17 Aug 2011  Research & Ideas

Protecting against the Pirates of Bollywood

Hollywood's earnings in India have largely been disappointing. Professor Lakshmi Iyer believes the problem has more to do with intellectual pirates than the cinematic kind.

 

In 2007, Sony Pictures became the first multinational studio to enter the India film business known as Bollywood with its $7 million film Saawariya. The movie grossed only $9 million. That same year, Walt Disney Pictures collaborated with Yash Raj Studios, one of India's leading production houses, to make the $3.5 million Roadside Romeo. The first-of-its-kind animated Hindi movie barely broke even.

All told, Hollywood studios invested an estimated $100 million on producing films in India between 2007 and 2009. But box-office profits were hard to come by, despite the power of India's growing middle class, and the fact that India's film industry sold 3.2 billion tickets in 2009.

"Movie piracy in India is rampant—you can get one online the day after a release"

Harvard Business School Associate Professor Lakshmi Iyer, a native of New Delhi, was intrigued by Hollywood's failures, especially considering American films had made great inroads in other countries. So she started to investigate a potential link between the disappointing box-office receipts and intellectual property (IP) law.

In the case study Hollywood in India: Protecting Intellectual Property, Iyer and HBS India Research Center researcher Namrata Arora uncover a complicated mix of piracy and plagiarism that harm not only Hollywood's efforts at success in the Indian market, but local Bollywood companies as well. Iyer says the case can help students and practitioners understand the best business strategies for firms to protect their intellectual property rights—one of the most important growth drivers in the US economy—in developing markets.

The case is one of a series Iyer is developing that are linked to property rights in emerging economies. Other case studies include an analysis of slum redevelopment in Mumbai, and an ongoing investigation of the transfer of land from agricultural to industrial use in China.

Pirates on the horizon

There are two primary types of IP theft for copyright industries, which include movies, music, books, and software. Piracy—the illegal copying and distribution of movies—represents an estimated loss to music and movie companies of up to $180 million a year in India. Plagiarism-—making films based on the ideas, plots, characters, and other "inspirations" from famous films—results in an uncalculated loss in royalties to the original writers and performers, and can weaken IP protections for others if not enforced.

The case meets up with Vijay Singh, CEO of Fox Star Studios, to discuss a strategy for protecting IP on the upcoming release of My Name is Khan in February 2010. Fox Star, a joint venture between Hollywood's 20th Century Fox and Asia's STAR Television (both owned by Rupert Murdoch's News Corp.), paid in excess of $22 million to acquire the film's global distribution rights.

Students are asked to make some of the same cost-to-benefit analyses considered by Singh and his team:

Should the mass-market price of DVDs be lowered from $5 or $10 to $1 or $2, which would match prices charged by pirates? After examining the numbers, Iyer says students understand that selling low is a losing strategy. "They take such a loss [on the profit margin] that the extra sales don't make up for it."

Should a single release date be used for global distribution, instead of a staggered release? By the time Fox Star Studios released Danny Boyle's megahit Slumdog Millionaire in India, several months after its US release, most people there had already seen pirated versions. To answer this problem, a distributor could choose a single worldwide release date. Doing so, however, would negate cost savings achieved by reusing film copies across staggered release dates. Studios could also limit a film's distribution to digital, not analog, screens, the copies tagged with electronic watermarks so forgers could be traced—but there are very few digital screens in India. With movie tickets in the country selling for only 57 cents on average, and a digital screen costing $150,000, installing one usually doesn't make economic sense for theaters.

Should local theater owners be prosecuted for running pirated prints? Iyer says going to court is a long and complicated process, with outcomes uncertain at best. For instance, it can be difficult to successfully prosecute a theater owner if someone sneaks in and makes an unauthorized camcorder recording.

Should studios go after Internet pirates? "Movie piracy in India is rampant—you can get one online the day after a release," says Iyer. To police pirated copies online, a Hollywood company could pay $100,000 to hire 50 monitors after a debut. But if 350,000 people are prevented from illegally downloading one movie, and instead pay 57 cents to see the movie at a theater, is it worth the cost? Yes, it probably would be worth it, she says.

