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| Komal Nahta |
An edited version of this Q&A first appeared in DNA Money edition on Friday, December 28, 2012.
Year 2012 saw 163 Hindi films being released with the industry clocking net box office revenues of over Rs2,000 crore. Komal Nahta, noted film trade analyst discusses how the year has been for the industry, highlights and trends. Edited excerpts...
Could you briefly tell us how the calendar year 2012 has been for bollywood? What were the key highlights?
It's been a very good 12 months for the trade this time around. Although the success percentage (anything between 18% - 22%) of films that worked on the box office wasn't any different from the last few years, the differentiating factor this time around was that a lot of films did huge business. Nine films including the likes of Ek Tha Tiger, Rowdy Rathore, Agneepath, Barfi, Son of Sardar, Bol Bachchan, Housefull 2, Jab Tak Hai Jaan and the latest being Dabangg 2 registered net box office revenues of over Rs 100 crore with Ek Tha Tiger being the top grosser of the year at Rs 199 crore.
Secondly, all kinds of films worked be it comedy, horror, family drama, thriller, action etc did well at the box office. Interestingly, even women oriented films (Kahani starring Vidya Balan) that normally don't do well on the box office received huge praises, was acclaimed by the critics and the audience alike became a huge hit without a single recognisable face in the movie. Then there were some films with complete newcomers like Vicky Donor and Ishqzaade that became a big hit. So the audience appreciated every kind of a cinema in 2012 which was a good thing for bollywood.
What has really brought about this change in the audience?
In the last few years, film makers have realised that it is not just the stars who could get audience thronging to the theatres to watch a movie. While big stars could lure audience for one or two shows, the year 2012 has proved it is mainly the content of the film that is the main driver. As a result, each one has worked really hard on their scripts which is showing in terms of performance of their films at the box office.
While we have very often heard people saying scripts are the backbone of the films, a lot of producers and film makers would overlook this aspect when signing big stars because they somewhere felt huge starcast doesn't require a strong script. That mindset has changed big time. This apart, with so many channels mushrooming and the audience being exposed to world cinema sitting in their home, a taste for newer subjects has developed in a section of the audience which is big enough to make the film commercially viable.
With first few days from release deciding the fate of a movie, what kind of a change has that brought in the overall film making approach?
We have seen that trend getting stronger gradually as a result a section of the film makers have diverted their focus from the script and are focussing more on the promotion and marketing aspects. These film makers feel if they can hoodwink the public into coming into the cinemas for the first few days they have won the battle. It is easier to promote the film in the last 15-20 days than to work on the film's script for over 6-8 months. And you need to get a brainwave to get something new in the script while marketing is much easier. So 'apna kaam ho jaaega' attitude is certainly being noticed in some films.
Film marketing budgets would have shot up significantly in that case?
Absolutely. About three or four years ago, marketing budget for a big fils was in the Rs 4 - Rs 5 crore range. That number has increased to Rs 10-12 crore and even Rs 15 crore in case of really huge films.
We also saw films like Gangs of Wasseypur, Paan Singh Tomar etc. gaining huge traction. You think more such movies will get produced in the coming years?
Such movies getting acceptance in itself is really heartening because these movies would earlier get classified as 'art cinema' catering to a very small section of the audience. Today these movies are being released commercially all over the country in the smallest of the towns is a big change in the overall film consumption behaviour. In fact, 2013 will see another realistic movie titled Bhaag Milkha Bhaag featuring Farhan Akhtar and directed by Rakeysh Omprakash Mehra.
So 2013 is looking equally good or better?
It is looking good and we are hoping it will be much better than the year going by. A huge line of big films - not only actors but directors as well - are due for release. Prominent among them are Amir Khan's Dhoom 3, Shah Rukh Khan's Chennai Express, Hritik Roshan's Krrish 3, one movie each by Sohail Khan and Sajid Nadiadwala featuring Salman Khan, 4-5 releases by Akshay Kumar etc. so a host of big budget, big banner, big starcast films lined up. In fact, 2013 kick-starts with the big budget film Race 2, Kai Po Che! that are again content rich films.
