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CanSection B

Go Global?
Case Analysis for

Arjun Vikas

Analysis Framework
The Indian film industry, the largest in the world, is based primarily around the Hindilanguage industry in Mumbai, known as "Bollywood". However, it still faces low
profitability, stemming from the low revenues. In the last few years, the industry has seen
changes, bringing in a more corporate and professional style in its operations, which has
helped in expanding its reach beyond the national borders. The problem would be considered
from both the financial aspect as well as the cultural aspect. The framework of the analysis
would be as follows:
1. Situation Analysis: The situation analysis would provide a brief introduction of the
case. It would describe the scenario in film industries across the globe. It provides
facts about the size of the various film industries and their revenues.
2. Problem identification: As the name suggests, we present the main problem that the
case presents in this section. The causes of this problem and its effect on the industry
will be studied in this section.
3. Statement of purpose: This section presents the objective behind studying the case
4. Evaluation of options: This section first lists the various possible solutions to the
problem identified in the above sections. The section also provides the detailed
analysis and the potential impact of these alternatives.
5. Recommendation and Conclusion: This section provides the best possible solution(s)
from the options presented in the previous section along with the reasons for choosing
the same. Lastly, it provides the various conclusions drawn from the case study.
6. References: This section lists the various sources used in the case

Situation Analysis
Bollywood is the heart of the Indian film industry, which prides itself in being the
worlds largest film industry (in terms of volume). The Indian film industry produces roughly
twice the number of movies as the American film industry, and sells 2.5 times the number of
box office tickets as the U.S market. However, both the topline and bottomline, present a
completely different picture. In 2011 alone, Bollywood earned revenues of only $1.47 billion
which translates to only 1/7th of the revenue of North America. Apart from North America,
film industries of countries like China, Japan, France and Britain have higher revenue per
film as compared to India. This figure shows that Bollywood has a far way to go before it can
compete with Hollywood.

The history of film industry goes back to 1895 in France when the first movie
LArrivee dun Train en Gate de la Ciotat (The Arrival of a Train at the Ciotat Station) was
released on December 28, 1895. Following this the film industry saw a flourishing film
industry in France which began to produce and distribute movies not only in France but also
in the USA. Following this period, the largest French firm entered USA and began one of the
greatest film industries which we now know as Hollywood.
This set the stage for the birth of Hollywood. American dominance of the global film
market emerged during World War I (WW1). The huge domestic market enabled Hollywood
to gain scale. With over 18,000 movie houses, there were around 5000 feature films released
in US in the 1930s. After gaining on domestic market US films began their domination of the
European markets too. Several US films were distributed and watched all across Europe. The
main competitors of Hollywood were the film industries in France and Britain, but both these
industries could not match the glamour and the following attained by the Hollywood movies.
Movies as we know them, were introduced by representatives of Frances Lumiere
brothers in 1896. Released in 1913, Raja Harischandra was the first full-length movie made.
The 1920s saw the introduction of the Hollywood-style studio system into Indian cinema.
Much like MGM and Warner Brothers in Hollywood, studio houses such as Bombay Talkies,
New Theaters Ltd, and the Southern Studios controlled the majority of filmmaking activity in
India. In the 1970s and 1980s, Hindi films became a catalyst for the nations homogenizing
mission, where the poor, underprivileged man was the primary audience. In recent decades,
the Bollywood film industry has been associated with the notorious Mumbai underworld, at
the nexus of gangsters, money, and politics. Films were financed by ad hoc collections of
investors, many of whom were from the construction and trade industries, who charged
interest rates as high as 60-100 percent. The industry also welcomed funds from gangsters
and politicians, looking for ways to launder their ill-gotten gains, known in India as "black
money." After the government added the film industry to the list of legitimate industries, the
corporatization of Bollywood - and the wider entertainment industry - began. Most of the
major entertainment firms have evolved into a broad range of content lines, including films,
TV, and music, much like the U.S. counterparts. Today, even leading film stars, like Amitabh
Bachchan, have issued IPOs and listed their own production companies on the stock

The Problem:

Despite being the largest film industry in the world in terms of the number of movies
produced, the Indian film industry is not in good financial health.
The two main primary reasons for the poor financial performance are:
Low-priced movie tickets- the prices of the tickets in Indian movie theatres are much lower
than those in Europe and North America
Piracy- widespread use of duplicated CDs/DVDs and with the advent of Internet, torrents, has
dealt a heavy blow to the Indian producers as well multiplex owners
Following in the footsteps of their western counterparts, Indian producers and distributors
have started screening and distributing their movies abroad. The problem, however, is
whether they can succeed in going global. If not, what do they need to change in order to be
successful in the global market?

