The tension between multiplex owners and film production/distribution companies over revenue-sharing has been building up for some time. It recently exploded into a full-fledged battle. Though their fight is only with multiplexes, a united front of film producers and distributors, has decided to hold back the releases to all theatres (including single screens) from April 3 this year.
The issue — so far multiplexes had been sharing 48 per cent of their ticket sales of a film (net of entertainment tax) with film producers/distributors in the first week of release. The share decreases to 38 per cent from week two onwards. For some time now, producers/distributors (usually the same entity) have been demanding a flat 50 per cent share across all weeks, without success.
Both multiplex owners and producers/distributors claim higher expenses — the former on operational costs and the latter on marketing and print costs. Much of this is irrelevant says Siddharth Roy Kapur, CEO, UTV Motion Pictures. He points out that globally the formula, irrespective of week or territory remains 50:50. So why shouldn’t it be so in India? “All multiplex owners are saying is that revenue share should be performance-oriented,” counters Alok Tandon, COO, Inox Leisure.
Why has revenue sharing become important now, after nine years of corporatisation and the growth of multiplexes? My guess — the organised film industry’s abject dependence on multiplex revenues and its stubborn refusal to believe that a market in middle or lower India also exists.
According to Prakash Chafalkar of The Multiplex Association of India, of the 11,394 screens in the country, 800-odd are part of multiplex chains. They sell tickets at anywhere between Rs 120-150 against the all-India average of Rs 30-50. Overall, theatre revenues accounted for 76 per cent (or Rs 9,700 crore) of the Rs 12,600 crore that Indian films made in 2008. According to Kapur, multiplexes bring in 55-60 per cent of a film’s theatre revenues, while the remainder comes from the 10,500-odd single screens.
This invariably skews everything — the creative, marketing, the entire business focus of film companies. The overriding belief among scriptwriters, film executives and firms seems to be that only the audience going to these 800 screens is capable of enjoying and paying for cinematic variety.
So while you will see some rich-quality cinema coming to multiplexes, there is hardly anything interesting being made for the rest of India. The last few mass-market films were Om Shanti Om, Sivaji and Jab We Met (2007) and Rab Ne Bana Di Jodi and Ghajini (2008). None of the large film companies attempt to create portfolios that mix languages, genres, or segment audiences to account for the two key characteristics of any market in India — volumes and heterogeneity. Kapur points that no studio sets out to make films only for multiplexes. He reckons that the creative calls the studios take are more inclined to the sensibilities of people making the films. (UTV has usually had a better portfolio mix than other studios)
Maybe. But this has left vast portions of the audience with growing purchasing power, but with nothing to watch. A resurgent Marathi, Bangla or Bhojpuri cinema has rushed in to fill the gap and grab slices of the film pie. The narrow focus also limits non-theatre revenues because many of the multiplex films are of little-interest to the ratings-oriented and ad-supported TV channels, big buyers of film rights. The only other major revenue source for multiplex-oriented films is home video.
Besides the skew, the other reason things could have come to a head — two bad years (2007 and 2008), rising costs and falling margins.
Don’t link this to the slowdown — that is when people spend more on films. After five years of stagnant revenues, the US box-office has perked up in 2009, in the middle of a gut-wrenching recession. According to media reports, revenue from ticket sales till March this year were up 16.5 per cent compared with last year. The number of tickets sold, a figure that hasn’t increased in about a decade, has actually gone up 14.8 per cent.
What film companies and multiplexes should be working towards is getting more people into theatres — not fighting over revenues from falling footfalls.
The writer is a media consultant and author of The Indian Media Business firstname.lastname@example.org