11 min read.Updated: 16 Sep 2016, 04:14 AM ISTLata Jha
Walt Disney's move to shuts its Hindi film-making business underscores a rethink among corporate entities about backing big-budget, high-risk movies
New Delhi: Walt Disney Co. has decided to pull the plug on its Hindi movie production business, shortly after its big-budget release Mohenjo Daro fizzled out at the box office.
Made at a cost of Rs115 crore, the period epic directed by Ashutosh Gowarikar and starring Bollywood heart-throb Hrithik Roshan collected Rs57.92 crore in the first three weeks of its screening and simply didn’t have the legs to run longer.
“We periodically review and realign our business priorities in response to evolving market dynamics. Given the challenges with the current economic model for investing in the local film industry, we intend to shift the focus of our film strategy to driving our Hollywood movie slate in India," a Disney spokesperson said in a statement on 1 September.
The failure of Mohenjo Daro followed the debacle of another Disney production, Fitoor, based on Charles Dickens’s Great Expectations. The movie directed by Abhishek Kapoor and starring Aditya Roy Kapur and Katrina Kaif cost Rs60 crore. It ended with lifetime box office earnings of Rs19.28 crore.
Walt Disney isn’t alone in suffering a streak of box-office bad luck after backing big-ticket movie projects. Ekta Kapoor’s Balaji Motion Pictures Ltd and Anil Ambani’s Reliance Entertainment Pvt. Ltd have clocked more losses than they’d like to recall.
Reliance Entertainment’s recent releases—Amitabh Bachchan-starrer Te3n and last year’s Hawaizaada—both performed much below expectations with earnings of Rs19.08 crore and Rs3.53 crore, respectively. The studio did not respond to requests for comment on its upcoming strategy.
Balaji’s two big sex comedies this year—Great Grand Masti and Kya Kool Hain Hum 3—and its superhero action film A Flying Jatt sank without a trace with collections of Rs13.59 crore, Rs30.25 crore and Rs38.55 crore, respectively, while the much-hyped Udta Punjab only managed Rs60.34 crore after a long-drawn battle with the censor board.
Last month, the production house was reported to have decided to put its film business on hold after the setbacks. Sameer Nair, group chief executive officer, Balaji Telefilms, denied the reports.
State of denial?
“There is no crisis of any kind. Sometimes films do well, sometimes they don’t and individual studios may respond to that," Nair said, adding that the production house had two films on the floors and another two lined up. “What happened this year with Great Grand Masti was unfortunate and has to do with the larger issues of piracy and lack of screens that we need to address as an industry. Otherwise, the entertainment business has always been very vibrant, movies will be made and audiences will continue to watch them."
Still, experts in the film trade are calling Walt Disney’s pullback the start of a crisis they have long feared in the Bollywood movie industry, which churned out 204 films last year and earned Rs10,140 crore in combined revenue, according to the 2016 report on the media and entertainment industry by the Federation of Indian Chambers of Commerce and Industry (Ficci) and KPMG.
“I’m not one bit surprised," said trade analyst Komal Nahta. “The most important quality a producer should possess is the ability to assess which scripts will work and at what price. Because corporates came in ill-equipped, they started applying business principles to the film industry and went completely wrong. It took 10-15 years because they had deep pockets. An individual producer would have shut shop in 3-4 years."
The so-called corporatization of India’s movie industry dates back to the mid-1990s, when Bollywood star Amitabh Bachchan, then in his 50s, founded an eponymous entertainment company.
Amitabh Bachchan Corp. Ltd (ABCL) had ambitious plans—it wanted a finger in every entertainment pie, from film production and distribution to event and celebrity management, audio publishing, commercial sales of spin-off products ranging from posters to toys, and even magazine publishing.
The most important quality a producer should possess is the ability to assess which scripts will work and at what price. Because corporates came in ill-equipped, they started applying business principles to the film industry and went completely wrong...- Komal Nahta, trade analyst
Bachchan spared no effort to make it work, hiring business management executives at exorbitant salaries and spending lavishly on kitting out ABCL offices.
A few inconsequential films and a Miss World pageant that failed to live up to its hype followed, after which ABCL folded with losses of over Rs70.82 crore that exceeded its net worth of Rs60.52 crore. Bachchan relaunched it in 2001 as AB Corp., setting his sights much lower, and it has delivered an occasional, modest hit.
