. We started by taking up a position in the U.K. Then, in December 2007, we made our North American acquisitions. This is all part of our global plan to connect and integrate the service offerings across markets because the language of film and cinema and any audiovisual content remains the same. The technology remains the same. And in these times when economic conditions have become more difficult, we need to be able to present a global solution to these global markets where there are financial challenges. The opportunity and the interest in what we do have become only greater.

India Knowledge at Wharton: To some degree do you think the film industry has been buffered during the downturn?

Malhotra: I wouldn’t agree with that although the box office tends to be its own indicator. You saw [some] interesting films. Two that I would like to name came in December last year. One was Avatar which is a game changer in the film business worldwide. And there was a film in India called Three Idiots, which again was a game changer. It changed the entire Bollywood numbers. No film had ever grossed anything close to the numbers they grossed.

On the one hand you still have inadequate financing and structured money. The number of projects and the number of people that could work on those projects come under pressure. But the box office is obviously a function of the quality of cinema and people’s interest. If the right project comes along, revenues don’t necessarily get impacted even though the production of content could be because of the lack of financing upfront. It’s interesting. These two films have created interest in the revival of the industry in India and in Hollywood. As I see it, more films are back in the running and there is greater optimism amongst global financial investors in the entertainment business.

India Knowledge at Wharton: You mentioned James Cameron’s Avatar and you contributed 10% of the visual effects for that movie. It was 80% of the visual effects for another big film — The Twilight Saga: New Moon.

Malhotra: That’s right.

India Knowledge at Wharton: Do you think it is necessary for Indian film companies to look westward for expansion — to look to Hollywood? Was that a central part of your own strategy?

Malhotra: Yes. A company like ours is a technology and creative solutions company. We believe that we have to be able to service our capabilities and technology with people and systems through a global market place. That is the structure of growth for any company out there in that space. In our particular case, that it is clearly the way we need to be. We have to take advantage of our positioning in India and now in the rest of the world to provide this global solution rather than operate in these bifurcated zones the industry tends to get divided into.

If you think about it, films in India get distributed worldwide. ‘Avatar’ was also one of the highest grossers in India, which is very unique to Hollywood films doing business in India. So what we find is that in a globalized world — when films are traveling everywhere — film companies like ours are tagging behind and going where the filmmakers go.

India Knowledge at Wharton: What do you think is the market potential for 3-D in general? Is it a fad — a flash in the pan? Or is it something that you think is going to seep into more and more filmmaking?

Malhotra: Unlike the past when 3-D came more like a fad and went away, this time the technique that James Cameron used in Avatar was more about the experience and not gimmicky. It gripped you more into the story. That is always more interesting as against things just coming out at you, which is what traditional 3-D has always done. The fact that 3-D television sets are already available today is a clear sign that this is the next level at which audiovisual content and entertainment is going to be consumed. It is going to be a more involved process like the last big revolution when black and white films moved to color. We’ve been watching color films now for more than 50 or 60 years. This is the next big transition into another domain of how films and other forms of content will be consumed.

India Knowledge at Wharton: So is this the next big trend or changeover in filmmaking and entertainment. Are there any other effects that will help to transform the industry or are there other big trends we should be aware of?

Malhotra: What’s happening more and more is that the creative part of the business is staying independent today.

You see all the new digital media devices — home theatres, plasma screens, blue-ray, VOD and the new computer systems that have 3-D on them. What’s changing is the consumer need — how they use content and how they switch between various forms of media. That’s where the world focus is: on how consumers get this content and how they can interactively use it across gaming or movies or the mobile. There are going to be so many new forms in which content is going to be streamed as against the forms in which it was created. And technology is enabling that. So there is talk that technology is the new creativity in our business. There is a bigger role that technology is playing in enabling all this while the creative vision of filmmaking continues to remain pretty similar or pretty standardized.

India Knowledge at Wharton: Are there any limits to that distribution? For instance, do you think people will watch full-length movies on their cell phones or on their iPods?

Malhotra: When you see the new generation on a computer, you see them doing eight things at one time. I think the mind space is clogged with so many different ways in which people interact now, that it is an absolute position of choice. You could be watching a movie while you are waiting for a bus or in the tube or at the airport. You could be making calls and looking up the weather and the map and it’s all coming together as one medium. It is clearly the way things are going to be. It is going to get more and more interactive and there are going to be more ways in which that content will be integrated into daily life. Technology is making that possible. That’s the way we think the future of our business is slated to grow.

India Knowledge at Wharton: Now just taking a little step back into your own background, your bio says that you are a compulsive entrepreneur. What is it that compelled you to start Prime Focus?

Malhotra: I’m [my family’s] third generation in the film business. I’m a compulsive entertainment and audiovisual entrepreneur rather than a regular entrepreneur. My grandfather was one of the finest cinematographers. He shot one of the first color films in India. My father has been an eminent film producer. In the early 1990s, we figured out that technology was not a very big part of our filmmaking as it was in the West. And we felt there was a unique opportunity for somebody — for people like us who know the film industry. If you could learn the technological aspects of what the West had already done, it could be an interesting way to serve our Indian filmmakers. That set us on the path of providing these services and that’s what got me in at a very early stage of my life. Since then we have just been building this business on a backward and forward integration model — from a small editorial house in 1995 to an end-to-end service provider across markets and across geographies. It has been an interesting journey.

India Knowledge at Wharton: Yes. And you started that journey in a garage, right? Literally.

Malhotra: Yes.

India Knowledge at Wharton: So what is the biggest lesson you have learned as an entrepreneur since that time when you began in a garage?

Malhotra: It’s the ability to consistently learn and consistently adapt. It’s great when things are working in your favor. But when you have to build something, you have to be able to very quickly adapt and learn and navigate yourself. When you know that things are not working, you start pushing it harder the other way. Sometimes your destination is much closer to you than you can see.