COVER STORYCOCOVVEVER S OROORRY BEYOND THE BOX …s3images.coroflot.com/user_files/individual_files/143182_hKscBH57... · have one. Entitled Ra.One—Th e Game, will be available

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BEYOND THE BOX OFFICESATELLITE, MUSIC AND DISTRIBUTION DEALS ARE HELPING BOLLYWOOD PRODUCERS RECOVER MUCH

OF THEIR INVESTMENT EVEN BEFORE A FILM IS RELEA SED, SECURING THEM AGAINST BOX-OFFICE FAILURES.

Ra.One, Shahrukh Khan’s much awaited ac-tion fi lm, is all set to hit the screens around Diwali this year. With King Khan playing a superhero, and the likes of Kareena Ka-poor and Arjun Rampal in the star cast, the #100 crore plus fi lm has all the makings of a blockbuster. Even so, Khan’s Red Chillies

Entertainment and its co-production partner, Eros Interna-tional, are not taking any chances. Th ey have derisked their investment considerably even before the fi lm hits the screens.

Red Chilles and Eros have made a neat #35 crore selling the satellite television rights to Star India for fi ve years. Th e music rights have been sold to T-Series for #15 crore (read the story

on music rights on page 54). In addition, they have tied up with Sony Computer Entertainment Europe to create a video game around the fi lm, becoming the fi rst Bollywood fi lm to have one. Entitled Ra.One—Th e Game, will be available to PS2 and PS3 gamers, and will earn Khan and Eros a slice of the revenues on every sale. Even independent distributors are queuing up to buy distribution rights, which Eros has retained. Th en there are the international rights, which will bring in a signifi cant chunk of revenue. All in all, the co-producers won’t get hurt even if the fi lm were to fl op badly. “By the time the fi lm hits the theatres, we will try and recover at least 60% or even up to 80% of the cost. We do that for all our fi lms,” says Kamal Jain, COO, Eros International.

AJITA SHASHIDHAR

Indian fi lm-makers are not only thinking big with ambi-tious projects such as Ra.One and Robot (Endhiran in Tamil; it made a net profi t of over #100 crore), they are also doing everything they can to make the business less risky. Today, the industry’s dependence on theatrical revenues has almost halved. Even a fi lm with a moderate performance at the box offi ce manages to recover its costs to a great extent. Almost 35-40% of the revenue comes from satellite rights alone, which, in most cases, are pre-sold to a TV channel even before the fi lm hits the production fl oor.

Th us, even if a fi lm turns out to be a dud, the producers are protected to a great extent. Take Vipul Amrutlal Shah’s Action Replayy for example. Starring Akshay Kumar and Aishwarya

Rai, the fi lm had a budget of around #40 crore. Shah presold the movies satellite rights to Colors for close to #20 crore. It turned out to be a prudent move—the fi lm bombed badly at the box-offi ce. “It was a disaster. It wouldn’t have recovered even half the money had it not been for the satellite rights,” says a leading Mumbai-based distributor.

Similarly Anjaana Anjaani (Priyanka Chopra and Ranbir Kapoor), an Eros production, made a #16 crore profi t despite getting a tepid response at the box offi ce. Th e fi lm had a budget of #50 crore and the studio made #22 crore by pre-selling the satellite rights. Another #9 crore came from music, while dis-tribution earned it another #35 crore revenue.

Th is trend of having multiple revenue streams is a welcome

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Studio: UTVCost: 25 croreBox Offi ce Revenue: 40 croreSatellite Revenue: Not Sold

Studio: Viacom 18Cost: 18 croreBox Offi ce Revenue: 10 croreSatellite Revenue: 15 crore

Studio: Eros InternationalCost: 55 croreBox Offi ce Revenue: 80 croreSatellite Revenue: 35 crore

Studio: Yashraj FilmsCost: 12 croreBox Offi ce Revenue: 12 croreSatellite Revenue: 11 crore

40 OutlookBusiness > September 17, 2011 41OutlookBusiness > September 17, 2011PAGE DESIGN BY MANISH MARWAH; PHOTOGRAPHS BY SOUMIK KARSOURCE FOR TRADE FIGURES: ENTERTAINMENT BUSINESS NETWORK

