He’s not the only one. A lot of producers feel that faster broadband, cheaper smart TV sets and proliferation of video streaming services will have an impact on the film industry in general and multiplexes in particular.
Though it is just the beginning, but some of the questions being raised in the board room of the studios and multiplexes are on the business models and what next.
Will multiplexes lose footfalls? Will OTT cannibalize or compliment the multiplex business? Will multiplexes have to redraw their business plans? Is direct to OTT release a viable business plan for a filmmaker?
WHY RELEASE DIRECTLY ON OTT?
Established industry norms are undoubtedly being challenged. With limited theatrical window and the likes of Netflix, MX Player (owned by BCCL, which also owns ET), Prime Video, Hotstar, and 30 other overthe-top (OTT) video streaming services vying for consumers attention, filmmakers, who were finding it hard to get release dates and screens have got new distribution platform and revenue streams.
The problem of finding release date can be judged by the fact that a total of 1,776 films were released in 2018, an average of 34 films per week. If one considers only Hindi films, the number was 238, or over four films a week. There are only 9,600 cinema screens, of which multiplexes account for just over 3,000 screens. But because multiplex accounts for close to 60% of box-office revenue, these chains have control over the release window and decide when to pull out films.
Hence, for many small and low-budget films, which grow through word-of-mouth promotions, it is becoming more viable to release them directly on the OTT platforms. For instance, Ronnie Screwvala’s ‘Lust Stories’ and ‘Love Per Square Foot’ and Karan Johar’s ‘Lust Stories’, Ronnie Screwvala’s ‘Love Per Square Foot’, Yoodlee Films’ (Saregama India) ‘Brij Mohan Amar Rahe’ are some of the films which were directly released on to Netflix.
ECONOMIC LOGIC FOR SMALLER FILMS
Even for a small budget film with a cost of production of under Rs 10 crore, the marketing, promotions and distribution costs have gone up to almost another Rs 15-20 crore. If the film is released in multiplexes, the box office revenue constitutes almost 55-60% of a film’s total earnings, But a producer’s share is only around 45% of the net box office revenues. Thus, even to breakeven, a typical small film has to recover over Rs 50 crore at the box office.
But, instead, if the filmmaker can get the cost of production and some premium over and above for exclusive rights from an OTT service, it will make sense for him to have a direct to OTT release, which may also give wider audience reach.
So no wonder that Screwvala (RSVP) has another six movies lined up, out of which four will be released on Netflix, while Johar’s digital content studio Dharmatic Entertainment has signed exclusive output deal with Netflix for all its films and series. Yoodlee’s entire business model is based on OTT.
Screwvala feels OTT will “disrupt” both the economics as well as audience consumption patterns forever. “The rhetoric that audiences will always look at going to the theatres to be a family outing will not make sense,” he said giving example of restaurants, where delivery services like Swiggy and Zomato have disrupted the business models. “Many restaurants have had to shut down and most make of their money only on home delivery. The same uberisation of content will also happen,” he argued.
SO IS THERE AN IMMINENT THREAT FOR MULTIPLEXES?
The answer could be a “resounding YES” or a “big NO” or a meek “too early to say”, depending on who is answering.
“There is enough passion and love for movies, enough fondness for the cinema experience and there is enough content to be enjoyed on the giant screens,” said Alok Tandon, CEO, Inox Leisure. “...if the industry’s performance in FY19 is anything to go by, this situation is only getting better, with best ever revenues, footfalls, rollouts and introduction of new technologies.”
Multiplex executives feel entertainment will not just co-exist but flourish in the country. Kamal Gianchandni, CEO, PVR Pictures, said that cinema as a platform has existed for many years and has competed with many forms – VHS, DTH, PPV, VCD etc and survived.
“Last financial year was the best in the last 10 years for PVR on all metrics, be it occupancy, footfalls, revenue or operating profits. The OTT players were fairly aggressive on marketing and in spite of that cinema chains had a fabulous year. It clearly shows that cinemas and streaming platforms are not just co-existing but prospering,” Gianchandnai said.
