Indian film sector experiencing unprecedented growth


While it is universally accepted that the Indian film business is experiencing unprecedented overall growth, there are key developments within the industry that are particularly noteworthy.

Indian cinemas will admit 4 billion moviegoers a year by 2011, according to new report "Cinemagoing India" from U.K. analysts Dodona Research.

"On the basis of current plans, in 2011 half of all the screens in the country will have been built or re-equipped within the past five years," report author Katharine Wright says. "Even at its height, the European and North American multiplex boom did not match this scale of investment."

With 3.7 billion tickets sold in India compared with 1.4 billion in the U.S. in 2006, market potential is ripe for between 2,000–3,000 new multiplex quality screens, according to a recent joint study by consultants A T Kearney and industry body Confederation of Indian Industry.

The study, titled "The New Economics of the Indian Film Industry: Creativity and Transformation," adds that the Indian film industry is expected to touch $4.5 billion–$5.1 billion in value terms by 2011 (from $1.8 billion in 2006), reflecting a 25% annual growth.

Another hot growth sector is the previously overlooked home video segment, which ignited more than a year ago when New Delhi-based Moser Baer -- the world's second-largest optical storage disc manufacturer -- launched its Mumbai-based home video division by acquiring almost 7,000 domestic titles, from Hindi Bollywood films to regional cinema. Moser Baer unleashed a never-seen-before price war with DVDs priced from 82 cents, possibly the cheapest in the world. By contrast, established competitors were typically selling DVDs for $7.

Expectedly, prices have now dropped to compete with Moser Baer, which could wean customers away from pirated product. With India's current installed base of 13 million DVD players expected to touch 50 million by 2010, opportunities also are seen in the rental business. One of the many aggressive players is South India-based DVD rental company, whose advisors include Eric Meyer, co-founder and former CIO of Netflix.

A recent joint report by PricewaterhouseCoopers and industry body Federation of Indian Chambers of Commerce and Industry showed that home video increased its market share a whopping 65%, from $97 million in 2005 to $158 million in 2006. An annual growth rate of 31% is projected to take this segment to $609 million by 2011. Moreover, the share of home video in the overall film pie is expected to grow from current levels of 8% to 14% by 2011.

Given India's overall robust economic growth, with average GDP growing at more than 6%, as in other industry segments, entertainment is becoming attractive for foreign investors. The A T Kearney-CII study states that the Indian entertainment industry has witnessed foreign investment of $1 billion over the last three years via major international funds such as 3i, Warburg Pincus and D. E. Shaw, among others. Saurin Doshi, a partber at Mumbai-based AT Kearney India says, "We predict that additional foreign investment in entertainment could touch between $1 billion-$2 billion over the next four years."

Indian players are also eyeing international markets considering that foreign box office revenues are growing -- seven of the top fourteen foreign films released in the US were Hindi titles that each grossed an average of over $2 million in 2006.

Another hot growth area is animation, which is expected to touch total revenues of $869 million by 2010 (compared to $354 million in 2006), according to a report by Indian software and services industry body NASSCOM.

From a creative perspective the acceptance of domestic animation content is breaking new ground, as seen in 2005's hit feature "Hanuman," based on the story of the Indian elephant god. Its sequel, "Hanuman Returns," is ready for release jointly produced by Mumbai-based Percept Picture Co. and South-India based animation studio Toonz Animation.

"Domestic content will be a key driver for animation which will help the industry evolve from being a strong outsourcing base to developing home grown stories," says Toonz Animation CEO P Jayakumar.

Similarly, VFX and post-production companies are also getting aggressive. Recently, Mumbai-based VFX company Prime Focus Group bought out two US-based companies, Post Logic Studios and Frantic Films VFX, for $43 million.

Says Prime Focus CFO Nishant Fadia: "Manpower costs are between four to six times higher in the U.S. than in India and we hope to capitalize on this advantage by outsourcing work here via these acquisitions while gaining access to international markets."

Elsewhere, in May 2006, Prime Focus bought a 59% stake in London-based post facility VTR Group for $8.47million.

As in any other film industries, the spotlight ultimately falls on screen talent. While Indian stars rarely cross-over beyond their massive audiences, some are beginning to attract Hollywood's attention. For instance, striking Indian actress and 1994 Miss World Aishwarya Rai will be seen in the next "Pink Panther" installment with Steve Martin.

Additionally, LA-based talent agency Brillstein Entertainment Partners recently signed Indian superstar Hrithik Roshan, while in August BEP signed former Miss India-turned-actress Celina Jaitley.

Says BEP manager Jai Khanna: "We are primarily focused on finding Hrithik international projects which will obviously include Hollywood, but we are also interesting international films that are assembled through independent financing."