Explained: As streaming gains new releases in lockdown, what is at stake for big screens?

These exhibitors received yet another jolt on Monday (June 29) when it was announced that Laxmmi Bomb, featuring Akshay Kumar, will premiere on Disney Plus Hotstar. Six other films will also be released on this platform: Bhuj: The Pride of India featuring Ajay Devgn and Sanjay Dutt; Sushant Singh Rajput’s Dil Bechara; Sadak 2 featuring Alia Bhat and Aditya Roy Kapur; Abhishek Bachchan’s The Big Bull; Vidyut Jammwal’s Khuda Haafiz; and Lootcase featuring Rasika Dugal and Kunal Khemmu.

Mohan Umrotkar, CEO of Carnival Cinemas, said: “It is very disappointing that filmmakers are opting for the digital first route when we are just steps away from the theatrical releases with the reopening of cinema halls across the country with all the necessary precautions… If films made for theatres release directly on streaming platforms, it may hamper the overall growth of the ecosystem.”

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So how are profits shared in the case of theatrical releases?

Traditionally, producers in India get their biggest returns from box office collections. “If a movie does well, anything between 60 per cent and 70 per cent of its earnings come from the box collections, both from the domestic and overseas markets,” Umrotkar said.

“The overseas market generates around 20-30 per cent of the total theatrical collections. The bigger a movie’s box office collections, the higher the amount for its satellite, OTT and music rights. That’s another advantage of a movie’s theatrical run,” he said.

Profit-sharing between the exhibitors, especially multiplexes, and producers has been a contentious issue in the past. Even though this arrangement can change on a case-to-case basis, it works on an overall informal understanding.

“The producers and exhibitors split the net value of the box office collections, after deducting the tax. In the first week, the producer takes 50 per cent of the profit. In the second week, the producer gets 45 per cent, and the third week onward their share is 35 per cent,” trade analyst Girish Johar said.

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This arrangement can change when a movie does good business. In that case, the producer gets 52.5 per cent in the first week and 47 per cent in the second week. The arrangement for the third week onward remains unchanged.

And what makes theatrical releases such a big deal?

With technological advances including IMAX and 4K resolution screens, laser projection, and immersive surround sound, watching a film seated in a comfy couch at the theatre with a tub of popcorn is sold as an experience that is impossible to have at home, on a smart TV screen, a laptop, tablet, or mobile phone.

“What theatre offers is the unique experience of viewing a movie with the community in a dark room with larger-than-life representation on the big screen, even though everyone is a stranger there. This habit is not going to change anytime soon, at least in India,” Ajit Andhare, COO of Viacom 18 Studios, said.

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Also, most of the multiplexes in India are located in malls with food courts, and watching a film often becomes a social event – a long outing with family or friends, along with a meal.

How have streaming platforms grown in India?

Over the last four years, India has witnessed the base of streaming platforms grow. OTT platforms acquire old and upcoming movies, shows documentaries, and commission their own content. Many filmmakers, however, continue to design their products aiming for box office success.

“What we tag as small and digital movies are also written keeping the box office in mind. The fact that these products should be exhibited remains the primary driver from the business point of view, mainly because a significant chunk of revenue comes from ticket sales,” Andhare said.

The consumption of shows and movies follows different patterns on streaming platforms and in theatres. “The audience on digital platforms usually gets drawn to the content. The entire design of that content, especially in web series with a cliffhanger at the end of every episode, is very different from a mainstream film meant for a theatrical release. Of course, a movie can be made solely for a digital platform, and that’s something that is happening more often now,” Andhare said.

Even though the streaming services pick up niche and offbeat films, they have their favourites too. Usually, the movies of Shah Rukh Khan, Aamir Khan, Salman Khan, and Akshay Kumar bag the best deals. Ayushmann Khurrana and Ranveer Singh movies too, have been striking good deals.

Why is a digital premiere not an option for all?

Yash Raj Films and Reliance Entertainment have made it clear that they won’t release their new movies on OTT. The production budget of movies such as Kabir Khan-directed ’83 and Rohit Shetty-directed Sooryavanshi are high. If they miss the theatrical release, they won’t be able to recover their investment from OTT deals alone.

“A Rs 10-crore film can premiere on a streaming platform but not a Rs 100-150 crore budget movie. Obviously, those handling such big productions won’t settle for less. Mostly, it’s the small production houses that are likely to do distress sales,” Johar, the trade analyst, said.

It becomes tough for small producers to hold on to the product as they borrow money from the market. They also have to pay rent for the office space and salary of their employees. “For the entire value chain, theatrical releases remain the mainstay of the cinema experience. The digital premiere of movies during the lockdown will not fundamentally change this model,” Andhare said.

When are theatres likely to reopen and how?

The Unlock 2 guidelines issued on Monday (June 29) have not allowed cinema halls. But most exhibitors remain confident that once normalcy returns, audiences will throng the theatres in large numbers in response to pent-up demand.

However, the whole experience is likely to undergo a change – deep cleaning, fumigation, social distancing, and temperature checks will become the norm. “We have made a number of suggestions to the government regarding safety measures to be taken and the rules to be followed. When someone books some seats, the next seat will be blocked and won’t be available for booking,” Umrotkar said.

It is essential that theatres re-open in order that livelihoods are saved, he said. “Twenty people are employed directly per screen, and as many indirectly.”

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There are around 9,500 screens across India, and they generate around Rs 30 crore per day in ticket sales. Almost half of them are in multiplexes, and the rest are single-screens. Cinema halls are mainly in the metro, Tier-I, and Tier-II cities. “This is an area where India needs to grow. China and the US have close 50,000 screens,” Umrotkar said.