By Una Galani

MUMBAI, Aug 7 (Reuters Breakingviews) - Apple is star-struck by Bollywood. The Silicon Valley giant is in talks to buy the movie and music library of top Indian producer Eros Group, Reuters reported on Monday. The mooted price tag of $1 billion for a collection of more than 10,000 titles seems very generous. But inflated values reflect the rush by big players including Amazon and Netflix to establish a foothold in a hot emerging market where consumers are increasingly willing to pay for content.

Eros is India’s leading movie-making machine, churning out around 50 motion pictures a year, a handful of which typically feature in the country’s top 10 box office hits. Its Mumbai-listed unit produces the films, while the company’s New York-listed parent takes care of international distribution and its nascent but fast-growing digital portal.

Despite a weak record of generating cash, Bollywood’s top studio has made some progress trying to make money out of its library. Though just 4.3 percent of the 68 million registered users to its Eros Now portal pay for the service, this figure has trebled in little more than a year. Executive Chairman Kishore Lulla is aiming for 100 million users within five years. India’s young population and the rapid rollout of high-speed internet will support that ambition. Broker Antique Limited expects revenue from the country’s film industry to grow at a compound annual rate of almost 8 percent between 2016 and 2021.

Nonetheless, a valuation of $1 billion for Eros’ back catalogue looks hyped up. Parent company Eros International has an enterprise value of roughly $655 million, based on Friday’s closing price and net debt at the end of March. A purchase would also be unusual for Apple given that it rarely splashes large sums on acquisitions and has largely steered clear of buying content, preferring to license movies, music and TV shows for its iTunes service.

But original Indian content is scarce and rival wannabe digital moguls are busy producing their own. Meanwhile, big tech groups are trying things in India that they haven’t elsewhere. Facebook-owned messaging service WhatsApp, for example, is preparing to roll out payment services in India. Eros' Bollywood library offers Apple an exotic but not totally improbable plot.

CONTEXT NEWS

- Eros Group, India’s largest movie producer, is in preliminary talks with Apple and other distributors to sell its entire library of films and music, Reuters reported on Aug. 7, citing a source familiar with the matter.

- Amazon and Netflix are also in very early-stage talks with Eros, Reuters added citing the source. Earlier in the day, India’s Economic Times reported that the deal could be worth around $1 billion and may also include Eros Now, the company’s digital content portal.

- Eros Now is owned by New York-listed Eros International Plc, which has a market value of $497 million. That company is also the parent of Mumbai-listed Eros International Media, which has a market value of $311 million.

- Shares of Mumbai-listed Eros were up around 5 percent at 220.6 rupees by 1535 local time.

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(Editing by Bob Cervi and Peter Thal Larsen)

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