(Last Updated on : 08/01/2016)
Indian films and policy makers share a great bond which has strengthened considerably over the last decade changing the facet of entertainment industry. Since the time Indian policy makers have identified the economic potential of the film industry, several alterations in the regulations have been introduced at both national and state levels. The promotion of national market for films with varied dimensions has been a significant step in this regard. Alliances of production companies with distributors have greatly boosted the markets of Indian film industry.
Combating Piracy in Indian Films
To enhance the economy of Indian film industry efforts have been made to reduce piracy, which according to some estimates trim down more than 40 percent of the revenue. Anti piracy cells have been installed by the government for tracking down the offenders and punishing them legally. Public campaigns and conferences are also organized in an attempt to diminish the piracy.
Entertainment Tax in Indian Films
Pressure has been put on the states by the national government for lowering the entertainment tax up to 60 percent which consequently promotes the sales of the films. This move of the government has also been supported by many states, especially in South India, which have reduced the entertainment tax. These states have greatly boosted their film industry with tax exemptions. In addition to these, more targeted policies have also been introduced to increase the stature of film industry including film awards
and establishment of multiplex cinemas. Under various policies, national tax incentives are provided for the building of multiplexes. This has led to the increase in the number of multiplexes attracting more viewers especially from urban areas. The state of Maharashtra
, which houses the Bollywood
industry of India provides a tax exemption of five years for new multiplex cinemas but on the other hand it has one of the highest entertainment taxes of India. This however holds a minor significance as Bollywood collects a large portion of its revenue from other states of India.
Investment in Indian Films
Another important alteration is made by the policy makers in the field of finance which has posed profound impact on film industry. Since 1998 the film industry has been granted an official status by the Government of India
with the purpose of revolutionizing the finance for the production of films. Industrial Development Bank of India have been making investments for encouraging insurance companies, private banks and financial institutions to establish associations with the finance and insurance of film industry. Government has also allowed foreign funding and investment in the film industry. Establishment of semi-public film funds have been proposed to supplement National Film Development Corporation
which has since 1975 supported documentaries and art films.
Distributors in Indian Films
The major capital in the film industry is gathered by the distribution of films. Distribution firms, responsible for the complete marketing of a film, also attract corporate investments. Alliances of production companies
with distribution firms have opened new channels of attracting finance in film industry. The advent of new policies has brought several positive changes in the film industry. It has been a general trend in the film industry that the financial institutions usually restrain from investing in single projects owing to the high risks involved and prefer investments in production companies. The success of a production company is assessed by several films instead of one and thus the investment becomes safer. Indian film industry has also encountered the same impact after gaining the official status. Owing to the reluctance of the banks for funding film projects, majority of the Bollywood projects has become dependent on the agreement with distributors. Only the reputed and big production companies such as Mukta Arts
, Yash Raj Films
etc enjoy bank loans and public equity. However the irony of the situation is that, the top production companies which attract institutional funds and bank loans need it the least and are capable of funding even the high budget and lavish productions themselves.
Thus with the transformation of the policies of film industry, distributors have played a significant role in alluring institutional capital and corporate investments. Some of the firms such as UTV, Sahara One
and Adlabs have funded the production and distribution of their own films but have not been much successful in up-scaling their own production houses. Thus they have been involved in distribution and financing of the movies produced by the specific production companies which are unable to attract institutional finance. These alliances have thus enabled the access of new companies to the finance. Flow of investments in Bollywood has thus become much easier with the introduction of new regulations and new modes of efficient investments.