It was a visit to India a few years ago that convinced Michael Lynton, head of Sony (NYSE: SNE - News) Pictures Entertainment, that it was time to tackle Bollywood, one of the last great frontiers for Hollywood in the world movie business.

Sony had been embedded in India's television industry for more than a decade but no Hollywood studio had tried its hand at that great Indian film tradition - the three-hour song-and-dance extravaganza aimed at the sub-continent's movie-crazy audiences.

Mr Lynton was impressed by the growth of the film industry in India on the back of the construction of multiplexes and the opportunity to distribute movies among the vast Indian diaspora in key markets, from the US to the Middle East. "It really does represent an immense opportunity for US studios to come in and become part of the process," he says.

The result was Hollywood's first attempt at a Bollywood film - the Hindi-language Saawariya, a moody romance about unrequited love.

It proved to be an adventure full of surprises - even for Sony, with its extensive experience in India's entertainment market. The movie ended up going head-to-head on its opening weekend against a homegrown film starring Bollywood's biggest star, Shah Rukh Khan, in a contest the domestic press painted as a clash of the titans - Hollywood v Bollywood.

Although Mr Khan's film, Om Shanti Om, came out on top in the box office, Sony enjoyed some success and can take comfort from the fact that its peers among the other Hollywood studios are now rushing to emulate its example and reach India's movie audiences.

The move into India might seem obvious good sense, given Bollywood's presence around the world, which has grown alongside India's increasing economic clout. But until this decade, India's movie-making industry, while one of the oldest and most prolific in the world with more than 1,000 films a year, was uninviting for foreign companies.

Budgets were tiny, at around $3m and the industry lacked a corporate structure. Funding often came from murky sources, reputedly including the criminal underworld.

This has begun to change. More entertainment companies have listed on the Indian and London stock markets. Movie funding has also become more transparent, making it easier for foreign corporations to get involved.

For the venture into India Mr Lynton, Sony Pictures chief executive, turned to his international film production team, led by Gareth Wigan, the Hollywood veteran who oversees Sony's International Motion Picture Production division alongside its president, Deborah Schindler.

Mr Wigan concluded that the key to cracking India's market was to make truly local films. In India, domestic movies account for about 90 per cent of total box office takings, which reached an estimated $2.1bn in 2006.

Mr Wigan was no stranger to pioneering new markets. The London-born executive oversaw Sony's push into local-language film production 10 years ago, starting with Chinese-speaking Asia and Europe. The unit has completed 37 movies in 12 countries in nine languages. Hits have included the Academy Award-winning Crouching Tiger Hidden Dragon and Hong Kongfilm Kung Fu Hustle.

In India, Mr Wigan met Sanjay Leela Bhansali, a local director acclaimed for movies such as Black, a film based on the story of Helen Keller, the deaf, blind and mute girl who learned to communicate. Mr Wigan signed a deal with Mr Bhansali to make Saawariya.

After nearly two years in production, Sony scheduled Saawariya for release on the weekend of Diwali last November, India's big holiday season.

During the long lead-up to its premiere, however, Mr Khan said he would release Om Shanti Om on the same weekend.

In contrast to atmospheric Saawariya, Om Shanti Om is a colourful Hindi pop movie aiming for the feelgood factor in Indian audiences.

Saawariya was panned by local critics, who dismissed its bluish lighting, surreal sets and long scenes as pretentious and boring. The Hindu newspaper dubbed it "a stale tale".

Om Shanti Om, however, received rave reviews.

Supporters of Saawariya say it is unfair to compare the two films, which belong to very different genres. But both are big budget films by Indian standards, with Saawariya costing $12m to make. Local movie websites have branded it a flop at the box office - a claim that Sony rejects, saying the film made $20m on its release.

Independent film website Box Office Mojo says Saawariya took nearly $900,000 domestically and a total of $17.6m in foreign markets. Om Shanti Om took $3.6m in India and $36.2m overseas, according to the website.

Mr Wigan is sanguine about the experience. He says: "We like to talk about our super hits, we like absolutely never to talk about our super flops, which we occasionally have, but this is neither of those in terms of financial performance. It's a middle of the road movie." Sony is "very proud" of the film.

Even so, Mr Lynton says the group has learnt lessons about marketing films in India - one being that the print media retain more importance here than anywhere else in the world. In addition, celebrity is crucial. Saawariya used two debutante lead actors who were unknown although they came from well-known acting families.

"The power of actors and directors helps to drive movies much more than elsewhere in the world because the whole media is set up for it. How you manage that process, takes some learning," Mr Lynton says.

One thing is certain: Hollywood will soon be knocking at Bollywood's door again. Sony has an agreement with Mumbai-based group Eros to produce about four films a year while Disney and Viacom, among others, are also circling the market.