Katzenberg Seeks a Slice of Disney’s India Revenue

The entertainment market in India took center stage today in Jeffrey Katzenberg’s $580 million lawsuit against Walt Disney Co., his former employer.

The piracy rate in the Indian home-video market will decline to about 10% in 2006 from 80% last year, and 65% of homes will have video players by 2040, up from 5% currently, according to Sameer Mithal, a consultant with Booz, Allen & Hamilton Inc.

Mithal testified on behalf of Katzenberg, who has sued Disney for a bonus based on 2% of the anticipated future profits generated around the world by the films and TV shows that he oversaw at Disney. Mithal predicted Katzenberg’s product will generate $893 million in income in the Indian market, and his 2% bonus should net him $17.8 million.

Mithal discussed how economic reforms in the early 1990s have resulted in an opening of the Indian market and growth in demand for goods and services.

Burbank-based Disney, though, took issue with several of the assumptions that Mithal made in his projections.

Mithal, for example, said he expects a $6 million cap on the amount of money that the major U.S. studios, such as Disney, can take out of the country to be removed within the next year.

Under cross-examination, Disney Chief of Operations Sanford Litvack asked Mithal how he can be sure that the cap will be removed so soon if it’s been in place since the early 1990s.

If studios can’t remove more than $6 million in revenue from the country, why would Disney do business there? Litvack asked.

“If Disney’s desire is to increase shareholder value, there wouldn’t be much point in being in business in India if it couldn’t get its money out,” Litvack said.

Mithal agreed.

Litvack also suggested that if Mithal’s assumptions for video player penetration in India are wrong, his forecasts for Katzenberg’s bonus would be inaccurate.

Mithal, who said he’s spent about 500 hours on Katzenberg’s case, said he expects the Indian population to grow to about 1.5 billion in 2040 from 975 million last year.

The Indian film industry produces more than 800 films a year, though only a small number of those target kids.