This story first appeared in DNA Money edition on Tuesday, December 18, 2012.
Singapore-based sovereign wealth fund Temasek will acquire 19.99% stake in Godrej Agrovet, a subsidiary of Godrej Industries, for Rs 572 crore.
The deal, which could well be the single largest alternative investment in the Indian FMCG space,values the company at Rs 2,860 crore.
Temasek will acquire the stake through a combination of primary and secondary market transactions, though Godrej did not give the exact size and other details of each of these, or of the investment firms looking to exit through this placement.
The primary component will be used to support Godrej Agrovet’s future expansion plans, the company said in a filing, without sharing details on the nature of the expansion it was planning.
A diversified agribusiness company with interests in animal feed, oil palm, agri-inputs and poultry, Godrej Agrovet had sales of Rs 2,460 crore last fiscal.
It has been a tremendous source of value creation for Godrej Industries, said Nadir Godrej, its chairman. “It continues to be on a strong revenue and profit trajectory while delivering excellent returns on capital employed.”
The company has over the past few years aggressively expanded its rural distribution, increased manufacturing capacities and launched cutting-edge technologies for farmers.
“Partnering with Temasek will further accelerate our performance,” said Balram Singh Yadav, managing director, Godrej Agrovet.
Incidentally, this is Temasek’s second investment in the Godrej group this year – the investment firm had in January bought 4.9% stake in Godrej Consumer for $135 million.
This story first appeared in DNA Money edition on Tuesday, December 18, 2012.
Indian cement companies are set for a strong revival, driven by visible bottoming out of the industry’s capacity utilisation in the current fiscal and lower-than-expected capacity additions in the next two.
Analysts said for the first time in five years, capacity addition in fiscal 2014 is expected to be lower than the incremental demand.
Reema Verma Bhasin and Amit Rathi, analysts with Bank of America Merrill Lynch, said in the next fiscal the industry’s effective capacity utilisation will be flat on a year-on-year (yoy) basis at 71%, but is likely to rise to a sharp 76% in fiscal 2015 as demand grows.
“Compared with our earlier expectations, overcapacity is a tad higher this fiscal, but capacity pipeline for the next fiscal is sharply lower. Installed capacity growth in the fiscal 2015 is now estimated at 4% yoy versus 8% growth expected earlier,” the analysts said in recent report, adding that general elections scheduled in the next 18 months, too, could boost cement demand.
Indicating a cyclical upturn for the sector by the second half of fiscal 2014, Deutsche Bank analysts said that rising capacity utilisations and emerging logistical constraints could impede supply.
As a result, industry is likely to be more localised and would benefit all the players, they said.
“Those with upcoming capacities and a bigger presence in tight demand supply regions (UltraTech and Shree), such as western and northern India in particular, could see disproportionate benefits,” said Chockalingam Narayanan, Manish Saxena and Abhishek Puri, analysts, Deutsche Bank, in a sector update.
Cement prices pan-India have declined 5% during July-December against a 7% price rise in the same period last year, largely due to the Competition Commission of India’s (CCI) order on alleged cartelisation in June 2012.
An industry source said most cement companies have a prices decline Rs 25-30 per 50-kg bag in the last 4-5 months.
“The stress on cement prices will continue in the balance part of the current fiscal as well. The category A companies will be hit significantly due to pricing pressure from category B and C companies,” he said.
Analysts,however, see an increase in cement majors’ operating profit 25-50% in fiscals 2014 and 2015.
This story first appeared in DNA Money edition on Tuesday, December 18, 2012.
Cement companies ACC and Ambuja may not face any major impact from the royalty payment to Swiss parent Holcim, with experts saying it would affect their profitability marginally.
Putting all speculations to end, the Boards of ACC and Ambuja have confirmed the payouts to Holcim with effect from January 1, 2013, to be presented to shareholders for consideration at the next annual general meetings.
The companies would shell out 1% of their net annual sales to Holcim as technology and know-how fees (read royalty). Experts, however, said the impact on profits would be well under 2%.
