Film Insurance & Financing in India
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THE PROBLEMS contd...At various other stages in
the course of production of the movie – transactions with the distributors
and the music companies for instance – there was always an element of black
money involved. Most of the popular stars commanding a high fee, did not
take their entire payment in white money in order to escape the taxes.
According to estimates, 15-20% of the money paid to stars was always in
black money.
By the mid 1990s, the industry was facing serious problems with the
underworld mafia demanding increasingly higher payments. Often,
producers/stars/directors were threatened to pay ‘protection money'or the
rights for distributing a potentially successful movie. After some
celebrities were murdered, reportedly by the underworld, the government had
even begun providing police protection to film personalities.
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Another problem plaguing the industry was the issue of
piracy. The piracy of films, either in the form of illegally showing the
movie on cable networks, or the selling/renting of unauthorized video
cassettes, VCDs, LDs and DVDs[3] , had become a big business in India. In
1995, the industry lost approximately 99% of its total earnings to
piracy. Though the figure had come down to 80% in 1998, the threat of
piracy was still very significant. |
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In the late 1990s, the film industry was going through a
phase of changes. With increasing concern over removing the underworld
influence and the emergence of corporate houses, (such as Mukta Arts, Ajay
Devgan Entertainment and Software, Balaji Telefilms, Zee Telefilms, Amitabh
Bachchan Corporation Ltd. and Dreamz Unlimited), the demand for the
government granting films an industry status intensified. In October 2000,
the government finally gave films industry status via notification 2 (C)(XVII)
of the IDBI Act 1964. Though the move was welcomed by the industry and
banks/FIs in the media, the film financing and insurance business failed to
pick up as expected.
Analysts remarked that the financing and piracy problems combined with the
issues of lack of transparency in operations, disorganized functioning,
frequent cost overruns and no physical assets being offered as collateral,
resulted in banks and financial institutions shying away from financing film
production.
Ram Gopal Varma, the maker of blockbusters such as ‘Rangeela'and ‘Satya,'said, “All film makers get financial support from private financiers with
whom they have mutually beneficial relationships. Bollywood at the moment is
not ready for institutional finance.” Producers claimed that they could not
afford to bring in transparency, as it would entail revealing certain secret
deals like actual payments to film stars and the amount of profits made per
film (most of which usually remained unaccounted). Also, as the producers
were used to getting huge sums of money without any documentation and
collateral, they seemed to be reluctant to go through the process of
preparing reports and other lengthy procedures.
THE SOLUTIONS
QUESTIONS FOR DISCUSSION
ADDITIONAL READINGS & REFERENCES
[3] Video compact discs, laser
discs and digital video discs.
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