FDC: Boon or Bane

Prepared For Saeed Alamgir Jafar Professor, Institute of Business Administration, University of Dhaka

Submitted by Syed Saleh Ahmed Sobhan (125) Mohammad Shahidul Islam (127) Khondkar Nahin Ahmed (129) Shuvajit Mandal (135) Amitav Adhikary (136) Mir Zahidur Reza (160) Batch MBA 46(D) Date of Submission 1/19/2012

Table of Contents
Executive Summary ................................................................................................................................ 4 Introduction............................................................................................................................................. 5 Analysis of Data ...................................................................................................................................... 6 INCOME DATA (2001 2005).......................................................................................................... 6 EXPENSES (2001 2005) .................................................................................................................. 8 INFORMATION ABOUT INFRASTUCTURE AND LOCATION ..................................................... 9 INFORMATION ABOUT THE HEIARCHICAL LADDER AND DIVISIONS ................................ 10 Application of Methodologies................................................................................................................ 12 Past experience with similar problems or industries ........................................................................... 12 Organizational life cycle .................................................................................................................... 14 WOTS-UP analysis ........................................................................................................................... 14 Strengths ....................................................................................................................................... 14 Weakness ...................................................................................................................................... 14 Opportunities ................................................................................................................................. 15 Threats .......................................................................................................................................... 15 Formulation of alternatives .................................................................................................................... 16 Recommendation of the Strategy ........................................................................................................... 17 Privatization of the Corporation ......................................................................................................... 17 Statement of plan of action to be taken .................................................................................................. 18 Methods of Privatization .................................................................................................................... 18 1. Selling of Government shares in The Capital Market: ................................................................. 18 2. Assigning Management for the Corporation: .............................................................................. 18 3. Leasing out the Corporation: ...................................................................................................... 18 4. Direct sale of the Asset: ............................................................................................................. 18 5. Sales through multiple methods:................................................................................................. 19 6. Transferring part of the shares to the employees: ........................................................................ 19 7. Sale through International Tender: ............................................................................................. 19 Evaluation of the Projected Privatization of BFDC ......................................................................... 19 Works Cited .......................................................................................................................................... 21 2

List of Figures
Figure 1: Films made in last 50 years ..................................................................................................... 11 Figure 2: Recently parallel stream movies like Moner Manush has both gained commercial success and critical acclaim ...................................................................................................................................... 13

Executive Summary
The main purpose of this assignment is to represent the functionality of the only state run Film Development Corporation of Bangladesh. This paper is targeted toward understanding that how FDC was created, why it was formed, what was the main purpose of this organization. The paper will venture into the history of the organization. The rise of FDC as the main force of film making in Bangladesh will be discussed. We will also try to scrutinize the comparison of FDC with of other Film Development Corporation in the region. How FDC with its growth became the monopoly organization of film making in Bangladesh, hindering the prosperity of independent and Art House Cinema. The accretion of FDC branded film destroyed the film culture of Bangladesh. The paper will also discuss that how and why FDC from its humble beginning inflated to powerhouse in late 70s, 80s and early 90s, then how the whole bubble burst and nearly obliterating the film industry of Bangladesh. In this paper we will also try to understand that why the industry as vast as Films were severely paralyzed if run by a state run organization. That how bureaucratic model of managing FDC was a huge hindrance of such a industry which heavily depends on artistic forces and creativity. We will also try to understand that why the private studio system could not thrive in Bangladesh while FDC became the dominant film making organization. How the lack of growth in film industry cost so many jobs and shutting down hundreds of cinema theatres. The non-functionality of FDC affected the economy of Bangladesh. Why Unions such as producers union, directors union and actors union trying to achieve their best interest actually hurt themselves. How and why FDCs policies made it so difficult for new filmmakers to enter into the market. The final purpose of this paper is to examine all these inconsistencies and provide a proper solution to this problem. We will try to find ways to rejuvenate this dying industry by making changes both in management and policies of FDC. Though some might consider that the film industry is already dead and there is no way to invigorate this industry, but we must understand that there is actually a huge market for the consumption of cinema in Bangladesh. With the expansion of middle class the market for cinema will only increase, and that is an opportunity that must be properly utilized.

