Multiplexes v producers: A battle without a winner

The movie theatres have fallen silent owing to the pandemic, but there’s been enough drama outside. Over the past few days, a battle has been playing out between the multiplex majors on the one side, and the film producers and studios fraternity on the other. The issue at hand is the decision by a few producers to release their movies directly to the over-the-top, or OTT, platforms rather than waiting for the multiplexes to reopen after the lockdown ends. One of the big triggers which started this faceoff was the decision by Rising Sun Films to release its much-awaited movie Gulabo Sitabo, directed by Shoojit Sircar and starring megastar Amitabh Bachchan and popular actor Ayushmann Khurrana, directly on Amazon Prime, rather than waiting for a theatrical release. Other movies like Vidya Balan starrer Shakuntala Devi and a clutch of south Indian films are also slated for direct-to-OTT releases in the coming days.

This has led INOX Leisure, owned by the Jains, PVR of Ajay Bijli and Carnival Cinemas to come out with statements against the move, in varying degrees of aggression. INOX was clearly the most aggressive, warning of “retributive measures” against what it called “fair-weather friends”, and expressing its “extreme displeasure and disappointment.” PVR was more careful in its statement, expressing disappointment over the move but thanking those producers who have rescheduled the release of their movies. Carnival, on the other hand, said the situation was such that no one could really be blamed. However, the multiplex chain hoped that once people were able to go back to the theatres, everyone would be able to do business as usual. It said while OTT was a reality, big players would prefer a theatrical release.

The Producers’ Guild of India, the collective of movie producers, retaliated, calling the statement by INOX on retributive measures “abrasive and unconstructive messaging”, and pointing out how, like the exhibition sector, the producers are also suffering “hundreds of crores of losses on a daily basis.” Justifying the producers’ concerns, the Guild has also pointed out that given the lockdown in various states, the reopening of cinemas is likely to be staggered. This apart, there will be uncertainty on the overseas market, lower occupancies in the initial stages owing to fear of infection, and a bunching of pent-up releases causing sub-optimal opportunities to smaller films.

The truth is, this is a battle no one can win. While multiplexes are understandably concerned about losing the opportunity to exhibit big budget movies, it will also be equally tough for producers to wait as lockdowns get extended. Big markets like Mumbai are Covid hotspots, and malls and multiplexes are closed even in areas where the lockdown has been relatively relaxed. In such a situation, producers will find it increasingly difficult to resist the temptation of releasing their films on major OTT platforms like Amazon Prime and others.

“We have urged the producers and studios to wait for the theatres to resume operations and follow the globally prevalent cinematic windowing pattern as it has done wonders in terms of revenues for the content creators and other stakeholders, as it offers the creators an opportunity to extract the best from all available mediums,” INOX CEO Alok Tandon tells me. “Therefore, all we expect the content creators is to have a theatrical run for their content, followed by digital platforms, like it has been happening so far across the globe.”

Earlier this month, Multiplex Association of India had come out with an appeal to the content creators and urged the producers and studios to wait for the theatres to resume operations. “Even we made the same request through our own appeal. What is important is that every element in the value chain understands the significance of cinema, and we will collectively see through this phase through collaborative efforts and decision making,” Tandon explains.

Realistically, when does Tandon think multiplexes like his will be able to resume operations? “We will leave that to the health and administrative authorities to decide, and we will follow the directives as and when received. We earnestly hope to see our country Covid-free at the earliest,” is all Tandon says at this point.

Jyoti Deshpande, who heads the media and entertainment business at Reliance Industries (which owns Jio Studios), has a slightly different take on the issue. “These are unprecedented times. My take is that this time is as good as any other to make some meaningful changes to the way business is conducted in India,” she tells me. “The distribution of risk and reward across the value chain (producer/talent, the studio, the exhibitor) has always been inequitable with the studios who entirely finance the films sitting with all of the risk. The studios take all the downside but have to share upside equally. Print and advertising expenses have been systematically mounting over the years and small to mid-sized films sometimes run the risk of not even recovering that investment if the film bombs with their viability hinging on licensing fees from OTT players.”

Deshpande points out that the exhibition sector is rife with problems in India. The number of screens in under-served for the size of the market and the production of films is prolific. So too many films across languages are vying for screen space. The multiplex exhibition industry being consolidated, they work together and put pressure on the fragmented producer fraternity be it for renegotiation of terms or any other matter, she adds.

Showcasing (which means how many screens and shows a film will run on across a cinema chain) is controlled by the multiplex operator. The multiplexes seek a contractual holdback from producers that for 8 weeks from the beginning of the theatrical run, that the film will not play on an alternative digital format such as OTT or satellite television. “However, if the film does not have the desired footfalls, then the exhibitors unilaterally have the right to remove it from the cinemas or drastically cut back the ‘showcasing’ even after 3 days, let alone 8 weeks. This leaves the studio/producer combo high and dry as they cannot even advance the OTT window to cover up some of their losses,” Deshpande tells me.

Another producer points out that multiplex operators have made almost a one-time capex in building out these cinemas to enter this business and a modest opex for regular upkeep. Screen growth is not as prolific as it is in countries like China which has 35,000 screens compared to India’s 3,500 for a similar population size. The producers and studios invest thousands of crores each year to produce content to feed these cinemas.

“In this pandemic, the cinemas don’t have footfalls so their income is suffering, but think about the producers for a minute. Mounting interest costs on finished films that are facing release uncertainty and bearing interest cost, partially shot films not covered by insurance that have to decide whether to abort the project or complete the films at an increased budget when things reopen and who will fund this over run. And many other points which many others would have articulated in detail,” a studio boss says.

The point producers are making is this: when certain producers have sold off their rights for a straight to digital release on an OTT platform, they are not trying to profit from the situation. They are merely trying to mitigate some of their losses. “Every film maker worth his salt only dreams of making films for a big screen experience. Every actor wants a big screen presence. For every studio the sum of the parts is greater than the whole. So they want to monetize across maximum avenues,” says Deshpande.

“Though we are disappointed with the move of filmmakers to go straight to digital, we understand the financial burden/compulsion that one may have in these times. Even in the past, there have been a few cases of filmmakers facing failure when they opted for digital release, skipping the theatrical run,” Carnival Cinemas CEO Mohan Umrotkar says in a statement. “..The entire industry needs to stand by each other. Films releasing on OTT is the loss of opportunity. It is not an absolute loss, however. We hope filmmakers stick to theatre format. We were expecting them to stand by us because we are family.”

Tandon of INOX explains that multiplex owners are getting ready for a new normal once the lockdown restrictions are lifted and cinemas reopen. Detailed standard operating procedures (SOPs) are being put in place, including temperature checking, deep cleaning of auditoriums, encouraging online booking and seating keeping strict social distancing in mind. He believes that there is a pent-up demand which will be seen once cinemas reopen, and hence box office collections would not be impacted.

The most important player in this battle between the producers and exhibitors is the customer, perennially hungry for good and engaging content. Whether the smaller OTT platform or the big screen experience, customers will choose what they want to watch, when they want to watch and how they watch it. Producers, exhibitors and OTT platforms know that only too well. Today’s customer can seamlessly switch between watching a film on OTT and then deciding to go for a big screen experience the same weekend.

Deshpande sums it up saying: “Let’s stop bickering, roll up our sleeves and adapt and change and collaborate to create win-win partnerships in what is going to be a new normal.”

A new normal it surely will be.