FOR Bollywood, 2007 was a remarkable year, and also saw the start of a new era of professionalism and corporatisation. The dramatic transformation of Bollywood sees a strong parallel in similar changes that have happened in the Indian real estate industry in recent years.

Both Bollywood and the real estate sector have for decades been in the clutch of unprofessional managers, starved of funds, deprived of the latest technologies, and some of the players maintaining shady links to the underworld. But both these sectors have managed to transform themselves of late, thanks to measures initiated by the government to reform the sectors.

As in the real estate industry, Bollywood has started attracting funds from international firms. Technology is also transforming the Hindi film industry, while professional managers are bringing a sea-change in the way films are made, marketed and distributed.

Bollywood, which churns out 200 movies a year, is undoubtedly one of India’s most prominent brands internationally. Thanks to the infusion of new funds and technology, it is now set to reap huge benefits.

The Hindi film industry has already attracted the big Hollywood studios, including Sony Pictures Entertainment, Viacom (Paramount Pictures) and Disney. Private equity funds have started pouring millions of dollars into production companies, helping them churn out stuff for a burgeoning market hungry for new films.

Sony Pictures became the first Hollywood studio to launch a Hindi movie, when it released ‘Saawariya,’ in November. The film, despite heavy marketing, wasn’t a blockbuster, but Sony made a handsome profit on its investment. It grossed nearly $20 million, on an investment of just around $10 million.

Importantly, Sony tied up with several marketing firms, pushing the ‘Saawariya’ brand; it signed a deal with the Future group – which runs a chain of retail outlets – for $2.5 million, introducing special merchandise across India. It signed marketing deals with Sony Ericsson, Citibank, Lotte India and Airtel for promoting the brand, fetching it over three-quarters of a million dollar in each deal.

The Sony-promoted ‘Saawariya,’ was one of the first films to realise the potential for marketing tie-ups. Another big-budget film that was released simultaneously, Shah Rukh Khan’s Om Shanti Om – which did rather well at the box-office – also had tie-ups with Shopper’s Shop, a leading retail chain.

While the film cost around $7.5 million, overseas distribution rights alone fetched it $20 million. The superstar’s film production company,

Red Chillies Entertainment, also managed to raise another $6 million by selling music, DVD and satellite TV rights.

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BOLLYWOOD, according to industry sources, did exceedingly well in 2007, notching profits of over $100 million. According to a report prepared by international consultancy Price water house Coopers, for the Federation of Indian Chambers of Commerce and Industry (FICCI), the Indian film industry – which besides Bollywood, includes several regional centres, especially in the southern states – churns out films worth over $2.1 billion every year.

The film industry is expected to grow at a rapid clip, clocking in 16 per cent compounded annual growth rate (CAGR) over the next few years. It is estimated to almost touch the $4.5 billion mark in just three years.

Much of the growth will be fuelled by digitisation, the setting up of new multiplex cinemas, and the growing demand for films from the 25 million-strong expatriate Indian community living around the globe. Increasingly, many Bollywood filmmakers are coming out with films that appeal to a wider audience, including NRIs living in the US, Europe and the Gulf. Not surprisingly, these films – made at relatively low costs – turned out huge profits for the producers. In 2007, for instance, the most successful hits were low-cost films, including ‘Bheja Fry,’ ‘Chak De,’ ‘Jab We Met,’ and Aamir Khan’s new release, ‘Taare Zameen Par.’

Digitisation is gaining credence, as producers realise that it not only helps cut costs, but is also an effective anti-piracy tool. Copying scores of prints and sending them to different distributors across the country is an expensive proposition. Copying just one print costs Rs60,000, whereas in digitisation the cost is slashed to a mere Rs5,000.

Simultaneous, including international, release is possible thanks to digitisation, ensuring maximum reach – and revenues – in the first couple of weeks. According to estimates, there will be about 2,000 digital screens in India over the next three years.

India is also emerging as a major entertainment hub, with excellent production facilities, an enormous pool of talented actors, artistes (including musicians and dancers), technicians, and filmmakers, besides a growing number of sophisticated studios and outdoor facilities.

The Ramoji Film City in Hyderabad, for instance, has emerged as one of the world’s largest film production studios. The 2,000-acre complex on the outskirts of Hyderabad includes hills, valleys and lakes. The smaller, state-owned Film City in Mumbai’s Goregaon suburb is now facing stiff competition from private studios.

The Ramoji Film City – it is controlled by the Eenadu group, which has a chain of television networks and newspapers – has attracted global attention. Leading international private equity group, Blackstone, is keen on investing $275 million in Ushodaya Enterprises, which owns the Ramoji Film City.

The Indian government has, however, not yet cleared the proposal for infusion of $465 million in foreign funding into the company; besides Blackstone, the group was keen on roping in international banks.

Malaysia’s Limkokwing University of Creative Technology is also planning a tie-up with the Ramoji Film City. Tan Sri Lim Kok Wing, the university’s president, met Ramoji Rao in Hyderabad recently, seeking joint productions and also training for its students in the art of making movies. The Ramoji studio can ensure simultaneous shooting of 50 films, and also has the latest in post-production facilities.

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THE Blackstone group is not the only international private equity (PE) fund that is eager to enter the Indian entertainment space. PE firms like 3i, Cisco and Oman International Fund have invested $140 million in Nimbus Communications, another entertainment and film production firm.

Other production companies like Shemaroo Entertainment (which made ‘Omkara’), Shree Ashtavinayak Cinevision (‘Jab We Met’), Percept Picture Company, Venus Movies and even Adlabs are looking out for PE funding. Many are already in negotiations with leading PE funds. Shemaroo, for instance, plans to raise $50 million over the next few months for funding its ambitious plans to produce several films.

According to a company spokesman, the production house will look at PE funds as well, to fund its production and distribution plans.

Production companies are also raising funds through foreign currency convertible bonds and also going in for listing at London’s Alternative Investment Market (AIM). The Indian Film Company – which is owned by Viacom and Raghav Bahl, a television entrepreneur – has also listed its film investment fund in the AIM.

Many Indian real estate firms have opted for listing at the AIM in London, as the process of getting listed is relatively easy, unlike in major stock markets.

Funding Bollywood productions has undergone dramatic changes in recent years. Traditionally, films were financed by the producer – raising his own funds, or borrowing from friends – distributors and private film financiers. But growing professionalism and corporatisation in Bollywood have also transformed the funding scenario.

Increasingly, producers now borrow funds from banks and financial institutions, raise money through initial public offers (IPOs), or approach venture capital and PE funds.

With big money flowing into Bollywood, filmmakers would no longer have to worry about funding their projects, and should be able to concentrate on making better flicks for the growing audience worldwide.