Bollywood: Breaking Down the Billions

NISHITHA LINGALA

August 21st, 2018

 

 

Films are more than entertainment. While movies can offer an escape for audiences, this enjoyment has far greater implications beyond entertainment alone. Film industries have a significant influence on society by means of culture and economics. One particular film industry that has been particularly engrained in a country’s development is India’s Bollywood. Though its name may seem like it is a replica of Hollywood, Bollywood’s unique films have fueled rapid growth, making it the largest producer of films in the world as of 2016. Approximately 2.2 billion Bollywood movie tickets are sold annually throughout the country. In 2017, Bollywood grew 27% with an estimated future increase in revenues of 156 to 191 billion rupees by 2021, worth almost $3 billion.

 

Though there are various ways in which Bollywood has contributed to the growth of the Indian economy, the most obvious is through revenues generated by films. While Bollywood has consistently maintained its position among the five largest producers of films worldwide it is not only the quantity of films but the quality of recent Bollywood productions that has contributed to a 27% growth in revenues for the industry. In 2017, for the first time in the history of Bollywood, a total of nine films generated revenues of over 1 billion rupees. Within the broader industry, the top 50 films (ranked in terms of revenues generated) directly contributed to over 98% of net revenues. Although these few films bring substantial revenue, the industry runs the risk of relying on a relatively few number of hit productions. Analysts used to believe that increasing Bollywood revenue was simply a product of the quantity of films produced.  Though significant, 2017’s massive growth is instead primarily a result of improved cinematic and marketing quality of films.

 

Although future outlooks remain positive, uncertainties exist. Current trends show an increase in demand for Bollywood films, however, this may be a result of the unprecedented popularity of films produced in 2017. For example, Bahubali was released in 2017 and was the most expensive film ever to be made in India, costing 1.8 billion rupees. Bahubali, along with the 8 other top films, accounted for the year’s 98% growth in revenues, again risking overdependence on a few films. This uncertainty may stifle potential future investments.

 

Despite these uncertainties, the nature of the industry itself can seemingly ensure continued demand and secured profits. As stated earlier, apart from the financial aspect and the uniqueness of the films released in the Indian film industry, the supposed loyalty of the audiences and stardom of leading actors plays a huge role in securing increasing revenues. This loyalty lays the foundation for stable future demand regardless of the quality of films in coming years. According to the president and chief strategy officer at SRS group (a large scale North Indian cinema chain) Tinku Singh, “there’s a huge fan following for the big Indian stars, and whenever their films hit the screens, people go mad about it … Indian people may be happy to give up their food for a day, but they won’t give up entertainment.” This loyalty secures revenue for each film released. Additionally, the high-value India places on entertainment has helped shape customer loyalty towards films as well as celebrities. Films are viewed through a very personal lens, making watching films in theatres, especially those starring celebrities, a personal commitment rather than a simple form of entertainment. This attitude among Indian consumers ensures their loyalty and gives confidence to producers regarding the future earning potential of Bollywood. Furthermore, loyalty to films and stars provides significant advertising incentives. Karan Anand, the head of relationships at Cox & Kings agrees that “Bollywood has always influenced Indian society in multiple ways in terms of lifestyle, fashion, and travel.” Anand explains, “Bollywood fans always dream of visiting beautiful locations shown in the movies, not only drawing interest but also helping to boost tourism of particular destinations.” This loyalty has a real economic impact. Cox & Kings themselves successfully launched a romantic trail based on locations featured in the Bollywood film Jab Harry Met Sejal. Similarly, another special package tour was designed to Manali, Ladakh, and Amritsar - locations where the film Tubelight was shot.

 

As seen, India’s film industry is not only a leading film industry worldwide but also a significant contributor to the growth of the Indian economy overall. Though some argue the future demand for Bollywood remains uncertain, consumer loyalty has the ability to provide investable stability.

Disclosure:

Investing involves risk, including possible loss of principal. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Opinions reflect the market conditions when written.