Hyderabad
November 24, 2008

Using the 80:20 principle – we can safely say that the big-budget films form the industry's backbone as most of the commerce is through these films. Its understood and acknowledged that 'small budget' films are equally essential to the industry. Many of the classics of telugu cinema, where 'small' when they released. Many of the biggest names in the industry today – technicians and actor got their 'big break' from this form of filmmaking. This article – is more about the economics of these films, rather than their creative importance. Until recently for many years small budget movies – the ones made under a budget of 2 crores have not achieved major success. While there were hits, none of them were ground-breaking.

The earlier scene: In 2000, Chitram by Teja was made on a shoe-string budget of about 50 lakh and went on to collect 8 crores are 'net revenues'. Bettering that was 2001's Nuvve Kavali which was made on a meager budget of less than 2 crores, went on to gross over 20 crores – making it one of the most profitable films if one had to calculate RoI (return on investment). 6 Teens was another low-budget sex comedy which had superhit music, youngsters with raging hormones, eye candy and went on to gross over 5 crores. This set off a trend of 'youth movies' in telugu films – where filmmakers constantly dished out movies with similar storylines hoping into the cash on the success of the above films. Some succeeded, while most failed and the point came when the audience was fed up of it and the genre was sidelined completely.

There were many small movies through 2002-2007 in telugu films that tasted success such as Show, Missamma, Aithe, Anand, A film by Arvind, Vennela and Pellaina Kotthalo. And then there were the mid-budget films such as Jayam, Pellam Vurelithe, Manasantha Nuvve, Itlu Sravani Subramanyam, Dongodu, Kabaddi Kabaddi, Nuvve Nuvve which steadily supplied the industry with hits. But none of them were ground-breaking or could repeat the magic of Nuvve Kavali.

The 'Happy Days' effect: But one film that totally changed the scenario – making everybody sit up and notice small budget films. It was Happy Days. Suddenly, small is in vogue. Everybody is making such films. Technically that movie was made for a little above 2 crores, but that can be excused. The film had an unknown cast, new music director, abused theme of campus romance and director who tasted only moderate success. But that film went on to become one of the biggest hits of 2007 making instant stars out of all the people associated with the film – the huge ensemble of actors right from the lead to the character artistes, the music director Mickey J Myers and director Shekar Kammula who is now seen as a brand name.

The movie got industry counterparts in Chennai and Bombay also talking about it. Its now being remade in tamil and Bollywood. But one feat only Happy Days can boast amongst all small movies is - its blockbuster run in the overseas boxoffice. It crossed the collections of super hits of A-list stars such as Chiranjeevi, Mahesh Babu and Pawan Kalyan! Yes, it did. Happy Days for sure isn't the 'father of small budget films' but sure did revive people's interests in making such films. And its success is used as a benchmark to measure the success of other films of this league. Unlike the last time luckily, the industry this time seems to have learnt its lesson. They're not churning out Happy Days clones, but testing subjects from different genre such as thriller, horror, comedies and love stories, ofcourse.

Small films are next big thing: Today most people in the industry – big and small want to make a 'small budget film' with a sub 2-crore budget. It's not the challenge of telling an interesting story with minimum resources that excites most of these filmmakers, but the economics behind it.

The inflation in production cost from 2000 to now is marginal – while revenues have increased multiple-fold. The inflation is again due to external factors such as higher labour wages, rise in real estate, petrol etc., But pure production material such as raw stock, studio rent, equipment have remained in the same price bracket. Raw stock still costs Rs 10,000 for 1000 feet (which equals 10 mins footage). A small film use about 40-50,000 feet of raw stock. The cost for a single print is still about Rs 50,000 for a 150 minutes film. Rents for studios are between Rs 7,000 per day to Rs 20,000 depending on the location & sound-stage size. Shooting permissions in municipal places such as roads, parks remain almost the same as before. Same is the case for rents for real-life houses, offices, colleges to be used in films. Likewise a lot of other costs have remained in the same price range as before.

Filmmakers who have shot their film completely on digital, ie : HD camera such as Viper, Sony CineAlta or Red One have cut down their costs by a half by shifting from film. The whole process of scanning the footage for editing, dubbing, scoring background score, sound effects, mixing and then printing back onto film becomes simplified if a film is shot on HD. Unlike bigger films, a small budget unit size is smaller – where people handle multiple functions which help cut costs further. Films like Cell, Grahanam, Black & White were completed under Rs 50 lakh budget with a minimum crew and less than 40 days of shooting. Films like Chitram, Allari, Premiste (tamil dubbed) were completed in a budget less than a crore. The recent boxoffice superhit – Ashta Chamma was completed within a budget of Rs 1.5 crore. The movie recovered its total production cost even before release by 'pre-selling' its television rights and ancillary. So, all the money made from boxoffice goes straight into the producer's pockets.

There are three major factors that contributed for the increase in revenues of small budget films. They are : 1) Satellite rights 2) Hyderabad city boxoffice 3) Ancillary revenues.

