A Sea Change in India’s Film Industry: New Opportunities For Hollywood By Anand Desai

India’s entertainment industry has always been open to creative ideas from the West in general and the United States, in particular.  Indeed, the focus of Indian cinema on Indian cultural preferences has not stopped Bollywood from sometimes openly mimicking Hollywood films, TV shows, and music. In recent years, however, that interest has included business models, as well, which has led Hollywood studios to pay greater attention to India. These Hollywood studios have recognized the vast potential in Indian markets for Bollywood product.

Most large Hollywood studios, including Disney, Fox, Sony, and Warner, have not only set up distribution offices in India, but have moved to producing Indian films.  They have done so by partnering with Indian studios either through co-productions or formal corporate acquisitions like Disney-UTV. For example, Disney has started funding the production of Bollywood films. Fox Star has produced almost 30 Bollywood (Hindi language) films, as well as a few “Kollywood” (Tamil language) and “Mollywood” (Malayalam language) films, as well. (Other Hollywood inspired names for India’s prolific and varied regional cinema, include “Ollywood” for the Oriya language, and “Tollywood” for the Telegu language films industries.)

This kind of international collaboration has been made possible, in part, because decision-making in the Indian film industry has undergone a sea change, evolving from instinctive, talent driven decisions by a few individuals and “film families” to corporate studio management with defined strategic processes with emphasis on the quality of content, talent, production values, marketing, and distribution. Marketing strategies, including budgeting to implementing those strategies, play a pivotal role in determining which story will ultimately make it to the big screen.

The restructuring of India’s studio system has been one of the reasons for Hollywood’s interest in Bollywood.  Other reasons include India’s well-developed infrastructure for film industry.

The Indian film industry now follows a similar approach to the American film industry, monetizing each aspect of film production, and thereby maximizing revenues. Films are financially de-risked at their under production stage. Although a significant chunk of revenues are garnered from theatrical exploitation till date, however newer exploitation platforms are being added, which are resulting in increasingly higher revenues. The Indian market for dubbed films is also expanding noticeably, and Indian film stars are gaining popularity in many parts of the world. Indian studios are exploring Western distribution practices, such as adopting moratorium periods where certain properties are released and then the exploitation of the property is suspended temporarily to increase their monetization prospects.

Another technique is re-releasing old films after digitally restoring them. Indian studios are also looking at building franchisee content which can be exploited across platforms. Producers of films such as “Krrish (a science fiction/superhero movie [2006]) and “Chhota Bheem (“Little Bheem,” an animated comedy-adventure series about a boy and his friends [premiered 2008]) have attempted to explore merchandising opportunities, like Disney merchandised properties.

Indian film companies are also now aware of the offers of various incentives for film and television production, provided by several American states, such as California, New York, Michigan, Nevada, and Utah. This includes the California Film Commission which is a one-stop resource for film and TV production, and provides information on how to obtain film and TV tax credits and online permits for filming on government property such as beaches, parks, roadways, public universities, and government buildings. The New York Mayor’s Office of Film, Theatre & Broadcasting, addresses all production needs in New York City.

Removing Red Tape

The Ministry of Information and Broadcasting (“MIB”), which is the primary body for regulating the entertainment industry, is considering a mechanism that will facilitate international as well as domestic film productions, and has formed an the Inter-Ministerial Committee to that end. The committee hopes to streamline the production process by acting as the single conduit through which producers may obtain the necessary licenses and permits to produce their films and TV programs. The committee is also expected to provide useful guidance concerning shooting locations, production crews, talent, facilities, stages, equipment, and support services. Furthermore, the government is also considering tax exemption incentive packages to attract foreign film-makers. The MIB has also recently issued simplified guidelines for film shooting by foreign nationals in India (http://mib.nic.in/WriteReadData/documents/flm1.pdf).  India is also becoming a favored destination for shooting films, which enables Hollywood studios to produce films in a foreign location at a lower cost. Recognizing the bureaucratic impediments inherent in producing films in India, and to promote India as a destination for film shooting, the Indian Government of India recently initiated certain key reforms for the benefit of the film industry.

Streamlined Visa Process For Production Crews

The entry, movement and immigration of foreign nationals into India is governed principally by the Foreigners Act, 1946, the Citizenship Act, 1955, and the Registration of Foreigners Act, 1939, which collectively provide the framework for the movement and behavior of foreign nationals within India. Foreign artists intending to shoot in India on a long term basis may apply for a “B-Visa” if the production is commercial in nature, or a “J-Visa” if the production is a documentary or pertains to journalism.