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OutlookBusiness > September 17, 2011 OutlookBusiness > September 17, 2011 4342

Lessons LearnedTh e studios have since learnt a thing or two. Instead of acquir-ing fi lms at outrageous prices, co-production has become the order of the day. For instance, Aamir Khan Productions part-nered with UTV for the recent blockbuster, Delhi Belly. In this instance, UTV was involved in the production right from its in-ception. Typically, in such cases, the studio pays the production

house a producer’s fee (around 10% of the budget) and han-dles all marketing and distribution activities. Th e two partners have a 50:50 share of the intellectual property rights (IPR) and share revenues from the various revenue streams.

However, each co-production deal depends on the partners involved. While Eros would have shared the IPR for Ra.One with Shahrukh Khan and UTV would have shared it with Aamir, it doesn’t mean the studios strike similar deals with all production houses. “In most cases a studio partners with a production house, gives them a production fee, but retains 100% IPR monetisation with itself,” explains Jain of Eros. “Th e revenue sharing in most cases is 60:40 in favour of the studio, and in some cases it is 50:50.”

Typically, if a fi lm earns #100 crore, the studio retains 20%; another 10% goes toward marketing and advertising, and the rest is shared with the production house.

Many believe the co-production model has made the system transparent. “Since we are part of the project right from the concept stage, we have complete control on the cost of produc-tion,” says Lamba of Reliance. “Now the fi nancial risk from the start is ours. Aft er we recover the costs and the fi lm goes into profi t, we share the profi t with our co-production partner.”

Vikram Malhotra, COO of Viacom18 Motion Pictures, con-

control of its cost from day one.” Garg says that though fi lms such as Shor in the City and

Once Upon A Time in Mumbaai were produced by Balaji, it partnered with Freshwater for Love Sex Aur Dhoka and iRock for Ragini MMS. “On co-production deals, we are hands-on supervisory producers, apart from taking care of marketing and sales.”

On its part, UTV prides itself on being a studio-cum-pro-duction house. “We believe that the director is the captain of the ship and we back him by being a sounding board,” remarks Siddharth Roy Kapur, CEO, UTV Motion Pictures. Th e #454 crore fi lm business of UTV (which was recently ac-quired by Walt Disney), produces close to 15-20 fi lms every year across languages.

Fox Star, a newbie in the Indian studio business, adopted a co-production model from the beginning. “We were not in-vestment bankers who would fund a project and not be part of it,” remarks Vijay Singh, CEO, Fox Star. Th e studio has also followed a strategy of not releasing too many fi lms. “Our tar-get is not to make more than 4-5 fi lms in a year.”

Money From AboveToday, satellite TV rights con-tribute anywhere between 30-35% of the revenue of a fi lm, sometimes even more. Band Baaja Baaraat, for instance, did moderately well in cine-mas. Th e #12 crore fi lm man-aged to break even with a box offi ce earning of #12 crore. It eventually made profi ts aft er selling its satellite rights for

curs: “When I was acquiring content, I had no idea for whom I was doing it. Now I have full control and I understand the target audience I am trying to reach.”

Going It AloneIf a studio releases 12 fi lms in a year it produces at least 6-7 of them in entirety. Th ese are ‘self-produced’ fi lms. In this model, everybody in the value chain is paid a fee and all the profi ts are pocketed by the studio.

Viacom18 Motion Pictures produced fi lms such as Shaitan and Tanu Weds Manu. “We were involved right from the con-cept stage. In fact, in Tanu Weds Manu, I remember even re-working the music in the climax scene because we felt that it could have been better,” says Malhotra.

