Of movie makers and theatre owners

The immediate trigger for the war of words was the news that two major Bollywood movies – Amitabh Bachhan and Ayushman Khurana-starrer Gulabo Sitabo and Shakuntala Devi with Vidya Balan as the human calculator  – were going for release directly on video streaming platform Amazon Prime Videos instead of waiting for the multiplexes to open.

The convention is that producers allow their movies to be exhibited only in theatres for a certain number of weeks before they are released to other distribution platforms such as television channels and video streaming platforms (the latter are also sometimes called over-the-top or OTT players).

For theatre owners, it was not just about two movies but the worry that the producers would think of streaming platforms as a viable option to launch movies. Along with these two, Amazon Prime Videos had also signed up several south Indian productions.

Inox, the second biggest multiplex company, came out with a press release making clear its extreme displeasure and disappointment. The Multiplex Association chipped in, appealing to producers to not release movies till the theatres were open again. The Producers Guild came out swinging, expressing its unhappiness over the petulant behaviour of multiplex owners during difficult times.

But tempers began cooling as the reality sunk in that both groups were in the same boat. “It is unfortunate how it played out but it is understandable,” says Ajit Andhare, chief operating officer of Viacom 18 Motion Pictures, which makes movies for theatre release as well as serials for video streaming platforms (the latter are produced by the production house Tipping Point). “Exhibitors would be worried and want to protect the commitment that has been there all along so I can appreciate their angst. But it is a shared angst because even for producers the main revenue source is theatrical release.”

To understand that, take a quick look at the business model of the movie industry. The multiplex association represents the multiplex companies – PVR, Inox, Carnival, Cinepolis and Miraj. They accounted for 3200 of the 9527 theatre screens operating in the country in 2019, according to the latest EY report on the Media and Entertainment industry. The rest of the screens (6327 in 2019) are the so-called single screen players.

Though single screens outnumber multiplexes, the latter wield more influence because just five players account for all the multiplex screens and they also dominate the bigger cities and fetch the bulk of the revenues. Single screen owners are mostly in smaller cities and many owners have no more than two or three theatres at most.

Big movie producers depend on multiplexes for the majority of their revenues and last year was a bumper year for everyone. The EY report estimates that domestic theatrical revenues in 2019 crossed Rs 11,520 crore, with 1833 movies being released last year.

“When a producer sets out to make a full-length movie, it is with a big screen and the theatre in mind,” points out Viacom's Andhare, “they don’t set out to make it for a mobile screen or a laptop.” Bollywood alone made over Rs 4200 crore through theatrical release in 2019, which was a standout year, he says. In contrast, the digital or OTT rights fetched Indian movie makers barely Rs 1900 crore.

When a nation-wide lockdown was announced suddenly, multiplex owners and movie producers were left twiddling their thumbs. In the first three phases of the lockdown, neither producers nor multiplexes could do anything but wait. In the fourth phase – from May 18 to May 31 – movie producers can get back to work after following social distancing rules. Multiplexes, meanwhile, will have to wait until the next notification as the current one specifically bars them from reopening till further notice.

“We were not expecting to be allowed to reopen till the end of May but we are still hoping that by the first or second week of June, we will be allowed to reopen,” says Kamal Gianchandani, CEO of PVR Pictures Ltd and Chief, Business Planning & Strategy, PVR Ltd, the largest multiplex player.

For movie producers who had completed production and were just waiting to release the film, the lockdown timing was particularly unfortunate. They had the content but no way of showing it to audiences to earn some money. And the interest costs of their debt taken to make the movie kept mounting even though revenues were zero. The multiplex owners were in an equally bad situation as their high rental expenses continued even as no revenues came in. (Some multiplex owners though used Force Majeure clause to not pay rents in some properties during the lockdown.)

The big four of the multiplex world had been expanding heavily over the past few years. A huge number of empty screens is an albatross around the neck. They need big theatrical releases to make their operations viable.

Video streaming services were growing fast even otherwise but the lockdown was the most beneficial thing that could have happened to their businesses. It was little wonder that some producers with movies ready and waiting for launch decided to go for deals on them.

But Andhare says that only a couple of dozen movies are finished and ready to be released and video streaming services can only do deals for them. For producers, it would be sub-optimal deals at best because OTT rights do not match up to revenues they can hope from a successful theatrical release. Therefore, if a movie has not yet been completed, it makes sense to plan for a theatre release if the multiplexes open by June.

If footfalls get back to normal quickly once the lockdown is over, the industry will go back to the old ways of doing business. But if the pandemic changes people’s behaviour permanently and makes them wary of going back to movie halls in a big way, the entire economics of the business will change. At the moment though, neither movie producers nor multiplexes want to contemplate that possibility.

(Prosenjit Datta is former editor of Business Today and Businessworld magazines and is founder and editor of Prosaicview.com. Views are personal.)