Should Hollywood sue Bollywood production houses to fight plagiarism? This bet can be a lost cause for American studios. After showing a couple of scenes of the Bollywood version of the Will Smith movie Hitch, it was obvious to Iyer's students that it was a knockoff. But they were divided, just as India's courts have been, about whether what they watched was plagiarism. The words used in Bollywood films are different, and India's theatergoers perceive the movie's dialogue differently than US audiences, students observed. And India's copyright law, similar to the law in the United States, lacks a clear dividing line that defines plagiarism. "The ambiguity is inherent in the product," Iyer says, making it difficult for Hollywood to collect anything in the courts when its scripts are stolen.

Getting it right

Despite the formidable challenges, Iyer found that Hollywood's efforts in India are far from a lost cause, noting that all these problems can be addressed if a studio understands India and develops a coherent strategy, as did Fox Star Studios. After some effort, Iyer persuaded Fox Star execs to open up about how they succeeded in producing and distributing My Name is Khan in the country. The first thing Fox did right? "They set up shop in India."

The company's previous release of the Hollywood blockbuster Avatar to the Indian market created the blueprint. Fox Star aggressively distributed the film to over 700 screens and dubbed it in three regional languages. Then, when the company introduced My Name is Khan, it put both money and power behind the release. "It's going to be released in a way no Hindi film has been released internationally before," the film's star, Shah Rukh Khan, says in the case.

First, CEO Singh took steps to keep Khan prints out of the hands of movie thieves. To prevent hijacking of copies heading to theaters, a Fox Star employee accompanied every analog reel released in theaters in India and abroad. The studio also hired antipiracy agencies across India that worked with local police to raid illegal DVD-making facilities in the days following the film's release. (The Mumbai police alone seized over 3,000 pirated DVDs of My Name is Khan on February 18, 2010.)

To battle illegal distribution over the web, Fox Star hired three agencies that specialized in online crime, with one agency targeting Internet users in India and two focused on foreign users. The agencies identified and shut down 11,000 online links.

A single global release date further helped thwart online piracy. "By having a universal release date, we helped reduce the temptation faced by our global audiences who were eager to watch the film as soon as it was released in India," case protagonist Rohit Sharma, head of international sales and distribution at Fox Star, says in the case.

Happy ending

The end result was a major success at the box office, both in India and internationally. Industry sources estimate the movie, which cost $22 million for Fox Star to acquire, earned more than $40 million—one of the top 10 highest-grossing Bollywood films of the past decade. Khan also succeeded on DVD, and according to industry reports, Fox Star sold the film's Indian satellite television rights to Star India Private Limited for a record $3.3 million.

Iyer saw My Name is Khan, a love story whose autistic lead character is frequently compared to the one in the American film Forrest Gump, as part of her research. "It is a well-made movie with great actors," she says. "I thought it was a little melodramatic toward the end, but I quite enjoyed it."

About the author

Kim Girard is a writer in Brookline, Massachusetts.

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Comments

    • Anonymous

    The author is missing an important point here. Piracy or not, the movies cited are bad films to begin with. Movie studios perhaps have not understood the Indian market well and put money on poor scripts or poor directors. There are films that still earn well, for example Dabangg, Ready, Golmaal 3. I think it is a case of simple economics. With tickets and snacks, family of five could easily spend a thousand rupees on a film. However, if a film has received bad reviews, people are deterred from going to the theaters and prefer to watch them on poor quality pirated versions, or wait until the movie gets shown on television.

     
     
     
    • SRK
    • Manager, Manager

    I agree with anonymous. Hollywood people havent got to know the pulse of Indian audience. It is not about the extravagance which Sawariya potrayed attracts masses here. Hardly any animation movie in India has made money. Its more of no brainers like Aneel Bazmee and off beat directors like Anurag Kashyap and Farhan Akhtar who rule the roost. I would suggest all these Fox studios and Sony Pictures of the world to hire people like Anurag and Farhan as consultants and they would see the change immediately. Era of superstars is over for India. No more Amitabh no more SRK. Welcome Abhay Deol and the likes

     
     
