Eros and Sky agree Bollywood deal

By Josephine Moulds

Last Updated: 1:26am BST 06/07/2007

BSkyB is set to launch a Bollywood video-on-demand channel with Aim-listed Indian film studio Eros International.

	Eros International announced a 76pc increase in profits

Eros announced the venture as it unveiled a 50pc increase in revenues, driven by the growing appeal of Bollywood films worldwide.

It would not disclose the value of the deal, but said it would initially provide the Sky channel with 100 films from its library of 1,300.

The shares jumped 29 to 421p - more than double last June's flotation price - as Eros announced a 76pc increase in profits before tax and exceptional items to $32.5m (£16m), on revenues of $66.4m.

Eros chairman and chief executive Kishore Lulla said: "We've seen a massive increase in profits from the growth in India and internationally of Indian movies."

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PricewaterhouseCoopers estimates that revenues from India's film industry, valued at about $1.75bn in 2006, will nearly double to $3.4bn by 2010. Mr Lulla said: "If you look at the Hollywood industry, why is it so big? Only because grosses in the domestic market are huge, it captures world attention.

"India has one billion people. There are 300m people in the middle class and 40m joining every year. You have the multiplexes coming in, there were 3.9bn tickets sold last year."

Mr Lulla said Bollywood films appealed to global audiences because they are "like a breath of fresh air, full of family values and music".

Eros's recent foray into Shakespeare, a highly acclaimed Bollywood version of Othello called Omkara, was one of its most profitable films last year, grossing around $15m worldwide.

Other big hits include Namastey London, a Bollywood love story set in the English capital.

Mr Lulla sees it as his mission to consolidate the fragmented Indian film industry. Last year, he spent $90m on buying libraries of films and small production companies.

He intends to spend between $150m and $200m continuing this process over the next two to three years. He said the company could take on some debt if there were more opportunities.

"Eros consolidated the content and distribution factor," he said. "We became a global player. Now we are a one-stop shop for global distribution.

"You name any format, we exploit the content through that format, we are not reliant on anyone else to distribute that content. We want to become the studio model."

Eros has embraced the internet as a distribution channel initially for music, and it recently launched a channel on video sharing site YouTube.

Mr Lulla said: "The new media is giving us high margins, which is hitting our bottom line." He said the company is in discussions over a possible distribution joint venture with two of the major Hollywood studios.