How increased FDIs can boost India’s media & entertainment industry

India is among the fastest-growing economies in the world, and a major market for many industries. Owing to enhanced disposable incomes and discretionary spending, the spending patterns focus on media & entertainment (M&E), which is a booming $18.6 billion industry.

The country is also home to one of the top five (largest) film industries in the world. The M&E industry plays a major role in projecting the country’s soft power. Also, dynamic lifestyle patterns have emerged, and the country now has the second-largest number of Internet users. Thanks to the country’s demographic dividend, this number is projected to grow.

These emerging trends are a boon for the M&E industry, and give impetus to aspiring and seasoned foreign investors, including myself. So, how can these huge opportunities be tapped?

FDI in M&E industry

The M&E industry has always been a playground of plenty of content and talent, hence, attracting foreign investors. From Hollywood studios, such as Sony, Fox Studios, Walt Disney or Universal, producing Indian movies, to global streaming platforms generating Indian content, the industry has seen foreign investments across different verticals.

The COVID pandemic has caused a considerable shift in the viewership behaviour of Indian audiences, and led to the transformation of movies from theatres to OTT platforms. Several foreign OTT platforms, such as Amazon Prime Video and Netflix, are producing more local as well as regional content. The takeaway is that these foreign operators are investing more in India, creating employment opportunities and contributing to the economy.

Yet, we are not seeing fundamental changes in the industry. For example, the number of Indian movies released last year was minimal, as compared to the pre-pandemic years. Although producers were only left with the option of releasing their movies through OTT platforms, as lockdown restrictions forced theatres to shut down, the number of movies released through such platforms remained low. This is primarily because of the low penetration of OTT platforms in rural India – a large target audience of the M&E industry, including the film industry.

Therefore, releasing movies via OTT platforms did not lead to desired earnings (read box office), as access to such platforms in rural areas was limited due to factors, such as access to Internet, income, etc. Having said that, the industry can now explore other possible options because the ‘new normal’ appears permanent.

To overcome these obstacles, we need more synergies between digital media, such as OTT platforms, and the M&E industry. So, how can funding help? Here are three techniques adopted from my own personal journey in the M&E industry. Increased financial aid, by funnelling FDI, can help the industry grow.

1) Institutional financing helped scale the industry

Back in the day, movie production was largely financed by wealthy individuals based on personal bonds of guarantee. This, obviously, had its limitations. Investors, who had the money to invest in films, were wary of the way business was being managed.

Earlier, the production was not streamlined and mostly executed as per the preferences of one, or two individuals. Neither bankers nor film insurance providers recognised the film production and business as an industry. This was a major hurdle in the scaling up of the industry.

In the early 2000s, a production house set up by me sought to resolve this problem by introducing completion guarantees so that institutional financial donors, like insurance and banks, could step in and finance production. The initiation of this corporate culture in the film industry streamlined financing and execution of movie production. The practice was embraced by the industry and is widely applied now.

2) Foreign investments target growth factors

Right now, the M&E industry is driven by growth factors, such as local content, technology, etc. Attracting more foreign direct investments (FDIs) will lead to further investments in these growth areas that could unleash the full potential and talent of the industry. This is not a mere assumption. FDIs will, thus, always benefit the industry through transfer of technology and other resources. Let me walk you through an example of how targeted tech investments solved the quagmire of film distribution in India.

Film distribution and exhibition in India was very primitive, and a logistical nightmare. Multiple film rolls had to be printed, which in itself was a cumbersome and expensive process, and then transported to different theatres across India. It was not economical to distribute, or exhibit movies in this traditional way.

While setting up an uplink facility in Singapore for the Sony joint venture (JV), I chanced upon the idea of digital distribution of movies via satellites. In 2006, Cinemeta, a company owned by me, invested in a digital print of a movie that was to be uplinked to a satellite and then downlinked to numerous local theatres with dishes. Cinemeta was a chain of 35 local movie theatres. This was the initial form of multiplex in India.

We bypassed the tedious logistics behind producing and transporting individual prints to different parts of India. Similarly, investments targeted at such growth areas will help the industry overcome any challenges thrown its way by the pandemic.

3) Overcoming current crisis

As a foreign investor who founded Spuul, one of India’s first streaming platforms, and realised the full potential of such platforms, I can safely say that the M&E industry can tap into even more growth opportunities on digital media. It is a broad spectrum of media, including streaming platforms, gaming, video-sharing and content discovery platforms, digital commerce, etc.

The M&E industry, worldwide, has been left in limbo since the pandemic. While the way forward is still not clear, one clear way to overcome this challenge is by cementing the relations between Indian and foreign digital media industries, which can be facilitated through FDIs. In fact, if we look closely enough at the current OTT growth in India, it is a result of such collaboration between foreign digital media companies and the Indian M&E industry.

The M&E industry is going through a transformative phase. While it is exciting to see new business models taking shape, it is also disheartening to see many film technicians, junior artistes and back-office staff lose their livelihoods during the pandemic. We are not privy to the extent of the impact that this pandemic has had on this revenue-driven sector. Securing more FDIs is, therefore, important.

(The author is an industry veteran, with over two decades of experience in the Indian film and media industry. He was one of the founder directors of Sony television channel in India. A Singapore-based investor, he founded Spuul – an OTT streaming platform – in 2010.)