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Indywood | The Indian Film Industry
Contents
Foreword 3
Executive Summary 5
Make in India Initiative and the Film Industry 6
Indias Film Industry 6
Industry Overview 7
Key Trends in the Indian Film Industry 10
Growth Drivers and Opportunities 15
Key Challenges in the Industry 17
Key Focus Areas for the Film Industry 21
Technological Advancements in the Film Industry 24
Skill Development in the Film Industry 32
Film Tourism in India 34
Background and Global Perspective 34
Film Tourism in India: An Overview 40
Recent initiatives to Improve Film Tourism 40
Next Steps and Initiatives 46
International Best Practices: Case Studies 50
Case Study: Film Tourism in the UK 50
Case Study: Film Tourism in New Zealand 54
Shooting of Foreign Films in India Tax Aspects 59
Authors, Acknowledgments and Contacts 62
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Indywood |
The Indian Film Industry
Foreword
Welcome to the Indian Film Industry Report critical to remain at the forefront of global
for the Indywood Film Carnival taking place trends. The report analyses the methods to
during September 24 27, 2016 in Ramoji achieve this including technology transfers,
Film City, Hyderabad. The film industry collaboration with international studios and
has been earmarked as a key sector in the development of technical skills in-country.
Make in India campaign. As part of this, Another endeavour of the Make in India
the Government of India is taking several campaign has been to develop technical
initiatives to effect growth in the sector skills for film production, post production
as well as promote foreign film shootings and VFX. Given the low labour cost, this
locally. Deloitte Indias objective with this could be a key factor in attracting foreign
publication is to provide an overview of filmmakers to the country. The report
Hemant Joshi
the film sector in India and analyse the key elucidates the current initiatives being
trends impacting the sector today. taken by the Government of India under
the Make in India campaign to improve
Our endeavour is to provide a considered availability of skill and talent in filmmaking.
point of view on key initiatives required The report also analyses other actions
going forward in the film industry to propel that can have an impact on increasing
growth and promote film tourism. In order availability of skills locally.
to do so, the report delves into the current
state of the industry to identify key focus In this report, the international best
areas and requirements to increase box practices in thriving film sectors globally
office realizations, improve occupancy and have been studied including initiatives
address the infrastructure constraints. taken by various regions to attract foreign
film shooting. The report also includes
Ashesh Jani
As the Indian film industry moves into the case studies on the UK and New Zealand,
next phase of growth, it is imperative to countries that have successfully been
keep pace with the global technological able to position themselves as key filming
advances and innovation. Historically, destinations as was witnessed by the Harry
the Indian film sector has lagged behind Potter Series and Lord of the Rings Trilogy.
in its counterparts in the deployment of
emerging technologies such as virtual Deloitte hopes that you and your
reality, augmented reality, drone shootings, colleagues find this report a useful
etc. The development and deployment stimulant in your strategic thinking.
of key technologies in Indian films will be
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Indywood | The Indian Film Industry
Executive Summary
of the total industry. Cable and satellite
rights and online/digital aggregation
produced with between 1,500 to 2,000 revenues are the fastest growing
segments, and expected to grow at a
20 languages. In terms of revenue, the CAGR of about 15% over the period FY15
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Indywood |
The Indian Film Industry
Make in India
Initiative and the
Film Industry
Overview of the Make in India Make in India initiative. Till now, several
Campaign steps have been taken in the sector
The Make in India campaign, launched to improve investments and increase
by Prime Minister Narendra Modi in business opportunities. The following
September 2014, is aimed at enhancing steps, specific to the film segment, have
local manufacturing, fostering innovation, been initiated under the campaign:
and facilitating investments in the Indian A Film Facilitation Office has been
industries. The initiative is being led by established under the operatorship
the Department of Industrial Policy and of the National Film Development
Promotion (DIPP) and the Department Corporation (NFDC) for facilitation of film
of Commerce and Industry and covers shooting in India and promotion of India
25 key sectors, including media and as a destination for foreign production
entertainment. houses.
The Make in India programme endeavours Media and Entertainment Skills Council
to create additional employment (MESC) is being promoted by Federation
opportunities through improving business of Indian Chambers of Commerce and
opportunities and positioning India as Industry (FICCI) with financial support by
a destination for manufacturing and National Skill Development Corporation
services. The programme also aims to (NSDC) to create 1.2 million skilled
facilitate businesses and entry of new workforce by 2022 in the media and
players in India by instating clear and entertainment sector across 74 job
transparent processes, enabling Ease of profiles.
Doing Business, and simplifying laws and Additional film treaties are being explored
regulations. Since the inception of the by the Government of India, having
Make in India program, there has been recently entered into film treaties with
a significant increase in Foreign Direct China and South Korea, to not only avail
Investment (FDI) owing to the growing film production benefits but also widen
positive perception of India in the global the reach of Indian cinema.
scenario.
The Make in India campaign for the film
Objectives and Initiatives in the Film sector aims at driving growth and creating
Sector employment opportunities in the sector as
Media and entertainment has been well as making India one of the leading film
identified as one of the key sectors for the tourism destinations globally.
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Indywood | The Indian Film Industry
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Indywood |
The Indian Film Industry
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Indywood | The Indian Film Industry
Domestic
Box Office
74%
Source: Deloitte Report - Economic Contribution of the Indian Motion Picture and Television Industry
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Indywood |
The Indian Film Industry
International,
7%
Other
Regional,
14%
Hindi, 43%
Telugu, 17%
Tamil, 19%
Source: Deloitte Report - Economic Contribution of the Indian Motion Picture and Television Industry
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Indywood | The Indian Film Industry
2
Deloitte FICCI Report: The Digital March Media and
Entertainment in South India
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Indywood |
The Indian Film Industry
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Indywood | The Indian Film Industry
generating over INR 1 billion in box office Digital cinema has also helped in
revenues. addressing piracy as well. With the advent
of digital technologies, piracy of films and
Distributors and exhibitors: Digitization
songs has decreased tremendously. With
of content has resulted in the reduction
digital distribution, movies are released
of costs of physical transportation and
on the same day in all places and checks
print manufacturing. Digital content
can be kept on where movies are showing
is delivered by way of satellite or hard
and how many times they are screened,
drive adding convenience and cost
resulting in reduction in the scope
effectiveness to the process. Nearly all
for piracy.
theatres have adopted digital technology
resulting in shift from large-sized
Organic and inorganic growth in
projection systems to smaller and more
multiplexes: Multiplexes have shown
efficient digital projection systems.
a growth rate of 15% in Indian cities,
Although digital projection systems have
increasing from 925 in 2009 to 2,100 in
a heavy initial investment, the running
2015. Over 2,000 single screen cinemas
costs as opposed to analog are minimal.
have been shut down or converted to
Consumers: Digital projection in the multiplexes in the last year mainly due
cinemas has superior quality of images to greater cost of operations (higher
which are not subject to deterioration entertainment taxes, increase in
with the passage of time. It has also given distributors share, and lower ticket prices),
viewers access to technologies such as non-viability of running on a standalone
VFX, animation, and 3D films. basis and low occupancy rate. Multiplexes
3
2
2
6 6
5 5
2
1 1
2008 2009 2010 2011 2012 2013 2014 2015
INR 1 bn + INR 2 bn +
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Indywood |
The Indian Film Industry
PVR DT 2015 39
Emergence of alternative streams of
revenue: Other sources of revenue have Carnival Glitz 2015 30
started to make an increasing contribution
Carnival Broadway 2014 10
to the film industry realizations. In the
last few years, the window available to Inox Satyam (Delhi) 2014 38
monetize a films revenues at the box office
Cinepolis Fun Cinemas 2014 83
has shortened considerably. This is driving
film studios to exploit ancillary streams of Carnival Big Cinemas 2014 250
revenue such as the following:
PVR Cinemax 2012 135
In-cinema advertising: In 2015, the
Inox Fame Cinemas 2011 95
in-cinema advertising revenues reached
Source: Business Standard4
557
493
400
372 341
193
http://www.business-standard.com/article/companies/coming-soon-multiplex-boom-across-india-115021101507_1.html
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Indywood | The Indian Film Industry
approximately INR 6.3 billion exhibiting a Mobile and online platforms: Revenue
28% growth over the previous year. This from new media, including mobile and
is mainly due to increased digitization of online rights, is expected to increase with
ads, shift from public sector advertising the high penetration and accessibility of
to corporate advertising, and higher ad 3G services by mobile operators. Further,
durations in multiplexes. Going forward, film production houses can reduce their
ad revenues are expected to grow at 18- dependence on theatrical performance
20% over FY16-20 and play an important by monetizing content through gaming
role in growth of revenues. on mobile and online platforms.
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Indywood |
The Indian Film Industry
currently exhibiting a 2x increase with mall development in Tier 1 cities has development of the digital channel. This
a corresponding middle class of over reached saturation point. At present, shift towards digital is expected in turn
90 million people.6 This level of median only 25% of malls are located in smaller to give a thrust to the small budgeted
household income will drive discretionary cities and retail attractiveness of Tier 1 good content films which can then be
spending on leisure and entertainment. cities has been stagnant. Smaller cities monetised through personal devices.
As a consequence, the film sector has and towns offer large and inexpensive Further, digitisation can result in creation of
huge potential in India with rapidly growing spaces for infrastructure development new release windows by enabling studios
demand and increasing footfalls. with rising disposable income making to explore release of films through various
them attractive for investments. Further, platforms with differentiated prices to
Further, India has around 500 million there are many small cities and towns that consumers. Films are now available for
unique mobile users which is likely to have an appetite for cinema consumption, home theatrical screening the day of
become 1.3 billion by 2020. Currently, but are still virgin pockets for multiplexes. release and pay-per-view, with DTH, digital
around 200 million have access to internet Over 50% of screen additions in FY15 by cable and Internet Protocol television (IPTV)
and this number is set to increase with Inox and PVR has been in Tier 2 and 3 distributors at prices as low as INR 50 per
the introduction of 4G services. The cities.7 screening.
proliferation of internet and smart phone
usage has opened up a new platform for Diversifying into international Upside from ancillary revenue
film distribution and viewing. markets: While domestic markets provide streams: : Apart from the box office
the Indian film sector with steady growth, revenues, ancillary revenue streams can
Demand from Tier 1 and Tier 2 cities: In diversifying to international markets can provide an increasing share of the film
the recent years, there has been a change provide a large upside in demand as well revenues driven by digitisation, onset of
in the outlook of investors regarding future as revenue. For example, Hollywood next generation networks and availability
prospects, with the focus shifting from the currently derives almost two-thirds of its of sophisticated devices to access media.
national to regional markets. As the Tier 1 revenue from overseas market versus Releasing the potential of these revenue
cities near saturation, growth of the film 15% overseas revenue collected by streams can provide a large upside to the
sector is expected to be driven by the Tier the Indian film industry. Since only few theatre related income. For example, Star
2 and Tier 3 cities: international markets have an established Wars grossed total revenues of $42 billion
film sector, Indian production houses while only $7.3 billion (approximately 17%)
Production of regional films: The
are well positioned to tap the domestic came from box office revenues. Home sales
demand for films in non-metro cities
demand in these regions. This can be entertainment, toys and merchandise and
with distinct cultures, languages and
realised through forming collaborations video games where the largest contributors
content preferences is a rapidly growing
with local studios and talent for distribution with $5.7 billion, $17 billion and $4.3 billion
segment. This represents huge markets
of dubbed movies, co-production of local
within markets and provide a variety of respectively.
and international films. For example,
opportunities to deliver localized and
Eros tied-up with three Chinese film and
regional content. While many global film Some ancillary sources of revenue that can
entertainment companies in May 2015 to
studios have already entered regional be explored in the Indian film industry are
co-produce, distribute and promote Sino-
markets and are producing regional as follows:
Indian films in both countries.8
language content, this is expected to be a
Merchandising: While merchandising
key growth driver going forward.
