By Neeraj Jha
Globally, the entertainment industry is redefining itself. Waves of globalisation are sweeping the shores of film industry worldwide. The Indian film industry cannot turn a blind eye to the changes that are redrawing the contours of the film industry all over. Consider the following global trends in the entertainment industry:

Most global movie companies have come under new ownerships during the past decade and a half, thanks to a rash of acquisitions. Much of the entertainment industry's assets are now concentrated within eight companies.

Major players such as Disney, Viacom and Sony are extending their value chains. Some of them are also major stakeholders in broadcasting and cable channels.

The entertainment industry is looking at increasing its global presence. American movies account for a major share in box office receipts in Western Europe and Japan.

Globalisation demands
Conventional wisdom tells that the Indian film industry cannot be sanitised from these global trends. As the Indian economy becomes integrated with the world economy, the Indian film industry cannot remain isolated for long. Chances are that the industry players would soon become large organised corporate entities straddling across the entire value chain, from production to exhibition.

Hold on. Globalisation tends to put certain demands. And the Indian film industry players need to tread the globalisation path with care and caution. It is essential for the Indian film industry players to have a global outlook. Agrees R Ravimohan, managing director of the Mumbai-based rating outfit Crisil: "They must have a global paradigm. Globalisation is both a necessity and an opportunity."

The tragedy
Fine, what Ravimohan says is eminently acceptable. The tragedy, however, is that most Indian film industry players are not able to comprehend globalisation in its entirety. But, there are no two ways about this: Indian film industry players should corporatise themselves faster and streamline their operations. For, larger global media companies are invading their turf. That is why domestic players should work out strategies to leverage themselves on the convergence platform.

The question still lingers. Why is corporatisation moving at a snail's pace ? One, most Indian film industry players are not very comfortable with corporatisation which means public accountability and corporate governance. Says Shakti Samanta, a noted film producer: "Indian film industry players haven't forgotten disasters such as Amitabh Bachchan Corporation."

And there are other problems too. One, even the few corporate entities in the Indian film industry have no professional management teams in place. Two, these corporate entities do not have business models worth writing home about. Naturally, corporate governance and shareholder value continue to remain alien terms for the industry.

Competition coming
All these problems cannot be wished away. That is why Indian media companies are circumspect about foraying into film production. For instance, the RPG Enterprises-controlled Gramophone Company of India (GCIL) had forayed into film production and ended up with burnt fingers. Says K Krishnan, president of GCIL: "We would like to wait till corporate governance is established in this film industry."

There are signs that this might happen soon. For, foreign entertainment conglomerates are knocking at the doors of the Rs 8,000-crore Indian film industry. For instance, the Australian media moghul Kerry Packer and his Channel9 have already made clear their intentions to become a long-term player in the Indian entertainment industry by foraying into activities ranging from film production to building multiplexes.

Clearly, this coming competition is an opportunity for the Indian film industry players. It should wake them up, goad them to spruce up their acts and put their houses in order. Is this the beginning of an end for the disorganised domestic film companies? "Not so soon," says Mahesh Bhat, a noted film producer. Adds Bhat: "I do not see foreign media conglomerates getting into film production so soon here. It is a strange world and they will need insiders who understand the industry. However, Indian production houses might become sub-contractors."

That is just one contrarian view. But, there are signs that foreign media majors are keen to get into film production in India. For instance, Nine Broadcasting Limited, a joint-venture between Australia's Kerry Packer-controlled Publishing and Broadcasting and Hindustan Futuristic Communications, has worked out plans to get into film production and working at setting up a film studio in Mumbai. Sure, this trend is bound to pick up.

Survival strategies
It is not that Indian film industry players are oblivious to the impending threat. What are they doing about it? For starters, most Indian players are looking at acquiring economies of scale. Says Yash Chopra, another noted film producer: "I would like to make more films every year. Making one film in three years in not viable any more." Players such as Subhash Ghai are not only optimising returns by making more films, but are also producing different types of films. They are also resorting to synergetic diversification and leveraging all emerging cross-promotion opportunities. Ghai's proposed integrated studio complex is an example.