Tanuj Garg, CEO of Balaji Motion Pictures, fi rmly believes that a studio has to take on the onus of production to be able to de-risk itself more effi ciently. “A studio has to be involved from scripting to post-production, enabling it to be in greater

change for Indian fi lm-makers. In the old days, industry icons such as Raj Kapoor (Mera Naam Joker) and Sunil Dutt (Reshma Aur Shera) would get burned just because their fi lms didn’t do well at the box offi ce. Th at was an era when 90% of a fi lm’s success depended on box-offi ce receipts. A fi lm-makers rise and fall was dictated purely on the theatrical performance of his fi lm. Another example is Boney Kapoor’s #9 crore extravaganza Roop Ki Rani Choron Ka Raja, which was a box-offi ce bomb. Th e multi-starrer (Anil Kapoor, Jackie Shroff and Sri Devi) fi lm was declared a ‘disaster’ on the fi rst day of release itself. It raked in just #3 crore and Kapoor end-ed up in a huge fi nancial mess.

Corporate Profl igacy Th e entry of corporates such as Eros International and Re-liance Entertainment in 2005-2006 gave a boost to the de-risking eff orts of production companies. Film-makers such as Rakesh Roshan and Vipul Shah earned crores selling their projects to studios for unheard of sums. Shah is known to have sold the rights of his blockbuster Singh Is Kinng to Studio 18 (now Viacom 18 Motion Pictures) for a whopping #70 crore when the actual cost of his fi lm was in the region of #30 crore.

While production companies had hit the jackpot, the stu-dios burnt their fi ngers. Th ey mindlessly acquired fi lms and were saddled with huge debts. Even if the fi lm did well at the box offi ce, the studio couldn’t recover its costs because it had shelled out huge sums to acquire it. Rock On!, for instance, was a huge box-offi ce hit, but Reliance Entertainment, which released the fi lm, ended up making losses. Farhan Akhtar spent around #15 crore to produce the fi lm, but Reliance acquired it for #50 crore. Th e fi lm recorded a net collection of #25 crore at the box offi ce but Reliance was unable to recover its costs, let alone turn a profi t.

“Th e acquisition model didn’t work for the studios at all. We all made losses,” admits Sanjeev Lamba, CEO, Reliance En-tertainment. “We look at the high acquisition costs as a price we paid to enter the market,” he adds.

By the time Ra.One hits the theatres, we will try and recover at least 60% or even up to 80% of the cost. —KAMAL JAINCOO, Eros International

Th e industry should now lookfor the next big revenue stream. It could be a new geography or even a new technology. —SIDDHARTH ROY KAPURCEO, UTV Motion Pictures


GAME

Studio: UTV Motion PicturesCost: 60 croreBox Offi ce Revenue: 22 croreSatellite Revenue: 15 crore

THANK YOU

Th e acquisition model didn’t work for the studios at all. We all ended up making losses.—SANJEEV LAMBA, CEO, Reliance Entertainment

PRIYAM DHAR PRIYAM DHAR

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OutlookBusiness > September 17, 201144

#11 crore. Satellite rights are pre-

sold depending on the na-ture of the fi lm, star cast and the pedigree of the production house. While the satellite rights of fi lms such as Zindagi Na Milegi Dobara and Ra.One were pre-sold at astronomical-ly high prices, Dabanng, which earned box offi ce revenues of #214 crore, was pre-sold to Colors for only #10 crore. Th is was because Arbaaz Khan’s credentials as a producer were not es-tablished. Nobody expected Dabanng to be such a blockbuster.

Th e cable and satellite rights revenue segment has grown by more than 33% in 2010-11, according to a recent FICCI-KPMG report. Th e report adds that this segment is likely to grow at least 10%-13% in the coming year.

According to Boney Kapoor, who produced the box-offi ce hit Wanted, it is not unusual that TV has become an important source of revenue. “Television channels are acquiring fi lms in large numbers. Earlier, it was just three channels—Star Gold,

Sony and Zee. Today, Sahara and Colours are clearly important players.” Kapoor adds that acquisition prices for satellite rights will continue to rise since there is clear demand.

Many studios are also getting into bulk deals with channels through which they bundle fi lms that have not performed well along with their blockbusters. Eros, according to Jain, has re-cently signed a #240 crore satellite rights deal with a leading broadcaster. “We clubbed some of our low-budget fi lms such as Chalo Dilli with our blockbusters and sold it to a leading broadcaster.” Viacom 18 is also known to have inked a bulk deal with Zee TV to club its blockbusters such as Tanu Weds Manu and Pyaar Ka Punchnama along with the not so suc-cessful Bbuddah Hoga Terra Baap.

