Bollywood Takes on Hollywood

Ronnie Screwvala is the front runner in the race to become Bollywood's Jack Warner—the man who transformed parochial American cinema into its modern global form. Yet Screwvala is rarely picked out of a crowd in India, let alone in the United States. Still, Hollywood insiders know him well for producing the "The Namesake," the groundbreaking hit about Indian immigrants, and for coproducing a Chris Rock comedy ("I Think I Love My Wife"). Now he's coproducing "The Happening," a sci-fi thriller coming out in June starring Mark Wahlberg and directed by M. Night Shyamalan ("The Sixth Sense") that could vault him into the big leagues. With a budget of $57 million, it will cost as much as 10 Indian blockbusters, setting a new bar for Bollywood. "Our ambition is to be a global Indian entertainment company," Screwvala says. "There's no reason we can't make big-budget Hollywood movies too."

At 45, Screwvala is a stocky, soft-spoken man whose urbane colonial English is a far cry from Jack Warner's bluster. But his innovations are putting his Mumbai-based company, UTV Software Communications, on the world cinematic map as well as setting the standard of studio efficiency in Bollywood in the way Warner did in Hollywood. Screwvala's multimedia conglomerate, which is listed on the Bombay market exchange with a market capitalization of $435 million, has interests in film, TV, animation and videogame production and distribution—it's the closest thing to the diversified Warner Bros. that India has ever seen.

Over the past five years Screwvala has led the transformation of India's prolific but chaotic film industry. India makes about 1,000 movies a year, including Bollywood's 200-odd Hindi pictures and others in regional languages—about 10 times Hollywood's total. But until recently, every Bollywood movie was an independent film made by a producer-director who ran his operation like a mom-and-pop shop. Deals were cut off the books between film families. Marketing was left to theater owners. And writers scripted scenes on the day of shooting, following stock formulas: brothers separated at birth, village rebel vs. rapacious landlord or cops vs. robbers. It was considered the height of innovation simply to meld these elements, creating, say, a story about brothers separated at birth who grow up on opposite sides of the law but then ultimately join forces against an evil landlord after much singing, dancing and weeping.

In its heyday, from the 1950s through the early 1980s, Bollywood managed to pack cinemas throughout this movie-crazy country with such fare. But its formulaic plots grew stale at just about the time that TV penetrated middle-class homes. Film revenues stagnated between 1985 and 2000 at about $1 billion annually—less than one third the box office of a single major Hollywood studio. India's poverty and low ticket prices started making foreign markets alluring. But Bollywood couldn't produce a global hit.

That may finally be changing. Indians are getting wealthier. The younger generation is spending more on entertainment. And innovators like Screwvala have begun professionalizing the business, bringing in outside investors and accounting standards as well as aggressively marketing films with novel plots. His production company has cut the old three-and-a-half-hour marathons to between 90 and 120 minutes and has hired Hollywood scriptwriters to make its features more watchable. He's also gone straight to foreign shores—backing Mira Nair's New York-based production of "The Namesake," a story about the Indian diaspora—to prove that his model will work. The film grossed about $14 million at the box office—nearly 95 percent from the United States, more cash than any other Indian production has earned abroad to date.

Indian movies are also enjoying an impressive domestic boom. In 2006, India's film business grossed about $2 billion, up from $1.5 billion in 2004, and PricewaterhouseCoopers forecasts revenue will leap to more than $4 billion over the next five years. "Our growth rates are much higher than Hollywood's, but in value terms we are way below," says Timmy Kandhari, head of PWC's media and entertainment practice. But that will change as ticket prices—which now average less than $1 in India—catch up with the racing Indian economy.

This anticipated boom has foreign and domestic players scrambling to get in. Disney bought a 15 percent stake in Screwvala's UTV for $14 million in 2006. This year Viacom inked a 50-50 joint venture with budding news-media mogul Raghav Bahl, head of the Indian entertainment conglomerate Network18. The venture, called Viacom18, will produce and distribute TV shows, digital media and, eventually, 10 to 12 movies a year. A separate entity called the Indian Film Co.—in which Network18 and Viacom own stakes—will begin financing about 40 to 45 films a year by 2010. Billionaire Anil Ambani's Reliance ADAG conglomerate has acquired a 51 percent stake in a leading movie company called Adlabs Films for a little less than $90 million. And three Indian studios held IPOs in London this year, raising a combined $220 million.

That's big money in a nation where until recently the average film budget was only about $150,000, and it should dramatically increase the number and quality of Indian films. But very little cash will likely flow into coproductions with Hollywood, an area where Screwvala remains several years ahead of his competitors, most of whom still shy away from big Hollywood gambles. Screwvala is contributing $27 million—more than an Indian hit would gross—to the $57 million budget for Shyamalan's "The Happening." But the returns can be huge: "The Sixth Sense," which cost Shyamalan about $40 million to make, grossed nearly $700 million.

Screwvala has more than one wager in play. UTV has also forged coproduction deals with Fox Searchlight and Sony Pictures, and with Will Smith's Overbrook Entertainment. Hollywood—which requires endless cash injections and has for years been looking for outside funding from sources as diverse as German pensioners and private-equity funds—is only too eager to cut more such deals. These coproductions "are going to become more common," says Jose Rodriguez, Shyamalan's U.S.-based coproducer on "The Happening." "Ronnie is sort of leading the pack."

