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Trends

The Credit Crisis Visually Explained

by karan on March 20, 2009

in Economics, Trends

There is probably not a single person in the world today that hasn’t been affected in some way by the crisis that currently surrounds us. The majority have been affected negatively and a few positively, but everyone HAS been affected.

Not many people, though, and almost no one that has been affected without any direct link to the crisis (by this I mean people that aren’t in finance or finance related positions) actually really knows what happened and how we snowballed into something that comes along once a century.

Jonathan Jarvis, however, is someone who has and he’s managed to create an absolutely fantastic visual explanation of how this mess we’re in occurred. It explains mortgages, subrpime loans, collateralized debt obligations, securitization etc. in simple visual forms. The video is below:


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

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The Business of Bollywood: Life after the Box Office

by karan on February 8, 2009

in Business, Trends

Admit OneIn my last post on the Business of Bollywood, I explained the waterfall (the progress of money through a series of parties) of Box Office revenues of a film and how, of the vast amounts claimed by films, only a small fraction trickles down to the producers.

The Box Office, however, is only one of the many many avenues available for a film to recover its money. In fact, in the west (Hollywood and the European industry), Box Office revenues make up less than half the total revenue that a producer makes. The other avenues include TV Rights, which are then divided into Satellite (Sony, Star, HBO etc), Terrestrial (Doordarshan), Pay-per-view (DishTV, Tata Sky or Airtel) , Home Video Rights, Music Rights, Mobile Rights, Internet Rights, Ancillary rights (airline rights, hotel rights, ship rights) and indirect sources such as merchandise, comics and for successful films, even remake rights (for example a successful Tamil film could be remade in Hindi).

The split of revenues of a film as as follows:

Right Big Film Small Film
Domestic Theatrical 35% 39%
International Theatrical 18% 6%
Home Video 7% 7%
Music 14% 14%
TV 25% 33%
Ancillary 2% 2%
TOTAL 100% 100%

Television

For a big, commercial Hindi film, more than half the revenue (about 55%) comes from the box office domestically and internationally. The next big ticket item is Television rights. Satellite channels have been paying out ludicrious amounts of money for the rights to play the film. These rights are usually sold for a multiple year period (3, 5 or 7 are the most common) and the channel that buys it then has the right to show the film as many times as it wants in that period. A newer model that is emerging is the “Syndication Model”, in which rights are sold “per-play” instead of a fixed number of years. This ends up yielding more actual revenue to the producer but over a much longer period.

Home Video

Home Video in India is currently a small but very fast growing segment. It is actually the largest segment of a film’s revenue in the west but becuase of rampant piracy in India (and amongst the NRI community abroad), the home video market doesn’t yield much. This situation, however, is changing rapidly because of 2 major factors. One - the time period between a film’s theatrical release and the home video release is getting ever shorter (from an average of a few months earlier to a few weeks now). And second - the introduction of ultra low cost titles from players like Moser Baer and now T-Series has seriously cut into the pirate market. From a current share of about 7 - 10% of the revenue of a film, Home Video should end up commanding about a 15 - 20% share in the next few years (still way off the 45% that a western movie gets from home video).

Music

Music at one point used to be the mainstay of the Indian industry after theatrical. The advent of MP3s, the internet and digital piracy completely killed this. From about 2002 - 2006, music was dying a slow death of a cancer it could find no cure for - piracy. Then in about 2006, its savior came in the form of mobile content. Ringtones, caller back tones, ringback tones, monotones, polytones and the like completely changed the landscape. While it isn’t back to its historical position in the pecking order of things, music is again a driving force in an Indian movie’s revenues.

Ancillary Rights

With the advent of of new platforms like the internet and mobile phones, various new avenues like wallpapers, videos, internet downloads, themes etc. have emerged as small but credible sources of revenue for a film. In addition to these platforms, various other sources like airlines, ships and hotels have begun buying rights to Indian films with the increase in Indian tourism all over the world.

So all in all, especially for a smaller film, life after the box office is getting increasingly important and lucrative. As the industry matures further, more changes will occur and the basic economics of a film will continue to change and evolve, and due to this, allow producers to experiment with their content, which will allow for better and more varied content for the viewing public.

Till next time.

Bollywood Series

  1. The Business of Bollywood: The Theatrical Waterfall
  2. The Business of Bollywood: Life after the Box Office

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The Business of Medical Tourism

by yameer on February 2, 2009

in Business, Trends

Medical Tourism in India

Medical tourism (also called medical travel, health tourism or global health care) is a term initially coined by travel agencies and the mass media to describe the rapidly growing practice of traveling across international borders to obtain health care.

A Deloitte study forecasts that the number of people turning to “medical tourism” will increase from 750,000 to 6 million by 2010, an eightfold increase. (“Medical tourism represents a $2.1 billion business, study shows”)

There are various reasons why patients travel for treatment:

  • From US -Medical tourists are seeking treatment at a quarter or sometimes even a 10th of the cost at home.
  • From Canada - people discouraged by long waiting lists.
  • From Great Britain - patients that can’t wait for treatment by the National Health Service (NHS). Also, a private physician is too expensive.
  • Others - want to combine a tropical vacation with cosmetic surgery and/or other treatments.
  • From Poorer countries - more patients are coming from poorer countries such as Bangladesh where proper treatments may not be available.

