By Shreya Narayan

Ah, how many conversations have we had, beloved Mumbai. You sat and cried with me when I was shown, and still am, innumerable doors of powerful men; open only to other powerful men and women. Heart heavy, yet heart alive, you never let me give up hope, because when all doors closed, maybe a good-natured, crazy auto-driver passing-by waved out, ‘Madam smile please!’, and suddenly, you knew that all was not lost.

Though your concrete buildings come between me and the sun and I choke on your sulphurous air, I am still inspired by the running millions to fight another day with life….because, life must be fought to find even an inch in this over-populated, rich people’s haven where a house shall take a lifetime to turn into reality, if one is not first killed on roads – of stress while driving! The sea was however a relief; the sun-setting beaches, bleaching away the dark scars from one’s aching heart. Alas, now sullied by human ignorance, the same sea that soothed, soothes only from a distance. On close encounters, it has become a health hazard. Despite all this, you remain glorious Mumbai, because we were told that men need one thing even more than love and oxygen — An eyeful of dreams to run after! Or so we thought.

For the first time in the last hundred years, other states are making a concerted bid at the Entertainment business. The reasons may have to do with the fact that the Media and Entertainment industry stands at US$15.7 billion. As per the FICCI-KPMG Report 2015, the Indian Media and Entertainment Industry (which includes Films, TV, Print, VFX/Animation/Gaming, Post-production and other ancillary services) is set to grow at a CAGR (compound annual growth rate) of 13.9%, from INR 1026 billion (US$15.7 billion) in 2014 to INR 1964 billion (US$30.2 billion) by 2019, i.e. a growth rate almost double that of global media and entertainment industry. On the employment front, the Media & Entertainment industry currently employs about 0.40 million people. This number is expected to grow to 1.3 million by 2022, translating into 0.9 million additional employment opportunities during the period 2013-2022. M&E industry is highly dependent on human resource, thus employment growth and output value are strongly correlated. Out of the total number of people who work in Media and Entertainment sector in India, 35% people work in films.

Suddenly, the much coveted Mumbai has competition. And the reasons are worth examining.

Technology—The Great Equalizer

Technology was known to make people redundant. Now, it is doing the same with self-important cities by dispersal of power through communication and reach. Men need not be huddled up in a city, insecure of leaving it’s environs in fear of losing touch or opportunity. And this is effectively changing how the film industry works too.

A film can be scripted in any part of the world, sold as an idea in another part of the world, shot/produced in yet another part of the world, and finally sold to corporations in absolutely unrelated territory, with actors who do not belong to any of the places where it was written, shot, sold or exhibited! Moreover, the media can report news from the smallest of villages in a matter of seconds. Consequently, big cities do not have monopoly on even the media anymore.

Rise of Alternative Cities

Newer cities want more business and are thus, provide a better lifestyle than Mumbai. Mumbai is, and was, a place of over-times. Here, people arrived leaving their loved ones to earn money, wallowing in pain while singing songs of separation, conveniently provided by Bollywood. However, now they could go to the city nearest to their beloved homes and still find employment and growth opportunities.

On Jan 28, 2016, the Modi government picked 20 cities, including five state capitals, to launch its larger urban makeover plan. It proposes to invest Rs. 50,802 crore on these cities in the next few years. This is under the first phase of the government’s plan to set up 100 smart cities. The future shall see more dispersal of power, population and business from traditional centers of activities.

Increased Focus on Lifestyle

As the Indian economy opened up and social media arrived strongly, there came stories of burnt-out people, who had worked very hard in big cities to fulfill their dreams; only to realize rather belatedly, that in a bid to fulfill those dreams, they had lost out on a hundred good things that life had to offer. Re-examining life-choices is fashionable again.

Health, eating habits and yoga are being obsessed over with the rise in diabetes, blood pressure and other lifestyle-related diseases affecting people in large numbers. Even the young have not been spared. Thus, the value of peace of mind and health vis-a-vis money and dreams is being reinforced once again.

Changing landscapes in Maharashtra — Politics, Tax and Employment

The outsiders coming to Mumbai is a huge issue, ignited again and again for political expediency when it suits the major parties of Maharashtra. This game played by politicians is hurtful, inconvenient and extremely provocative. Mumbai wants to enjoy the perks of having Bollywood and the premier Stock Exchange here but does not want people to come to here to work their way up this business i.e, they want Shah Rukh Khan once he is successful, however, could Shah Rukh Khan have been successful without coming to Mumbai at the time he did? Similarly, they want money and glamour of big Hindi films but could not care less for small budget films.

The Entertainment tax in Maharashtra is 45% which means that for every ticket that costs Rs.100, Maharashtra government takes away Rs.45 for providing good environment, infrastructure and law and order to shoot?

