Disruption Or Chaos?
On September 1, 2016, some twenty minutes into his speech to shareholders at the 39th Reliance Annual General Meeting (AGM), Reliance Industries chairman Mukesh Ambani made it clear that the 4G LTE services of the brand name Reliance Jio (RJio) would come with free voice calls, zero roaming charges, simple tariff plans and a host of attractive offerings, making the worst fears of incumbents such as Airtel, Vodafone and Idea come true. The service was launched on 5 September 2016. Today, the telecom business has been disrupted for sure. Voice service is virtually free, roaming is free too and data consumption is perhaps, at an all-time high. While the consumer does feel like a king, the industry is ridden with debt, taxes and multiple other issues.
Three years later, addressing the 42nd RIL AGM, Ambani made yet another announcement that could potentially disrupt the business of films screened at theatres across India. Ambani announced that JioFiber, the optical-fibre-based fixed line broadband service, will roll out ‘Jio First-Day-First-Show’ to all ‘premium JioFiber’ customers. So come Friday, when typical Bollywood (regional and Hollywood) films are released, they will be available to all ‘premium JioFiber’ customers.
Today, nearly Rs 12,000 crore of revenue is generated by organised, branded, multiplex chains like PVR, Inox, Cinemax, and several other national and regional (state-level) players. Better theatrical experience has attracted more footfalls (Rs 25 crore-plus) leading to higher revenue year after year.
If a mega-starrer film is suddenly available in your home the same day as its theatrical release, the probability of customers not stepping into a nearby multiplex appears to be higher. And this, if it actually becomes a reality, could disrupt theatrical collections and in turn the current business model of the film industry, be it producers, actors, distributors, exhibitors and others. At least, that is the fear. Under what conditions can this ploy actually harm theatrical collections? Are there any benefits for the film industry in associating with the JioFiber platform? We will attempt to answer these questions.
Mega Announcement
First, let us examine in detail what was announced. While the detailed tariff plans for JioFiber will be revealed on September 5, 2019, the price range has been shared by Ambani. “... We are pricing our plans at less than 1/10th the global rates, to make it accessible for all. JioFiber plans will be priced between Rs 700 to Rs 10,000 per month to suit every budget and every need,” Ambani said in his speech. He also announced that Jio GigaFiber customers who opt for its annual plans “Jio-Forever plans” will get an HD (High Definition) or 4K LED television and a 4K set-top-box for free.
The JioFiber potentially has the capability to disrupt the direct-to-home or DTH services too, because the bundled offer includes lightning fast broadband speeds of upto 1 GBPS, availability of all leading OTT platforms like Netflix, Amazon Prime, Hotstar and others, a free landline telephone bundled with low-cost international calling facility, most number of HD channels and certainly all cable-based channels, interactive gaming, virtual reality content, multi-party video conferencing and what not. Nonetheless, the only ones to react to the announcement were the leading multiplex operators – PVR and Inox among others.
Of course, as an immediate fallout of this announcement, share prices of listed multiplex exhibitors, including PVR and Inox took a beating before recovering in later trading sessions. It was but expected that strong reactions would be shared by exhibitors who together account for nearly half the domestic box-office collections (Rs 10,200 crore in 2018). And indeed, the reactions came within a couple of days.
PVR Cinemas said in an exchange filing, “As on date, the publicly available information regarding the proposed service is limited, however, given the wide coverage in various media reports, we would like to place on record our observations ... For decades, the theatrical release window has been a valuable model for exhibitors and producers alike. In India and globally, producers have respected the release windows and kept a sacrosanct gap between the theatrical release date & the date of release on all other platforms, i.e. DVD, DTH, TV, OTT etc.”
Reiterating PVR’s statement, Inox Leisure said that the producer of the film is the owner of the creative content and is therefore, entitled to choose the platform of distribution and consumption of his content. “We would also like to point out that producers, distributors and multiplex owners in India have mutually agreed to an exclusive theatrical window of eight weeks, between the theatrical release of a movie, and release on any other platform. This exclusive theatrical window is a model that is followed internationally, in order to ensure the robust financial viability of all the segments of the sector, and has been replicated in India,” Inox said in a press release.
