A Chinese-language, partially studio-backed film, Ang Lee's Lust, Caution, may have just walked off with the top prize from Venice, but these days the US studios seem more intent on learning Hindi than Mandarin Chinese.

Over the past few months, the studios have announced a string of local-language production deals in India. Last month, Warner Bros Pictures unveiled its first Hindi-language film - action comedy Made In China - which it is producing with India's Orion Pictures and Ramesh Sippy Productions. This follows Walt Disney's announcement in June that it is tying up with Bollywood major Yash Raj Films to co-produce a series of animated features, and Viacom's wide-ranging joint venture with India's Network18, which was unveiled in May.

Sony, one of the most active local- language producers, was in the game a little earlier and recently completed its first Hindi film, Beloved (Saawariya), directed by Sanjay Leela Bhansali. It is set for release in November around the time of the Hindu Diwali festival.

Producing in India, along with the other Bric territories, Brazil, Russia and China, has become a major focus for the studios - two of which, Sony and Universal, have recently set up international production divisions. What is significant about India is that, even more than the other territories, it is dominated by local product (non-Indian films managed a box office share of just 4% in 2006). This makes tapping into local talent even more desirable. And in comparison with its Asian neighbour, India appears to offer a much easier ride.

The studios have made greater strides into India than into the heavily-regulated Chinese market. It is not that they have given up on China. The most local language-friendly studios - Sony and Warner Bros - still have more Chinese than Hindi projects on their development slates.

But the studios have greater scope on the sub-continent, where - unlike China - their affiliated TV channels, such as Sony's SET and News Corp's Star, have long been active in local production. There are also no limits on foreign ownership of film production outfits and they are allowed to distribute their own films.

'The US studios have been distributing their own product in India for quite a while now, so it's only natural that they would also want to start producing, but in a phased manner before they get into full-scale production,' says Siddharth Roy Kapur, chief operating officer of local studio UTV Motion Pictures.

But it is not just an easier regulatory environment that is drawing the studios to India, otherwise they would have been producing Hindi movies long before now. The Mumbai-based industry is itself changing and sending signals that it is ready and open for business.

Once ruled by tight cliques of producer-directors who operated without contracts, budgets or even a script, Bollywood has recently seen an influx of bank financing and legitimate capital, along with the rise of professional studios such as UTV, Adlabs Films and newcomer Studio 18. Driving expansion is a growing middle class, the recent multiplex boom and rapid development of ancillary markets.

All of which makes the US studios feel more comfortable about stepping into production. Thanks to the growing screen count, it has been a good year for the studios in India - Spider-Man 3 grossed $15m, setting a new record for a foreign film. But they realise their share of the pie will remain tiny unless they cast Indian stars in local-language films.

According to Paramount Pictures' Los Angeles-based chief of local acquisitions and co-production, Ellen Pittleman, the studios are keeping an eye out for Indian projects with crossover potential, but their main interest is in making films for the Indian market. 'Sometimes local films can be exported - Crouching Tiger, Hidden Dragon certainly proved there's an appetite - but on the whole, their budgets have not been parallel with what's happening in the rest of the world,' Pittleman says. 'So you have the tentpoles for worldwide distribution but, in each individual market, it's only natural that people want to see their own films.'

In the case of Hindi-language productions, there's also the opportunity to reach the market of around 20 million overseas Indians. Sony's Beloved will be released day-and-date to the global diaspora in North America, the UK, Australia and other territories.

However, as Adlabs chairman Manmohan Shetty points out, making Hindi films does not deliver you the entire Indian audience. 'We have different film industries, a variety of languages and cultures just within our own country,' Shetty says. 'The Hindi, Tamil and Telugu industries are all about the same size and yet none of us really know what the others are doing.'

Turning the tables on Hollywood

So far, all the US studios' attention has been on the Mumbai-based Hindi industry, which is probably the most visible. But while it is easy to understand why Hollywood is courting Mumbai, it is more difficult to figure out what the Bollywood studios gain from their overseas collaborations. They have a huge domestic market and already have international distribution networks in place. However, as UTV's Kapur observes, it is not the local studios that are hooking up with Hollywood for Hindi films, but individual directors and producers.

'What local film-makers gain is the creative freedom that they might not get with an Indian studio, particularly as the foreign studio doesn't know the market,' says Kapur. 'Then if the local director wants to make an international film, there's this built-in guarantee that the studio can take it to the highest possible level.'

As for the Mumbai-based studios, they're more interested in turning the tables and making Hollywood films. UTV, which is co-financing M Night Shyamalan's $57m The Happening with Fox, and Adlabs, which is co-financing a slate of English-language films with Hyde Park Entertainment, both see no reason why they should not reverse the process.

'We're co-producing (English-language projects) because we want to gain experience working on films with Hollywood-sized budgets,' says Adlabs' Shetty. 'If the studios are coming here to make Hindi films, then we should also try Hollywood. Our potential to invest is limited as Indian companies are still quite small.'

Potential stumbling blocks

Any outsider entering the lndian film industry should be mindful that, while it looks less complicated than China, it is still not exactly plain sailing. Bollywood is becoming professionalised, but is thankfully still some way from being completely sanitised - its inner workings are often as colourful as the plots of its films.

In recent months, two major Bollywood stars, Sanjay Dutt and Salman Khan, were sentenced to prison for arms possession and poaching respectively, giving the producers of several projects sleepless nights until both were granted bail.

Also, while censorship is not as difficult as in China, it is still something that foreign producers need to be aware of. China bans all mention of religion or the occult, which rules out horror films, but the Indian censors are equally concerned about offending the sensibilities of different religious communities. All of which makes it important to team up with experienced local film-makers who can negotiate with the stars, appease the censors and still come out with an entertaining film.

And after overcoming all those obstacles, with tickets in India selling at an average of $0.40 (rup18.6), how much money can the US studios actually make'

The potential revenues are tiny, but then so is the initial investment, and anyway that is not really the point. 'The fact is that the international markets are growing, while the US market has matured, and Wall Street is only interested in growth,' says one Asia-based studio executive who asked not be named. 'Even a small increase in stock price can cover their costs.'

In other words, it does not really matter what you are doing in India or China so long as you are seen to be doing it.

Along the way, the world's two largest film producing nations, the US and India, might just learn something about what makes their respective audiences tick.

Why Hollywood loves India
- Long-standing presence in local TV industry
- Multiplex boom
- Growing middle class
- Rapid development of ancillary markets
- More relaxed regulatory environment than China
- Hindi films appeal to global diaspora
Why India loves Hollywood
- Film-makers enjoy greater creative freedom
- Opportunity to work with huge production budgets (on English-language films)
- Global distribution for international films

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