The benefits go beyond cost: (‘Medical Tourism’ Industry Grows Rapidly)

  • Consumers gain from cost savings and also receive excellent care from highly qualified doctors.
  • Many providers offer more personalized care i.e. a higher physician-to-patient ratio–than is commonly available in the Western world.
  • Some services that are not yet approved by the U.S. Food and Drug Administration, such as certain hip replacement surgery techniques, are available overseas.

However, consumers also face risks when undergoing treatment in a foreign country:

  • Follow-up is difficult when the patient returns home, and expensive care may be required if complications occur.
  • Quality assessment is problematic, and the language barrier can complicate matters.
  • Malpractice laws in other countries are different.

Cuba, Costa Rica, Hungary, India, Israel, Jordan, Lithuania, Malaysia and Thailand are active in promoting medical tourism. Belgium, Poland and Singapore are also entering the field.

India is considered to be the leader amongst other countries promoting medical tourism and now it is moving into a new area of “medical outsourcing”, where subcontractors provide services to the overburdened medical care systems in western countries.

India’s National Health Policy declares that treatment of foreign patients is legally an “export” and deemed “eligible for all fiscal incentives extended to export earnings.” Government and private sector studies in India estimate that medical tourism could bring between $1 billion and $2 billion US into the country by 2012. The reports estimate that medical tourism in India is growing by 30 per cent a year. (Medical Tourism India)

Today, a fact that is well known globally is that some of the best doctors in the world are Indian. The quality of health care in India has improved dramatically and the economic implications of Medical Tourism are too large to be ignored, even by the government. All these factors combined with the substantially lower costs and English-speaking population have allowed India to become the leader in Medical Tourism.

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Good Time to Invest in the Art Market?

by yameer on January 30, 2009

in Trends

Manjit Bawa's Painting

Manjit Bawa's Painting

If you are unaffected by the liquidity crunch, then the answer is yes. Currently, the Art market is going through a rough phase like most other markets and it will take time to stabilise.

According to an art consultant, there are a few good reasons for buying Art:

  • The prices are coming close to being reasonable for the first time in several years.
  • Numerous dealers & galleries are now willing to negotiate prices.
  • Some investors are selling of quality works at lowered prices because of the cash crunch (also known as distress sales).
  • Good artworks are likely to come up at auctions again due to distress sales.
  • Both dealers & galleries are likely to focus on better quality works in order to woo the price-sensitive buyer.

“A year ago people couldn’t get enough work. They would buy two copies of everything because it seemed like money in the bank,” says Farah Siddiqui of FSCA gallery in Mumbai. “Now people are desperately trying to sell works at cost price or even lower.”

Bodhi Art, one of India’s biggest galleries, is rumored to have offered 40% reductions to clients and many of the other galleries on the international fair circuit are reported to have made reductions of at least 20%. “We are making deals like everyone else,” says Peter Nagy of New Delhi and Berlin gallery Nature Morte. “The collectors are still there but there are a lot more negotiations over prices.”

“The trend appears to be shifting somewhat from the investment aspect of art to its aesthetic or intrinsic value. It therefore appears that decorative and affordable art will do well in the interim period, but serious collectors are on the lookout for excellent works. As a buyer, for you, an ideal work of art is one that can combine the aesthetic and financial investment components”, says art consultant, Nalini Malaviya. She suggests that the best way to buy art is to zero in on the artist or the artwork through systematic research. Visiting an on going art shows and buying one that you like and one that suits your wallet is another option. Although, the one bought through systematic research would be a safer bet in the long run.

This is clearly indicative of a bear market. A sudden crash in asset (art) prices and a sudden interest in value investing. Just like in the stock market, where people have now started paying heed to PE ratios, Debt/Equity splits and quality of management, people in the art market have begun to investigate the intrinsic value and quality of what they buy.

The good news is that artists are no longer mass-producing their works. They current scenario is forcing them to once again strive for quality in their creations.

Whatever the experts may advise, this is a time in which most people are suffering from a liquidity crunch. Many opportunities to invest may come your way, however, I feel the safest place for your money is in the Bank (one that is unlikely to fail)!

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The Business of Bollywood

January 30, 2009

Everyone sees a number of ads, articles and other information regarding the “business” a film has done. Never has there been a more vague description of what a film actually earns than “business” or “gross”.
The film revenue waterfall goes like this:
Gross: Rs. 100
Less Entertainment Tax: 33% (this goes straight to respective state governments)
Net (or Net [...]

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Real Estate in India to turnaround after next 2 quarters

January 30, 2009

According to the CEO of Kotak Realty Fund S Srinivasan, the real estate sector could witness a turnaround in the next two quarters and would see fund flow after that. “It will take at least two quarters before the fund flow to estate developer community begins, and the sector can witness a turnaround,” he said [...]

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Is your Job Safe? 50 Million Job Losses in 2009: ILO

January 29, 2009

The International Labour Organisation (ILO) says in its annual Global Employment Trends report that global unemployment in 2009 could increase over 2007 by a range of 18 million to 30 million workers, and more than 50 million if the situation continues to deteriorate.
Getting pushed into extreme poverty could just be the fate for some 200 [...]

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