'Excessive production expenses and high payments to stars may make the industry unsustainable in the long run'

Policies and politics, views and vignettes, of governments, parties and individual politicians are not the only fodder for the cables that are routinely sent to Washington by the diplomats of the United States. Their fine-tuned eyes and ears scan much more. One example is Bollywood — the Mumbai-centred Hindi film industry — which they have looked at as thoroughly and professionally as any other issue that matters to U.S. interests. After detailed discussions with film industry experts and reviewing the often modest revenues and low profitability levels of the industry, diplomats concluded that the impact of Bollywood, which is “touted as one of the largest film industries in the world, is more cultural than economic.”

Two detailed cables sent on February 11, 2010 (248355 and 248356: unclassified) from the U.S. Consulate in Mumbai, accessed by The Hindu through WikiLeaks, documented the unsustainable levels of compensation that are routinely paid to Bollywood stars, briefly discussed the underworld connections involved, outlined the emerging global aspirations of Indian film companies and analysed the failure of some Hollywood-Bollywood joint productions. The cables also spotlighted how the Indian film world was divided on what Hollywood can bring to their table.

Though Hindi films are produced in large numbers every year, according to G.K. Desai, a film producer, only one in every 10 productions turned out to be successful. In the assessment of Siddharth Roy Kapur, the CEO of UTV Motion Pictures, the situation was even worse. He said that “only five percent of Hindi movies released in 2009 made a profit.”

The diplomats were told by industry sources that despite such sustained losses, people continued to make films “because of the attraction and glamour” the field offered.

The cable noted that, according to Aashish Singh, vice-president of Yash Raj Films (YRF) Studios, a production company based in Mumbai, one of the reasons for the “little fortune” in Hindi films was the high production costs. Actors, Mr. Kapur pointed out, command fees that amount to as high as 50 per cent of the total budget for a film. Unless the compensation levels get realistic and production costs come down by some 40 per cent, the business will not be sustainable in the long term, Akshaye Widhani, vice-president of YRF held. However, many of them were aware that such reductions will not happen easily. This prompted Mr. Widhani to admit that till “one of the major production studios fails or declares bankruptcy,” actors may not get realistic with their compensation packages.

If lack of lines of credit was a problem till 2000, in more recent times it was the oversupply of money that affected film production in India, noted the cable. According to Jehil Thakkar, Head of Media and Entertainment for KPMG, until 2000 the industry did not have access to legitimate commercial financing. “As a consequence, films were financed by ad hoc collections of investors, many of whom were from the construction and trade industries, who charged interest rates as high as 60-100 percent. The industry also welcomed funds from gangsters and politicians, looking for ways to launder their ill-gotten gains.”

The U.S. diplomat was told that the situation had changed after the government made it possible for the industry to access formal credit, but the multiple avenues and sources of financing that opened up also caused problems.

Industry professionals complained that “there is too much money and too many people chasing [a] limited amount of talent.” This, in turn, created “a ‘price bubble' and ‘unrealistic expectations'.”

Citing Mr. Thakkar, the cable noted that India had just 12 screens per million people while the U.S. had 117 screens per million. This gap, it observed, indicated the room for growth that was available. Officials at Anil Ambani's Reliance Big Pictures — which is described by one of the cables as “the most aggressive Indian player in Hollywood” — thought that the best way to go forward is to corporatise the Indian film industry and go global. However, Jawahar Sharma, COO, was candid enough to admit that their own global ventures had less to do with any strategic considerations.

Joint productions

Hollywood studios, which are “amongst the highest revenue earners in the world,” were attracted by the growth potential of the Indian film industry and made forays into Bollywood. Unfortunately, the cable documented, all the joint Hollywood-Bollywood productions released thus far have failed at the box office, signalling that “a successful entry into Bollywood is not easy.”

According to the film professionals who are quoted, one of the difficulties faced by Hollywood film-makers is Bollywood's attitude. Mr. Kapur told the diplomat that Indian film production studios viewed “Hollywood as a competitor.”

“It is difficult to convince the large Indian film companies to partner with Hollywood,” said Blaise Fernandes, managing director of Warner Brothers India.

This was partly due to the fact that even well known companies like YRF Studios thought Hollywood studios had little to offer them other than finance. As a result, “they [the Indian film companies] would seek collaboration to de-risk the film project by jointly investing in its production, or to re-make Hollywood movies in Hindi,” noted the cable, citing Indian producers. However, a few others held a different opinion. Hollywood, they observed, had a range of things to offer including its script libraries, valuable production talent, and an international marketing and distribution network.

One cable (248355), after reviewing the opinions and information that were collected, concluded that “U.S. studios have to still find a good working model for partnering with Bollywood.” However, it was optimistic that U.S. companies can still “achieve success in this unpredictable market where even the best Bollywood studios and stars have been known to falter.” In order to get there, the cable advised, the U.S. studios “have to diversify the production pipeline to include a mix of small, medium and big-budget films by renowned and new talent for mainstream and world cinema audiences.”

(This article is a part of the series "The India Cables" based on the US diplomatic cables accessed by The Hindu via Wikileaks.)