The Hollywood studios came in soon after—by the mid-2000s. They sensed an opportunity in tapping the potential offered by an entertainment industry that was starting to change, with the gradual mushrooming of multiplexes and changing cinematic content.
The studio model offered local producers a way out of the age-old Bollywood tradition of risking a lifetime of personal savings or mortgaging their homes to produce a movie. The studio model introduced a systematic blueprint for producers to break even, even before a film’s release.
Studios such as Viacom18 Motion Pictures, Eros International, Reliance Entertainment and UTV Motion Pictures engaged in operations that involved acquisition, production, syndication, marketing and worldwide distribution of full-length feature films.
Their pre-licensing deals entailed music, television, satellite, home video, Internet, digital, in-flight, overseas and merchandising rights. The studios footed part of the production costs and shared the revenues that accrued.
Local producers embraced these changes, too. Sanjay Leela Bhansali’s Saawariya was co-produced by Sony Pictures Entertainment and Guzaarish by UTV Motion Pictures; and Goliyon Ki Rasleela Ram-Leela and Bajirao Mastani by Eros International. Karan Johar’s My Name Is Khan was one of the first Indian films to be distributed by Fox Star Entertainment.
The studio model introduced a systematic blueprint for producers to break even, even before a film’s release
Smaller film-makers found a way to tell niche stories when backed by studios—for instance, Dibakar Banerjee, whose Khosla Ka Ghosla (2006) was financed by UTV Motion Pictures, and Vikas Bahl, whose Queen (2014) was backed by Viacom18 Motion Pictures. They both went on to carve out a space for themselves in the movie industry.
Yet, the deep pockets of corporate houses backing film productions may have been their biggest undoing.
That often translates into unreal production budgets—for example, film-maker Sanjay Leela Bhansali today pegs the cost of his upcoming period drama Padmavati at Rs180 crore.
The film will be produced by Eros International and Viacom18 Motion Pictures.
“It is a given that the film will lose money. People who hold the purse strings need to get more conscientious about what they’re doing," said a person familiar with the workings of a studio who declined to be identified.
The reason production budgets have spiralled is the astronomically high remuneration for top actors, a move Nahta calls “studios digging their own grave".
Individual producers such as Sajid Nadiadwala or Karan Johar often share a personal rapport with movie stars, built over several years; in contrast, it is tougher for studios to develop a relationship with stars, and that is where gigantic remuneration figures came in.
Atul Mohan, editor of trade magazine Complete Cinema, said only corporate entities can afford the kind of money top stars have begun to demand today.
Actors such as Akshay Kumar today work on profit-sharing arrangements, making around Rs30-35 crore per film, according to a trade expert who declined to be named.
Added to such high remuneration are the deals signed by actors such as Salman Khan and Hrithik Roshan with broadcast networks for satellite rights to their upcoming films.
Actors today work on profit-sharing arrangements, making around Rs30-35 crore per film
“Adlabs had signed a Rs10-15 crore deal with Hrithik Roshan during Koi..Mil Gaya in 2003. Between 2003 and 2016, something should have changed and the industry should have corrected and self-regulated itself," the person cited above said. “Look at Salman Khan’s deal with the Star Network. Why would you even do a film with him? You’re not going to make any money. Not only will he have a share of the satellite rights, but also a share in the profitability."
The person was referring to the Rs1,000 crore deal the actor has signed with Star Network for the satellite TV rights of Salman Khan’s next 10 films and for making appearances on the channel.
Compared with the payment structure in Hollywood, where actors are never known to get more than 20% of the budget, leading stars in the Hindi movie industry take away almost 50-60% of the production budget today, the person said.
The high cost of film acquisition remains yet another reason for the undoing of a studio.
There are two levels of producers in the industry today—boutique production houses including the likes of Karan Johar’s Dharma Productions, Sajid Nadiadwala’s Nadiadwala Grandson Entertainment and studios such as Viacom18 Motion Pictures, Eros International, Fox Star Studios and Walt Disney Studios. Single producers are known to charge anything between Rs4 crore and Rs15 crore per film when they sell movies to studios for distribution.
