‘Even If It Ain’t Broke... Fix it’ – that’s a chapter from my book Dream With Your Eyes Open, and I remembered it when in the past two weeks I got many Qs on the recent media reports about the gloom and doom facing the movie industry in India. My reaction was – well I have been out of this sector for now close to four years and don’t have an inside view.
But then I saw a spate of blogs/articles from totally random people – self-professed experts, who themselves would have done precious little, nor been active in the creation and production of movies, never having known or taken any risks, but suddenly were the evangelists, and I thought: Maybe there can be a contagion here, and it needs an antidote.
Before I start sharing my very candid and blunt views on some of the Qs I have framed and asked myself, I want to clarify and caveat that I have failed many times on this journey. Failed hard and publicly and have been very much part of some of the wrong models and decisions that I may be about to be critical about below, and it took time to correct them. I also may not have taken many hard calls I should have taken at various stages and let passion and even worse “emotion” get in the way. I think I got rapped on the knuckles many times but perhaps not hard enough.
But we did not follow the herd, for as you know when you do that
you only see the back side of the person in front of you. What we
did was break the mould, change the narrative, opened new genres never tried
before, backed visions at high risk, redefined the way movies were narrated but
most of all – we stayed the course in a long, tough but exhilarating roller
coaster ride and I think from time to time we created an impact.
- Apart from taxes, the flawed acquisition model, rampant costs, creative bankruptcy are some reasons why the Hindi film industry is suffering.
- The studio model in its present model in India is extinct.
- Not everyone in Bollywood has woken up to the challenges facing the industry.
- It would be totally wrong to set apart producer and director led production houses as the ‘creative guys’ versus corporate studios as being mere ‘business executives’.
- Disney is sending a strong message to the industry by hitting the ‘pause’ button on the production of Hindi films.
Q. So what has really changed or gone wrong in the last five years or so?
Couple of things have gone from bad to worse.
(A) Service Tax really hit the Industry badly and added 15% to the overall cost of each movie. This is one of the only industries taxed for Entertainment Tax and Service Tax which means you cannot really offset the tax paid or pass it on to the consumer.
(B) The “acquisition” model (where a studio buys all rights or distribution rights for movies from production houses) just got worse as while some studios continued to overpay – the so called creative companies from whom they were acquiring the content did not deliver on their creative – nor looked to preempt trends/anticipate what audiences wanted to see. And basically the acquisition model is flawed as in no other economics does any one party take 100% of the risk- for a possible 50% or less of the upside and that too on a “License & Leave” agreement – where the IP is not co-owned by both in perpetuity.
(C) Discipline on costs and the right cost for the right movie got thrown out of the window, lead by a combination of indulgent directors; lack of pre planning and basically a low respect for money and budgets... more like “whose money is it anyway”.
(D) Creative has gone quite insular or bankrupt for the most parts – though in the last 18 months one has seen a few gems but by and large there is a low focus on script and screenplay which is the bedrock. I think that’s happened in Hollywood too where it’s now mostly prequels /sequels/superheroes and the new one is ‘Resurrections’ with a Ben Hur, Magnificent Seven as most of the great screenplay writers have moved to digital & TV.
(E) We also had Talent making headline busting TV deals directly with broadcasters and I can understand why the talent would want to do it – after all it’s 100% insurance on their hits, average fare and big flops and all at the highest guaranteed amount, but how a broadcaster would benefit from this still needs some clear answers but then again, who is asking?
(F) And then, suffering from and trying to justify this top dollar
purchase – the broadcaster is forced to telecast their folly within days of the
movie going out of theatres – which means it’s on TV in 30 days from it
theatrical premiere - unprecedented anywhere in the world, thereby setting back
theatre going habits, reducing footfalls overall – as audiences would say – why
watch in a theatre when you can watch it in 30 days
on ‘free’ TV.
Q. So is the studio model here extinct?
Yes I would say, in its present avatar, in India – it’s extinct. Firstly, large overheads kill the model – as most of the time you’re forced to increase your slate just to cover the costs that should not be there in the first place. 20-member marketing teams and 15-member distribution teams are archaic and indulgent, which forces the need to get into acquisitions, mostly under the garb of co-productions – but basically you’re the last man standing when things go south.
So unless studios are committed to 70% own development,
and for the balance 30% a risk reward in their favour and overall staff
strength is 10 to 15 – yes, the studio model is extinct.
Q. So is everyone in the industry on the same page on the challenges?
I am not sure, but going by what I hear – NO. There is no joint accountability on the right cost models, disciplines on budgets, where creative accountability rests and where indulgence crosses the line. From what I hear, taking creative accountability for a weak script, or mediocre direction and just poor execution does not exist. And when you have no one to blame – blame marketing, poor distribution, wrong release date, bad weather - everything but the content.