1. Sattelite rights: This is the lifeline of all small-budget movies today. Many of these films have recovered their films from purely satellite rights alone. With 11 channels in the market at present, and another 5-6 in the pipeline, the channel's appetite for content is ever-growing. And in the Andhra, its always the film-based programs that draw the maximum TRPs. A perpetual satellite rights of these films get sold even before the film's release – at times even acting as a source of finance. A small-to-mid budget movie can fetch anywhere between 60-1.5 crore today, where as big-budget films have fetched up to 4 crores in the recent times!

2. Hyderabad city boxoffice: Hyderabad had a population of about 40 lakhs in the late nineties. But today the greater Hyderabad metropolitan area has nearly a crore inhabitants. So, it's understood that the boxoffice too grew likewise in size. For a big-budget films about 20% of the domestic boxoffice revenues from Hyderabad city alone. But for many small budget hits, that ratio is as high as 35%. The 2-3 multiplexes present alone contribute over a crore rupees in collections for a hit film. With more coming up – its only going to get better. Unlike in single screens, the difference in collections between a small budget hit a 'star cast film' isn't very wide much if the movie is a hit – as the urban audience are more willing to experiment.

3. Ancillary rights: Earlier the only source of revenue for a movie is from boxoffice. With the advent of cable in the 90s – television rights was a new source. But now there are newer sources of income streams such as home video rights, which fetch upto 50 lakhs today for a big-budget blockbuster and 25 lakh for a smaller film. While the sale of cassettes have fallen its compensated by the rise in CDs, mp3 downloads (legitimate through sales), FM royalties and the biggest of them all – "caller back tunes".

These are the sources of revenue which increased in size from the past. But, growth in revenue is flat from the older streams – boxoffice collections from Ceeded, coastal Andhra towns and 'districts' of the Telangana. But on the whole, the size of the industry has increased. I have purposefully avoided 'overseas market' as its almost non-existent for small films due to various reasons. Any income from this can be termed as a 'windfall gain' Happy Days being the only exception – as Mr. Kammula is a brand name there.

Frankly, even I am smitten by this 'indie style' of filmmaking and wish to test the waters for two reasons. The first – creative restrictions are lesser in this form of filmmaking. The best form of creativity usually comes when resources are limited (read : budget). Also, the producer has better say in creative and managerial decision. And atleast amongst avid film goers, the producer will earn a name for having bet on new talent and pulled off a success.

Secondly, like for a lot of other people – the sheer economics behind making one. If one calculates the RoI (return on investment), big-budget films typically can fetch only 20-25% returns if they're a hit. But small budget films have fetched returns of 200-300% in the recent past.

The 'high risk' of small films: Here comes the pitfall. The people working in the two biggest film processing laboratories in Hyderabad – Prasad's and Ramanaidu Studios tell me that nearly 50-70 such small budget films are "lying in cans" in each of their studios. The value of 100-120 odd films lying in these studios without being released could over 200 crores. These films have either stopped shooting mid-way as they've run out of money or dint clear the lab's bills.

Some of the films are complete, but did not return the money to the financer who has to submit the 'Clearance letter' allowing the lab to print the film for release. Typically, these films are made by small-time producers who don't lack a proper source of finance. They invest very little from their own pockets and borrow heavily from private financiers at ridiculous rate of 3% per month or 36% annually! Three times what most nationalized banks charge. Banks lend money only to producers with a track record, hence financiers are the only option. Also, unlike big-ticket films – distributors don't buy the rights of these movies in advance. For big star-cast films, the advances paid by distributors against the rights are a major source of finance. And it comes interest-free to the producer as the distributors become investors in the project. The producers of these films screen their film for distributors. But rarely does any one take the risk and bet their money on an unknown film.

So, it's death-spiral from here onwards for a lot of producers. Their personal money is locked in the project. They take loans from financiers mortgaging their properties. Non-payment means the property can be liquidated. Distributors mostly don't buy the rights in advance, hence that source of finance is not available to these films. Now, they don't have money to shoot further or repay the loan. As time lapses interest piles on. To cut-it short it takes a lot of financial and production-planning to execute a small-budget film successfully. The filmmaker should be able to secure a source of funding, where they would not fall into the above pitfalls, but still be able to take part in the profits of the film. So, it there is a lot of risk. But as the maxim says, higher the risk – higher the reward. But one thing is for sure – we're going to see more small budget films in the coming few years. And yes, I will be a part of it.

PS: One of the best ways for smaller filmmakers to secure funding is to approach a known producer to become a partner. He can guide in the managerial process and be a source of finance. If you're good enough to handle production, a corporate company rich on funds or a HNI (high networth individual) like a real estate fat-cat, or NRI friend are good options.

About Allu Sirish: Sirish Allu is a 21 year old blogger from Hyderabad, India. He has completed Bachelors in Mass Media (Journalism) in R.D National College, Mumbai. He is a hardcore movie buff. Sirish Allu has been associated in the production of Geeta Arts films like Jalsa and Ghijini (Aamir Khan). You can visit Allu Sirish blogs at http://www.allusirish.in/