No green in Kollywood

The Tamil cinema industry is still going through a cash crunch.

Despite this year seeing a record number of Tamil film releases, the industry is still going through a cash crunch. Big producers are finding it difficult to fund films with the recent box-office failure of some big films creating panic among some of them. Many regular Kollywood financiers have shut shop, with some of them only funding selectively. In fact, some big financiers have been forced to turn producers, in order to service bad loans.

A leading Chennai-based financial analyst said, “Today, the viability of film business is being questioned mainly due to films whose budgets have gone haywire. The satellite channels have become very selective and have virtually stopped buying film content. Theatrical rights alone cannot sustain the model of film financing, as there is a cap on ticket prices in Tamil Nadu. Many financiers have lost money, as some producers have taken advantage of loopholes in the system and got away without settling dues. Even the recent RBI guidelines have cautioned banks against funding films, even if producers provide real estate collaterals.”

The star system has also played havoc, with star salaries continuing to rise with every film (the success or failure of the film doesn’t seem to matter) to the point where it now is almost 50-60 per cent of the total budget. The stars in demand are willing to work only if they are paid 50 per cent of their salary as advance payment. They don’t seem to be comfortable with other payment options such as profit-sharing. And should no producer be willing to agree to their terms, the stars are happy to produce the film themselves and sell it at a “record” price at the time of release.

There have been quite a few instances of producers borrowing money at high interest rates (often as high as three to four per cent per month as interest rate) only to be able to fund the star’s advance payment. And often, halfway during the shoot, the hapless producers realise that they need more money to complete the project.

Earlier, advance from television channels came as a source of relief, but that has dried up now. By the time a film is ready for release, the producer has usually run out of money for promotions and release. Producers say that they are forced to release amidst competition, as they have to recoup their investments as early as possible. If the release gets delayed, the interest rates shoot up.

Prasad V. Potluri, Chairman of the PVP Group, which is into film production, financing and real estate, explains, “The trouble started when some producers found it difficult to pay back previous liabilities and losses. The murky situation is on account of factors such as exhibitors stopping the Minimum Guarantee (MG) system and broadcasters withdrawing from aggressive film acquisitions. At the moment, we are not funding new producers. We’re only servicing existing clientele.”

PVP Cinema is currently producing nine films in Tamil and Telugu, including Inji Iduppazhagi, Thozha, Brahmotsavam and the Bangalore Days remake. Potluri adds, “I feel there is still a market for the stars as they command an opening, but content and budgeting will determine the success of a film.”

Many analysts feel that the present financial crunch is just a temporary setback, and Tamil cinema will soon bounce back

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