The announcement removes the overhang on both the stocks as investors have been awaiting clarity on the issue, they said.
Rajesh Kumar Ravi, analyst, Karvy Stock Broking, said the development will have a marginal impact on the profitability of both the companies if they are not able to pass on this cost.
“The increased royalty should increase cash outflow by 0.4-0.5% of net annual sales. This should lower ACC’s estimated calendar year 2013 earnings before interest, taxes, depreciation and amortisation (Ebitda) by 2% and profit after tax by 2.5%. Ambuja’s calender 2013 Ebitda and net profit would be lower by around 1.6%, if not completely passed through,” Ravi said.
For the first half ended September 30, ACC and Ambuja registered net annual sales of Rs5,638 crore and Rs5,199 crore, respectively.
Assuming the same figures for calendar 2013, the 1% technology and know-how fees for both companies works out to Rs 56.4 crore and Rs 52 crore, respectively.
A Morgan Stanley report in June had said that ACC and Ambuja were already paying 0.6-0.7% of net revenues to Holcim towards a few services such as training and technical consultancy.
Starting January, this expenditure will increase to 1% of net sales.
Raashi Chopra, analyst, Citi Research, said the proposed royalty is intended to bring the Indian subsidiaries more in line with the group practice and replace some of these payments.
“Thus, the negative effect of the royalty would be partly offset,” said Chopra in a recent report.
Though there was some confusion whether 1% was over and above the existing outflow, an ACC spokesperson confirmed that the technology and know-how fees is not over and above the existing expenditure being incurred by the company and will be inclusive.
“This, however, is lower than the level of 2% being indicated by various reports earlier,” said Ashish Jain, analyst with Morgan Stanley Research, in a recent report.
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| Guy Nixon |
This story first appeared in DNA Money edition on Saturday, December 15, 2012.
Go Native, the London-headquartered serviced apartment operator, is looking at expanding its brand in the Indian market to cash in on the growing demand for long-stay accommodation from its clientele in Europe, Middle East and India.
Guy Nixon, founder and CEO, Go Native, who was recently in India for client meeting, said, “We would love to explore opportunities to expand out brand in India. We would be keen to meet property owners who would like to work with the Go Native franchise.”
The company has a network of 25,000 serviced apartments, a large part of which is branded and operated by Go Native in London and Edinburgh. It also works with operators across the UK, Europe and the Middle East catering to clients’ need for housing in these regions.
Elaborating the company’s business model, Nixon said most of properties in the network are on 10-15 year management contract. “We brand and furnish the buildings and run them a bit like hotels but they are all apartments,” he said.
On the Indian market, he said, “We have been housing Indian people in the UK for over 10 years now. We have learnt a lot about the Indian market in that timeframe and have good understanding of their needs for housing. Their primary requirements are good quality accommodation, value for money, sensible pricing, good transport connectivity, preference to live within a community and close proximity to the workplace,” he said.
Go Native operates three-, four-, and five-star buildings and pricing depends on how long people are staying. In comparison to hotels, the rates at fully equipped serviced apartments are 20-30% cheaper while offering a lot more space.
While the duration of stay varies from company to company, Indian business travellers generally use Go Native apartments from 7-14 nights on the lower side going up to 1-6 months or more when coming on knowledge transfer and long-term projects.
“Banking industry forms large part of clientele from Mumbai while it is technology sector from Bangalore, Hyderabad and Chennai. It is a fairly mixed one in terms of companies from New Delhi,” said Nixon.
An edited version of this story first appeared in DNA Money edition on Friday, December 14, 2012.
Anil Ambani promoted Reliance Group is foraying into the Indian real estate sector. The diversified Indian business house has partnered with one of China's largest multi-billion dollar enterprises Dalian Wanda Group to set up a joint venture (JV) that will undertake real estate developments in the country. Financial details pertaining to the JV were not disclosed. The two groups are likely to also explore synergies in the film exhibition business (through Reliance MediaWorks Ltd) as the Chinese entity is among the leading multiplex players in the world with over 6,000 screens.
