Lionsgate Films, the Hollywood studio behind cinematic gems like American Pyscho, The Day After Tomorrow, Hunger Games and La La Land, opened its Mumbai office this August and is set to dabble Indian film production. The major production and distribution studio appointed Rohit Jain, former deputy CEO of Videocon d2h, as the man-in-charge for its India outpost.
A unit of Lions Gate Entertainment Corporation which reported revenues worth $3.2 billion in the last financial year, Lionsgate film is seeking a share in a lucrative Indian media and entertainment industry set to grow at a compounded annual growth rate (CAGR) of 14% to touch Rs2.41 trillion by 2021, according to a 2017 KPMG-FICCI report. But will Lionsgate, now seen as a comeback studio whose films pulled in the highest number of Oscar nominations this year, go down the same route as Walt Disney Co. or Warner Brothers who pared back and dismantled their local production ambitions after weathering a series of Bollywood misfires?
While Mr Jain did not wish to share any insights at this point on Lionsgate India strategy or the kind of projects already sanctioned, there is enough to learn from the experiences of other major studios who have incurred heavy losses on expensive productions, especially Disney's Mohenjo Daro or Jagga Jasoos. On September 1 last year, Disney confirmed terminating its plans to invest in Indian-language films. "Given the challenges with the current economic model for investing in the local film industry, we intend to shift the focus of our film strategy to driving our Hollywood movie slate in India," a Disney India spokesperson toldVariety.
According to Himanshu Parekh, co-Head, Media & Entertainment, KPMG, one of the biggest challenges which Hollywood studios in India face is the huge talent cost that comes with making big-budget movies. The A-listers from Bollywood insist on walking away with a major chunk of the revenue share from box-office collections, over and above their exorbitant fixed fees which is never dependent on the outcome of the films. In India, producers end up getting a minuscule portion of the overall revenue unlike the West where talent or star power alone does not determine business decisions.
"If you look at the talent cost in Hollywood as a percentage of the overall cost of the movie, it is far lower as compared to big-budget Bollywood movies. Hollywood has been able to consciously move away from a talent-dominated industry.If you look at the franchise model which the Hollywood studio has been following, they are trying to build characters as the selling proposition of their franchise rather than banking purely on actors. This is one way of managing cost and also delivering and focusing on profitability," says Parekh.
He further adds that, "While Lionsgate will not expect to generate global blockbusters like Hunger Games or Twilight from its Indian stable right away, the key lies in coming up with differentiated content. "The ability to come up with content which can relate to the masses, content which is differentiated in nature, new story-lines, new concepts, new themes is the key;whenever production houses have come up with such films, people have appreciated it," says Parekh.
He cites the example of Viacom 18 Motion Pictures (VMP), a 50/50 joint venture between Viacom (the American media conglomerate) and the Network 18 Group, which has made many films not involving heavy stars, but focusing on delivering quality and differentiated content. Their mostly small and medium budget films like OMG-Oh My God!, Madras Cafe, Special 26 and Gangs of Wasseypur (1 and 2) have reaped commercial and critical plaudits.
For Hollywood, where 65 per cent of their earnings come from international markets, India is now seen as a prime trading outpost to drive growth from a long-term perspective. With internationally successful movies like Baahubali and Dangal, there is a renewed interest. And with the coming of Netflix and Amazon, there are alternative revenue streams now open for big production hoses to tap into by means of content acquisition and producing original content series.
In March this year, Lionsgate signed a partnership with Amazon Prime Video to bring its bouquet of movies for Indian customers. With no restrictions on the number of movies they can produce in India or ownership models they can be confined to, unlike in China, Lionsgate can hope to devour a lion's share in the Indian show business marketplace if they play their cards right.