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Experts also opine that rather than critically affecting the industry, perchance the economic downturn has simply affected the unnecessary hype and hoopla that had previously surrounded Bollywood for the last few years. But Rakesh Sippy of Raksha Distributors provides a different spin altogether, saying films and actors in the current economic climate are in fact ‘right priced’ rather than being illogically overpriced, as they had been earlier. And he holds private corporations the accused for the previous overpricing. “Corporates were paying much more to actors than they actually deserved,” he puts forth, adding that when the going was good, the deals kept being signed, but when the going went bad, these corporations, for whom the movie business was ‘just another division in their company’, simply stopped investing to save money for their other divisions.

Interestingly, well entrenched film producer and director Mahesh Bhatt supports Sippy’s spin, “The recent architects of the new Bollywood, the corporate houses, relied more on share market funds to fund projects. Thus, the moment downturn struck – and markets went down – they are facing graver situation [than what traditional filmmakers are facing].” Due to this, industry veterans do forecast that some more projects could go on hold in coming few months. But another seasoned player, Shubho Shekhar Bhattacharjee, CEO of Planman Motion Pictures (producer of Mithya, The Last Lear...), disagrees and feels that most decisions to hold projects is not because of lack of funds. “It’s mostly panic driven. People have funds but because of the dampening of the mood in the industry, they are sitting on the funds and taking a cautious approach.”

It is a fact that theatrical revenues have taken a big hit in the past months. Statistically, here too one cannot plainly blame the slowdown, as a significant part of the downfall occurred during the weeks of the terror attacks (even during Raj Thackeray’s followers’ unlettered attacks or during other preceding blasts). As per Sanjay Mehta, arguably the biggest distributor in New Delhi, occupancies in the Delhi territory alone fell by 50% post each terror attack. In fact, even satellite revenues (which contribute up to 30% of gross collections) could be hit up to 50%. This is considerable given the fact that movies do consider satellite territories important. Consider this – Welcome got Rs. 12 crores and Singh is Kinng got Rs.16 crores by selling satellite rights. Moreover, satellite rights were sold pre-release for a lot of movies. The Aamir Khan starrer Ghajini’s satellite rights were sold in early 2008 for a whopping Rs. 22 crores. No such deals are happening now. Most of the recently released films like Dostana, Yuvraaj, Golmal Returns et al have not been able to bag a satellite deal yet. Planman Motion Pictures’ Bhattacharjee explains, “Even the satellite deals that are happening now are for very low prices. A movie, which would have earlier got a crore or two, is being sold for Rs.50-60 lakhs.” Renowned film producer Pritish Nandy adds, “The reason no satellite deal has happened for past two-three months is the absurdly low rates that the channels are putting up for the films. No filmmaker can afford to sell at those rates. The channels are going through a bad time with pressures on revenues from advertising.” And the result? Film producer Vipul Shah asserts to us, “I do feel that a family, which was watching almost five, even six films a month, will watch a maximum of only two now; and even that pretty selectively.”

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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After years of recording gravity-defying growth, auto majors in India are finally feeling the heat.

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For long now, India and Indians have debated over the repercussions of ever-increasing oil prices. There were two wheelers and four wheelers rolled out of the assembly lines all across the country and auto financers were running after prospective ‘drivers’ and ‘riders’, everywhere… Cheap funds, cheap bikes, cheaper cars (with that ‘interest’ string attached), but ‘expensive’ oil! That was the buzz around, and India was worried (and so were the Americans, of course!). It felt like wartime, with guns but no bullets, with automobile engines all around but perhaps no oil to vroom around! And the financials of the auto majors? Oh! They stood tall and pretty, prouder than bearing the ‘seal of the eagle’! Happy Capitalism was the dream word, but no more a reverie!

Then came the turmoil, and happy faces soon faded into the background; many of them belonging to the automaker community. And 4Ps B&M spoke, last issue (dated November 7 – November 20, 2008) through its cover feature titled, ‘Bechara Bajaj’ commenting on the deplorable 34% fall in sales figures (in units) reported for October 2008 as compared to the same month the previous year. We thought, it was just the ailing Bajaj (and hence ‘Bechara’) that was getting its pockets ripped apart by the recessionary jackals. But then came some more shockers – Hero Honda and TVS, the other two two-wheeler players also reported a fall in sales units over the previous year. And if that wasn’t enough to convince us all of the melancholic environment in their factories, the Society of Indian Automobile Manufacturers (SIAM) disclosed that sales figures for the entire auto industry (including the four wheeler giants) had plummeted by a 14.2% during the month of October 2008 (compared to the previous year). That meant a reduction in monthly sales by 145,817 units for the industry! And suddenly, it feels like the war times are back, with no guns available this time… Yes, oil prices have stabilized globally and there is good news everywhere when it comes to this ‘liquid gold’ at the moment. But there are cut downs reported all across the sector with players announcing reduction in production volumes… No engines, but oil… no guns, just bullets!!!

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Cartels are the most pernicious of anti-competitive practices!

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PRADEEP MEHTA, SECRETARY GENERAL, CUTS CENTRE FOR INTERNATIONAL TRADE, ECONOMICS AND ENVIRONMENT

"Cartels don’t only relate to price fixing, but also division of business, territory, restriction on output..."