Anil D Ambani, chairman, Reliance Group, said that the Reliance Group has become the single largest trading partner between India and China over the past few years. "We have built strong relationships with a large number of leading corporates, and major financial institutions and banks in China. We are now looking forward to extend our strategic partnership to the highly successful and dynamic Wanda Group, in a manner that will tremendously benefit both groups, and unlock substantial value for millions of all our stakeholders,” Ambani said in a media statement.
The Reliance-Wanda JV is the fourth such association between an Indian company and an international real estate development firm. Earlier in 2004, Puravankara Projects Ltd had collaborated with Singapore's Keppel Land Ltd for a 49:51 JV to develop integrated townships across India. Following suit was another partnership in 2005 between ICICI Ventures and US real estate development company Tishman Speyer Properties for realty projects in the country. Thereafter in 2007, India's largest realtor DLF Ltd formed a joint venture with a privately owned international real estate firm Hines to develop a major office tower in Gurgaon.
Industry experts said that the Reliance-Wanda is certainly a unique and positive development for the Indian real estate industry. "This comes at a time when majority of the global economies excluding Europe are on a recovery path. Indian economy is also likely to recover within the next couple of years. Keeping this scenario in mind, the joint venture is an exciting development for the real estate industry," said a top official with a international property consulting firm.
As for the nature of developments to be undertaken by the proposed JV is concerned, Reliance Group said in the media statement, "It will be to develop integrated township projects in India, including but not limited to commercial buildings and residential condos / apartments, hotels, retail space, etc."
To start with, the JV will develop the land parcel owned by Reliance Communications Ltd (The Dhirubhai Ambani Knowledge City complex in Navi Mumbai spread across approximately 135 acres) having the potential for development of over 10 million sq ft, subject to necessary approvals. Similarly, another 10 million sq ft will be developed area in a phased manner on 80 acres owned by Reliance Infrastructure Ltd in Hyderabad. The said land parcel has unlimited floor space index (FSI) for development for commercial and residential purposes, hotels, etc.
Wang Jianlin, chairman, Wanda Group said that India is a rapidly developing economy and huge market potential. "Wanda is very excited about the opportunities in the Indian market. By joining our strengths together, we hope our cooperation will bring mutual benefits and great results,” said Jianlin.
Among leading real estate developers in the world, the Wanda Group has built over 130 million square feet in 66 integrated projects across 50 cities in China. Going by the scale, Reliance Group is primarily banking on the expertise and demonstrated track record of the Wanda Group to execute its realty developments in India.
This story first appeared in DNA Money edition on Thursday, December 13, 2012.
Five years after creating ripples with restaurant chain Punjab Grill, celebrity chef Jiggs Kalra along with son Zorawar has now collaborated with Mirah Group for a new venture.
The new entity, Massive Restaurants Pvt Ltd, will set up a chain of fine-dining, smart casual dining and luxury mithai (Indian sweets) outlets across the country, which would be expanded to select international markets after a year.
Gaurav Goenka, director, Mirah Group, told DNA that Massive Restaurants is a joint venture with Mirah Hospitality, in which the Kalras hold a majority stake.
“The food and beverage (F&B) concepts will be created by the Kalras and Mirah will leverage on its experience in the real estate and operational matters,” said Goenka, adding that within three years the JV will be India’s largest restaurant chain operator.
The fine-dine restaurant will operate under Masala Library by Jiggs Kalra brand, while it will be Made in Punjab for the smart casual restaurant chain.
The luxury / premium mithai chain will be operated as Mithai by Jiggs Kalra. All the brands and trademarks will be held under the new venture.
Jiggs Kalra, partner, Massive Restaurants, said the venture will endeavour to provide patrons to experience a culinary journey while capturing the grandeur of centuries-old traditions and the long-lost essence of one of the oldest known culinary traditions in the world.
“The fine-dining restaurant will recreate the erstwhile culinary traditions to offer a truly gastronomical adventure for connoisseurs of fine cuisine,” he said.
The JV has set a target of 11-12 outlets (between the three brands) in the next 12-16 months.
