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sreedhar pillai analyses the effects of demonetisation on Kollywood, which is largely fuelled by hard cash.

Prime Minister Narendra Modi’s decision to scrap Rs. 1,000 and Rs. 500 notes has crippled Kollywood. Shooting schedules have been cancelled, release dates reshuffled, and projects delayed. Panic has spread in the industry, with Tamil film financiers temporarily shutting shop.

P.L. Thenappan, vice-president of Tamil Film Producers Council, says, “Shoots of several films have been stalled due to the shortage of small currency bills (Rs. 50 and Rs. 100) that are usually used to pay daily wages to the likes of light boys and junior artists. We are used to dealing in higher denominations (Rs. 500 and Rs. 1000) for convenience. Many shoots have been cancelled, and release dates have gone for a toss as financiers are waiting for new notes.”

Lack of online booking facility

The footfalls in cinema theatres across Tamil Nadu are at an all-time low. Gautham Menon’s Achcham Yenbadhu Madamaiyada ( AYM), the first Tamil film to release after the demonetisation move, had a fantastic opening in the 3 Cs – Chennai, Chengalpet, and Coimbatore, but collections in other areas remained low.

S. Pictures’ Srinivasan, a North and South Arcot-based exhibitor and distributor, says, “Ninety per cent of screens in the 3 Cs – including all multiplexes – have an online ticket booking facility. The rest of Tamil Nadu, which comprises 90 per cent of all the screens, however depends only on walk-ins. In these centres, the priorities of people have changed, and they spend money only on essentials. It will take a few weeks for business to get stabilised.”

Rakesh Gowthaman, managing director of Vettri Theatres in Chromepet, says, “ AYM had a good opening in my theatre, thanks to online booking. But other films had dismal collections as walk-ins were low. My canteen sales plummeted to just 20 to 25 per cent of our normal sales. What do you do when people give you a Rs.500 note to buy something for Rs.30?”

To sidestep this issue, Chennai-based SPI Cinemas has introduced card payment for the cafeteria and parking at its stand-alone properties (Sathyam and S2 Thyagaraja).

Release dates pushed

Nearly 30 films that were being shot in and around Chennai have come to a standstill. Release dates too have needed to be rescheduled, as financial settlements could not be made with financiers. T. Siva of Amma Creations, producer of G.V. Prakash’s Kadavul Irukaan Kumaru, had to postpone its release by a week in order to settle his financiers. Vijay Antony’s eagerly-awaited Saithan, which was to release on November 17, has now been pushed to December 2. Vishal’s Kaththi Sandai too has been pushed from its initial release date of November 25.

Mahesh Govindaraj of Auraa Cinemas, that’s marketing Saithan, says, “I have sold all areas and planned to released my film on November 17. But because our film was a more ‘massy’ subject, distributors wanted the market – especially the B and C centres – to stabilise. Therefore, we have pushed the release date to December 2.”

Grapevine has it that much of Tamil cinema is run with black money. There have been many reported cases of income tax raids on stars, producers, financiers, distributors, and middle men. Some of these cases are still going on. Take the case of the disappearance of one-time leading financier and producer, Madhan of Vendhar Movies, for instance. Madhan, who worked as an ‘admission agent’ of SRM University chancellor T.R. Pachamuthu, is reported to have produced all his films using black money procured through college admissions. The release of his new film, Raghava Lawrence’s Motta Shiva Kettai Shiva, is presently being held up due to legal tangles.

Black history

The production and release of new Tamil films have come to a halt as 95 per cent of their funding comes from individual financiers. Most corporate financiers have vanished, as they found it difficult to do business. According to a recent study by a private bank, the black money-to-white money ratio in medium-budget Tamil films (financed by multiple small financiers) is 60:40. The number of films held up due to financial disputes between producers and financiers is the highest in our industry.

In Bollywood, the entry of corporates following the liberalisation of movie business has checked the flow of black money into the industry. A bulk of all the black money transactions has ceased to exist. During the 1970s and 1980s, smugglers with underworld connections funded Hindi films. In 2011, a leaked cable released by Wikileaks had mentioned Bollywood’s underworld connections, and that “it welcomed funds from gangsters and politicians looking for ways to launder their ill-gotten gains, known as black money in India.”

