A few days ago I was being lectured to by some analysts about the fickle fortunes of the movie business; very risky, low returns, non-scalable, poor valuations they said. The conversation drifted to my favourite topic – the lack of screens as the primary reason for the subdued valuation of the industry. As has been said ad nauseum, India is significantly under screened (7 screens per million) as compared to the US (123 screens per million) and China (27 screens per million).
For being a movie crazy country and for being the largest producer of entertainment cinema in the world, the fact that we don't have enough screens seems strange.
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But it is a sorry fact, and if reports are to be believed, the screen count is shrinking further – driven by the older single screens shutting down and not being replaced in equal number by the new multiplexes.
The 1000 Crore Movie
When I mentioned that this is a big danger that faces the film industry, one of the analysts said "Anyway, I guess the industry will just leapfrog into the digital age, what with 900 million mobile phones and 160 million TV homes and the 4G revolution – who needs physical screens anymore?"
Actually nothing can be further from the truth. In fact, the very idea that TV and Digital platforms can replace the physical screen is flawed. And dangerous.
I had spoken at a TED conference last year where I built up an hypothesis on what it would take for us to have our first 1000 crore movie in domestic box office receipts. The best we’ve done is three 300 crore films - PK, Bajrangi Bhaijaan & Sultan - so far.
Assuming that we cannot triple the prices of tickets in a price sensitive market like India, it can only happen if we get three times more bums on seats at the current average price point. So theoretically PK could have done a 1000 crores if it had released in triple the number of screens and/or had triple the number of people seeing it in the theatres.
Triple the screens? The immediate questions that pop up - Where can we install these additional screens? In which small towns? Are there really a ready, willing and able consumers living in these places? Will they pay, on an average, Rs. 100 for a 3 hour air-conditioned entertainment experience? In hot humid tropical India? For an outing with family or friends or lover? And finally, are 3 times more bums on seats a realistic possibility?
I believe so. If you do the math on the 300 crore PK at an average ticket price of Rs. 100, it means no more than 3 crore people actually went to the theatres to see it. 3 crore out of a population of 66 crore (Hindi speaking markets) is a meagre 4.5%. Even if you reduce 40% of this 66 crore for being very old, very young or very poor, you're still left with 40 crore people of which the 3 crore tickets account for just 7.6%. Just doubling that which still means only 15% of the available audience would imply a 600 crore Box Office for PK.
India's Century of Urbanisation
The retail potential of small town India is huge. In a population of 1.2 billion, the audience exists, they increasingly have the disposable income, they are now connected to the rest of urban India via telephony and social media, and are eager to join the mainstream of entertainment glamour, gossip and excitement. The 21st century is going to be India's Century of Urbanisation – small towns will become smarter and cooler, all the international & national brands will penetrate deeper, the whole Café & QSR experience will spread and become commonplace – and most importantly, riding the digital wave, the average small town consumer will catch up with the rest of us.
Movies – as an idea, brand and entertainment product - need no introduction. God, Cricket and Movies are what make India tick. All Indians know about movies, they are aware of the art-form and they’re madly passionate about their STARS. Television in the last 20 years has doubly made sure of that. Now imagine if their favourite stars and their latest movies were to be suddenly available on a big screen right at their doorstep.
At an economical price and with all the frills of air-conditioning, plush seating and yuppie F&B. The 100 rupee price point is affordable even for a small town audience when compared to what else you can get for the same amount - a few packs of chips, a snacking meal, a short distance trip...Combine this with a delayed satellite window and we're talking about opening up a giant new retail market contributing significantly to growing theatrical box office receipts, increasing tax revenues for the government and reducing piracy. Additionally, more screens will give more shelf space to all the smaller movies, Hindi and regional, that struggle to release in the current crowded calendar.
An aside on the delayed Satellite Window...till the late 90's, the satellite window had a five year hold back. Then in 1998/99, we (as in me, Rajnish Khanuja and Star - with the help of Mukesh Bhatt) broke that window down to under 6 months with Ghulam and then Satya. After that, a one-year satellite window became the norm but over the years it has shrunk further and further. Nowadays, movies often hit TV & DTH screens as early as 4-8 weeks from theatrical release. This has a stunning impact on Box Office revenues. All the fence sitters, affected as they are by the instantaneous social media reviews, prefer to wait to see the movie on TV rather than spend money going to the theatre.
Anyway... assume for a moment that physical screens do shut down and we're left with just phone and TV screens. Who, then, will pay for the production of movies? Theatrical revenues account for at least 50-60% of total revenues. I cannot imagine that deficit being made up by digital & satellite. Often times satellite deals are linked to BO performance. No theatrical release kills two key elements of the movie industry – the magic of the Big Screen experience and a huge chunk of revenue that cannot be made up by the newer platforms. The industry would head to a Direct to DVD/TV/OTT and that is pure and simple disaster! Even in the US, possibly the most digitally mature market in the world, the 'going to the movies experience' has not declined. Theatrical revenues still contribute the largest chunk and are protected by smart windowing and regulation. India should be no different.
How To Ensure India Continues to Go to the Movies
'Going to the Movies' is a global cultural phenomenon that we cannot allow to wither away and die in India. Instead we must actively create it and grow it. It is critical for the survival of the industry. There is a lot of money to be made and it ensures that the industry remains healthy enough to feed the ravenous appetite of the digital ecosystem that is growing alongside.
The death of screens is not an option. What we need is new bright ideas of how to make physical screens a cheap, cost-effective, scalable business proposition to successfully penetrate into small town India while providing a superior entertainment experience to audiences living there. Already digital distribution has long since reduced the time and effort in distributing physical prints to screens across the country. The current incumbents are doing a great job of expanding screen count but we need more. We need the equivalent of the Maruti for the Multiplex. Big Out of the Box ideas to build lower cost screens – own, rent, franchise, partner, share, whatever – to extract retail ticket revenue from the captive populations. That is the next big frontier for the film industry.
It may sound contrarian to advocate physical brick & mortar in this digital age but only then can we grow revenues to make bigger and bigger blockbusters, smarter and edgier movies, exponentially grow the industry. Yes, local & state regulations and permissions are presently hurdles but effective industry lobbying can help impress upon government that more screens means more tax and more employment, and a major reduction in revenue loss through piracy.
What fights piracy best is easy availability and low price - and increasing screen count delivers exactly that outcome.
The magic of the BIG SCREEN is something we should protect! We should use the digital, retail and urban revolution - and the consumption story that goes with it - that is sweeping across India to leverage, preserve and grow the film industry; not destroy it. Only then will the 1000 CRORE movie become a reality!
(Sameer Nair is the Group CEO of Balaji Telefilms.)
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