While initial investment is pegged at around Rs25 crore, the overall capital expenditure in the coming years is envisaged at about Rs40 crore, which would be funded internally.
Zorawar Kalra, partner, Massive Restaurants, said two fine-dining, four smart casual restaurants and five mithai stores were targeted to be set up for the next fiscal.
The first fine-dine restaurant is expected by April at Bandra-Kurla Complex in Mumbai.
“These would ideally come up in the Mumbai and Delhi and eventually be opened in the other top 8-10 cities, including Bangalore, Kolkata and Chennai. With a seating capacity of 90-100, the fine-dine restaurants will be spread across 3,500-4,000 sq ft, while it will be 115 seats across 3,500 sq ft for smart casual restaurants. The mithai outlets will range 300-1,500 sq ft,” he said.
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Piyush Pandey
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This Q&A first appeared in DNA Money edition on Thursday, December 6, 2012.
Piyush Pandey, executive chairman and creative director, South Asia, Ogilvy India, does not believe in doing the most popular thing in the market. He would rather try and create something that can be very popular and needs deeper thinking. For instance, item numbers have been very successful, but will he do one? “No. I’d rather find something else which is better, otherwise it becomes a formula and I don’t believe in formulas,” he said. Edited excerpts...
What are the three things that make Ogilvy click so well?
I’d say belief, respect for the consumer and respect for our clients’ needs have worked for us and the end result is out there for everyone to see.
You are an acute observer of people and trends. How do you absorb the nuances of life – the panorama of emotions, attitudes, quirks et al?
It’s a 24 x 7 job of observing and understanding people, seeing the changes they are going through. It’s not a research but observation of human life. Respect the surroundings and do not tell yourself that you know it all. You have to keep learning.
You have been at the fulcrum of advertising for more than three decades. Where does creativity go from here? How different are the creative guys of today from the earlier ones?
I don’t think creativity will ever change. The expressions may change, media may change, we may move from conventional media to new media, but the one who will succeed will be the one who will be more creative in doing it. This is because the new media will be available to everybody, but only the most creative will stand out. That’s the way I see life, which is ever changing and one has to keep pace with it. Values will never change and you’ll have to live with them. Certain expressions will change and you’ll have to learn them.
If medium is the message, how do you see the new platforms panning out in India?
I think all media will live together. I have always believed that in the next 10 years, conventional media is not going to get out of fashion, but new media will come in. Everyone has to be prepared to accept the change and yet not forget that we are not the best. Even the best has not changed that much. I mean, the talk about new media is a bit over-hyped to my mind. You have to keep pace with it. There is a new India which is lapping up the conventional media and you will have to keep a sense of balance between the two.
What’s the one accolade you are yearning for?
The only accolade that I really yearn for every day is that when I go to my barber shop, my barber tells me I saw your advertisement and I loved it. That personal connect is much more to me than anything else. On Tuesday night, there were 50 students who met me and said I loved your work. Now, they didn’t give me an award, but I think it was a bigger award than anything else that we got on the awards night.
At the end of the day, we are commercial artists and not artist artists. Otherwise, I would be happy painting things in my house while nobody else would be interested in them. I am paid to reach out to people and when people react to the work that we do, it is the greatest accolade and nothing can get any bigger than that.
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Vikas Oberoi
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This story first appeared in DNA Money edition on Wednesday, December 5, 2012.
Oberoi Realty, the predominantly Mumbai-based developer, plans to enter the Delhi market within a year, joining other city-based realtors such as Tata Housing and Godrej Properties that have recently come up with projects in and around the national capital.
While Oberoi would enter the National Capital Region (NCR) in a year, the company also intends to expand into southern India at a later stage.
Vikas Oberoi, chairman and managing director, said, "Now that we know how to do multiple sites in the same city, we want to look at multiple cities. Markets like Delhi, NCR, Gurgaon and NOIDA will be looked at to start with."
Delhi with its simplified and well laid-out land acquisition processes also has a lot of established developers, he said. "We will soon set up a team and get going with developments there. It's a work in progress for now. Something concrete should happen in the next 12 months." said Oberoi.