Releasing the potential of digitization: currently contributes miniscule amount
Addition of screens: Currently, screen Going forward, digitization is expected of revenue, it has immense potential
distribution is largely skewed to Mumbai to increase with digital becoming an with the development of Indian movie
and Delhi/Uttar Pradesh which account independent revenue stream, rather franchise and strong content. In order to
for 60% of the box office collection than part of a bundle, and the entry of drive this stream of revenue, films require
of films. However, the next wave of more international players in the film strong story lines, relatable characters,
expansion of screens is expected to be industry. Digital revenues are expected and innovative ways of engaging with
driven by the Tier 2 and Tier 3 cities as to grow significantly owing to the rapid the audience. For example, Ra.One was
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Top 5 Emerging Markets with the Best Middle Class Potential, Media and Entertainment (M&E) Industry: The Sunrise Sector Of India
7
Analyst Report India Film Exhibition
8
Eros International Announces Deal with Major Chinese Film and Entertainment Companies
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Indywood | The Indian Film Industry
Figure 7: Star Wars Franchise- Revenue Split used by the visual media in India in three
Miscellaneous categories, i.e., movies, TV shows and
9% Box Office advertisements. In India, the VFX segment
17% is currently in its nascent stages with low
Intellectual
Property domestic consumption; most of the work
10% comes from outsourced projects from the
Video
Home USA and the UK. However, with viewers
Entertainment becoming increasingly sophisticated, the
Games
Sales
10%
14%
domestic market is seeing bigger budget
movies and ad campaigns leading to a
rise in VFX spend. Currently, India has
nearly 300 animation and 40 VFX studios,
Source:
employing more than 10,000 professionals.
Fortune
Toys and Merchandise
News
40%
The film sector has been increasing its
usage of VFX and visual effects is expected
one of the first Indian film to be launched to play a bigger part in Indian cinema
with an overall campaign. It had over 25 going forward. This can also be seen in the
brands associated with the film covering regional films where VFX is a growing trend;
merchandising, licensing, publishing, for example, the Marathi film Mitwa used a
video games, board games and figurines. total of 325 VFX shots. In 2015, the Indian
film industry saw a number of VFX heavy
Licensing content for games and mobile
films such as Baahubali, Bajirao Mastani, I,
apps: Consumption of media and
Dilwale, Bombay Velvet, Bajrangi Bhaijaan,
entertainment related mobile content,
Baby, amongst others. The industry
such as songs, games and mobile
(including post-production) is expected
themes, accounts for almost 30% of
to grow rapidly in the coming 5 years.
overall VAS revenues in India. Developing
However, the VFX industry is still inhibited
bandwidth-light games and apps that
by cost constraints and skill gaps in the
engage consumers can significantly
country leading to slow adoption.
increase recall and add value to the
movie brand while bringing in additional
To tap into the growing VFX space,
revenues.
production houses in India are setting up
Web-based home entertainment: The their in-house VFX divisions. For example,
home movies market had been steadily Yash Raj Films (YRF) has commenced an
declining over the last few years owing independent VFX division, titled yFX, which
to relatively high pricing and piracy. This released its first film in July 2016.9
has led to large repositories of movies
being underutilised after release. With Key Challenges in the Industry
the proliferation of 4G and broadband
Low infrastructure penetration: While
services, the home entertainment can be
the Tier 1 cities and metros are reaching
revived through online delivery of movies
saturation, the Tier 2 and Tier 3 areas lack
over PCs, mobile phones and tablets. To
the required infrastructure such as malls,
fully capture this segment, there is a need
access to low-cost power, etc. This lack of
to develop effective distribution channels
availability of exhibition infrastructure is
and invest in digitising and meta-tagging
a key impediment for the growth of the
content for digital delivery.
sector. The addition of screens has not kept up
with demand with increments of only 150-200
Upcoming use of Visual Effects (VFX)
new screens per year. Further, India is severely
in movies: VFX involves the creation of
behind the globe in screen penetration with 6
live action imagery by using computer-
per million, versus 23 per million in China and
generated effects. It is being increasingly
126 per million in the US.10
Source: Yash Raj Films to have its own VFX studio yFX
9
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Indywood |
The Indian Film Industry
Single screen theatres have historically had of these taxes are applicable on program
Figure 8: Screen Penetration
low occupancy, low ticket realisations, and, production, in-film placements, grant
(per million population)
hence, low profitability. This has led to shut of various rights such as distribution
US 126 down of single screen cinemas especially rights, theatrical rights, cable and satellite
France 85 in small and rural towns which have rights, sale of airtime for advertisement
experienced a decline from approximately purposes, recording/editing of program,
Spain 82
10,000 screens in 2009 to 6,000 currently. sale/lease of program content, etc. These
UK 61 While multiplexes are being added in taxes are increasingly being disputed with
Germany 45 the Tier 2 and Tier 3 towns, the pace of authorities. Complications in taxation in the
Japan 26 additions is one-third of the pace at which film industry have arisen due to interplay
the single screen theatres are shutting of multiple indirect taxes and frequent
China 23
down. Without faster addition of screens, changes in taxation law and judicial rulings.
India 6 especially in small towns and rural areas, Further, entertainment tax varies across
Source: PVR Investor Presentation, February 2016
the growth of the film industry will be states in India and is one of the rates
stunted. India needs to have at least 20,000 levied globally. Recently, some states have
screens to fully realise the potential of films granted exemption from entertainment tax
Figure 9: ATP across Screen Types - 2015 produced in the country. for regional films to promote the sector.
239
Slow growth in average ticket price Rising costs and lack of access to
(ATP): In India, the growth in ATP has been funding: The film sector in India suffers
slow rising from INR 150160 in 2011 to from lack of access to funding across
127 INR 175200 in 2015, marking a CAGR of the value chain due to high tax rates and
95 approximately 4%. This growth has been complex taxation.
mainly driven by increase in multiplex
56
screens, priced at more than 100% to Film production is facing severe shortage
single screens and rising number of 3D of funds while costs are rising with only
movies which continue to be priced at a studios as a source of capital for most
High end Multiplexes Single Low end
Multiplexes screen screen premium of 15-20% over regular movies. films. The biggest cost inflation factor
ATP also varies regionally; for example, Tier is employment of talent, which can
Source: MOSL INOX Initiating Coverage
1 cities command an ATP of approximately charge up to 40% of a films budget, the
INR 200 versus INR 160 and INR 100 in Tier highest globally, wherein the cost of
Figure 10: Global ATP Comparison - 2015
2 and Tier 3 cities. Meanwhile, the ATP in talent does not exceed 1520% of the
10.7 the US and China are $8.4 (approximately film budget. Further, marketing costs
INR 570) and $5.5 (approximately INR of films have risen to 30-50% of a film's
8.4 385) respectively. In order to improve budget depending on the size of the
performance of Indian cinemas, keeping in film, from 15-25% in 2010.12 Costs have
mind the average occupancy rate of 35%, to be controlled through lowering of
5.5 ATP will have to drive towards global rates. talent costs (hiring of younger stars and
providing share of profits rather than
Complicated tax regime: Several levies, upfront fee) and efficient marketing
2.0 central as well as state, are charged in the strategies (move towards social and
media and entertainment industry with digital platforms of marketing).
central levies being Central Excise duty,
India China US UK Customs duty and Service Tax and State While the bank support has been
Source: Business Standard11
levies being state-VAT and Entertainment extended to films after the industry status
tax. The Service Tax and state-VAT or one was accorded to the film sector in 2000,
http://www.business-standard.com/article/companies/india-s-box-office-growth-runs-into-a-screen-problem-116011801209_1.html
11
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Indywood | The Indian Film Industry
Table 2: Entertainment Tax across States of conversion has been stalled by lack
of cash flow and access to funds by
State Entertainment Tax the single screen operators. Financing
support can be provided through tax
Andhra Pradesh 20% (15% for Telugu Films)
holidays for operators retrofitting their
Himachal Pradesh, Punjab Nil properties, allowing single screen owners
to have extra floor space index that can
Bihar 50%
then finance the retrofit, introducing
Delhi 40% a public private partnership model for
Gujarat 20% conversion of single screens and access
to government capital at lower interest
Haryana 20% rates.15
Karnataka 30% (Nil for Kannada Films)
Piracy: Despite the ongoing digitization
Kerala 30% of the film industry, piracy continues to
Maharashtra 45% (Nil for Marathi Films) be a key issue resulting in industry losses
of INR 190 billion a year. Over 150 sites
Tamil Nadu 15% (Nil for Tamil Films) thrive on piracy where content is stolen
West Bengal 30% (2% for Bengali Films) from Indian movies, quick copies are made
and distributed globally. Nearly half of
Source: Deloitte Analysis the 150 are from the US, followed by 11
from Canada, 9 from Panama and 6 from
the stringent norms for lending have to invest INR 3 billion in South Indian films
Pakistan. The top 100 sites make INR 35
resulted in difficulty in accessing capital. and TV.14
billion ($510 million) highlighting the extent
Especially affected are the small players
Exhibition: Several single screens in India of the issue.
and independent filmmakers which
are severely dilapidated and in need of
typically do not get access to bank finance.
maintenance. However, owing to low The problem is exacerbated for regional
Further, while several film funds have been
revenues and occupancy, investments on films. For example, Baahubali, which
founded such as Third Eye, Cinema Capital
renovation are not feasible. This has been had one of the highest budgets in the
Venture Fund, Vistaar Religare Film Fund,
witnessed in the Bengali film industry film industry, was pirated on the day
and Dar Capital, their success has been
which is suffering from lack of profitable of its release. About 1.6 million people
intermittent. This is mainly as investments
and sustainable exhibition infrastructure downloaded the movie and another 1
are made in smaller productions which
resulting in shut down of several theatres. million people watched it illegally through
carry higher risk.13 With the growing focus
1,500 links. Additionally, the Telugu film
on content, improvement in scale, and
The conversion of single screen cinemas industry lost about INR 3.6 billion in 2015
corporatization of the industry, film funds
to multiplexes is essential not only to due to online piracy through 18 million
to investing in Indian content may gain
increase the number of screens in India downloads or web streaming.16
prominence going forward. For example,
but also to improve the profitability of the
Bend It Media fund, with a corpus of INR
sector. However, retrofitting or turning
1.8 billion, has been launched to invest in
single screens into two or three screen
Hollywood, Indian films and TV. Cinema
multiplexes costs INR 4-7.5 million at the
Capital has been instated to invest INR 1.7
low-end to INR 10 million (non-metro) 25
billion in Bollywood films and Indus Media
million (metro) per screen for three or
Cinema fund has been recently created
more screen multiplexes. This process
13
India film funding: Bollywood bets
14
This is for reel
15
India's box office growth runs into a screen problem
16
How online piracy industry is a box-office wrecker
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Indywood |
The Indian Film Industry
Multiple layers of bureaucracy: There is Prevailing strict censorship norms: was released within 48 hours of the Court's
no single window to provide all clearances The censoring of films by the Central decision.18
needed to shoot in India. Producers Board of Film Certification (CBFC) prior to
need to approach several institutions to public screening in India is mandatory for Further, several Hollywood films releasing
understand the required permissions. filmmakers as per the provisions of the in India are subject to edits prior to public
At times filmmakers need to obtain over Cinematograph Act, 1952. In this process, screening. This leads to delays in public
70 permissions and licenses for a shoot films are viewed before public screening viewing and often discourages viewers in
in the country without any pre-defined by CBFC which in turn takes a decision watching the movies in a cinema resulting
turnaround time.17 For example: of whether or not it should be screened in challenges to release Hollywood films
publicly as is, with restricted access, or in India. As a key growth segment in the
Central clearances: Shooting of foreign
with certain cuts and alterations. This has Indian film sector, Hollywood films should
feature films in India requires the prior
been a major impediment for the Indian be subject to minimal censorship and
approval of the Ministry of Information
film industry not only due to the extended delays to capture the growing audience and
and Broadcasting (MIB) whereas in the
time to monetization but also due to risk of potential of this segment.
case of a documentary, approval of
reduction of good content.
the Ministry of External Affairs (MEA) is
required. The script of the film has to
As larger sections of the audience have
be approved by the MIB which is a time
become more receptive to films which
consuming process; the Ministry may also
tackle serious issues, filmmakers have
depute a liaison officer to facilitate the
become more experimental as they seek to
shooting.
make better content and progressive films.