     
    • Ananth
    • CEO, Techdivine Creative Services

    Wonderful article on an important subject that is a growing concern each day in the film industry. Films or any form of IP are definitely important to the Creator of the Content. It does not matter about the Quality of the movies per se, simply because, no one is being forced to watch it. If the reviews are bad, one can simply choose to watch another or stay home & read a book or hang out at a Game House. Due to many such issues and concerns that Corporates and Brands have constantly expressed, we have an Event or a Meet-Up in our Organization from time to time Under the event name of "TechBrandsMeetUP". The idea is to bring such serious issues that corporates and professionals face (especially online piracy, banking scams, negative branding etc) In our last meet-up, of the 14 Industry participants, one Industry was from media and the topic of Piracy definitely came to light. From the article too, its clear that having a Single Global Release date definitely helps. Meanwhile, few other suggestions too were discussed like Releasing the movies online on Sites like YouTube with Pay-per-view options or releasing them on affordable VCD/DVD's in the not so distant future (as most movies take about 4-6 months to come on DVD), like MoserBaer does is wonderful.

    What "might" eventually happen is, people will stop piracy for the sheer reason, that the same movies are available at nominal costs, legally with great prints. Also, taking the help of LAW in the right way to not only catch the culprits but also create more awareness among the audiences.

    My Name is Khan, set a wonderful example with their right mix of strategy. But not every filmmaker would have such heavy backing. So, hopefully, soon, audiences will learn to respect the efforts behind the content created and if not at least not entertain illegal practices. Or is it hoping against hope? Only time will tell. Thanks for this article. Regards Ananth V

     
     
     
    • Anonymous

    a. Indian viewers are more sensitive to ticket prices than their western counterparts. Lowering the price to $1 is drastic, but what if the price were set to $3 instead? Would that be enough of a moral and social incentive for people to move away from the rather ordinary print quality of the pirated copies? Could the increase in the number sold then make up for the loss in revenue per DVD? b. Can the DVDs be more than "just" movies on a DVD? For instance, can the packages have vouchers, that can subsidize the cost of buying the next movie(s)? So in essence, buying a DVD is then like using a rewards card, and the more you shop with this card, the quicker you get "free" movies. Win win?

     
     
     
    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited

    An average Indian viewer is not very keen to rush to a cinema hall to watch a movie as this is more costly than watching it on TV or even by purchasing a DVD which a group can watch in a go. Normal TV channels such as Sony display new movies not long after their release. Some cable operators shows these much earlier may be by using pirated versions. These are freely available eventhough sale thereof is banned. Weaknesses of law enforcing agencies are well known as they too take their cut. Corruption in India is well known and this is not being tackled as many in power too seem to be involved. Only now a leader of corruption protest has emerged whose crusade is being jeered at by the powers at the helm. Coming to the research of Professor Lakshmi Iyer, the proposed steps are welcome but the gap between what is proposed and implementation at ground level needs to be narrowed down. If we cannot effectively implement, we would be back to square one.

     
     
     
    • Nitin Pujar
    • Principal Consultant, Maven Advisors

    Any Audience coverage statistics or rather viewer statistics and an analysis of reach of the movies would also have been interesting. Sometimes mere monetised yields do not do justice to how movies worked or otherwise! If three million persons viewed the movie the sheer star engagement it represents means SRK would have become more powerful as a star and thus he gains from endorsements or live show earnings!!! We can then really discuss the issue of value to society rather than just the investor corporations. A wee bit like the value of generics versus branded pharma!!

     
     
     
    • Anonymous

    Piracy is a universal problem and not confined to Bollywood. In fact, both in percentage and absolute figures, more Hollywood movies and music sell pirated copies than bollywood. In fact the Indian audience is very happy to go and watch a movie in a theatre which costs much less than buying a pirated copy. Most households in India dont even have DVD players or Internet access to download pirated versions. Most pirated versions are downloaded by the Indian Diaspora that stays overseas as bollywood are not released at the same time globally and in many countries not released at all.

    Indian movies are one of the best sources of entertainment for the middle class society in India. It is like a family event so they would definitely go out and watch a good piece of cinema in theatres.

    I think many studios are using piracy an excuse to hide behind the fact that they have not been able to produce good cinema. They are operating the same way as old bollywood studios worked - chasing the big star cast to make movies successful. Indian audience has become pickier than watching useless love story and success stories such as Udaan, Bheja Fry, Munnabhai series etc vindicates that theory.

