Credit crisis puts new twist in Bollywood tale

By Rina Chandran

MUMBAI (Reuters) - The financial crisis is forcing cutbacks, consolidation and greater efficiency in a business known for its love of excess, the Indian film industry.

In Bollywood several productions have been shelved, marketing budgets slashed and stars asked to renegotiate pay packages.

"Fewer movies will be made and released in the coming months," said Siddharth Roy Kapur, chief executive of UTV Motion Pictures, a unit of UTV Software Communications, which has done "a very sharp review" of its investment plans to cut costs, and is consolidating its television broadcast business.

"We are going to see a rationalisation of costs across the board. We all want to make money, so we need to be prudent -- even the stars understand that."

The filmed entertainment business in India is forecast to grow at the fastest rate of any country in the Asia-Pacific region, expanding at about 15 percent a year to nearly $4 billion by 2012, PricewaterhouseCoopers (PwC) predicts.

The industry, the world's most prolific, churns out about 1,000 movies a year, mostly racy thrillers and lavish musicals, but profit margins are thin because of low ticket prices, the high cost of production and distribution, and rampant piracy.

"Costs had gotten completely out of whack in the last couple of years as money was not a constraint," said Vijay Singh, chief executive of Fox Star Studios, a joint venture of News Corp's Twentieth Century Fox and broadcaster Star.

Scripts were bought at high prices, big stars were signed on for multi-film packages for millions of dollars, and distribution became pricey, sending production costs through the roof.