2019

Should Bollywood take on Hollywood?

Corporate Strategy

Group 9
Pravin Premkumar (18X5001)
Srinivas Sanga (1816051)
Vinay Sanji (1816052)
Hagar Sudha (1816062)
 Should Bollywood take on Hollywood?

Table of Contents
The History of Cinema ................................................................................................................................. 2
Hollywood & its Rise ................................................................................................................................... 2
Tackling the Global Competitors ................................................................................................................. 3
Evolution of the Indian Film Industry .......................................................................................................... 3
Indian Films – Statistics Summary ............................................................................................................... 4
Current Problems in Indian Film Industry .................................................................................................... 6
How can Bollywood take on Hollywood? .................................................................................................... 8
References .................................................................................................................................................. 13
Appendix .................................................................................................................................................... 14

 Should Bollywood take on Hollywood?

The History of Cinema

It all started with Louis Lumiere, a French inventor, who, in 1894, invented the Cinematograph –

a portable single unit camera consisting of a developer and a movie projector. The Cinematograph

soon became a popular medium of entertainment across France and flourished throughout Europe.

In the meantime, in 1891, Thomas Edison from the USA invented the Kinetoscope, which

consisted of a large, peephole viewer that enabled the audience to watch movies -one person at a

time. By 1904, the immense popularity of the French movie industry touched the American shores

too. Pathe Freres, the largest French producer/distributor eventually entered the American market.

Pathe Freres expanded rapidly – by 1914 they had 41 offices worldwide with offices in India and

Singapore too. During the same period, the French movie industry gained 70% of the global market

share. Pathe Freres expanded their presence internationally systematically by helping the

indigenous entrepreneurs open theatres so as to retain exclusive contractual rights to screen only

their movies.

Hollywood & its Rise

Hollywood eventually capitalized on the opportunity thrown at them to expand beyond borders
during the World War 1 as the European movie industry took a hard hit during the war. The
production houses in Hollywood did the following 5 things to mark their international presence:

1. Vertical Integration: The Hollywood studios started acquiring distributors in Europe so

as to reduce the lead time.
2. Product Bundling: The production houses in America signed contract with the movie
theatres in such a way that the theatres were forced to screen all the movies produced by
the studio in order to screen one big blockbuster.
3. Intense Lobbying: The American studios and production houses pursued intense lobbying
so as to have favorable trade regulations for the American movie industry.
 Should Bollywood take on Hollywood?

4. Wall Street Involvement: The lucrativeness of the movie business caught the attention of
Wall Street that disciplined the industry and entertained free flow of financing to establish
state-of-the-art infrastructure for luring the audience.
5. Alternate Revenue Streams: The Americans were the first to explore the concept home
entertainment by bringing direct-to-home video content that opened-up an alternative
stream of revenue for the movie business.

Tackling the Global Competitors

The two other major movie industries that were posing serious competition to the expansion of
Hollywood in international waters were that of the French and the British. The American studios
employed specific strategies to tackle their international competition as illustrated below:

• France:
o The American production houses employed a train strategy to take on the French.
It specified contacts with the movie theatres to take in 4 or 5 other movies that have
to screened for a specified number of weeks so that the theatres get the privilege to
screen one blockbuster such as ‘The Jurassic Park’ or ‘The Terminator’ - a
locomotive film with cars that follow along – just that the cars were all trash.
• UK:
o To tackle the UK movie industry, Hollywood employed a talent drain strategy. The
movie studios welcomed the British stars such as Alfred Hitchcock and Charlie
Chaplin with open arms that resulted in cross-pollination of the creative talent
resulting in a subsequent talent drain of the UK movie industry.

Evolution of the Indian Film Industry

The Indian movie industry’s evolution can be traced back to four distinct periods as illustrated below:

1920 - 1950: The Early Days of Indian Cinema

• 1913 – Raja Harishchandra, the first silent film of the Indian movie industry set in motion the ball.
• 1931 – Alam Ara, the first talkie film of India opened-up new possibilities in terms of the cast and
content.
•
 Should Bollywood take on Hollywood?

1950 – 1960: A Golden Age of Indian Cinema

• 1955 – Pather Panchali by Satyajit Ray gave rise to a new genre of Indian movies called Indian
parallel cinema.
• 1956 – Mother India pushes filmmakers to set new boundaries that gave India its first Oscar
nomination.

