Filmed Entertainment

Ushering in the digital era…

Increased use of technology in films and digitisation of theaters has continued to drive the filmed entertainment industry in India in 2011. The growth of regional cinema, accompanied by new marketing media, has captured the attention of audiences. The year witnessed increased collaboration between domestic and international production houses as the scale of movies increased substantially. The growing demand for quality content, rising disposable incomes and increasing investment in multiplexes and theaters (driving average ticket prices) are expected to be the key drivers of the industry, going forward.

The filmed entertainment industry has witnessed considerable advancements in technology this year. Digitisation of theaters continues to ensure the widespread release of films, reaching the remotest areas of the country at less than 80 per cent of the cost of conventional film prints. The number of digital screens in the country increased from around 2,000 in March 2010 to nearly 5,000 in June 2011. Moreover, the digital revolution has enabled leveraging of content across various platforms such as home videos, internet and mobiles. New guidelines, permitting the digital cinema copy of a film to be eligible for obtaining certification, were issued this year, making it easier to release digitally made movies. Digitisation of theaters is expected to continue in the future with investments from several players. The Indian audience seems to have embraced the use of technology in films, with Haunted being the country’s first stereoscopic 3D film, and Singham as well as Bodyguard making extensive use of animation and visual effects (VFX). 3D continued to bring audiences to theaters in huge numbers, which enabled higher realisation due to increased ticket prices, while maintaining the exclusivity of theaters. With the rising demand for 3D movies, the country, with around 160 3D screens at present, is expected to have 500 such screens by March 2012, with their number reaching 1,250 by 2013.

Hollywood filmmakers outsourced more VFX work to India to tap low labor costs and the large pool of English-speaking workers with advanced computer skills in the country to successfully make animations such as Puss In Boots. The growing comfort of Indian filmmakers with VFX, increasing formats for 2D to 3D conversion and the continued growth of outsourced work are expected to be some of the industry drivers in the coming year.

Multiplexes were the preferred choice of movie-goers in 2011, enhancing the viewing experience for the audience and increasing per-ticket realisation. Multiplex chains rekindled their expansion plans, with a focus on non-metros, driven by the increase in disposable incomes in these regions. International players have also entered the market, backed by supportive government policies, allowing 100 per cent foreign direct investment (FDI) for all film-related activities, including exhibitions. Investment in multiplexes is expected to increase, with the total number of multiplex screens in the country projected to be 1,275 in 2011, increasing to 1,925 by 2015.

This year witnessed several big-starrer films hitting the Rs 1 billion mark. With improved collections, production budgets have also been stepped up. Singham, Ready, Bodyguard and RA.One were expensive projects, earning more than Rs 1 billion each. This trend is expected to continue in 2012 and beyond.

As films are becoming bigger and bigger, collaboration between Indian production houses and foreign studios has also been on the rise, along with increased investments from foreign studios. This trend is expected to continue as scale and realisation increase and distribution costs reduce. Collaboration of international film studios with local film-production houses, to develop Hindi and regional movies, is also expected to increase.

Film studios are stepping up their investments in regional cinema, to tap underpenetrated markets. This segment, which is dominated by South Indian cinema, has witnessed significant growth in Marathi, Punjabi, Bhojpuri and Bengali cinema. Studios are also releasing the dubbed versions of popular Hollywood films, while multiplexes are increasing the number of shows of regional movies. Consumption of regional entertainment is expected to continue growing next year with rising purchasing power across tier II and tier III cities.

Social media has gained prominence as a marketing tool for production houses. Facebook, Twitter and other social networking websites are being used to create a “buzz” around films before and after their release. Audiences are increasingly being engaged with film content through games, contests, teasers videos and opinion polls. Social networking websites have also been useful in gauging audience response. Digital platforms, apart from their growing reach, offer an important source of revenue through advertising. Use of this medium for marketing movies is expected to rise with increased internet penetration in the future.

Furthermore, low-screen penetration in India is expected to continue providing growth opportunities for investors for several years. Producers and distributors should exploit new outlets for monetising rights, including cable and satellite (C&S), home video, direct-to-home (DTH), digital, wireless and internet downloads, to increase their revenues. However, enhanced quality content will continue to be the major driver of industry growth.

Going forward, improved and advanced financial planning will help filmmakers improve their margins and broaden the purview of financing options available to fund their films. New means of financing, including film incentives, need to be tapped. After the success of Zindagi Na Milegi Dobara, the Government of Spain has offered a tax deduction of 18 per cent on the total production cost of Indian filmmakers shooting in the country. The industry will also need to make a concerted effort to reduce the tax burden by highlighting the commercial aspects of the movie business while negotiating with the government for reduced taxes.