Actor John Abraham
and his director friend Shoojit Sircar had a great idea for a film - militancy in Sri Lanka. They even had a title in mind - Jaffn
a, after the capital of Sri Lanka's Northern Province and the worst affected city during the LTTE years. For two years, they discussed the idea threadbare. Amid those conversations, in a sudden twist in the plot, Sircar brought up the subject of sperm donation and persuaded Abraham to make a light-hearted film about it.
And that is how Vicky Donor
, the first production of Abraham's company, JA Entertainment, was conceived.
Not only was Abraham venturing into production, where actors such as Amitabh Bachchan, Akshay Kumar and Ajay Devgn had burnt their fingers in their first attempt, but he also took a number of risks. He departed, however, from their approach of making big-budget films that bombed at the box office. Vicky Dono
r, which cost Rs 9 crore to make, raked in Rs 44 crore at the box office worldwide and launched Abraham's career as a producer.
The co-producer of Vicky Donor
, Eros International Media
, also co-produced Chalo Dilli
(2011), the first film made by actress Lara Dutta's company, Bheegi Basanti Films. Chalo Dilli cost Rs 5 crore, and grossed twice as much. Devgn, sitting in the office of his father, stunt and action choreographer Veeru Devgan, in Mumbai's posh Juhu locality, says: "I produced Raju Chacha with a budget of Rs 30 crore. In today's time, it is equivalent to Rs 100 crore. It turned out to be a loss-making project." Raju Chacha was released in 2000.
Amitabh Bachchan's company, Amitabh Bachchan Corporation Ltd (ABCL), made films such as Tere Mere Sapne
(2001) and Mrityudaata
(1997), but failed because of poor financial management, marketing and distribution. The tide turned after 2009, after ABCL was reincarnated as AB Corporation Ltd and co-produced Paa with Reliance Big Pictures. The Rs 15-crore production, starring Big B and his son Abhishek, grossed approximately Rs 60 crore at the box office.
For a new producer like Abraham, a comedy may have seemed a safer option than a film about ethnic politics and militancy. But it's not as if he fought shy of risk. After all, sperm donation is not your average Bollywood theme, and the lead was played by a newcomer, Ayushmann Khurrana. Abraham, however, says he was confident about his decisions. "The hero of my film was the content and not the newcomer," he says.
Abraham, who has a management degree and was a media planner before he became an actor, also took the risk of releasing Vicky Donor
in the middle of the Indian Premier League season. Conventional wisdom considered such timing suicidal.
"Other film makers had decided against any big releases, leaving the field open," he says. He, however, was convinced that "there was fatigue regarding cricket".
Abraham and others are putting the finishing touches on a shiny new business model for the century-old Indian film industry. Many leading actors own production houses and are increasingly business-savvy risk takers. Actors and Studios Share the Risk
Many actor-producers are teaming up with large studio banners. For instance, Viacom18 Motion Pictures co-produced the recently released OMG with Akshay Kumar's new banner, Grazing Goat Pictures, and Son of Sardaar
- scheduled for a Diwali release - is being co-produced with Ajay Devgn Films. Disney UTV coproduced Peepli Live (2010) and Delhi Belly (2011) with Aamir Khan Productions, and is co-producing Chennai Express with Shah Rukh Khan's Red Chillies Entertainment.
As co-producer, the studio not only bears the cost of making the film, but also markets and distributes it. It pays a production fee to the actor's roduction house, and the latter may also get intellectual property rights.
Instead of charging huge acting fees, actor-producers are taking a percentage of profits. So while Akshay Kumar, Shah Rukh Khan or Aamir Khan charge around Rs 20-25 crore to act in a film, as co-producers they agree to take a 50 per cent share of the profit. If a film fares well, both the actor and the studio gain, and if it does poorly, the studio doesn't have to cough up a hefty acting fee.
In India, the lead actor accounts for around 35 per cent of the total film cost. Vikram Malhotra, CEO of Viacom18 Motion Pictures, says: "When one component of the cost is so high, it is necessary to de-risk, and a good way to do this is by reducing the upfront financial commitment to the project by bringing the actor into the…sharing of risk."
Rakesh Jariwala, Partner and expert on filmed entertainment at Ernst & Young, says high acting fees made the older business model (producers hiring actors only to act) less profitable. "Because very few movies reached the Rs 100 crore revenue mark, there was no profit," he says. "There was also pressure on the revenue side, and people realised that if everyone has to make money then probably we need to take a cue from Hollywood and build a participative model."