And if I look at the broadcaster’s ill-advised long term TV output deals with superstars – guess the time has come for them to produce and finance the full movie themselves – as who in their right mind would green-light a movie where almost all rights save theatrical and music are sold off - mostly in perpetuity to the broadcaster!
I guess only they can justify their left
pocket – right pocket pricing and force their movie channel to pay for
the “visionary” deals done by their movie counter parts :-). So I guess no – everyone is not on the same page.
Q. Some of the independent producers or director led production houses have said publicly that “they” are the creative guys – the dream merchants – and the rest of the industry and studio guys are a bunch of business executives?
Ha ha... that’s hysterical. If one were to tally up the track record of these ‘creative entities’ it would not be rosy at all. Many of them have out costed themselves, made one-sided deals and not been able to supervise their own creative execution at any scale.
From my own experience – I can only say that movies like Rang De Basanti, A Wednesday, No One Killed Jessica, Dev D, Kaminey, Swades, Life in a Metro, Jodhaa Akbar, Kai Po Che, Pan Singh Tomar, Barfi and many many more were not easy films to green-light at their time and chances are many of them would not have been made if we did not have the creative conviction, so it’s easy to say the grass is greener on the other side, never is.
I recently took a look at what happened with Bombay
Velvet, Tamasha, Shandaar and more recently - Baar Baar Dekho to
realise the model is really broken. If you want to make a passion project - pay
for it yourself. And before you make a sweeping statement, fix your own creative
accountability, that would be my response.
Q. Last 10 years – next 10 years, what’s going to be more creative – movies or television?
Look, TV has stagnated, very little innovation for the last decade. And it’s not anyone’s fault but when it’s 70% advertising driven there is little choice but to cater to the largest denominator. And the only experimentation that has happened is for a broadcaster to launch a new channel - so as not to disrupt the “status quo”.
I headlined this blog “Even if it ain’t broke - fix it” and television content is the anti-thesis of that presently and something has to break. Unfortunately in India, even the digital wave is moving backwards, more aping television, with no bold experimentation, though TVF does push the envelope.
Movies on the
other hand sometimes mirror the pulse of the nation and mostly reflect the
mood, culture and grammar of our youth. Rang De Basanti lit the candle
(literally) and ignited a new form of cinema. Raju Hirani’s story telling from
Munna Bhai to 3 Idiots to PK makes a diverse country like India share a common binding
perspective. When Anurag Basu moves from Life in a Metro to Barfi and now to
Jagga Jasoos, each represent a new narrative style that is disruptive at the
core. And if we see the more recent ones from Pa to Piku and Neerja to Kapoor
and Sons, it’s setting the tone for a more contemporary and real life
perspective, reflecting the mood and reality of the 21st century
and the world we live in. So yes, movies will always lead the way.
Q. Are Amazon, Netflix, Hotstar, Jio and others going to be game changers for the movie Industry?
They will have an incremental effect with a spike maybe in the first year or two (the honeymoon period) – but not a game changer. I will break this up into two parts.
First is the likes of Amazon and Netflix commission series at unreal budgets. It’s a matter of time before the US bosses realise that this content will not travel globally so these large budgets will have to be substantiated by the Indian diaspora and India footprint mainly and that will not justify the costs or overall spends. So it would be misguided to think that the only way to get this going it to bring in:
(a) Movie directors
(b) To make
cutting edge content (or is it edgy content )
(c) And give them large budgets
as that’s what worked in the US
Well, even if one out of ten shows does break out (and definition of break out is subjective), it can never justify the spend overall. Plus will it have a needle moving impact on the subscription base? The jury will be out on that for a long time.
Shifting to movies - are these digital platforms going to create a strong and new revenue line for movies rights… yes, for sure but I do believe
that there will be some initial competitive pressure between the platforms to
cover more titles, for the first year or two and so the payouts will be high
and then water will find its own level.
Now, if one of the platforms can break the mould and manage exponential growth in their subscription model - with a monthly charge above say Rs 600 and at scale - then we have a game changer for all. But chances of that happening here are low, because when today most Indians have a choice to watch a premier movie on VOD on your DTH operator for as low as Rs 75 but will still elect to get the pirated version for Rs 35, I think we will see subscription numbers in the very low million/s for a monthly charge of over Rs. 600 – representing a niche of a 1.3 billion population - Or a high million/s base but for a monthly charge below Rs 200. So for the next half decade – yes, digital platforms will be a boost for revenue lines of movie content but not a game changer.
Q. There’s been a lot of media coverage on Disney stopping its local production in India. You being close to this, what’s your perspective?
Well, I am not close to this and cannot speak for Disney at all. But, what I do know is that Disney takes a long-term view on everything. They are also a company focused on profitability. So it makes complete sense, given how the whole industry has moved in the last four years to hit the pause button.
