For the last two years, the Hindi film industry has had to deal with some tough issues, the most important being the cost of production. With liquidity tight due to the global financial meltdown, the industry, on a high pre-October 2008 and costs escalating on all fronts, had to quickly downsize budgets and rein in costs of production to ensure success at the box office. Pre-meltdown, there were Rs 100-crore film budgets that were being green lit. In the last two years, that?s become a thing of the past. Of the toughest to control, however, were talent costs, with Bollywood A-listers charging crores per film. This year, though there are reports that a Salman Khan or a Shah Rukh Khan are again quoting double digit salaries in crores, insiders say talent costs have begun to stabilise. And that?s a huge change because depending on the film, the cost of key crew members (actors and director) comprise 30-50% of the total costs.
?Two years ago, costs of production were going out of control. Now, films are being made at the right cost and are economically viable,? says Siddharth Roy Kapur, CEO, UTV Motion Pictures. Over the last few years, the talent, too, has become aware that they must be associated with commercial ventures, points out Kapur. The fees vary from artist to artist, but ?everyone is now concerned about commercial viability of the film?.
Rakesh Jariwala, partner, Ernst & Young, says the industry is witnessing a down trend in film budgets from the levels seen before the economic slowdown. ?Two consecutive not-so-successful years have softened the big time spenders. Talent costs have begun to stabilise and it is a very encouraging sign.?
Kamal Jain, CFO, Eros, says many of the top stars today are opting for a profit-sharing model, accepting a portion of their fees from the profits a film earns. ?When a film earns profits, you don?t mind sharing,? says Jain, pointing out that 60-70% of Eros? Hindi films are now in the co-production model. UTV follows the co-production model selectively. ?We did it for Tees Maar Khan with Akshay Kumar and then for Dhobi Ghat, which we were distributing,? says Kapur.
Jariwala says the talent should follow the model followed in the West and work on a participation model, especially in times when a lot of stars are doing niche projects, which do not have mass value. ?Producers have also responded to the situation well and are churning out niche projects with lower budgets. They should continue to streamline the production and publicity processes to cut the costs even further. This should help in recovery of costs for all the stakeholders within the industry,? he adds.
In fact, Kapur cautions that though talent costs are now under control, publicity costs are too high and need to be reined in to make films economically viable.
Yash Raj Films doesn?t let budgets go ?out of control?. Says Rafiq Gangjee, VP, marketing and communications at YRF: ?With bound scripts in place, we do have a very tight control on the shooting schedule and a strict adherence to stipulated budgets. We have always had the good fortune of working with professional artists and crew, and this has been largely instrumental in keeping a check on sticking to the allocated budget.?
With many big-ticket films like Blue, Kites, Raavan and Guzaarish failing, production houses are opting for a host of things to ensure that films don?t fail.
According to Jariwala, some of the things that the industry is currently doing are back-ending the talent costs, putting more focus on the production process, managing the production costs (including availability of film incentives for shooting) and resorting to newer means to stimulate sufficient public interest in the finished product. ?Production houses are looking at innovative and cost effective mediums to promote their films,? he adds.
If we look at three of the biggest releases of 2011 so far, No One Killed Jessica, Dhobi Ghat and 7 Khoon Maaf, each had devised different ways to promote the film. ?We will witness well thought out marketing strategies of films this year and in future,? says Jariwala. ?Overall, proper planning at an early stage would help curb costs by financing the films from non-traditional funding options like film incentives, merchandising, pre-sale of satellite rights, etc.?
According to UTV and Eros, pre-selling of satellite rights has been one of the overwhelming trends of 2010-11, and due to this, risk factors and costs have de-escalated to a degree. Most of the top films of 2010 saw satellite rights being sold much ahead of their release.
And yet, Jain says costs must come down further?talent fees, cost of location, marketing and publicity costs. Exotic locations, massive promotion spends or high star costs all could affect a film project adversely, points out Jariwala. Too many films fail at the box-office and the ratio of success to failure is still rather low. Analysts say the industry would regularly churn out profitable ventures only if costs are rationalised. ?Some of the stars have already started working on profit-sharing basis. Such restrained actions could ease off the pressure being felt by other constituents of the industry like producers and distributors and help in the overall growth,? says Jariwala.
Already, most of Bollywood?s A-listers from Aamir Khan to Shah Rukh, Ajay Devgn, Akshay Kumar to Saif Ali Khan have their own production houses and typically co-produce the films they work in. Insiders say depending on the film, an Aamir or an SRK charge anything between R 5-10 crore for a film, and also, usually opt for the profit-sharing model.
As things stand, the performance of films in the last two to three years has forced the production houses to assess where things have not gone well. Analysts say the audience?s taste has changed rapidly and they want to see smart movies with diverse concepts. According to Rajkumar Gupta, director of No One Killed Jessica, proof that audiences are demanding different content is evident from the fact that the two heroines-led film based on a true incident did so well at the box office. Made at a budget of R8-9 crore, it grossed R40 crore worldwide. Jariwala says production houses have realised that good content is the key to get audiences back besides having bankable stars and, hence they are laying greater emphasis on the ?concept? before the green lighting process.
UTV?s Kapur says the production house has always been ?circumspect? about green lighting movies. Says Gangjee, ?Most production houses green light films not on budgets, but on scripts. Good content finds its funding. YRF will continue to commission projects based on a great script and allocate adequate and more importantly, appropriate budgets for them.? This year, production houses like UTV, Eros, Balaji have announced their slate, others like YRF are yet to announce the films it will release this year.
Most of the players hope that 2011 is better compared to last year?the three films that released early in the year have done well at the box office. ?The first half is likely to remain muted because of the Cricket World Cup and IPL-IV, but the second half looks very interesting with some promising films lined up,? says Jariwala. There are films by SRK (Don 2, Ra.One), Aamir (an untitled thriller directed by Reema Kagti), Abhishek Bachchan (Dum Maro Dum), Saif Ali Khan (Agent Vinod) and Ranbir Kapoor (Rockstar).