Indian Market vs China Market-Films Of Course!!
Hi Folks,
Interesting article here on Variety, on the size and potential of the Indian film market, as perceived by the West. Also on that same note here is our latest newsletter of SAAFA, with an interview with the CEO of ADLABS
http://www.saafa.org/newsletter/Feb07/feb07.htm
Variety.com
Sat, Feb. 10, 2007
H’wood quest: Rupee vs. yuan
India, China present challenges for the West
By PATRICK FRATER
Nearly a decade ago, Sony opened a Chinese-language
production office in Hong Kong. But the unit has had
trouble finding success on the scale of “Crouching
Tiger, Hidden Dragon.” In fact, it hasn’t made a movie
in the past two years.
By contrast, India has proven bountiful for Sony
Entertainment Television, which has become an
established TV player in the country and is now
expanding from movie buyer into local production.
Similarly, Warner Bros. recently sold off its
multiplex chain in China due to a change in government
policies on ownership, while in India, overseas
investors are embracing a blooming number of
exhibition chains.
It raises an interesting question: Should media
congloms be looking to China’s neighbor, India, as the
next great marketplace?
With its rapidly expanding workforce and 8% annual
growth in GDP, India is on a similar upward trajectory
as China. Moreover, its openness in trade, its
increased competition and productivity have one recent
Goldman Sachs study predicting India’s economy could
rank second to China’s by midcentury, ahead of even
the United States.
“I’ve just gotten back from a meeting in L.A., where I
was told they’d taken away my funding,” the China head
of one Hollywood company said recently. “They are
going to put it in India.”
Culturally, the two countries could not be more
different. India is more of a shirtsleeves kind of
place, while China long ago ditched Mao suits for
better-made business attire and more intimidating
settings. Chinese meetings involve big rooms with huge
armchairs and semiformal statements of position and
policy.
But in both countries, you can get lost in red tape
once you move away from the negotiating table. As
great as growth is, India still struggles to improve
its infrastructure, as electricity in some areas is
sporadic. Half of urban households lack drinking water
within the home, a report in the Economist says.
Hyde Park Entertainment’s Ashok Amritraj, an Indian
native who is setting up projects there, says the
country has “a brilliant, amazing chaos” — elaborate
skyscrapers and technology juxtaposed with “traffic
jams created by a bunch of cows.” Bollywood has its
own traditions.
“There’s a lot more reading between the lines,”
Amritraj says. “You don’t have the lawyers dotting the
i’s and crossing the t’s. It is very much a
relationship business.”
Like in India, Chinese authorities come across as
friendly and anxious to do business, in a country with
a younger generation of avid capitalists. But
ultimately projects are constrained by perplexing
bureaucratic mandates.
For major congloms, their investments in Asia are not
a matter of China or India, but of a willingness to
wait.
“How could you not be in both? I can’t get my head
around that,” says Jim Gianopulos, co-chairman of Fox
Filmed Entertainment. “The markets are very different.
But they are similar in their enormous potential,
massive populations, high rates of piracy and absence
of fully developed retail and distribution
structures.”
His choice is made easier because Fox and parent News
Corp. have long had a commitment to be a global
player, with operations in every meaningful market in
the world.
At a New York media event last week, News Corp.
chairman Rupert Murdoch said, “If there was any
country in the world I would double down on, it’s
India. There is a working democracy, the rule of law.
“China is vast. But China has not opened up yet. We
keep a presence there. We’re going to behave ourselves
and be there until we see a change in policies. And it
will have to come. It’s a sovereign country, and
that’s the way they do things, and we’ll just wait.”
Some companies, however, have picked one over the
other (see story, next page). Asia’s market dynamics
and regulatory climate are giving studios plenty to
think about.
Until last year, the world’s entertainment giants
viewed China as the next great thing. CEOs and studio
heads made regular trips to Beijing, Asia-Pacific
operations were made as China-friendly as possible and
there was expansive talk about co-productions and
joint ventures. Congloms were not simply attracted to
the size of the market; some were also interested in
producing at the “China price.” That’s the rock-bottom
price that Chinese firms seem to be offering in so
many business sectors.
And there has been a lot of talk about the Chinese
media and entertainment markets becoming more open,
driven by the country’s entry into the World Trade
Organization and its desire to look good at the
Olympics in Beijing next year.
But for some western media firms, the China dream is
being tarnished.
Companies are finding it is still difficult to build
meaningful businesses in China or remit profits out of
the country. Western movies may have grossed $102
million in China in 2006, but with the revenue share
starting at 13% and rising to a maximum of 17%, the
net benefit was probably no more than $15 million.
Strictly speaking, China may not be anti-Western, but
it does everything it can to favor its own. Chinese
films have scored impressive box office, but with the
aid of market manipulation in favor of local product.
“The Da Vinci Code” was pulled from theaters, while
numerous other movies suffered numerous delays and
blackout periods when they could not be released.
Meanwhile, the Chinese pic “Curse of the Golden
Flower” was genuinely popular and scored more than $31
million, but Chinese auds were not given much
alternative: Regulators made sure the annual 20-film
quota for big Western films was exhausted before
“Flower” blossomed on 825 screens.
India, meanwhile, is seen as moving in the opposite
direction, with deregulation of the TV and retail
sectors helping local and foreign firms pick up the
pace of economic development. One recent example: UFO
Moviez, a fast-expanding digital distributor and
supplier of digital film equipment, in January
attracted $15 million in capital injection from a
British VC firm.
With a population close to China’s 1.3 billion, the
potential for growth in India is staggering. In fact,
the country’s lucky stars may finally be in alignment.
Due to a wave of multiplex construction, the
theatrical market is expanding. That’s allowing the
first steps toward nationwide (rather than state by
state) releasing.
