Film Insurance & Financing in India

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Themes: Financial Markets
Period : 1998 - 2000
Organization : UTI India
Pub Date : 2002
Countries : India
Industry : Financial Services

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Case Code : FINC012
Case Length : 07 Pages
Price: Rs. 200;

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Background Note

Cinema entered India in 1896 with the screening of six soundless short films in Bombay. Dada Saheb Phalke, considered to be the father of Indian cinema, made the first fully indigenous feature film 'Raja Harishchandra' in 1913. The first film with sound 'Alam Ara,' was released in 1931, and the first color film, 'Kisan Kanya,' was released in 1937.

The industry followed the 'studio culture' of Hollywood in the initial days, wherein big movie production houses (called studios) hired stars, music directors and film directors as salaried employees for four to five years. However, over the years, the studio system gradually gave way to independent producers. The decades that followed saw Indian cinema flourishing and becoming an integral part of every Indian's life. Film stars, producers, directors, music directors, lyricists and playback singers became immensely popular celebrities.

The industry was broadly classified into four segments - software (films, music and programs), hardware (studios and other infrastructure services that support the creation of entertainment software) and services (distribution, exhibition, film procurement and banking services) and the front-end media segment (which film magazines, video cassettes and promotional tools). By 2001, the Indian film industry had produced about 27,000 feature films and thousands of documented short films. With around 800 films being produced every year, in over 52 languages, India was undoubtedly the world's largest film producing country.

In March 2000, a FICCI-Arthur Andersen report revealed that the Indian film industry was expected to grow from Rs 84 billion in 2000 to Rs 340 billion by 2005. However, all was not well with the Indian film industry. The success rate of Indian films was extremely low. A majority of the films could not even recover the investments made. Even after nine decades, the number of 'blockbuster' movies was very low when compared to the US film industry. Analysts claimed that the most significant problem was the lack of quality and the mediocre production values often resulted in films sinking without a trace in the market. The need for insuring films arose from the basic principle of getting protection against financial loss arising on the happening of an unexpected event. Table I gives the various categories for film insurance:

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