Specials

Film industry needs to live in tight budgets to lure investors










 

MUMBAI: Having squandered the capital that it raised over the last few years, the Indian film industry is facing tough times as it prepares to swing into growth after two years of slump.


Suffocated with high costs, limited stars and poor content, the time has arrived for the industry to live in tight budgets, introduce processes and be transparent if it wants to lure back investors.


“The truth is that we blew it up,” said Kaleidoscope Entertainment managing director Bobby Bedi, who has used organised funding for his films. “As bank financing opened up, we became very greedy and some even doubled their budget projections so that they could do the movie with debt. We out-priced ourselves and fell sick in the process.” 


The film industry has seen negative growth for two straight years and fell 6.7 per cent to Rs 83 billion in 2010, according to the latest KPMG report released at Ficci-Frames.


Bedi urged the industry to follow transparency in reporting profitability of film ventures, adopt processes and invest money in a responsible manner.


“For any of the business models to work, a public-oriented system which will tell us the reality of our profitability numbers has to be set up. Unless processes are built, none of the traditional or innovative ways of funding will work. The investor is the supplier of our oxygen. We need to respect that,” said Bedi.


Goldman Sachs India vice president for media and entertainment Nirvaer Sidhu said investors were looking at mitigation of risks for alignment of interests with project promoters, simpler business models and desired intermediaries to manage the interests of producers and studios.


For the period 2004-06, $6 billion were raised for films at the global level. The market has dried up since 2008 and different forms of film funds have evolved.


“The Indian market is very different and there are very few players of scale. Investors look for production houses that release more than one film a year,” said Sidhu.


Avendus Capital managing director and chief executive Ranu Vohra stressed on the need for creating an ecosystem similar to that of Silicon Valley.


“There are opportunities for new funding models, like investment from family offices and slate financing. The first generation family businesses that have excess of $100 million can look at films as an alternative asset class. We need to create a Silicon Valley kind of environment here as the entertainment industry is a high-risk, high-return business,” said Vohra.


A lucrative and untapped financing option is securitisation of intellectual property rights (IPR).


“Intangible assets like movie libraries and even music libraries can become a means to raise capital. Securitisation of IPR is a well established option in the West and it is only a matter of time before Indian companies realise the value of a movie or a music library,” said Yes Bank EVP, media and entertainment, Karan Ahluwalia.
 

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