Kannada cinema’s financing vortex: Is the reel dream turning into a real nightmare?

Shivarajkumar’s prophetic words have resonated with those connected to Kannada cinema, where over 95 percent of films produced annually fail to recover their investment, prompting serious introspection. A closer look at developments in Kannada cinema reveals that the era of considering producers as Anna-Daata has faded with changing times and filmmaking practices. Producers, in their enthusiasm, have increasingly neglected the ‘content quotient,’ instead focusing on promoting the ‘hyper-masculinity’ of ‘insecure’ stars and investing heavily in them. These funds are often borrowed from financiers at exorbitant interest rates. When films fail at the box office, no one comes to the producers’ aid. Frustrated, they blame the industry, audience, or government. Unable to bear the financial strain of high-interest loans, while some producers fight for survival with grit, others who are desperate and overwhelmed and by financial pressures, tragically resort to ending their lives.

Amplified pressure on producers across India

This financial phenomenon is not restricted to Kannada cinema alone. It reflects the state of affairs in most major film industries across the country. Except for four or five Bollywood films, the rest struggled at the box office in 2023. Earlier, in November 2017, Ashok Kumar, one of the few popular Tamil film producers, committed suicide, allegedly due to the relentless financial burden incurred from producing films. In his death note, he explicitly stated that the movie business had driven him to this extreme step. Similarly, in April 2024, Soundarya Jagadish, a noted Kannada film producer, took his life, reportedly due to the trauma caused by debts owed to financiers.

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In July 2024, prominent Kannada filmmaker Vinod Dhondale also committed suicide over a Rs 3 crore loan and an unfinished film. His financial crisis was exacerbated by shooting days exceeding the originally planned schedule. The recent death of Kannada actor-director Guruprasad has further highlighted the severe financial strain, considered a major challenge by most industry insiders. Last week, on November 19, a 37-year-old TV serial actor, Thandav Ram, was arrested for allegedly opening fire at a director over a financial dispute involving a stalled film. These incidents underscore the urgent need for systemic changes in the film industry to address its financial vulnerabilities.

“It seems social media and OTT platforms have amplified pressures on film producers. The competition is fierce with new faces entering the field every day. The relentless need to perform and remain in the spotlight, including on social media, is exhausting for actors and producers, besides financial issues”, says actor-turned producer Umesh Banakar.

Film analyst and writer Chetan Nadiger makes an interesting observation. According to him, out of over 200 films released in Kannada in 2023, one can identify at least 100 new producers, filmmakers and ‘heroes’, who enthusiastically entered the Kannada cine scene. But only a few succeeded and majority filmmakers, producers and stars disappeared. The situation is no different in 2024. Producers, who borrowed money from financiers in their avowed passion for making films, refuse to return to film production. A new set of producers with new dreams replace them.

In a film industry fuelled by glitz and fan craze, first-timers and small filmmakers often end up with huge debts when their films fail. About 95 per cent jump into filmmaking for the passion with no knowledge of the market risks. This is a vicious circle of film production not only in the Kannada film industry, but in Indian cinema as a whole in recent years,” says Umesh Banakar, President of Karnataka Film Producers’ Association (KFPA).

Other language films and the use of ‘black money’

The state of affairs in other language film industries is similar. According to sources in South Indian Film Chamber of Commerce (SIFCC); though corporate and international production houses entered the Telugu film industry, movies are still largely produced with funding from private financiers. The Telugu film industry, which attained international fame with Baahubali franchise, is “the most disorganised sector”, when it comes to financial matters. “The amount and interest on borrowing depend on the desperation of the producer. There is no standard at all,” says a third generation filmmaker.

Citing the suicide of G Venkateshwaran, brother of director Mani Rathnam, over alleged pressure from financiers, a senior film producer in Tamil Nadu says, “The high interest rate charged by financiers is a problem with the film industry in Chennai. People in the industry approach financiers, knowing well that the interest is high. We will pay just because we need to be in the business,”

Sources in Kerala Film Chamber of Commerce admitted the use of slush funds in film production. Both state police and agencies such as the Enforcement Directorate acknowledge the use of gold smuggling money into production of films. “Non-resident Indians are a major source of funding to the Malayalam film industry. Private financing firms charge up to 36 percent annual interest, but take the film as collateral security, which is being referred to as ‘negative pledging’ and release of the film is subject to clearance of debt,” said a senior film producer from Kerala on condition of anonymity.

It is widely believed that many opt for film production just to turn their black money into white. It is no secret that the Income Tax Department keeps a watch on film producers, distributors, and actors using cinema to turn black money into white. According to a former senior official of Income Tax, raids targeted at actors and producers of big budget Kannada films in 2019, blew the lid off their alleged dodgy dealings. In 2019, IT officials carried out simultaneous raids across 27 locations in Bengaluru targeting actors and producers of recently released big-budget films. It is important to note that the raids at that time were conducted on film producers, including C R Manohar, Rockline Venkatesh and Vijay Kiragandur of Hombale films. IT department officials justified their actions as a crackdown on money laundering.