The Distribution PieIn the television industry, there is a popular saying: “If content

is king, distribution is God.” Distri-bution has also become an important revenue spinner for fi lm studios. Prior to the advent of these studios, pro-duction companies gave distribution rights to a distributor for a minimum guarantee and later shared 15%-20% of the revenue.

Most studios today have their own distribution set up. Reliance Enter-tainment, for instance, has 10 distri-bution offi ces across the country and offi ces in the UK and the US as well. In addition, it has alliances with dis-tributors in the UAE and South Africa. It has also picked up a stake in US fi lm distribution company, IM Glo-bal, to be able to distribute its movies in international markets. Distribu-tion contributes close to 40% of the company’s revenues, says Lamba of Reliance Entertainment.

In fact Reliance also partners with production companies to merely

A studio has to be involved from scripting to post-production, which enables greater control of its costs.—TANUJ GARG, CEO, Balaji Motion Pictures

With diff erent revenue streams,the dependence on theatrical revenues has defi nitely come down.—VIKRAM MALHOTRA, COO, Viacom18 Motion Pictures

Distributor: T-SeriesCost: 40 croreBox Offi ce Revenue: 60 croreSatellite Revenue: 25 crore

READY

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46

rights of Singham in some territories to independent distribu-tors such as Raksha Entertainment for #11.70 crore. Similarly, Eros sold the distribution rights of Game to an independent distributor. Eros distributed Dabanng in 60% of the territories and sold the the rest. Balaji Telefi lms sold the rights of Ragini MMS. “Derisking is key and maximising pre sales of all rights is defi nitely the way forward,” explains Garg of Balaji.

“Distribution has become a science and a key business strat-egy tool for most studios,” re-marks Jain of Eros. He claims that more than 40% of his stu-dio’s revenues come from dis-tribution. Jain cites the example of Zindagi Na Milegi Dobara in which they consciously decid-ed to distribute 90% of the fi lm in multiplexes and only 10% in single screens. “Since the fi lm catered more to an urban au-dience, we felt that it would do better business in multiplexes,”

distribute their fi lms. One of its recent distribution tie-ups was with Prakash Jha Films, to distribute Aarakshan. “We were only involved in the distri-bution and had nothing to do with the making of the fi lm or its marketing,” clarifi es Lamba.

According to the FICCI-KPMG Media and Entertainment report, the number of prints for domestic theatrical release has grown 50% in the last year. Not only have domestic releases increased, there has also been a surge in the release of Indian fi lms in the international market. For instance, Karan Johar’s My Name Is Khan earned gross revenues of #180 crore, of which overseas earnings ac-counted for #82 crore. Fox Star Stu-dios had bagged the fi lm’s worldwide marketing and distribution rights for #100 crore before its release. Th e fi lm even screened in untapped markets such as Poland, Russia, Lebanon and Egypt. Again, Zindagi Na Mi-legi Dobara, a more recent fi lm, earned #60 crore from the domestic market and #22 crore overseas in the fi rst 10 days of its release.

Th ough most studios have their own distribution set up, they also sell the distribution rights of some of their fi lms to independent distributors. Reliance, for instance, sold the

By distributing and taking my fi lms to newer territories, studios enable more people to experience my work.—AMOL GUPTE, Writer and Producer

Viacom 18 was extremely serious and committed even though Pyaar Ka Punchnama was a

5 crore fi lm.—LUV RANJANDirector

Studio: Fox Star StudiosCost: 45 croreBox Offi ce Revenue: 15 croreSatellite Revenue: 15 crore

DUM MARO DUM



he explains. However, Ramesh Sippy, Chairman of Raksha Entertain-

ment, a distribution company, says that the corporates that have entered the fi lm business are yet to learn the tricks of the trade. He believes these studios lose revenues by releasing fi lms across all the theatres in a territory. “You can’t distribute fi lms from your laptop. One needs to understand the nuances of the business in order to get the maximum bang for the buck,” says Sippy. He points to the recent blockbuster Singham, which he distributed in South Mumbai. “While we ensured that the fi lm was exhibited in all the multiplexes, we released it only in two single-screen theatres. Th ese single screens had packed shows and as a result my revenues went up by 60%.

