The cinema industry is large in India. How large is it actually?It depends on how you look at it. It is at least $5 billion in size. But if you look closely, it could be three to five times this figure. And there are several reasons for this. The television industry also includes short films. The music industry has most of its music coming from the film industry.
The events industry comprises many events around the cinema industry and its starts. Much of these incomes actually belong to the cinema industry. That is why, the industry could be at least $15 billion, but could be a lot bigger than that. And it is growing at 18% compounded year on year.
Conventionally, the industry was financed by private financiers, whose terms were quite stiff, and the money available was limited. That is changing now. Would you comment on it?You are right. They are changing. The first change was when it got industry recognition by the government and hence the banking sector could be approached. But that posed a big problem for the industry. Like the IT industry, the film industry is not asset driven. Banking works only against assets which can be collateralised. The cinema industry is intellectual property (IP) driven. Banks could only offer debt.
They cannot take risks with injection of equity or seed funds. So the industry had to come up with new answers even after being classified as an industry.
What was good for the industry was the international recognition it got from films like Monsoon Wedding, Lagaan and Devdas. With recognition and applause came film financiers, and now there are venture funds that are willing to finance Indian films and take up the risk. They have devised their own set of parameters.
Since the industry is IP-driven, what would the new parameters be?
Please remember that any financing of this industry faces three types of risks: financial, performance and completion.
The last is the most important because without the last risk, final exit for financiers cannot be possible. But nowadays there is a new type of funding which is crowd funding. It is a good model, which could allow the financing of risk even better. But there could be a cap on this type of funding – maybe around `1-2 crore. But it is a good development.
Could you elaborate on what you mean by crowd funding?
As the name suggests, it is when hundreds and thousands of people like the work of a producer-director-scriptwriter and create the seed capital they may require to launch another movie. A very good example of this is the new scheme by Airtel which allows you to download a video for just Rs1.
The amount is small, but the numbers are staggering. Blogs have also come up to raise money for a seed idea. But there can be a risk if the script gets circulated, and the IP gets lost. Then there are script development funds, and one of the parties working towards this is NFDC which is making a market in Goa.
Are there other ways to raise money?
Yes there are. You bring in co-promoters. For instance, you had the Lunchbox with several co-producers. It raised money from the Berlin Median Board, from France and even NFDC. You can find a list of such fundings sources from other countries from the website under Film Commissions Worldwide (www.afci.org/). Then you have groups like those found under LinkedIn called Feature Film Gap Funding. All of them could help as well.
What about country funds?
Many countries try to promote films shot in their territory.
Countries like Turkey offer a refund of the 18% value-added tax, and is considering a 50% refund of expenses incurred in that country.
Germany, Austria, Israel, South Africa all have schemes to promote the shooting of films in their territories because they promote the local economy and also tourism.
Which is the most critical part that film financiers look at?
There is a saying in this industry that ‘Content is king, but distribution is god’. If you have a good script, or can work out a distribution agreement with a TV company or some other agency, you could raise funds that much more easily.
Original article was published by DNA India
http://www.dnaindia.com/business/interview-crowd-funding-co-production-can-reduce-financial-risk-in-filmmaking-manoj-srivastava-1895863