While entering other states, he said the company will look for partnerships and initially take up small projects. "We want to set our company for the next 100 years," said Oberoi.
On expansion in other markets, Oberoi said, "In the outer circuit we have kept Hyderabad and Bangalore, but have not gone beyond a particular point in exploring those possibilities. We want to first do Delhi and will see how it works in the next 2-3 years."
On the company's serviced residences and residential development in Worli, Mumbai, Oberoi said the project is in the fairly advanced stage of being launched and details will be made public within the next couple of months.
While the market is abuzz about Mandarin Oriental being signed as the hospitality partner for the serviced residences, Oberoi did not disclose any deal.
With cash reserves of about Rs 1,111 crore, Oberoi has no plans for any fundraising in the future. But the company will have to go for an offer for sale to reduce stake in the company to 75% as mandated by the new guidelines of the Securities and Exchange Board of India.
My colleague KV Ramana co-authored this story appearing in DNA Money edition on Monday, December 3, 2012.
The animation industry is, well, in suspended animation. What started as an action-filled arena in early 2000, with a huge promise, appears to have meandered into wilderness somewhere along the way.
With a revenue pie of around Rs 1,200 crore – which is shared by at least 50 active companies – it remains a poor cousin of the IT-BPO industry, which boasted revenues of Rs 5.5 lakh crore last year.
It all started with the American studios recognising the creative talent available in India at a lesser cost. These studios started outsourcing work to the Indian animation experts, who had their own outfits with equally creative people.
But today, most of these animation units have shut shop, while the remaining few are unable to break the small and medium enterprises mould.
Blame it on a lack of capital and government focus on the sector, and burgeoning costs, say industry experts.
“In a way, we missed the bus. Now, most of the projects are going to Malaysia and China. There are many 3D projects being done in Malaysia. There, the advantage is the Malaysian government is stepping in as an investor whenever the local companies bag an international project. It is not a grant. It is a pure investment and the government takes its share later. The advantage for the company is in terms of ready availability of the initial capital that is required to kick off a project. We are told the local government is funding about 50% of the entire project cost. Additionally, the Malaysian industry is present as a single unit at all the international conferences and the government is sponsoring them. All these measures are helping the Malaysian industry grow,” said Rajiv Chilaka, founder and managing director of Green Gold Animation.
Green Gold’s own situation is representative of the larger story. Though founded in 2001 and employing around 250 people now, the company’s annual revenues are around Rs 20 crore – even that is largely because of a single successful project – Chota Bheem.
Going by Chilaka, without Chota Bheem, the company might have shut shop by now.
To make matters worse, animation has no industry body yet and is represented either by Nasscom, which is an umbrella organisation of software sector, or Ficci.
“It normally takes about five years for any animation company to start seeing the revenues. But, during those five years, the companies need some handholding. Unlike software companies, the animation companies are formed by creative people. They know how to make something more creative or how to narrate a story more creatively, but most do not know business or how to sell a product. This is where the industry needs to have government support. The support is also required by the government’s initiative to mandate the telecast of a certain percentage of TV content in the form of India-made animation content. Most of the channels today depend on imported content dubbed into a regional language,” said D Sravan Kumar, a senior functionary of another animation company.
On the content side, detractors have long criticised local animation as being dependent on mythology or unable to go beyond grandma stories, though some argue that the success of series like Krishna vindicates the belief that mythology still sells.
As such, the odds appear to be stacked against the industry.
“Domestic work has been caught in a different cycle altogether as there are people who want to watch animation content that conform to international level/ standards. However, the number of such people who will pay high ticket prices to watch such content is too small, so a producer investing Rs 70-80 crore in an animation movie will only be able to recover Rs 10-15 crore odd from the release and other ancillary revenues. So there is a huge gap between costs versus revenues and unless that equation has been fixed one cannot have a widespread domestic release that is viable enough,” said Raghav Anand, segment champion - new media, Ernst & Young.