The pay TV market may boom if mandatory set-top
decoders allow subscription revenues to flow to rights
owners, rather than mom-and-pop cable pirates. The
country is expected to have five DTH satellite
platforms by the end of 2007.
The development of an organized retail sector of chain
stores and supermarkets is driving growth of home
entertainment, even as it looks wobbly in the rest of
the world.
With cell phone numbers growing at more than 5 million
per month, mobile entertainment is delivering real
gaming and music returns. Because TV penetration is
low compared with other, more developed countries,
including China, some analysts expect mobile ownership
to even outstrip TV.
Chinese firms have little problem attracting venture
capital and private equity coin. There are several
Chinese firms with NASDAQ listings, but these tend to
be in the Internet and telecom sectors, rather than in
media and entertainment, where the state likes to keep
control.
The apparent anti-Western stance seems to stem from
high-level Communist Party apparatchiks and is
enforced by state regulations that have taken several
steps backward since a regime change 18 months ago.
Former Disney execs have told Variety that they could
already be well on their way to building the
much-talked-about Shanghai Disneyland park that both
the city and the Mouse House are anxious to see break
ground.
The hitch is that Disney apparently has linked the
issue of a mainland park to getting its channels on
the air in China. Like all Western groups, including
those broadcasting in Chinese like News Corp.’s Star,
foreigners have only been given landing rights in
Guangdong Province, in 3-star or higher-rated hotels,
and in foreigners’ compounds.
Others say China’s tough policy stance is meant for
public consumption and can be very different from
behind-the-scenes pragmatism. Senior public affairs
execs based in the region say it is perfectly possible
to work together, but the key to success is not
crowing about it.
Whatever the truth about News Corp.’s ad sales
operations exceeding its mandate at the Qinghai local
satellite channel, Murdoch’s greater error may have
been his volume and visibility. In that respect he has
changed his ways. Other international groups have
apparently caused ire in Beijing by revealing too much
financial detail in their annual reports.
So how far will the pendulum swing India’s way?
“China is too frustrating to deal with, too lucrative
to ignore,” says one corporate insider.
India’s big drawback has been that the level of
overall economic development is significantly behind
China and its entertainment industry is largely
isolated from the rest of the world. Local-language
movies account for 95% of the box office, and the
soundtracks of Bollywood dominate the music industry.
“What is shocking is the fracturing of the old
Hollywood, imperial model where we could talk of a
home office and the far away provinces,” says one
studio exec. “There is a growing regionalization of
the film business. Some countries seem to be able to
do without Hollywood. India and Korea are extreme
examples. China would like to, and even Japan is
leaning that way.”
Although Bollywood is bigger in absolute terms, the
Chinese industry has been more successful on a world
scale.
“The Chinese films generally have had larger success
outside of China than the Indian pictures have had
outside of India,” says Sony’s Michael Lynton. “The
market outside India is largely people who are part of
the Indian diaspora.”
Indian regulators are just as capable of infuriating
congloms. Barely a month had passed after a new policy
was put in place for mandatory conditional access
systems, or set-top boxes, in order to curb cable TV
theft by mom-and-pop pirates. But then regulators
decreed that pay channels should not be allowed to
charge more than 1 rupee (2 cents) per month, in order
that the poor also can afford their shows.
Appeals are ongoing, but the notion that either
country will enact reforms for the benefit of foreign
interests is somewhat ridiculous.
“In the end, the Indians will prove to be no different
than the Chinese,” says Andre Morgan, one of
Hollywood’s most experienced Asia hands, who recently
signed a three-picture deal with state-run China Film.
“They are interested in what we can do for them.”
Among Indian producers, “there’s a cautious note when
it comes to the studios,” Amritraj says. “There’s
always a concern when a huge company comes into a
smaller industry. You always wonder what they want and
why they want to do business with you.”
Both countries are making some progress on copyright
issues, even if it has been an uphill battle for U.S.
firms. Chinese courts are increasingly enforcing
copyright laws, and one recently established principle
is to pay music royalties. In Delhi last year, a court
made it clear that rental libraries are illegal, and
studios are now encouraging stores to go legit.
“We have to talk to government, not just about respect
of IP, but also about building a tax base,” says
Gianopulos. “A lot of people getting to see movies for
free (on pirate disc) is a cheap way to keep them
entertained. But that is a massive black market
economy that the state never benefits from.”
The biggest hurdle to success in Asia may be adapting
Hollywood mindsets to local ways. Winners will likely
be those that do not flex studio muscle, but learn to
hitch their wagons to local power structures, and
those who make local films without expectation of them
traveling. Just adapting to the way many films are
made can be a challenge, what Amritraj calls “pickup
and dropping,” where three months of production can be
followed by a six-month break.
While bullish on India’s growth, he adds that U.S.
firms “will have success if they have the patience,
but in the short term it is going to be very difficult
for them.”
After all, even with all the headaches, the ultimate
lure is each country’s billions of dollars of
potential.
Sincerely,
Vivek “yep if there is one thing that Indians bought even in their most nationalistic days, it was western movies”Kumar
Anurag Kashyap
Abhay Deol
Dibakar Banerjee
Hansal Mehta
Khalid Mohamed
Kundan Shah
Anish Kuruvilla
Jaideep Verma
Manish Gupta
Navdeep Singh
Bhavani Iyer
D. Santosh
Onir
Ashvin Kumar
Ramu Ramanathan
Sudhir Mishra
Pankaj Advani
Revathy
Saurabh Shukla
Shilpa Shukla
Sujoy Ghosh
Suparn Verma
Santosh Sivan
Shashank Ghosh
Shivajee
Pavan Kaul
Partho Sen-Gupta
Prroshant Naryannan
Sam Langoria
Satish Kasetty
Thnx for the article Vivek. Par bada lambaaa hai yaar.