Inox added that the proposed move by RIL will jeopardise a significant revenue stream for multiplexes, considering that between 60 per cent and 70 per cent of the revenue of any movie comes from the domestic theatrical exhibition. A FICCI report on India’s media and entertainment sector released in March 2019, says of the total filmed entertainment revenues of Rs 17,450 crore in 2018, theatrical box office (domestic and overseas) contribution was about 75 per cent.
The PVR statement ended with hope of continued growth of the film exhibition business. “Theatrical and at-home are two completely different experiences and each has their own places. Both these experiences have co-existed and prospered for decades and will continue to do so in future. We are extremely buoyant about cinema exhibition’s growth prospects and remain committed to expand PVR’s reach in cities and towns across the country, while delivering an unmatched movie going experience to the Indian consumers,” it said.
Merits & Demerit
For the benefit of our readers, let us expand and decode the offerings and announcements made by Ambani on JioFiber. Here is what Ambani said in his speech. “Today, I am announcing that JioFiber plans will come bundled with subscriptions to most leading premium OTT applications. Also, for the first time in India, we are introducing a disruptive concept for watching new movies. Premium JioFiber customers will be able to watch movies in their living rooms the same day these movies are released in theatres! We call this Jio First-Day-First-Show. We plan to launch this service in the middle of 2020,” he said.
Experts tracking the business of films say with caution that the first-day-first-show on JioFiber may not be as disruptive as it appears to be at the moment. “We do not know the details. From whatever is out, it will be for the premium customers those who may be subscribing the annual pack and paying the highest subscription amount (the number may be much lower than the overall subscriber-base),” says an expert on condition of anonymity.
“Moreover, not every film will see the simultaneous release, I suspect. Why? Because of legacy issues like producer-exhibitor contract on revenue sharing that is in effect for over ten years now. Then, out of say 1,000-plus films that are released every year, not more than one to two per cent end up crossing the Rs 100-crore collection figures. So why release each and every film every Friday simultaneously,” asks the analyst, we have quoted earlier in this report.
A clear advantage of the first-day-first-show on JioFiber, however, could be for the smaller budget films. Producers of films of this genre may have a distinct advantage, should they manage to negotiate a healthy deal, which could be much more than say, the potential theatrical revenue.
“In such a scenario, we may see films getting made exclusively for JioFiber release, others exclusively for OTT platforms and the rest for theatrical release. The Direct to DVD film market is a mature one in the USA and Europe. Direct to New Platforms could develop as a genre in India in the coming years,” says a film-trade analyst.
Theatrical Business Scenario
Multiplexes currently account for ~33 per cent market share of the screens, but account for ~60 per cent of the overall box office collections. Fast-paced expansion of multiplex screens has had a major contribution in the number of films that were Rs 100-crore-plus grossers from both Hindi and regional cinema in the last ten years. The Aamir Khan-starrer 3 Idiots, released in 2009 across 1,000 screens is one such example. It was the only film that year to have set cash registers ringing. Fast forward to 2018, the Rajnikanth and Akshay Kumar starrer 2.0 was released across 6,900 screens (virtually seven times the screens as 3 Idiots) and the pursuant collections showed the difference.
Here is another statistic that supports massive growth in the film collection business due to the expansion of multiplex screens. In 2008, only one film grossed net collections exceeding Rs 100 crore. In the last five years or so, the number of films generating collections of Rs 100 crore – Rs 200 crore, have steadily gone up. The year 2018 saw 15 such films including five films that grossed over Rs 200 crore. In 2017, only ten films grossed revenue in excess of Rs 100 crore.
The larger point here is that a steady growth in the number of screens and multiplexes is directly proportional to the revenue growth of the Indian film industry. A disruption can only harm the business, which is the fear for now. But disruptions also tend to open up new business models. For now, however, the stakeholders are adopting a wait-and-watch policy while continuing to invest in expanding their respective footprints.
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