Location specific permissions: However, constant battles for certification
Film makers require approvals from without edits with CBFC are a dampener
authorities in specific locations prior to to the industry. For example, the CBFC
shooting. demanded 89 edits in the recent movie,
Other approvals: Filmmakers also Udta Punjab, a film on the growing problem
need to adhere to certain local laws of drug addiction in Punjab. The ensuing
of the region where shooting is to legal battle has become a precedent for
take place in India. The regulators the industry and CBFC, as the Bombay High
may be various Municipalities and Court ruled in favour of Udta Punjab which
Municipal Corporations, associations of
cinematographer, make-up, hair-dresser,
etc., and state legislations.
Often, foreign producers are faced Table 3: Approvals Required for Film Shooting
with unclear rules and regulations in
Location Relevant Authority
terms of obtaining permissions making
the process inefficient and expensive. Sensitive areas of Jammu and Kashmir,
Ministry of Home Affairs
However, the Indian film sector, along North-east India or border belts
with the Government of India and various
City/town/village District Magistrate and Police authorities
state governments, is revamping its
approvals process as well as looking to Forest State Forest Department
incentivise local film making through
Historical Site Archaeological Survey of India
the establishment of an India Film
Commissions and the Film Facilitation Defence Area Ministry of Defence
Office. Both these initiatives have been Airport Airport Director
recently announced as part of the Make in
India campaign in the film sector. Railway station/Train Railway Board and State Railway Zone
Deloitte Report: Single window clearance: Making India easier for filmmakers Way forward for Indian Film Commission
17
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Indywood | The Indian Film Industry
Figure 11: Employment in the Film Industry, 2013-17 Figure 12: Split of Demand for Skill
Direction Others
248,600 Hair & Dance
2% 4%
222,900 Grip makeup 3%
3% Set Crafts
199,900 3%
20%
179,300 Camera
160,800 3%
Sound
4% Acting /
Costume
Voiceover
4%
19%
Post
production Support
7% Staff
Lighting (Drivers,
7% Spot Boys)
Production
2013 2014 2015 2016 2017 10% 11%
Source: MESC Report: Skills Gap Study for the Media and Entertainment Sector
MESC Report: Skills Gap Study for the Media and Entertainment Sector
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Indywood |
The Indian Film Industry
trained on the job rather than through traditional means of finance in the form to increased competition for acquiring
formal trainings resulting in non- of film incentives, brand finance, pre-sale movie rights and a new revenue stream
standardised skill sets.21 Even candidates based bridge finance and revenues through for film producers along with a channel to
recruited from media schools lack technical alternative sources pre-release amongst monetise older and archived films.23
and practical training on how to apply others.22
theoretical concepts to live situations. Countering piracy: Piracy is a key issue
With the increasingly technical nature of Updating current technology: The Indian plaguing the Indian film industry with large
the industry, technicians will require to film industry is behind the global industry revenues being lost annually. Despite
be formally trained in new and evolving in terms of adoption of new technologies various efforts to arrest piracy, this remains
technologies for Indian films to move to and trends. Going forward, greater focus a key issue requiring proactive measures
the next level. While film schools such as should be updating existing technology and being implemented by state governments
embracing emerging technologies which are
Satyajit Ray Film and Television Institute, through initiatives such as spreading
being deployed globally.
Kolkata and Film and Television Institute awareness against piracy and the formation
of India, Pune exist, a concerted effort by of anti-piracy cells as have been created
In the production segment, keeping up with
the government and industry is required to by Tamil Nadu and Maharashtra. Further,
new and emerging technologies can help
develop skill in India. since almost 67% of website services
the industry in unlocking new revenues,
offering pirated version of Indian films are
catering to the wider international markets,
Further development of formal training located abroad, the film industry is unable
and adopting methods to prevent piracy.
schools and high skill course will be to take action. In order to counter this, state
For example, uptake in production of
imperative for the Indian film sector to governments need to consider tie ups and
3D movies in Hollywood has generated
come on par with the global industry. bilateral agreement with the US. Such an
higher returns for studios by allowing
Collaboration with foreign film schools to agreement is being negotiated by the anti-
theatres to charge a premium to audiences
set up specific courses in various aspects piracy wing of the Telugu Film Chamber of
and helped curb piracy by maintaining
of film making can be explored. Commerce (TFCC) and the CID of Telangana
exclusive distribution to technology -
police to coordinate with the authorities in
enabled theatres. 3D films usually generate
Shortening window of release through the US and Europe.24
about 66% higher revenues than 2D films
better planning: Due to increasing resulting in more investments. The Indian
digitization and expanding reach of movies, film sector is considerably behind in Adopting emerging encryption
the window available to a film to monetize production of 3D films with few successful technologies to safeguard the film content
revenues at the box office has sharply films made in 3D. The first 3D film was in all stages of release and distribution is
reduced. During the opening weekend, made in India in 1984 called Chota Chetan. becoming imperative. Digital Compliant
distributors flood the market with prints Following this, over 40 other 3D films have Digital Cinema Initiatives, LLC (DCI) was
in order to ramp up high revenues. In been developed which is significantly created in March, 2002, and is a joint
the current scenario, over 60% of box behind the global trend. venture of Disney, Fox, Paramount, Sony
office collections are realized in the first Pictures Entertainment, Universal and
week of a movies release. As a result, Further, adoption of emerging technologies Warner Bros. Studios to establish and
focus needs to shift towards shortening and platforms for distribution can unlock document voluntary specifications for an
of release windows and quick reach to new revenue channels. For example, the open architecture for digital cinema. A
audience across the nation to monetise pay-per-view (PPV) market is an emerging secured DCI Compliant distribution model
film investments. source of revenue for the Indian film can be established to ensure that the film
industry. Growth in PPV market is directly content is safeguarded at every stage of
Further, Indian films face a long lead time linked to the growth in the direct-to-home its release process including certification,
in planning and execution of films. Better (DTH) segment. Through DTH service supplies to global distributors and Indian
planning and management of film projects providers PPV films are available for a price digital operators.25
can help in bringing cost efficiencies and of $0.5 1. With all four metros and many
savings to the project as well as improving others cities moving towards digitisation Along with stricter legislation and
the bankability of the film. Planning at and DTH services, the demand for PPV repercussions for users of pirated
an early stage can also facilitate non- films is expected to increase. This will lead content, there is also a need to create
21
Cinema is to be learnt
22
Film financing in India
23
IBEF Report: Corporatization of the Indian Film Industry
24
Telangana govt mulls deal with USA to curb film piracy
25
Guild Initiative To Curb Piracy Of Upcoming Film Dishoom
22
Indywood | The Indian Film Industry
public awareness on the damage done by Table 4: Comparison of Multiplexes to Single Screen Cinemas28
piracy and bust the common perception
that piracy is a victimless crime. State Multiplex Single Screen
governments and movie guilds should Number of screens 2,100 6,000
undertake initiatives to launch large scale
campaigns and create awareness is all Seats per screen 250 750
segments of society. Shows per day 5.5 5.0
The following initiatives have been Occupancy rate (%) 27% 19.5%
proposed by the MIB to counter piracy:26 Footfalls (million) 271 1888
Dissemination of multi-media campaigns Average ticket prices 183 75
on piracy
Contribution to box office
40% 60%
Training programmes and workshops to revenue
sensitize police, judicial, administrative
Growth in revenue since 2010 20% 2%
officials, multiplex and cinema hall
owners about the Copyright Act
higher occupancy rate to break even. Along addition of multiplexes in the country in a
Research on the effects of piracy and
with higher revenue share to distributors, cost effective manner. Such retrofits cost
formulation and implementation of
low ticket prices, advertising revenue about INR 400,000750,000 at the lower
public-private strategies to combat piracy
potential and limited food and beverage end and can be encouraged through tax
Formation of a dedicated web portal income make economics of single screen holidays/subsidies or allowing single screen
challenging. Multiplexes, on the other hand, owners to have extra floor space index to
Engaging with the Human Resource
have improved economics due to higher assist in financing. Conversion of 75% of
Department (HRD) to include anti-piracy
ticket prices, advertising revenue potential the existing 6,000 single screens into two
awareness material in the curriculum of
and food and beverage sales. screen multiplexes can unlock revenues
the schools and colleges
of INR 40 50 billion for the film industry
Retrofitting of existing single screen through higher ATPs, occupancy rate
Growth of Multiplexes: India has a
cinemas into two or three screen and advertising and food and beverage
multiplex density of 6 multiplex screens per
multiplexes can lead to a significant revenues.29
million people which is significantly lower
than that of developed countries. Further,
multiplexes account for only 15% of the
total market share while the remaining is
still controlled by single screen cinemas. In
comparison, 90% of the screens in the US
are multiplexes. In India, multiplexes are
expected to gain significant market share
going forward with expanding presence
in Tier 2 and Tier 3 regions as well as the
steady decline in single screen cinemas
due to unfavourable economics. Further,
India has a potential for 7,500 to 10,000
multiplex screens compared to the 2,100
currently established.27 Given this, the
share of multiplexes in total screens is
expected to increase to 25% by 2018.28
26
India at Cannes
27
Coming soon: Multiplex boom across India
28
PVR Ltd. Analyst Reports
29
India's box office growth runs into a screen problem
23
Indywood |
The Indian Film Industry
Technological Advancements
in the Film Industry
Global Scenario and Emerging etc. The world of cinema has remained
Technologies ceaselessly dedicated to technological
advances throughout time. With the
In the 120 years since its origin, the global
recent proliferation of digital platforms
movie industry has continuously developed
and grown through technological advances. and computer-based innovations, the
Both mechanical and digital innovationw s film industry is continuously pushing the
have influenced everything from equipment technological boundary even further. For
to exhibition, changing how films are made, example, 24 frames per second has been
edited, distributed, and consumed. The film an industry standard, however, due to
sector has seen a flurry of technological major advances in filming technologies, The
advancements that have revolutionised Hobbit was the first movie made with 48
the industry time and again such as 3D, frames per second resulting in making of a
green screens, IMAX, Computer Generated more immersive and visually stunning film
Images (CGI), digital filming and distribution, than ever before.
24
Indywood | The Indian Film Industry
1925
Development of
non-fiction films
in Soviet Russia
such as Battleship 2002
Potemkin and The Blue-ray discs
1982
Man with the Movie announced
Compact Disc
1907 Camera commercially Russian Ark, the
Invention of The released first single take
1926-27
Dolly, i.e., placing film, 96-min long
Move from silent 1986
camera on wheels shot, using the
to sound films and 1969 First permanent
to move along steadicam
black and white to Start of recording IMAX 3D theatre
tracks for getting colour onto memory 2006
built in Vancouver,
sweeping shots cards and internal Disney buys Pixar
Standardization Canada
1908 of the Hollywood storage for $7.4 bn
Steve Jobs
First movie to have studio system 1970 acquires Graphics 2007
a score specifically The Jazz Singer first Tiger Child, Group division of RED One Camera
written for it (The film with recorded 1946 first IMAX film Lucasfilm - became enabling high
Assassination of the dialogue and first First Film Festival in demonstrated in Pixar Animation quality digital films
Duke of Guise) musical Cannes Osaka, Japan Studios for $10 mn shoots
Source: Public Report - The Evolution & Future of the Film Industry
25
Indywood |
The Indian Film Industry
26
Indywood | The Indian Film Industry
Some of the upcoming technological are safer, easier, and faster to set up and levels of detail, print size and finish leading
advancements which can once again use, making them a popular tool among to props departments on big productions
transform the industry are as follows: directors and cinematographers. Drones embracing the flexibility and efficiency
are also more economical, costing about of 3D printing. The computer-generated
Virtual Reality (VR): Virtual Reality is the one-fifth of the total helicopter expenses designs are brought to life through 3D
next major innovation being explored and with a camera drone and crew costing printing, bringing fantasy just that much
developed across Hollywood. VR is seen almost $5,000 a day, compared with at closer to reality.
