Foreign Investment in the Indian Film Industry

Bollywood is a thriving industry – in 2012, nine films made more than 1 billion rupees (£ 12 million) each at the box office. The article in The Telegraph used in the previous entry also highlights that India produces the highest number of films annually, estimated at about a thousand titles. And big multi-national companies like Disney, NBC and Fox want a share of this pie. These companies want geographical expansion to be their next source of revenue, especially with the tremendous growth that Indian cinema has showcased in the last few decades.

There is statistical evidence that shows that it's time for the two industries – Hollywood and Bollywood – to come together for a greater share of revenue for both. According to an Economic Times article, “Hollywood's share in Indian cinema is 7-8% of the total box office collection of $1.5 billion.” However, a similar share is not captured by Indian cinema in the Hollywood industry. Although Indian cinema is among the top three foreign language cinemas, its box office collection is just a fraction of the US domestic box office, “which was $10.8 billion in 2012, up 6% from 2011."

The only way Indian cinema could make its mark in the Hollywood industry would be to produce content entirely in the English language. However, there still remain cultural and traditional barriers to this strategy. The entirely English language movies will not be received well by the Indian audiences. Moreover, the cultural aspect of Bollywood movies will not sync with the American audience. Therefore, there still remains a long way for Bollywood to establish a strong presence in the American entertainment industry.

On the other hand, Indian cinema appears to be a promising market for American entertainment giants. This is because Indian cinema is a booming movie industry with a wide diaspora of genres. Recently, with the rupee hitting an all time low against the US dollar , it provides American companies the opportunity to make a higher profit, as they get more revenue in rupees for each dollar invested in the Indian entertainment industry. With multiplexes making more money and the emergence of the middle-class audience, there are more screens to display content made by the American companies. American companies can benefit from making both original content for Indian audiences, as well as an export of American content.

Following the above logic, Walt Disney International has acquired a controlling stake in one of India's leading media and entertainment companies, UTV in early 2012.  Disney already owned 50.44 percent of publicly listed UTV and last July, it made an offer of $454 million to acquire the balance stake to gain a controlling interest in the group. Walt Disney International’s chairman Andy Bird believes that increasing their brand presence and reach in key international markets is a cornerstone of their growth strategy. He also states, “This acquisition expands our footprint significantly and allows us to more effectively build, monetize and brand multi-platform franchises, and deliver a rich library of content to the world’s second largest population.”

After interacting with Andy Bird at the USC Indian Film Centennial last week, I realized that Disney’s core strategy in India is to make specific original content for the Indian audiences. Bird has realized that in order to capture a wider audience in the Indian market simply exporting American content by dubbing in Hindi would not suffice. Indian audiences have very specific expectations regarding their cinema, which he believes Disney can achieve through this merger.

Since the integration of Disney and UTV in India last year, the studios’ team “has been looking for the right stories to develop into the first set of Disney branded local productions”, said Siddharth Roy Kapur, managing director of studios for Disney UTV. Disney plans to continue making movies that are “heartwarming, uplifting and fun for the whole family” which falls under the company’s theme. A interesting comment made in the article raises an important point that, “Using the Disney label by itself in the territory poses the question of whether the Mouse House is slowly getting a bigger hold of India, or if it’s India that is reshaping a Hollywood conglomerate.”

Disney's increased commitment to UTV follows a series of similar deals being brokered in India, a joint venture between 21st Century Fox and News Corp's Star broadcasting and media group, NBC Universal buying a stake in the entertainment division of New Delhi Television for $150 million and Viacom partnering with TV18, which runs India's version of CNBC.

In the future, with heavy foreign direct investments, the line between the Hollywood and Bollywood concepts of movies could seem to blur. However, Bollywood filmmakers need to be careful of not losing the distinctive appeal of Bollywood cinema, because that has proved to be Bollywood's core competitive advantage.