Row with producers may cost multiplexes Rs300 cr

Row with producers may cost multiplexes Rs300 cr
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First Published: Fri, Mar 20 2009. 09 40 PM IST

 Seeking settlement: A Fun Cinemas complex in New Delhi. The multiplex could lose anything between Rs12 crore and Rs15 crore. Suman Sarkar / Mint
Seeking settlement: A Fun Cinemas complex in New Delhi. The multiplex could lose anything between Rs12 crore and Rs15 crore. Suman Sarkar / Mint
Updated: Fri, Mar 20 2009. 09 40 PM IST
Mumbai: A long-running dispute between cinema owners and producers could see multiplex chains losing up to Rs300 crore over the next two months because insurers will not protect cinemas against the non-delivery of films.
Seeking settlement: A Fun Cinemas complex in New Delhi. The multiplex could lose anything between Rs12 crore and Rs15 crore. Suman Sarkar / Mint
Insurance experts declared the loss of revenue through business disputes as “beyond the purview” of the insurers and said losses would have to be absorbed by the multiplexes. It comes just days after producers pledged to put all cinematic releases on hold from April 4 unless they receive a 50% share of ticket sales from the multiplexes.
“This is something that the insurance companies will not cover,” said Rahul Aggarwal, chief executive of Optima Insurance Brokers, referring to cover for loss of revenue. “This is something called business risk, and the dispute is about how to share revenues, so it is not an accidental loss. It is beyond the purview of the insurers.”
Relations between cinema owners and producers hit an all-time low earlier this week after producers joined forces to take a stand on a dispute over revenue-sharing terms—a historically thorny issue in their relationship with multiplexes, including BIG Cinemas, Fun Cinemas and Fame India. Arguing that multiplexes have been holding them “to ransom” and exploiting their lack of unity, producers are demanding that revenues be split equally between the parties, irrespective of factors such as the budget of the film and its cast. In turn, multiplexes are advocating a performance-linked revenue system which affords them some protection in the event that the film is a flop.
“We are not insured against this sort of thing,” said Shravan Shroff, managing director of Fame India, which operates a chain of cinemas, referring to the threat to hold back new releases. “This would be for the non-supply of movies and we have no cover for that. We continue to be in discussions and both sides are eager to find a settlement. We are optimistic that there will be a settlement as both sides have a lot to lose. We are going to be computing the potential losses over the next couple of days—we do not have a figure yet because this is a unique situation that none of us have been in before.”
Insurers said that protection against loss of revenue for multiplexes only applied to eventualities such as fire and floods, and did not cover business disputes and that if such a policy was needed, it would take months to create it.
“In the case of non-supply from suppliers, in this case of films from producers, I do not think there is any policy to cover that,” said S.K. Sethi, vice-president of the Insurance Brokers Association of India. “And if such a policy was needed, it would require several months to develop and would need to be approved by the regulator. The insurers have to calculate what the risk is and what the premium would be.”
Adding that the cinemas were hoping to screen IPL cricket matches as one potential source of supplementary income during the next two months, Shroff said that Fame had not yet lined up contingency plans in case the deadlock in talks was not broken.
“We will think about contingency plans from next week if the talks are not broken, but we still have a couple more weeks to go and we are being optimistic about reaching a solution.”
The dispute throws into doubt the release of up to two dozen films over the next two months, and has already cost the delay of several releases, including Shortcut, a romantic comedy produced by Anil Kapoor due to be out on 3 April, as well as Life Partner, starring Govinda and Tusshar Kapoor.
In addition, trade analysts have voiced concerns that Nagesh Kukunoor’s 8 x10 Tasveer, which stars Akshay Kumar, could also be delayed as it is currently in post-production and might not be ready on time for its expected April 3 release.
Multiplex owners remained sanguine yesterday about reaching a deal with producers before the deadline, as they acknowledged the mutual interdependency of the two parties and the extent of the losses they would bear.
Comparing the relationship between the multiplexes and producers to the link between “fish and water”, Tushar Dhingra, chief operating office of BIG Cinemas, said: “There is no other way to reach a compromise so talks are continuing.”
Emphasising that talks were ongoing, Vishal Kapur, chief operating officer of Fun Cinemas, said that the chain would lose “anything between Rs12 crores and Rs15 crores” if there were no new releases through April.
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First Published: Fri, Mar 20 2009. 09 40 PM IST