LEGAL ASPECT OF BUSINESS

PROJECT ON:

“CORPORATIZATION OF BOLLYWOOD”
BOLLYWOOD

SUBMITTED BY:
10-741 Akash Salve
10-743 Kushal Sangoi
10-745 Nityanand Satpute
10-749 Ashutosh Shelke
10-751 Shweta Shetty
10-753 Vishaka Sonawale
10-755 Vinait Thorat
10-757 Navneet Vaishaya
10-759 Suresh Vasamsetti
10-763 Ileshaa Sansgiri

GUIDED BY: Prof. Anant Ambdekar

DEPARTMENT
OF
MANAGEMENT STUDIES

(MMS)

2010-2011
 OBJECTIVES

 To depict the comprehensive picture of current status of Indian film

industry , its future growth and interaction potential.

 To understand how the corporatization has helped film industry to

improve and raise the quality and standards of the film

 Identify how the Indian film industry and corporate world work together
and adopt each others strengths so as to provide bigger and better
entertainment in future.

 To find out the change in trend adopted by Indian Film Industry

 To know how laws incorporated in Bollywood.

 To find out how underworld used to run bollywood as a money minting

process.
 Contents

Sr.No. Page Title Page No.

1. Introduction 4

2. Bollywood: Before Corporatization 5

3. Bollywood Corporatizations & their Causes 8

4.
Indian law for bollywood 11

5. Copyright 15

6. Piracy 19

7. Film Financing 20

Institution and Banks film Financing

8 22

9 Foreign Investment 26

10. Insurance 28

11 Marketing & Promotion 32

12. Product placement in bollywood, sources of 36

income.

13 Sources of Income 37

14 Effects of corporatization 38

15 Conclusion 39

16 Bibliography 41

1. INTRODUCTION
Bollywood is the name given to the Mumbai-based Indian film industry, which mainly makes
Hindi language films. It is the largest film producer in the world. They produce roughly 1000
movies a year. Hollywood only produces 500 and Japan produces 400 movies a year.

 The Bollywood industry at present has a revenue more than US$ 3.3 billion , and has
been growing at approx. 9% a year.

 The revenue is expected to reach US$ 4.1 bn by 2013.

 71% of all cinema tickets sold in the world are Bollywood tickets

Raja Harishchandra (1913), by Dadasaheb Phalke, was the first silent feature film made in
India. By the 1930s, the industry was producing over 200 films per annum. The first Indian
sound film, Ardeshir Irani's Alam Ara (1931), was a major commercial success. There was
clearly a huge market for talkies and musicals; Bollywood and all the regional film industries
quickly switched to sound filming.

1. The 2000’s saw a growth in Bollywood's popularity in the world. This led the nation's
filmmaking to new heights in terms of quality, cinematography and innovative story lines
as well as technical advances in areas such as special effects, animation, etc. Some of the
largest production houses, among them Yash Raj Films and Dharma Productions were the
producers of new modern films.

2. The opening up of the overseas market, more Bollywood releases abroad and the
explosion of multiplexes in big cities, led to wider box office successes in India and
abroad, including Lagaan (2001), Devdas (2002), Koi... Mil Gaya (2003), Kal Ho Naa
Ho (2003), Veer-Zaara (2004), Rang De Basanti (2006), Lage Raho Munnabhai (2006),
Krrish (2006), Dhoom 2 (2006), Om Shanti Om (2007), Chak De India (2007), Rab Ne
Bana Di Jodi (2008), Ghajini(2008), 3 Idiots (2009), My Name is Khan (2010), Raajneeti
(2010) & Dabangg (2010) delivering a new generation of popular actors (Hrithik Roshan,
Abhishek Bachchan) and actresses (Aishwarya Rai, Preity Zinta, Rani Mukerji, Kareena
Kapoor and Priyanka Chopra, and keeping the popularity of actors of the previous
decade.

2. BOLLYWOOD: BEFORE CORPORATISATION

 After the collapse of studio system in 40-50s, the task of Hindi cinema production fell
upon independent producers and remained so for next half century. The complicated process
involved in making a film was not known to many people.

The Stages in making a film:

1. Development: In this stage, a story is conceptualized and a proper script is developed in

collaboration with writers. The feasibility of making a film is analyzed at this stage and if
everything falls in place it is taken to the next stage.

2. Pre-Production: From the time a film is green-lighted till it goes to the shooting floors, the
time period is called pre-production. During this time, the cast, crew, story, music is finalized
and locked for the film. The planning of shooting like location hunting and constructing sets
are done during this period. In this stage, the film is designed with shot break-up and proper
illustration.

3. Production: The moment a film starts shooting floors till the time the main photography is
completed, the film is categorized as ‘under-production’. Before corporatization, when one
actor did multiple films simultaneously, shooting was a major hurdle as the producer had to
run from pillar to post to attain the actor’s dates. An actor did two/three shifts everyday for
different films. Due to this, usually a film would remain under production for 2 years and
sometimes more.

For example: Govinda had 12 films on floor in 99/00. In fact, a close look at Govinda’s film
graph tells that during 80s, after his debut into Hindi cinema, he had average 9 releases every
year. In 1988, he had 10 releases and the following year he had 14 releases. Also actors were
infamous for coming late to sets. Hence it can be inferred that shooting a film was less
complicated than getting all the actors together for a film at one time. Since no formal
contracts were signed, and in an industry where stars determine everything, it was almost
impossible for a producer to control such phenomena.

4. Post-Production: The work that goes after completion of cinematography till the film is
ready for release is called Post-production. Post production is dominated by editing, mixing,
and dubbing since during that time most films were not shot in sync, sounds implying to the
actors had to dub their lines in the studio.

5. Sales and Distribution: The film is screened for potential buyers (distributors), picked up
by the distributor and released in theatres. The Music rights are also sold at this stage. The
Home Video and Satellite rights are sometimes sold at this stage, if the producer gets required
price or waited upon the release of the film. If the film becomes a hit, the price of Home
Video and Satellite rights usually go up ‘exponentially’.

2.1 Method of Working

Before corporatization, Hindi Film production worked on informal basis. There was no
documentation of contracts. Mostly it was done by verbal agreement and mutual relationship.
Actors after establishing themselves worked only in their comfort zone. There was no
prominence given to bound script. In fact most films were signed even without a script. A
star’s dates were acquired and then the producer searched for a subject that would suit him
and hence a film was conceptualized. Not much importance was given to continuity of a film.
Since there is no bound script, the lines were often written on the sets. Many times, the actors
would say that whatever was narrated to them the film has turned out completely different.
This often led to creative dissatisfaction.