High entertainment tax discourages small films production.

The Mumbai territory of film distribution of Hindi films is the maximum revenue-generating territory. Maharashtra government wants to get the major pie of people’s love for films; while the industry that makes these films is squeezed, stunted by thoughtless taxation. The result is that the Hindi Film Industry, in order to assure returns on investment, has been forced into practices that are dangerous in the long run.

Surprisingly, the Entertainment tax does not distinguish between a 100 Crore film or a 1 Crore film. This is akin to saying that the tax slabs of a citizen who earns three lakhs a year, vis-a-vis who earns three crores a year shall be the same! After all, only 50 films in a year may be big-to-medium budget films, rest 800-900 Hindi films made each year are small budget independent producer films, made at such stringent budgets that the survival of the producer is mostly at stake. But then, Maharashtra wants big names, big players. Rest can take a hike?

A case of thoughtful policy-making is at hand in Andhra Pradesh, which helms a successful Telugu Film Industry. The state’s Entertainment tax is 21% for films produced outside the state, 8% for low budget films produced in the state and 16% for big budget films produced in the state. Thus, it is encouraging both low budget films and film production in it’s own land — a win-win for both the state government and the film fraternity. This also keeps the ticket costs from rocketing beyond the common man’s reach.

Besides the Entertainment tax, the Value added tax (VAT) is at 5% and numerous other taxes on materials, locations and services used such as octroi, sales tax, service tax, etc. is one of the driving forces in shooting up the production cost of films. Unlike other products, where the makers/producers get refund-taxes paid when the product is sold, after covering the cost of production….in case of films, the cost of production is never taken into consideration.

Fair trade practices and protection of employee income have never been on India’s radar (a recent case is Vijay Mallya’s Kingfisher Airlines), or else Maharashtra, one of the most progressive states in India, would have taken steps towards the same. High population and undeveloped markets have been held as culprit. It is okay for Indian Employees of companies to be left in a lurch because the labour laws in India allow them to be left in the lurch. In fact, the present BJP dispensation that wants to give a boost to business, has already started loosening other facets of labour laws in place, in order to attract businesses. They say that this will generate more employment! Rajasthan has already taken steps towards the same.

Ironic, is it not, that to provide employment, the government wants to attract businesses by telling them that it is okay not to pay employees, or retrench them at a moment’s notice?!

The present Maharashtra government wants to bring such labour laws to the state too. Good luck to us for the future, but past inaction is telling on its intentions. Films have been made in Mumbai for the last hundred years. Thousands of aspirants have flocked to Mumbai with dreams in their eyes and father’s money in their suitcases. Thus, for almost a hundred years, money promptly flew out of other states, and came to Mumbai, as an average aspirant struggles for almost a decade before he truly makes it. But he shall be respected and his salary would be assured only after he has become a big name? Most of the people working in this sector are contract workers/freelancers, as opposed to full-time employees. What do the lack of any laws/assurance/system in last hundred years of the existence of Bollywood, for those who work in this fragmented sector signify?

Ask any artist, make-up man, hair-dresser, art director, lightman or the ilk…everyone has a federation. Anytime someone is not paid their dues, the surety of which is as guaranteed as the arrival of monsoons each year, the beleaguered party has to go to cronies of some or the other political party, under whose patronage that particular federation works. After a lot of hand-folding, hand-holding and feet-touching, the neta assures that he shall talk to the producer in question, who then gets a call. Earlier, Dawoods and the ilk did this job. Now the political parties, who go on to form governments do so. This helps them in two ways — their egos are massaged and power established, and the grateful party’s assurance of votes secured. These are the main reasons that subsequent Maharashtra governments have not bothered with ensuring employee justice.

Reduced Focus of Maharashtra Government on Bollywood

Maharashtra government wants to promote Marathi films, and rightly so, since it is the responsibility of every state to boost the indigenous language and industry. Thus, there is NO Entertainment Tax on Marathi Films. No means Zero! Besides tax exemption, they are given a subsidy of Rs. 15 lakhs. The Subsidy is given thus, a) Rs. 15 lakhs, at the time of starting the next production, or b) Rs. 20 lakhs, if the film is being produced in 35 mm Dolby/Digital and c) Additional Rs. 15 lakhs, if the film gets a National Award. This subsidy is given to five producers in a year on the basis of the script selected by the government. Thus, independent Marathi producers are encouraged with incentives while independent Hindi producers are struggling even to survive. There is no difference between small Marathi and Hindi films, except the language.

Thus, instead of making rules that helped small players find a footing in the Film Industry, the Maharashtra Govt. chooses to look the other way when it comes to Hindi Films. It only wants to milk the situation that Bollywood is based in Mumbai.

