CO-PRODUCTION WITH INDIA

CO-PRODUCTION WITH INDIA

By: JAVED REHMAN KHAN

INTRODUCTION

The Indian Film Industry enjoys mass appeal in India and forms one of the most important content feeder systems to the Music, Radio and Television segments.

The Indian Film Industry eclipses Hollywood both in terms of number of films produced and theatrical admissions. The total annual theatrical admissions in Indian cinema trail Hollywood in overall revenues. While cheaper admission prices and the relative lack of multiplexes (the average theatre admission price in the US is nearly 7-8 times that in India) are two reasons that explain this gap, poor monetisation of various revenue streams and inefficiencies across the value chain have also resulted in suboptimal revenue.

Overall, 2009 was a difficult year for the Indian film industry. While the multiplex-producer stalemate left the industry with significant losses, the general elections and the swine flu scare also kept audiences away in early 2009. Moreover, lack of good sustainable content affected the success ratio and fortunes of the industry.

However, the last quarter of 2009 brought some cheer to the industry. The success of films like ‘AJAB PREM KI GHAZAB KAHANI’, ‘AADHAVAN’, ‘VETTAIKARAN’ and ‘ 3 IDIOTS’ boosted the industry’s fortunes. Hollywood films like ‘2012’ and ‘AVTAR’ also did well at the box office.

The Industry learnt some important lessons from the business cycle of 2009. Although the multiplex strike temporarily derailed the Indian Film Industry, it sowed the seeds of an open constructive dialogue between these two important stakeholders. This augurs well for the industry as it is expected to lead to a more collaborative approach towards business in the future. Further, poor profitability of films on account of mediocre content and high talent cost is expected to force the industry to be more cognisant of such issues and follow a more efficient approach in maintaining cost discipline while producing films. Continued interest by global studios in India, investments in technology such as 3D and digitisation, introduction of miniplexes, coupled with strong government support against piracy is likely to help the Indian Film industry strengthen its position in the years to come. Now, the industry mood is upbeat and many Indian companies have emerged stronger in the aftermath of the downturn in the industry. Indian media conglomerates are now getting stronger. The multi-faceted Reliance Entertainment, the Essel Group with diverse interests; the Times of India Group with interests ranging from Print to Radio to TV to Music and Films; the giant UTV and many more now dot the media landscape and have placed India strategically and firmly on the global entertainment map.

The recent global success of “MY NAME IS KHAN” – distributed by Fox Star Studios – is a classic case study that Indian movies can reach out to audience beyond the Diaspora.

Times have never been so conducive for the growth of the Indian Film Industry as what they are today, calling for growth and development in practices in India and outside India. Things have begun to change in order to stay abreast with the global norms. Professionalism, Corporatisation and institutionalization are new ‘FORMULAS’ for the industry. There have been considerable improvements in making and marketing the film. Many production houses are going public and this means they are accountable more than ever for their decisions/actions.

The significant development in the last few years has been on the front that Indian movies are gaining immense popularity overseas. And the overseas producers/investors/financiers started approaching Indian big banners for co-productions. So, the time has come to give necessary push to co-production treaties. We already have a full-fledged, workable treaty with countries like Italy, UK, Germany, France and Brazil and many more to come especially from South Korea. Multiplexes have changed the business of film exhibition in India and the future, perhaps, lies in emerging platforms in the digital world too.

 CO-PRODUCTION

Co-Production may broadly be understood as the collaboration of two or more persons to pool resources, rights or services to produce an audiovisual work and then commercially exploit the same with the view of sharing the proceeds in agreed proportions. At times, the role of one party to a co-production arrangement may only consist of making financial contribution where the” finance only” partner participates in the commercial exploitation of the audiovisual work without being co-owner of its constitutive elements. There may also be a third category known as “twinned co-production” that involves two audiovisual works production costs of which  are borne jointly by co-producers and while one co-producer exercises pre-dominant creative control over one of the works, another exercises such control over the other. Eventually, it depends on the nature of the arrangement that the co-producers have and the rights and obligations vary in accordance with the agreed manner of co-operation.

CPTs (Co-Production Treaties) are agreements or treaties between countries that provide an umbrella framework within which nationals of signatory countries may enter into contracts to produce audiovisual works together. CPTs ensure that audiovisual works so produced are treated as “national audiovisual works” in signatory countries and receive benefits that are domestically available to national works. Although traditionally co-production treaties have dealt with feature films, documentaries, science films, animation films and also commercials that can be shown in cinemas, on television or on video-recorders, irrespective of the medium on which the same are recorded or stored in the attempt to capture the subject matter coverage of such modern CPTs, the broader expression “audiovisual works” will  be used  during my speech, where relevant.