With studios consolidating a large part of the distribution pie, the business of the independent distributors has dropped considerably. Many have either joined hands with studios to only distribute fi lms or have become secondary buyers such as Sippy, who buy individual projects.

Acquiring fi lms for distribution has become expensive says Kumar Mangat, CEO, Big Screen, who distributes fi lms in Punjab and Western Mumbai. “A few years ago, I bought the rights for Black for #2 crore, but earlier this year, even though I was prepared to pay #10 crore for Guzaarish, I couldn’t get the rights.”

Mangat insists that studios don’t share distribution unless they are uncertain of the fi lm’s success. “Even though distribu-tors are willing to pay a premi-um for upcoming releases such

You can’t distribute fi lms from a laptop. Th e nuances need to be understood to get bang for your buck.—RAMESH SIPPYChairman, Raksha Entertainment

as Bodyguard and Ra.One, the studios don’t want to sell to the distributors as those fi lms would for sure get them high returns.”

Still RiskyDespite all the derisking strate-gies, only 25% of the 150-odd Hindi fi lms produced every year make money. “I will not say it is a less risky business now, but with more revenue streams coming in, the dependence on theatri-cal revenues has defi nitely come

down,” says Malhotra of Viacom18.In addition, many of the studios continue to carry losses from

their earlier misadventures. “We are yet to recover our accumu-lated losses,” admits Lamba of Reliance. Industry sources say Viacom 18 Motion Pictures also registered a loss in FY2011.

Eros International’s profi ts in FY2011 went up by almost 40% from #82 crore to #118 crore, while UTV Motion Pictures’

Th ough our profi ts have narrowed, we prefer to partner with studios as they take a lot of responsibility off us.—VIPUL SHAHProducer

Studio: Reliance EntertainmentCost: 45 croreBox Offi ce Revenue: 80 croreSatellite Revenue: 32 crore

SINGHAM

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CLOSE TO THE MADDING CROWD

Anirban Dhar AKA Onir’s fi lm, I Am, has been in the news for the way the fi lmmaker raised funds. Onir

raised over N1 crore through Facebook, winning support from 400 people across 45 cities.

Bollywood studios have been ducking new talent in favour of more established big-ticket names.This has left smaller fi lm-makers little choice but to resort to alternative platforms. Ashvin Kumar, director of

Little Terrorist that was nominated for the Oscars, raised $10,000 through crowd funding. This is essentially a collective effort by a network of people to fund entrepreneurial endeavours of an individual. Crowd funding has even attracted the attention of venture capitalists (VC). Springboard Ventures, a start-up VC fund, is launching the popular US-based crowd funding platform, Filminteractor, in India. “This will give fi lm-makers a platform to raise funds for their fi lms,” explains Satish Kataria, MD, Springboard Ventures.

This is how it works: if a fi lm-maker looking to raise N1 crore for his project, he gets N10 lakh each from fi ve investors. And N50 lakh from one person, who is then invited to become co-producer. “The co-producer gets a share in the revenue of the fi lm,” says Kataria.

Yogesh Karikurve, CEO, Magus Entertainment, specialises in generating funds from various international markets by roping in funders from across the globe. Recently, he co-produced Serda Dreams, a documentary that described the craze for Bollywood dancing in Germany. “Since it was co-produced, the risk was mitigated,” says Karikurve.

Crowd funding gives fi lmmakers a platform to raise funds. —SATISH KATARIAMD, Springboard Ventures

revenues went up from #315 crore to #454 crore in FY11. But some aren’t too sure if the picture is indeed that clear. “Even the so-called profi table companies are bleeding,” says trade consultant Mehra. “Th ey are postponing their losses by am-ortising them over a period of three-four years.”

Raksha’s Sippy feels that the entire co-production claim of most studios is a farce. “I think the term co-production is misleading. It’s more a case of co-ownership. How can a

studio co-produce a fi lm when they don’t have a proper pro-duction team in place?” A senior trade analyst agrees, saying that most of them, barring UTV and Balaji, “are yet to have a proper production team in place”.