Considering Rs15 crore is the usual profit on a film, that leaves the studio with little for itself unless the movie turns out to be a box office success. Producer Mukesh Bhatt sold low-budget movies such as Mr. X and Hamari Adhuri Kahani that he is reported to have made for Rs5-7 crore to Fox Star Studios for nearly Rs20 crore each, according to a trade expert who declined to be named. The two films made Rs24.79 crore and Rs34.43 crore, respectively.
Ajit Andhare, chief operative officer at Viacom18 Motion Pictures, agrees the acquisition approach is fundamentally flawed.
“When you run with a purely acquisition-led approach, you’re paying significant premium, have little control over the product and you’d end up in very one-sided deal structures, which is hardly collaborative," he said. “This is where chasing only big films can land you (in trouble). The question is what is your paradigm? Is it volume, top line or big film-focused or is it based on content and business fundamentals such as story material, bottom-line, risk mitigation and cost efficacy? If you focus on fundamentals, the results have been far better."
The crisis is deeper than foreign studios or corporate movie houses reporting consistent losses—it is to do with the movie business in general. A look at the top 20 Hindi movies of the past three years shows only five or six have made any meaningful profits.
“If you’re a studio that is making eight movies a year, obviously not all the profitable five can be yours. In the top five, maybe two or three could belong to you. So out of every eight movies, not more than one or two can be profitable. That is how bad profitability in the Hindi movie industry is," the person mentioned above said.
“Plus, every year, only 10-15 Hindi movies do more than Rs50 crore at the box office, and that is a really small number. So, if you’re a studio making eight films a year, by the law of averages and statistics, what are the chances your film will be profitable or even make Rs50 crore? People usually talk of movies losing money, but they’re missing the point. The point is not how much money you’re losing on the films that don’t work but how much you’re making on the films that do work," the person said.
India has a screen density of six per million people, compared with 23 per million in China and 126 per million in the US
Because those two or three movies have to sustain the entire studio slate and the fattest amount on those possible hits goes to the actor and the director, a studio that makes eight films a year—six flops and two possible money-spinners—is left high and dry.
Then there are logistical reasons. In a severely under-screened country such as India, a film-maker has 52 weeks to release a film.
Out of those, there are about 10 weeks which are not conducive to movie business—due to school exams or the Ramzan season or cricket tournaments.
According to the 2016 KPMG-Ficci report, India has more than 8,000 screens (including more than 2,000 multiplex screens) with a screen density of six per million people, compared with 23 per million in China and 126 per million in the US.
“In 42 weeks, you have to release 200 films. That’s why you have two films on Diwali, Independence Day, and so on," the person mentioned above said. “Unlike China or North America where there are so many screens that you never have a problem, in India, because the screens are so limited, the same movies are going to eat into one pie because the audience is the same. People get into ego battles, but they forget that we eat into each other’s share."
Fire and passion
An additional problem is that many movie studios are diversified into broadcast networks.
“In no other country will a movie come on television within 30-60 days of theatrical release. What you’re essentially telling the audience is they need not come to the theatre, the movie will be brought to them for free, especially the smaller films," the person mentioned above said. “The window for movies is so bad. Everywhere in the world, you have such well-protected theatrical windows where for four or five months, you can’t put the film on TV. So, we are killing our own business on a sustained basis."
Our industry has been of an uncertain nature right from the beginning. It is nothing new. We are facing crisis throughout- Kamal Kumar Barjatya, managing director, Rajshri Productions.
Profits and box office aside, industry experts say the main differentiator between corporate houses and family-owned businesses remains the fire and passion that is missing in the former. MBA degrees notwithstanding, a studio head is, at the end of the day, an employee who draws a salary on a contractual basis and fears losing money for his employer.
And creativity can rarely flourish under such insecurity.
“Our industry has been of an uncertain nature right from the beginning. It is nothing new. We are facing crisis throughout," said Kamal Kumar Barjatya, managing director at the family-run Rajshri Productions, who had tied up with Fox Star Studios for the distribution of its last release Prem Ratan Dhan Payo that netted Rs210.16 crore at the box office. “But we are totally devoted to this and we don’t have any other business, nothing else to do but be in this line. We have Sooraj (Barjatya) to take care of the creative side—that is the biggest asset. We are together and it’s a joint effort which everybody puts in."
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