Introduction
Films are cultural artifacts created by specific cultures, which reflect those cultures, and, in turn, affect them. Film is considered to be an important art form, a source of popular entertainment and a powerful method for educating or indoctrinating citizens. The film industry consists of the technological and commercial institutions of filmmaking: i.e. film production companies, film studios, cinematography, film production, screenwriting, pre-production, post production, film festivals, distribution; and actors, film directors and other film crew personnel. Though the expense involved in making movies almost immediately led film production to concentrate under the auspices of standing production companies, advances in affordable film making equipment, and expansion of opportunities to acquire investment capital from outside the film industry itself, have allowed independent film production to evolve.The major business centers of film making are in the United States, India, and Hong Kong etc. The United States has the oldest film industry (and largest in terms of revenue), and Los Angeles (California), is the primary nexus of the U.S. film industry. But the effect of American cinema has even larger role to play in world economy. The effect of US pop culture is heavily realized in todays globalized world. American cinema has actually created a very large market for American products around the world. From American fashion to food, their cinemas have influenced a global market for these products. So there is no way to belittle the influence of Hollywood in todays global economy. India is the largest producer of films in the world. In 2009, India produced a total of 2961 films on celluloid that include a staggering figure of 1288 feature films. Indian film industry is multilingual and the largest in the world in terms of ticket sales and number of films produced. And this cinema has a profound effect in Bangladesh. Indian Cinema heavily influences our youth. And that is why local cinema plays such an important role. Homegrown products depicted in local cinema can cater to very large audience and in effect higher usage of local products offsetting the dependence on imported goods. Marketing usage of product placement and film sponsorship can in effect play a very important role to amplify Bangladeshi made products, which definitely further advance the various industries here. So Cinema with it far reaching grasp can not only creates employment and revenue it can also improve the state of other industries working in the nation.

As a nation, we have always had film as a foremost choice of entertainment, and as an outlet of our emotions. Statistics show that the film industry revives better than most others from negative Influential factors, often at rates which are unexpected for a people with spending capabilities as limited as ours!
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Analysis of Data
Bangladesh Film Development Corporation was established on the basis of FDC Act 15, which was passed by the parliament of East Pakistan in 1957. The corporations main occupation was to facilitate film making by providing the producers with all relevant services or facilities, technicians, raw films, loan etc. In 1958, the government of Bangladesh grants a sum of 10 million in local currency (BDT) to this corporation as its initial capital and along with that, furnishes it with some film making equipment, which formerly belonged to the PR department. However, Bangladesh Film Development Corporation starts its operation with these assets (capital and machineries). In 1987, the government declares the corporations loan of BDT 7.2 million as its capital and as a result, the refined capital of the corporation turns out to be BDT 8.2 million. Besides, the government allocates to the Film Development Corporation a land area of 6.56 acres in Tejgaon Industrial Area, from where it runs all its activities till this day. Then, in 1980, 105 acres of land in Kabirpur, Gazipur has been allocated to the corporation for the arrangement of shooting facilities. FDC has spent BDT 1.75 million so far from its revenue budget for the development of this region and a project in this sector has been under consideration of the government. The corporation has adopted BDT 408.3 million till now as loan from the government, with which it has established new buildings and machineries. At this moment, FDC can provide facilities for the making of 85 full-length movies (approx) a year. At present, this corporation has been running as an autonomous body under the control of the government of Bangladesh. Here are some of the information provided on the FDC Website. These include the income statement and the trend in which they have been changing over the recent years. The information also includes the Governing body style and the division of the departments. The division allows effective management of resources.

INCOME DATA (2001 2005) The trend shown in the information over the recent years suggests that the sales have increased with a major jump in 2003-04. This was mainly helped by the release of more films and also the usage of the FDC facilities by 3rd party groups for the production of documentaries and TVC. The income data shows that the main income comes from the sale of Raw Film. This accounts for almost 50% of all the income, in some cases this has exceeded all the other incomes which includes those from Shootings, Laboratory, Recording and Editing.The income of the recent years have increased further more due to the increase in the making of high budget films and more production value.

EXPENSES (2001 2005)

From the information provided in Profit section, it can be seen clearly that there has been a gradual increase in the profits over the years with a drastic increase of about 50%. However, there was a big dip in the income since then. This can be mainly attributed to the release of fewer films and also other political related issues.
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INFORMATION ABOUT INFRASTUCTURE AND LOCATION

From above information we see that the infrastructure of FDC is clearly not up to par with international standards. Heavy investment and improvement must be done to improve its state.

