UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

--------------------------------------------------------------- IN RE:

ARCAPITA BANK B.S.C.(c), et al.,

Debtors.

---------------------------------------------------------------

x : : : : : : : x

Chapter 11 Case No. 12-11076 (SHL) Jointly Administered

AFFIDAVIT OF PUBLICATION OF ANDREW SOLLINGER IN THE FINANCIAL TIMES

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FINANCIAL TIMES MONDAY MAY 6 2013 ★ 15

COMPANIES

Bollywood films are known for theirupbeat finales, but the industrybehind them also has plenty to cele-brate. India’s Hindi-language filmbusiness marks its centenary thismonth, while a new feature toastingthe nation’s cinematic heritage,Bombay Talkies, premiered at theCannes Film Festival last week.

Indian filmmakers are in fine finan-cial fettle too, as a boom in multiplexscreens brings record audiences in tosee their song-and-dance spectaculars,making last year the sector’s mostsuccessful ever by sales.

But a management revolution isbrewing in a business that dates itsbirth to the first screening of a silentfilm in Bombay in May 1913, and onebrought about by the arrival of someof the biggest names in the globalentertainment business.

US-based studios such as Disney,Viacom and Fox are attempting towin a larger share of the Indian filmmarket, which is the world’s mostproductive and popular, making morethan 1,000 films annually and sellingmore than 3bn tickets last year.

Money is one motivation: Indianfilm revenues are projected toincrease by more than half to $3.6bnover the next four years, accordingto consultants KPMG, helping thecountry surpass Britain as the fifth-largest film market by sales.

Openness to outsiders is as impor-tant, however, especially to interna-tional participants seeking growthacross the developing world.

“Which of the large emerging filmmarkets is as free of regulation asIndia? Here there are no restrictions.Anyone can come and make whatthey want,” says Ronnie Screwvala,the head of Disney UTV, India’slargest film producer by revenue.

“The only other potentially reallylarge market, China, is full of limitson how many films foreign groups canmake and distribute.”

Disney is the most prominent of theforeign arrivals, following its acquisi-tion last year of UTV, a large Indianfilm and television group, in a dealworth $454m.

Viacom may follow suit as industryobservers expect the US conglomerateto buy out the remainder of its 50-50joint venture with Network 18, anIndian media company.

Rupert Murdoch’s News Corp isincreasingly prominent, with its FoxStar Studios division building on thesuccess of the company’s larger andmore established Star India cabletelevision business.

Hollywood’s biggest names havenonetheless had to grapple with anunusual challenge as they attempt tocrack the Indian market, says JehilThakkar, head of media entertain-ment at KPMG in Mumbai, namelythe unusual reluctance of local film-goers to warm to their main product.

India has proved almost uniquelyresistant to imported English-language films, with foreign effortstaking only 9 per cent of the country’sbox office last year compared withabout half of the market in China.

Consequently only a few dozenEnglish-language films are released

each year, as India’s public show aclear preference for films in Hindi,alongside those produced in morethan a dozen other local languages.

In response, the foreign participantshave adopted an unusual approach:setting themselves up as domesticfilm studios, which attempt to beatBollywood at its own game by produc-ing Indian-language films, overseenwith minimal interference from theirparent groups in California.

“In nearly every other world mar-ket, the Hollywood studios have basi-cally established local distributionoffices to push their own Americanmovies,” KPMG’s Mr Thakkar says.“But India is the only place wherethey have been forced to go local witha vengeance.”

These hybrid international busi-nesses have proved commercially suc-cessful so far, says Vikram Malhotra,chief operating officer of Viacom18,while introducing a shake-up on thefinancial side of an industry that untilrecently was dominated by small,family-controlled production houses.

Alongside two domestic studios –the film arm of industrialist AnilAmbani’s Reliance empire and ErosInternational, a film producer tradedon Aim, London’s junior stock market– the big US studios account for themajority of funding for Indian films.

“In a very short span of time, thefinancing architecture of the industryhas changed completely,” says MrMalhotra, who says roughly three-quarters of film funding in India iscontrolled by larger corporate groups,up from about a 10th a decade ago.