In the United States, a film and production crew can either apply for “O-1 Visa” for Artists of Extraordinary Achievement (actors, directors, producers, other singular professionals known for their craft), or “O-2” Visa for supporting cast and crew (actors, Assistant Directors, crew who are essential or have been attached to O-1 talent).

State of the Art Post-Production Facilities

Film cities have developed in Mumbai, Hyderabad, Chennai, and Noida. India also offers economically viable world-class post-production facilities like VFX, 3D, and animation. Furthermore, outsourcing of post-production services to India from other countries has steadily increased. For instance, films like Avatar and Life of Pi, among others, were post-produced in India.

Franchised Programming

India has seen a significant increase in the number of television channels, television serials, and other programs, including franchised programs such as Bigg Boss, India’s Got Talent. The latter category offers a significant platform for individuals  who don’t have adequate resources to present themselves to entertainment recruiters and society more generally. Indian performers are increasingly capitalizing on opportunities in American productions, and vice versa.

American Entertainers in India

In the past few years India, has increasingly seen American entertainers performing in India, including music performers, stand-up comedians, and other celebrities. However, such exposure has not escaped controversy. For instance, while some Indian audiences have accepted American standards surrounding stand-up comedy and other modes of expression, other, more conservative audiences have actively resisted and have frequently invoked India’s speech regulatory regime to censor performances they view as conflicting with “traditional Indian values.”

Music Industry Delinked from Bollywood

In India, the music industry is largely dominated by film-based music, while in the United States, independent music performers rule the market. India is slowly but steadily moving towards an independent music culture that is film agnostic, including “indie” music artists who now tour the world performing at various festivals and shows.

Indian Event Management

Indian event and talent managers are mushrooming, and talent is benefiting from the professionalism introduced by effective business managers. The talent pool, which was earlier dominated by only a few families, has now opened up to trained and qualified individuals who succeed on their management and recruitment acumen.

Computer-generated Games and Animation

With the abundance of Indian software professionals, India provides a skilled workforce for developing games and animation, at relatively low cost. This feature of the Indian labor market provides enormous opportunity for digital outsourcing from the United States.

Challenges

Two major areas pose challenges are intellectual property protection and censorship.  India courts are enforcing recent laws for providing greater IP protection which brings India closer to international norms.  India’s censorship laws, on the other hand, are entirely a matter of domestic cultural sensitivities and politics among India’s diverse ethnic groups.

Censorship

The freedom of speech under Article 19(1) of the Indian Constitution is not unbridled and can be suppressed if content is considered objectionable, harmful, or is required to be curbed to maintain communal harmony. The Indian Parliament has enacted multiple statutes that combine to form a complex regulatory regime governing the entertainment industry. Key enactments include the Cinematograph Act, 1952 (as amended), the Copyright Act, 1957 (as amended), The Cable Television Networks (Regulation) Act, 1995,  the Indian Penal Code, 1860 (as amended), and the Press Council of India Act., 1978.

Furthermore, Indian administrative bodies, such as the MIB, have promulgated regulations and guidelines to complement statutory enactments. For example, the Central Board of Film Certification certifies films as “universal”, “adult” or “parental guidance.” The Programme and Advertising Codes prescribed under the Cable TV Network Rules (issued under the Cable TV Networks Act) regulate television content. With the increase in the number of general entertainment television channels in India, the Indian Broadcasting Federation (“IBF”) felt the need to regulate content and address program related complaints, and a set of self-regulating content guidelines were framed by the IBF and implemented. IBF has also established an independent complaint redressal system, the Broadcasting Content Complaints Council.

In the United States, fairly unrestricted freedom of speech is considered an integral part of American culture, and is protected by the First Amendment to the U.S. Constitution. Film censorship in America has developed largely through case law, where local, state, and city censorship boards attempt to ban or edit films.  This is relatively difficult to do because the authority of these bodies to censor films is circumscribed by American free expression jurisprudence.  Indeed, it is extremely difficult to ban or censor speech in the United States under the 1st and 14th amendments to the U.S. Constitution as interpreted by the courts.

This approach stands in contrast to the relative readiness of Indian courts to uphold governmental bans or restrictions on speech or expression found to be offensive or hurtful to the sensibilities of a section of society as defined by a complainant.  Even though Articles 19 and 21 of the Indian Constitution guarantee freedom of speech, proponents permitting greater restrictions argue that there is a greater concern in India over the potentially adverse consequences to public order of permitting expression considered offensive to the complaining group than in the U.S.  Critics argue that the concern is overstated and sets India on a slippery slope of limiting free expression to the point that the right of free speech becomes meaningless.