as a rich narrative platform for viewing least $25,000 a day for a helicopter shoot.32
of media and as a practical, time-saving Drone technology is being increasingly For example, Propshop, a production
pre-production tool. With the amount of used and has been embraced by big- company at Pinewood Studios produced
concept art and design that is now created budget movies such as Skyfall, The Wolf Of set pieces for many films from 3D printing
in digital 3D files, VR offers production Wall Street, Mission Impossible 5, etc. such as the night vision goggles in Zero
designers a way of planning and designing Dark Thirty, full-scale tank exterior for an
a full set environment complete with props, In an effort to encourage the adoption of action set-piece in Fast and Furious 6, and
before its built. While the technology is still drones as innovative tools for filmmaking, the canopy of Peter Quills spaceship in
nascent, a number of developers, such as several film festivals dedicated to films Guardians of the Galaxy.34
Oculus Story Studio, are working to build made with drones are coming up as
compelling VR cinema formats. platforms for aerial filmmakers to showcase Digital platform for filming versus film:
their work. The largest ones are New York Historically, film has been the preferred
IMAX has announced its plans to team up City Drone Film Festival, London Drone technology for filmmaking. However, this
with Google to build a virtual reality camera Film Festival, Flying Robot International trend has been moving towards more
and to develop a premium location-based Film Festival, and Rise of the Drones Film digital adoption for shooting. Shooting in
virtual reality offering. Across cinemas, Festival amongst others.33 digital can be more economical and easier
multiplexes and malls, IMAX will provide as it enables shooting multiple takes,
studio-quality VR experiences created by 3D printing: In 1990s, CGI led to the minimal retakes, and capturing multiple
Hollywood filmmakers. Further, several emergence of virtual cinematography angles. Further, with the rest of the movie
filmmakers are exploring VR as a key through the application of computer making process being almost entirely digital
opportunity due to its potential to change, graphics to contribute to images in art, including editing, distribution and exhibition,
engage and immerse the audience even printed media, videos, and simulators. digital footage is a lot easier and quicker
further. For example, the Transformers Similarly, 3D printing is set to transform to work with. Currently, movies shot on
director Michael Bay is in talks with IMAX film industry by enabling movie studios film are scanned into a digital intermediate
about potential VR projects and Heather and special effects artists to use 3D for editing and distribution. This stage can
Wright, an executive producer at Aardman printing to make concept models, and be skipped entirely if the film is shot in
Animations, is currently working on an as- full-size props, set-pieces, and costumes. digital thus saving costs on conversion and
yet unnamed VR project with the BBC.30 This technology can achieve sophisticated improving quality through editing.
40%
Drone shooting: As drone technology
30%
has evolved, filmmakers have increasingly
20%
begun utilizing drones to capture difficult
10%
shots. Compared to the traditional usage
0%
of helicopters for aerial shots, drones 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
27
Indywood |
The Indian Film Industry
India Current Status of Film featured King Fu Style fight scenes and mainstream Hindi cinema taking up
Technology choreographed by Hong Kong legend more VFX centric films, the industry is at
Yuen Woo-ping, animation and special the inflection point of growth. The budget
The origins of Indian cinema can be traced
effects by Stan Winston Studio, costume allocation to Indian films to VFX is expected
back to 1986, with the French Lumire
designs by Mary E. Vogt (The Matrix; Men to increase from 1015% currently to
Brothers hosting a screening of their work
in Black). The movie pioneered in blending 3035% in the coming years.37
in the Mumbai Watson Hotel. This led to
eastern talent with western technology
a series of potential Indian filmmakers
and experience. This has been further In line with the increasing demand for VFX,
experimenting with techniques and
improved on by Ra.One which involved the technology has also been evolving in
technologies leading to the making of the
a movie crew of 5,000 members drawn India. Currently, there are more than 40
first Indian short film in 1898. However,
from India, Italy, and the US put together major domestic VFX companies in India
the first Indian movie (Shree Pundalik)
by more than 1,000 people working in catering to domestic and international
was screened in 1912 with the help of
around 15 prime studio rooms across the clients. Several studios, such as Reliance
British cinematographers, equipment
world. The movie was converted into 3D MediaWorks, Prime Focus, Tata Elxsi and
and processing. A year later the first film
by Prime Focus which had earlier worked Pixion, have been successful in establishing
fully directed and developed in India,
on 3D format movies like The Chronicles a strong footprint in international VFX
Dadasaheb Phalkes Raja Harishchandra,
of Narnia and Transformers. International markets. This growing presence on Indian
was screened giving birth to Indian
special effects specialist, Jeffrey Kleiser, studios in the global market has enabled
cinema.35
led a team of 750 technicians to supervise transfer of technologies and skills into the
special effects of Ra.One resulting in a truly domestic industry. This has resulted in
Since then, the Indian film sector global production. Such efforts have been the Indian industry moving up the value
has adopted a host of technological instrumental in transfer of key technologies chain in terms of quality of work conducted
advancements being used by the global to the Indian industry and also in upgrading locally and adoption of technologies.
industry. The evolution of the Indian the skillset of local technicians. Acquisition Further, in an endeavour to move closer to
film industry through the adoption of of the innovation and skills can be deployed the global innovation in the sector, Indian
technology can be seen in visual effects readily in the Indian and global film studios are looking to acquire or merge
based films such as Krrish, Enthiran, industry.36 with Hollywood VFX studios similar to the
Eega and Ra.One amongst others. recent merger of Prime Focus with Double
The endeavour has been to improve With the advent and adoption of digital Negative (DNeg) to create the worlds
storytelling, scriptwriting, and special technology in India, key technologies are largest independent VFX, stereo conversion
effects skills to new frontiers that can being developed locally to keep up with the and animation company serving the
be recognised and appreciated by an global film industry. Hollywood film industry.38
audience within and extending beyond
Indian borders. Historically, adoption of Visual Effects (VFX): Over the years, the Indian films in 3D format: Technology
established technologies across the film Indian VFX industry has been growing and for converting 2D to 3D films is being
value chain has resulted in a boosting of transforming rapidly. Studios have been developed by studios which have
box office sales, wider distribution, and upgrading their technology and reinventing increasingly taken to outsourcing these
cost efficiencies. However, the Indian techniques, through their experience on conversions. Prime Focus has become
sector is still far behind the global scenario outsourced work from Hollywood which a market leader in end to end 2D to 3D
in terms of innovation and adoption of is now being deployed within the Indian conversion having worked on the recent
forefront technologies. film sector as filmmakers are aligning largest Hollywood movies such as The
VFX as an integral part of storytelling. For Legend of Tarzan, Captain America: Civil
Of late, technology transfers in India example, VFX was used in over 90% of War, X-Men Apocalypse, and Teenage
have happened through polycentric the scenes in the movie BaahubaliThe Mutant Ninja Turtles: Out of the Shadows
innovation wherein Indian films utilized Beginning, released in 2015. Out of the amongst others.
globally available innovation, technology total production cost of INR 3 billion
and creativity to co-develop radically spent on Baahubali, INR 850 million were While this technology exists within
new products, processes, and business spent on VFX. VFX was also used as an India, it is limitedly used in Indian films.
models. For example, Enthiran (2010), important tool in several major films such Historically, this has been mainly due to
was produced by Chennai based Sun as Bajirao Mastani, Hawaizaade, Detective local filmmakers claiming that theatres in
Pictures with an international crew and Byomkesh Bakshi, Bombay Velvet, and India did not have the technology in place
globally distributed by HBO. The movie Bajrangi Bhaijaan. Further, with regional to screen 3D movies while theatre owners
35
A Cinema Like No Other: 100 Years of Bollywood
36
ISID Report: Bollywood on the Wings of Technology and its Contribution to Economy
37
Is Indian VFX on par with Hollywood?
38
Prime Focus World and Double Negative Announce Merger
28
Indywood | The Indian Film Industry
29
Indywood |
The Indian Film Industry
have been wary of limited 3D enabled country. Still, India is under penetrated
content to warrant the investment required and largely dominated by single screen
to make screens 3D enabled. However, the households leading to vast potential for
advent of Hollywood 3D movies in India has VOD services. Establishing sustainable
led to the proliferation of 3D screens and monetization model, subscription or
higher revenues from screenings resulting advertising-led, which is suitable for the
in an extensive exhibition platform for Indian audience is key for all VOD firms
Indian 3D content. Further, film production going forward.42
costs increases by 3540% if it is made
in 3D without compromising on technical Table 5: List of VOD Platforms in India
elements.39
Company Brand Launch in Business Model
Usage of drones for shooting: While
India
usage of drones for shooting of aerial
and action shots is becoming increasing Yupp Communications YuppTV 2006 Pay
common internationally, in India
Google YouTube 2008 Ad based
deployment of drones for film shootings is
at a nascent stage. This has been stunted PCCE-Vuclip Viu 2008 Ad + pay
due to difficulty in obtaining experienced
Media Matrix nexGTV 2010 Pay
and well trained pilots to work with the
cinematographers and special permissions Zee Group Ditto TV 2012 Pay
required by the police department for
Multi-Screen Media Sony Liv 2013 Ad based
flying drones above 400 meters. However,
drones have been deployed in the movie Times Group Box TV 2013 Ad + pay
Kick (2014) for shooting high action Eros International Eros Now 2014 Ad + pay
scenes where the director wanted a high
impact that could not be captured by a Spuul Spuul 2014 Ad + pay
zoom lens.40 Further, for the first time in Star India Hotstar 2015 Ad based
regional cinema, drones were deployed
for shooting of scenes in the Kannada film Sing Tel (with Warner and
Hooq 2015 pay
Sony)
Aatagara. The action sequence in the film
was shot from multiple angles using four Netflix Netflix 2016 pay
cameras on the ground and three drones
PressPlay TV PressPlay 2016 Ad based
by a cinematographer and a team of
technicians.41 Network18 Voot 2016 Ad based
39
Cinema's born-again avatar
40
Game of Drones
41
Drones used to shoot Kannada movie scene
42
Video-on-demand services set to explode in 2016
30
Indywood | The Indian Film Industry
Initiatives to Encourage Technology done well, others have had intermittent emerging technologies such as VR, drone
Adoption in India success. For example, Warner Bros. lost cinematography, 3D conversion amongst
almost INR 300 million in its first venture, others through tie-ups with global schools
While the Indian film industry has been
Chandni Chowk to China. This discouraged developing of the likes American Film
receptive to adoption of new technologies
international studios, with cutting edge Institute (AFI), CalArts School of Film and
historically, wider deployment of emerging
technology with low risk capital, from Video, NYU Film School etc.
and cutting edge innovations has lagged
entering India. However, with the rapidly
behind the global industry. This has
growing Indian film sector entry of several Financial incentives for studios and
been due to various challenges faced by
large players looking to enter this large films deploying emerging technology:
the industry which has hampered the
market is expected. Studios in India are usually faced with
entry of global players and development
funding challenges which holds them back
of technology locally. Key initiatives are
In order to bring emerging technologies to from developing, deploying or adopting
required to assist the industry in deploying
the country, it is important to incentivise expensive frontier technologies. In order
upcoming technologies, encouraging
co-production of films with global studios, to incentivise studios to explore emerging
technology transfers, and developing new
especially ones engaging in leading technologies, financial incentives such as
technologies in the country.
technology disruption such as VR/ tax holidays or recovery of development
augmented reality. Such incentives can costs can be instated. This will not only
Strengthening of Intellectual property
range from tax breaks for co-produced provide studios with the required cash flow
(IP) in films: Over the years, the Indian film
films, cash rebates or provision of funding to develop technologies in-country but also
industry has realized the importance of IP
at lower rates. The government is looking encourage global production houses to set
in the work produced including prequels,
at formulating methods to facilitate up shop here.
sequels, remakes, copyright or trademarks.
co-production and support the entry of
However, additional strengthening of IP in
foreign filmmakers. Funding support for conversion of
the film industry is required as the industry
2D screens to 3D compliant screens:
is still lagging far behind in defining and
Development of technical skill: India In order to encourage wider adoption
implementing a process whereby IP is
has emerged as a preferred destination of 3D content in Indian filmmaking, it is
developed and nurtured in a systematic
for outsourcing of VFX and 3D conversion important to ensure proliferation of 3D
manner and results in creation of an IP
work. This is mainly due to the availability screens to monetize content. Currently,
bank. Implementing a strict process of
of low cost labour; however, there is a the cost of conversion from existing 2D
IP registration and protection right from
dearth of technicians with training in high screen to 3D compliant screens cost INR
pre-production to filming will encourage
technologies. Development of skill in 1 million whereas the cost of building a
international studios to enter India, enter
emerging and cutting edge technologies new 3D screen is approximately INR 33.5
into JVs with local players, and co-produce
would not only enable early adoption and million. Government incentives to support
films with domestic studios. This could
deployment of new technologies but also funding of conversion of 2D to 3D screens
enable transfer of emerging technologies
position the country as a film service centre should be explored including tax benefits
used by global players and also lead to
for the global industry. and access to funding at low interest rates.
development of local skills.