INFORMATION ABOUT THE HEIARCHICAL LADDER AND DIVISIONS

Now lets have a look at the viewing pattern of Cinema audiences in Bangladesh 1. The current cinema viewing is relatively low with 11% (approx 16.5million) of the population watch cinema at least once a year 2. At least 25% of the cinema viewers , watch films once every 4 months 3. At least 25% of the cinema viewers , watch films once every 6 months 4. And 16% of the cinema viewers , watch films once every month *Source: ACNielsen

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Productivity
Films Made in last 50 years
films made

500 375 250 125 0

19561959

19651969

19761980

19861990

19962000

Figure 1: Films made in last 50 years

From the figure it could be seen that with the passage of time the number of movies released steadily increased.

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Application of Methodologies
Past experience with similar problems or industries One relevant example of gradual decline in film development and successful recovery is the Cinema of West Bengal, India. The industry is known for producing many of Indian cinema's most critically acclaimed Parallel Cinema art films, with several of its filmmakers gaining international acclaim, most notably Satyajit Ray. The film industry based in Kolkata, West Bengal, is sometimes referred as "Tollywood", a portmanteau of the words Tollygunge, a neighbourhood of Calcutta where most of the Bengali film studios are located, and Hollywood. The journey of Bengali cinema started in the late 1890s. Up to 1930, the movies were silent. But the first Bengali film to be made as a talkie was JamaiShashthi, released in 1931. The period 1931-1947 has seen the steady rise of Bangla Cinema in undivided Bengal. It was followed by the Golden era of Bengali Cinema during 1952-1975. During this period, Bengali cinema enjoyed a large, even disproportionate, representation in Indian cinema, and produced film directors like Satyajit Ray, who was an Academy Honorary Award winner, and the recipient of India's and France's greatest civilian honours, the Bharat Ratna and Legion of Honor respectively, and MrinalSen, who is the recipient of the French distinction of Commander of the Order of Arts and Letters and the Russian Order of Friendship. Other prominent film makers in the Bengali film industry at the time included Bimal Roy and RitwikGhatak. In the 1980s, however, the Bengal film industry went through a period of turmoil, with a shift from its traditional artistic and emotional inclinations to an approach more imitating the increasingly more popular Hindi films, along with a decline in the audience and critical appreciation. This apparent downfall of Bengali cinema continued up to the first decade of 21st century. The Bengali film industry, which had been a beacon for the country's film industry until the 1980s, is in a turnaround mode. At a time when Bollywood continues its roller-coaster ride, there are cheers in the Bengali film industry with several commercial successes. The dark period of the 1990s when Bengali tinsel town was on a steep decline seems like a nightmare that's best forgotten. And, with the money pouring in, producers from other States are now knocking on the doors of Bengali directors. Industry sources say that the best proof of the comeback is seen in the increasing number of cinema houses showing Bengali films. Even a few years ago, of the 800 movie theatres in the State, no more than 350 were showing just Bengali films. The remaining had spread their risk showing a mix of either Hindi and English or Hindi and Bengali films. 2008, nearly 700 theatres are showing Bengali films. Loose and unorganized production activities, dominated and dictated by providers of capital led to proliferation of sub-standard films, which were most often commercial failures. The recent successes have come through some concerted effort by Parallel Cinema which has tapped the domestic market, even while scouting the overseas ones, hitting the festival circuit somewhere in
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between. As such, celluloid creations of award-winning directors like GautamGhosh, RituparnoGhosh and AparnaSen started bringing money for their producers.

Figure 2: Recently parallel stream movies like Moner Manush has both gained commercial success and critical acclaim

The long-held perception that meaningful cinema does not do well in box office is withering away, paving the way for commercial revival of the industry, according to a latest study on the eastern media and entertainment sector by India's apex business and industry body Federation of Indian Chambers of Commerce and Industry (FICCI). Films like BaisheSrabon, Autograph, MonerManush, Abhohoman, Anuranan, The Japanese Wife and Shukno Lanka have walked the tightrope between box office success and critical acclaim. Consequently, from an average of 40-50 films in 2006, the industry today is producing close to 100 films per year, according to figures from the Central Board of Film Certification (CBFC). The box office collections for Bengali films have started reaching figures as high as Rs. 5-6 crores, which is a significant increase from the past half a decade, the report said. Hollywood houses like Columbia Tristar have made their debut in distributing Bengali movies. According to industry experts, several issues need to be addressed to build on this resurgence and consolidate it. These include inadequate infrastructure, which often compels moviemakers to go outside the State for facilities pushing up costs, poor marketing and distribution and increasing competition from Bangladeshi films. Saregama Films, the entertainment company in the RPG group, has decided to restrict its budget in film production to about Rs 5 crore and this would be aRs 4-5-crore budget film.

