When liberalization changed film production and distribution in India

The economic reforms of 1991 radically changed the way film production and distribution in India was run, and allowed Indian films to go global with a vengeance.

A still from Dilwale Dulhaniya Le Jayenge, where the lead pair Raj and Simran played NRIs who fall in love while on a vacation in Europe

Shriram Iyengar

In 2012, The Walt Disney Company acquired UTV, one of India’s leading media and entertainment companies. It was a sign that Hollywood had woken up to the potential of South Asian, particularly, Indian cinema.

In 2015, Priyanka Chopra made her debut on American network television while Irrfan Khan bagged a lead role alongside Tom Hanks in Ron Howard’s Inferno, the screen presence a marker for the growing social presence. This was a far cry from the days when the only Indian faces in foreign films were actors like Om Puri, Naseeruddin Shah and Saeed Jaffrey, part of the ‘parallel' cinema movement.

Liberalization of the Indian economy in 1991 opened many doors for filmmakers, breaking down barriers to investment and technology. It took another seven years for institutional finance to enter the picture, however. In 1998, the sector was awarded industry status. In 2000, the Industrial Development Bank of India (IDBI) began to offer loans for film production at 15-20% interest per annum. This was to curb the practice of producers investing personal or underworld wealth in projects. It gave the industry encouraging stability and a sense of security.

Around the same time, multiplex chains started emerging across India. In an article in The Times Of India newspaper in 2007, columnist Swaminathan S Anklesaria Iyer said, “The end of the licence-permit era has led to an explosion of new theatres in every city. Even more crucial, price control has largely disappeared. This has made possible the multiplex, the cornerstone of the new film revolution.”

Industry status and the proliferation of screens transformed filmmaking, a risky business at the best of times. With finance available from legitimate sources at reasonable rates of interest and many more avenues for monetization apart from the big screen and music rights, such as TV, satellite, DVD and internet rights, the risks for producers were brought down to an acceptable level, reducing the pressure on them to stick to tried-and-tested formulae.

But the bigger change came about in distribution. A process that was disorganised began to get structured. The use of statistical analysis, marketing research and audience metrics, unknown three decades ago when distributors and producers depended on word-of-mouth appreciation of films and a general understanding of their subject, has become standard.

The distributor is usually responsible for marketing, exhibiting and syndicating a film. He is a key arm of the revenue-generating process of filmmaking. The planning begins before a film hits the theatres. Its value is often based on its first showing to producers and distributors. This, in addition to its subject, star value, and director’s reputation determine its eventual bid price.

The distributor then offers a ‘minimum guarantee’ to the producer. Minimum guarantee refers to an initial sum paid to the producer, irrespective of how the film fares at the box office. The responsibility then shifts from the producer to the distributor, who decides the circuits in which the film could do well, contacts exhibitors for theatre rights, balances the entertainment tax and logistics involved. The distributor’s profit is the total money collected by ticket sales minus taxes and the share of the exhibitors.

Overseas distribution was not very dissimilar. Considering that the market for Hindi cinema, and Indian films, was small before the 1990s, few producers were willing to spend the money and energy to take their films overseas. “Few would dare to compete in foreign markets,” recalled Surinder Suneja of Eagle Films. "Unless you were a Raj Kapoor or a Yash Chopra, the foreign markets were out of reach.”

In many ways, Indian, and Hindi, cinema remained exotica to audiences in the US and Europe. Apart from films like Awara (1951) or Mughal-e-Azam (1960), Mother India (1957) or Satyajit Ray's Apu trilogy, Indian cinema attracted few people to theatres outside India. Most films that found screens overseas fell in the category of ‘festival films’.

The growing commercialization of Hindi cinema was the first change. The liberalization policy coincided with the rise of stars like Shah Rukh Khan, Aamir Khan and Salman Khan. They were young, hip, with a personality that appealed to both sides of the hemisphere. In addition, directors like Aditya Chopra, Karan Johar and Sooraj Barjatya brought a globalized sensibility to their films. This facilitated audience interest overseas.