    Nevertheless I agree that piracy is a major setback for any creative project and should be tackled in every possible way. However Hollywood studios should look into this a bigger universal problem and find a solution rather than focusing their energy on bollywood only.

     
     
     
    • N.Sushil Kumar
    • General Manager, TN

    One suggestion to reduce the piracy is to develop a low cost single use DVD ( meaning a DVD that can be played only once and that can never be copied like a PDF document) and it should be sold less than a cost of normal ticket. Then many people would prefer buying such low cost original DVD. If you sell a low cost single use DVD for Rs 50 then PIRACY would be killed. People would prefer original DVD even if it is single use one. Majority dont want to watch a film repeatedly except some hardcore movie buffs

     
     
     
    • Alex

    Bad movies or not, people do not have a right to watch a pirated version. It is an enormous global problem that threatens the industry as a whole. Another step that really needs more enforcement is education. So many of these people feel it's okay. That directors and actors make a lot of money and their personal watching does not affect them. They don't understand who it really affects. It's this sense of entitlement that is so widespread.

     
     
     
    • Vishal
    • Chief Strategy Officer, ISS Facility Service

    I couldn't have agreed more to the FIRST comment from anonymous. In order to attain results in India, MNCs have to understand local dynamics. Saawariya & Roadside Romeo were disastrous movies by it's sheer content & representation. Piracy wasn't really the key reason for their disastor. Neverthless, viewpoints presented in comments has far more merits than case study itself. Thanks to Laksmi though for starting this conversation :-) Vishal

     
     
     
    • Prasad
    • www.blueboxmedia.tv

    What is lacking in India is a distribution mechanism where the content is available in an affordable way. There is a huge appetite for bollywood/regional content. But the Cost of the Content is usually high (In-Theater and Post-Theater). If the entertainment industry needs to tap into post-theater revenue there needs to be a thriving movie rental business. (more in the likes of Netflix). Given the high degree of piracy, a DVD based rental business is difficult to survive. (bigflix/seventymm failing).

    If we have a movie rental scheme that is cheaper than a pirated DVD, or available enough to obviate the need to watch in all the no-name pirated sites, it will significantly helps to reduce the piracy.
    

    There are many moving parts to this, and the first step is to make the distribution digital with DRM protection. We are trying to address this through a low-cost Kiosk based digital distribution

     
     
     
    • Dr. Hotta

    In the present scenario, the only answer to pirecy is a bi-phasic release, that is-

    1. A Digital release covering maximum possible theaters on day one, with pirecy protection features like CAP and CineFence.

    2. A subsequent print release covering all the leftover areas whereever digital projection is not possible.

    Recently, there has been a steady growth in the number of digital projection theaters. The cost of installation is not too much. Most of the class C digital projectors are affordable now and is suitable for small scale theaters which are mostly in the rural and small towns. Companies like UFO and CUBE are quite poppular now and given a suitable strategy, pirecy can be brought down to minimum.

    Moreover, does anybody enjoy the quality of pirated movies they distribute ?

     
     
     
    • Anonymous8
    • NA, NA

    First talk about Piracy done by Bollywood movies out of which Hollywood movies are suffering. Piracy/ Plagiarism done by Bollywood hurt Hollywood most.

    Why ? because out of LA that is the one of the largest earning movie industry who does not acknowledge creativity/ production management/ technical innovations of the technicians, writers and even producers.

    When Shahrukh Khan or Amir Khan steels a movie plot from Hollywood or advertisement idea from American Production companies then while they get sponsorship of Omega for that region without acknowledging the effort what makes Leonardo DeCaprio great (the crew behind his movies) and not to mention his own efforts.

    Isn't it strange companies giving their brand ambassadorship to people who are sunken in Plagiarism. I will never buy a Rolex which is sold by Hollywood brand and for local taste a less competent guy get same status/ reward.

    This may not effect you because you are from Harvard but this difference in Quality effects me alot ....... http://shrutibarton.wordpress.com/2013/03/11/pirates-copy-bollywood-directors-copy-hollywood/