Once the conversion is completed through
There is a scarcity of formal training funding support, theatre owners expect
Incentivise co-production of films
institutes for film and creative technologies to quickly recover their investment given
with international studios: Several
in India. Currently, most of the personnel that 3D films are generating two to three
international studios such as Vaicom18,
are trained on the job or self-trained. times the revenue per theatre than the
Walt Disney, and Sony Pictures have
Establishing more institutes to impart conventional format. This can enable the
entered the Indian film industry to co-
film education is key to developing a growth of 3040% in 3D screens annually
produce movies for the large domestic
standardised skill for films in India. in India.
market. While some players that have
Further, the institutes should explore
formed alliances with local studies have
instating specialised courses on key
31
Indywood |
The Indian Film Industry
Skill
Development
in the Film
Industry
Film Education in India in moving up the value chain to higher
With a population of over 1.5 billion people, end work. Thus, with technology entering
India has one of the largest educational every aspect of the film value chain, it is
systems in the world and is the highest imperative that technicians need to be well
contributor to the global workforce with trained in new technologies especially at
the working age population surpassing the high end of the spectrum for Indian
950 million. Over the last two decades, films to move to the next level.
the higher education system in India has
Currently a number of initiatives to increase
transformed dramatically having created
vocational training in the film sector have
an additional capacity for 40 million
been undertaken:
students. The number of institutions
imparting higher education has grown at The Media and Entertainment Skills
a CAGR of 11% and student enrolment Council (MESC) is being promoted by
at a CAGR of 6% over the last 10 years, the Federation of Indian Chambers
leading to a student population of over 70 of Commerce and Industry (FICCI)
million. However, despite the rapid growth, with financial support by National Skill
Indias higher education has not emerged Development Corporation (NSDC).
as a global leader with less than 25 Indian
The MESC has a mandate to create 1.2
universities in the top 200. Further, focus
million skilled workforce by 2022 in the
on vocational training has been low with
media and entertainment sector across
limited number of specialised institutions
74 job profiles.44
for imparting high skills in specific
domains.43 Veteran actors and film makers are
expected to collaborate with government
The film sector also faces a dearth of institutions offering film courses by giving
specialised institutes that impart training training lectures and holding workshops.
and formal education in film technologies, MIB has received support offers from
higher skills and creative thinking. Majority 120 actors, film makers, and technicians
of the workforce in the sector has been for this initiative, and is chalking out a
trained on the job or self-trained, leading plan to hold lectures every fortnight and
to a lack of standardisation in process and workshops every semester. MIB also
techniques across the sector. Further, plans to use their consultation to improve
this has hampered the entry of new film the quality of government support
technologies into India and also stunted offered to the Indian film industry.45
the growth of the special effects segment
MESC Website
44
Film industry promises to be part of PM's Skill India; Javed Akhtar, Aamir Khan to pitch in
45
32
Indywood | The Indian Film Industry
46
New York Film Academy website
47
Reliance Education website
48
Education trends in Indias animation, visual effects and gaming verticals
49
Maya Digital Studios' first of its kinds 'In Studio Training' initiative
33
Indywood |
The Indian Film Industry
Film Tourism
in India Background and Global Perspective Rings Trilogy with a $150 million incentive
Across the world, films have been program51 which helped position the
recognized as a powerful tool to promote country as a prominent holiday destination
and generate tourism in various locations. for international tourists by showcasing
According to the Tourism Competitive the countrys picturesque scenery and
Intelligence, more than 40 million landscapes. Post release of the films, New
international tourists per year choose their Zealand experienced an increase of 40%
destination primarily because they saw a in the average annual visitors and 17%
film shot in that country. Further, almost increase in visitor spend.52
5% tourism is inspired by movies leading to
several countries vying for local production In order to promote film tourism, several
of films.50 Fuelled by the growth and reach countries across the world are providing
of the media and entertainment sector and film incentives to encourage shooting of
increase in international travel, film tourism foreign films in those countries. Typically,
is expected to be a growing phenomenon most countries offer tax sops in the form
worldwide. of VAT refund or tax exemptions for films
that spend a certain percentage of the
There are several examples demonstrating budget filming in a particular country
the impact that a film had on visitor and using local talent. Shooting of films
numbers, either of a specific shoot site locally not only result in driving tourism by
or more generally to the country in which showcasing travel destinations but also has
the film was shot. The Sound of Music, a range of other benefits. It is estimated
a Hollywood classic shot in Salzburg, that a studio-based production can spend
Austria still attracts over 300,000 visitors upwards of $250,000 per day while a large
to Salzburg every year with 40,000 taking international television commercial can
the official Sound of Music Tour even 50 generate local spending of up to $1 million
years after the films release. Similarly, in less than two weeks.53
New Zealand provided The Lord of the
Revenues to Local Economy Creation of Employment Technology Transfers Promote the Local Film
Industry
Inflow of foreign exchange Local technicians hired on film Opportunity to showcase Local industry gets exposure
Expenditure in the host crew capabilities of the local film to new technologies and
country on hotels, logistics, Employment of locals for industry which could result techniques
facilities, and leisure assistance on film production in further collaboration and Training of local talent on
co-production latest technologies in the film
Revenues to local companies Hiring local transport and
for building sets, equipment logistic companies sector
rentals, and other film related Increase in hotel occupancy
assistance
50
40 million tourists choose their destination primarily by movies or TV programs theyve seen
51
Hollywood: World's most dramatic travel agent?
52
Oxford Economics: The Economic Impact of the UK Film Industry
53
India Needs Film Commissions to Attract More Foreign Shoots, Study Findsv
34
Indywood | The Indian Film Industry
Stockholm, Norway
Vancouver, Canada Millennium series
Ireland
Twilight series Revenues of $100 mn
Star Wars:
Positioned as Forks,
The Force
Washingtvon
Awakens
10x visitors Alps, Switzerland
Increase in Japan
Demand for Bollywood films
number of Lost in Translation,
themed tour 250,000 Indian
overseas Last Samurai
visitors per year, 25% increase in UK
visitors
15 105% growth visitors
Taiwan
Life of Pi
England 43% increase in
Harry Potter tourists inflow
Increased
tourist activity Singapore
~$2 bn Thailand Krrish
contributed The Beach International
to the UK 20% increase in visitors rose
economy youth visitors to 15.6 million
every year in December
2013
Salzburg,
Austria
Sound of Music New Zealand
Bolivia 300,000 visitors Lord of the Rings
Motorcycle a year 40% increase in visitors
Diaries since mid 1990s
30% increase in
bookings
Source: Deloitte Analysis
35
Indywood |
The Indian Film Industry
Recognizing various direct and indirect and often result in increased employment
benefits of encouraging local film opportunities, growth in direct and indirect
productions, several countries have started taxes, increased tourism and development
investing in film production incentive of film industry infrastructure. A
programs. These programs include both comparison of incentives provided in select
monetary and non-monetary benefits countries is as follows:
Producer Offset Tax credit of 28% Tax relief of 32% of Tax credit up to 25% of Film in Malaysia
provides a cash on qualifying British eligible expenditure qualifying production Incentive Scheme
rebate of 40% on Columbia (BC) labour with a lower cap: costs of foreign films (FIMI) gives 30% cash
Qualifying Australian expenditure with a cap of EUR 5 rebate on Qualifying
Eligible expenditure
Film Incentives
Australian resident Canadian taxable Producer company Italian Executive Foreign production
company production company must be: Producer Service companies filming
with a permanent Company that produce in Malaysia or
Foreign company Be Irish resident or
establishment in BC portions of films on undertaking post
with permanent trading through a
Company should commission from production
establishment in branch
have primary foreign production
Australia Co-production
Beneficiaries
Not connected to a
broadcaster
Hold 100% in
Qualifying Company
SPV for 1 film
54
Aus Film, Australia Government Department of Arts & Communication, Screen Australia
55
Canada Film Capital
56
Section 481 - Irish Film Board
57
Filming in Italy, Interlinea Film
58
Film in Malaysia
36
Indywood | The Indian Film Industry
QAPE includes: QPE include: Eligible expenditure Eligible expenses are: QMPE includes:
includes cost of all cast
Goods and services Wage expenditures Production costs till provided in Malaysia
and crew and goods,
provided in Australia master copy
Service contract services and facilities Land use in Malaysia
Land use in Australia expenditure purchased in Ireland Financial and
Minimum QMPE
insurance expenses
Crew cost for Tangible property Projects having eligible required:
Eligibility for Benefits
up to 7.5% of
members remaining expenses expenditure of at least
production cost MYR 5 million ($1.2
in Australia beyond 2 EUR 125,000, or total
Hotel, international mn) for production
consecutive weeks cost of production of Production staff
travel expenses (inclusive of post-
at least EUR 250,000 costs up to 25% of
Minimum QAPE production); or
Minimum production total cost
of AUD 500,000 Must pass cultural test
expenses of CAD 1 mn MYR 1.5 million
($380,000) for feature Overhead expenses
($0.7 mn) ($370,000) for post-
films (net of GST) to up to 7.5% of
production
qualify for PDV offset production cost
number of interns
distribution/
based on production
broadcast channels
size:
o $5-15 mn 3
Interns
o $15-45 mn 5
Interns
o >$45 mn 7
Interns
37
Indywood |
The Indian Film Industry
Film Rebate International films VAT refund on 25% cash rebate Film Production Credit
Scheme provides produced in Spain procurement on UK qualifying of a 30% refundable
30% rebate for eligible for 15% tax and import of the film production tax credit on qualified
Qualifying Production rebate on eligible costs goods and services expenditure expenses
Expenditures incurred with cap of EUR 2.5 mn purchased during film
Tax relief is capped 30-35% post
in Mauritius for both ($2.8 mn) production
at 80% of core production tax credit
local and international
Rebate of 35% for for costs incurred in
Film Incentives
expenditure
filmmakers
productions based in NY
No budget limit
Gran Canaria with a
Productions with
cap of EUR 4.5 mn ($5
budgets over
mn)
$500,000 receive
additional 10% credit
on qualified labour
expenses from specific
countries
Film production Foreign producer All cinematographic Film Production Production companies
company registered along with Spanish works approved by the Companies (FPCs) that film majority of
in Mauritius including production service Ministry of Culture and within the UK tax net the project in NY or
those with 100% company to manage Tourism post production work
Official Treaty Co-
foreign ownership production happens in NY
productions
59
Filming in Mauritius
60
European Film Commissions Network
61
Turkey Film Commission
62
British Film Commission
63
Empire State Development Film Tax Credit Program
38
Indywood | The Indian Film Industry
Qualifying Production Eligible expenses: Foreign film producers Eligible expenditure Films with budgets
Expenditures include: can file for VAT returns is that incurred on pre- of over $15 mn and
Creative staff costs
post duration of film production, principal being produced by a
Travel and from Spain or EU
shooting photography, post company with more
accommodation not exceeding EUR
production within the than 5% ownership by
50,000 ($55,000) per Submission of
Ground transport UK and goods and a public firm requires
head certified financial
and facility vehicle services consumed at least 10% of
accountant (CFA)
services Expenses for hiring in UK principal photography
report following
Eligibility for Benefits
Rental of equipment
Allied costs
Minimum local
qualifying spend of
$100,000 per project
39
Indywood |
The Indian Film Industry
Film Tourism in India: An Overview cities in India are the Mumbai Film City, for promoting local shooting for films.
Currently, India is gaining traction as a film the Ramoji Film City in Hyderabad, the
In 2012, a Memorandum of
shooting destination. After the success MGR film City in Chennai, and the Noida
Understanding was signed between
of India based movies such as Slumdog film city in Delhi, NCR. The Ramoji Film
the Ministry of Tourism and the MIB
Millionaire, several international studios City is the worlds largest integrated film
to promote Indian cinema under
are increasingly considering shooting a studio complex. Further, film studios and
the Incredible India campaign in
large portion of their films in India. Some cities are being developed in popular
international film festivals and larger
of the recent Hollywood movies shot film shooting destinations such as Goa,
global industry.
in the country include Point Break, The Vishakhapatnam, Mussoorie, etc.
