Bollywood has always been an interesting film market, in that for a number of years it was run in a much different way than other film industries across the world. Now that has been changing at a fast pace, and the timing has Hollywood studios looking at making a number of deals in that area.
In the past the Indian market was closed, and a lot of shady, unconventional ways of financing movies were part of the way of doing business.
With the Western film market saturated and mature, Hollywood is looking outside of its usual market for growth, and India and Bollywood fits that strategy almost perfectly at this time. The unpredictability of the Chinese and their film market also makes India and Bollywood especially attractive too.
"The fact is that the business in India is becoming more and more like the rest of the world," said Michael Lynton, chairman and chief executive of Sony Pictures Entertainment (SNE). "It looks much more like a business that we understand than perhaps it did 10 or 15 years ago and the trend is to become more like that rather than less like that."
Bollywood is growing at an annual rate of 16 percent, and in 2006 ended with revenue at about $2.1 billion. That growth rate is in connection to the Hindi-language arm of the industry. Over the next several years that's expected to double.
Now that Bollywood is gravitating toward a business model in the industry, it's the right time for Hollywood to look at ways to invest in the country.
Big name films from the West have been introduced to the overall Indian population, but they haven't been too successful, only accounting for a small percentage of the box office take. That has Hollywood looking at making movies for the local population to gain market share.
Sony has already made one attempt with "Saawariya," and while the Indian critics blasted it, it did well financially, costing only about $8 million to make while generating $20 million in revenue.
Now Sony has partnered with one of the major film studios in India: Eros International, where they plan on making between four to six films yearly.
Viacom (VIA-B) is also entering the Indian market, partnering with Raghav Bahl, a player in the Indian television industry, who along with Viacom, will manage the Indian Film Company - an investment fund for movies.
This is a must for Hollywood. Even though they'll tout the great year they had in 2007 domestically, films still drew less moviegoers than in other years. The reason some records were broken was related to price increases, not more people going to the movies.
The increasing predictability of Bollywood and the Indian film industry make this a no-brainer for Hollywood studios. Assuming that continues on, this will probably be the key area of growth for the industry over the next decade.
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