INDO-ITALIAN AND INDO-UK CPTS : STATUS

The Indo-Italian CPT was signed on May 13, 2005. This CPT is fairly exhaustive and contains elaborate provisions covering various aspects of co-production except the procedure for application and approval, which will be provided at a subsequent stage.  And the Indo-UK CPT was signed in New Delhi on December 5, 2005. The following annexes have been finalised through an exchange of notes :

i.              Appropriate film-making and cultural benefits to the UK and India;

ii.            The nature of co-producers;

iii.           The minimum and maximum financial contributions of co-producers;

iv.           Content, language, credits, locations, and personnel; and

v.            Rules of procedure for granting and withdrawal of approved co-production status.

 TERMS

Being in the nature of an agreement between countries, a CPT generally contains a provision specifying the time-period during which some or all its provisions constitute valid legal obligations of the signatory countries. However, this varies on a case to case basis. The Indo-Italian CPT states that it would be valid for a period of 3 years from the date of its entry into force and that a tacit renewal for like periods would take place one or the other party gives a written termination notice of six months. Co-productions in progress, which are already recognized by competent authorities, will continue to benefit fully until their completion.

After expiry or termination of the treaty, the terms thereof will continue to apply to the division of revenues from completed co-productions.

On the other hand, the Indo-UK CPT makes no provisions for a fixed term.

However, it states that either party may terminate the CPT by giving a written notice of 6 months. Under this CPT, an audiovisual work will be eligible for the grant of co-production status even if production commenced before the coming into force of the CPT, provided that the first day of  commencement of principal photography is no more than 18 months before the date of entry into force and production is completed after such date. Further, subject to certain conditions, an approved co-production will continue to be eligible to receive benefits of the CPT even if the latter ceases to have effect.

FINANCIAL CONTRIBUTION

Most CPTs specify the limits of the minimum (sometimes also the maximum) financial contribution that must be made by co-producers in order to qualify for the benefits. One of the general requirements is that the full production cost of the audiovisual work must be accounted for in the financial contributions of the parties, and a qualified accountant’s report is insisted upon to demonstrate the same. Such reports show the details of items such as total production cost, each co-producer’s contribution and the expenditure which is regarded as representing each co-producing country’s creative contribution.

The Indo-Italian CPT states that while specific percentage of contribution is to be decided by co-producers themselves, an individual co-producer must contribute a minimum of 20% of the total cost of the co-production in terms of finance, material and management, including creative and other inputs.

The Indo-UK CPT does not contain any such specific requirements at present and mentions that the same will be covered in the annex.

LOCATIONAL/PERSONNEL REQUIREMENTS

Some CPTs also mandate the extent to which the audiovisual work should be made in the signatory countries and the requirement of using talent/personnel available therein. Where the script of a film requires the use of talent/personnel from a third country or shooting outside the signatory countries, exceptions may be granted. However, because the audiovisual works should be made for the most part in the co-producing countries, exceptions are always subject to the approval of the competent authorities. In general, the majority of the filmmaking work should be carried out in the country of the majority investment co-producer.

The Indo-Italian CPT requires that the co-producers must be citizens or permanent residents either of India or Italy. In exceptional circumstances, persons other than citizens or permanent residents may be engaged with prior written permission of both the competent authorities on the condition that the work does not lose its character as an Indo-Italian co-production. The CPT further states that live action shooting and animation works such as story boards, layout, key animation and voice recording must, in principle, be carried out alternatively in Italy or India. Location shooting, exterior or interior, in third country may be permitted if the script or the action  so requires and if technicians from  Italy and India participate in the shooting. The laboratory work must be done in either Italy or India unless it is technically impossible to do so.

The Indo-UK CPT does not contain any such specific requirements at present and mentions that the same will be covered in the annex.

BENEFITS

Normally, CPTs restrict the benefits available to a co-production to the co-producer of the country concerned and the provisions vary in terms of their scope and content. For instance, both the Indo-Italian and Indo-UK CPTs provide that every co-production there under will be regarded as a national audiovisual work and provided benefits accordingly. However, while the former clearly states that these benefits will accrue to the producer who is from the country granting them, the latter is silent on this point.

SHARING OF REVENUES

Some CPTs require that the revenues from the commercial exploitation of the work should be proportional to the respective financial contributions of the co-producers. On this too, provisions of different CPTs require the arrangement for commercial exploitation to be incorporated in the co-production contract.

The Indo-Italian CPT states that the sharing of revenue, in principle, is to be proportional to the contributions of the co-producers and must be specified in the co-production contract.

OWNERSHIP OF COPYRIGHT AND NEGATIVE

CPTs normally require a provision to be incorporated in co-production contracts to the effect that each producer will own a negative and will have access to original production material.

The Indo-Italian CPT mandates that the audiovisual work should have two negatives or one negative and one dupe negative with two international sound tracks. It further states that each co-producer will own one good quality print, one dupe positive and one international sound track and will have the right to make copies.

Further, each co-producer will have access to the production material. These requirements are subject to the agreement between the co-producers. It may be noted that in a case where a CPT specifies provisions that can be overridden by the express terms of the contract between co-producers, the provisions of the CPT would become applicable in default if the co-producers have not recorded their understanding to the contrary in a written contract.