Studios say the actor-producer business model mitigates risk. Siddharth Roy Kapur, CEO of Disney UTV, says: "Studios take the financial risk and are obviously able to earn a commission on distribution above that, and then share the profits with the actor-producer in the preagreed ratio."
Kamal Jain, Chief Financial Officer at Eros International Media, says: "It is a win-win situation for the production house and the studio, as each gets to leverage the other's strengths - the production house gets to focus on producing a quality film, with the studio simultaneously exploring and implementing the best distributing and marketing strategies for its release." Besides co-producing Ra.One (2011) with Red Chillies Entertainment, Jain's company made Agent Vinod and Cocktail - both 2012 releases - with actor Saif Ali Khan's Illuminati Films. Actors Get More Business-Savvy
Bollywood has come a long way since the first moving picture was screened in 1896 at Watson's Hotel in South Mumbai. India not only makes more films than any other country, but also has the largest number of film watchers in the world. Indians buy three billion cinema tickets every year, propping up the Rs 10,000-crore industry that cranks out around 1,000 films in 20 languages annually.
In the 1990s, distribution and viewing patterns changed with the rise of multiplexes. Now, the revamped studio system is changing how films are made. Studios and actor-producers are not a new trend in Bollywood. In the 1950s and '60s, actors often established studios and produced films. For example, Guru Dutt produced path-breaking films such as Aar Paar (1954), CID (1956) and Pyaasa (1957) under his banner Guru Dutt Movies Private Ltd, and Dev Anand's company Navketan Films produced hits such as Hare Rama Hare Krishna
(1971) and Jewel Thief
(1967). For these actors, it was all about wanting to make films they believed in.
"Making profits was secondary," says Malhotra of Viacom18 Motion Pictures. "Films banked on the credibility of the actor and his name. They never marketed the films the way it is done today." He adds that the supply and demand economics were vastly different back then - the film output was one-fifth of what it is now, and hits remained in theatres for months.
Unlike in the 1950s, today actresses are also stepping into the producer's shoes. Lara Dutta, Dia Mirza and Sushmita Sen have all produced films.
Today's actor-producers obviously believe in the films they make, but they also consider film-making a business proposition. Production, distribution and financing are planned right from the script stage, and every penny is accounted for.
Among the recent crop of actorproducers, Shah Rukh Khan and Aamir Khan, who turned producers in early 2000, have been remarkably successful with their calculations.
Aamir Khan's 11-year-old Aamir Khan Productions has produced only six films, but all of them have been successful at the box office. Aamir Khan's first film, Lagaan
(2000) cost Rs 25 crore to make, and earned Rs 75 crore worldwide at the box office. Peepli Live
and Delhi Belly
, co-produced with Disney UTV
, also did well. Khan, who could not be reached for comment - he is in Chicago, shooting for Dhoom 3 - devotes a lot of attention to marketing and promotional strategies. Sources close to him say he's a hands-on producer who understands the creative aspects of film-making and also has a say in production and marketing strategies. However, he defers to the studio with whom he is co-producing to take care of a significant part of a film's strategy: distribution.
Shah Rukh Khan, too, considers marketing and promotion important. His company, Red Chillies Entertainment, has produced 10 films, of which Ra.One
is the biggest. Jain of Eros International Media, which co-produced Ra.One, says: "The film raked in almost Rs 102 crore even before it was released." Just the satellite rights, for instance, were presold for Rs 35 crore. Twenty-five brands were associated with the film, and Star One reportedly paid Rs 10 crore for the music launch telecast rights.
This emphasis on marketing is a departure from the Guru Dutts and Raj Kapoors, who simply invested their money, focused on making the film, and banked on their popularity to do the rest. Today's actors, conscious about their brand image, are more picky about the films they want to be associated with. Abraham, who in his pre-acting days planned advertising campaigns for The Times of India and other brands at ad agency Enterprise Nexus, says: "This job helped me understand not only audience segmentation but also the demographics of an audience. It helped me plan my maiden production."