Which are the sectors in India where cartels exist or may be in process of coming into being?
Airlines, banks (setting of bank charges and interest rates on savings A/Cs), cement and telecom sectors have come under the scanner for cartelisation in India more recently. Also, collusion has often been found in a number of government procurements, for example in construction activity. Most of these cartels work under guise of trade associations. In cases abroad, even trade associations have been charged for aiding and abetting collusion.

What is the impact of cartels in an industry and economy?
Cartels are considered the most pernicious of anti-competitive practices. In many jurisdictions cartelisation or collusion is treated as a criminal activity under the law. While companies have paid heavy fines, senior executives have even undergone jail sentences. Besides, cartels don’t only relate to price fixing but also division of business, territory, restriction on output, et al. They can create barriers to new entrants and non members to the cartel agreement.

Any efforts to quash cartelisation?
A recent example is in the cement sector where the MRTPC passed cease and desist orders on some old enquiries. The recent alliance between Jet and Kingfisher in the airline industry is being analysed from the perspective that it maybe a cartel. Few months ago the private airlines had got together to set up the Federation of Indian Airlines and proposed benchmarks for fares, but the low cost airlines fell out.

Are there steel cartels too?
I do not see any signs of cartelisation in the steel industry. Prices went up phenomenally due to high demand, which resulted from high economic growth.

The likely impact of the Jet-Kingfisher alliance on the industry?
The possibility of price fixing is very high and most likely to happen. The flip side is that if these airlines do not cooperate on prices then they would operate in a dirty way and hurt themselves badly. They may even shut down, thus affecting the whole economy.

Would you consider this the end of the low-cost regime in Indian skies?
The low cost regime will stand on its own and not relate to these major players. However, if the major players raise their prices, then smaller/low cost players will also raise prices.

Which are the international cartels operating in India and what is their impact on consumers and economy?

Very little work has been done to find out the impact of international cartels on India. One study done by Evenett on the impact of an international cartel in vitamins did show a cost of about $25 million on India. CUTS had moved the MRTPC to investigate the matter but they did not bother to do anything. Another recent case of airlines fixing prices on cargo rates across the transatlantic route and elsewhere has also had an impact on India, for both exports and imports. But nothing has been done. Perhaps there is no appreciation of facts. One hopes that the new Competition Commission of India will do something when it comes into action, as it has extra territorial jurisdiction powers.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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“Private labels will rule the retail world”

PAUL MARTIN, GLOBAL SALES MANAGER, PLANET RETAIL

Recently, an interesting thing happened in the UK retail market. Tesco, regarded as the worldwide pioneer of own brand private labels, suddenly started introducing ‘phantom’ private label brands in its stores. For the first time, Tesco was abandoning its policy of only offering own labels under its own name. The move is important as Tesco has been at the vanguard of the three-tier private label strategy (‘good, better and best’ approach) which is now adopted by most of the world’s leading grocers.

This surely indicates that the growing power of retailers across the globe and their growing focus on private labels, which offer higher margins and a point of difference over rivals, means that private labels are becoming increasingly important in almost every market. In fact, in developed markets, private labels are moving beyond their original price and functional benefits, to more sophisticated tools for promoting retailers’ ethical credentials. Private labels generally need a highly developed retail environment to succeed with high levels of concentration, consumer trust in retailers and the presence of international players. For these reasons, the share of private labels is highest in Europe, where private label penetration has reached 53% in Switzerland. In contrast, the private label share in a fragmented market such as China is under 5%.

In immature retail markets, penetration of private labels tends to be generally lower. This is due to the fact that retail markets are usually quite fragmented, consisting of a large number of smaller retailers where price competition is less intense. Smaller retailers also generally have less control over the supply chain. Having a grip on the supply chain is an important requirement for launching private labels.

So keeping all these in mind, launch of phantom is a nice strategic move by Tesco. However, it remains to be seen how consumers will react. Will they be happy to see more variety or will they be even more confused now?

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

Kamal Gianchandani

IIPM Ranked No. 1 B-School In Global Exposre - Zee...

Kamal Gianchandani: on the other hand, is the man who micro-retails film content – via stores, online, home delivery service – under ADA’s youngest venture (four months old to be precise) Bigflix. Gianchandani, an MBA from Pune University and another former PVR Pictures employee, believes that Bigflix is a result of the “group’s vision to have comprehensive presence in filmed and non-filmed entertainment sector.” His total focus these days is on tapping the home entertainment market in India, which he believes is largely untapped. Sample this: Unlike in India, where theatrical revenues account for 67% of a studio’s revenues, domestic theatrical revenues account for only 18% for Hollywood studios. With growing relevance of alternate revenue streams like telecast rights, home and mobile entertainment, the share of theatres in media consumption is likely to stagnate. When that happens, Bigflix will be ready to net in the moolah. Gianchandani plans to spend a cool Rs.25 crore to build the brand Bigflix in this financial year and says that “over 40-50% of (his) time is spent on increasing numbers (adding more customers and clients) and the balance 50% time is spent on identifying gaps in service and improving them.” For now, the company is busy packaging its latest offering, of allowing users to download movies through their set top boxes for viewing.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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