What about other domestic film industry players who do not have the financial wherewithal? What strategies are they working at? Consider noted film maker Prakash Jha. Jha is trying to bring four or five established filmmakers together in a bid to build financial muscle. Says Jha: "Coming together is imperative for us and it makes economics viable."

The implication: instead of making films individually, players can produce a combined film house brand making around ten films a year. Even if half of them are successful, such film houses can survive. These cartels might become popular among small film companies. Primarily because such a cartel promises to offer benefits of brand equity and potent distribution networks. Says Jha: "Make commercial films to expand your brand and leverage this brand strength to expand the market for your other films."

Acquiring a respectable size is another survival strategy. Size has obvious advantages in the fragmented Indian film industry. One, a large film company can diversify its risks over many projects. Two, thanks to volumes, large media companies can gain clout with theatre owners and TV networks. Three, large media players can derive the benefits of brand recognition and management expertise, and establish linkages between creativity and product distribution capabilities.

Looking overseas
There are opportunities galore in the overseas market as well. There is a large Indian expatriate market. Indian film companies can make films in other international languages at the Indian hi-tech studios and market them overseas. All these are tempting opportunities. Says Ravimohan of Crisil: "India has a tremendous potential as a sourcing base." Yes. For instance, Crocodile II, a Hollywood film, is being made at the Hyderabad-based Ramoji Studios at a much lower cost.

Ravimohan's suggestion makes tremendous business sense. Asks Ravimohan: "Already, India is known in the global entertainment industry thanks to our Miss Universes and Miss Worlds. Then, why not pool this strength with our directorial talent and make foreign films right here?" Dubbed foreign mega hits, which have been massive cash-churners here in India, is another business opportunity Indian film companies should look at. For instance, Samanta is into this activity, having dubbed Jurrasic Park among others.

Sure, the overseas film market is exciting. But, there are quite a few sceptics around. Says Karan Johar, another noted film director: "Not all films are overseas market-friendly." And massive piracy of DVDs and VCDs is rampant.

The domestic lure
Fine, but the domestic film industry has been gaining more charm of late. Veteran filmmaker Yash Chopra says that the domestic film market has still got lot of charm left in it. So, it is essential to identify the keys to success. And that key could be making films which enthrall audiences and market them through strong distribution networks. Clearly, recognising the target audience and their tastes are very important. Says Jha: "You have to know where your niche lies." Chopra, who has made films with the Pan-Indian appeal, is tuning in more towards the youth. Yes, the youth segment is fast-growing and is thus a high-potential segment. Says Bhat: "Urban youth is a prominent part of the middle class segment."

What makes the domestic market even more attractive now, especially for niche films is this: the multiplexes that are being planned and coming up in scores (see Box). Says Jha: "Multiplexes mean more screens being made available to low-budget small cinemas. It will be a producers' market then. And low-budget compact, and niche cinema would then become viable."

Even large players are excited about this idea. For different reasons, though. Says Johar: "Multiplexes will actually enhance the viewing experience. This is good for film makers who bring in technology and creative audio and visual effects." That is why not only Indian business groups such as Zee and the Rahejas are finding multiplexes attractive, even foreign players such as Channel 9, Paramount and Universal are enthused.

So, the Indian film industry offers a plethora of possibilities and opportunities. But, do not forget the obstacles on the way. The Indian film industry is divided and fragmented. Modern business concepts are yet to be understood by the industry. Alliances and partnerships do not happen here simply because self-interest rules the roost and there is total absence of transparency.

What needs to be done now? Considering the fact that the Indian film industry is a major revenue-generator and employer, it should be given a priority industry status. Alongside, it is essential to rationalise entertainment taxes levied by the state governments. The Reserve Bank of India should lay down guidelines for banks keen to finance the film industry. And above all, piracy needs to be tackled on a war footing with effective monitoring and vigilance cells. Importantly, there is need for a clear and a comprehensive national film and entertainment policy.