1970s – 1980s: The Angry Young Man Awakens

• 1973 – Zanzeer creates wave among the Indian youth; makes Amitabh Bachchan an iconic figure.
• This period also saw the emergence of art cinema in Bollywood.

1990s – 2000s: Bollywood Gains Popularity

• 1995 – DDLJ takes the international markets by storm creating a rage among the non-resident
Indian diaspora too.
• Cinema in India becomes more than just a form of entertainment whereby even the Indian Politics
was strongly intertwined with the Indian Cinema giving rise to many new political leaders
especially in the south.

Indian Films – Statistics Summary

The Indian movie industry is poised for future growth with the expected revenues of 228 billion rupees by
2023 (Exhibit 1). However, when compared to the global movie industries such as Hollywood and
Chinawood, Indian cinema accounts to only a fraction of the global movie revenues as depicted below:

Figure 1: Comparison of Bollywood with Hollywood and Chinawood

 Should Bollywood take on Hollywood?

Out of $16.7 billion of the APAC market in 2018, only less than 10% of the revenues (Exhibit 2) came
from the Indian market parting one with the question: ‘Are we leaving money on the table? If so, how are
we supposed to take control of it?’

Industry Structure
The firm industry value chain consists of three main functions i.e. Production, Distribution and

Exhibition.

Figure 2: Value Chain – Film Industry

Production: Till 2001, Bollywood industry was not recognized as organized industry and it was

difficult to get the funding from banks and legal financial institutions. Producers used to get finance

from private financiers and mostly from the Mafia. Once Government of India recognized

Bollywood as official industry in 2001, floodgates were open for alternate finance through banks,

foreign investments and other legal financial institutions. It leads to 400 production

houses/producers in India, 32 of them registered as corporate entities.

Distribution: Indian film distribution was divided into seven territories: six territories in India,

and the seventh territory covering the rest of the world. Initially, firms used to release in big cities
 Should Bollywood take on Hollywood?

first with new prints and with worn out prints in smaller cities and villagers. However, this didn’t

work well and impacted earnings of the films. Later, film industry moved towards Ancillary

channels i.e. digital cinema delivery, where films were distributed through servers, telecom and

satellite technology.

Exhibition: As on 2016, there were 7200 screens in India, which are significantly lower compared

to other countries i.e. 45000 screens in North America and 60000 screens in China. With

comparison to growing economies, India has a low penetration of screens with a potential to have

almost 8 screens per million. In last 10 years, there has been major shift between single screen to

multiplex culture. Multiplexes have shown a growth rate of 15% in Indian cities, increasing from

925 in 2009 to 2,200 in 2016. Over 2,000 single screen cinemas have been shut down or converted

to multiplexes in recent times mainly due to greater cost of operations (higher taxes, increase in

distributors’ share, and lower ticket prices) and low occupancy rates, making it unviable to run

screens on a standalone basis. Multiplexes currently account for approximately 26% market share

of the screens; however, they contribute more than 40% of box office collections. However, this

number is slowly increasing. Overseas Exhibitors are coming to setup theatres in India as well

which is a signal that Indian film industry has huge potential. (Mexican multiplex chain Cinepolis

is planning to introduce 14-screen megaplex).

Current Problems in Indian Film Industry

Piracy: The biggest problem in Indian Industry is Piracy. Approximately Rs.18,000 crores and

60000 jobs are lost in film industry due to piracy issues. There is no centralized government body

to regulate the piracy issues in film industry. Current responsibility is divided across multiple

government and regulatory bodies such as the Ministry of Information and Broadcasting (for film
 Should Bollywood take on Hollywood?

censorship), the Ministry of Finance (for taxation issues), and the Ministry for Human Resources

Development (for copyright violation issues). The industry is currently demanding that the

government empower the Ministry of Information and Broadcasting as the sole body dealing with

the film industry.

Ticket Prices: Ticket Prices are much lower when compared to other global film Industries.

Average ticket price in India is $4 (multiplex) whereas it is greater than $12 abroad, with average

being $9.11 in 2018. When one compares the cost of movie ticket to average earnings in India,

Screen Digest survey found that it took the average Indian 16 ‘working’ minutes to earn the cost

of a movie ticket making India one of the cheapest nation to view a film.

