Film Insurance & Financing in India

THE SOLUTIONS

In December 2000, a Joint Institutional Committee on Financing Entertainment Industry submitted an interim report that laid down certain norms for offering financial assistance to the film industry. The committee headed by the Department of Banking-Ministry of Finance, had Industrial Finance Corporation of India (IFCI) and Industrial Development Bank of India (IDBI)^[4] as its members. The committee's recommendations included:

• Institutions should extend finances only to corporate entities.
• Besides negatives, music rights, satellite TV rights and overseas rights must also be considered as security.
• Insurance companies must extend insurance cover for films and develop more products for the industry.
• When financing a single film, the duration of advance may be restricted to between 6 and 18 months.
• Banks and FIs should work together with producers to evolve standards for financing and insuring films.
• Creating a film industry-rating agency by pooling people from banks/FIs, eminent filmmakers and experts in the media sector to judge a filmmaker's credentials.

The increased transparency as a result of film production companies adopting corporate practices was expected to enable the banks/FIs/insurers to deal with the film industry like any other industry. The changed setup was also expected to result in better films being produced with significant improvement in the overall industry performance levels. Besides helping the film industry in breaking away from the underworld, corporatisation of the film industry was expected to result in multiple benefits for the government as well. Film software was expected to become a $ 1 billion industry by 2005, employing around 10 million people. Further, ancillary industries like dubbing, editing, sound recording, web designing, web-casting, merchandising and promotion were expected to flourish as well.

The government was reported to be working towards developing a comprehensive legal structure for insuring all kinds of movies along with institutes like National Film Development Corporation (NFDC)^[5] and Film & Television Institute of India (FTII)^[6]. This was expected to go a long way in opening up the film finance sector. With transparent accounting practices and assured adherence to targets and time-schedules, a buoyant and flourishing film insurance industry in the country seemed all set to become a reality.

QUESTIONS FOR DISCUSSION:

1. The US film industry had begun insuring films in the era of silent movies itself. Why do you think the Indian film industry waited till the 1990s to adopt this practice?

2. Do you think the highly unorganized film industry would be able to transform itself to a corporate setup? What steps need to be taken by the industry as well as the government to ensure that the film insurance business becomes a success in India?

ADDITIONAL READINGS & REFERENCES

1. Chatterjee Dev & Deosthalee Deepa, Foreign insurance cos won't dance to Subhash Ghai's Taal, Indian Express, December 30, 1998.
2. Shyamal, Aishwarya's Fall costs 35 Lakhs, www.chalocinema.com, June 2000.
3. Jha Neeraj, The FE think-tank: Entertainment industry, Financial Express, August 27, 2000.
4. Gopalan Krishna, Ghai insures Yaadein for Rs 14 crore, Financial Express, November 27, 2000.
5. Real life, reel woes, Business World, January 15, 2001.
6. Sampat Jay, Insurance ke Liye Kuch Bhi Kareega, www.indiainfoline.com, June 18, 2001.
7. Insurance companies swing to a new Taal, Business Line, July 10, 2001.
8. Ramnani Vandana, The Beat of Passion - Film Insurance First in India, Business Standard.
9. Sampat Jay, A Script for Yashwant Sinha, www.indiainfoline.com.
10. www.indiainfoline.com

^[4] IDBI and IFCI are development finance institutions.

^[5] The National Film Development Corporation Limited (NFDC) is involved in the production and export of Indian films, import of foreign films, import and distribution of raw stock, construction of cinema theatres and development of technology.

^[6] The Film & Television Institute of India is one of Asia's premier film schools, offering courses in editing, motion picture photography, audiography, production management, and art direction.

2010, ICMR (IBS Center for Management Research).All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means - electronic or mechanical, without permission.

To order copies, call +91- 8417- 236667 or write to ICMR,
Survey No. 156/157, Dontanapalli Village, Shankerpalli Mandal,
Ranga Reddy District,
Hyderabad-501504. Andhra Pradesh, INDIA. Mob: +91- 9640901313, Ph: +91- 8417- 236667,
Fax: +91- 8417- 236668
E-mail: info@icmrindia.org
Website: www.icmrindia.org