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Will Disney’s Alice in Wonderland find a release in Europe on March 5? Theatre chains across the continent have refused to release the film because Disney plans to release it on home video three months after its theatrical release, instead of the usual four months.

It is a situation that Indian film companies could soon face. The gap between the theatrical release of a film and its release in other formats has been in a free fall for some years. Last year, it crashed.

On the fourth day of its release in theatres, UTV’s Main aur Mrs Khanna was being screened on direct-to-home (DTH) TV. Kaminey, one of the big hits of 2009, was on DTH within four weeks of its theatrical release, ditto for Wake Up Sid. The bet is on about when 3 idiots and My Name Is Khan — two of the biggest hits this year — will make it on DTH.

It is not surprising then that the mumblings of discontent from theatre chains, which brought over 70 per cent of the Rs 12,600 crore the industry earned in 2008, have turned more vocal. “There has to be an industry-wide norm (on when films should release in other formats). Every channel (for distribution) has to be given a chance,” says Deven Chachra, managing director, Satyam Cineplexes.

The Multiplex Association of India (MAI) is debating the issue. It is veering towards giving theatres at least six weeks before a film is released on DTH or in any other format.

Most producers are resisting this. DTH, satellite TV and home video are becoming increasingly profitable. More importantly, they help capture revenues that get lost because of low theatre penetration. So, production firms would prefer a two-to-four week window for DTH, six-eight weeks for satellite TV and three months for a home video release.

“We need the windows (of exploitation) cut short because of piracy,” says Siddharth Roy Kapur, CEO, UTV Motion Pictures. “It is very easy to decode a DTH box and get a better print. So, piracy could actually increase with DTH,” counters Chachra.

Unlike in the US, where home video brings in three times the revenues that theatres do, in India, the latter rules the revenue pie. Why, then, are film companies heading for a showdown with theatre chains?

Mind the gap
Till a few years ago, producers and distributors were two separate entities. So, “the contract the distributors signed with producers stipulated a six-month window for all formats,” says Arvind Chafalkar, a theatre owner and an MAI member. This, too, was not a standard. In the south Indian market, the gap is a year or more, because the trade associations there are very strong.

This huge gap between theatrical and other format releases is made worse by the pathetic penetration of cinema in India.

Of the 11,000-odd screens only 9,000 are estimated to be active. Even if films were released with 9,000 prints, possible with growing digitisation of theatres, cinema would still reach only a fifth of the people that TV does. According to the Indian Readership Survey (IRS) of 2008, cinema reached only 83 million people against 427 million reached by TV.

Clearly, there is a revenue opportunity in closing this gap between the thirst for films and their reach. It is a gap that satellite broadcasters exploit, legally, by paying huge amounts of money for film rights. For instance, Ajab Prem Ki Ghazab Kahani sold for a reported Rs 5-6 crore to Colors for 30 screenings over five years.

But the people who really profit from the gap are the pirates. They exploit this gap by releasing the film in formats (home video, TV, cable), places (tier two and three India) and among target groups (lower-income) that a simple theatrical release misses.

The game changer
Earlier, the arrangement between the distributor and producer, and the fragmentation in the business meant that the producer just lived with it. Over the last few years, two things have changed.

One, corporatisation has meant that production companies have also become distributors of their own films. So, the old arrangement of six months doesn’t hold. They are larger and make more than half a dozen films a year. Also, unlike individual producers who bore the risk along with the rest of the trade, now all the risk is borne by the production company.

Two, the pressure to make as much money as possible within the first few weeks of the film’s release is now phenomenal. There is the pressure on costs — production budgets have risen two-three times over the last few years, and marketing and distribution costs are now 20-25 per cent of the total budget for big films. There is also the pressure from investors — a lot of the money coming into film production is from private equity firms or from the public.

This urgency on returns combined with increased risk makes production companies more open to releasing in other formats. The idea, rightly so, is why let the pirates get all the gravy from the film.

Add to this the arrival of DTH.

The ability to run shows through the day and get a revenue share for it has made DTH the equivalent of having another theatre-like outlet. The successful films on DTH do anywhere between 100,000 to 200,000 subscribers per head for each of the five operators. For instance, if Tata-Sky charges Rs 75 for a day for four shows of Kaminey, then UTV would make roughly half of that, net of taxes. Going by estimates, Kaminey and Wake Up Sid together grossed Rs 80 lakh on DTH.

Though the DTH reaches only 18 million homes of which 10 million are pay (Doordarshan’s dish TV is free, once the set-top box has been purchased), the upside is huge. In about three years, this is estimated to go to 50 million. Assuming even 10 per cent buy a new film, that is a gross of Rs 37-odd crore for just one film. That is more than what the entire market could fetch for a medium-budget film.

Would looking at Hollywood help deal with this issue?

Salil Kapoor, COO, Dish TV, reckons now. “Hollywood gets a bulk of its revenues from outside of the US. Whereas Indian films make a bulk of their money from the domestic market,” says he. So, production firms have to exploit this market as much as they can and as soon as they can.

Watch out then for the signs of a longish stand-off between theatre owners and producers, like the one in 2009.

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