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Disney Disputes Movie and Home Video Projections for India

A P Kamath

India featured prominently last week in the biggest trial in Hollywood in which former Walt Disney strongman Jeffrey Katzenberg was demanding $ 500 million from his ex- employer.

Katzenberg today is a partner in the DreamWorks studio founded by Steven Spielberg and David Geffen.

He had sued his former boss demanding compensation based on the future earning projections for such monster hits as Lion King and Aladdin, conceived and produced by him during his employment at Disney.

Disney lawyers hit back at Katzenberg, asserting, among other things that many non-animated films produced by him had lost money. Disney lawyers also said that Katzenberg, during his reign at Walt Disney, had made wrong assertions about business possibilities for Disney and other Hollywood studios in India.

The suit was settled early this week, with Katzenberg accepting the promise of about $ 230 million from Disney but Hollywood pundits continued discussing many of the issues raised by the case, and whether Katzenberg had overestimated the Indian market's potential.

Katzenberg's associate Sameer Mithal testified last week that Katzenberg was indeed right when he had argued that India would one day become a major market for Hollywood movies and videos.

Disney lawyers slammed Mithal's projections and argued that he was inflating the figures because he wanted Katzenberg to get a bigger settlement from the studio.

Katzenberg's agreement with Disney had stipulated that he would get two per cent of Disney's future profits on the movies he had produced for Disney during the decade he was the chief of the film division there. So the higher the projected profits are from India and China -- two emerging markets for Hollywood movies and television films -- the more profitable it was for Katzenberg.

Mithal said his studies justified Katzenberg's expectation that India would buy $ 16 billion worth home videos by 2040. Hollywood believes the value of videos sold in India legally is worth about $ 6.5 million today and the pirated video business earns five or six times more.

If the projections were to come true, the Indian legal video market has to grow by more than 2,500 times, Disney lawyers said, asking how this could happen?

Could the Indian economy blossom so much and there would be enormous amount of disposable income that the demand for Hollywood videos would soar?

A person would need a "leaps of faith," said Stanford Litvack, the Disney lawyer, to believe that India will have such an economic miracle. Besides, piracy continued unabated across India, and had become such a big problem that many Hollywood and British companies including Disney were not selling home videos in India because there was no money to be made there, Litvack argued.

Mithal stood by his projections. He said the growing number of Indian homes with videos, and the money non-resident Indians from world over to sent to their families and friends in India, would lead to a dramatic increase in video purchases in India. He asserted that five years from today, India would buy at least 2 million video units of Disney superhits such as The Lion King, Beauty and the Beast and The Little Mermaid, all produced by Katzenberg.

While Mithal conceded that the black market accounted for over 80 per cent of video sales in India, he also argued that the situation could change, and the legal sale of videos would go up.

But Litvack was not satisfied.

He asked: "If Titanic, the movie that grossed over $ 1.8 billion worldwide, sold only about 32,000 home video units in India, how could Katzenberg and Mithal argue that lesser hits such as The Lion King and The Little Mermaid beat the Titanic record by many times?"

But the day did not end before Litvack catalogued the reasons why many Hollywood companies hesitated to do business with India. One of the key reasons, he argued, was that the Indian government allowed just about half of the earnings by Hollywood studios to be expatriated.

Though Mithal did not have time to respond to some of Litvack's questions on Friday, he did assert that India was in the process of rescinding the repatriation policy.

He was to be grilled further on Monday but by then Katzenberg and Disney had reached a settlement.

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