India at a crossroads

Not so much whether the incumbent Congress party or a Narendra Modi-led BJP would win – but the impact that media and the internet has on influencing outcomes. There was also much talk of social media with commentators expressing concern that platforms such as Facebook and Twitter are being used to vent anger rather than engage in constructive debate.

For India’s film industry, it remains unclear whether a change of government will make much difference. One of the industry’s biggest headaches is India’s complex tax regime and high entertainment taxes. But as taxation is decided at a state rather than national level, it’s unlikely that a change in central government will see these issues resolved.

Another major roadblock is the slow pace of multiplex expansion – and although cinema investment is a matter for the private sector – this is one area where the government could intervene. Last year, India added only 150-200 new screens for a total of around 9,000, compared to more than 5,000 new screens in China, which with a total of more than 18,000, now has twice as many screens as India.

Comparisons to China were made constantly throughout the conference. But one of the reasons the Chinese film industry is growing so fast is the boom in the country’s retail sector. India’s government backtracked last year on a decision to allow foreign retailers into the market, which would have resulted in a great deal more shopping malls, inevitably with shiny new multiplexes as their anchor tenant.

Indeed, the overriding message at FICCI Frames was that India’s media and entertainment industries are growing, but not with the speed and consistency that they could. “India has experienced exponential growth but it’s still story of missed opportunities and unrealised potential,” said former Reliance Entertainment chief Amit Khanna during the closing session.

He continued: “ I believe we have potential to grow at 20-25% annually if we get whole scenario right. We have to understand that in the digital world technology moves very rapidly, and unfortunately society moves much more slowly and is always a casualty, so it requires talent and skill to bridge that. In this context, it’s important that our politicians give this industry the importance and significance it deserves.”

For the film industry, the reality is that box office grew at a much more conservative 10% to reach $1.5bn in 2013, according to the annual FICCI-KPMG report. Another big problem is high levels of piracy and box office leakage. During a panel on the exhibition industry, UFO Moviez joint managing director Kapil Agarwal said that the unreported box office in India could be as high as $1.3bn, as many cinemas are still not hooked up to electronic point-of-sale. “It could take ten years before the single screens use electronic ticketing systems,” Agarwal said.  

Meanwhile, director-producer Rohan Sippy talked about the problems that niche cinema faces in India’s ‘one size fits all’ market. “Small films need to grow with word-of-mouth, but the terms offered by exhibitors are not changing,” Sippy said. “There’s pressure to show the biggest films every weekend and smaller films are shoved out.” Again this is down to the market being under-screened. Sippy observed that there are still not enough multiplexes to give screen space to smaller films.

But while the situation is far from ideal, Fox Star Studios CEO Vijay Singh argued that there’s never been a better time for smaller productions. In 2012, six out of 50 small films (defined as having budgets under $1.6m and no stars) were successful, while ten broke out in 2013. “Big stars are important, but they only get you an opening,” Singh said. He also suggested that the Hindi film industry should rethink the length and expense of marketing campaigns.  

Finally, FICCI Frames also chewed over changes in the cable and satellite industry. Television is important to the Indian film business as it’s the second largest source of revenue after box office, worth $248m in 2013, but satellite rights are subject to boom-and-bust patterns of pricing.

India’s TV industry is also a victim of high levels of leakage and piracy, which will supposedly lessen when the cable infrastructure has been digitised. The first two phases of digitisation have been completed, but NDTV CEO Vikram Chandra pointed out that additional revenues are still not flowing back to the top: “We need to look at this as a long-term thing,” Chandra said.

And thinking long-term is something that every corner of the media and entertainment industry will have to get used to. Growth is definitely happening – the consumer base is there, the demographics are promising and the potential is huge. But the message at FICCI Frames was clear: without a proactive and supportive government, that growth may not be happening as fast as it could.