Global Investors with Flashing Money for Bollywood. Up until a few five years ago, the film industry had always been a shoe-string operation but in the last couple of years, foreign investors were “flashing money everywhere,” according to Sippy, a third-generation filmmaker who has watched the industry’s financing structures change up close. However the current worldwide recession has tempered that enthusiasm to some degree. It was going crazy, but it seems to be over now.
Foreign investors have good reason to be drawn to his industry as a billion people watch films, possibly more than once a week, and the numbers are hard to ignore. India has the largest film industry in the world; with almost a thousand films being produced a year, which is definitely much more than Hollywood.
A recent FICCI-KPMG report on the Indian media and entertainment industry suggests that it tracked a steady annual growth of 17% to 18% over the past five years, with revenues of US$2.2 billion at the close of 2007. It projected an 18% cumulative growth for the industry over the next five years to reach nearly US$3.4 billion by 2013. The report also counted foreign investments of Rs. 8.5 billion (US$179 million) in the entire entertainment and media industry in 2007, up 21% over the previous year.
That trend seems to be continuing: Last September, Reliance Big Entertainment formed a joint venture with Steven Spielberg’s Dreamworks studio, and earlier in 2008, billionaire investor George Soros invested US$100 million for a 3% stake in Reliance Entertainment Ltd., a film, Internet and TV broadcasting company.
In addition to the increasing number of foreign funding sources, the industry is also witnessing dramatic changes in how and from where it earns its revenues. Its intake from the domestic box office formed 80% of total revenues for 2007, according to the FICCI-KPMG report. Also, overseas theatrical distribution grew more than 22% to account for nearly 10% of total revenues the same year, the report added. More significant are the growth rates for the home video segment (26%) and cable and satellite rights (29%), according to KPMG.