2.2 The Underworld Nexus

The Mumbai underworld have been known to be involved in the production of several films,
and are notorious for their patronization of several prominent film personalities; On occasion,
they have been known to use money and muscle power to get their way in cinematic deals.
This was result of failure to attain legitimate source of finance. In 90s, many such links came
to fore. In 1993, actor Sanjay Dutt’s link with the underworld became known after police
found illegal arms in his house, apparently gifted to him by underworld don. Soon after,
Divya Bharti died in mysterious circumstances, which many observers felt was doing of the
underworld.The underworld acquired money by illegal means such as extortion, smuggling.
Many Bollywood personalities were terrorized by the underworld to give money or face
terrible consequences. In 1997, Music Baron Gulshan Kumar who owned the company T-
series was assassinated by the underworld because he didn’t give in to the demands. In
January 2000, director Rakesh Roshan was attacked but he survived the bullets. Many times,
the mafia pressurized actors to do particular film because they had invested money in it. On
other occasions, they promoted many actresses who were their mistresses.

The proved example was Monica Bedi who was arrested with underworld don Abu Salem.
The nexus in film production came to the fore with the film Chori Chori Chupke Chupke.
The film was financed by Bharat Shah, but apparently underworld boss Chhota Shakeel was
behind the finances. Bharat Shah was arrested and remained in lock for a year. Later, it was
proved in the court that he didn’t take money from Chhota Shakeel but was aware of the deal
with the producer of the film Nazim Rizvi, who was in jail for longer period. The film was
scheduled to be released in 2000, but CBI confiscated the prints.Industrial Development Bank
of India (IDBI) was first to enter with a funding of Rs.100 million with 16% p.a. interest rate.
 3. CORPORATIZATION 0F BOLLYWOOD

Corporatization refers to the streamlining of the value chain, creating not only formalized
networks and joint ventures but also large-scale studios in production, distribution, and
exhibition. Corporatization has changed the old norms of Filmmaking intensified market
competition and introduced the culture of big-budget films with short deadlines. It has
brought about increased level of professionalism and transparency in business and accounting
practices in the Indian film industry. Actors and production companies prefer to work with
people who have bound script and detailed plan of action of the schedules. A film is taken up
as a project and a fixed timeline is followed.
The two important milestones that have laid the foundation for the process of corporatization
of the Indian film industry are:

 The Information & Broadcasting Ministry according “industry” status to the film
industry in May 1998
 The Finance Ministry’s announcement that the entertainment industry would be
recognized as an approved activity under “industrial concerns. Since then, the
Government of India has taken several initiatives to liberalize the exchange control
regulations in film production and financing.

3.1 CAUSES TO THE RISE OF CORPORATIZATION

1. Opening of Indian economy: Opening the economy had immediate as well as far reaching
effects. While far reaching effect was high growth and coming off of affluent Indian middle
class. The immediate effects were de-regularization of television giving rise to private pay
channels to be aired through cable and satellite.

It not only played a medium to open Indian eye to global entertainment, it also enhanced the
revenue potential for Indian films. Opening the economy also meant release of Hollywood
films in Indian theatres almost at the same time. Though in 90s there was not much success of
Hollywood films except Jurassic Park and Titanic, the new millennium brought more
audience for Hollywood films.

For instance, Spiderman 2 earned Rs 10 Crore in its opening weekend despite the release of
Hindi super hit film Mujhse Shaadi Karogi on the same week in 2004. Now, major
Hollywood films are simultaneously released in India and are major hits.

The recent examples are 2012 and Avatar which overtook the box office performance of
many Hindi films. When Hollywood was knocking at its door, Hindi film industry had to
inevitably adapt a model which reduces risk, brings more professionalism and synergizes all
resources. Hence, corporatization of the industry.

2. Digital Revolution: The 90s decade saw a revolution in information technology that no
other times in the past can equal. Internet, Mobiles phones, Computers, Compact Discs all
came into existence and it redefined the way we lived life. It also had great impact on the film
industry. Compact discs replaced VCRs and since VCD players were much moderately
priced, everyone could own it. It led to the rise in Home Entertainment revenue.

Internet enabled content like music and movies to be sold through the web which meant more
revenues. The direct to home services made sure suburban and rural areas where cable TV is
not available, get premium channels. As the volume of viewership increased, the revenue also
increased. With time, the prospect of revenue generation grew more and more, the corporate
decided to enter the industry.

3. Advent of Multiplex Cinema Halls: Multiplex cinema halls are the complex which has
multiple screens with seat capacity of almost 1/3rd of a Single Screen Cinema hall.The ticket
rates are triple or 4 times more than single screens. The first multiplex was set up by PVR in
Saket, Delhi in 1997. The first decade of the new millennium saw a boom in multiplexes in
tier I, II, III cities. They not only generated more revenues, they also brought new trend with
it. More screens mean more films to keep all of them occupied implying more demand of
films.
Hence more films were needed to be produced. It was not practically possible for
independent producers to meet the demand which paved way for the formation of
corporation.

4. Reaching the hinterland: The advent of cheap pirated CDs which would show the most
recent films killed the cinema halls in B and C centers. The main reason behind this was that
films would release in these theatres almost after a month of its release. Meanwhile, the
pirated CDs would reach them with couple of days. Most of the cinema halls were shut down.
But the advent of digital films gave rise to new digital cinema halls.

The digital cinema halls don’t use actual reel to show the film. Rather they download the film
through satellite and show through digital projectors. Hence films could be released
simultaneously released in hinterland, as there was no need of more physical prints of a film
was required, which brought the audience back to theatre. This also meant more revenues.

5. Granting ‘Industry’ status: Hindi cinema production was given industry status by the
government in 2000, which became the immediate cause for corporatization. The industry
status meant bank credit was easily available and finances could be raised through other
instruments. There was no limit to Foreign Direct Investment which meant foreign studios
could produce films in India without any local partnership. As more money was pumped into
the industry, the prices of the top stars went sky high, which became unaffordable to most
independent producers. It was kind of history repeating itself. The time of independent
producers was over.

6. Growing Overseas Market: Since late ‘90s, Indian movies started to make its presence
felt in overseas especially in the UK, USA and the Gulf countries where there is considerable
population from Indian subcontinent. With time, the revenue base has grown and added
significant amount of revenue. Film-makers like Karan Johar has been perceived to be
making films keeping overseas audience in mind. Most of his recent films did better business
in the overseas than in India.
 4. INDIAN LAW FOR BOLLYWOOD

Laws pertaining to the film industry differ from other legal subjects, mainly due to the special
economic considerations and business practices that influence their development. An
important feature of entertainment law is the drafting of diverse entertainment contracts,
which primarily deal with artistic control, credit or billing, compensation of artists and the
protection and conveyance of intellectual property rights, such as copyrights, performer's
rights, trademarks and right to publicity. This provides a broad overview of the Indian and
American legal issues of the two film industries.

The Ministry of Information and Broadcasting ("MIB") is the apex Indian body that
formulates and administers rules, regulations and laws regarding Indian films. The import and
export of films along with the development and promotion of the film industry falls within
the MIB's mandate. The Film Wing of the MIB consists of, amongst others, the Central
Board of Film Certification ("CBFC"), the National Film Development Corporation
("NFDC"), Films Division, and the National Films Archives of India ("NFAI").

