Eros shifting focus from box office to online video streaming
New Delhi: Bollywood production and distribution company Eros International Plc is undergoing a revamp. The company, with close to 30% share of the Bollywood box-office collections, no longer wants to be a film studio but a digital content company.
Eros, which is listed in Mumbai and New York, is reducing its dependence on box office and is instead focusing on its online video streaming platform Eros Now. “Over the last two and a half years, Eros Now has tripled in growth. About 25% of our overall revenue comes from digital platform and in three years, digital will be three quarters of our revenue. We are moving on from being a film studio to a digital company,” said Jyoti Deshpande, group chief executive officer at Eros, which aims $260-270 million revenue this financial year.
As part of its strategy, Eros, which produced movies like comedy drama Shubh Mangal Saavdhan, Rajkumar Rao-starrer Newton and Amole Gupte-directed Sniff in 2017, is now only investing in films which are low cost, have a high return on investment (RoI) and are suitable for digital platforms. “We are not making flashy, big-star and big-budget movies. That is a good strategy because it fits the digital pipeline; the whole riskiness and box office dependence is going away,” said Deshpande, adding the company has commissioned six films which will be released directly on Eros Now.
Launched in 2014, Eros Now has 3.7 million paying subscribers, which the company expects to touch 6-8 million by March. Eros Now charges Rs50 a month for streaming content and Rs100 a month for downloading and watching the content offline.
Although the platform is film-heavy with Eros’s library, the company is working on launching one or two digital series every month. “We are trying to make edgy series. We are doing a series on human trafficking starring Radhika Apte. We are also working on a comedy one,” said Deshpande.
Eros’s strategy comes in response to an overall decline in the film exhibition business. Revenue from domestic theatrical releases saw a 1.6% decline in 2016 to Rs9,980 crore, down from Rs10,140 crore in 2015, according to the Indian Media and Entertainment Report 2017 released by lobby group Ficci and consulting firm KPMG, in March.
The number of movies which were able to record a positive return on investment also declined from 27 in 2014 to 18 in 2016.
“On an industry level, the charm of big budget films with star cast appeal is going away as no such project is making money. Even the films which have been declared hit, there is nothing in the profit and loss accounts, when you actually look there. We were one of the first companies to call the trend,” added Deshpande.
Priyanka Chaudhary, director at Grant Thornton India Llp said today’s consumer is savvier, though star power continues to attract people to movies on weekends. Emergence of user generated content platforms, availability of niche and superior quality original content, access to fast and high speed data and affordable smartphones have created an ecosystem with a wide array of choices, she said. “These factors together impact every facet of content consumption. As these factors play out, it is imperative for companies to diversify their offering to cater to the fast evolving digital consumer,” Chaudhary said.
Earlier this year, Eros suffered a brief liquidity crisis ahead of the maturing o its $85 million revolving credit facility (RCF) on 31 March. Standard and Poor’s (S&P) had lowered its long-term corporate credit rating on Eros International to “B-” from “B+” and placed it on credit watch with negative implications. However, the firm won a last-minute reprieve from creditors by executing documentation to extend the maturity of the RCF by six months.
“We just did a $100 million dollar convertible bond. With this refinancing which is a quasi-equity instrument, our net debt is below $40 million. We are in a comfortable position. Some companies live to tell the tale, we are one of those,” said Deshpande.