DreamWorks deal marks big changes for Bollywood

By Alex Dobuzinskis

LOS ANGELES (Reuters) - Indian media company Reliance ADA Group's expected deal to finance a new incarnation of the DreamWorks film studio signals broader changes for Bollywood moviemakers looking to reach Western audiences, experts said.

The United States and India are the world's largest film producers, and U.S.-based studios have stepped up investment in India. By contrast, Bollywood -- an informal name for the Indian industry whose movies in large part feature singing and dancing -- has its eye on the United States as a marketplace, investment opportunity and model for growth, experts said.

"We're really looking forward to our movies being accepted by the Western audiences," said Ken Naz, president of North American operations for Eros International, a distributor of Bollywood films.

Reliance is currently in talks with director Steven Spielberg and his DreamWorks co-founder David Geffen to invest about $500 million in the movie studio behind hits such as "Indiana Jones and the Kingdom of the Crystal Skull" if, as is widely expected, they leave their parent company, Paramount Pictures, which is owned by Viacom Inc..

But Reliance is not looking for creative control, which Hollywood jealously guards, said Farokh Balsara, an Indian-based analyst with the firm Ernst & Young.

"It gives them some sort of stake in the whole Hollywood ecosystem," Balsara said. "And with that they get to know how Hollywood functions and what they do and don't do."

An attorney representing Reliance declined to comment.

With operations in telecommunications, financial services and energy, Reliance only recently ventured into film. It also is buying about 200 U.S. theaters and has signed film production deals with companies owned by A-list Hollywood stars including George Clooney and Tom Hanks.

THERE'S NO BUSINESS LIKE...

With a goal of releasing more movies in North America, Reliance needs to learn how to finance, distribute and market films here, Balsara said.

A few years ago, Bollywood producers -- famous for making movies on the cheap -- funded films with private investors and often the money came from underworld sources, Naz said.

But in recent years, as the business has gained respectability, Bollywood producers have turned more to banks and other financial institutions for backing, he said.

Indian corporate entities such as UTV Motion Pictures have also made forays into film financing as star salaries have skyrocketed and production values improved.

In the past, Indian movie budgets have been low by Hollywood standards and typically hovered at less than $4 million per film. Marketing campaigns were often thrown together after a film was shot, experts said.

The average cost to make a Hollywood movie in 2007 was $71 million and the average cost to market was $36 million, according to the Motion Picture Association of America.