Hand to heart if this was in the old UTV avatar, I would have done the same. Whether I would have had the luxury of taking such a hard call – I don’t know – but Disney can and it has a very positive and long-term view on India and it’s sending a strong message to the industry – let’s get the model right, let’s work in a collaborative framework, let there be a win-win formula of creative partnership and if not then we will pause, regroup and come back on our own terms.
After all, they are the largest media company in the world, by far. And let’s not forget the upcoming releases of Disney-UTV - Dangal and Jagga Jasoos will be two of the top five releases of the coming year. So it’s to be seen who has the last laugh and who are the more astute guys in the business.
I believe Sid
(Roy Kapoor) and the team made a strong and balanced case for hitting the pause
button and it’s a smart one. Disney-UTV had a great year – the year before and yes a bad year last year. That alone would not daunt the Walt Disney Co.
However, the overall model does. Regretful in some ways but till better
sense and economics prevail, it seems like the right move.
Q. After all you’ve said above, and the state of flux – you are launching a new brand RSVP and re-entering the movie space next year ?
Let me clarify. I am deeply committed to our online education company UpGrad, our sports initiative, my commitment to entrepreneurship and our not-for-profit – Swades Foundation, but on the creative side I do feel a sense of “unfinished business” when it comes to movies.
It is one of the most communicative and impactful mediums and creatively I am drawn to it. I also think this is a very
interesting time to re-enter the space (more on that in my last Q below) but
the model is very different for me. It’s not a studio model. The focus is much
more creative and develop from ground up. I feel if one listens to the pulse of
audiences today, looking for new narratives and one creates one’s own
model –it’s going to be fun and disruptive at the same time. I like building
things from ground up and never tire of starting up again.
Q. So what’s the bright side? What’s looking up? What has to change? Why do you think it could be Achhe Din from here on?
Yes, many things have to change. But it is a cup that is more than half full. I’ll
break this up as A) Creative and B) Commerce
On Creative:
1) There is a positive shift where audiences are open and receptive to new narratives – story-telling that is more in touch with real life stories and contextual content. This is not about ‘Old’ vs ‘New’ narrative but more about a growing acceptance to new ideas, stories and screenplays.
2) Movie consumption has become multi-platform now, which means more people will consume it, but just not in theatres. This allows creatives to think out of the box. This also opens up new genres and will redefine duration and grammar of our movies as we need to get out narratives below 2 hours and also have our storylines and dialogues not to be as repetitive as they are today, more subtle.
3) Scripts and writing has moved to a new level. I have been reading 2-3 scripts on weekends and there is big jump. There are some good writers out there, and they need the respect and spotlight to do better. I think Talent Agencies have managed to position them well, aggregated them and given them a strong place in the entire creative process.
4) And there is some great new talent - directors and front of screen - and in some way I get the sense of a new wave, more like when we started up over a decade back with Rang De Basanti and others and this always brings in new mindsets and a fresh look on creative.
On Commerce:
1) GST will change the economics in two ways. One, everything will be offset and audiences will pay for it via their movie tickets (instead of entertainment tax) and overall the cost of production will drop by 15% and secondly with no entertainment tax, the actual share coming to both theatres and content producers will go up .
2) With the slow down and some studios pressing the pause button and others going slow, I see more than a thousand crores being sucked out of the system per year for a few years and that will have a strong downward pressure on costs/talent fees and overall acquisition costs.
3) Marketing costs will need more accountability and spends will be for ROI (return on investment) and not ROE (return on Ego).
4) Costs need to get real and I it think will, partly with less flow of money and also because everyone will need to be more accountable and less indulgent. I have seen this Live in the Entrepreneurial/VC/PE space first hand, where a few maverick investors and hedge funds gave founders more money than they could think what to do with it, guided them for top line growth at the cost of everything else - and made the badge of honour for a successful entrepreneur only based on the amount of funding you can raise - and that’s gone through a 180 degree shift in the last 6-9 months.
5) Acquisition models have to cease and certainly in the manner they are structured presently, some may be forced to still do it due to some top line pressure, but even they will finally need to be accountable for profitability or will have dried up cash flows.
6) New forms of revenue and the whole digital space will add a new revenue line.
7) I hope better sense will prevail with some of the broadcasters doing their one-sided talent TV deals.
8) The only elephant in the room is piracy. With data charges plummeting and courts certifying that watching pirated content is not a crime, this tsunami can hit the industry.
But, overall with all above - some of the gloom and doom is a good omen... to see better days ahead .
(First generation entrepreneur Ronnie Screwvala is the founder of UTV. Onto his second innings Ronnie is starting ground up with his businesses in sports (USports) and digital education (UpGrad). His foundation, Swades, works towards empowering Rural India; lifting a million people out of poverty every five years.)
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