Th e biggest benefi ciaries of the entire value chain continue to be the fi lm production companies. Th ough the honeymoon period, when studios gave them whatever they asked for, is over, production companies continue to be more than willing to partner with studios.

Vipul Shah says that though his profi ts have defi nitely nar-rowed, he still prefers to partner with studios as they take a lot of responsibility off his shoulders. “When you partner with a studio they get involved in the project from day one and share the risks,” he says. “One can concentrate completely on making a great fi lm, unlike earlier, when the producer had to take care of everything from distribution to exhibition.”

Writer Amol Gupte, who recently made his debut as a pro-ducer with Stanley Ka Dabba, backs such partnerships. “By distributing my fi lms and taking them to newer territories, the studios enable more and more people to experience my work,” says Gupte, who partnered Fox Star studio for his fi lm.

Luv Ranjan, Director, Pyaar Ka Punchnama, feels his fi lm wouldn’t have had a wide release had Viacom 18 not been

part of the project. “Th ey were extremely serious and com-mitted even though it was a #5 crore fi lm.” Kumar Mangat, the producer, says working with a studio instantly lowers the risk. “Th e studio takes charge of funding, allowing me to make more fi lms. Today, I am looking at making 3-4 fi lms a year, unlike earlier when I never dared to make more than one.”

According to Uday Singh, CEO, Motion Pictures Associa-tion, in addition to strengthening their business models, it is high time studios paid attention to larger issues such as the huge threat broadband penetration could pose to the various monetisation platforms. Singh believes the industry needs to ensure that broadband users pay for the content and don’t consume it free. “Th ere are hundreds of ways by which one can easily download even the latest blockbusters and watch them for free,” he points out.

UTV’s Kapur feels the #90 billion industry (according to the Ficci-KPMG report), should now look for the next big revenue stream. “It could be in terms of a new market, new geography or even a new technology. I think that it is high time we look at the next level of evolution.”

With inputs from Krishna Gopalan

Email us at [email protected]

or SMS OLB<feedback> at 575758 �


ANJAANA ANJAANI

Indie filmmakers are turning to alternative means of fi nancing.


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KRISHNA GOPALAN

A huge poster of Salman Khan from his recent blockbuster Ready is perched comfortably behind Bhushan Kumar in his sprawling western Mumbai offi ce. “Yes, the fi lm did pretty well,” says Ku-mar, Chairman and Managing Director, T-Series. “Pretty well” is an understate-

ment: Ready is the biggest Bollywood hit of the year, gross-ing over #180 crore globally on a #40 crore budget. T-Series not only holds the music rights to the fi lm, it also produced the blockbuster. Kumar doesn’t say how big his profi ts were but his rivals jealously concede that the cash registers haven’t stopped ringing.

T-Series, known to some people as Super Cassettes Indus-tries, is the largest player in the Indian music industry. Kumar decided to hold on to the music rights of Ready when he could have sold it for a handsome sum. He says the thought never entered his mind. “Th e fact is we have a great label and the music business is one we understand really well.” Th e track

record bears out that claim: in the past year alone, T-Series released the music for fi lms such as Dabangg, Once Upon a Time in Mumbaai, Murder 2, Ready and Zindagi Na Milegi Dobara—each of which earned upwards of 20% on their in-vestment. “Th is year, we have picked up the music rights of 60 Hindi fi lms,” Kumar says. Th at’s nearly half of all planned Bollywood releases in 2011.

Striking The Right NoteAs anyone in the music industry will aver, getting the audience’s pulse right is anything but easy. Besides, music in Bollywood is almost always sold without a music company ever getting a chance to listen to its soundtrack. Sounds ridiculous, but that’s exactly how this high-risk, uncertain-return industry operates. If that’s not enough, supply continues to be at the same level. In 2009, there were 94 releases, while in 2010, 129 fi lms hit the theatres. “With the number of fi lms not increas-ing dramatically accompanied by the fact that there are barely three or four large players, there is bound to be an infl ationary mindset,” points out Shridhar Subramaniam, President (India & Middle East), Sony Music Entertainment India. His company picked up the rights to Prakash Jha’s Aarakshan for #6 crore

THE SOUND OF MONEYMUSIC RIGHTS HAVE SAVED MANY A BOLLYWOOD FLICK FROM GOING UNDER.

