Article: For Bollywood, the Credit Crunch Means More Slumdog, Less Millionaire

The Wall Street Journal
www.wsj.com

For Bollywood, the Credit Crunch Means More Slumdog, Less Millionaire

By DEEPALI GUPTA

No money, no film; no film, no money. Bollywood is in a tough spot.

Lacking financing, India's movie producers are unable to finish and market their films. It could mean as many as half of the films scheduled for release this year mightn't make it, industry officials say.

The results speak for themselves. Bollywood, an industry that generates annual global revenue of above $2 billion, has released only about 20 major films -- targeted India-wide, with a reasonable publicity budget -- so far this year.

That is down from about 100 for the same period in past years, estimates UTV Software, a large movie production and distribution company.

Without these blockbusters, and the marketing behind them, to lure audiences into cinemas, ticket buyers are staying home. Cinema occupancy in India has dropped to 40%, from as high as 60% at the end of 2007, analysts estimate.

So the film industry is being forced to change the way it does business. Song and dance routines may be less flashy. And massive upfront salaries for film stars -- actors' pay accounts for nearly half of a film's typical budget -- are out.

Already, two of Bollywood's top male leads, Shah Rukh Khan and Aamir Khan, have agreed to be paid out of film profits instead of a straight salary. More are agreeing to similar profit-sharing terms.

Total film budgets could be cut as much as 30% to 45%, and more funds will go toward publicity to draw audiences, says Sheetal Talwar, managing director of Vistaar Religare, a $40 million fund that invests in films.

Some are hoping low-cost but high-quality content targeting the urban elite -- pointing to the success of "Slumdog Millionaire" -- will get them out of this spot.

Still, one thing Bollywood mightn't be able to address is cheaper alternative entertainment that has been keeping audiences at home. A key new rival is the TV broadcast of the Indian Premier League cricket tournament.

A spat between the producers and cineplexes that screen their films could make a bad situation worse. The producers have threatened that, unless they get a full half of ticket sales, they will stop releasing films entirely, as of Saturday.

This is a hard bargain to drive. As it is, multiplexes -- which currently share between 38% and 48% of collections, according to the finance chief of one large chain -- are dropping ticket prices. Movie-goers also aren't spending as much on high-margin food and beverages.

The key to combating Bollywood's malaise could be spending more money on promotion to draw in audiences.

The snag: That requires financing to flow again.