Film Business: From Single Screens to Multiplexes

Transcription

1 Film Business: From Single Screens to Multiplexes Sachin Verma Abstract Gone are the days when we used to hear terms like silver jubilee, golden jubilee & diamond jubilee and houseful board was used frequently by the exhibitors. The era of multiplexes doesn t even recognize most of these terms. Business has grown four folds and so is the investment in producing a film. This paper draws attention towards what is the difference between the way revenue was generated in film industry in the past and what are the current trends. Also, how the investment is also on the rise as this huge budget of film making is a big problem for small and medium size production houses. Moreover, it is an attempt to throw light on how the arrival of technology led the makers change their scheme of things i.e. how they used to offer their product (film) to the customers (audience) decades ago and what they prefer to do in today s environment. Keywords: Exhibitor, multiplex etc. Introduction Many years ago we used to hear that a particular film was all set to score a diamond jubilee or golden jubilee at the box office. A certain film has celebrated a silver jubilee is something that we heard many times long ago. Then came the era of home video when no. of people stepping into a theatre dropped as they were happier watching a movie with their family in their home itself on a rented VHS tape, better known as a video cassette. After that we got VCD s but the problem of falling no. of theatrical audiences came into light. At the same time there were films like Hum Aapke Hai Kaun & Dilwale Dulhaniya Le jayenge & Kuchh Kuchh Hota Hai brought the family audiences back to auditoriums & the board of houseful was also bringing a broad smile on the faces of each & everybody related to the film. And now in year 2012 what really matters is how many people stepped in during the first week of the release and more so in the first weekend. The equation of film business has undergone a huge change over the years. Film Business in India The Indian film industry is the largest in the world in terms of number of movies produced. The industry is quite old with the first commercially successful film produced in the year The Indian film industry produces more than 1,000 films every year in 52 languages and over 3.7 billion tickets are sold annually. There are over 400 production houses in the country with 32 corporate houses in the business of film production. The film industry provides employment to over 60 lakh people and its current turnover is crossed Rs.12,000 crores for the year Film viewing is an experience after which one feels inclined to pronounce a judgment. Whatever the kind of film, its genre, whether good, bad or ugly, people can t refrain from declaring what they thought of a film. They discuss the film with family, close friends or colleagues at their work-place. Hit, flop, super-hit are terms usually used by cinegoers to describe a film they ve seen. But while these terms are quite loosely employed by the general public, words such as the above are actually very technical in nature with specific meanings. More often than not, when laymen employ the above terms to describe a film, they use them to describe their feelings about the film, about how they liked or disliked it. The film trade, however, treats a film as a hit or a flop according to its earnings vis-ã -vis its cost. Whereas personal judgments can be very subjective, money is the only tool to categorise films into hits, flops, semi-hits, disasters, super-hits etc. A film is treated as a hit by film trade analysts only if it more than doubles the investment of the Sachin Verma sachin.saregama@yahoo.co.in 327

2 MIT-SOM PGRC KJIMRP 1 st International Conference (Special Issue) ISSN No.: distributor. If the cost of a film to a distributor is not recovered after the film has completed its run, it is termed a flop. Not many are aware that the cost of a film to its distributor and not to the producer is compared with its earnings in the distributor s circuit for arriving at the categorisation of films as hits, flops etc. For the uninitiated, a producer is the one who makes the film by arranging for the finances, stars and technicians and their dates. He sells it to various distributors, one for each circuit or territory. The buyer, or distributor as he is called, has the right to release the film in only the territory for which he has acquired the distribution rights. Thus, for example, the person who buys a film for the Bombay circuit will release it in cinemas falling in the jurisdiction of Bombay city and suburbs, parts of Maharashtra (like Pune, Aurangabad, Malegaon etc.), Gujarat, Saurashtra and parts of Karnataka (like Hubli, Belgaum etc.). The circuits for the purposes of film business have nothing to do with state boundaries we know. For instance, although Central Province was the term used to describe today s Madhya Pradesh in pre-independence India, even today C.P. As against the