The global focus of business is on the 'E" of entertainment. Call it by any name, entertainment is making the world go round. The Indian entertainment industry, which is currently a US $5.3 billion industry³, is small compared to the global figure of a staggering US $300 billion. However, it is expected to grow rapidly and dominate the Indian economy within the next five years.

While possibly unknown to the outside world, the Indian film industry began over a hundred years ago. The first exposure to films in India came when the Lumiere Brothers' Cinematograph exhibited six silent short films in Bombay on July 7, 1896.⁴ The first Indian film, The Wrestlers, was produced by Harischandra S. Bhatvadekhar in 1899 and the first Indian feature film, Raja Harischandra, was produced by Dhundiraj Govind “Dada” Phalke in 1913.⁵ The industry expanded rapidly to produce 18 feature films in 1920, 40 films in 1921 and 80 in 1925.

It has now grown multi-dimensionally with a unique blend of commerce, art, craft, star glamour, social communication, literary adjuncts, artistic expression, performing arts, folk forms and above all, a wide-ranging and abiding appeal to the heart, the mind and the conscience. Bollywood is continuously changing with the tastes and preferences of its audience. Javed Akhtar, a leading screenwriter-lyricist, describing Bollywood as another “state” within India along with Gujarat, Rajasthan and Bengal remarks: “Hindi cinema's culture is quite different from Indian culture but not alien….It has its own world, its own tradition, its own symbols, and those who are familiar with it understand it.”⁶ Indian people's lifestyle and sociology have been reflected over the years in the mind-boggling number of over 67,000 feature films and thousands of documented short films in 30 different languages and dialects.⁷

Even in terms of technology, Bollywood, like Hollywood, has come a long way from the shaky, flickering images and grating noises and sounds of 1930s. Bollywood can now boast a very sophisticated state-of-the-art technology, helping to create and project the images and soundtracks of the 21st century.

Today, the Indian film industry produces on an average over 1,000 feature films a year,⁸ making it the single largest film producing nation in the world. The two major segments of the Indian film industry are based on geographical classifications: the Mumbai film industry (Bollywood) and the South Indian film industry (Sollywood) (for the purposes of this Report, we are referring to both these segments of the Indian film industry jointly as "Bollywood"). These two segments are quite distinct, despite the fact that both are major filmmaking centers. While both regions share a similar microstructure, they differ significantly in the style of functioning, work culture, technology, infrastructure, etc.

Hindi-language films account for approximately 28% of the total films produced.⁹ Films made in the four South Indian languages i.e. Tamil, Telugu, Malayalam, and Kannada (Sollywood) account for 54% of the total films produced.¹⁰

The functioning of any film industry can be divided into three distinct components:

(a) Production, (creating the entertainment product)

(b) Distribution, (distributing the entertainment product to its sellers) and

(c) Exhibition, (selling /communicating the product to consumers or the end-users).

In Bollywood, these economic functions are usually performed by different entities, whereas in Hollywood, the big studios mostly control the whole chain of production, distribution and exhibition.