Ever wondered the plethora of substandard movies that we churn out in India and you come across a just couple of 'decent' ones in a year. Have you wondered if this industry is really making any money with such a low success rate? Have you wondered where the financing is coming in this industry? Apparently, the US diplomats have done a nice study and are now available to us through Wiki Leaks.
Here are my excerpts of The Hindu's excepts of Wiki Leaks cables on this topic:
- Only 1 in 10 productions are successful. Only 5% of movies released in 2009 made profit (quoted by sources, not scientific survey)
- People continue to make movies in such unprofitable industry for "glamour" (hard to believe)
- Reasons for little or no profitability is because of high production costs, in other words the exorbitant prices of the actors. Actors, it is said command as high as 50% of total budget of a film.
- Unless these unrealistic compensation levels come down by 40%, the business will not sustain for too long. But the industry says that reduction is not going to happen anytime soon. One of the industry VP was quoted to say that unless one of the major production studios fail will the actors not realize the folly of their unrealistic pay packages.
One interesting comment is that until 2000 there was an oversupply of money. Until 2000 the industry did not have access to legitimate commercial financing, as a result the films were financed by collection of investors, many from construction and trade industries who would charge an exorbitant 60-100% interest. Gangsters and politicians too joined in financing the movies to launder their ill-goten gains. After the government opened formal credit to the industry, the situation has improved.
So what is the state of the industry now? Too much money and too many people chasing limited amount of talent thus creating a "price bubble".
Another interesting observation in the cable is that India has far fewer screens per capita (12 screens per million people) than US (117 screen per million people). Anil Ambani's Reliance Big Pictures is advantage of this opportunity to build movie theaters and go global.
Finally, the cables talked about Hollywood-Bollywood joint production business. It seems that Indian film production studios view Hollywood as a competitor. Indian studios felt that Hollywood studios had little to offer than finance. The cable advised the US studios to diversify the production pipeline to include a mix of small-medium-big budget films by renowned and new talent.
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