4.1 Film Contracts

A majority of the Indian film industry operated on verbal contracts. However, this practice of
not entering into well-defined and structured agreements often results in a great deal of
complications and disputes. Hence writtem contract was implemented.

(a) Formation of a Contract

In India, the basics of forming contracts are provided under the Indian Contract Act, 1872
("Contract Act"). Though the Contract Act is over a century old, the provisions enshrined in
it are relevant even today. Under the Contract Act, a contract has been defined as an
agreement enforceable by law. Not all agreements are contracts. For an agreement to become
a contract, five essential elements need to be satisfied. They are:

(i) There must be an offer made by one party to another and an acceptance of the offer;
(ii) There must be lawful consideration for the agreement;

(iii) The object and purpose of entering into the agreement must be lawful;

(iv) All the parties to the agreement must consent freely to enter into the agreement, i.e, while
entering into the agreement they must not be defrauded, coerced, or unduly influenced or be
under any misrepresentation from the other party or enter into the agreement under a mistake
of fact or law; and

(v) They must have the legal capacity to enter into an agreement.

While the Contract Act does not make it mandatory to enter into a written contract, it is
advisable to enter into a written contract to avoid any disagreements at a later stage. Even if
any litigation is initiated against either party, it becomes simpler to prove the terms and
conditions agreed on between the parties if there is a written contract to that effect.

Moreover, under certain special laws, such as the Indian Copyright Act, an assignment or
license of copyright has to be in writing and must conform to certain parameters. Thus, an
oral agreement would not be valid and consequently, there would be no assignment or license
of copyright.

(b) Types of Contracts

(i) Literary acquisition agreements: The success of a film, to a large extent, depends upon
its script and dialogues. However, while acquiring a script for a film, the producer must be
cautious about the ownership and originality of the script. It has to be ascertained whether the
script is original or has been copied, adapted or translated from an existing work and
accordingly necessary approvals have to be obtained. At the same time, a producer should
know the exact nature of the rights which he or she acquires upon purchasing the script, for
example whether he/she has the rights to modify the script; whether he/she can make another
script based on the original script or a sequel to the original script or whether he/she can
make a television serial or drama from the same script. All these elements need to be properly
captured in the literary (script) acquisition agreement.

(ii) Agreements with actors, writers, music composers, director and crew: While in
Hollywood, these types of agreements are in vogue, in Bollywood, these agreements are not
generally entered into. Even when they are entered into, the agreement is a very basic one
pager, which is never good enough. In fact, a contract not well drafted is worse than having
no contract at all, as it leaves a lot of room for ambiguities and uncertainties as it does not
clearly lay out the terms and conditions agreed upon by the contracting parties. Therefore, it
is essential to draw up formal detailed contracts with the actors, writers, music composers,
directors and crew, which specify the nature of services to be rendered, the time-period
required, the consideration to be paid, the ownership of any rights, insurance considerations,
exclusivity criteria, etc.

Many times, due to the lack of any concrete contracts, the star cast and crew do
not perform their services to the satisfaction of the producer. At the same time,
producers do not provide adequate compensation and proper treatment to the
star cast and crew. In order to avoid any such disputes, it is important that
proper contracts are created.

(iii) Finance and production agreements

 Investor financing agreements: An investor financing agreement is useful for a producer

or a production company that needs an investor or a lender to contribute money towards
the production of the film. If there are various investors in a film, the agreement should
reflect this and the profit share and rights of each investor in the film. The investors may
either be partners in the equity of the production company, if they are investing in the
production company per se, or partners in the intellectual property and profits of the film,
if they are investing in an individual film project. Sometimes, they may even want credits
as producers if not as financiers.

 Co-production agreements: In a co-production agreement, usually two or more parties

enter into a sort of joint venture to produce a film. The intellectual property in the film is
usually shared between the producers and therefore no assignment of the intellectual
property rights can take place without a mutual agreement between both parties. In this
type of agreement, the producers share the money received from the sale of the various
rights in the film in a ratio mutually agreed upon between them.
 Agreements with banks and financial institutions : Though filmmaking is a risky business,
several banks and financial institutions have begun to show interest in financing film
productions. However, before lending the money, they make sure to enter into detailed
agreements with the producers to ensure the timely return of their money. Also, banks
usually have the first lien on the film, meaning that in the event the film is not completed,
or they do not get back all their money, they can complete the film or use /sell the film to
any third party to recoup their share. Moreover, usually the terms and conditions imposed
by banks are so stringent that a slight default on the part of a producer could result in
termination of the agreement.

 In-film advertising agreements: Films have become a popular medium of advertising for
commercial enterprises. Companies usually enter into in-film advertising agreements with
the producers for subtly advertising their products or services in the film. While these
agreements are an additional source of revenue, it is important to lay down an exact
understanding between the parties as to when, how and the number of times the
advertisements will appear, so as to avoid any problems.

 Distribution Agreements: In order to showcase the film to the world at large, the
producers/owners enter into agreements for distributing various rights in the film. While
entering into these agreements, producers/owners must ensure that they own all the rights
in the film and should try and capitalize on all these rights to the maximum extent
possible. At the same time, producers should ensure that distributors take adequate
precautions against the piracy of the film, and even assist them to fight piracy.

 Music agreements: Agreements with music companies for distributing the soundtrack of
the film are more popular in India than in the US. Generally, under these agreements,
 complete music rights are given to the music companies and they in turn, pay the
producers a lump sum amount, as well as consideration based on the total volume of sales
of the film music.

5. COPYRIGHT

Copyright is an exclusive right that the owner of a work has with respect to his work.
Copyright consists, not merely in the right to reproduction, but also in the right to work
derived from the original works.

Copyright Act

In India, copyright in a film is recognized and protected under the Copyright Act, 1957 (the
"Copyright Act"). The Copyright Act, defines an author of a film, the different rights existing
in the copyright of a film, the term of the copyright and mode of transfer of these rights. It
also lays down the provisions regarding infringement of copyright in a film. The Copyright
Act has been amended from time to time to make it more effective and to comply with
international obligations.

In the film industry, copyright exists in the following works:

• Script, as a literary work

• Lyrics of a song, as literary works
• Music in the film (either in the song, or the background music),
as musical works;
• Photographs or any posters made with respect to the film, as
artistic works;
• A recording of the songs and dialogues in the film, as sound
recordings; and
• The entire film as a whole, as a cinematograph film.

The author and first owner of a film is its producer. The producer also needs the services of
artists, performers, directors, lyricists, music composers, etc. during the course of production.
Under the Act, there is a provision that if a work is made in the course of the author's
employment under a contract of service or apprenticeship, the employer shall, in the absence
of any agreement to the contrary, be the first owner of the copyright therein.
The Copyright Act lays down the various rights given to each class of work. It provides the
author/owner of the work, the exclusive right to do or authorize the doing of certain acts, such
as reproduction, communication, publication, adaptation, translation etc. of the work or any
substantial part thereof. For example., for cinematograph films, the owner of a cinematograph
film is granted exclusive rights to:

• Make a copy of the film, including a photograph of any image forming

part thereof;
• Sell or give on hire, or offer for sale or hire, any copy of the film; and
• Communicate the film to the public.