FILM BUDGET MUSIC RIGHTS BUYER

Ready 40 9 T-Series

Delhi Belly 25 8 UTV Music

Zindagi Na Milegi Dobara 55 12 T-Series

Aarakshan 42 6 Sony

Bodyguard 60 9 T-Series

Ra.One 100+ 15 T-Series

Krrish2* N/A* 8 T-Series

Music sales add to the revenue of fi lms, in some cases bringing in almost a third of the budget.

A New Tune

* To be released in 2012. All others are 2011 releases. Source: IndustryAll fi gures in Ncr

ILLUSTRATION BY MANISH MARWAH; PHOTOGRAPHS BY SOUMIK KAR52 OutlookBusiness > September 17, 2011 53OutlookBusiness > September 17, 2011

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OutlookBusiness > September 17, 2011 OutlookBusiness > September 17, 2011 5554

and has also signed a three-fi lm deal with Vashu Bhagnani. Clearly, one person who is not complaining is the producer,

who manages to put in place a derisking model that works—get in some useful money by selling the music, which takes care of a good part of the cash fl ows. And if you are making a big-budget fi lm like Zindagi Na Milegi Dobara, Ra.One or Krrish2, you can be assured that at least 15% of your budget will come from the sale of music rights (see accompanying graphic). “For a fi lm with a budget of #12 crore, music can bring in as much as 35%, while for a fi lm with a #60 crore budget, that number could well be 25%,” adds Subramaniam.

Tips’ Taurani should know a little bit about that. His com-pany, which in the past has picked up rights to musical hits like Khalnayak and Raja Hindustani, had a huge success with Ajab Prem Ki Ghazab Kahani, its home production, in 2009. Made on a budget of #40 crore, the fi lm grossed close to #90 crore at the box offi ce. According to Taurani, the producer’s share of domestic box-offi ce revenue was #33 crore, while it earned #10 crore from the overseas markets. “More impor-tantly, it earned #4 crore from music, which I did not have to share. Th at’s the good part about music as a revenue stream,” he says. Not surprisingly, it is a model that he will employ in the time to come—produce a fi lm and retain the music rights.

Th is is a model that seems to have appealed to Saregama as well. India’s oldest music company will release Soundtrack, its home production, in September this year. Th is #5.7 crore fi lm will have as many as 12 songs with some from Sarega-ma’s existing catalogue. Th e music rights will remain with the company. “Yes, there is money to be made in music, though we will take a measured approach to the business,” says the company’s Managing Director Apurv Nagpal. In the recent

past, Saregama has acquired the music rights to No One Killed Jessica and Ragini MMS. “Th e plan is to produce three or four fi lms in the next 18 months,” says the company’s Business Head (Films), Aditya Shastri.

If there is a feeling that music prices for large fi lms have hit the roof, it is worthwhile to recall the phase between 2001 and 2002, when the rights for Kabhi Khushi Kabhie Gham were sold for #10 crore while Devdas went for #13 crore. Taurani’s Tips acquired Yaadein for #8.5 crore where he is said to have recovered just #1.5 crore. “Th e reality is that music prices have remained relatively stable unlike home video. A song typically gives a fi lm more longevity,” points out Subramaniam. Today, no fi lm fetches more than #1 crore for its home video rights.

Th at probably explains how the music of a fi lm actually mini-mises the damage at the box-offi ce as well. Take the case of Tum Mile, a #20 crore fi lm that saw its music alone bring in #5 crore. Eventually, the theatrical collection for the fi lm was barely #10 crore. Likewise, Patiala House, made on a budget of #20 crore saw its music bring in over #4 crore. Th e fi lm tanked at the box-offi ce.

Go DigitalContrary to popular perception, the fi lm music business in India is alive and thriving. What’s really helped is the ubiquity of the mobile phone and the digital revolution that’s come alive through DTH, radio and the slew of music channels. Today, music reaches the end user in various forms, with physical (older formats like CDs and cassettes come here) now a poor second to digital. For 2010, according to a KPMG report, digital brought in #420 crore, while physical contributed #320 crore of a total industry size of #850 crore. By contrast, in 2007, dig-ital accounted for #140 crore, while physical was #560 crore.