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However, refuting the role of black money in production of films, Karnataka Film Chamber of Commerce (KFCC) asserts that the strategy of turning black money into white was a pre-Goods and Services Taxes (GST) phenomenon in pre-GST days. These days, they underline, every paisa spent on film production is being accounted for and transactions are strictly white. “No one is ready to accept ‘black’ money as those who receive it are accountable for it,” maintained M N Suresh, president, KFCC. Suresh, who has produced over nine films so far, said: “New generation producers, who don’t have the idea of film production, borrow money from financiers at a maximum of 3 per cent interest for six months. But because they fail to complete their films because of various industry factors, their loan gets multiplied and becomes unwieldy for them.”

Then underworld connection, now real estate

In the early 90s, it was the underworld of Bengaluru, which financed film production. Now it is the real estate mafia, which is pumping huge money. According to industry insiders, even today distributors and theatre owners are the major source of short-term finance for producers. Film financing took an unethical turn when some producers sought help from the underworld elements. These elements started financing films by 1995. Riding on the trend, some underworld elements became producers and distributors. A few underworld ‘dons’, who claimed to be ‘reformed,’ are successful producers and distributors today.

Now, the underworld has stopped financing films. Instead, underworld elements are acting as ‘recovery’ agents for them. The Kannada film industry was mostly free from the underworld, until the murder of film producer Chidambara Shetty in 1997. He had borrowed money from the underworld dons. When he failed to repay it with interest, he was kidnapped and tortured. His body was dumped on the outskirts of Bengaluru. The Kannada film producer Ramesh Jain was found murdered in 2018. The Central Crime Branch of Bengaluru recently arrested M Gajendra in connection with the murder of Ravi, a criminal in early 2000. In 2018, Karnataka high court found film producer Gowardhan Murthy guilty of murdering actor Vinod Kumar.

In the past: Production with ethics

Factually, Suresh is right. “Reputed production houses, such as Vajreshwari Combines, Eshwari Productions, KCN Productions, VPC Productions, Parijata Productions, Srikanth and Srikanth productions were producing films keeping the market trends in mind with a focus on ‘good content’. Never did they bank on distributors, financiers and theatre owners for funds. They knew the film finance and economics dynamics. Today’s producers lack that ethics and understanding,” says B N Subrahamanya, National Award-winning film writer.

The Industrial Development Bank of India (IDBI), which has been financing the production of Kannada films, stopped financing as it saw its loans turned into non-performing assets. IDBI had financed Ashwini Ram Prasad’s Jothegara in 2009, but its producer Prasad was not able to repay his loan. Even S V Rajendra Singh Babu and Sunil Kumar Desai took loans from commercial banks to produce films. In early 1970s, three filmmakers came together to make three films and availed a loan from a commercial bank. Now, commercial banks are hardly coming forward to finance films as they don’t consider film as an industry. “The National Film Development Corporation and its predecessor, the Film Finance Corporation, also contributed to the production of films with good content. So far, NFDC has funded and produced over 300 movies in various Indian languages in India, including Kannada. Many prominent art filmmakers of Kannada, including Girish Kasaravalli, are beneficiaries of the NFDC,” he adds.

Regardless of the failure of the majority of films in box office, new producers are descending on the Kannada film firmament. This phenomenon puzzles the film writers. Film experts point to the practice of borrowing money at high rates of interest in the mid-70s to prove that the Kannada film industry is surviving on borrowing for periods ranging from three to six months from friends and acquaintances for interest. “Traders, basically from the Gujarati and Vysya community, were financing Kannada films at an interest rate of 25 paise to 50 paise for a mount of Rs 100 for a loan up to Rs 3 crore and above per month. If the producer failed to repay the principal and interest for three months, the traders would add the principal interest to the total for the next three months. These terms and conditions hold good to this day,” explains a veteran producer, who has now stopped making films.

Producers are the victims now

“The film industry was moving smoothly till the end of the celluloid era. The dynamics of filmmaking has changed in the digital era and the situation has turned chaotic,” observes another film producer Shanta K, adding that in the early 1990s, star actors, including Vishnuvardhan, Ravichandran, Ambareesh and others, would negotiate with the financiers on behalf of producers. Following the ideology propagated by Dr Rajkumar, they wanted to protect the interest of producers. But the situation has completely changed with the exit of Vishnuvardhan and Ambareesh,” he says.

The immediate challenge the film industry is facing is that the big financiers are not offering any concession, even after understanding the current plight of Kannada cinema and producers are not getting extra time to repay their debts. With little support from formal financial institutions, most movie producers are forced to depend on these film financiers (‘glorified money lenders’) to get their movie productions off the ground. And film financing is crucial for the entire cinema industry to run without hassles.

“Some big-budget movies of Kannada cinema failed to recover even 10 percent of their budgets. But the most important question is why the budgets of their movies are high. It is a simple understanding of cinema. Big names would pull the audience and big names mean expensive production and expensive publicity. This false premise is the basis of this blunder. There are many reasons that the audience does not go to the cinema,” notes a film analyst, who spoke to The Federal on condition of anonymity. “I know many film producers who are well aware of the problems that exist. But no one has come forward to explain what it means to make good films though they know it very well,” he adds.