Hollywood sets its sights on Bollywood

Twentieth Century Fox had almost as much success in India with a Hindi film that had no special effects as with James Cameron's blockbuster Avatar.

That's a lesson for US studios on how to compete in the world's most prolific movie market.

News Corp's Fox, Walt Disney and Warner Bros are using local talent to produce Indian-language films as they try to crack a market that sold more than 3.2 billion movie tickets last year - more than double US and Canada combined.

Ticket sales are expected to grow to 130 billion rupees ($4.09 billion) by 2013 from 87.8 billion rupees last year, according to a report by PricewaterhouseCoopers.

"Hollywood studios realise that if they want to increase their revenue, they are going to struggle to do that in America," said Mike Ellis, Asia Pacific president for the Motion Picture Association.

"Nearly every single studio is already in India. They are definitely here for the long haul."

My Name is Khan grossed US$23 million in India, just behind the US$26 million earned by Avatar.

It tells the story, in Hindi and English, of a Muslim in San Francisco at the time of the September 11 attacks.

The production by Fox-Star Studios India and two Indian companies is the highest-grossing domestic film this year in India.

India's film industry generated an estimated 107 billion rupees in revenue in 2008, and that is expected to grow by an average of 11.5 per cent annually to 2013, PricewaterhouseCoopers said.

Distributors released 1325 movies, in Hindi and regional languages, in 2008, more than triple Hollywood's output of 463, according to Netscribes (India).

Admissions in the US and Canada fell to 1.41 billion in 2009 from 1.57 billion in 2002, according to the National Association of Theatre Owners. Box-office receipts have risen by an average of about 2 per cent annually since 2002 while ticket prices increased 3.7 per cent.

That's prompting Hollywood to look to China and India, the world's fastest-growing major economies.

China's economy grew by 11.9 per cent in the first quarter compared with a year earlier, yet the Government allows only 20 imported films a year.

India's economy is expected to expand by 7.2 per cent in the year ending March 31, according to a Government forecast. Sixty foreign films were released in India last year, earning a combined 3.8 billion rupees, according to a report by consulting firm KPMG.

"China is essentially closed to them," said Jehil Thakkar, executive director at KPMG in Mumbai. "That leaves only India."

Rupert Murdoch's Fox-Star Studios plans to make as many as six Indian language movies a year, said Vijay Singh, chief executive officer.

My Name is Khan, featuring Indian superstar Shah Rukh Khan, was produced with India's Dharma Productions and Red Chillies Entertainment.

The average ticket price in India is 25 rupees (55c), the PricewaterhouseCoopers report said, while the average US ticket price is US$7.50, according to the theatre owners association.

India's middle class, with an annual disposable income of between US$4380 and US$21,890, is expected to swell more than 10-fold to 583 million people by 2025, New York-based consulting firm McKinsey & Co said in 2007.

Studios also will benefit from the growing number of screens in India. The first multiplex opened in New Delhi in 1997, and now there are more than 800 in India, the KPMG report said.

The dominant Hindi-language film industry is called Bollywood, a portmanteau word for Bombay and Hollywood. It released 242 movies last year, an increase from 229 the year before.

"We all know the size and potential of Bollywood and the fact that it's at the forefront of popular culture in India," Singh said. "Our continuing focus will be to grow Hollywood in India."

Fox's strategy starts with the perception that it is a filmmaker and not an investment banker paying for local productions, Singh said.

The studio is involved from the beginning of the creative process through a film's distribution.

"Our plan in Bollywood is to get into co-production and not cut a big cheque," Singh said. "We want to be actively involved."

Disney partnered with Yash Raj Films to release its first animated Hindi movie, Roadside Romeo, in 2008. Disney says India is one of the largest markets it has invested in for local production.

The company also is targeting audiences that speak regional languages such as Tamil and Telegu - a segment that generated box-office receipts of about 15.1 billion rupees, according to PricewaterhouseCoopers.

In March, Disney announced production of its first film in Telegu. The fantasy adventure, scheduled for release in January, also will be dubbed in Tamil.

"Disney is committed toward building a family entertainment brand in India," said Mahesh Samat, managing director of Walt Disney India.

"We will continue to tap into the local creative ecosystem to develop content which resonates with Indian kids and families."

Warner Bros Pictures India signed deals in 2008 to make three movies with India's People Tree Films and several regional-language movies with Ocher Studios. The company declined to comment, spokeswoman Deborah Lincoln said in an email.

For decades, Hollywood tried to pry the market open with blockbusters dubbed in local languages, yet success was fleeting because Indians often don't understand American culture, humour or slang, Thakkar said.

"That experiment didn't really work," he said. "If they want to crack the Indian market, they had to become localised."

- BLOOMBERG