He's also shaking up Bollywood. Until recently, India's film industry was controlled by a few powerful producer-directors like Yash Chopra, who enjoyed strong family or personal ties to Bollywood's fickle superstars, many of whom were also related. The heads of these "film families" never worked out a budget in advance and started shooting with only a fraction of the cash they needed in hand. Preproduction was a 20-minute meeting. Writers made up the dialogue as they went along. There were no production schedules or contracts; stars walked in and out of projects at whim. With hundreds of local distributors and tens of thousands of theater owners who habitually underreported box-office returns, it was hard to tell who, if anybody, was making money. "Nobody thought of this as a profit-and-loss [business]," says Screwvala. "They thought of it as a cash-flow [business]. So if a producer-director made a movie and it lost $5 million, but he got advances to make his next movie of $5 million, [in his mind] he'd broken even."

UTV, by contrast, went public on the Bombay Stock Exchange in 2005, becoming one of the first listed film companies in India and introducing modern methods. The studio spends as long as two years in preproduction selecting scripts and setting casts, budgets and distribution plans. UTV has also taken control of marketing and raised spending to 25 percent of each film's production costs, nearing the Hollywood average (about 50 percent). And UTV shoots pictures in three months—on budget. To improve collections from the foreign market, UTV has avoided selling the overseas distribution rights to its films and built its own distribution network instead, setting up offices in the United States, Canada, Britain and the United Arab Emirates. Now the company is focusing on turning the 20-odd other countries where Bollywood films have established a niche market into a meaningful part of the business.

Screwvala says he shook things up out of necessity. "I was an outsider," he explains. "I hadn't grown up with these stars and directors." The son of a businessman—his father retired as managing director of a cosmetics firm—he was hardly destined for the movies. But after graduating with a degree in commerce from Mumbai University, he cut his teeth in television. He was the first to launch multichannel TV in India, schlepping around to meet with the residents' associations of Mumbai apartment buildings to sell closed-circuit cable at a time when the only other option was a single, state-owned broadcaster. Later, his company produced India's first daily afternoon soap opera, "Shanti." Working with Disney to dub its library of films into Indian languages in 1996 gave Screwvala the idea to try to create a modern, Western-style film company himself.

With little capital and without the family ties needed to attract big stars, he attacked the industry's fringe first. UTV got into film distribution in 1996, and then in 1997 Screwvala produced a typical low-budget Bollywood romance named "Dil Ke Jharoke Main" ("In the Windows of the Heart"). It bombed, convincing Screwvala of the need to work with a new generation of actors, directors and writers who were willing to experiment.

Hollywood is impressed. James Lassiter, Will Smith's partner in Overbrook Entertainment, says he and Smith "connected" with Screwvala when they met in India last year. "We connected with Ronnie," Lassiter says. "He's more ambitious, he has a global perspective and I think ultimately he'll be a big winner in worldwide cinema." At home, Screwvala has already come a long way. He has crept steadily up the charts to become the second biggest box-office success in Indian film after Yash Raj, which still focuses on romances and big-budget song-and-dance extravaganzas. And Screwvala now takes in more than any of the other big producers from India's film families, many of whom are now scrambling to adopt his basic business model.

The next challenge for Bollywood is to branch out to the broader media and entertainment business, which is expected to grow in India from about $11 billion to $25 billion by 2011. Screwvala is building UTV into what he calls a 360-degree media and entertainment company. He already has ventures in animation, gaming and TV content production, and he has eight to 10 TV channels in the works. UTV's animation division is producing four features for the world market this year, including one starring Smith and another directed by Simi Nallaseth, one of the animators of "Ice Age." Earlier this year, UTV acquired a British videogame company called Ignition Entertainment Ltd. Ignition is set to release WarDevil, a high-end game for the Sony's PS3, in 2008 and hopes to turn it into the linchpin of a multimedia franchise. UTV is also partnering with Richard Branson's Virgin Comics on a line of superheroes based on Indian mythology.

UTV can expect lots of competition, with big Indian media players now seeking out foreign partners. With Viacom's backing and marketing muscle, Network18 is also building a media and entertainment empire. Apart from its fast-growing film operation, it is already one of the biggest players in Internet content and TV broadcasting, where it has teamed up with NBC Universal, Time Warner and Viacom. Deep-pocketed Reliance ADA Group, one of India's biggest conglomerates, is going into satellite broadcasting, launching 45 radio stations and recently establishing a second film production company to complement its majority stake in Adlabs.

It's difficult to predict where the dealmaking will end. Hollywood, which has been going global for several decades, now earns more than 60 percent of its revenue abroad. While it's tough to imagine Indian films ever developing as broad a global market, the PricewaterhouseCoopers projections show the ticket sales for Indian productions rising fastest outside India. Meanwhile, Bollywood seems set to continue its development as a financier and marketer of global products—whether created at home or abroad. As the muscle of the new media titans like Screwvala increases, it won't be long before they truly become household names—in India and beyond.

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