While the Indian motion picture industry must work with this tension in Indian freedom of speech jurisprudence, U.S. filmmakers have the relatively easier task of simply complying with the classification system of the Motion Pictures Association of America.  The MPAA, through the Classification and Rating Administration, issues ratings to keep mature or adult content from reaching minors, with ratings for film such as “General Audience,” “Parental Guidance,” “PG-13,” Restricted,” and Adults Only” ratings.  In addition, public dialogues, legislative debate and judicial review have provided filtering strategies in the United States for regulating content on the internet.

Despite a more restrictive approach than in the U.S., laws limiting speech cannot be overbroad.  For example in a recent judgment in the case Shreya Singhal v Union of India, (2015) 5 SCC 1 (March 24, 2015), the Supreme Court of India struck down as unconstitutional Section 66A of The Information Technology Act (introduced by an amendment of 2008).  Section 66A authorized police to arrest persons for social media posts construed “offensive” or “menacing.”  The law was challenged by Shreya Singhal after she and her friend were arrested by Mumbai Police after posting comments on Facebook in 2012 critical of the total shutdown in Mumbai after the death of Bal Thackeray, the head of the Shiv Sena.  Calling Section 66A “open-ended and unconstitutionally vague,” the Supreme Court held the section unconstitutional “in its entirety” on the ground that it “arbitrarily, excessively and disproportionately” invaded the right to free speech, right to dissent, right to know, and had a “chilling effect” on constitutional mandates.

  1. Information that may be grossly offensive or which causes annoyance or inconvenience are undefined terms which take into the net a very large amount of protected and innocent speech. A person may discuss or even advocate by means of writing disseminated over the internet information that may be a view or point of view pertaining to governmental, literary, scientific or other matters which may be unpalatable to certain sections of society. It is obvious that an expression of a view on any matter may cause annoyance, inconvenience or may be grossly offensive to some.

Criticising the language of Section 66A, the Court went on to say many things:

  1. may be grossly offensive, annoying, inconvenient, insulting or injurious to large sections of particular communities and would fall within the net cast by Section 66A. In point of fact, Section 66A is cast so widely that virtually any opinion on any subject would be covered by it, as any serious opinion dissenting with the mores of the day would be caught within its net. Such is the reach of the Section and if it is to withstand the test of constitutionality, the chilling effect on free speech would be total.

Still, Hollywood/Bollywood collaborations will have to continue to be careful not to offend any group, whether in the majority or a minority that could coalesce to express a grievance that they have been offended to the extent that unless censored the content in question poses a threat to public order. Producers must also be careful to steer clear of section 295 of Indian Penal Code, which makes it a criminal offense for anyone who acts on a deliberate and malicious intention of outraging the religious feelings of any class of citizens.  Publisher Penguin India was accused of such malicious intent when it published and distributed Nancy Doniger’s book The Hindus.  Penguin withdrew the publication as part of an overall settlement of the suit).

Continuing Challenges in Intellectual Property Protection

Despite the reasons for optimism articulated above, piracy, particularly online piracy, continues to be a challenge for India and the United States. The Motion Picture Association of America has been fighting internet piracy, theatrical camcorder piracy, and DVD piracy among other forms. However, success in this area is a long way off and likely will require legislation and effective enforcement.

The entertainment industry generates enormous amounts of intellectual property. Both India and the United States have strict laws regulating this area of the economy. However, a possible difference is the widespread protection methods that are implemented in the United States, as against a more fragmented approach that is prevalent in India, partly influenced by India’s historical approach of sharing what one creates. In India, it’s a common practise for two or more producers to jointly own intellectual property in pre-defined ratios while the Hollywood studios tend to own intellectual property in a single entity instead of co-ownership structure.

In sum it is the new environment in Indian cinema and entertainment industry has created new opportunities for mutual cooperation between India and United States across all aspects of the entertainment industry.  However, continuing reforms, in both the public and private sectors is essential to sustain the impressive levels of growth this sector of the economy has been generating.

 

Anand Desai is managing partner of the Mumbai-based law firm DSK Legal. He has extensive specialist experience in the fields of intellectual property rights, media and entertainment, banking laws, financial services, M&A, real estate, outsourcing issues, and litigation. He can be reached at anand.desai@dsklegal.com. 

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