One of the main challenges in the movie industry is a high degree of risk and uncertainty associated with the launch of new products. In fact, there are no specific attributes of films that can be employed in order to guarantee profitability (Teti 2013). Meanwhile, taking this risk is inevitable as movies generally make a lion’s share of sales within the first week, or even a few first days after the release (Zhuang, Babin, Xiao & Paun 2010). To be profitable, a studio needs to create new movies regularly, while having limited means to influence the quality of the end result and predict its performance. However, companies struggle to alleviate this risk by employing more effective evaluation policies at all stages of selection and implementation of their projects.

Perna Arts is an example of a movie studio that is currently undergoing such a transition. Highly profitable throughout the 2000s, the company has faced a sharp decline in revenues in the next decade. None of its recent films has become successful. According to the company’s CEO, the root of the problem might be in the overly intuitive process of project selection that needs to be amended in order to promote better performance.

Managing the Creative Aspect of a Project

Perna Arts was one of the first movie studios in India to go public and hire a professional CEO in the early 2000s. The company came to this turning point already with a strong background in the movie industry and well-developed core competencies: out of each 15 films produced prior to 2000, 13 were hits. This success was largely attributed to the talent and experience of the studio’s first managing director, Basu Khatri. He had a “gut feeling” for promising film ideas and an expanded network of relationships with renowned directors, screenwriters, actors and other professionals. Relationships were extremely important in this industry as they greatly influenced a star’s agreement or refusal to participate in the project and the fee charged. In the case with Perna Arts, directors, actors and musicians often agreed to work for smaller fees in order to be associated with the company’s famous brand.

The studio adopted a project approach to manage its operational activities. Each movie was considered as an individual project. Perna Arts aimed at producing two to four films a year – it was generally enough to generate sufficient cash flow and compensate failures with hits.

Each movie project had to balance creativity with commercial success, with family audience in mind. The first stage of the production process – idea selection – was highly intuitive and person-oriented. On average, one out of 50 film ideas sent to Perna Arts became a script and out of 12 to 20 scripts written each year, from two to four were made into films. After a script was approved, the actual project work began.

Selecting the ideas and then scripts that could provide for future success was the senior team’s responsibility. However, the management recognized that it was impossible to accurately predict a film’s success from an idea or script or even the past record of the talent involved. A well-known director, who had previously made a commercially successful and critically acclaimed film with the studio, could have failed completely with the next project. As one of Perna Arts middle-ranked managers commented, “All this is part of the business. And that is the peculiar charm of the business – no one can predict a winner.”

Thus, the project manager received a script and had to select a creative team that would contribute their diverse skills to turn it into actual movie. The skills to make arrangements and negotiate were extremely important in this process. In India’s well-developed movie industry, creative professionals often had to choose a project to work on from multiple invitations. The project manager had to “sell” the project, especially to renowned directors and actors whose names would help the film gain media attention and facilitate commercial success.

The process of the film creation required to input multiple variables, both creative and financial, and coordinate efforts of a diversely skilled team. The project manager had to find a balance between budget limits and the creative team’s ideas that directly influenced the film’s quality. He was responsible for scheduling, selecting locations, booking studios, managing contracts and day-to-day shootings. In running these activities, the project manager relied on the production-in-charge team that normally included up to four people, either externals or internals. The directorial team, including the director, actors, operators and technicians, mostly externals, was accountable for the creative and artistic side of the product.

The project manager’s key responsibility was to ensure the completion of the project within the given budget, time and resource constraints. When the production process threatened to exceed these limits, the project manager had to work in close collaboration with the directorial team to set this issue. If no agreement was reached, the project manager contacted the senior team. The constant dialogue, arrangement, and compromise between different interests was the basis of routine project work.