The Indo-UK CPT does not contain any specific requirements regarding this issue and the same are expected to be covered in the annex.

LANGUAGE, MUSIC, DUBBING AND POST PRODUCTION

Most CPTs require that in the absence of approval from competent authorities, music in an audiovisual work should be composed, directed and performed by nationals of residents of one of the signatory countries. Some CPTs may also contain language requirements and most require post-production activities to be carried out in the signatory countries.

The Indo-Italian CPT states that the audiovisual work should have its original soundtrack in English or Italian or in other Indian languages, capable of being further dubbed in any of these languages. However, if the script so requires, other languages may be used with the prior permission of the competent authorities. The dubbing or sub-titling should be done either in India or in Italy. Dubbing or sub-titling in Indian languages should be done in India and that in Italian in Italy. Dubbing and sub-titling in English may be done in India or in Italy as may be agreed between the co-producers.

TERMS AND CONDITIONS IN THE CO-PRODUCTION CONTRACT

Many CPTs specify the terms that must be included in the co-production contract and normally a copy of the contract is required to be submitted to the competent authorities as part of the application process.

The Indo-Italian CPT, for instance, states that the minority investment co-producer within sixty days following the delivery of all the materials required for the production of the version of the audiovisual work in the language of the minority country. The majority investment co-producer will have the same obligations and the failure to meet this requirement will entail the loss of benefits under the CPT. The Indo-Italian CPT mandates that this requirement must be clearly specified in the co-production contract to enable the co-production to be recognized.

CREDITS

Almost invariably, CPTs require the audiovisual work to include a credit indicating that the same is a co-production. Usually, the country of the majority investment co-producer is mentioned first. However, sometimes the co-producers may have flexibility in this matter depending on the territory where the work is exhibited. The requirements vary depending on the CPT concerned.

 WORK PERMITS/VISAS

CPTs also contain provisions for the movement of personnel and specify requirements for visas/work permits.

The Indo-Italian CPT states that subject to the applicable law, both countries will facilitate entry and short stay for directors, actors, producers, writers, technicians and other personnel mentioned in the co-production contract, and will allow temporary import of equipment. These will be subject to the applicable law.

The Indo-UK CPT states that both countries will permit any person employed in the making  or promotion of an approved co-production to enter and remain in the UK or India, as the case may be, during the making or promotion of the audiovisual work, subject to the applicable law as to  entry, residence and employment.

COMMITMENT FOR PUBLIC SCREENING

In general CPTs make the provision that the signatories would be under no obligation to allow public screening of approved co-productions in their respective jurisdictions.

Both Indo-Italian and  Indo-UK CPTs specify that the CPTs will not bind either of the countries to permit public exhibition of an audiovisual work merely because it has received an approved co-production status.

CONCLUSION

The Indian audiovisual industry is riding on the economic growth and rising income levels that the country has been experiencing in the past few years. It is one of the fastest growing sectors and is expected to grow at a compound annual growth rate of 14%. The Indian film industry is said to be one of the largest in the world with 934 films produced in 2004 and more than 3.1 billion admissions. The film industry is expected to grow at the compound annual growth rate of 18% for the next five years. Further, the international success of “Bride and Prejudice” and “Bend it like Beckham” is indicative that the Indian audiovisual industry has the potential to cater to a global audience. For such crossover films, the return on investment is very good due to low production-cost in India and high revenues arising from global acceptance. The animation industry is also becoming big business. In the next three years, India will receive more than USD 2 billion worth of animation business. It has been reported that Walt Disney Company, the USD 30 billion entertainment conglomerate, has lined up a series of investments  for India and the plans include a slew of high-profile movie releases for India, almost coinciding with the releases in the US.

All this clearly indicates that all avenues must be explored to give impetus to the audiovisual including having more bi-lateral CPTs with countries like South Korea, Japan, China, U.K., Ukraine, Turkey, entire Europe etc., that have strong audiovisual industries. Participation of India in bi-lateral CPTs will result in the following benefits :

1.    International filmmakers will be encouraged to pool their creative, artistic, technical, financial and marketing resources with their  Indian counterparts;

2.    Indian filmmakers will be able to share their risks and gain access to international financing, locations, expertise apart from a wider audience base;

3.    More Indian locales will be utilized even for non-India specific projects,  boosting local industries  besides raising the visibility of India as a preferred shooting destination; and

4.    The cost competitive post-production and animation sectors of the Indian audiovisual industry will stand to gain.

To conclude, I’d like to say that Asia Contents & Entertainment Industry Fair (in short ACE Fair) is certainly a platform that drives a host of policies and hence, it is one of the reasons that we come every year to Korea to attend it, to have and participate in dialogues and offer suggestions, if any. There are definitely opportunities to meet a host of industry players from all over the world who come down on a forum such as ACE Fair. It is definitely a forum for negotiation, partnerships and new ventures to take back to our country.

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Written By : JAVED REHMAN KHAN

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