Transfer of Copyright : Transferring of copyright is a very crucial issue in the film industry
as the process of transferring copyrights commences from the time of production of the film
and continues until the time the film is communicated to the public through various mediums.
Transfer of copyrights can take place either by way of an assignment or a license.

5.1 The Copyright (Amendment) Bill 2010

This Bill amends the Copyright Act, 1957 and seeks to make the provisions of the law in
conformity with relevant international treaties. The Bill expands the definition of
“copyright” and introduces a system of statutory licensing to protect the owners of literary or
musical works. It includes a system of compulsory licensing of copyrighted works for the
benefit of the disabled, with the prior approval of the Copyright Board. It also protects
performer’s rights, including, allowing them to make sound or visual recordings of their
performances and reproduce them in any medium, issue copies to the public or sell or rent a
copy of the recording.

Highlights of the Bill

• This Bill amends the Copyright Act, 1957.

• Copyright in a film currently rests with the producer for 60 years. The Bill extends
copyright to a director as well, but for 70 years. In some cases, this amendment also
applies to films produced before the Bill.
• The Bill makes special provisions for those whose work is used in films or sound
recordings (e.g. lyricists or composers). Rights to royalties from such works, when
 used in media other than films or sound recordings, shall rest with the creator of the
work and can only be assigned to heirs, or copyright societies which act in their
interests.
• The Bill allows for the production of copyrighted work in special formats for use by
persons with disability, without infringing copyright. It also specifies a procedure by
which work can be produced in general formats, for use by such persons.
• The Act gives authors, or their representatives, the right to claim damages against use
of their work (while under copyright), in a way which adversely affects their
reputation. The Bill allows such a right to be exercised indefinitely, as opposed to
being restricted to the term of copyright, as is the case currently.

5.2 TRADEMARK AND DOMAIN NAME PROTECTION

While typically copyright protection receives tremendous importance in the film industry,
protection of trademarks associated with the film is often an ignored issue. However, with the
globalization of the Indian film industry, this particular intellectual property right will be of
immense significance in brand building.

A trademark is a visual symbol, which differentiates the goods manufactured or otherwise

dealt with by the proprietor of the trademark from similar goods. In the film industry,
trademarks may be relevant in the following instances:

(i) Name of the film, if it is used in merchandising and publicizing the film;

(ii) Logos of the production houses or companies which produce films;

(iii) Logos of the music companies, distributors and exhibitors which distribute films and
film music; and

(iv) Logos and trademarks of sponsors and in-film advertising companies;

(v) Characters in films, whose names or visual images readily identify a single source of
authorship, who have had significant continued exposure to the general public and function as
a form of identification and commands public acceptance and recognition.
In India, trademarks are protected under the Trade and Merchandise Marks Act, 1958
("Trademarks Act"). Only trademarks, which are registered under the Trademarks Act, are
entitled to protection from infringement. Unregistered trademarks are protected under the
common law of passing off i.e. if a third person uses such an unregistered trademark on
similar goods so that the public can be confused or deceived, the owner of the unregistered
trademark can bring an action against such third person.

An important distinction between copyright and trademark protection is that while copyrights
are protected only for a particular term after which they can be used by any and everybody,
trademarks can be protected in perpetuity or as long as the business exists. Moreover,
registration of copyrights is not mandatory and registration does not provide any additional
benefits to the owner of copyright in any work.

On the other hand, the registration of the trademark gives the registered proprietor the
exclusive right to use the trademark in relation to the goods for which it is registered.
Violation of these rights can be prevented by an action for infringement. Registration acts as
public notice to others that they should not use the trademarks which are registered or
pending for registration. However, protection is also granted to trademarks that are not
registered in India, in the event that marks, have acquired a substantial reputation in India,
through advertising or other means. In such cases, then any person who attempts to use the
same trademark on his goods so as to deceive the public into believing that the goods are
manufactured by the proprietor of the trademark, can be prevented from do so, under the
action of passing off. This common law recourse is intended to protect commercial goodwill
and also ensure that business reputation is not exploited. Moreover, in the Internet arena,
domain names have acquired a significant position in brand-building and protecting goodwill.
A domain name is the address of a particular website, such as www.bollywood.com. Over the
last few years, several Indian films, as well as film companies and distribution companies,
have established their presence on the Internet.

For example, in order to promote Lagaan, a website www.lagaan.com was developed.

Similarly Idream Production Pvt. Ltd., a well-known film production and distribution
company, has established its own website www.idreamproduction.com. The World
Intellectual Property Organization has formulated a special arbitration center to decide upon
disputes concerning domain names. This could be used as an effective medium to protect a
domain name.
 6. PIRACY

Piracy occurs in various media, such as cable piracy,

VCR piracy and its variants, CD, DVD and VCD piracy.
Renting or selling these pirated films the world over
considerably undermines the business potential of the
film. Most Bollywood films are telecast on cable
without any authorization or distribution rights, almost as soon as they are released in
theaters. Costs for curbing piracy are prohibitive, costing more than US $50,000 for the first
three to four weeks alone primarily, because there are as many as 40,000 cable systems in
India. Even Hollywood films are released in India without authorization within a few weeks
of their international release. This often results in multiple copies of the film being made
available in India prior to their theatrical releases.

The Indian government has initiated several measures for better enforcement of copyright
laws. Production houses have also actively started taking steps to curb film piracy. An
attempt to control piracy was made by Rajshree Productions Limited prior to the release of
their blockbuster - Hum Aapke Hain Kaun. Every print of the film was assigned a serial
number, which was reproduced with every copy of the film made. Thus, if any pirated copies
were released, it would be easier to trace their source. As a result of these measures, the
release of pirated copies of the film was deterred. Further, the Indian judiciary has also come
to the fore in the area of copyright protection. In addition to increasing the penalty under law,
video films have to display certain copyright related information on the recorded video films
and containers. Backed by strict regulations and the strong enforcement of the law,
Bollywood is thus leaning towards legally enforceable structures and processes.

Another aspect of piracy includes copyright thefts, which entails the copying or lifting of an
author's work by making the 'necessary' changes to avoid infringement. Films that borrow or
recycle existing material, conventions, idioms, styles and even images have increased in
number. Such pilfering of ideas can cause whole industry to suffer. For a film to be
successful on the global scale or for a movie industry to become a player on a global level, it
has to rely on creativity and originality.

7. FILM FINANCING

“Bollywood,” as the industry is typically referred to, as the world’s largest by volume,
producing in excess of 1000 films annually. Currently, there are two onshore venture funds:
Cinema Capital Venture Fund and Vistaar Religare Film Fund, which are registered with the
Securities and Exchange Board of India(SEBI) as domestic venture capital funds. Together,
they have a corpus of about Rs 3,500 million. While these funds have been set up recently,
they have indicated a potential return in the range of 25% to 35% to the investors.

