Cinemas in India have been shut since mid-March even before the lockdown began. Film producers and studios, who raise money on interest to fund films, are sitting on completed ones even as interest and employee costs keep adding up. The ones who have staying power hold on, others give in. This capitulation is an aberration brought on by an unusual set of circumstances and will not last for three reasons.
One, a theatrical release combines revenues and an amplification that is unmatched by any other format. Cinema screens bring in over 60 per cent of the Rs 19,100 crore that Indian films earned in 2019. The reception a film gets in theatres impacts the price of every other revenue stream – TV, OTT, overseas. For instance, films are the second most popular genre accounting for almost a fourth of all TV viewing in India. In 2019 broadcasters paid Rs 2,200 crore for film rights bringing in 12 per cent of the industry’s revenues. This money resulted in estimated ad revenues of Rs 7,700 crore for broadcast networks. If a film has been exposed on OTT first its ad revenue potential goes down. Why would they pay that kind of money for it then?
You could argue that OTTs could fill the gap. That’s the second reason this is just an aberration. As a format OTTs brought in 10 per cent of the film industry’s revenue. It might go up a bit more but it cannot substitute what a film makes through the entire release cycle from theatre, overseas, TV/OTT et al.
Three, for four years ending 2018 cinema audiences or ticket sales had been stagnant or falling. Last year, just when OTT viewership shot through the roof, film ticket sales hit a record billion plus. And the trajectory was upwards given the creative transformation of the film business. But now instead of a great year multiplex chains are looking at long months of bearing rent and salary costs without any income. Much of the talk of retributive action then is simply posturing born out of anger.
None of this means the theatrical business is doomed or that OTT will become the first window of release. That is the kind of babble that arises every time a new format becomes fashionable. Remember radio was going to kill the live performance music business, TV was going to kill films, the internet was going to kill everyone. All formats eventually survive.
A film never earns in one shot; it earns over a year, five years or even decades like Dilwale Dulhania Le Jayenge or Sholay that continue to make money. It is part of an ecosystem that stretches across formats, geographies and audiences. Producers/studios and cinema owners are critical parts of this ecosystem. Their interdependence is too high to risk it for short-term cash.
Take a look at what’s happening in the US — many studios are releasing their smaller films (Trolls World Tour) online and holding back the bigger ones (No Time to Die). They know the big bucks will come only when theatres open.