Black money that has entered Kollywood comes from those running businesses across diverse categories including education, real estate, health care, liquor, sand smuggling, and gold. Recently, a scrap dealer produced a hit film. In the last two years, many have turned producers in order to launch members of their family in the industry.

The industry also receives frequent funding from NRIs, who are smitten by the glamour and glitz of tinsel town. Where this money originates from is not an issue in an industry which produces over 200 films a year.

Right from the days of its first superstar, Thyagaraja Bhagavathar, Tamil cinema has remained a business run by cash. In the early 1960s, big heroes started taking a part of their salary in cheques to avoid income-tax issues. Tamil cinema’s strongholds in the B and C markets deal only in cash, and cinema theatres are required to charge a stipulated amount fixed by the government. But when a major film releases, these tickets get sold at two to three times the fixed rate. In short, the money generated from such inflated prices cannot be accounted for, and this amount too is used to settle financiers, who charge exorbitant interest rates.

Star salaries

The high amounts paid to producers by distributors in the form of Minimum Guarantee (MG) were mostly in cash. This was circulated within the industry to settle financiers or to pay artistes and technicians. A veteran producer says, “The main reason for the high salaries of certain Tamil stars is the easy availability of cash. People were willing to pay ridiculous amounts to stars, without looking at the commercial feasibility of the project. That’s why a majority of star films fail at the box-office. Financiers, meanwhile, end up funding the same producer again in the hope of getting back their investment with another film.”

The path ahead

What’s next for Kollywood? A small-time financier says, “It is not going to be easy to switch overnight from cash to cheque payments. The cash flow has stopped and nobody seems to have kept Rs. 100 and Rs. 50 notes. In fact, we have always dealt in Rs. 500 and Rs. 1,000 notes, as it is more convenient. Our priority now is to convert a heap of ‘scrapped’ notes to legal tender. This reform is good in a way… star salaries will crash, as nobody is wiling to accept cash. I feel it will take at least six to eight months for things to turn around.”

In the current situation, there is no ‘legal currency’ circulating to pay back loans taken from financiers. Many producers have taken almost 50 per cent as cash and are finding it difficult to pay back the cash component with interest.

Those on the look out for the new Rs. 2,000 notes say it will take months before they become easily available. As far as theatres in Tamil Nadu are concerned, the impact will be on two levels – micro and macro. It makes things easier for audiences in the 3 Cs, as they can use plastic money and make online transactions. But the real problem is outside these areas, where walk-in crowds comprise 90 per cent of the viewers.

Producer and historian, Dhananjayan Govind, says, “The biggest impact of demonetisation is on the southern film industry that relies heavily on cash for funding both the production and distribution of films. Not many banks fund films, and with limited finance from corporate entities, most producers have borrowed from traditional lenders with high interest rates. Now, they have to pay back in cash and settle the loans to release their films. Until the current cash crunch is dealt with, and distribution mechanisms relaxed, the situation will not improve.”

Transparency and accountability

The good news, however, is that a lot of workers and junior artistes are accepting cheques or RTGS payments. Raju Mahalingam, creative head of Lyca Productions, that’s producing Rajinikanth’s big-budget 2.0, says, “Demonetisation is a blessing for all corporate and multinational companies. Initially, we had a tough time as we needed Rs. 10-15 lakh every day to settle our daily shoot expenses. It was troublesome as we had to withdraw money from banks on a daily basis and prepare cash vouchers for payment. Now, we are making only RTGS and NEFT payments after deducting TDS. In the long run, it is beneficial for the industry, and there will be more transparency and accountability.”

It looks like it will take at least six months for the industry to overcome the after-effects of demonetisation. In the future, producers in Kollywood must become professional, and look for institutional funding or corporate backing to finance films.

At the same time, traditional funding and distribution mechanisms will become a professional operation. The State Government too should implement the High Court order and give a free hand to the industry to allow flexible ticket pricing.

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Printable version | Apr 1, 2020 8:21:17 AM |

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