When the Indian delegation walked the red carpet at the Cannes’ Marche Du Film, representing India as its first ‘Country of Honour’, it was a historic moment for our film industry. A much-awaited and long overdue recognition for the Indian film industry , which produces more than 1,500 movies every year in over 20 languages — the highest in the world.
This is a sector that has immense potential for fulfilling the aspirations of young India. So, the success of this industry at the international level is important for India. The South Korean film industry has also passed through a similar phase and may have important learnings for India.
‘Hallyu’, which means ‘the Korean wave’, is a term generally referred to showcase the international dominance of South Korean films. Before 2000, there was hardly any movies from Korea in international film festivals. But since then, there has been a complete turnaround. What led to the success of Korean films?
During the 1980s, Korean film producers were rent seekers from import quotas and hence were not efficient. The Korean film industry took off after the elimination of import quotas in 1986. The 1990s were completely different and had seen intense competition from foreign companies in the Korean market. This compelled Korean film producers to increase their efficiency and productive capacity. While this saw the number of films produced per year reduce over the years, the box-office revenue increased.
Big conglomerates such as Samsung, Daewoo and Hyundai, called ‘chaebols’ in Korea, invested in the Korean film industry and played a major role in its success. Companies were recognised as leading actors both in the production and exhibition of films, thereby encouraging vertical integration in the Korean film industry.
On the other hand, the government used the subsidies in a limited and prudent manner — that is, only for small and medium sized companies. And the subsidies were limited to movie production and not to cinemas or multiplexes.
Korea also invested in the technological upgradation of its film industry. Film studios actively collaborated with film schools and brought technology and instruments to provide training to the film crew and technicians. As a result, Korean film schools became the best in the world.
Korea is a classic example of balance and cooperation between government interests as cultural protector and private companies. Korea followed two complementary policies, a pro-competition policy with prudent use of subsidies and few excessively restrictive domestic regulations.
Apart from the learnings from the Korean experiences, the following aspects also require attention to increase the international recognition and revenue of Indian films.
The number of films produced in a year could be a misleading indicator for measuring the growth and success of a film industry. Rather, box-office revenue per film is the right indicator as it shows the commercial success and profit of the films. Though India is the largest producer of the films, the box-office revenue per film is still low.
The US and Canada produce around 700 films a year, less than half of Indian films, but together generate around $11 billion in gross box office realisations as against less than $4 billion by Indian films. This implies that many of India films may not be able to break-even or earn very less profit.
Coproduction agreements are important for the growth of the film industry. These agreements allow cultural diversity in the films, ensure larger market size for film distribution, and provides for sharing of costs. Thus, it is a win-win for countries entering into such agreements.
India has signed bilateral cooperation agreements with a number of countries such as Brazil, Canada, China, Germany, France, Italy, Korea, New Zealand, the UK, etc. However, use of such agreements for film shooting in India seems to be low.
Therefore, the reasons for low uptake of these agreements should be identified. Some of these agreements have been signed more than 10 years ago. A revision in these agreements may be required in view of technological advancements and new medium of entertainment, such as OTT platforms.
Services related with film production and distribution are subject to trade negotiations in the WTO and free trade agreements (FTAs). Some of these services, such as post-production services, editing and sound recording, etc., are of significant interest to India. These services can be provided in India at cost-effective rates with a talent pool and modern studio facilities.
India should seek ambitious liberalisation commitments for these services in its FTAs that are under negotiations. Most of the developed countries, including Canada, the EU and the UK, are generally averse to taking binding commitments for liberalising their audio-visual services and have kept these services out of the scope of trade negotiations in their recent FTAs. Therefore, getting commitments by these countries in the ongoing FTA negotiations for film production and distribution-related services would be a challenge.
The government is keen on making India a ‘content and post production hub’ of the world. It has announced a number of incentives for increasing film shooting and production in India. These will certainly help the domestic film industry to grow fast. But, not to forget, movies are ‘experience goods’ and hence both attractiveness and quality are important to make a mark at the world stage.
The writer is Policy Leader Fellow, European University Institute, Florence, and Associate Professor, Centre for WTO Studies, IIFT, New Delhi.