The Bollywood gold rush ends

The film industry, in the last two years, has witnessed exponential growth. In 2006, it was estimated to be worth US $1.8 billion and according to estimates was to grow to US $ 5.1 billion in 2011. The last five years also saw the entry and consolidation of corporate houses in the business. Flush with funds, top-billed stars and filmmakers could ask for the moon and get it. Tie-ups, mergers and acquisitions of unimaginable scale had become the norm-the recent Big Picture Entertainment investment in Steven Spielberg's Dreamworks for US $ 550 million being an example. With a financial crisis across the global bourses, has the film industry's dream run come to an end?

Presently, Bollywood players claim that all is well with their world though insiders on condition of anonymity are willing to admit that things look set to change soon. Raising funds for projects will be more difficult as banks are facing a liquidity crisis. Companies that are listed on the London Stock Exchange and have IPOs have reportedly been impacted by the global financial crisis. According to reports in the pink papers, the shares of Indian companies have already gone down in value over the last year.

The fallout is that companies will go back to being more selective about the films they make. Projects toplining blue-chip stars, heroes in particular such as Shahrukh Khan, Aamir Khan, Akshay Kumar and Amitabh Bachchan are likely to sail through but the pressure to bring in a higher return on investment is likely to increase. It bodes well for actors like SRK who have been consistent with their prices through both good and bad times. Likewise A -list directors are unlikely to face trouble but they will have to cut down the frills to keep projects cost-effective.

Says Farrokh Balsara, Head, Media and Entertainment, Ernst & Young, "The current situation will bring in a reality check. There is likely to be a lot more discipline. A lot more planning if you will which could be as much as a year and a half as opposed to the present six months while the actual shooting may just last for two months. There is really no recession on the consumer end."

Corporates, new entrants in particular, who were putting out unrealistic sums of money to attract stars, will have to innovate as funds from the markets are hard to come by. Expansion plans are likely to be on hold unless they have a direct bearing on the core business which is making films.

Even as we go to print, the word is out on UTV World Movies and UTV Movies folding up operations in Delhi. They will now be consolidated within the Mumbai broadcasting operations. Filmmaker Sujoy Ghosh also concurs that there would be weeding out among the current crop of players while Ramesh Sippy thinks that everybody is likely to be affected. Also, the money coming in from satellite rights etc (which was as much as Rs 10 crore) will be reallocated-producers will have to settle for more realistic prices. Television channels are no longer keen to acquire rights for films. Expenditure will be on the conservative side and stars will have to take a pay-cut with both films and endorsement deals. Balsara, however, reiterates that the income from new media is likely to grow as producers might want to better exploit non-traditional revenue sources. As is the home viewing segment which will find more takers.

However, standalone producers and production banners which have thrived under far more harsh conditions in the absence of corporate funding will manage to tide over the crisis. Independent producers will tighten their belts and will opt for films that bring in audiences across the spectrum and not just the urban viewers.

Producer Sajid Nadiadwala who counts among the few remaining standalone producers was of the opinion that the current phase is a "cleansing period" during which the crucial price corrections will take place. "There can never be a recession in the film industry," says Nadiadwala. In the face of the current adversity, it is a sentiment that the industry would like to hold on to.