The 1990s also saw a rise in the number of Indians travelling abroad for education or work. This resulted in a growing market for Indian films. As Anupama Chopra said in a article in July this year, “Shah Rukh Khan as an NRI was more Indian than Indians. The argument was that Indian values are movable, you don’t have to live in India to be Indian.” 

This has not necessarily translated into box-office success. Distributing Hindi films overseas remains a daunting task. “It also depends on the organizational nature of the activity,” said a leading distributor of Indian films in the USA. “There was no such organization in the past. Distributors in USA would often buy Indian films based on star value, cash payments, or MG [minimum guarantee]. The producer would receive neither data nor a percentage of its showing. It was a very ‘bania’-like business.”

Often, big production companies like Yash Raj Films, Eros or Shemaroo take on the task of distribution themselves. In recent times, these studios have also taken up the task of syndication, exhibition and ticket sales, in addition to television rights and overseas distribution. 

This seems like an extended, though fairly simple, process. However, before the advent of digital technology, or data storage facilities like drives and online systems, the logistics involved were mind-boggling. Apart from the statistics and marketing research, the distributor would have to ensure the safety of the cumbersome film reels to be transported to different locations. Often, the reels would be duplicated before they reached metro centres, resulting in blatant piracy.

To prevent this, distributors would seek help from local managers/distributors, who turned to strongmen and theatre owners to prevent piracy. This still did not guarantee protection. In addition, the trickling down of profits through all these channels often ensured that the share reaching the distributor was minimal. The trickle would almost dry up by the time it reached the producer.

Suneja said, “There was no proper way of functioning back in the day. Only big producers like the Chopras held sway.” The complexity only increased when it came to overseas distribution. This was one of the main reasons why only big studios chose to market their films overseas.

Liberalization opened up this job for corporate studios. Corporations brought structure to the system. Studios like Disney (then UTV), Reliance Entertainment and Eros International would take on the entire task from acquisition of a film to syndication, marketing, and distribution overseas, in addition to investing in the filmmaking process. With established centres across the country, and overseas, these studios managed to set up the right channels to ensure smooth transfer of funds and films.

The arrival of corporations also ensured greater presence in foreign markets. Thus, Rajkumar Hirani’s 3 Idiots (2009) became the highest grossing Indian film in overseas markets. The film earned a return of $65 million (Rs442 crore at current exchange rates) in the domestic and international markets combined. Its performance in Japan and Southeast Asia was astonishing for an Indian film. The film was distributed by Reliance Big Pictures, which partners Steven Spielberg in its overseas arm, Amblin Partners LLC.

Growing international presence is one of the key revenue models for Indian films today. Studios such as Warner Bros, Disney, Fox and Dreamworks have entered into collaboration with local film production houses to develop Hindi and regional-language movies. The free exchange of information about markets, distribution techniques, and know-how has enabled both local and international production houses to find effective project-planning and cost-control systems.

Suneja agreed: "Foreign studios brought structure to the distribution process. They were armed with statistics, marketing research, data which was never previously used... though it did not necessarily reflect in success.” 

The entry of foreign studios has had its drawbacks, too. As one overseas distributor put it, “We have not cracked the science behind distribution in foreign markets. Also, most foreign studios who have entered the Indian market focus on getting the most out of Indian markets, but do not distribute Indian films overseas.”

At a recent screenwriters’ festival, Disney's India head, Siddharth Roy Kapur said the revenue of Hollywood films in India has grown from 8% to 15% in the past five years. Meanwhile, Hindi and Indian cinema continue to wrestle for space alongside European and Asian films on American screens. Although films like Sultan (2016), Bajirao Mastani (2015) and Queen (2014) generated decent revenue, the market remains dependent on stars.

According to Deloitte's Indian Film Industry Report for the Indywood Film Carnival that took place in September this year in Ramoji Film City, Hyderabad, "In terms of revenue, the industry has gross box office realisations of $2.1 billion which is expected to grow at 11% compound annual growth rate reaching $3.7 billion by 2020."