"Initially, we started making films as a passion, like in the past," says Devgn. "But now, it has become a business proposition because it's lucrative if played well. But there are risks. Above all, it's our brand equity which is on the line." Lessons learned, Devgn and Kumar are now co-producing films with large studios.Changes in the Cash Flow
The business is lucrative because theatres are no longer the only source of revenue. There are also cable and satellite rights, overseas distribution, home video, pay-perview, licensing and merchandising, and in-cinema advertising. The actor-studio co-production model has gained ground because revenuesharing offsets the high fees demanded by stars. The new revenue streams make it even more attractive.
According to a 2012 FICCI-KPMG report on media and entertainment, by 2015, domestic theatres will account for about 72 per cent of a film's revenues, down from 74 per cent in 2011. Satellite rights, which account for 10 per cent, will increase to about 13 per cent.
The co-production model and additional revenue streams are altering how banks perceive the film industry. Change has been slow since 2000, when the IDBI Act was amended to grant industry status to film production. Although many film projects have got bank funding, there have been reports that banks have reduced their exposure in the last couple of years, as they could not recover dues in many cases.
Still, banks are getting smarter about how they lend. Recently, the Central Bank of India ventured into film financing by lending Rs 10 crore to the first production of actress Preity Zinta's company, PZNZ Media. The film, Ishkq in Paris
, stars Salman Khan and French actress Isabelle Adjani, and Zinta herself. To avoid exposure to market risks, the bank requires that the loan be paid back from the sale of film rights.
Studios typically plan their cash flows for the year, so most films are financed through internal accruals. However, they also say they have no trouble borrowing from banks. "Ra.One was completely financed by us through internal accruals," says Jain of Eros International Media. "But sometimes we raise funds from banks, if we fall short." He says banks such as IDBI and YES Bank finance films and are willing to fund a project if there is a corporate guarantee. He adds that loans generally have to be paid back before the film is released.Actors Have More Creative Control
Actor-producers not only manage production, but also provide creative inputs. The film, of course, benefits from not only their experience but also their brand equity.
Abraham says: "As an actor I was a complete director's actor - I only followed and never gave any inputs. But as a producer, I am involved right from the beginning of the creative process."
Kumar says: "Bollywood has evolved over the years, and there's an addition of a creative producer. In this case, it's the actor himself, who, unlike an executive producer, is more involved in taking creative calls rather than merely being involved in the nitty-gritty of production." For most actor-producers, production affords room to grow. "Having spent 10 years in the industry, I realised I knew the industry and had the necessary contacts," says Dutta. "Turning a producer was the next logical step."
Production also gives actors the chance to own a project, and to be part of the film-making process from the idea stage. "I think it's a pretty good way to work, as the studio and the actor-producer are on the same creative wavelength from the beginning," says Disney UTV's Roy Kapur.
Actors' production houses usually have their own creative teams that explore ideas. "A lot of our concepts are being developed by our in-house creative team," says Ashvini Yardi, former programming head of Viacom18's Colors channel, who co-founded Grazing Goat Pictures with Akshay Kumar with the aim of making high quality creative films, both full-length and short.
In-house creativity is crucial, as a lot hinges on content. "The budget should be defined by the concept and not by the actors," says Dinesh Vijan, Partner at Illuminati Films, which currently has six scripts under development. Vijan says it takes about 18 months to write a script.
The emphasis on creativity also provides opportunities for fresh talent. "There is a dearth of writers in our industry," says Vijan. "In the next two years, Illuminati Films will build good infrastructure that will develop quality content in-house, and nurture writers and other new talents. This will be the future of any production house."
John Abraham says his company stands for content in films, and not just in film proposals. "Vicky Donor
is my benchmark," he adds. JA Entertainment's next project is Jaffna, also directed by Shoojit Sircar. Abraham's co-producer for this venture is Viacom18 Motion Pictures. Directors Take the Cue from Actors
Like actors, directors are also taking to co-producing their films with studios and have begun to split the profits instead of charging a fee. Anurag Kashyap, whose company, Anurag Kashyap Films Pvt Ltd, coproduced Gangs of Wasseypu
r with Viacom18 Motion Pictures, is an example. "Anurag did not charge a single penny as his fee, but has a share in everything proportionately with Viacom18," says Viacom's Malhotra. Gangs of Wasseypur 1
together earned Rs 75 crore at the box office.
Film production is growing in maturity as more actors and directors manage projects in partnership with studios. Actor-producers have a remarkable amount of control: they can alter the script, choose their costars, and even replace the director. But perhaps the biggest change is that the more successful the film, the more money they make.Imaging by Santosh Kuswaha