Mode of Funding Remarks

Private Financiers Most frequently used funding source. Interest
rates differ for different borrowers. By and large,
interest rates have become competitive with a
macro level fall in interest rates.

Promoter’s Equity The second most popular source of funding.

Larger Producers (in lieu of distribution rights & Not too popular as all big producers do not have
profit sharing) excess capital. Most of them shy away from this
type of funding (equity investment for third
party film projects) and concentrate on their own
projects.

Institutional Debt Most of the producers who can get sanctions do

not need institutional debt funding while
producers who need funding can not get
sanctions due to conservative sanctioning
approach (more so due to prudent credit
policies) followed by lenders in order to protect
 themselves against distribution & completion
risks.
Distribution Financing Is available presently only for big banner films
with reputed producers, directors and star cast.

IPO Hangover of poor returns earned by investors

from prior IPOs. Difficult but possible for
business with diversified operations.

Venture Capital / Private Equity (Company Not forthcoming for plain vanilla film
level) production companies due to concerns of
transparency & higher risks. Low institutional
activity due to lack of good, diversified
investment opportunities.

Venture Capital / Private Equity (Project & Slate Mitigates most of the critical risks associated
Specific) with company level funding. Funding from
corporates & individuals is growing rapidly
through plain vanilla financing and / or co-
productions.
 8. INSTITUTION AND BANKS FILM FINANCING

Indian banks have evinced a growing interest in financing films, especially after "industry"
status was granted to the film industry. However, considering that investing in films is a risky
proposition, banks require adequate documentation to guarantee that the film will be
successfully completed. Discussed below is a brief summary of some of the guidelines
concerning film financing.

(i) NFDC Guidelines

In 1975, National Film Development Corporation Ltd., (“NFDC”), a Government of

India Enterprise, was established with a view to promoting and organizing an
integrated development of the Indian Film Industry, to foster excellence in cinema
and to encourage the good cinema movement in the country.

The primary goal of the NFDC was to plan, promote and organize an integrated and
efficient development of the Indian film industry and foster excellence in cinema.

Over the years, NFDC has provided a wide range of services essential to the growth
of Indian cinema. The NFDC (and its predecessor the Film Finance Corporation) has
so far funded/produced over 300 films. The National Film Development Corporation
("NFDC") undertakes co-production and co-financing of domestic as well as
international films.

The manner in which the NFDC provides loans is briefly outlined below:

1. The applicant must submit a loan application form in duplicate to the NFDC,
along with nine copies of the script for feature films, or two copies for
documentaries or short films and the prescribed processing fees.
2. Once the project is sanctioned, the applicant must pay a deposit amount, which is
adjusted towards repayment of the loan. In case the application is withdrawn or
the applicant fails to commence production within one year of the sanction, the
deposit is forfeited.
3. A committee of persons distinguished in the fields of Art, Culture and Education
and/ or who have the background of Film Production/ Direction /Appreciation has
 been constituted by the NFDC. The committee recommends a script which is put
before the NFDC Board along with duly filled informs.

• The quantum of loan does not exceed 75% of the budget of the
film. The maximum loan give for producing feature films is Rs. 2
million.
• The loans are given at simple interest of 17% and are secured
against certain collaterals.
• If an application for loan is submitted together with all the
information required, a decision on it will normally be taken within a
period of three months after its receipt.

(ii) IDBI Guidelines

The Government of India has approved the financing of films as an eligible activity
under the Industrial Development Board of India Act, 1964.

IDBI Bank provides finance for production of feature films as defined under the
Cinematograph (Certification) Rules, 1983. Advertisement films, short films,
documentaries etc. are not eligible for financing. A film production house, promoted
by reputed producers, backed by established directors & other technicians and
possessing satisfactory track record are eligible to avail assistance under the scheme.
In case, the entity is recently formed, track record of the main promoter(s) is
considered. Assistance would be not less than Rs. 2 Crore and not exceeding 50% of
the estimated budget of the film. Interest rate would generally be Cap rate in the
prevailing interest rate band.

The conditions of this IDBI Scheme are summarized below:

1. IDBI is permitted to finance the production of feature films as defined under the
Cinematograph (Certification) Rules, 1983. Advertisement films, short films,
documentaries etc. are not eligible for financing.
2. The applicant must be a corporate entity with a good track record
 3. The loan offered is not less than Rs.20 mn & not more than 50% of the film budget.
4. The debt-equity ratio of the film must not exceed 1:1
5. The promoter must contribute atleast 30% of the budget and may raise up to 20%
from distributors.
6. The period of the loan would not normally exceed two years
7. Interest would be the cap rate in the prevailing interest rate band (subject to
availability of tax shield under Section 36(1)(viii) of the IT Act). IDBI has the
discretion to charge a higher rate in case the tax shield is not available.
8. As security for the loan amount, the borrower must provide the following:

(i) Letter from film processing laboratory conveying rights on the

negatives of the film in favor of IDBI.

(ii) Assignment of all agreements and Intellectual Property Rights

("IPRs") in favour of IDBI. IDBI shall have rights in the negotiation of
valuation of all IPRs.

(iii) A Trust & Retention Account ("TRA") has to be maintained for all
capital as well as revenue inflows and outflows. The receivables on
sale of all IPRs shall be credited to TRA. The modalities of TRA will
be worked out to the satisfaction of IDBI. A No Objection Certificate
(NOC) from all concerned parties for the TRA arrangement will be
required. IDBI shall have the first charge on the TRA.

(iv) First hypothecation charge on all the tangible movable assets under
the project,

(v) Personal guarantee(s) of the producer(s)

9. Borrowers must submit progress reports, cash flow statements, audit reports and other
reports in specified formats to IDBI at periodic intervals.
10. IDBI may also appoint specialized agencies to monitor the progress of the film.

As of April 2002, IDBI had invested approximately Rs 72.85 crores towards the film
financing of 12 projects.
(iii) RBI Guidelines

Based on the IDBI guidelines, the RBI formulated guidelines for film financing that
allows commercial banks to finance film producers (corporate as well as non-
corporate) with a good track record and also entities that produce films in
participation with the NFDC. While the RBI guidelines are quite similar to the IDBI
guidelines, there are certain distinguishing features, which are enlisted below:

• Banks may provide finance to corporate as well as non-

corporate film producers with good track record in the relative field
• Banks may also provide finance to these entities for production
of films in participation with the NFDC.
• Banks may invest in films where the budget does not exceed
Rs. 100 million. However, the maximum investment by the Bank is
limited to 50% of the budget of such films.
• The period of the loan may be based on the bank's assessment
of the cash generation of the project.
• However, the restriction on financing films where the budget
does not exceed Rs. 100 million is not viewed as a very practical
approach since most films nowadays exceed this limit. For instance,
Gadar, the Bollywood blockbuster film, cost Rs. 180 million, whereas
film like Devdas cost Rs. 500 million .
 9. FOREIGN INVESTMENT

In mid 90’s, the foreign investment regime in India was not very favorable for the film
industry and therefore, Hollywood and overseas media players had no incentive to invest in
Bollywood. The Government of India has considerably liberalized foreign investment in the
film sector.

