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Show Me The Money!

Even though Bollywood enjoys industry status, banks are still reluctant to lend to producers. This, coupled with crushing taxes, has dealt the industry a double blow

finance

The ambitious ‘Make In India’ program, a pet initiative of the Narendra Modi government, has earmarked the Media & Entertainment sector as one of its key thrust areas.

Needless to say, the entire film industry welcomes this prioritisation and feels privileged to work towards the growth of the national economy and by extension, its clout on the world stage.

Like with every other economic endeavour, the growth of the film industry is contingent on the flow of capital and liquidity, as also taxation and other policies that promote investment in the various arms of the filmmaking ecosystem.

How does the current financial support system of the film industry measure up to what is required for it to fully realise its potential as a major contributor to India’s economic strength? Read on:

lalit-chatnaniLalit Chatnani, Director, Finance,  Sony Pictures Entertainment, India

The Indian film industry is burdened with very high taxes, with the average rate of entertainment tax being 27 per cent. We are, in fact, one of the few countries with the highest entertainment tax. As a result, net earnings continue to be low. With the political will behind GST now, one hopes that once entertainment tax is replaced by GST, the effective rate of tax will come down by 10 to 12 per cent. The flip side is that municipal bodies across the states have the power to levy their own taxes, despite GST, and so one still doesn’t know what the eventual percentage will be. Currently, the input credit of service tax is also denied to the extent of revenue generated from theatrical revenues and this leakage of input credit loss will be a thing of the past once GST takes effect.

When it comes to financing movies, the studio model, which looks at varied options – acquisitions, co-productions, productions – works best. Apart from a greater appetite to experiment with content, the alliance of production houses and studios has resulted in long-term associations that have set new benchmarks in terms of revenues and creativity. The model is dynamic and evolving still, as more and more avenues to share and monetise content arise.

shailesh-singhShailesh Singh, Producer

It’s not that banks don’t finance films at all. There are production houses which do get finance from banks, especially corporate studios or basically anybody who is credible. But when it comes to films, there is a huge risk factor involved.

In fact, in between, banks started offering finance but a few of them witnessed major losses and that’s when they grew reluctant to continue. Now which business doesn’t suffer losses? The problem with films is, there is no tangible product. The solution to the lack of film financing is that we have to become more organised.

Filmmaking is based on one man’s vision, and it is still not considered a ‘serious business’. People associate films with the entertainment industry and that’s why it took so long for us to get industry status. Consider the risks. When you make a film on a budget of Rs.5 crore and also spend Rs.5 crore on marketing, budgeting like this doesn’t work with a bank. Also, just because one film does business of Rs.200 crore doesn’t mean every film will follow suit.

There is a talk of Disney shutting shop in India and other foreign corporate studios may do the same because of the way they process. You can’t make every film on a budget of Rs.50 crore, without looking at the returns. The problem with these studios is that they don’t concentrate on content. They first look for an actor, then a director and then a writer to write a script. Shouldn’t it be the other way around? In India, we make ‘projects’ rather than films. Bollywood is virtually tuning into a studio and everyone just wants to make money.

Two of our biggest industrial houses entered the filmmaking business but quit when they started making huge losses. We have to acknowledge that understating a product and understanding a film’s script are two very different things. You can learn about marketing a product in college but films are a creative medium.

Also, even if you make a good film, it does not necessarily mean it will earn the expected money at the ticket counter. Dharma Productions and Yash Raj Films have survived for so long because they believe in making good films. Even if two successive films don’t work, their third release will.

When corporate houses came in, banks started financing films but they started to face huge losses. There was no recovery for them even in upcoming projects. That’s why producers have to take money from the market at high interest rates.

If Rajkumar Hirani asks a bank to finance his film, do you think the bank would agree? Of course, it would because Hirani takes two years to write a script and two years to make a film. He doesn’t allow his film to release unless he is satisfied with the project. That’s why he is such a bankable director among the audience.

Box Office India
Collection Chart
As on 19th August, 2017
FilmsWeekWeeklyTotal
Toilet Ek Prem Katha190.84Cr90.84Cr
The Dream Job120K20K
Dirty Madam X110K10K
Jab Harry Met Sejal14.09K57.45K
Gurgaon26.83L52.42L
Mubarakan35.28Cr51.98Cr
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