Risk mitigation in Indian film industry

Abstract

The motion pictures business i.e. the movie business has certain unique aspects which pose challenges in front of those who fortunes are linked with the industry. The shelf life of a movie is short whereas the cost of producing and marketing it and the financial risks associated with its success are very high. The concept of hedging risks is in a very nascent state in the Indian film industry . The business is done in a very traditional way which exposes producers, distributors and financers to undue risks. In this paper we have looked at the Indian film Industry , the Hindi film industry in particular, its evolution and The risks and challenges that the industry faces. We have analyzed various risks faced by the industry like the risk of a flop movie, financing risks, political risks , and competition from regional film industry and also competition from Hollywood movies which are gaining popularity in India to name a few. We have categorized these risks in certain applicability of various financial instruments like options to hedge the risk of low business of a movie. We have also looked at a novel idea of securitization of box office returns and float bounds with those returns as underlying to generated short term financing.