Sunil Lulla

October 2007

By Mansha Daswani

Indian feature films have been increasingly popping up in the top-20 lists of box-office releases in the U.K. and the U.S. The Hindi-language movie business, dubbed Bollywood, has expanded well beyond the subcontinent, with a fan base that includes more than just viewers of Indian descent. Globally, Eros International has become the leader in this space, with a network of offices in India, the U.K., the U.S. and Dubai, among other markets. Last year, it became the first Indian media-and-entertainment company to be listed on the London Stock Exchange, and in its 30 years in existence has rapidly expanded beyond being just a producer. In addition to its own titles, Eros has grown its catalogue through acquisitions and output deals and by aligning with key talent like actor Saif Ali Khan and music director AR Rahman. It is involved in theatrical, TV and DVD distribution, has launched a dedicated Bollywood channel on YouTube, along with other digital media initiatives, and has begun operating a music label. The company’s chairman and CEO, Kishore Lulla, speaks to TV Asia Pacific about Eros’s growth path.

TV ASIA PACIFIC: What have been some of the major shifts in the Bollywood market?

LULLA: The Indian film industry is in the same phase today as Hollywood was in the 1930s—double-digit growth but extremely fragmented and therefore, poised for consolidation.

With over 40 million people joining the 400-million-strong consuming middle class every year, the Indian economy, the fastest-growing democracy in the world, continues to boom. This is having a major effect on the Bollywood market.

The Indian entertainment sector is currently valued at over $10 billion by PricewaterhouseCoopers. Growing at 18 percent compound annual growth rate (CAGR), it is slated to cross $25 billion by 2011. The Indian film industry contributes approximately 20 percent of the total entertainment sector valuation. India has the most prolific film industry in the world, measured by film production, following more than a century of cinema growth. The industry employs over 6 million people. India has about 13,000 single-screen theaters servicing its 3.9 billion estimated annual ticket sales. With growth in multiplexes, there is a marked increase in ticket prices, which have propelled the Indian box-office revenues skywards.

In order to benefit from this growth we moved into the Indian theatrical distribution market in 2006 and are releasing about 15 films a year. So far, in 2007, we command five spots in the Indian box office top ten, with our recent release Partner holding the top spot.

TV ASIA PACIFIC: In that competitive field, what do you think makes Eros titles stand out?

LULLA: As a global market leader in this space, Eros has already taken a substantive lead in the consolidation of the fragmented Indian entertainment sector. We have made acquisitions, output deals, talent tie-ups and built an enviable global distribution infrastructure with operations across 50 countries. Eros has been one of the largest content owners over the last three decades with a quality film catalogue of over 1,300 films. A strong content pipeline, a well-entrenched distribution network, a rich film library and first-mover advantage with a vertically integrated strategy sets us apart from the rest of the pack.

TV ASIA PACIFIC: Are you remaining solely in film production, or would you consider doing television series or movies too?

LULLA: Our focus is on content and distribution. Alongside Bollywood [movie production], we have already moved into music and animation, as well as widening our film focus to include Tamil-language films. We already syndicate our films for broadcast on television channels worldwide. Television content production is a logical next step and fits with this content-and-distribution strategy. We will consider opportunities as they arise.

TV ASIA PACIFIC: How have you seen the demand for Indian entertainment evolve internationally over the last few years?

LULLA: Eros was established in 1977 with the aim of taking Bollywood internationally. In 1998, Dil Se, which was distributed by Eros, was the first Indian film to reach the U.K. top-ten box office charts. Indian films now regularly feature in the top ten. With the explosion of satellite channels, the availability of [Indian] DVD titles in major retail chains across the world, and a potential South Asian diaspora audience of over 50 million people, Indian content is now becoming part of the mainstream.

In addition, Eros has successfully opened new markets for its content by providing subtitled and dubbed versions of Bollywood films through television and home video in markets such as Germany, Russia, Indonesia, Malaysia, Thailand, Fiji, South Africa and the United Arab Emirates. In many of these markets, the audiences have been predominantly the locals in these countries�over and above the expatriate Indian community.

More markets are opening up around the world, where audiences who are used to watching Hollywood and other content dubbed into their own language are embracing Indian films. This means that in addition to North America, the U.K. and the Gulf states, new markets continue to open in Europe and Southeast Asia. With production values on par with Holly�wood and the variety of genres of Indian films available, these new markets will continue to expand.

This is an ongoing strategy; some countries take an immediate interest and with others, it can be a slow burn. Southeast Asia, Europe, the Middle East and Latin America are new markets with a very large upside and potential as the production values of Indian films keep going up and get embraced in a wider sense.

TV ASIA PACIFIC: How is the demand for the TV rights for your library? Is your business mostly with niche, South Asian-targeted services, or are broader general entertainment networks also interested in Eros content?

LULLA: Eros licenses content to Indian entertainment channels, like Zee TV, Sony Entertainment Television, B4U etc., as well as mainstream platforms like Channel 4, Sky, Tiscali, RTL Netherlands, NRK Norway, SVT Sweden and SABC South Africa, to name just a few. We have been representing the company at markets like MIPCOM, MIPTV and film festivals for several years. This helps to develop the business in new markets and syndicate content to networks around the globe.

TV ASIA PACIFIC: How important is the DVD market for Eros, especially given the explosion of niche online download services?