old system of distribution in which the producer used to give the distributor quota prints along with the distribution rights, today the cost of prints is borne by the distributor. The publicity in his territory is also to be done by him. Thus, the cost to the distributor is the total of all the three aforesaid costs (MG royalty plus print cost plus publicity cost). For example, the total investment of the Bombay distributor in the recently released Qayamat for Bombay was Rs crore. If the film would ve done a business of Rs crore, it would have been termed an average fare. If it would not even have recovered its cost, it would have been termed a flop or, if the business fell far short of the investment of Rs crore, even a disaster. But if Devgan Software, the Bombay distributor, does a business of Rs. 5.5 crore, the film would be referred to as a semi-hit. Business of more than Rs. 5.5 crore would entitle it to be referred to as a hit. And if Qayamat goes on to touch the figure of Rs. 6.5 or 7.5 crore, it would be construed to be a superhit. If it does more than even that, it would qualify to be a blockbuster, depending on how much is the final figure of business done. In reality, the film is expected to touch Rs. 3 to 3.25 crore, which would make it a commission earner. A film becomes a commission earner when it covers its cost plus 25% more than that. Twenty-five percent is the industry norm for calculating the distributor s expenses for releasing a film. Between a commission earner and a semi-hit is the nomenclature of overflow films. Such a film covers its cost as well as 25% commission and goes on to do more business. Every rupee earned after the entire commission of the distributor is recovered, is to be shared with the producer, usually equally. That is to say, the distributor keeps 50 paisa of every rupee earned after his commission is earned and gives the remaining 50 paisa to the producer as his share of overflow. Hence, the term overflow film. When film industry trade papers predict the fate on the day of a film s release, what they actually do is estimate the likely business of the film through its entire run of 5, 7 or 10 years and compare that with the price for which the said film was sold. Interestingly, although the distributor s revenues depend on whether or not the public likes a film, a producer can make his money on the day of release itself, if he has been able to pre-sell all the rights. Technically and theoretically, therefore, even if a film were to bomb on release, the producer would sit pretty with some crores or lakhs in his bank account because the risk is that of the distributors of the various territories. This is generally true in the case of top-line producers of big-budget starcast films who have successful track records. For them, their productions are hits and super-hits or even blockbusters on the day of release itself. For example, although Subhash Ghai s Yaadein was a flop in the distributor s hands, the showman s company, Mukta Arts, made a hefty profit in the disaster as the film was pre-sold to distributors across the world. But for the majority of the producers who can t pre-sell their films, the risk is more theirs than that of their distributors who may not buy the film on MG royalty basis. Business Now V/S Business Then Industry status The Indian government accorded industry status to the film entertainment business in Film entertainment companies are now listed on Indian 328

3 and International stock markets and have attracted significant private equity and venture capital from across the world. India s leading corporate houses like Reliance, Birla have also entered this sector. Reputable banks and financial institutions now provide funding and insurance services to the industry. This transformation has contributed to the film industry segments rapid growth from approx. Rs 600 crores in 1999 to 9600 crores in 2007, an increase of 15 times in just 9 years. Industry has doubled in size in the last 4 years (since ) and is projected to double again by Overseas territory Rajshri s Hum Aapke Hai Kaun (1994) as the 1st Hindi film that was properly released in overseas territory & that proved to be a hit. But those were the initial days. Real turnaround came with the grand success of Dilwale Dulhaniya Le Jayenge (1995). After that all the major production houses started releasing their major projects in foreign land as well, USA & UK being the major overseas territory. Then came Australia, Canada & Mauritius. These way Indian movies were reaching all the NRIs around the globe. Family and lighthearted films were & are still preferred by overseas audience to action or any other genre faster returns, the revenue that was possible to earn in 3 weeks in older days the same amount can be earned in a week. Thanks to increased no. of shows. Since a multiplex has many screens it can run 2 or even more shows of the same film simultaneously on different screens. This is not possible in average conventional theatre as it has the facility to run just one