Shailesh Kapoor: VOD Services: Bollywood’s Latest Saviour

07 Apr,2017

By Shailesh Kapoor

 

The VOD (Video On Demand) business has been at the forefront of media discussions in India for a while now. With the launch of Amazon Prime Video (APV) and Netflix in India, VOD has gone ‘mass’, being no longer limited to catch-up television and live sports services run by broadcasters. APV, in particular, has made a significant impact, with an aggressive marketing campaign and a price point that’s affordable enough to coerce a traditional, ‘non-paying’ market like India to consider SVOD (Subscription Video On Demand).

 

While original series were the talking point in the VOD space till a year ago, led by some great work done by TVF, it’s the film content available on VOD platforms that’s an interesting point of study too.

 

If we go back a decade or two, the film industry got a huge shot in its arm when it discovered a new source of revenue – Satellite Rights. Film channels were mushrooming all around, and library buying was an aggressive, cut-throat thing. Films were purchased at prices that were not recoverable over their run period (typically 5 to 11 years). But high demand in the market ensured that most movies, including the ones that failed to perform at the box office, found a buyer at these exorbitant prices.

 

Many films released in the 2003-2013 period became viable, even profit-making, projects for their producers purely on the strength of their satellite rights sales. It was routine for a small film lacking a starcast to make more than 60-70% of its total earnings from satellite rights alone.

 

Somewhere over the last five years, this model has run out of steam. Most new films released in the five-year period before that, including the ones purchased at a hefty premium, failed to deliver ratings. When dubbed South action (purchased at as low at Rs 50 lakh to Rs 2 crore for 7-11 years) can outperform Rs100 crore Bollywood hits (purchased at prices ranging from Rs15-40 crore) comfortably, telecast after telecast, the pricing levels were bound to break down.

 

The cinema almost became more urban and niche, with only about half a dozen films in the mass comedy and action genres every year. What worked in the multiplexes did not work on the telly. Single screen oriented cinema was more aligned to the small screen, but with the proportion of single screens’ box office revenue dropping year-on-year, the intersection between theatrical and television audience of films kept reducing year-on-year.

 

Many films released in 2014-16 have not been able to sell their satellite rights. In most of these cases, it’s not even a case of the price point. Channels are just not interested in picking up content that’s proven dud on the small screen. In some cases, the rights are transferred within the same group that houses both the studio and the broadcasting brand. But for this advantage, the situation could have been much worse for the studios.

 

But with the launch of VOD services, especially APV and Netflix, the second shot in the arm has come. Digital rights of films are being sold at aggressive prices, including certain deals that reward box office performance. Compared to similarly-attempted satellite deals in the past, there is more logic here, because of the huge intersection between the VOD audiences and the theatre-going universe.

 

Many films releasing in 2017 are going to be comfortably in the green even if they are average to dull at the box office, because the digital rights will recover large part of the investment, greatly reducing the box office burden.

 

Much as the film industry is welcoming this as a strong business opportunity, they need to guard against short-term greed coming in the way for long-term growth. The Bollywood box office business has been stagnant for four years now. As per the latest edition of The Ormax Bollywood Audience Report, the Bollywood theatre-goers universe (defined as those who watched three or more Hindi films in a theatre in a year) shrunk by 11% within a year, from 3.66 crore individuals in 2015 to 3.27 crore in 2016.

 

This is an alarming drop in what is already a low number. If movies are easily accessible at low cost on VOD platforms, this number could go down further. If the theatre-going habit breaks and the universe continues to shrink over the next two years, there is avery real long-term threat waiting. And competition from Hollywood is not too far away.

 

VOD services have emerged as Bollywood’s short-term friend. Hope they don’t turn out to be its long-term enemy.

 

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