LULLA: DVD continues to play an important role in our strategy. In established markets we are waiting to see what opportunities arise from high-def DVD. Dubbed markets continue to open, and as India experiences a rapid growth in consumerism with prices of DVD players crashing, we still expect growth in DVD. Internationally, the key is wider distribution and securing shelf space. We have struck a deal with [the distributor] Baker & Taylor in the U.S. With a proven track record and a strong content lineup we can deliver the content that retail outlets want. Also, the e-commerce and online download-to-own model is picking up.

TV ASIA PACIFIC: How much of a problem is piracy?

LULLA: Piracy is an issue to all content owners, including Hollywood. The Indian market is no different. We actively work with all the organizations and authorities to discourage piracy through prosecution of offenders and education of consumers. But at a time when the sector itself is experiencing huge growth, the effect of piracy is not as visible as it would have been in a mature or declining market. To combat online piracy we launched the first official Bollywood partner channel on YouTube, which is hugely popular.

TV ASIA PACIFIC: How are you using the YouTube channel to build your business?

LULLA: New media is part of Eros’s strategic business units and we have been focusing on expansion in the digital arena. The YouTube channel was launched with the same objective. It has become quite successful within a few months of its launch and we are now among the top 20 YouTube partners with over 2 million page views per month. This channel not only helps us promote theatrical releases and drive people to our other online channels, but we also monetize this content through advertising; it’s absolutely free to the consumer to access. The YouTube initiative is a key example of the power of online communities.

TV ASIA PACIFIC: What about your other digital and new-media services?

LULLA: Eros continues to pioneer new-media initiatives through key strategic distribution deals and digitally repurposing its content library of over 1,300 films. Apart from ongoing deals with RTL Holland, Movielink [the U.S. download service], Rogers Cable Canada and [the U.K. broadband service] Tiscali, we have recently signed some significant deals with BSkyB [for the Sky Anytime on-demand service], On Command [for hotel in-room entertainment across the U.S.], Comcast [for an SVOD service], Microsoft Online Spotlight and Mauj Telecom [for mobile content in India].

As part of our B2C [business-to-consumer] strategy, Eros offers content though www.erosentertainment.com, which is one of the only official online Indian portals that offers full-length feature films for download or streaming, music videos, mobile ring tones and DVDs, all as a one-stop-shop destination. The content is offered on subscription, pay-per-view or download-to-own models.

TV ASIA PACIFIC: How is your alliance with Comcast in the U.S. faring?

LULLA: The deal with Comcast was a major step forward for Indian entertainment. The alliance produced the first SVOD Bollywood channel offering a mixture of films and music videos. The service is doing very well and has already exceeded 10,000 subscribers in a short span of time. We are working to extend the service to other U.S. cable operators. Similar services are planned in other countries.

TV ASIA PACIFIC: Are you looking to enter into other international collaborations, via co-productions or other ventures?

LULLA: We are talking to a number of people in this space and exploring the potential of tie-ups to make a new genre of crossover films as well as to take Hollywood into India. While traditional Indian films have crossed over in non-English-speaking markets that are used to watching Hollywood films dubbed in their local languages, in the two main markets of U.K. and North America, one will still have to develop a new genre of film which can amalgamate the talents from Hollywood and Bollywood and make films in English for a wider audience.

TV ASIA PACIFIC: What do you think Hollywood and other global entertainment markets can learn from Bollywood?

LULLA: Among the key aspects of Bollywood are undying resilience, the ambition to excel, the willingness to learn and the hunger for success. Indian filmmakers travel the world, learn from the different cultures but always adapt to the pulse of their audiences. With very modest support from the government and virtually no subsidies like many other markets enjoy, the Indian entertainment sector has managed to take advantage of the growth and consumerism that India is presently enjoying.

TV ASIA PACIFIC: What are your broad goals for the company in the short and long term?

LULLA: To continue to focus on content and distribution consolidation globally. Eros is fully committed to a growth strategy, which is expected to involve new developments in four growth areas: animation, digital cinema, gaming and cable channels, all of which revolve around opportunities within the content ecosystem and broader distribution within the Indian entertainment sector.

Of those areas, animation in India promises to be a significant growth business, where we intend to take a leading role by leveraging our distribution as well as our relationships with content creators. As part of that strategy, Eros has commissioned its first full-length feature animation, Toonpur ka Superstar.

Secondly, we plan to extend our local presence across India by signing deals with cinema owners for the development of digital cinema distribution, enabling Eros films to be released in many more outlets using the available new technologies. This will allow Eros to better monetize its films throughout India rather than just being focused on large urban multiplexes.

Part of the brand extension for the company also creates opportunities in casual gaming, where Hollywood film-based titles are already generating more than 20 percent of revenues in the $50-billion gaming industry. The casual-gaming market is exploding globally through the convergence of broadband Internet, mobile phones, home entertainment and consoles. Going forward, Eros will spearhead the development of the gaming sector within the Indian media-and-entertainment market by building strategic partnerships around the film content it owns.

Lastly, our broader distribution presence will extend to the cable TV market in India, where there are more than 80 million cable homes. Eros will participate with a content-driven strategy of cable channels, video on demand and value-added services as the fragmented cable market is digitized and consolidates.