Second Best Exotic Marigold Hotel, Million The MIB has recently announced the
Dollar Arm, The Hundred Foot Journey, However, foreign filmmakers still have formation of a Film Facilitation Office
The Darjeeling Limited, Life of Pi, Mission to face long convoluted procedures to (FFO) to facilitate efficient approvals and
Impossible IV, The Best Exotic Marigold obtain clearances and shooting permits. improving the ease of shooting in India.
Hotel, and Jobs. Factors promoting India as Currently, about 70 approvals and licences
Website for India Film Commission
a prime location for film shooting include: from as many as 30 authorities are
established to provide details of
required for shooting films in India. Delays
permissions required, film treaties, tax
Several attractive locations for in the approvals process often results
incentives, etc.64
shoots: India has various heritage and in filmmaker going to other destinations
picturesque locations for shooting despite the cost advantage in the country. Film treaties have been signed with 11
films of various genres. Different Due to hurdles in obtaining licenses, India countries including UK, Spain, Germany,
terrains including beaches, deserts, has lost at least 18 big budget movies China, Canada, New Zealand, Brazil,
and mountain ranges as well as world to other locations in the last 4 years. Italy, Germany, Poland, China, and,
renowned heritage sites such as the However, with the establishment of the most recently, South Korea. The salient
Taj Mahal provides the filmmaker with Film Facilitation Office (FFO) and India Film features of the film treaties are as follows:
various options. The country also has Commission, simplification of procedures is o Co-productions get treated as national
innumerable unexplored locations that to be expected along with considerable film productions in both nations and can
can provide new visual landscapes for shooting support and efficiency. claim financial and other benefits
shooting foreign films. available to films in either region.
Further, there is considerable competition o Governments facilitate the temporary
Low cost labour: Talented crews to
amongst countries to incentivise film stay and entry of film personnel along
assist in filmmaking at a comparatively
productions locally. Foreign filmmakers with custom free export and import
low cost are available locally in India. The
are more inclined to shoot in destinations of equipment to ease film shooting.
country also has well developed post-
providing lucrative financial incentives o Most film treaties mandate the
production capabilities including VFX,
as well as assistance with visas, licencing shooting, production and post
3D and animation which are currently
and application process and other on the production of films in the co-
being outsourced by major Hollywood
ground requirements. In order to promote production countries; however, other
films due to the significantly lower cost.
the shooting of foreign films in India, it locations can be used if required and
Foreign film producers can create entire
is imperative to streamline the process approved.
films from shooting to post-production
of approvals as well as provide incentive o Film treaties require the employment
at a considerable cost advantage locally.
packages to filmmakers. of personnel from the co-production
Making of foreign films with assistance
countries, unless otherwise
from Indian film studios has historically
Recent initiatives to Improve Film approved.
lead to reduction of production costs by
Tourism o Minimum financial contribution is
up to 15%.
outlined in co-production treaties
Central Government Initiatives
Film infrastructure availability: India has (mostly minimum contribution
The Government of India has recognised
film production facilities across multiple required in 20% of total film costs)
the potential of films to promote tourism
cities called film cities. These facilities and creative contribution is expected
to various destinations in India. Recent
provide all infrastructure requisites for in line with the above split.
initiatives to boost film production in India
film producers including air-conditioned
include:
and soundproof shooting floors, An overview of the treaties entered into by
custom-designed set locations, digital The Ministry of Tourism has formulated India is as follows:
film processing labs, dubbing studios guidelines for extending Central Financial
and other allied requirements. Major film Assistance to States and Union Territories
40
Indywood | The Indian Film Industry
New Oct-11 20% (Max 80%) Yes Shooting in Co-production Exceptional Yes
Zealand other countries countries cases requiring
permitted if approval for
technicians performers
from India and and technical
New Zealand personnel
employed
Crowd artists,
small roles
Brazil Jun-07 20% Yes Any location (on Co-production or additional Yes
approval) countries employees
10% of
multilateral from country
productions of shooting
(max 70%) permitted
Canada Oct-05 20% (Ma x 80%) No Any location (on Co-production Mutual consent Yes
approval) countries required for
third-party
nationals
France Dec-06 20% (Max 80%) No India or France Co-production Film personnel Yes
countries to be from India,
Other shooting
France or EU
locations
permitted if Participants from
required on other countries
approval may participate
on approval
Germany Feb-07 20% (Max Yes Not specified Not specified Film personnel to Yes
80%) 10% of be from India or
multilateral German
productions
Participants from
(max 70%)
other countries
inly in exceptional
circumstances
41
Indywood |
The Indian Film Industry
Spain Oct-12 20% 10% of Yes (financial Shooting in Co-production Film personnel to Yes (third
multilateral contribution other countries countries be from India or party
productions between permitted if Spain contribution
(max 70%) 10% - 25%) technicians capped at
Participants from
from India and 30%)
other countries
Spain employed
on approval
in exceptional
circumstances
More recently, additional treaties have been signed with China and
South Korea in September 2014 and May 2015 respectively.
42
Indywood | The Indian Film Industry
Maharashtra No tax for Marathi Films with additional tax Tourism policy 2016 envisages:
exemption subsidy of INR 1.5 million
Simplificatvion of procedures and Single window clearance
Tax exemptions to single screens under mechanism for permissions
Municipal Councils for 5 years and to those
Online registry mechanism for various services related to the
located in rural areas for 7 years
film industry
Gujarat 100% exemption from Entertainment Tax for State Government has started a Single Window Clearance Desk
Gujarati films to help filmmakers scout locations and provide logistic support
Gujarati Films to be graded out of 100 and be Presence of a dedicated web portal, international promotions,
bucketed in 4 categories: database of product facilities and hotels and emergency
o 81 or more points A grade INR 5 million services68
or 75% of production cost whichever less
66
Maharashtra Tourism Policy 2016
67
Gujarat govt announces new policy for incentives to Gujarati films
68
Gujarat named most film-friendly state
43
Indywood |
The Indian Film Industry
Andhra 7% concession on Entertainment Tax for low- Earmarked 7% of Entertainment Tax collected to develop films
Pradesh budget Telugu films and 15% for high-budget and arts in the state
ones
Tamil Nadu 100% entertainment tax exemption on films Established animation and visual effects studio, renovated
with Tamil names given U certificates dubbing theatres and constructed hostels in MGR Film City with
an expenditure of INR 80 million
Uttar Subsidy limit of 50% for Braj, Awadhi, Bundeli, Film Bandhu, Uttar Pradesh set up to provide all film production
Pradesh and Bhojpuri films and 25% for Hindi movies related requirements and acts as a nodal agency to promote
on production costs film related activities
Maximum limit of INR 10 million for films with Film Development Fund set up for sanctioning subsidies to films
at least 50% of shooting days in UP produced in the state, scholarship to students, arrangement
of film equipment, setting up of film training institutes,
Maximum limit of INR 20 million for films with
organisation of film festivals, financial assistance on film, etc.
at least two-third of shooting days in UP
Film Development Council to be constituted to ensure long term
If 5 main artist used in the film hail from UP,
development of the film sector in UP70
additional subsidy of amount paid as wages
to the artist or INR 2.5 million (whichever is
lower)
44
Indywood | The Indian Film Industry
Jammu & Waiver of taxes for films shot in the sate Single window clearance system for granting permission for
Kashmir shooting films within 7 days in Kashmir
Goa Entertainment Society of Goa (ESG) The International Film Festival of India is held annually at Goa
is formulating a draft scheme for which attracts filmmakers from across the globe
reimbursement of 5% of the film cost spent in
Single window clearance system and permits for films to be shot
Goa76
anywhere in the state
71
West Bengal Incentive Subsidy Scheme
72
Rajasthan Tourism website
73
Rajasthan Tourism Board
74
Rajasthan offers sops to boost film shootings
75
Kashmir in Bollywood Films
76
6ovt may provide tax rebate to filmmakers shooting in Goa
45
Indywood |
The Indian Film Industry
Punjab Rebate of 5% on Entertainment Tax to Film City and film institute to be set up in Mohali providing
Punjabi filmmakers provided that 75% of the animation, film mixing, cinematography, sound engineering,
dialogues are in Punjabi editing and lighting facilities along with training in 48
specialisations78
Proposal to abolish entertainment tax on
Punjabi language movies being considered77 Punjab Film Policy to promote and incentivise film shooting in
the state is being developed79
Jharkhand Films made in Jharkhandi languages granted Film Development Management to work along with banks
50% subsidy on total production costs to provide funding support for films shot more than 75% in
Jharkhand
Films made in Hindi, Bangla, Oriya and other
languages will be granted 25% subsidy on Film Fund set up for sanctioning subsidies to films produced
total production costs in the state, scholarship to students, arrangement of film
equipment, setting up of film training institutes, organisation of
Maximum limit of INR 10 million for films with
film festivals, financial assistance on film processing, etc.
at least 50% of shooting days in the state
Single desk system for clearances81
Maximum limit of INR 20 million for films with
at least 2/3rd of shooting days in the state
Next Steps and Initiatives Corporation (NFDC). The FFO will include foreign filmmakers to enter India. FFO
Roll out of Single Window Clearance representatives from key ministries like is required to be modelled around the
through Film Facilitation Office for Home, Tourism, Culture, Railways, Civil lines of film commissions across the
film shooting in India: In India, as many Aviation, Defence, and External Affairs world that provide the complete range of
as 30 authorities are involved in granting ministries to coordinate and provide quick pre-production services. The role of FFO
permission for film producers to shoot clearances. The office will also include should encompass general resource for
in the country leading to increase in nodal officers from State Governments for filmmakers, clearing house for information
process time from the stipulated three film clearances. The FFO will develop and locations and repository of logistical
weeks to over three months. Recently, implement a standard operating procedure information regarding crew, talent, facilities,
the government has launched a single to accord clearances for film shooting by stages, equipment and support services.
window clearance to facilitate the film domestic and foreign filmmakers across Overall, the goal of the FFO is to provide
makers in the country in order to secure the country. assistance throughout a films production
efficient approvals and improve the life cycle and aim at promoting India as a
ease of shooting in India.82 The MIB has While the establishment of the FFO has favoured region for film shooting.83
also announced the formation of a Film been announced, the swift implementation
Facilitation Office (FFO), which will be of the office is critical to promoting A summary of some services that could be
operated by the National Film Development local film tourism and encouraging provided by the FFO is as follows:
77
Punjab proposes to abolish entertainment tax on Punjabi movies
78
Punjab govt sets up Film Institute to promote Punjabi film industry
79
Soon, Policy for Promoting Films in Punjab
80
Punjab to announce new film policy, set up rural cinema halls
81
Jharkhand Film Policy 2015
82
IB Ministry has launched single window clearance to facilitate country's film makers
83
Deloitte FICCI Report: Single window clearance: Making India easier for filmmakers June 2013
46
Indywood | The Indian Film Industry
Some other roles and responsibilities of the regulatory and transport agencies. Hollywood to help in creating awareness
FFO are as follows: about India as a shoot destination and
Collaboration with film funds or financial
promote brand India.
institutions: While the FFO is not a
Entry and informational assistance to
financing body, it may need to work Affiliations with international Film
foreign productions: The FFO should
closely with film funds and banks to Commissions: FFO would need to obtain
provide all necessary information with
provide funding options to producers. membership of international networks
respect to acquiring work permits and
of Film Commissions. This would help in
visas, rules for import and subsequent Marketing of the Indian film industry:
expanding the reach of the FFO as well as
export of equipment, and any other The FFO should participate in various
enable an exchange of the best practices
information on mobility of personnel international film festivals such as Cannes
among commissions.
and equipment. Additionally, the FFO and Toronto in order to promote India
should provide information to the as a favoured region for shooting films.