Moreover, there has been a determined effort by Maharashtra government to fix film shows for Marathi films in Multiplexes at favourable timings to further solidify their profits. Such kindness is not shown to small budget Hindi films which can never hope of finding a place in the multiplexes.

So, if Maharashtra is home of Marathi films and thus need support, then where is the home of Hindi films?

Moreover, Maharashtra with it’s ‘business capital of India’ tag, has too many other attractive and hundred percent more rewarding industries to pay attention to. Bollywood is too small a pie in the revenue game. However, Bollywood is instrumental in image assertion and photo-ops with stars that make India incredible without assuring justice for those who work in their films.

Changing Operating Model

The film industry has clung to Mumbai since the old-timers have bought and established expensive infrastructure. However, corporations (The Corporates) which now have major presence in the industry are conglomerates, with presence in several countries at the same time. They do not buy infrastructure, they merely lease them. Thus for them, location is not a constraint in doing business if profits add up.

As mentioned earlier, a film can be scripted in any part of the world, sold as an idea in another part of the world, shot/produced in yet another part of the world, and finally sold to corporates in absolutely unrelated territory, with actors who do not belong to any of the places where it was written, shot, sold or exhibited! This is ironic in the face of the fact, that at any one time about a 100 people may work in close human contact on a film to make it a reality, yet the ease in reaching each other at any time of the day, for any length of time and the ability to bodily present oneself with convenient modes of travel present today, has the potential to broaden the lives of those who work in it, especially if they are well-established in their craft.

At the end of the day, money guides the media. In today’s fast-changing, technologically driven, tax-sensitive, new business environment of India, other states can easily woo film productions their way. Maharashtra state, its capital being Mumbai, has long enjoyed its status as the Entertainment Capital of India, just as Los Angeles in California has.

Let’s see what happened there.

State Incentives in USA

Just like Maharashtra is the entertainment capital of India, California State has traditionally been the entertainment capital of US, with Hollywood based out of it’s sunny land. The 2014 Otis Report on the Creative Economy of California concludes that the creative industries, that include entertainment, visual arts, fashion and publishing, generate $293.8 billion to California’s economy. $293.8 billion! This should give an inkling of the potential of creative industries in just one state of US and why other states would want to be in California’s shoes! The direct labour income of these creative industries is $71.4 billion. Entertainment workers took home 23.2 percent of that cash i.e. about $17 billion.

But, filming is highly mobile business and studios and producers increasingly rely on tax credits to lower their production costs. When a big Hollywood production comes to town, politicians can add boon to their local economies — marketing, tourism, food, catering, clothing and many more. In US, this led to a war between states.

Louisiana and New Mexico were the first to launch film incentive programs in 2002, hoping to siphon off the film work fleeing to Canada, where tax breaks and favourable exchange rates made it a go-to location. Today, nearly 40 states in US offer some form of rebate, credit or grant to the film industry. The plethora of choices has allowed studios and filmmakers to pit one state against another for the best deal.

California lost 18,580 jobs in the film and TV sector from 2004 to 2013, a 12% decline, according to federal jobs data compiled by the Milken Institute. During the same period, arch rival New York added nearly 10,000 jobs, an increase of 23%. New York has seen a surge in production since it increased its film credit in 2008. The state allocates $420 million annually to film productions. Louisiana, another top film destination, added 2,760 jobs, up 73%.

Tired of seeing Hollywood take its business elsewhere, California is moving to triple tax subsidies for film and TV productions, boosting incentives to $330 million annually and making the state competitive with New York, Georgia and other states that are courting the entertainment industry with even richer incentives. The action is widely seen as necessary to stop thousands of jobs from leaving Southern California, where most studios and production companies are based and would prefer to work if costs are roughly equivalent.

Several states in India too have woken up to the Media and Entertainment industry. In fact, the Centre has set the ball rolling in this direction with a few steps. The present Minister of State for Information and Broadcasting, Rajyavardhan Rathore, announced setting up of a Film Facilitation Office, which will be operated by the National Film Development Corporation (NFDC). It aims to make the process to get approvals simpler, by eliminating all channels of bureaucracy and red tape towards permission for film shoots. Moreover, in a move to encourage states to promote and embrace films from various genres, the information and broadcasting ministry has introduced a new category at the National Awards for theMost Film-Friendly State/UT. Uttar Pradesh already has a few key subsidies in place, Bihar is readying itself and even Arunachal Pradesh is coming up with a film policy! What is in it for these states? And what has made time and environment conducive to pursue Entertainment and Media?

Shreya Narayan is an Indian film and television actress, model, writer and social worker.

Posted by The Indian Economist | For the Curious Mind