Finances: Even after Film Industry was officially recognized as an industry, many film producers

are struggling to raise finance from banks and other legal Financial Institutions.

High Taxes: India had one of the highest entertainment taxes in the world. Till July, 2017 multiple

taxes (Entertainment Tax – up to 60%, Release Tax- 1%, Show Tax – 1% to 2%) were imposed

on film industry. Post July 2017, GST was imposed at 28% on ticket, which incidentally is the

highest rate prescribed in GST (today the GST rate on movie tickets is 18%) and 18% on Food

and Beverages.

Language Barrier: Most of the Bollywood films are made in Hindi language which limits its

global reach to only the Indian diaspora, unlike Hollywood movies which are in English. Subtitles

and dubbing is only a work around but it may not be as effective as English voice in the movie.

Quality: The technology used in Indian films for Graphics, Animation etc. are inferior compared

to Hollywood.
 Should Bollywood take on Hollywood?

Bollywood movies are generally a mix of romance, music and dance, comedy and action, which

has a limited appeal, unlike Hollywood movies have story lines which are more focused on a single

theme be it action, adventure, romance, kids’ genre etc. which has a more universal appeal among

the global viewers.

Talent Bureaucracy: In India, the entry in film industry and opportunities are much easier for

incumbents who have a successful film lineage in their family, which creates an entry barrier for

real talent in the industry.

Influence of Hollywood: With increased global exposure, Indian Middle Class seems to be tilting

towards Hollywood movies due to their technical superiority and rich content. The revenues of

Hollywood movies in India are witnessing an upward trend.

How can Bollywood take on Hollywood?

The growing affluence of the Great Indian Middle-class, which today can confidently boast of

having experienced the best across the globe, coupled with their affinity for superior products and

services, has caught the eyes of the International Film Industry, who see a lucrative market in the

Indian entertainment industry. India is one of the few markets where imported Hollywood movies

claim a small minority share of the movies market. It is not just Bollywood but also movies in

other local Indian languages like Tamil, Telugu, Kannada, etc. which churn out a large number of

movies every year, that make it challenging for Hollywood movies to capture the Indian market.

However, Hollywood production houses, over the decade have learnt from their mistakes of the

last decade and are increasingly producing movies with local flavor. Disney, Sony Pictures and

Viacom are some of the Hollywood Studios which have recently given hit movies like Dangal,

Pad-Man, Padmavat to name a few, which have seen huge commercial success. However, except
 Should Bollywood take on Hollywood?

for an occasional hit like Dangal which enjoyed international appeal, Indian movies still cater only

to the Indian diaspora. Further, Bollywood also needs to be conscious that it is open to newer forms

of competition with various forms of entertainment now accessible to its viewers at the click of an

app on his smartphone. In this scenario, we have attempted to put together a framework which

could enable Bollywood to reinvent itself to capture the global audience.

HIGH

• Focused Genre Movies • Industry Consolidation

•
• Reverse Engineer Movies • Nurture the growth Iconic
with country specific local Indian Stars
flavor in Profitable Markets
• • Innovate and Experiment
• Shorter Duration Movies by introducing new genres
BOX OFFICE
COLLECTIONS- • Strengthen Anti-Piracy
• NON-INDIAN regulations
• AUDIENCE
•
• Introduce Franchises /
• Sequels of Indian Heroes

• Enhance Releases to
Screens ratio

• Masala Genres with story

lines conveying stronger
messages and reflecting
the dynamics of Indian
Society

LOW BOX OFFICE COLLECTIONS – INDIAN AUDIENCE HIGH

• We have attempted to discuss a little more on each of the points mentioned in our

framework:
 Should Bollywood take on Hollywood?

• Leading Indian Production Houses, be it Dharma Productions, Yashraj Films etc., are

mostly family enterprises with relatively small balance sheet sizes, which basically fail to

support making of technologically superior and appealing movies for the global audience.

These Production Houses could explore the M&A route to bring about the much needed

Consolidation within the Industry so that we have Production Houses with strong Balance

Sheets, which can take up big budget movies with a global appeal.