Other numbers also bear out the digital boom in the music industry. In 2006, it accounted for just 14% of the #700 crore industry’s revenues. Today, the fi gure is just a shade under 50%.

KPMG’s estimates suggest that it will move to a much larger 79% by 2015, with barely 6% coming from physical. Kumar agrees on the potential for digital. “Th ere’s no doubt that digital is a big story. Th ere is a lot of action waiting to play out on all its platforms, be it radio, internet, mobile or television.” Th at will be the take-off point for the industry, as its dependence on theatrical revenues will come down substantially.

Other players, too, are convinced that the digital space will be the growth driver in the coming years. Tips Industries, for instance, has virtually stopped physical production of music. “Th e only time we make CDs these days is when someone comes to us with a large order and makes a down payment,” says Kumar Taurani, the company’s Chairman and Manag-ing Director.

Meanwhile, Shemaroo, the largest independent aggregator in Bollywood with over 2,500 titles, has put in place a team of 80 to execute its digital plans. “Th ese people work on key platforms like mobile, internet and IPTV,” points out Hiren Gada, Director, Shemaroo Entertainment. His company owns the perpetual rights for over 300 fi lms like Amar Akbar An-thony, Chupke Chupke, Namak Halaal and Jab Jab Phool Khile.

Rather than depend on uncertain sales of home video, the company is trying out innovative revenue-sharing agreements with online players. For instance, Shemaroo makes money each time a clip from any of its fi lms is watched on YouTube.

Th e fact is we have a great label and the music business is one we understand really well.—BHUSHAN KUMARChairman and Managing Director, T-Series

For a #12 crore fi lm, music can bring in as much as 35%, while for a #60 crore fi lm, it could be 25%.—SHRIDHAR SUBRAMANIAMPresident (India & Middle East), Sony Music Entertainment India

Th e model is simple: when a user watches a scene (or song) from the fi lm, it either starts off with an advertisement or there is a crawler at the bottom of the screen. Th e revenue gener-ated by YouTube through these ads is shared with Shemaroo. “Digital is a medium for the future and we expect that to contribute more than 10% of the fi lm producer’s revenues in

the next three years,” says Gada.

The Mobile ConnectionTh e mobile operators and hand-set manufacturers second digit-al’s dominance. Consider Nokia, which already has a strong on-line music presence globally. It is estimated that Nokia has over 1 million users in India, who, ac-cording to KPMG, account for 16% of its global downloads.

From an operator’s point of view, it is estimated that mu-sic brings in close to 60% of its non-voice revenue (more com-monly referred to as value-added services or VAS). Within this are caller tunes, ringtones and music clips, to name just a few. Th is is in addition to legal downloads of music from sources such as Music Bharti ( a part of Bharti Airtel), which claims to be In-dia’s largest music company in revenue terms. “Th e good part about this is that revenue can be generated over a period of time,” thinks Taurani.

It’s not all positive. Only 30% of the revenue on a mobile down-load comes to the music com-pany; the mobile operator takes the rest. And that shows no signs of changing. “Operators facili-tate the music reaching the end consumer. With the kind of in-vestments we have made, we will naturally get a larger share,” says an offi cial with a large operator.

Consider this: the revenue from VAS for operators is pegged at $1.4 billion (over #6,400 crore). Music is said to account for least half of that. Th erefore, when Kumar speaks of recent hits from his stable, such as Pee Loon, Munni Badnaam Hui and Sheila Ki Jawani, it translates to digital applications in vari-ous forms. For that matter, the songs from Dabangg are said to have been played over 200,000 times across radio stations. If the digital medium continues to rake in the moolah fi lm-makers can rest assured that at least one variable from their derisking equation will continue to work wonders.

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Yes, there is money to be made in music, though we will take a measured approach to the business.—APURV NAGPAL Managing Director, Saregama

Th e plan is to produce three or four fi lms in the next 18 months.—ADITYA SHASTRI Business Head, Films, Saregama

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