Manash P. Goswami

Wikipedia defines a low-budget film as “a motion picture shot on limited budget”. It says that young or unknown directors often make low-budget films due to a lack of funding from studios that are not willing to invest in a film which appears unlikely to become successful. However, Bollywood (Hindi film industry) famous for its penchant for melodrama and cliché has twisted this definition for good measure.

Low-budget films are no longer the experimenting ground for beginners to prove their mettle in the industry, even industry veterans like Subhash Ghai has turned to the low-budget theme with films like Jogger's Park and Iqbal teaming up with directors like Anant Balani (late) and Nagesh Kukunoor. The rise of low cost model is fast turning out to be a game-changer in Bollywood known for its opulence and larger than life images.

Portfolio Approach

The economics of the new game isn’t hard to understand. Subhash Ghai-owned Mukta Arts, which was listed in 2000, is answerable to its shareholders. So, the management is eager to hedge bets and not put all money on one big blockbuster. They have taken a portfolio approach to movie-making and included small, medium and big-budget films in their plans. Recent trends reflect the high success rate of low-budget films. And even if they fail, risks can be mitigated due to their low costs.

Data Source: ibosnetwork.com

Affected by the economic slowdown and megaflops, Bollywood’s dream merchants are now playing safe and adopting sure-shot winning formulas. They are well aware of the fact that 96 per cent of the big-budget movies made in the last few years have sunk without a trace. Moreover, Khans (Shah Rukh, Amir, Salman), Kapoors (Mainly Kareena) and Bachchans (Amitabh, Abhishek and Aishwarya) charge a bomb (around US$ 2 million) for a movie. Thus, film making was becoming a risky proposition for many.

To counter the box office failures, film-makers have recently started accepting the ‘small is bountiful’ strategy that costs a film anywhere between Rs 1 crore and Rs 5 crore. Many of these films target niche audience in the metros. Some film-makers have gone even further by making ‘crossover’ movies in English targeted at affluent urban and NRI audiences.

Despite the success of Kaante, Pritish Nandy Communications (PNC) is not attempting another mega movie. Rather, the company has lined up a few low-budget crossover films. In line with Mukta Arts and PNC, Metalight Productions - which made its mark with Satta – is shooting a few low-budget films that cost less than Rs 5 crore each. Also following the trend is Channel Nine Entertainment’s Sunil Muthreja, who is reported to be making films for less than Rs 1 crore.

Cut the crap

Low-budget films have more chances of bringing higher benefits for distributors. Companies like Metalight have the choice of making one megamovie for Rs 15 crore or producing three with the same money. From a financial point of view, even if one of the small-budget films becomes a hit, the job is accomplished and the risks are spread out. Moreover, distributors are happy with this structure: if one of the movies flops, Metalight can make up for it by offering a second at a discount. Distributors say that at least 90 per cent of small films give them good returns compared to medium or big-budget films that give them at best 50 per cent.

The encouraging cost-revenue ratio of low-budget films is changing the entire structure of the industry. It has opened new avenues for companies like Percept, which is basically an advertising and event management company, to venture into movies. Its children’s film Makdee that was made for under Rs 1 crore was a hit. Percept realised that no films for children had been made in the last year and two in India before they made Makdee and market size of this segment could not be ignored.

The economics of making a small-budget movie is entirely different from those of megamovies. To reduce costs, producers also hire equipment and services in a combined deal. Metalight, for instance, produces three films in a row so that it can save costs. That way it saves 15-20 per cent in overhead. Sometimes, they even recycle the sets, while others use fewer films during shoots, spending more time at the pre-production stage, conducting workshops with the actors to avoid any kind of on-shoot mistakes, etc.

Incremental revenue

The battle among TV channels for small screen rights of movies is helping moviemakers. They are forking out anywhere between Rs 5 lakh and Rs 30 lakh even for small-budget films. For instance, Percept sold the TV rights of Makdee to Zee and collected nearly 30 per cent of the film’s costs from the deal. Many producers believe that even a moderate run in halls combined with earnings from small screen rights and the international circuit will rake in reasonable profits for a low-budget film.

The international circuit is also keen on movies with middle-class themes. Channel Nine Entertainment, which produced and distributed films like American Desi and Freaky Chakra, recovered over 70 per cent of their costs from overseas and satellite rights. Even low-budget film-makers are tapping new markets, including non-English speaking countries. A dubbed version of Mr and Mrs Iyer was sold in Italy for around $20,000.

Picture abhi baaki hai…

Many say that low-budget films that receive a lot of publicity and critical acclaim do not necessarily bring in business. Some even argue that making small films has more risks than putting money on a megamovie. They say that getting financial support for low-budget films is tough and they can’t be pre-sold. So if it fails, the producer is down under.

However, looking at the trend, the message is loud and clear that it is wise to think ‘small’ sometimes. In the present volatile market and changing audience profiles, film producers have adopted calculative approaches to achieve a decent performance at the box-office. This is why the opportunities are growing.

Indiabiznews, December 24, 2009

Manash P. Goswami teaches marketing and advertising at Guru Gobind Singh Indraprastha University, New Delhi.