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The entry of big producers like Mahindra's Mumbai Mantra, Shree Venkatesh Films Private Ltd, Reliance Entertainment and Mukta Arts has injected the much-needed corporate finance to the Bengali film industry. However, the industry continues to grapple with challenges at the ground level due to issues of piracy and poor exhibition infrastructure that threaten the sustenance of this growth curve. Further, addressing areas such as a steady flow of Bengali content for the semi-urban and rural audience as well exploring overseas markets could prove to be beneficial for continued growth of the industry, the FICCI report suggested. Organizational life cycle Still Bangladeshi movies are trapped in the entrepreneur stage of Organizational life cycle. With a history of more than 50 years it is highly expected that this industry will step in to the next level of life cycle with adopting successful approaches and intention for further advancement.

WOTS-UP analysis Now if we consider the market of Bangladeshi films, it is obvious that along with the growing earning capability of mass people (current nominal GDP per capita is $638) there is also exponential growing need for quality and standard entertainment. The film industry has prospective market, huge demand. But in the course of identifying the weakness the main hindrance will come from

Strengths 1. 2. 3. 4. 5. 6. Approx. 1000 cinemas in all 66 major district HQ No. of Viewers: Over 50 million and above. Habitual attitude that entertainment is a big part of life for Bangladeshis Ample group of Talented artists and Makers Rising demand from viewers for more improved quality movies Average Cost of production is substantially lower that other countries/economies.

Weakness 1. Limited technological advancement 2. Heavily influenced Quality control forums.

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3. 4. 5. 6. 7. 8.

Poor Infrastructure for film crew and viewers. Politicized controlling body, Trade union Restricted entry given to large Private Sector Investors. Declining no. movie goers resulting in both falling Government and industry revenue Rising unmet demand from viewers for more improved quality movies Overall poor Perception of the Silver Screen and the values it generates

Opportunities 1. Potential viewer base of 50 million (approx) 2. Wide and extensive Outreach of cinema Halls. 3. The ongoing exponential rise in Marketing giving rise to opportunities for product placement in films. 4. Physiographical the range TGs are Entertainment Craving 5. Potential to capturing a large chunk of the Satellite TV Audience 6. Large NRB Population. 7. Potential for being first in BD for Pay Per View online 8. Current stability should provide conducive investment climate 9. A renewed interest in local Arts and Culture as evidenced by the boom in both the music industry and Private TV channels. Threats 1. 2. 3. 4. Satellite TV still has a formidable influence in terms of viewership Stringent and censorship rules dating back from before the satellite era. Cheap Technologies for Media reproduction CD/DVD/Internet. Physiographically the range TGs are Entertainment Craving (subject to influence of other modes of entertainment) 5. Current Instability threat to friendly investment climate 6. Lack of professional expertise entering the field can further lower standards

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Formulation of alternatives
1. Initiative of the industry's enterprises 2. Training of the people of the industry 3. Governmental cluster development program 4. Development of digital post-production cluster and music industry cluster 5. Development of educational programmes 6. Governmental support of two creative industries sectors: design and audiovisual media. 7. Most important factor is a cooperation inside and outside the industry 8. Both top down and bottom up policies proposals preparation for the film industry cluster initiative 9. Privatization of FDC 10. Issuing shares on Stock Market 11. Investment from both inside and outside of the country 12. Independent film makers should be brought under FDC

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Recommendation of the Strategy

Privatization of the Corporation One of the alternative solutions for transforming BFDC into a profitable organization is to privatize it; i.e. transfer the control and ownership of the entity to a privately owned company. The privatization process can be done under the regulation and directive of Privatization Commission of the Government of Bangladesh. Privatization Commission can take the initiative also with the assistance of the Planning Commission of the country. Since Privatization Commission has been given the responsibility of privatizing the unprofitable stateowned organizations and industries of the country, it had taken initiatives for this purpose in numerous occasions and achieved success. Nowadays all over the world, the function of the government tend to be as the facilitator instead of controller. In other sense, the task of the state authority is to make the regulation and then encourage the progress of any sector through private participation. Keeping view with this context, Privatization Board was established in Bangladesh in 1993 which later transformed into Privatization Commission in 2000. Since Privatization Commission has been given the responsibility of privatizing the unprofitable state-owned organizations and industries of the country, it had taken initiatives for this purpose in numerous occasions and achieved success. Likewise other sector, Film Development Corporation can also be brought under the privatization process with a vision to formulate it as a thriving organization.

