Sponsorship & Merchandising

In Hollywood, corporate endorsements and merchandizing are considered important sources of revenue for a film. Insertion of a consumer product (for example, a new BMW model in a James Bond film) can provide tremendous marketing value and boost sales while costing significantly less than creating and placing an independent advertisement. The producer advertises the sponsors' products in return for a lump-sum fee. The cost of in-film advertising versus advertising on television or in print is "pennies versus dollars." Generally, there exist product placement agents who represent different products and charge a fee/commission for their services. Hollywood has already leveraged its selling power to create a US $1 billion business by using films to promote BMW cars and Nokia phones.⁹⁹

With the success of Star Wars, E.T., 101 Dalmatians and Space Jam, Hollywood studios realized that the sale of film-themed products not only generate substantial revenue, but also that the products can also be used effectively to promote the film itself. Typically, 40% of film merchandise is sold before a film is released.¹⁰⁰ Studios/producers/distributors carefully retain control over other exploitation rights and goodwill associated to their films. In most instances, there is no risk to the studios/producers/distributors because the manufacturer incurs all manufacturing and distribution expenses. The studios/producers/distributors license these rights to spinoff product manufacturers for an advance payment as well as royalty payments. Walt Disney earned a fortune by selling toys as well as the revenue generated from its theme parks.

However, these two trends are new for Bollywood. In 2000, Subhash Ghai, in the making of his film Taal, entered into an arrangement for US$ 215,000¹⁰¹ with Coca-Cola, whereby the lead actor and actress were shown drinking Coke in various scenes. He also entered into similar arrangements with other corporate sponsors like BPL, Kenstar and the Manikchand Group for the same film. Owing to the success of in-film advertising in Taal, Subhash Ghai also entered into arrangements with Coca Cola, Paas Paas'and Hero Honda' cycles for in-film advertising for his film Yaadein in 2001 for Rs. 33 million.¹⁰²

Leading business houses are now increasingly warming up to the idea of promoting their branded products through in film advertising and sponsorship deals. Recently, in Ram Gopal Varma's film Road, the lead star cast are seen driving a “Tata Safari” multi-utility vehicle with sufficient shots of the tail to drive home the brand.¹⁰³ Coca Cola maker of Thums Up paid good money for the strategic placement of its product in Kaante.¹⁰⁴ Similarly “Pepsi” and “Provogue” struck a deal with producer Boney Kapoor for his film Khushi for approximately Rs. 20 million and Rs. 7.5 million respectively.¹⁰⁵

Rajshree Productions, a well-known production house of India, used merchandising as a tool to promote its film, Maine Pyar Kiya in the early 90's. In 2001, Aamir Khan and lndiatimes.com too, tied-up with "Archies", to merchandise certain products (writing pads, jigsaw puzzles, greeting cards, posters, photo albums, etc.) to popularize Khan's Bollywood blockbuster, Lagaan.¹⁰⁶ While the trend seems to be changing, such instances are presently only a handful in Bollywood.