New Delhi: Bollywood film producer and distributor Eros International Media Ltd’s latest release, the low-budget romantic comedy Happy Bhag Jayegi, has earned Rs.25.52 crore at the box office—good enough to recover costs and notch up a modest profit. And Eros International has the massive success of its 2015 blockbusters—Bajirao Mastani, Bajrangi Bhaijaan and Tanu Weds Manu Returns—to fall back on. Little surprise then that talk of a looming corporate crisis in the film industry and the pressure that it is putting on the film studios in India doesn’t faze Eros. In an interview, the company’s group chief executive officer, Jyoti Deshpande, spoke about the need to green-light films at the right cost and say no to astronomical star prices. Edited excerpts:
There is a lot of talk about how there is a corporate crisis in the industry. Is that something you agree with?
No, I don’t think so at all. We’ve gone through this journey several times in our 40-year history. It’s a process of discovery. I think what we’re sort of trying to see is if a few films didn’t do well, does that spell doomsday, and that is really not the case. One of the few things we’ve been saying over the years is films don’t flop, their budgets do. I think the fundamental strategy that we are adopting is that the company’s success is not dependent on one or two films, and we are broad-basing it across languages in the portfolio. Basically we invest Rs.1,000-1,200 crore every year in films, so at any point of time, we have 100-plus projects in various stages of production across languages.
The definition of the studio model is control over content and intellectual property (IP) and then building different businesses that have consumer touch points that relate to films. All the major studios here—whether it’s Fox, Viacom18 or Sony—have television interests in the media and entertainment pie. So films feed that television interest. As far as Eros is concerned, we have (on-demand digital platform) Eros Now. So we’re betting on the digital boom. Having a library of 3,000-5,000 films puts us in a very different market. We’re not dependent on cash-flows from newly released films. There is a huge amount of cash flow that comes from library monetization. So, your film production becomes the tent-pole business to generate a whole amount of imagery and cash flow. And then, your recurring cash flows come from businesses such as Eros Now.
As a studio, we are in a very good position and our spend outlook hasn’t changed. We already had this warning call a few years ago and we were probably one of the first to make those mistakes eight years before anyone else.
We corrected our prophesies, we corrected our green-lighting process. However, our desire is for all of the four studios to work together, bring discipline to the industry, ensure that none of us overpay for content. We’d love to see two studios work together on a prestigious project. If you’re competitive, the prices go up and talent runs away with the money and leaves the studios with all the risk. Collaborating is a much better way of working.
I think some of the films have been rude shocks. But if you take away the studios, who else is going to make films? These individual production houses, whose example we cite, are not putting in any money. The films are actually being funded by the studios. So, it’s important to see it in good light. I think what this will create in terms of consumer trends is the belief that the star system is already broken. We’ve seen flops with Shah Rukh Khan and Ranbir Kapoor, which shows that just paying any price to a star is not a guarantee for success.
What are the challenges for you and for the studio model generally in the Indian market?
I’m looking at this as a golden period. A lot of single-digit budget films are doing so well; if you back it with marketing, people are willing to come out and watch them.
At the same time, I think the breaking down of the star system and the growth of content-driven businesses is an opportunity. We have three main ways of sourcing content—we make movies ourselves like with Trinity Pictures (an in-house franchise division) where we have our own writers, we make four or six films a year through that route.
Then we have co-productions, and the last is acquisitions, where we buy movies. We prefer to be more reliant on own and co-productions. We only want to acquire films where we feel we will make money based on pre-sales and television syndication; box-office reliance on those films should be minimum. The rule of thumb we follow is that even if the film is a super flop, it should still make enough money from box office and cover 60-70% of the cost (paid for acquisition) from other rights (satellite TV and others)—that is when we will green-light acquisitions.
When you acquire a film, do you gain a sizeable portion of the intellectual property (IP) because that is an issue for a lot of producers?
You own all of the hardcore exploitation rights in the acquisition model—theatrical, satellite, overseas—but it is for a finite period. It may only be for 25 years but then you don’t have to pay the cost of production. No studio buys anything without the IP. The only difference is in a co-production, it’s fully transparent and you know the exact budget breakdown, whereas in the acquisition model, it’s a purchase price.
What is the way forward for studios?
I would say we don’t have to lose sleep over boutiques like Balaji (putting film production on hold after recent failures). In terms of size, you can’t compare it to a studio like Eros or Disney. The studios are all talking to each other to make sure talent doesn’t play off one studio against the other and get them to overpay for content. I think that is the key. If an actor charges Rs.40 crore for a movie, as long as one studio is willing to pay, there is no need for them to change. So, I think, it’s a question of studios working together to see how the market can grow; firstly, by making more films that are profitable and, secondly, by getting exhibitors to build more screens so that when we make these films, there are more cinemas to show them. Consumers are hungry for content, demand is booming, distribution channels are increasing; then why should anyone lose money?