Home >companies >news >Why the 180 crore ‘Padmavati’ deal may work for Viacom

New Delhi: Putting speculation to rest, filmmaker Sanjay Leela Bhansali joined hands with Viacom18 Motion Pictures for his epic project Padmavati in October. Scheduled for a 17 November, 2017 release, the estimated budget of the Ranveer Singh, Shahid Kapoor and Deepika Padukone-starrer is around Rs180 crore, making it one of India’s most expensive movie productions, said trade experts who declined to be named. About Rs150 crore has been set aside for production and the remaining for promotions, advertising and other expenses.

Media reports in the past two months suggested that the film would mark the unique collaboration of two major Bollywood corporate houses—Eros International that had backed the previous two films directed by Bhansali, Bajirao Mastani and Goliyon Ki Rasleela Ram-Leela, and Viacom with which he had co-produced Mary Kom and Gabbar Is Back. But Eros backed out of the deal in October, industry experts say, because of a financial crunch.

Eros International Plc.’s stock has fallen since August this year. Its shares, as of Friday on the New York Stock Exchange, reads last traded at $18.13 apiece, down from $19.23 apiece on 8 August . Bombay Stock Exchange listed Eros International Media Ltd stock witnessed a sharper fall in the same period, falling to Rs176.90 on Friday from Rs230 apiece on 8 August.

Padmavati is the second film that Eros has let go of recently; it earlier backed out of Ajay Devgn-starrer Shivaay, which also had a budget of over Rs100 crore. The studio declined to comment for this story.

The deal makes sense for Viacom despite the massive budget, say trade experts. For one, it involves Bhansali, who is riding high on the Rs184 crore net box office collections of Bajirao Mastani. “A director is always assured a budget equal to the recovery that his last film made. The challenge is to go beyond that and there is always about 10-20% risk for the studio involved," said Jayantilal Gada, chairman of film-producing and presenting company Pen India. “Plus with him (Bhansali), it’s a case of take it or leave it. Look at any of his films and you can see the money spent on every scene, they are all meant to be big screen experiences."

To be sure though, in absolute terms, Padmavati will have to equal the Rs500 crore plus gross collections of war epic Baahubali: The Beginning to recover the investment, said Atul Mohan, editor of trade magazine Complete Cinema, given obstacles like rising ticket prices and rampant piracy in the movie business.

“He is a very sensible director and you definitely need these larger-than-life films once in a while to provide variety for audiences. But the Indian box office is highly unpredictable and a big-budget film gone wrong can totally break a studio as the examples of Mohenjo Daro and Bombay Velvet show," Mohan said.

Viacom shelled out about Rs40 crore for the satellite rights of Bhansali’s Bajirao Mastani. The Rs150 crore production budget for Padmavati means that Viacom will spend about Rs75 crore from its own funds and the remaining will come as loans from banks. A mere Rs35 crore extra would give them rights to a Bhansali film that would, as most people agree, stand a class apart. Plus there are a variety of revenue streams available for Viacom to recover its investment in Padmavati.

“Earlier films were dependent on theatrical, music and satellite rights for earnings. Now there is such a huge revenue proposition in the form of digital apps, every mobile is a shop now," said Sanjay Bhandari, a financial adviser to the film industry.

Viacom especially stands to benefit thanks to its video-on-demand service Voot, a joint venture with Reliance Industries Ltd, which in September launched its telecom operation. The studio remained unavailable for comment.

“Producers aren’t just looking at recovery on the table now, at least 30-40% of the recovery happens after the release. The lifespan of movies has gone up tremendously and I see this as a reasonable deal," Bhandari said.

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