Such companies still face challengesas they aim for growth. Ticket pricesremain among the world’s lowest, forinstance, while India still has farfewer screens per capita than mostother big markets. This limits profita-bility. Even hit Bollywood films rarelyearn more than Rs1bn ($18.5m), a frac-tion of their Hollywood equivalent.

The industry is also yet to crack theglobal export market: its products arepopular with India’s sizeable diaspora,but there is little sign of a long-hoped-for “crossover” Bollywood hit capableof wooing an international audience.

Nonetheless, the scale of the changebrought by the arrival of internationalgroups is clear.

“For 95 out of the 100 years of Bolly-wood there were no corporations atall. It was one big family business,based on handshakes and hugs, oftenwith quite dubious sources offinance,” says the head of one largeIndian entertainment group, speakingon condition of anonymity.

“Now you have professionals run-ning the businesses, and professionalsources of finance too. It has upendedthe entire power structure of thisindustry, and for the better.”

US studios seek inroads into BollywoodMEDIA

News analysisIndian cinema dates backto 1913. A managementrevolution is now beingplayed out in the business,writes James Crabtree

‘India is theonly placewhere[Hollywoodstudios]have beenforced togo local’

Drive to reel in Indian movie audiences

Indian film star Amitabh Bachchanstages his debut in a Hollywoodfeature this year, playing underworldbusinessman Meyer Wolfsheim in BazLuhrmann’s adaptation of The GreatGatsby, writes James Crabtree.

But while his casting has attractedattention from fans in his homecountry, the move is also part of astrategy in which US studios areattempting to adapt their offerings tosuit the tastes of audiences inemerging markets.

China is typically the target. Westernfilms have cast Chinese characters orfeatured Chinese locations, includingDisney’s Iron Man 3.

But the same approach is being

used to woo Indian audiences, forinstance with the appearance ofBollywood star Anil Kapoor in thefourth instalment of the MissionImpossible franchise.

Hollywood films face stiff competitionin India’s film market, and US studiosare using other approaches to win oversceptical audiences.

Iron Man 3 has performed well inIndia since its release last week, inpart because its promoters decided todub the film not just into Hindi, butTelugu and Tamil.

Bigger marketing campaigns help, asdo early release dates: someHollywood films open in India wellbefore they reach screens in the US.

MORE ONFT.COMIndia boasts a$2bn film industry.The FinancialTimes’ JyotsnaSingh looks atwhat lies aheadfor the sectorwww.ft.com/bollywoodvideo

Revenues rising

Sources: KPMG; PwC

Indian film industry total revenues (Billions of rupees)

80

100

120

140

160

180

200

2011 12 13 14* 15*

* estimates

16* 17*

Hollywood versus Indian films2012 market share in India

8.5%

91.5%Indian

Non-Indian

Cheap ticketsAverage movie ticket price ($)

Japan

UK

US

Russia

Brazil

China

India

15.7

9.7

7.9

7.0

6.1

4.7

0.7

Shahrukh Khan in ‘Ra.One’ from 2011. Indian film revenues are projected to increase by more than half to $3.6bn over the next four years

In March, the Ouya gamesconsole achieved somethingalmost unprecedentedamong its Kickstarter-funded peers: it startedshipping on schedule.

The Android-based con-sole, which raised $8.5m onthe crowdfunding platformlast summer, began sendingout its first units to Kick-starter backers just in timeto meet its deadline.

That earns Ouya a raredistinction among Kick-starter technology hard-ware projects that raise mil-lions of dollars from thepublic. Others, such as thePebble smart watch and theOculus Rift virtual-realityheadsets, missed their dead-line by several months,risking the ire of backerswho had stumped up $99 ormore.

However, now that back-ers of Ouya, Pebble, Oculusand other graduates ofKickstarter’s boisterous“class of 2012” are finallyreceiving their devices, aneven more demanding con-stituency awaits these hard-ware start-ups: the massmarket.

Selling to regular con-sumers beyond the fewthousand early adopterscan require further funding,retail distribution agree-ments, and more, says YvesBehar, founder of the Fuse-project design consultancyin San Francisco.

“While Kickstarter hashelped people make things,everything else still needsto be figured out,” he says.

Fuseproject designed andbranded the Ouya, as wellas other Kickstarterprojects such as the GAMEgolf-shot monitoring device,

but Mr Behar is picky aboutwhich entrepreneurs heinvests time and capitalinto.