Analysts feel the industry size would definitely grow if the government had a digital media strategy and also an intention to promote animation in the education sector, rather than limit it to entertainment.
A Ficci-KPMG report has projected the animation and VFX industry size for 2012 at about Rs 3,600 crore and the gaming industry size at Rs 1,800 crore. According to the report while local characters are gaining popularity, a number of shows scripted and conceived in India are being executed in destinations like Indonesia, Singapore and Argentina, where animation costs are reported to be more economical compared with India.
“The global animation and gaming market is expected to grow from $122.20 billion in 2010 to $242.93 billion by 2016. This represents a compounded annual growth rate of 13% from 2011 to 2016. In comparison, the Indian animation industry is estimated to be Rs 1,130 crore, which is a small percentage of the world animation market. This gives the industry tremendous growth potential. It is estimated that the Indian animation industry will grow by a CAGR of 16% and will be Rs 2,397 crore by 2016,” the Ficci-KPMG report said.
A K Madhavan, chief executive officer, Crest Animation Studios, is not in agreement that animation projects are moving out of India.
According to him, high-end jobs continue to come to India. It is the low-end jobs that could be going to countries like Malaysia, Thailand. In fact, the quality and volume of work is much higher here than in most other Southeast Asian countries.
The biggest challenge, however, is finance.
Animation services companies require constant funding, and at regular intervals.
But banks are not forthcoming enough in funding the projects despite the notable success some animated movies have had at the box office, to say nothing of home video sales and merchandise. The banking and financial sector still hasn’t understood the way business happens in this space.
“A price-pressure situation came into play primarily in the low-end volume projects once studios started to evolve. Being more cost-effective, a few other destinations in the southeast Asian region started eying this low-end volume business. As a result it became necessary for Indian animation companies to evolve and get into the mid- and top-level of work that didn’t require as many people vis-a-vis the low-end volume assignments. This in turn has impacted hiring activities as only a certain number of people can be absorbed for that kind of work. That was the scenario in the last two years which is why you see some of these negative news coming in. Where animation was supposed to be the next big thing like IT that’s not how it has really played out,” said Anand.
Given all this, it is likely that only a few players will survive in this market in the years to come. Mergers and acquisitions (M&As) are a distinct possibility, too, said Madhavan.
He feels, greater support from the government is unlikely anytime soon and hence, the animation industry will have to come together and find a way out.
“Animation companies will have to design different structures to deal with the financial challenges. Crest Animation, for instance, has partnered with the distributors and producers of animation films and this approach has worked really well for us,” he said.
Anand appeared to concur. According to him, animation, unlike the IT industry, is creative plus technology and it has three growth cycles. Initially when it started, low-end volume is what was largely coming to India. Subsequently a lot of companies came into play thereby creating huge employment opportunities and demand for manpower in this space as a result we had a host of animation schools and colleges churning out students.
“The third phase that we are entering now is really a phase where some of the animation companies are also sharing the risk. As a result, we are now seeing a shift from pure production related activities to now actually owning the intellectual property (IP). And in case of projects from international markets, companies are trying and co-investing in certain IPs. The animation house in India which was traditionally doing outsourcing work would now be a co-producer of a series and taking between 40% to 50% risk depending on their capacity,” said Anand.
“Five years ago, all the quality work would be done out of London and India would deliver the low-end volumes. Now, some of the quality work has started to come to India and low-end is going to other cost-effective destinations,” he added.
Anand remains optimistic that work that requires some experience to execute will find its way to India.
“If only a handful of players have to succeed then the market forces can pretty well find their way. However, if the industry has to grow in a broad based manner, there are 3-4 things needed,” he said.
First, there should be promotion for domestic content in television, cinema theatres etc. and there should be specific incentives around that.
Second, there should be specific incentives (tax breaks etc) for companies/ entities doing the outsourcing work.
Third, for producers getting their work out of here, there should be incentives for them as well which will eventually motivate them to look at the Indian animation services providers.
And finally, there has to be quality training of people while their time in the institutes so that they get absorbed for high quality work after having completed their respective courses. “And there has to be government support in this area as well,” said Anand.