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However, the manager was not able to control the creative side of the project as it was a product of personal knowledge and skills applied by many narrowly specialized professionals, most of whom were externals. The final outcome depended on three main groups of factors – the quality of each team member’s skills, the quality of coordination and organization, and also on random factors such as weather on the shooting locations. The project manager had moderate power over all three groups. The optimal mix of skills could be ensured through casting, which also partly determined the quality of cooperation. For example, it would not be wise to invite the actors who were known to have a personal tension for two main roles. The possible adverse impact of random factors could be minimized by taking them into account at the planning (pre-production) stage and thinking about countermeasures. In general, project managers had sufficient means to lead the project to completion through balancing multiple creative inputs with financial, time, and resource constraints.

Finding the right balance between creative and commercial side could be a challenge as well. For example, a director’s wish to film on exotic locations could make the film’s cost soar. The spectacular shots of those sceneries would definitely increase the film’s artistic value; however, the latter was not necessarily a determinant of a higher commercial success. To make the right decision, the project manager had to consider the relative importance of exceeding the budget and making a more impressive film. The relationship with the director had to be taken into account as well. If it was long-standing and important for the studio and the refusal threatened to ruin it, additional spending on artistically necessary shots could be the better option.
While allowing enough creative freedom to directorial teams, Perna Arts had strict policies and procedures for financial and organizational aspects of project management. However, judging by a recent decline in the company’s revenues and number of hits, this approach did not work well enough. The current CEO attributed the problems to the fact that the asset building process was overly intuitive and too dependent on personal judgment. He advocated the need for more formal and businesslike approaches to lead the company from the crisis.

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Managing the Shifting Combinations of Human and Social Capital

Each movie is a complex project, assuming the definition of project complexity as a combination of structural complexity, uncertainty, dynamic, pace, and sociopolitical aspects (Geraldi, Maylor & Williams 2011). Managing such projects is generally more challenging as all these characteristics limit the manager’s ability to forecast and influence the process.

A movie’s structural complexity arises from the fact that this product is created through collaboration of multiple co-specialists and requires various resources such as equipment, costumes, and properties. Uncertainty is generated by ground conditions in the shooting locations – for example, it is impossible to predict exactly what the weather will be like on the scheduled day. Because of adverse conditions, shooting might be delayed or even cancelled, with the project manager’s job being to promptly find an alternative location.

Dynamic and pace of a movie production are often highly irregular, due to the nature of the process. For example, a whole shooting group might be waiting for hours while stylists are working with the key actors . Once they are ready, the shooting begins and might go at a very fast pace.

Time estimates for the completion of a project or its individual parts are extremely difficult to make – too many factors have to be taken into consideration. For example, one director might need 300 shifts to film the same scenes for which another director will only need 100. The “slowness” of the former might arise from his or her hallmark style, uncertainty of the final outcome, or just a sudden idea that changed the director’s vision mid-way and caused the need to re-film or add certain episodes.

Sociopolitical issues in movie production are especially problematic because each project has a unique team that mostly consists of externals. Directors, actors, operators do not usually have a constant working record with a single company. They move from one project to another, across multiple studios. Therefore, project managers face the need to coordinate the work of constantly shifting teams, some members of which might be meeting each other for the first time.

The nature of movie industry implies a close relationship between human and social capital involved. As the network of specialists is relatively small, many of them form close interconnections on personal and social level. For example, a star actor’s value for a project is not limited to his or her brand name and professional skills, which can be defined as “human capital”. Most likely, such an actor would bring a team of make-up artists and other support staff whom he or she feels most comfortable working with. Similarly, actors are much more inclined to take part in the project that is led by a director in whose films they enjoy playing. Long-term professional relationships between team members facilitate the shooting process going smoothly and each specialist being maximally productive. Moreover, a good mutual understanding between the director and key actors can have a direct impact on the quality of the film, making the difference between good and great. For these reasons, social capital possessed by the project team members is as important as their human capital.

The project manager’s task is to take into consideration both human and social capital of each candidate at the selection stage. Choosing the director, it is necessary to estimate which actors he or she might recommend for main roles and whether it is desirable or acceptable. When inviting a famous name, the project manager should keep in mind that he will work not only with this person, with all his or her skills and personal traits, but also with a whole supporting squad.