Shariq Patel, CEO of ZEE Studios, echoed the sentiment by adding that he doesn't see multiplexes or cinema chains going out of business. “If that had to happen, it would have happened a long time back with the advent of VCR. We have been hearing about death of cinemas ever since home entertainment started.”
But experts also feel that multiplexes will have to react to the OTT threat and introduce new consumer offerings and enhance their customer experience.
“What it will mean is that multiplex chains will have to start coming up with janta theatre as they penetrate further in smaller markets. That’s the business model they will have to cater to. Spectacular movies big on special effects will drive people to theatres, while for normal drama and high concept films, they will be equally comfortable or prefer to watch at home,” said one industry player requesting anonymity.
Multiplex chains like PVR, Inox and Cinepolis have been working towards taking the experience element to a new level by developing experience-driven entertainment centres. The focus has been on multiple formats like IMAX, 4DX, ScreenX as well exhaustive F&B concepts. However, many experts feel that the plexes will also have to work on their cost for a price sensitive market like India.
Ashish Pherwani, Partner and Head, Advisory, Media and Entertainment at EY India, said that film release windows will keep evolving with the spread of technology. “Customer segmentation is key, and given it's the age of the democratised consumer, ample content will need to be available on every platform at different prices.”
OTT: A COMPETITION OR COMPLEMENT?
While some see OTT as a substitute, it is equally true that OTT is also driving people to the multiplexes by creating more hunger for content. “With such powerful mediums driving growth, we are heading towards the Golden Period of Indian cinema, once again,” Johar said.
For example, availability of ‘John Wick’ I & II on OTT platforms drove audiences to the theatres when the third chapter of Keanu Reeve-starrer hit the screens earlier this year.
“John Wick 3 did six times more box office business than John Wick 2. Many people discovered earlier films on streaming platforms and it helped. So there is a positive cycle between streaming platforms and cinemas as far as India goes,” Gianchandani said.
OTT players have created a new set of stars and their edgier content has found purchase with the younger audience. In such a changing milieu, it’s easier for films like ‘Kabir Singh’, ‘Article 15’, ‘Badhaai Ho’, ‘Raazi’, and ‘Uri: The Surgical Strike’ to succeed in multiplexes.
“If we look at the box office numbers for the well loved and highest grossing movies this year , there is a definite increase and high concept movies are breaking out in theatres like never before. However, what we see is that there aren’t too many average performing movies, theatrical performance is getting polarised like never before.. we see streaming services offering great content options and that’s great for the consumer. As an industry we need to put out very compelling content which lends itself for cinema viewing, for the consumer to go out to the theatres,” Said Amrita Pandey, CEO of Junglee Pictures, owned by the Times Group.
UNDER SCREENED MARKET
Indian film industry’s biggest challenge has been the dichotomy of under penetration of screens and low occupancy rate. With 8 screens per million population, India is by far one of the most under screened nations in the world so there is still room to grow. India has 30-35 million frequent moviegoers and another 70-75 million who watch movies occasionally.
“As more cinemas get built, this number will go up. The industry took 20 years to build 3,000 multiplex screens, another 10 years we all will continue to build more. The number should reach 10,000 screens by then and this OTT Vs multiplex debate is premature,” Gianchandani said.
So while the definitive verdict is not out there yet, Karan Johar, owner of Dharma Productions, sums up by saying that films are and will always remain part of India’s culture.
“We love going to cinema I think we will continue to go to the cinema screens. It is not an either OTT or multiplex market. Both are going to grow,” said Johar.
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7 Comments on this Story
Sreenivasa Rao476 days ago
In a country like India, all types of media will work. TV and social media have not killed the newspaper here, in fact, their strength is growing.
GY476 days ago
Multiplexes charges so high and when you go and see inside , you find half the hall is empty and they cover up by charging 3-4 times greater price on popcorn and snacks. If they have to survive they should reduce the ticket cost, offer snacks at reasonable rates and provide various schemes to attract people at Multiplexes or let us know when the funeral is.
Aam Aadmi476 days ago
No threat but definitely negative threat there !