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Statement of plan of action to be taken

Methods of Privatization The privatization process for state-owned organization is regarded as the most realistic approach to achieve profitability with a high level of efficacy all over the world. In Bangladesh this process can be done through various methods. These methods are discussed below.

1. Selling of Government shares in The Capital Market: The Privatization Commission can take the initiative to sell a portion or the entire shares of BFDC owned by the government after making the Corporation a Public Limited Company. The selling procedure can be done through the Investment Corporation of Bangladesh (ICB). The selling can also be achieved by any member of the Stock Exchanges or any brokerage firm. Furthermore, it can also be done through Tender Procedure if the commission deems it necessary. It is recommended to hold some shares in the state-ownership to survive in the case of any volatile situation in the Capital market.

2. Assigning Management for the Corporation: Instead of selling ownership, the government can take decision of appoint a management body or transferring the management of the BFDC by an invitation to bid. It can be organized by Privatization Commission. The contract period for the task of management can be for a definite period. So the government can review the contract or replace the management if needed. 3. Leasing out the Corporation: Another provision can be considered is to lease out the corporation. The Privatization Commission may lease out the company to a proficient and competent organization who are capable of improving BFDCs present standing to a flourishing prospect.

4. Direct sale of the Asset: There is another option which is to sell the whole asset of the corporation. This is very much undesirable to many as well as for the government as it is the sole Film Development Corporation of the country. By selling it could lead to total alteration of the principle and value associated with the film industry of the country. Actually this sort of choice arises as a last resort in the case of very badly stated company or industry.
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5. Sales through multiple methods: The Privatization Commission may decide to adopt a combination of multiple methods as necessary for the purpose of privatization. For instance, a portion of the shares may be sold to sock exchange, part of it may be sold by auction, and even some part may be retained by the government.

6. Transferring part of the shares to the employees: The Commission can transfer part of the shares of the BFDC to the employees and to some extent to the other stakeholders. By making them shareholders, the performance could be improved as the employees feel to be more responsible about their function and the progress of the organization. 7. Sale through International Tender: The Commission can take steps to call for a tender process in order to invite International Companies or related groups for the purpose of selling corporations shares or managerial authority. Evaluation of the Projected Privatization of BFDC Implementation of privatization policy of BFDC could ensure improvement of managerial role of the organization. Through the adaptation of the new policies as required, the efficiency level of the employees of all levels can be increased by a large extent. Privatization process could open the door to the development of existing units which in turn create more employment opportunities. Through this process, modernization of the existing facilities and infrastructures can be done which improve both the quality and quantity of the production. Optimum quality production of films will increase the profitability of the corporation. Consequently, revenue collection of the government will increase. Thus, the corporation can be transformed into a self-sustainable company. Moreover, the government can relocate the subsidy to other priority sector, which is previously allocated for BFDC. If achievement can be done through privatization, foreign investment could be brought in the sector which will further strengthen the efficiency level and technological promotion.
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While making the decision of converting BFDC into a public limited company, certain measures have to be taken into account. Before selling shares in the capital market, the trend of the index of the stock exchange should be observed as well as the reliability of all the factors of the market. The government should retain a major part of the shares to face any sudden fluctuation of price in the capital market. While making any contract for leasing or assigning a management for the organization, the privatization commission should make sure about the competiveness and capability of the prospected managerial entity. The option of selling the entire asset should be avoided, because this is meant for the last alternative to make. As this is the lone facilitated film studio of the country, selling of this could lead to an uncontrolled change of the guiding principle of film production of the country.

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Works Cited
1. www.fdc.gov.bd/, Bangladesh Film Development Corporation Homepage 2. http://www.culturopedia.com/Cinema/earlyera.html 3. http://www.bolly-wood.in/bollywood-history.php 4. www.foxmovies.com/ 5. http://www.thedailystar.net/newDesign/arts_entertainment.php 6. Janina Gomes, Internationalisation of the Indian Film Industry 7. Seema Agarwal and Joel Sarosh, Films An Advertising Medium to Captivate Consumers 8. A Mukund, Films Insurance and Financing in India 9. www.nielsen.com/

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