Due to its social and creative complexity, a movie project involves managing multiple relationships throughout the shooting process. Some possible tensions can be prevented and eliminated at the casting stage. As almost every film project arranges for new people to work together, it is not always possible to predict their relationships. The project manager should be ready to resolve any emerging tensions in real time.

Perna Arts had effective relationship management, judging by the fact that some creative specialists agreed to participate in its projects for nominal fee, only to work with this studio. However, the financially sound decision of the late 2000s not to invite stars anymore could have had negative implications in terms of social capital.

In 2007, when overseas companies started investing large sums in India’s movie industry, star fees soared. The talent cost could take from 40 to 60 percent of a film’s total budget. As a reaction to this, Perna Arts adopted a policy of relying mainly on new talent. Instead of paying millions to stars, the studio looked for less famous but professional directors and actors. In 2009, with the industry’s overall decline, the company’s revenues became lower. Although the reasons were multiple, one of them could have been the loss of social capital from this policy. As stars were not invited, they could no more bring with them a team of highly skilled supporting staff. This led to general deterioration in the quality of human capital involved.
The above mentioned example demonstrates the strength of the interdependence between human and social capital in India’s movie industry and their joint effect on the quality of the final product. A movie studio is a networking organization where the key asset is created through constant dialogue and collaboration between efficiency-oriented production team and art-oriented creative team. The project manager’s challenge is to balance all interests of the project members so that they work effectively for the attainment of the common goal.

Recovery Strategy

As Perna Arts produces most of its films in Hindi, the studio’s current problems are part of the broader challenges faced by the whole Hindi film market. The industry’s rapid growth – by on average 17% per year – between 2004 and 2007 (Fetscherin 2010) was followed by a downfall in 2009. The reasons included the global recession, the soaring talent fees, and the cultural and demographic changes in the target audience.

There is no single opinion among researchers on the reason why Indian films became less popular in their home market. Ganti (2012) opines that film-makers should not have attempted to make their product “culturally unmarked” and hence, in their opinion, more globally appealing. In particular, the number and length of beautiful song and dance scenes, which have so long been a prominent feature of Indian movies, has been drastically reduced since 2008. By removing its traditional features, the researchers conclude, Indian cinema is losing its authenticity and attractiveness for both global and domestic users. However, Perns Arts’ case study presents a directly opposite point of view: Indian youth under 24, that currently makes half of the local movie audience, has globalized tastes and hence little interest in “traditionally Indian” aesthetics and patterns.

To resolve this debate, movie studios need to turn to the consumers and discover what kinds of films appeal to them most. Escoffier and McKelvey (2015) report that the quality of short movies has been significantly improved with the use of crowd evaluation and ideas in the process. This co-creation, involving “the wisdom of crowd” into the product development process, can provide for much better outcomes than making a movie blindly and then trying to sell it through extensive marketing spending.

Pern Arts can adopt a similar approach by conducting a customer survey to identify which film attributes appeal most and developing a set of formal evaluation criteria on the basis of this data. Optionally, a small portion of the filmed material can be demonstrated to a group of customers to test their reaction. The results can be used to adjust the filming process and script if necessary. A formal policy needs to be developed to guide the project managers’ actions in decision-making process and implementation of necessary changes.

Another route for improvement is to use the multiple regression framework by Fetscherin (2010) to predict box sales of a future movie based on creative and financial inputs, such as the budget, the talent (directorial and acting), genre, and audience review. These criteria should be applied to each proposed idea to estimate its future success with a higher degree of accuracy than the present intuitive approach can allow. Fetscherin’s model was tested on 330 Bollywood films released in the US and the UK over a decade and predicted the total box sales with accuracy of over 80%. Incorporating it into the selection process can help identify most promising projects to invest in.


The way for Perna Arts to return to its former glory lies in changing the intuitive approach to project selection for the one that can minimize risks and spend resources more rationally. A set of formal assessment criteria should be developed on the basis of customer surveys and reviews. Since a movie’s commercial success depends on its ability to meet the end user’s needs, “the wisdom of crowd” needs to be incorporated into the selection process to ensure that the studio focuses on the most promising projects.

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