Entertainment business in India needs transparent, process controlled culture for big investments, says panellist at FICCI FRAMES

Only 2% of films in India are able to garner 100% of their investment, while 98% of the movies flop. There are a number of people who want to invest in the business, but they are often turned off because of the lack of transparency and uncontrolled process costs in the industry

The Indian media and entertainment (M&E) industry is expected to grow at a compound annual growth rate (CAGR) of 14% to $28 billion by 2015, but investors are staying away from the sector due to lack of transparency and uncontrolled process costs, according to a financial advisor to the global entertainment industry.

"There are lot of opportunities in the Indian M&E industry, but due to bad scripts, bad-budgeting and bad production prices, the potential of the country's entertainment business remains untapped and investors lose an opportunity," said Jane Gordon, chief executive, Moneypenny. Established in 1980, Moneypenny is a group of companies, which provides specialist financial services to the global entertainment industry. Ms Gordon was among the panellists at FICCI FRAMES 2011.

She said, India could follow co-production and co-financing model similar to that of Europe. Co-production had reached a stage of maturity in Canada, Australia and Europe, which allows entertainment industry players to successfully piece together finance for their projects, Mr Gordon added.

Calling for transparency in reporting profitability of film ventures, Bobby Bedi, managing director, Kaleidoscope Entertainment, said the fiction (about profit numbers) created by filmmakers puts off real investors.

Mr Bedi, who has used funding for his films, said that earlier financers and a few corporates funded the entertainment sector, but the industry blew the money. While there was a good amount of money being invested in movies, the industry became greedy, out-priced itself and as a result the industry became sick, he said.

Describing 2010 as a challenging year for the industry, a FICCI KPMG report, has said that with better content, an increase in multiplexes, investment in research and continued cost correction, the industry is estimated to grow to Rs132 billion by 2015 from Rs83 billion at present.

The Indian film industry, which is multi-lingual, is the largest in the world in terms of ticket sales and the number of films produced. The industry is supported by a vast film-going public and Indian films have also been gaining in popularity in the rest of the world-notably in countries with a large number of expatriate Indians.

Each year, India produces over 1,000 movies in various languages. At the end of 2010, it was reported that in terms of annual film output, India ranks first, followed by the US (Hollywood) and China. In 2009, India produced a total of 2,961 films on celluloid with a staggering figure of 1,288 feature films, including 235 Hindi movies. Yet, only 2% of the films are able to garner 100% of their investment, while 98% of the movies flop.

Nirvaer Sidhu, vice-president for media and entertainment, GoldmanSachs India, said film producers today were looking at markets outside the classical mould, and foreign companies and studios were eyeing India with great interest. Investors, he said, were looking at mitigation of risks, for alignment of interests with project promoters, simpler business models and desired intermediaries to manage the interests of producers and studios.

Underlining the need to create an ecosystem similar to that of Silicon Valley and ways to attract investments from high networth individuals (HNIs), Ranu Vohra, managing director and chief executive, Avendus Capital Private Ltd, said, the entertainment industry is a high-risk, high-return business. This industry requires funding from corporations that have made it big and such an investment culture would spawn disruptive innovation, which would, in turn, throw up new funding models, like investment from family offices and slate financing.

Slate financing is an investment in a film portfolio, rather than a single film, in order to spread out the risk that comes in placing all the eggs in a single basket.

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