Foreign investment is permitted up to 100 % of the paid-up capital in an Indian company that
is involved in film financing, production, distribution, exhibition, marketing and associated
activities relating to film industry.

Until April 2002, such foreign investments were permitted under the automatic route of the
RBI, subject to fulfillment of the following conditions:

(i) The foreign company investing in an Indian company should have an established track
record in films, television, music, finance and/or insurance.

(ii) The foreign company investing in an Indian company should have a minimum paid up
capital of US $10 million if it is the single largest equity shareholder in such an Indian
company, and at least US $5 million in other cases.
(iii) The minimum level of foreign equity investment in such an Indian company should be
US $2.5 million for the single largest equity shareholder and US $1 million in other cases.

(iv) The debt to equity ratio of the Indian company should not be more than 1:1. That is, the
domestic borrowings should not exceed the equity contribution.

(v) The provisions of dividend balancing may be applicable to such investments. However,
the Indian Government has further liberalized foreign investment in this sector and in April
2002, it announced that foreign investment in film companies shall not be subject to
conditions (i) through (v) mentioned above.203

Whether foreign investment is permitted in an individual film project ?

As discussed above, the foreign investment regime in India permits foreign investment into
the equity of a film company. However, the provisions are silent as to the investment in an
individual film project. Though corporatization has set into the film industry, it is the
individual producers and partnership firms who make a vast majority of the films in India.
Therefore, in the event a foreigner desires to fund an individual film, the existent foreign
exchange regime does not permit this on an automatic basis.

In such a case, the foreign investor would need to get a case-by-case approval from the
Reserve Bank of India ("RBI") for investing money in a film project and repatriating the
proceeds out of India. This may prove to be a tedious and cumbersome process.

From film producers’ perspective, the film funds offer the freedom to focus on the creative
process, including identifying the best talent (i.e., directors, scriptwriters and actors), without
being tied down to a large film production house or carrying the burden of financial and
business-related aspects. All in all, the players who are not looking at aligning themselves to
established studios, the film funds offer an attractive alternate proposition—intelligent
money.
Since the formal ‘industry’ status was accorded, the banks have been extending support to
this sector. They have stringent norms for lending and as a result small players and
independent filmmakers typically do not get access to bank finance.

10. INSURANCE

Today, a lot of Bollywood movies coming from big banners are produced with high budget.
The amount of expenses have increased, a lot of this however depends on inflation and
recession. The economic conditions of not just of India but the global world tends to affect
Bollywood movies to a larger extent. Some production houses put in heavy amounts of
money for a certain reason that would be genuine to a greater extent. But, with some
production houses, it is an unnecessary investment. If the movie does not appeal to the
audiences, then the investment goes for a total toss. Keeping such things in mind, the
production houses make the final call.

The reason why Bollywood movies are being made at such a rate is based on what actors
participate in the movies. If the movies have stars like Amitabh Bachchan, Aamir Khan,
Salman Khan, Sharukh Khan, then the producers have to shell out excessively. These
celebrities are very pricy and the fees that they charge are immense and as a producer you
have to be willing to spend the desired rate.

Even with the budget of Bollywood movies reaching sky high, the industry still seems to be
doing just fine. The movies that are coming in every week, there is something that manages
to pull in the crowds and do some great business for them. With the high budget, the makers
of the movies are in for a huge risk. If the movies fail to click on the box office, it is the loss
of the production house, which does not affect the actors much. This is the reason why a lot
of production houses do their level best to promote the movies in an extravagant manner.
This would help them reach out to people and attract them to the movie halls.

The film insurance business is gathering momentum in the country and may soon become a
good revenue stream for insurance players.The demand for risk cover against unanticipated
incidents has led film producers to opt for mechanisms that provide protection to their
investments.The entry of corporate giants into film making has not only altered the dynamics
but also catalyzed the growth of the film insurance business.

“Films fall into the broad category of event management and hence like any other event
it can also be insured.”

Attributing the growth of the business to an increasing number of corporate entities like
Adlabs, Sony Pictures and UTV, amongst others, entering the realm of film-making,“these
corporates prefer to be insured against any unforeseen or unfortunate incidents and this is
becoming a big driver of growth.”

Another fall-out of this growth is that as the film insurance business picks up steam in the
next few years, so would institutional financing of film making .“As film insurance gains in
popularity, it will also encourage and promote institutional financing of film making,”

With films being insured, Bollywood is more secure now than ever. The films “Life Partner”
and “Kaminey” did not do any business in Mumbai and Pune over the weekends as all the
multiplexes and theatres were shut down because of swine flu scare.However, the producers
of these films did not suffer much of a loss because both “Life Partner” and “Kaminey” were
insured.
What sparked the drive towards insurance?

Initially insurance was considered as one more burden to film`s budget and the producers
were very hesitant in taking insurance policies. It was arrest of Sanjay Dutt during
`Khalnayak` which prompted Subhash Ghai to insure his next movie `Taal` for which he paid
Rs 1.5 million as premium for the film valued at Rs 110 million. Ever since Taal was insured,
more and more producers have rushed to insure their movies, like Mohabatein, Lagaan,
Kabhi Khushi Kabhi Gham, Ashoka, Dil Chahta Hai, Ek Aur Ek Gayarah, Kuch Na Kaho
and Deewaar.

Another reason for the move towards insurance is that Film production was given `industry`
status in 2000, and RBI allowed banks to lend to film production. Now the insurance of the
film is a pre-requisite for bank loans for Hindi films. Therefore any one who wants loan from
bank for filmmaking has to take insurance on his film. In the future with more uncertainties
in the film market such as Bharat Shah`s arrest and fancy for cocaine by some of our stars,
more and more producers will move towards insuring their films.

What the insurance coverage includes ?

Leading insurance companies have agreed to compensate for delays and losses due to
cyclones, bandhs, strikes, adverse weather conditions and traffic interruptions as well as harm
to individuals involved in film-making. Depending on the type of policy one takes, insurance
in Hindi films can be grouped under the following broad heads.

10.1 TYPE OF POLICY

For a typical movie, various covers as mentioned above typically exist. Depending on the
type of movie one is making, one will need to take one or all of the above coverages as a part
of the policy. For example, in a movie like Devdas where large sets have to be put in Film
City, the policy will be heavy on insurance for properties and sets whereas for a movie like
Kaun which is shot in just one room this kind of insurance can be completely avoided. Also
in a movie like DON where a great number of stunts have to be performed by the actor, extra
insurance may be taken whereas in a movie like Aastitva this may not be required.

Coverage types, insurers liability and exclusions

1.Production insurance: Coverage in such cases can be claimed due to non-
appearance which may arise due to - death, accident/illness involving
hospitalization, death in immediate family, natural calamity, complete
breakdown of transport system, riot/strike/civil commotion/curfew like
situation prohibiting the cast from reaching the site of shoot, acts of kidnap,
murder etc.