“What Steve Jobs said is:‘Great artists ship’,” hesays. “I tell [potential part-ners]: great CEOs, greatentrepreneurs ship. So whatI’m looking for is not justpeople with great ideas, butpeople who can build andrun a business.”

For many hardware entre-preneurs, Kickstarter andother crowdfunding sitessuch as Indiegogo providean opportunity to test themarket demand for a prod-uct before taking the costlyrisk of manufacturing.

“There is a tense relation-ship between demand andsupply and a lot of risk.Kickstarter has changed alot of that,” says Ben Red-ford of Mint Digital, a Lon-don-based design agencythat launched Projecteo, aminiature projector forInstagram photos, on thecrowdfunding site. A previ-ous product submissionfailed to reach its fundinggoal – “which is brilliant”,Mr Redford says, “because Ididn’t make something thatnobody wants”.

Eric Migicovsky, chiefexecutive of Pebble, agrees.A previous smart watch thecompany had worked onsold only a few thousandunits.

“The most importantthing at the beginning ofthe start-up is to get feed-back from your customers,”says Mr Migicovsky.

“The tools that are availa-ble now on the hardware

side mean that you can getto the point where you’regetting feedback from cus-tomers much sooner andmuch cheaper than before.That’s probably why thereare so many hardware com-panies that are starting upright now.”

But despite the fallingcosts of launching, only athird of technology projectsthat pitch for backing onKickstarter reach the target

required to receive theirfunds. Of those that suc-ceed, only a minority shiptheir initial product out ontime, even before they startthinking about larger pro-duction runs.

Even hardware start-upsthat raise funding the tradi-tional way, through venturecapital, can suffer delays.Leap Motion, which isdeveloping a hotly antici-pated motion controller forPCs, said last month that itwas putting back by twomonths its consumerrelease into stores such asBest Buy, while it fixed last-minute bugs. Such traumasare easier to manage forinternet businesses, whichcan control their own distri-bution.

“People are realisingwhat has been true in hard-ware for a long time – thatit is complicated and diffi-cult and there are a lot ofchallenges to overcome,”says Travis Bogard, head ofproduct at Jawbone, now aveteran member of SiliconValley’s hardware start-upscene after producing Blue-tooth headsets, speakersand health-monitoringwristbands for seven years.

“A lot of people view thatthe bar to hardware hasgone down,” he says. “Thebar to doing great hardwarehas not changed at all.”

More experienced hard-ware companies are nowlooking to help the start-upsout. Accelerator pro-grammes in Silicon Valleywork with selected “indieelectronics” companies toensure they meet their ship-ping targets and can scaleup to meet consumerdemand.

Examples include thoserun by Haxlr8r, an early-stage venture investor, andPCH, which manages out-sourced manufacturing inChina for many big-namegadget makers.

“There is a big differencebetween being a productand being a company,” saysBrady Forrest, who runsPCH’s start-up acceleratorin San Francisco.

Factories are likely tocharge smaller companiesmore for their early produc-tion runs, due to lower vol-umes and higher risk. Butbecause PCH has existingrelationships with thesemanufacturers, they aremore prepared to work withthem – especially as smalltechnology companies cangrow fast. “

With start-ups, you cango from year one to yearfour and become a billion-dollar business,” Mr Forrestsays. “We hold their handand spend more time withthem.”

Such partnerships canalso help build trust withlarger investors, whosefunds may be required toscale up beyond Kick-starter. Mr Migicovsky triedunsuccessfully to raisefunds for Pebble early lastyear, which is why heturned to crowdfunding.

But rather than thinkabout financing, Mr Migi-covsky says that improvinghis product through soft-ware updates will be hismain focus now that ship-ping the hardware is almostcomplete.

Ouya earns Kickstarter kudos bycranking out the consoles on timeTECHNOLOGY HARDWARE

News analysisA rare distinction,says Tim Bradshaw.But an even biggerchallenge awaits:the mass market

The Android­based console raised $8.5m on the crowdfunding platform

‘The mostimportant thing atthe beginning ofthe start­up is toget feedback’

MAY 6 2013 Section:Companies Time: 5/5/2013 - 17:55 User: digbyt Page Name: CONEWS2, Part,Page,Edition: USA, 15, 1

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