When Walt Disney announced that it was acquiring a controlling stake in UTV Software Communications in a filing to the New York Stock Exchange late on January 31 evening, it was the culmination of a process that began last July when Disney, which already owned 50.44%stake in the Indian media and entertainment company, offered to acquire the rest for a deal valued around R2,000 crore. Disney,already present in the Indian market via three TV channelsDisney, DisneyXD and Hungamahad acquired a 14.9% stake in UTV way back in 2006 and watched as UTV grew its motion pictures, broadcasting and, most important, gaming business down the years with a turnover of R930 crore before gradually increasing its stake and making the final move last year.
Increasing our brand presence and reach in key international markets is a cornerstone of our growth strategy, Andy Bird, Walt Disney International chairman, said in a release.
Its a fact that most big Hollywood studiosDisney, Warner, Fox, Sonyare trying to grow their India market in a variety of ways. India is still a small market for Hollywood and that means theres a huge potential for growth. To give an example, while Paramounts Mission Impossible 4 did $11 million of business in India, and this was one of the more successful Hollywood film releases at the Indian box office, a film like Transformers: Dark of the Moon did business worth $170 million in China.
Through the yearsWarner, Disney and Fox have been around in India since the late 90sHollywood studios have set up studios, entered into co-production deals, gone in for distribution deals, increased its number of releases, dubbed in local languages and are even venturing into the regional market for making films.
For instance, while China restricts the number of foreign film releases to 20 a year, in India just three studiosFox, Warner and Sony will release 35 in 2012 alone. Says Viacom 18 Motion Pictures COO Vikram Malhotra, We have identified the Hollywood film segment as an important and integral part of our growth strategy in India for the next three years. Viacom18, a 50:50 JV between Viacom (MTV, Paramount Pictures, Nickelodeon, etc) and Network 18, has been focused on both the Hollywood and Bollywood business in India. Last year, it produced four small to mid-budget films like Tanu Weds Manu, Shaitan and Budha Hoga Tera Baap, which did very well at the box office.
Hollywood studio insiders and analysts agree that 2011 has been a landmark year for Hollywood films in India. Studios like Sony (Tintin), Warner (Harry Potter, Hangover 2), Disney (Pirates of the Carribean, Cars 2), Paramount/Viacom 18 (MI4 and Transformers) grossed over R100 crore at the Indian box office, a first but still small considering that Kung Fu Panda 2 alone earned $95 million in China and Harry Potter 7 did business worth $10 million in India. Malhotra says in 2012 and beyond we will look to enhance our spread of relationships with international independent studios in addition to our existing strategic marketing and distribution alliance with Paramount Pictures International, to bring more and more quality and high-potential films to Indian shores.
When Viacom 18 entered into an alliance with Paramount Pictures in May 2011, it stated that the biggest business driver for Hollywood films in India in the years to come will be an ability to connect these films to an increased audience base and to use marketing as the key influencer to drive audiences to theatres. So,when Paramount/Viacom was releasing Mission Impossible 4, it flew down Tom Cruise for a red carpet screening in Mumbai. Given the success of last year, we will continue to focus on this area, says Malhotra. Hollywood has got more entrenched in the local market, says Jehil Thakkar, head, media and entertainment, KPMG. As the Hollywood footprint expands in India by releasing films in a large number of screens, dubbing in local languages, studios are also scouting the local market and not just Bollywood, he adds.
Though analysts agree that some studios like Sony and Warner are taking it slow in local productions after their first forays Saawariya and Chandni Chowk to China didnt fare well at the box office, Thakkar points out that the big Hollywood studios are in India for the long haul and know that if they want India to be part of their growth story they will need to have a local play in a big way.
Fox Star has a headstart on thisit is distributing Sreenath Rajendrans Second Show, the first Malayalam film to be distributed by Fox Star Studio, and also shooting its second Tamil film. It had ofcourse brought Slumdog Millionaire to India and partnered with Shah Rukh Khan and Karan Johar on My Name is Khan. Among the impressive lineup of Hollywood and Bollywood films it is releasing this year are Oscar buzz film Descendants, Ice Age 4, Life of Pi, Bol Bachchan and London, Paris, New York, which will mark the debut of London Film School-trained Anu Menon in Bollywood. We have a very exciting line-up, says Vijay Singh, CEO, Fox Star Studios. We are starting the year with AR Rahmans musical Ekk Deewana Tha (EDT) directed by Gautam Menon. EDT is a remake of Gautams Vinaai Thaandi Varuvaaya ,which he directed in Tamil and subsequently in Telegu. Its a musical love story releasing on February 17. Then we have two interesting sequels Janaat 2 and Raaz 3 and a host of other films. Vikram Bhatt understands the 3D genre in Bollywood and our Hollywood colleagues are working closely with him to enhance the 3D experience.
Our strategy was to release five to six films per year and to adopt a portfolio approach. So a mix of big, medium and small filmsover the last two years, we started with My Name Is Khan, and then released two mid-level films (Dum Maaro Dum and Force) and two smaller films (Stanley Ka Dabba and Khitchdi). We are very happy that DMD is one of Abhishekhs bigger solo hits and Force became John's biggest solo hit. And Stanley Ka Dabba made it to all the major Top 10 Film Lists of 2011we are happy with our performance.
According to Singh, Hollywood has been growing very well over the last 12-18 monthsevery successive blockbuster, like in Bollywood, is getting nearer to bigger box office numbers. Audiences are seeking content, especially action, sci fi, fantasy genres in English and regional languages. 3D is also helping to grow the market, he adds. The problem Hollywood studios face in the Indian market, which sells 3 billion movie tickets annually, is that all genres of Hollywood films dont work. For instance, romantic comedies, or dialogue-heavy English dramas dont do well in India. Typically, action, horror and VFX-heavy animation fare well at the domestic box office for Hollywood, says Thakkar. But even though if you want to be a player in India, there is no option but to go local. Some studios are taking it slow, even taking a step back, he adds.
Analysts say that a UTV-Disney acquisition is a one of a kind and dont see too many mergers and acquisitions in the space. There are a few entities like UTV up for grabs. With UTV in broadcasting, gaming, digital, it gives Disney a bigger play in the local market, feel analysts. Viacoms Malhotra says the next few years will be interesting with more and more opportunities opening up in high-growth markets across the world. Forward thinking players will clearly look at multiple ways of consolidating presence in these markets.