Insurer's liability is restricted to reimbursement of lost remuneration in event of above events,

reshooting expenses and losses due to expenses on account of cancellation/postponement etc.
However no cover can be claimed if the cancellation has taken place if the person is a
accused criminal under arrest, detention, interrogation etc. or accidents arising out of
participation in hazardous stunts or conditions like pregnancy etc.

2. Properties, Sets, Production Equipments, Negatives etc: Coverage in such cases is due to
losses arising out of fire, flood, storm or any natural calamities or accidents due to main
cast /accidental/external means or acts of riot/strike/ civil commotion etc. or
terrorism/theft/burglary/dacoity or risks of transit. What the insurance company examines is a
budget and the shooting schedule, as also the profile of the company, the director and, of
course, the star cast.The insurance company looks forward to transparency and honesty on
the part of the producer. So far, film insurance has been a good business for the company.
The only cases of payback were probably 'Mohabbatein', where Aishwarya Rai was injured,
and 'Saathiya', which had a "minimal" main camera equipment malfunctioning. The insurance
rates are approximate, concrete figures cannot be stated for every film. The repayment figures
are confidential, too.

3.Public Liability : Coverage is due to injury/loss to members of public and their property
which can include indemnity for court or fees, advocate's fees, legal costs and expenses
incurred with Insurer's consent in the successful defense of suits/writs/summons brought
against to prevent the film being shot further or being released. For example Kaun Banega
Crorepati had taken this type of Insurance against PIL (Public Interest Litigation

4.Money Insurance: Coverage in this case is cash in transit between shoot locations or cash
kept at the shoot site or cash embezzled by the authorized person of the insured
but detected within 48 hours of the occurrence. Insurers Liability is Rs.200,000
per incident of loss with an overall limit of Rs 600,000 during the period of the
policy. Major Exclusions include personal cash of any nature or unattended cash or loss
arising out of use of duplicate key whilst the cash is kept in the premises outside business
hours.

5.Workmen Insurance : Coverage includes bodily injury resulting in death/disability to the

workman arising out of and during the course of employment on-shoot locations. Insurer's
liability is as per the provisions of the Workmen Compensation Act.

6. Accident Insurance Coverage : This coverage is for all members of the production team
on-location and/or off-location at a predetermined rate. Coverage can be claimed for bodily
injury resulting from accidents caused directly and solely by external, violent, visible means
during the policy period.

11. MARKETING & PROMOTION

In this glittering world of glamour, it is very important that a product is packaged well.
Therefore, marketing and promotion of a film has become a critical decision point for
producers/distributors. In Hollywood, the amount spent on the marketing and promotion of a
film matches the skyrocketing film budgets. This same practice is now more or less also
being witnessed in Bollywood. Although on a relatively smaller scale compared to
Hollywood promotions, Bollywood's ad spends are also on the rise, along with the
development of a merchandising market (like caps, umbrellas and T-shirts) for "brand recall".
Be it either in Hollywood or Bollywood, the marketing and promotion of the film plays a
very important role in the creative awareness of a film.

Bollywood marketing and promotions:

(a) Pre-Launch Publicity: The marketing process of a film starts approximately a month
before the release of the music of the film. Pre-launch publicity of the film plays a crucial
role in the success of film at the box office. Distributors are usually responsible for the
marketing and advertising of the film, which includes outdoor advertising (hoardings), trailer
inserts, and advertisements through magazines, television and the Internet.

(b) Music Release : The music of the film is generally released two months before the film
itself is actually released. This way the track of the film gets a chance to reach its peak. Once
the music gets released, the music company spends money on the promotion of the film. The
music companies generally buy spots on channels in the beginning of the year itself. The idea
at this stage is to create awareness about the film in the public.

(c) Time of release : The producers try to ensure that the film is released at a time when the
audience is in a festive mood. For instance, New Year, Diwali, and Christmas are considered
to be good times in the year to release films. Similarly, most Hollywood films are released
during summer and Christmas.

(c) Coffee Table Books: (Recently, Bollywood has developed a new trend of releasing coffee
table books of films such as The Making of 3 Idiots, The Making of Don & so on. This trend
has, judging from the sales, been quite a hit, as it has caught the fancy of many film-crazed
fans. The Making of Sholay won the National Award for Best Book on Indian Cinema, 2000
and sold nearly 3,000 copies. , either as a lump sum or in parts, from the pre-production
stage until the release of the film. The producer may also, based on the agreement with the
distributor, get royalty overflow, meaning he would also, if the film makes profits (after
deducting distributor's costs and commission), share the upside with the distributor.
Similarly, the distributor may also enter into an advance contract with the producer, which is
similar to MG, except that the distributor has the right to, in the case the film does not do
well, take back his advance from the producer.

11.1 DISTRIBUTION

There are primarily two stages at which the distributors come in the picture for the
distribution of the film.

Pre-completion
While the film is in progress, the producer is often in need of finances to complete the film.
At this stage, the producer begins to negotiate terms and conditions with various distributors.

Post-completion
Once the film has been completed and the producer wants to launch a film, he needs a person
who can market the same.
Typically, in Bollywood, a distributor buys the distribution rights of a film for a particular
territory and recovers his costs from the exhibition of the film. For the purpose of domestic
film distribution, the country is divided into eight circuits.

11.2 MUSIC

Music is considered an integral part of the seamless web of word, image and sound the stuff
that cinematic magic is made of Music, in Indian films, forms one of the most important
ingredients that contribute to the success of a film, thereby ensuring a steady inflow of
revenue for the producer. India is the second largest producer of music, a crucial selling point
for Bollywood films.

There are various types of contracts that the producer can have with the music company. The
music rights are nothing but just another option that the producer can sell to get money. One
way it is done is through an outright sale of the music rights of the film to the music
company.

In the case of a big banner, or when the producer is confident of the success of the music, the
music rights are not sold on an outright basis. Instead, a minimum guarantee is taken by the
producer, over and above which a royalty is also paid to the producer.

11.3 EXHIBITION

Theater owners are the last link in the distribution chain. For a theatrical film, the principal
method of distribution is the exhibition of the film in cinema halls across the country.

In India, exhibition centers are available in various forms and sizes, ranging from open-air
facilities to thatched-roof rooms to air-conditioned and modern multiplexes. Most theatres in
the country possess only the basic facilities. Only a few theaters in major cities like Mumbai
and Delhi possess sophisticated equipment and sound systems

The distributors enter into contracts with the theater owners/exhibitors for screening the film.
The different contracts entered into between them are as follows:
a) Theater Hire : The distributor pays the theater owner a fixed charge for screening the film
on a weekly basis and earns his revenue through ticket sales. In this type of arrangement, the
distributor bears all the risk.

b) Fixed Hire : Under this method, the theater owner pays the distributor a fixed sum of
money per week. Unlike theater hire, here the risk is borne entirely by the theater owner.
Irrespective of the film's performance, the theater owner pays a fixed amount to the
distributor.

c) MG + Royalty : Here, the theater owner guarantees a certain amount to the distributor for
screening the film. In the event the film makes a profit (after the theater owner deducts his
cost and payment of MG), the same is shared between the distributor and theater owner in a
pre-decided ratio.

d) Profit Share : The theater owner and the distributor share an equal risk, as the amount
earned by the theater by way of ticket sales is shared with the distributor in a fixed ratio.

