For a generation that grew up in the 1990s or earlier, the transition from rickety single-screen cinema halls to plush multiplex theatres has been as a rapid as a blink of an eye. The Post-1991 liberalization policies have dismantled the license-raj system of the previous regimes. This transformation has a lasting impact, much deeper than the surface which we are nowadays accustomed to seeing.
After 1998, when the National Democratic Alliance government granted cinema the status of an industry, things have changed drastically. But how were those days when cinema used to be in terms of film financing and execution?
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- “Until the late 80s and early 90s, film financing was a shadowy affair, with behind-the-scenes financing never traced in the accounting books.
- 10-15 private businessmen used to gather and invest their money into film financing for reasons of earning through the traditional practice of usury.
- An interest of 3-4% per month wasn’t uncommon. For example, borrowing 1 Cr amount for six months would accrue an interest rate of 24%.
- Majority of such transactions were untraceable, mostly in black money. Also, Bharat Shah case is of great interest in this regard, as links with Indian mafia were found and the accused were sentenced lengthy prison terms.
- Illegal financing was an outcome of the Govt’s lack of interest in films as an economic sector and no efforts were made in regulating it.
- Beginning from 2000 onwards, things changed. Large financial corporations took an interest in film financing and banks like IDBI gave loans at rates of 15-16% per annum.
- Thus, began an age of systematic means of investment. As industry veteran Mahesh Bhatt quotes, “After which came corporates about five years ago that brought investments on a partnership basis with equity partners not charging any interest, but taking 50% of the revenue.” The Studio Model of film production begins thus.”
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- “Simultaneously, the multiplex phenomena began in the 1990s when the first multiplex was opened by PVR at Saket, Delhi and since then it has become the biggest player in the multiplex business, augmented by the govt’s policy allowing 100% investment in the exhibition business.
- With such increased capacity and viability of the business, the revenue sharing agreements have also tilted somewhat in the direction of distributors. This had a concomitant effect on film marketing which has now become an important tool of promoting films.
- Television plays an important role in the dissemination of films. Earlier, the amount paid by TV channels was a pittance compared to today’s times when pre-release deals are already set and the amount paid is substantial. Not only that, but they also market the films on free or contract basis.
- Competition from Hollywood has raised the quality bar much higher and we have seen the examples of Krrish and Ra One making attempts to compete with CGIs effects. Foreign production teams are nowadays not uncommon in Indian film production these days. “
- Apart from the box office revenues, television deals, DVD sales, etc. ancillary revenue streams are also being tapped to provide an increasing share of the film revenues driven by digitization.
- With the onset of next-generation networks and the availability of sophisticated devices to access media, it has become possible to diversify revenue streams to cover production & marketing expenses and to provide ROI to investors.
- The time in which ROI takes has appreciably reduced to a matter of weeks and months. This provides a clear picture for the investors to decide on investment on a project basis or on the basis of a Production House’s past history of film making and deals secured.