The film audience as shareholder

Over the past few years, the Mumbai film industry has stepped up its quest for quality upgradation. Whe-ther it is by way of slicker production values, or out-of-the-box themes, film producers and those wielding the megaphone have been desperately seeking to keep up with changing audience expectations. This trend has been on the increase over the past year or so. So whether it is the dark, brooding and path-breaking Black by Sanjay Leela Bhansali and the Birla-owned Applause Entertain-ment, or Dhoom from the Yash Raj Films stable, a new look and fresh ideas are what film-makers and producers are rushing to the drawing board for these days.

Over the past few years, a new connection has taken shape: that of the quality of films and shareholder value. Hyperbole? Not really. Since the beginning of the new millennium, a number of media companies have raised funds from the capital market as it became clear that the film and television industry would get increasingly corporatised and need more transparent and institutionalised sources of funding. Hence, whether it is Mukta Arts or Balaji Telefilms, UTV or Pritish Nandy Communications, today, there is a direct correlation between the fate of a film at the box office and the movement of their scrips in the stock market. Not surprisingly, the flop of a Yaadein gives investors the heebie-jeebies and tells on the Mukta Arts stock. Conversely, the healthy response generated by a fresh Jhankaar Beats does good things for PNC.

There are several other entities?Zee, Tips, Padmalaya, K Sera Sera, SAB etc among them?where the stock market keeps a close watch every time they release a film.

Clearly, the film industry has been bolstered by the initial public offer (IPO) option as it has enabled several companies to raise funds to finance cinema.Of late, the IPO route has been more popular than routes like institutional funding of films, started by the likes of the Industrial Develop-ment Bank of India (IDBI).

A recent and exhaustive report on the Hindi film industry by YES Bank puts the matter in perspective. It shows that the quantum of funding from non-traditional funding sources (of which companies that raised funds from IPOs are a part) has been increasing every year for the past few years. Typically, non-traditional funding includes loans from banks and institutions, companies and production houses which have availed of the IPO route, music companies, TV broadcasters and even individuals through venture capital and/or private equity.

In actual terms, the quantum of funding from non-traditional sources has grown sharply, from Rs 48.5 crore in 2001 to Rs 251.5 crore in 2004. Year-on-year, it has increased 39% in 2004 over the 2003 figure. But that?s not all. Within non-traditional sources, the share of companies which raised funds from IPOs was the second highest, at 16% in 2004. Though this was lower than the previous year?s 38%, it was crucial. The importance of listed media companies in the Hindi film business these days, therefore, can hardly be overemphasised.

Reports suggest the first few months of 2005 haven?t been too good for the box office, and the film industry is sitting on losses of over Rs 150 crore already. In 2004, 50%, or 89 of the 177 Hindi films released, had an average budget of over Rs 2 crore, according to Film Information figures. If similar trends continue in 2005, the quality of these films has to be well above the ordinary in order that they break even and make profits. So far, other than Black and Page 3, no other film has been a true hit.

But the hunt for the magic formula continues. Technical finesse is now taken for granted by an audience increasingly fed on the very best in international cinema, courtesy the DVD library, or the movie channels. Equally, the challenge is in getting that magic script and combination of actors that will work.

A number of films have been lined up by these listed companies for release in the coming days. UTV is readying Ram Gopal Varma?s D, Rang De Basanti with Aamir Khan and Namesake (together with Fox Searchlight) based on Jhumpa Lahiri?s novel, starring Tabu and directed by Mira Nair. K Sera Sera?s Amitabh Bachchan starrer Sarkar and Adlabs? Marigold starring Salman Khan are awaiting release. These films will have to satisfy both the audiences and shareholders. And pretty often, there may be no distinction between the two.