FFO should be viewed as a nodal agency
foreign filmmakers on the country, Additionally, the FFO could organize
for all film making requirements in India.
climate, cultural sensitivities and other roadshows showcasing India to key
However, the services envisaged for this
handy tips which can assist in planning foreign producers or members of the
agency will have to be built over time and
shoots. It may also choose to provide film fraternity. The FFO can also consider
rolled out in a phased manner.
contact details of relevant government, opening offices overseas, particularly in
Permissions for national and historic parks Local coordinator assists in finalizing the
locations as per requirements
Local coordinators who assist with additional
permissions with respect to specific locations Local guides to help introduce local culture and
customs of a location
Post Production
Contacts of registered agencies: Certification:
Provide a list of certified and credible post Post production facilities listed should be
production and VFX facilities. certified after a thorough inspection process
Source: Deloitte FICCI Report: Single window clearance: Making India easier for filmmakers June 2013
47
Indywood |
The Indian Film Industry
Financial Assistance Financial incentives for film Financial incentives for film
shooting such as tax credits, shooting such as tax credits,
cash rebates etc. cash rebates etc.
Grant of Film Incentives: Several FDI for films and TV productions under the resources, and infrastructure are key
countries across the world have initiated automatic route which has encouraged ingredients to attract foreign and local
incentives to improve film tourism due overseas studios to co-produce films in productions to shoot in a country.
to the enormous benefits that can India. Further, State Governments have Ensuring these factors are available
be accrued. For example, the French proactively initiated measures to attract to filmmakers in an efficient and cost
Government has set up Film France to both foreign and local filmmakers by effective way will ensure retention of local
attract international film shoots through offering production and tax incentives productions within the country and help
offering incentives such as refund of VAT in their regions. However, India needs to position India as an international filming
and rebate of 20% for non-French projects adopt a globally recognised standard to destination.
at least partly made in the country capped introduce production benefits to boost
at $22 million per project. film production across various locations. An array of film shooting incentives are
Production incentives, timely permits, implemented by various countries. In
Indias regulations already permits 100% availability of local talent, production India, these can be provided through
Source: Deloitte - FICCI Report: Single window clearance: Making India easier for filmmakers June 2013
48
Indywood | The Indian Film Industry
the FFO and provided uniformly across was partly (60%) shot in Singapore on
different states in the country. These prominent location such as Singapore
incentives can range from cash rebates, Zoo, the Gateway Building, and Singapore
tax credits, exemption from or refund of National Library. Through Singapore
VAT/customs duty to financial assistance Tourism Boards (STB), Film in Singapore
in the form of interest-free loans. subsidy scheme, Krrish availed 50% of
The following examples illustrate the the expenses incurred during the shoots
success of the incentive regimes in other in Singapore.
countries:
Tax credit: Tax credit is given as a sum
Cash grants: Cash grants are funds to be deducted from the total tax to be
disbursed to the production companies paid by the film production. It can be
which help them reduce their cost of granted for various types of taxes such as
production and can be paid upfront or income tax, value added tax (VAT), etc., or
on completion of the particular project. through refund of taxes paid while filming
For example, Life of Pi, an American 3D in a location. For example, Zindagi Na
adventure film was partly (70%) shot Milegi Dobara was shot in Spain and the
in Taiwan in 2012. The Government of filmmakers were provided with a refund
Taiwan provided a cash grant of $1.7 of 18% on VAT.
million to the film and also invested ($6.7
Tax holiday and tax breaks: A tax
million) in the film through a subsidy
holiday or tax breaks are a reduction
scheme set up to aid projects undertaken
or elimination of taxes payable for
locally.
a specified period of time. Such
Cash rebates: Cash rebates are given exemptions can bring down production
as a refund of actual expenditure budgets significantly, thus, attracting
incurred during shooting of the film. Cash production companies to shoot in these
rebates are usually given at a specified destinations. For example, Harry Potter
percentage on a minimum expenditure was mainly shot in the UK and was given
incurred in the host country or on the extensive tax breaks for its filming in the
overall production budget. For example, region, resulting in incentives of $160
Krrish, an Indian science fiction film, million per year.
49
Indywood |
The Indian Film Industry
International
Best Practices:
Case Studies
Case Study: Film Tourism in the UK were inward investment films. in 2000. However, majority of the films
The number of companies in the UK film released in the UK originate from the US,
Overview of the UK Film Industry industry has also grown rapidly at 47% India, and Europe.
The UK film industry has shown significant since 2010 versus the industry average
growth in the last two decades. The UK growth of 17%. Currently, the industry has UK films also contribute to over 25% share
box office recorded the highest revenue over 6,800 film production companies, of the global industry with worldwide gross
in 2015 of over GBP 1.2 billion ($1.6 billion) 2,660 film, video and TV post-production revenues of $9.2 billion. UK studio-backed
exhibiting an increase of 17% over 2014. companies, 420 film distribution films (UK films wholly or partly financed
Further, annual admissions soured to 171.9 companies, and 230 film exhibition and controlled by US studios but featuring
million with London accounting for majority companies. UK cast, crew, locations, facilities, post-
of the footfalls (approximately 25%). In production, and often UK source material)
2015, 201 films were produced wholly or Out of the total 759 films released in the UK accounted for 22.3% of the worldwide box
in part in the UK having declined from 310 during 2015, close to 210 were produced office in 2015, while UK independent films
in 2014. Of these, 30 were co-productions, by the local film industry showing a steady earned 2.8% of global revenues. 84
124 were domestic UK features and 47 increase from about 80 productions
Figure 18: Country-wise Share of Films Released in the UK (by number & market share)
India
Other 1%
Europe RoW
2% 1%
RoW UK
13% independent
US
29% 12%
India
15% US
51%
Number of Box Office
releases: Revenue:
759 $1.6 bn
UK studio
backed
Other 3%
Europe UK studio
16% backed
UK 34%
independent
24%
50
Indywood | The Indian Film Industry
The UK film industry has had wide acclaim Figure 19: Films Produced in the UK (by number and market share)
globally along with a large domestic
audience for international films. Owing to
this, the UK is well positioned to encourage Co- Inward
local film shootings due to an established productions investment
domestic and global market, familiar 15% 23%
locations and clear procedures. Out of the
GBP 2.1 billion ($2.75 billion) generated
by overseas visitors and tourists in 2013,
GBP 840 million is attributable to film-
induced tourism along with generating
full-time employment for 8,400 people and Number of
contributing GBP 92 million ($120 million) to releases:
201
the Exchequer.85
BFI Report: Economic Contribution of the UKs Film, High-End TV, Video Game, and Animation Programming Sectors
85
51
Indywood |
The Indian Film Industry
UK, qualifying expenditure is provided for Figure 20: Operation Support to Foreign Filmmakers
films produced locally. Films qualifying for
the tax relief have to have at least 10% of its Permissions:
total spend on goods or services used or BFC doesnt assist with requisite permissions. Line producers are
consumed in the UK. The tax relief provided expected to help the production house. BFC intervenes only in case
of permissions which require special consideration (E.g. opening the
is capped at 80% of total core expenditure; London Bridge)
however, there is no cap on the amount to Pre-production
be claimed. For example, in 2014, Disney Location scouting:
was given a total tax credit of GBP 32 million
Provides a list of experienced Location managers / scouts who can
by HM Revenue and Customs for filming the help in finding a suitable location
Avengers: Age of the Ultron in the UK. This
Provides links to various location directories such as The
has historically been the highest tax relief Knowledge, KFTV and Kays
provided to a film in the UK.
Provides links to various regional agencies (England, Wales, Ireland,
Scotland etc.) for other local permissions
In 2015, a total of GBP 251 million ($372
million) was provided to the UK film industry
Provides contact details of various guilds and associations
through the film tax relief program resulting comprising production houses, sound technicians, production
in over GBP 1 billion ($1.5 billion) in direct Production designers, line producers, location managers, cinematographers,
investments in the country. According to the directors, camera technicians, and makeup and hair artists,
editors and casting directors
British Film Institute, every pound of film tax
relief provided contributes approximately Provides
Source: Deloitte FICCI Report: contacts
Single window of relevant
clearance: guilds
Making India easier for filmmakers June 2013
GBP 12.5 ($18) for the UK economy. Since Provides financial incentives for production of films in the UK
the introduction of the tax relief scheme
in 2007, the UK film industry has secured Post Production Provides links to knowledge databases like Kays, The Knowledge
and KFTV for postproduction facilities. These databases give
GBP 1.5 billion ($2.25 billion) in government a comprehensive directory of top contacts for various post-
support with a total of 2,615 claims.86 A production facilities within UK
majority of the tax relief (approximately
66%) was paid to big budget films while the government agencieis, information in Los Angeles and US
remaining was provided to lower budget sources and directories, travel BFC is a member of the Association
films. The tax relief program has resulted in and tourism associations, weather of Film Commissioners International
an investment of over GBP 6.9 billion ($10 associations, etc. (AFCI) and is affiliated to European
billion) by the UK film industry across other Liaising with the UK Government to Film Commissions Network through
sectors in the UK, generated 260,000 full secure and maintain film-friendly Film London
time creative sector jobs, and positioned policies
the UK film sector as a global leader.87 Abundance of Film Infrastructure &
Production and location support
Talent:
British Film Council: The British Film across the country
o Studios and facilities: The UK has a
Commission (BFC) is the national body o Financial assistance to foreign
number of world class studios such
in charge of attracting, encouraging, productions: Guidance on the Film Tax
as Pinewood, Warner Bros. Studios
and supporting the production of Relief to all films passing the cultural
Leavesden, Shepperton, Elstree, Ealing,
international feature films in the UK. The test or qualifying as a co-production
Longcross, 3 Mills, The Bottle Yard
BFCs key roles are as follows: o Marketing the UK as a filming
Studios, etc. to undertake productions
o Operational assistance to foreign destination:
of varying size. By 2017, the UK will
productions BFC participates in various
boast over 1 million square feet of
o One source for entry and information film festivals such as Toronto
additional studio and workshop space.88
assistance to foreign productions: International Film Festival to
o Post-production and VFX: The UK has
Necessary information with respect promote UK as a favoured territory
one of the largest repository of special
to migration of workers and import Organizes various networking
effects and post production talent and
of equipment events with other screen agencies in
technology.
All information required for the UK
o Skilled manpower: The UK Government
mandatory film insurance along with Increases awareness and
invests large sums, managed by
a database of insurance companies encourages filming in the UK within
Creative Skillset, to support training
Contact details of various Hollywood by having brand offices
and skills development across film,
52
Indywood | The Indian Film Industry
television, animation and VFX. As a Individual Site Promotions: Several estimated GBP 4.2 million for the castle.89
consequence, the UK has highly skilled areas where Harry Potter shootings took
Gloucester Cathedral: The cathedral
technicians in the film sector with place have become key tourist attractions
was used to depict the corridors of
experience across the globe. leveraging their link to the series such
Hogwarts in the first two Harry Potter
as Gloucester Cathedral, Alnwick Castle
films. The cathedral recorded a 50%
Harry Potter Franchise An Example and Lacock Abbey. In London, the
increase in visitors in 2003 post the
Harry Potter is a series of eight fantasy Kings Cross station erected a plaque
release of the movies.
films based on the Harry Potter novels by signalling Platform 9, in response to
J.K. Rowling. The series was distributed by visitor demand. Goathland Station runs Pembrokeshire County: The Harry
Warner Bros and primarily shot in the UK. Wizards Weekends and Glencoe has Potter and The Deathly Hallows was
Harry Potter is one of the highest grossing themed events such as a Harry Potter premiered in 2010 in the Pembrokeshire
film series globally with $7.7 billion in box safari in which they point out the sets. County. The visitors to the county
office receipts. increased to 4.2 million from 30,000
The Harry Potter series has significantly during that year along with a rise in
The UK Government and other agencies helped promote tourism in the UK. The tourist expenditure in the county.
provided a number of film shooting and above initiatives have led to substantial
tourism initiatives to encourage the increases in the number of visitors to the The outcome of shooting the films in the
shooting of Harry Potter in the country following locations: UK was an increase in expenditure on
as well as promote tourism to the key local film production from $670 million
Alnwick Castle: The castle located in
shooting destinations. Some of the key pre-release of the Harry Potter movies
Northumberland was depicted as the
initiatives they took are as follows: to $1.8 billion backed by Warner Bros.s
Hogwarts School of Witchcraft and
investment in special effects technicians.
