FICCI-KPMG-Report-13-FRAMES

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74 The power of a billion: Realizing the Indian dream Key industry challenges Piracy The issue of piracy remains a critical issue for the Indian film industry. However, there are some changes that have helped the industry battle this issue aggressively. A few years ago, a film reached television and home video only after six months of its theatrical release. Pirates could take advantage of this delay, and would flood the market with pirated DVDs/VCDs. Currently the theatre-to-television window has been reduced to less than 3 months. The TV premier of ‘Ek Tha Tiger’ happened only 3 months after its theatrical release; while it happened in only 2 months for ‘Son of Sardar’. This has had some effect on the business of pirated DVDs. Also, with the shift in consumer preference to the Internet, the business of piracy has also transformed. The physical format (VCDs and DVDs) is disappearing and pirates are therefore shifting online. However, piracy continues to plague the industry. Indeed, camcording incidents in theatres have significantly increased in recent times. During January to September 2012, the Motion Pictures Association (MPA) had identified 53 forensic matches to camcording incidents in India, a 77 percent increase as compared to 30 camcording incidents for the same period in 2011. The audit report of first nine months of 2012 revealed that India accounted for 54 percent of all forensic matches in the Asia-Pacific region 54 . • Andhra Pradesh Film Chamber of Commerce (APFCC) and MPDA have formed an alliance to promote content protection. The alliance is working on initiatives to tackle camcording, content theft online and on cable as well as promote public awareness on the importance of content protection. In June 2012, a joint operation by MPDA and APFCC revealed two major organized criminal syndicates that cost the film industry about INR 250 million in lost revenues 55 . • The Anti Video Piracy Cell (AVPC) of the APFCC has also designed a web application to detect and report online piracy. The application which is compatible with all smartphones has educative information about content piracy (both online and pirated CDs). People coming across pirated material being sold on the streets or video libraries, can leverage this application to alert the AVPC instantly through their mobile phones. Such efforts will be recognized and rewarded by the industry 56 . While the Government and other affiliated agencies have made progress in developing response procedures to copyright infringement, strict enforcement is lacking. In developed economies, piracy is taken very seriously, with people found guilty of such infringement subjected to criminal charges. Moreover, a major deterrent to piracy will come only from a change in mindset on the part of consumers. © 2013 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. “ Content theft at source, through camcording in cinemas is an organised crime and remains the biggest challenge for us and the industry to combat. We need to build adequate deterrents to combat piracy , starting with strengthening laws and building consumer awareness. Government and stakeholders need to work together to build a robust regulatory environment with specific and strong legislation, which will provide law enforcement the tools to arrest and prosecute criminals. As per the Motion Pictures Distributors Association (MPDA), India is among the top nations in the world in terms of video piracy. MPA India estimates that the loss due to piracy in 2012 was USD 1.1 billion, an increase of 15.79 percent from that in 2008. “ - Uday Singh Managing Director Motion Picture Association, India In this context, it is important that industries collaborate and create efficient mechanisms for content protection. With cooperation from the government and internet service providers, site-blocking measures can combat online piracy. The initiatives of Telugu film industry are a significant step in that direction. 54. Industry discussions conducted by KPMG in India 55. ‘Bollywood no longer talks of piracy; but ignoring dangers of online can be costly’, The Economic Times, February 2013 Under-penetration of theatre screens While India leads world averages in terms of the number of films produced each year and attendance, the under penetration of theatre screens in India remains the biggest challenge for the industry. There are just 8 screens per million people, unlike in the United States, where there are 117 per million 57 . “ We are still severely under-penetrated in terms of number of screens per capita, especially considering the number of movies we make each year. The industry should look at doubling the number of screens in the next 10 years. Only once we have enough screens can the industry truly take advantage of the content democratization that has been enabled by digital, both in production and exhibition. 56. ‘A new app to curb online piracy’, Times of India, March 2012 57. ‘Show time: Growth in multiplexes to be be driven by malls’, Business Today, May 2012 “ - Senthil Kumar Co-Founder, Real Image
The power of a billion: Realizing the Indian dream 75 The number of screens is highly correlated with commercial real estate development in the country, which is currently challenged due to the overall economic slowdown. At many places urban land supply is controlled by state-owned development bodies and housing boards, leaving limited space for development of malls. Restricted land supply also leads to high real estate prices. Moreover, the approval process for a multiplex is very slow and cumbersome, as it is largely controlled by the local municipalities. Obtaining a theatre operating license can take as long as 6 months in certain cases 58 . “ Lack of mall readiness is slowing down the screen expansions. Last year approximately 30 percent of the plans have got delayed. “ Regulatory hurdles Extreme Taxation High entertainment tax acts as a major impediment to the growth of exhibition industry, as the overall tax implication is as high as 40-50 percent in states like Maharashtra, Uttar Pradesh, Bihar and Karnataka. Such high rates of entertainment tax on box office admissions seem irrational considering that films are available on other platforms like television and Internet platforms for free or very little cost. Such regulations have also led to many corrupt trade practices. To save on entertainment tax, some theatre owners under-declare occupancy rates. It is estimated that approximately 25-30 percent of the ticket sales is under reported by these theatres 58 . Hence, it is imperative that the entertainment tax structure across the country be rationalized by bringing down rates of entertainment taxes. - Sanjay Gaikwad Chief Executive Officer and Managing Director, UFO Moviez India Ltd 58. Industry discussions conducted by KPMG in India Scan the QR code to hear more from Sanjay © 2013 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Acknowledgement We acknowledge the
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