film at a time Revenue Stream: Then & Now Up till early 90s Domestic Theatrical Home video Music Current Scenario Domestic Theatrical Overseas Theatrical Home Video (DVD, VCD) Home Video (Overseas) Home Video (Rental) Music (India and Overseas) Mobile Rights Satellite Rights Overseas Satellite Rights Terrestrial Rights Doordarshan IPTV, Internet Rights Retail and Merchandizing Brands and Sponsorship rights Source: Yes Bank Report, AMR s Film Entertainment Worldwide The figure shows the distribution of all the revenue streams in the industry in percentages Arrival of multiplexes: Much faster returns than decades back Thanks to the arrival of multiplexes in the country the premier class families are also visiting cinemas so that they can have the big screen experience as well. Multiplexes are known for their premier projection & sound quality at the same providing a very comfortable film experience. Obviously, the admission rates of a multiplex is quite higher as compared to a conventional single screen but the cine lovers do not mind that price if they are going to get a high quality movie experience that was not easily possible in a conventional single screen. Balcony audience of a conventional theatre is now more than happy to have multiplex experience. Higher admissions rates i.e. price of the tickets are responsible for higher returns. Not only that, multiplex owners broke the tradition of running 4 shows/ day and they started showing as many shows possible in available time. That also leads to UFO supporting digital platform After carefully studying market realities, UFO(Universal Film Organization) has created an end-to-end Digital Cinema Solution which has revolutionized the film distribution and exhibition system. The Company has revolutionized the way films are distributed and exhibited through its pioneering technology, infrastructure and unique pay per show business model, bringing in a First Day First Show regime for film distributors and cinema owners. A Digital Cinema System encompasses the production, delivery and projection of full-length 329

4 MIT-SOM PGRC KJIMRP 1 st International Conference (Special Issue) ISSN No.: motion pictures, trailers, advertisements and other audio / visual programs to theatres using digital technology. In Digital Cinema a film is delivered to theatres through physical media such as hard disks or through other electronic transmission methods such as satellite. UFO has launched an MPEG-4 technology based Digital Cinema System which provides greater flexibility, efficiency and cost savings over any other Digital Cinema solution. MPEG-4 technology, allows reliable and speedy delivery of digitized movies through satellite. This technology further provides the great advantage of storing multiple numbers of movies in UFO server, at the theater. This storage of movies provides flexibility to schedule the number of shows with different movies, which basically creates a pseudo multiplex environment for the theater substantially increasing the revenue. UFO has pioneered a Pay per show based pricing strategy for distributors as against common practice of deploying a Virtual Print Fee (VPF) charge. In traditional system the print were moved manually to the exhibitors by the distributors, but this digital platform has removed that process. In a very short time the digital copy of a film s print can be sent anywhere in the world through satellite and hence a film can be released in much more number of prints than it was possible before. A conventional print of a film used to cost around Rs. 60,000 70,000 for the distributors but this digital print costs them much less amount. Reducing running time of films Currently, the average duration of a Hindi movie is minutes, while that of an English movie is 90 minutes. But, with audiences spoilt for various entertainment options and with a shortened attention span, production houses are investing in movies of 120 minutes on an average, making films more compact and to-the-point. Going forward, Hindi movies are likely to bring it down to 110 minutes, which is increasingly being considered optimal by producers. Sujoy Ghosh, director of movies like Alaadin and Jhankaar Beats, said: Short duration movies get more shows in multiplexes, at least five shows, per day. As movies these days make money only in the first two to three weeks, it is important for the producers to get as many shows in a multiplex as possible. Some movies that fared reasonably at the box office recently, like Bheja Fry (grossed over Rs 20 crore) and Khosla Ka Ghosla (grossed around Rs 15 crore) were just about two hours long. Shorter movies also make business sense. Vikram Bhatt, CEO, ASA Productions and Enterprises, said, Short duration movies take less time to shoot; also we save around Rs 10,000 per print, if the movie duration is short. Jehil Thakkar, an entertainment analyst pointed out that a minute movie would cost around Rs 50-70,000 per print. Any movie, which is 30 per cent shorter will save around 30 per cent per print, a