Financial incentives: Tax break of $160 Wizardry in the first two Harry Potter
Further, Warner Bros. contributed almost
million per year on all movies made in the films the Philosophers Stone and the
$2 billion to the UK economy every year
UK (which accounts for 25% of the total Chamber of Secrets. Since the release
during the shooting and marketing of the
production cost) of the films, Alnwick Castle has seen an
films, through salaries, national insurance
increase of 230% in tourist numbers,
Movie Map: In November 2001, the contribution, advertising and infrastructure
receiving over 800,000 visits yearly. In
British Tourist Authority (BTA, now known investments.
2014, tourists expenditure generated an
as VisitBritain) launched an international
tourism camA A saw a 300% increase on
the number of enquiries about travel to
the UK
Alnwick Castle expects visitor increase after final Harry Potter film released
89
53
Indywood |
The Indian Film Industry
Case Study: Film Tourism in New were completed exhibiting a 34% increase
Zealand over the previous year. Majority of the
co-productions were in collaboration with
Overview of the New Zealand Film Australian partners.
Industry
New Zealand has a growing film industry New Zealand, as a destination for mega
with increasing number of local films projects such as LOTR and The Hobbit,
along with several large international is expected to continue to boost the film
productions. In 2015, film production and sector. James Cameron's Avatar series,
post-production contributed NZD 483 comprising four films, is expected to be
million ($338 million) in gross revenues produced in New Zealand. A Memorandum
to the economy, with 35 feature films of Understanding (MoU) signed
produced locally, showing a decline between 21st Century Fox, Lightstorm
from 40 produced in 2014. The industry Entertainment and the New Zealand
experienced a decline in revenue from Government states a minimum spend
2014 to 2015, post the production of the of $412 million on production activity in
high budget The Hobbit trilogy released, New Zealand on the films, including live-
and during 2012-14 which clocked a total action and visual effects. The MoU also
602
571
338
Co-productions describe content produced with an overseas business or individual, where each business made a financial and creative contribution.
91
54
Indywood | The Indian Film Industry
Film Tourism in New Zealand international production of films in New threshold expenditure of NZD 30 million
New Zealand has become a global hub for Zealand by offering financial incentives. ($21 million). The QNZPE comprises the
filmmaking and a preferred film location The first incentive rolled-out in 2003 following:
both for its dramatic beauty and its was known as the Large Budget Screen
Goods and services provided in New
domestic talent pool spanning extensive Production Grant (LBSP Grant) providing
Zealand
production, post-production and special a 12.5% rebate on qualifying New Zealand
effects capabilities. Additionally, the production expenditure (QNZPE). In 2007, Land lease and rental
Government has been instrumental in the LBSP Grant was increased to a 15%
Fees and expenses for cast and non-cast
attracting international films through rebate and extended to post-production
professionals who have travelled to
providing financial incentives under the and VFX work under the Post, Digital
New Zealand to work on the production
New Zealand Screen Production Grant and Visual Effects Grant (PDV Grant).
provided they have worked on the
(NZSPG) as well as entering into several In 2014, the LBSP Grant and PDV Grant
production for at least 14 days
co-production treaties. For example, the were replaced with the New Zealand
Hobbit Trilogy collected $120 million in Screen Production Grant (NZSPG) for The applicant for the cash grant must be:
filming cash grants from the New Zealand International Productions increasing the
New Zealand resident company or
government over the course of the 4 year rebate to 20% of QNZPE.
partnership for tax purposes, or a foreign
production process. In turn, the films
corporation with a fixed establishment in
generated 3,000 direct jobs during their Under the current framework, the NZSPG
New Zealand
production and brought other significant offers a cash grant of 20% on all QNZPE
economic benefits such as increased with a minimum threshold expenditure of Entity responsible for all activities
tourism, influx of foreign currency, and NZD 15 million ($10.5 million) for feature involved in making the production
marketing related expenditure by the films and NZD 500,000 ($350,000) for
Special purpose vehicle established solely
production company. 92 post-production work for international
to make the production in New Zealand
productions. Some projects may be
also eligible for an additional 5% uplift if
Financial Incentives93
significant economic benefits are foreseen
Since November 2003, the New
from the film and it meets a minimum
Zealand Government has encouraged
Hobbit trilogy collects $120m in New Zealand filming incentives over four years
92
55
Indywood |
The Indian Film Industry
Co-Production Treaties
New Zealand has co-production treaties or
agreements with Australia, Canada, China,
Chinese Taipei, Denmark, France, Germany,
India, Ireland, Israel (to be enforced), Italy,
Poland, The Republic of Korea, Singapore,
Spain, South Africa and the UK. Further
treaties with Canada and Brazil are under
negotiation.
56
Indywood | The Indian Film Industry
Post the release of the films, a 50% It built skills and development of
increase in tourist visits to New Zealand forerunning technology in the production
were seen. In 2004, 6% of visitors to New and special effects industry
Zealand (120,000-150,000 people) cited
It contributed to the development and
The Lord of the Rings as being one of the
expansion of film related infrastructure
main reasons for visiting New Zealand.
Additionally, 1% of tourist cited LOTR as It contributed to the move towards a film
their only reason for visiting New Zealand friendly regulatory environment
which contributes approximately NZD
It enhanced Brand New Zealand, and
33 million ($24 million) to the country
helped in boosting of tourism
94
New Zealand tourism: Facts and figures
95
How have the Middle Earth films benefited NZ?
96
The Impact (Economic and Otherwise) of Lord of the Rings/The Hobbit on New Zealand
57
Indywood |
The Indian Film Industry
58
Indywood | The Indian Film Industry
Shooting of Foreign
Films in India
Tax Aspects
Background Income-tax implications or loan-out corporations, in turn, engage
In recent times, the Indian Government In connection with film shooting in India, the actor for acting services. In such cases,
has been focusing on promoting India as income-tax implications for the following performance income of the actor accrues
a filming destination. A country benefits non-residents should be evaluated: not directly to the actor but to another
from film shooting, primarily, by providing person/entity (star company or loan-out
Foreign film producers/studios
local facilities/infrastructure (e.g., hotel), corporation). This income should still be
generating employment opportunities Foreign actors (in front of the camera) taxable in India [Article 17(2)]. This is an
for its residents, collecting taxes, and anti-avoidance measure included in tax
Foreign crew (behind-the-scenes).
showcasing the countrys tourist locations, treaties. The income-tax implications in
thereby promoting tourism. the hands of star company or loan-out
Foreign film producers97: Based on a
corporation also needs to be evaluated.
specific exemption under the domestic
Over the past few years, several foreign tax laws, income of foreign producers
films have been shot in India such as Kung Income from performance in India (e.g.,
should not be taxable in India in respect acting fees) is taxable in India and taxes
Fu Yoga, Point Break, The Second Best of operations confined to shooting a film are required to be withheld by the payer at
Exotic Marigold Hotel, Million Dollar Arm, in India. Income from distribution of films 20% (plus surcharge and education cess)
and The Hundred-Foot Journey. is not covered under this exemption and under the domestic tax laws. If appropriate
hence, taxation of the same needs to be taxes are withheld on acting fees and this
Business Model evaluated separately. is the only India sourced-income for the
Typically, foreign producers and studios
actors, then such actors are not required
appoint a line producer in India for Foreign actors: Taxability of foreign actors to file a tax return in India. This benefit is
assistance with India film production is covered under Article 17 of most of applicable in case of non-resident actors
related activities and pay fees to such the tax treaties (Taxation of entertainers who are not Indian citizens.
line producers. The line producer may and sportspersons) that India have with
be a third party entity or an Indian group other countries. Income from personal Foreign crew would include behind-the-
entity. For shooting the film (or principal activities, as such, performed by actors in scenes personnel such as action director,
photography) in India, foreign actors and India should be taxable in India. At times, costume designer, etc. Taxability of their
foreign crew are engaged by the foreign income from acting fees is paid/accrues to income should be evaluated based on
producer/studio. The line producer star companies or loan-out corporations, criteria such as specific nature of services,
engages the Indian cast, crew and facilities i.e., companies owned by such actors. employer-employee relationship with the
and accordingly, enters into agreements In such cases, the actor services are payer, legal form of entity, presence/period
with them. Prior to the commencement of provided to the film producer by star of stay in India, and relevant tax treaty
principal photography, it is common for the companies or loan-out corporations and provisions. Foreign crew would be required
foreign producers/studios to undertake a accordingly, acting fees are paid by the to file an income-tax return in India, if the
recce in India. film producer to such star companies or income is taxable in India.
loan-out corporations. The star companies
97
Individual not citizen of India, firm which does not have any partner citizen/resident of India, company which
does not have any shareholder citizen/resident of India
59
Indywood |
The Indian Film Industry
In addition to the above, following are the length price is to be considered for team on a condition that an accredited
income-tax compliances to be noted in taxation purposes and an accountants representative of the foreign film unit
case of foreign films being shot in India: report (Form No 3CEB) may have to be or the television team executes a bond
filed with the Revenue authorities. in such form and with such surety
Individuals (e.g., foreign film actors), not as may be acceptable to the Deputy
domiciled in India, who visit India for A non-resident can claim benefits of a tax Commissioner of Customs or the
purposes of business/profession and treaty, to the extent it is more beneficial for Assistant Commissioner of Customs, as
earn income from a source in India, such non-resident vis--vis the provisions the case may be, binding himself to pay
are required to obtain a tax clearance of the domestic tax laws in India. For on demand an amount equal to the duty
certificate from the Revenue authorities claiming tax treaty benefits, a non-resident leviable on such equipment and cameras
before departing from India. requires a tax residency certificate issued if the same are not placed under customs
by the Revenue authorities of the home control for re-export within a period of
Indian income-tax registration number
country and Form No 10F (self-attested three months or such extended period
(permanent account number) is required
document). as the said Deputy Commissioner or the
to be obtained by the film producer
Assistant Commissioner may permit,
and actors. The crew is also required to
Indirect-tax implications after clearance for home consumption.
obtain a registration number, if income is
In connection with film shooting in India,
taxable in India.
indirect tax implications could emerge in Services availed from line producers:
A film producer or any other payer relation to the following transactions: Foreign producers may enter into a
withholding Indian taxes is required to contract with Indian line producers to
Import of film equipment by foreign unit
file quarterly withholding tax returns assist them with shooting films in India.
in India
outlining the details of expenses incurred This would include availing services of
and taxes withheld. A person liable to Services availed from line producers backstage technicians, music composers,
withhold taxes on payments is required lights, etc., which could be provided by
Royalty/license fees paid for importation
to obtain an Indian withholding tax the line producers.
of film print
registration number (i.e., tax deduction
Services provided by such line producers
and collection account number).
Import of film equipment by foreign unit: to the foreign production unit should
Additionally, a film producer is required The Admission Temporaire/Temporary be examined to determine applicability
to furnish a prescribed statement (Form Admission (ATA) Carnet permits duty of service tax depending on the nature
No 52A) outlining the details of expenses free temporary admission of goods into of service involved and further if such
incurred. Such statement is required to a member country. The list of exempted services are provided in taxable territory
be submitted per film per year within 30 products inter alia includes filming as per Place of Provision of Services
days from the end of the financial year or equipment. Rules, 2012 (POPS Rule), could attract
completion of film, whichever is earlier. service tax in India.
Moreover, Entry No. 414 of Notification
In case of cross-border payments made No. 12/2012-Cus, dated 17.03.2012,
Royalty/license fee on importation of film
to group entities, implications from a stipulates nil rate of customs duty for
print:
transfer pricing perspective need to television equipment, cameras and other
Film shot in India will be broadcasted
be evaluated. Once transfer pricing equipment for taking films, imported
in India through the distributors. On
provisions are applicable, the arms by a foreign film unit or television
importation of the cinematographic
film, in addition to the cost of the print,
remittance of royalty, license fee, profit
sharing, etc., is made to the foreign
producer/supplier for re-producing
copies, etc. Issue arises whether
transaction value for the purpose of
calculation of customs duty, if applicable,
includes only cost of print or also such
royalty/license fees paid for the same.
The Central Board of Excise and Customs
(CBEC) has clarified that royalties and
license fee related to the imported
goods which the buyer is required to
pay, directly or indirectly, as a condition
60
Indywood | The Indian Film Industry
61
Indywood |
The Indian Film Industry
Authors Acknowledgements
Neeraj Jain Hemant Joshi
Partner Technology, Media &
neerajjain@deloitte.com Telecommunications
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