• Storylines should be developed with the aim to create Iconic Actors (Aamir, Rajnikant)

who can be a great source of appeal for the global audience to watch Bollywood movies.

Integration by inviting Hollywood Stars to act in Bollywood productions with an

appropriate storyline created to acknowledge their presence, could also be explored.

• Hollywood Studios have been increasingly mining their vast libraries to come up with

storylines which can be re-made with an Indian flavor and released in the Indian market.

Knowledge based resources about Indian entertainment, which Bollywood Production

Houses possess, should also be similarly leveraged to reverse engineer and produce movies

to be released with a local flavor in profitable overseas markets or to even experiment

upon genres which can catch the attention of global eyeballs. Ex.: Dangal, 3 Idiots,

Secret Super Star (with 6000% ROI), while the mainstay masala genre must be

reinvented with changing societal conditions, Ex.: DDLJ. Making more cross-over

genre movies should also be explored to make Indian Cinema highly visible to the Global

Non-Indian Audience.

• High Quality, focused genre such as Animation for Kids, Sci-Fi for the Teens and Youth,

with interesting storylines and shorter durations can be released in multiple global

languages.
 Should Bollywood take on Hollywood?

• Thought provoking and inspiring story lines which have the potential for being remade by

other movie markets like Hollywood can also be explored to raise the standards of quality

of Indian Cinema.

• A better Releases to Screens ratio can be aimed at to ensure more windows to exhibit

movies within India with Exhibitors expanding their reach and Production Houses

strengthening their global distribution networks to capture more number of screens globally

for Indian movie releases.

• Government and Judiciary must take up violations like copyright infringement and piracy

more seriously and advocate harsh punishment upon violators

• Movies could be released in 2 versions, one with a focused storyline approach with shorter

duration for the global audience, the other with Indian elements (songs, dance etc.)

• Explore the possibility of creating more franchises around Indian Super Heroes. Ex.:

Baahubali, KGF, Munnabhai MBBS, and creating alternate revenue streams around

them, like co-branded accessories and product lines, direct-to-home entertainment, etc.

• Strengthen hold over Profitable Overseas Markets, especially in countries with similar

taste for movies as Indians, because of some commonalities in societies and culture, such

as the South East Asian Markets, the Middle East Asian Markets etc. This will help

Bollywood production houses to build an equal revenue mix from Overseas and Domestic

Box Office Collections.

 Should Bollywood take on Hollywood?

Thus, Bollywood should create its eco-system of global growth by re-defining CINEMA as:

• Consolidate to make it Big globally;

• Innovate to catch Global eyeballs;

• Nurture Iconic Stars to draw global audience;

• Expand distribution networks globally to have more screen releases;

• Motivate others to replicate Bollywood’s innovations and storylines;

• Adapt quickly to ongoing changes.

 Should Bollywood take on Hollywood?

References
1. Statistical Information from https://www.statista.com

2. Journal Paper “Capabilities in Motion: New Organizational Forms and the Reshaping of the
Hollywood Movie Industry*” by Joseph Lampel and Jamal Shamsie,City University, London;
Michigan State University

3. Strategic Management Journal paper: “LEARNING ACROSS THE LIFE CYCLE:

EXPERIMENTATION AND PERFORMANCE AMONG THE HOLLYWOOD STUDIO
HEADS” by DANNY MILLER and JAMAL SHAMSIE

4. Deloitee Report on Indywood – The indian film industry September 2016

5. https://en.wikipedia.org/wiki/Cinema_of_India
6. https://en.wikipedia.org/wiki/Cinema_of_China
7. https://en.wikipedia.org/wiki/Cinema_of_the_United_States
 Should Bollywood take on Hollywood?

Appendix
Exhibit 1: Indian Movie Statistics

Figure 3: Category-wise revenue breakup of the Indian movie industry

Figure 4: Revenues of Indian Film Industry

 Should Bollywood take on Hollywood?

Exhibit 2: Global Industry Statistics

Figure 5: Worldwide leading film markets in 2018

Figure 6: Global box office revenues from 2004 to 2008

 Should Bollywood take on Hollywood?

Exhibit 3: US Movie Ticket Statistics

Figure 7: Average ticket at North American movie theaters 2001-2018

Figure 8: Number of movie screens in North America from 2012 to 2021