lot, considering that a lot of big-budget movies release films worldwide with over 1,000 prints. Ravi Gupta, CEO of Mukta Arts, said, Currently, the average duration of Hindi movies is 120 minutes. This may come down to 110 minutes for Hindi movies in the near future, as that is optimal. Earlier, movies used to celebrate golden and silver jubilee of theatrical runs, but now a movie runs in theatres for only two to three weeks and the first week s collection matters most. Film Production is Getting Tougher for Small & Medium Production Houses Although there are many opportunities for making a low budget films for a small or medium size production house but whether it will find any takers is a big question now. The reason is a very high marketing budget of the film. Medium & small production houses are facing stiff competition from big production houses which are working like corporate houses. Yash Raj Films, Vishesh Films, Rajshri Productions, Viacom 18, UTV, Dharma Productions, T-Series, TIPS, Vinod Chopra Films etc. are some of the leading film making factories in India. The industry is ruled by these banners. Spending power of these big names is quite high so they have raised the bar for the overall investment of a film i.e. budget of making & promotion cost. They are also alleged to give a much higher price to the stars than that can be justified. These standards set by the big banners of Bollywood are not easy to be met by smaller banners or rather one should say independent producers like Vashu Bhagnani(Puja Films), K. C. Bokadia(BMB) or Pranlal Mehta etc. They all are well known names, still, but apart 330

5 from the first others are missing from the industry. The consequence of arrival of corporates into film making is that they have made life problematic for medium & small producers, either put a huge investment or just go off. That doesn t mean that new people are not coming to film making, they are, but they must have a larger amount of money so that can make & promote a film well enough. Every week we see new films announced and released but few of those producers are able to make their second film. First venture has to be a hit or at least producer should make money from various rights or else the same person is highly unlikely to be able to announce his next project. Suggestions Above discussions clearly indicates how the business of film industry has increased many folds over the years. It has undergone a lot of changes over the years. Here are some suggestions that might well prove to be important to maintain the growth rate or even improve it- Sky touching admission rate reduces the footfall in the multiplexes. First few rows in every cineplex (multiplex/single screen both) should not be priced more that Rs. 100 each as the repeat audience is generally from economical section of the society. Condition of single screens in the country is not all right & there is no serious effort from government also. Like in cases of multiplexes where they provide tax exemptions, some serious efforts should be invested to maintain the number of conventional screens as well. In the last decades the no. of screens that wound up their business is alarming because of high running cost. Leading production houses supposedly pay an unjustifiable amount to the leading stars of the film to get their films signed; consequence of this is that the fee of an actor goes up as heavily as it can t be paid by an independent producer. End result is either frontline actors feature in their own projects as producers or in a film financed/produced by a major production house. Conclusion Anything that s permanent is change, you just can t run away from this fact of life, a universal truth. Just like any other industry, bollywood has also seen many changes over the years hence it s obvious that with the changing world the schemes of revenue generation or business would also change. It s really amazing how the business has become many times faster and because of opening up of various revenue streams the investment can be recovered even before the film reaches its audience. Even if a movie doesn t perform well at the box office the investment can be recovered from other streams (different rights). Film makers, especially producers are much more secure now and hence many corporate have entered the field. Above mentioned suggestions will further improve the revenue in the industry. Being a passionate film lover my best wishes are always with the true caretakers of bollywood. References 1. Komal Nahata (2011). Komal Nahata on Dynamics of Film Business. Film Information. 2. C.Barathi, C.D.Balaji, Dr. CH. Ibohal Meitei (2011, April). Trends and Potential of the Indian Entertainment. Industry- An In depth Analysis. Researchers World. 3. Patrick Frater: India s Movie Business Suddenly Legitimate (2012, March 21). Retrieved from 4. Mukherjee, P. (2010 June). Bollywood Experiments with Shorter Movies. Business Standard. 5. M. Garikaparthi (2008). Case Study: Marketing of the Brand Bollywood. Volume 2, Issue 4/4, ISSN