11.4 BOLLYWOOD COMPANY TIE-UPS/COLLABORATIONS

Reliance Big Entertainment signed a deal worth $ 1.2 billion with Steven
Works SKG’ to produce 36 films for the next 6 years.

• Reliance also acquired around 200 theatres in 28 locations in North

America to screen Bollywood and other regional movies from India.

• Walt Disney has invested around US$ 324 million in a deal with Yash Raj
Films.

• Ramesh Sippy Entertainment has collaborated with Warner Bros.

• Warner Bros has also signed a three movie deal with People Tree Films
and a one film tie up with Tandav Films

11.5 PRODUCT PLACEMENT IN THE BOLLYWOOD MOVIES

Different examples of product placement with different intentions

• ‘Volvo XC 90’ was placed in the major box office “3 idiots (2009)” for a relatively small
amount. The goal was to create awareness of the newly introduced car brand in the Indian
market.

• The prominence of ‘Starbucks’ in ‘Kabhi Alvida Na Kehna (2006)’ where the target of the
placement was the audience outside India

• The box office ‘Om Shanti Om (2007) included many different brands like Exide, Tag
Heuer, Maybeline and MTV. Other brands being product placed: Coca Cola, Pepsi, Pizza
Hut, Toyota, Mercedes, ESPN, Sony Vaio, Sony Handycam, Nikon, Kawasaki, Nokia, Sony
Erickson, Calvin Klein, Goodyear, Castrol and many more

12.

ACCOUNTING AND PAYMENT STRUCTURE

Another fundamental principle of corporatization is the process of accounting that is adopted

in the filmmaking.

The payment system has to be through the cheques and the expenses
incurred in totality should be audited after the completion of the films.

In the process of corporatization another key edifice is the system of

deferred payment while here signing amount is the norm. Even the
corporate majors, who are stepping into this arena gradually, have not been able to introduce
the system of deferred payment on a gradual basis.

A form of deferred payments though has come into play in a big way, it being obtaining the
territory rights.

Once the system of deferred payments is introduced the headache of getting the signing
amount back from the stars who may have been signed in the initial euphoria but refuse to
return it, either after being dropped at the time of film going on the floor, or being dropped
from the project could become a thing of the past.

13. SOURCES OF INCOME

 14. EFFECTS OF CORPORATIZATION

1. The major and the biggest effect of corporatization was that finance was procured
with legitimate means which put an end to underworld era. In fact, after the Chori
Chori Chupke Chupke case, there was no news of underworld hand in film
production. Earlier, very now and then actors sought special protection. However, it
has changed after corporatization.

2. The resources have been streamlined. More control on the supply chain made the
process of making films faster. Now films are made within 6 months time. This
generates more revenues.
 3. Independent producers formed a group and made corporations. A new business
model came into play. Corporations who had no filmmaking experience would
collaborate with independent producers to make films. The producers helped in
effective execution of the shooting, while the corporate would finance as well as
look after into other aspect of the film

4. The actors’ fees have gone sky high. During the beginning of the decade top actors
like the Khans were paid Rs 1 Crore per film but by the end of the decade, they
received as high as Rs 20 Crore per film.

5. This has reduced risk by practicing the best methods. The ROI is calculated by
more capable people to make rightly priced films.

6. Aamir Khan does not charge for his films. He takes 33% if the total profit. In this
way, he takes risk for his work which most other actors don’t do. It has always paid
off for the maverick Khan as he earns more than Rs 35 Crore per film. Recently he
signed an endorsement deal with a company for approximately Rs 35 Crore with a
company. The valuation of actors has gone with corporatization and super talented
actors like Aamir seem to benefit the most from it.

15. CONCLUSION

A new Indian film industry is emerging in Bollywood, one that looks at filmmaking as a
formal business (rather than a social network of entrepreneurs) – even as it is still searching
for the right model to apply.

With Bollywood attaining the status of an industry, it has become easy for newer production
houses to raise capital from stock markets too. Trade analysts feel that the entry
of corporates into film production is an indicator of the tremendous potential of cinema as a
business proposition.

The film business has increased since multiplexes have popped up all across the cities,
increasing ticket sales. It is only thanks to the synergy of the two, Bollywood and corporate,
that when global recession hit the markets, Bollywood was one amongst the few sectors that
were able to come-out of the recession at the earliest, hence proving itself to be a sector
which is barely affected by economic slowdowns.

Fight piracy:

 Allocation of specific funds to be utilized in advocacy and awareness as well as

enforcement and legal matters.

 Release films much faster on DVD and TV after the theatrical release to make piracy
less profitable

Benefit from foreign knowledge to improve quality of movies

o foster co-production treaties with other countries

o encourage development of Bollywood as a production hub by setting up a “single

window clearance”

o system for shooting in India

Increasing professionalism and demand for more realism has driven film business towards
huge expenses and more risk.

Now the changed circumstances have made it necessary to cover the film under insurance.
Producers can do themselves a great service by insuring their films.

However, insurance companies need to beware of the Film Producers who can be a cunning
lot if experience abroad is anything to go by, where many insurers have shut shop due to huge
losses incurred. In normal insurance, the interests of policyholder and insurer are usually
somewhat aligned. If a traveler has taken medical insurance he does not want to get sick. A
film producer doesn't mind because it is not he who is getting sick but it is some one else who
is directly affected and due to which he is being indemnified.

Regarding the demand to include the performance of film at box office, as already discussed
the practical problems and negative effects are such that it must not be implemented.

With specific reference to Indian Film Industry, it has still to warm up for insurance.
Although many production houses has came up but the number is still increasing. However ,
a large section still believes that insurance does nothing but to increases the budget of the
film. This tendency should be changed. Advent of insurance in advertisement film is a right
step in the direction. Recently some interest has also being shown by the southern film
industry, which was most inactive and unwilling initially. This indicates that concept of film
insurance recognized and accepted in India. It is a good sign for the film industry

The synergy between Bollywood and the corporate world is the ‘win – win’ strategy for
both Bollywood and corporate entities. Win- Win situation because if Bollywood has
helped corporate companies to increase their visibility among their respective target
audiences, then the corporates have brought in finance and organization ensemble thus
structuring the otherwise disorganized and chaotic industry.

Corporatising Bollywood has certainly taken the industry to new highs, but internal
challenges like exorbitant star pricing, accountability, non transparency and piracy still
remains.

16 .BIBILOGRAPHY
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http://www.maharashtra.gov.in/english/government/index.php?rep_type_id=5

www.thehindubusinessline.in

http://entertainment.indianetzone.com/films/1/film_insurance.htm

www.indiatimes.com

www.hindustantimes.com

www.realbollywood.com

www.latestcinema.com