Statement of Purpose
The aim of this analysis is to understand how Bollywood can combat the causes of
low revenues such as piracy and low revenue per ticket. To answer this, a list of possible
options has been presented and then a recommendation has been made.

Evaluation of options
1) Penalising piracy
Undoubtedly, piracy is the biggest culprit in the under-realisation of profits for the Indin film
industry. It was estimated in 2005 that pirated films caused the industry to lose at least 50%
of their revenue each year. The biggest concern expressed in this regard by various producers
was the lack of a central control agency. A body like this was essential for taking decisions in
all matters regarding piracy and in forming the piracy laws. Presently this task is split
between three different governments: Ministry of Information and Broadcasting, Ministry of
Finance and Ministry of Human Resource Development.

Would provide a great boost to the revenues and consequently profits of the film

Would boost the revenues of multiplexes and theatres


Not all the customers watching through pirated means will switch to the official

means at full rates

Loss of jobs for those involved in the piracy business

2) Vertical Integration of production houses and theatres

This would help in tacking the issue of under reporting of revenues and net profits by
the producers as well as theatres in order to save taxes.

Lower costs for the combined entity due to elimination of margin for the middleman
Production houses can get the public opinion about their movies first hand directly
from the audience


Opening more multiplexes at the cost of theatres might result in loss of viewership as
people of lower income category would not watch movies in multiplexes

3) Crossover genre movies for global audience

Movies like Bend it like Beckham and Monsoon Wedding were a stark contrast to
the typical Indian masala films but made a good profit in foreign countries. Seeing this trend
top production houses like Dharma productions made Kabhi Alvida Na Kehna and My
name is Khan which were primarily targeted at the NRI population and made around 50% of
their revenues from foreign countries. These movies represent a new genre called crossover


Preferred by the foreign audience and hence brings in higher revenue as well
Improved quality of movies leading to foreign investment in the Indian film industry
further leading to better quality global films


It may alienate the domestic viewers who might prefer the typical masala Bollywood
movie over the crossover genre

4) Usage of Online Video Streaming Websites

The U.S. used this strategy very well to counter piracy. Websites like Netflix offer
access to movies based on the subscription that the user takes. This provides a cheaper access
to new movies and TV shows for the user without paying for the full price of the DVDs
released later. In India, cable TV operators like Tata Sky and DishTV are providing access to
new movies before they come on television through services like Showcase.

Curbs piracy by providing another low price alternative where the user pays as per his

Would lead to better revenues for the film producers


It would lead to loss of revenues for the multiplex operators

Loss of jobs for those involved in the piracy business

Recommendations & Conclusions

Penalising piracy would give a big boost to the revenues and net profits of both the film
houses as well as multiplexes. Piracy, however, is one of those vices that exist in every
society. Many countries, including the U.S., have been unsuccessful in getting rid of it
completely. Its a problem that has been complicated further by the success of internet, a
problem that the industry will have to carry in its stride.
Vertical integration is a measure being adopted by the large filmhouses, either by themselves
setting up new multiplexes or acquiring existing chains. Some of the existing chains,
especially the ones backed by large corporations, are also setting up their own film houses or
acquiring existing ones. However, this strategy alone will only help in saving costs in the

long term and not in boosting revenues, only partially solving the problem. Also, a huge
initial investment will be incurred in setting up theatres or acquiring them.
The sustainable solution lies in expanding the market altogether, by making sales beyond the
national boundaries and via new, modern mediums. Gone are the times where you try to
screen everything on the big screen. In the fast paced world these days, its important that
people be able to watch movies as per their desired timing. Hence film-makers must consider
alternative routes for distribution. This will have dual benefits- a) it will increase the revenues
as well as profits; b) a virtuous cycle will be created whereby good quality movies will attract
foreign investment, which will further improve the quality of the films.
Hollywood is very often considered as the trendsetter for the global culture. The evolving
nature of global demand for cinema carries major business implications. Film-makers need to
consider the type of films that they will make which will attract audience from different parts
of the globe. The film industry in India is beginning to share the global ambitions of other
Indian companies and industries. Films like Slumdog Millionaire, which won multiple
Oscars, have definitely helped in drawing attention to the Indian actors. This momentum
gathered by the Indian actors needs to be sustained. Hollywood at the same time is
considering venturing into the Indian film market. Hence, its important that the film makers
keep the global viewpoint in mind before making films, even if it means losing out on a
certain section of the traditional segment.

Jones, Arora et al , Can Bollywood Go Global, HBR Case Study, July 02, 2014
Anuj Kumar, Flight of Imagination, The Hindu online edition, October 18, 2012
Rakesh Jariwala, In-focus; Film Exhibition Segment, Box Office Indian online
edition, September 24, 2011