India’s cinema bosses are moving beyond the pandemic with the view that OTT and direct-to-streaming film releases are just more elements in an expanded ecosystem... and not the voracious opportunistic giants that gobbled up their world.

JD, a professor battling alcoholism, is sent to teach at a juvenile reform school for three months. Feature film, Master, is the story of his clash with Bhavani, who uses the students as a cover for his crimes. Lokesh Kangaraj’s high-voltage action drama became an overnight hit on its theatrical release in India in January 2021, grossing over US$40 million at the box office. Master is not just a ‘scream your guts out in the theatre’ kinda film. It is, along with Jathi Ratnalu, The Priest, Karnan and others, a good reason to junk the ‘OTT has killed the movie business’ argument. The films were released between October 2020 and March this year, when theatres re-opened in India. 

“Watching a film is in our DNA. [Unlike people elsewhere in the world] we don’t go trekking or biking; we eat, shop, watch a movie; it is at the top of the pecking order among entertainment needs,” says Alok Tandon, CEO of Indian theatre chain Inox Leisure. 

“If you are sitting at home, you will order food from outside [and watch something on a streaming platform]. But look at Black Widow, Fast and Furious 9 [recently released and doing well in the U.K. and the U.S.]... I am positive. We have been forced to stay indoors because of the pandemic,” adds PVR Cinemas’ chairman, Ajay Bijli. 

At 648 and 842 screens respectively, INOX and PVR are India’s largest theatre chains. More than two-thirds of Indian cinema revenues – read that as the entire box-office – was wiped out last year when the pandemic hit. PVR, for instance, has seen its revenues plummet to 10% of March 2020. You could argue that Bijli and Tandon are speaking from the pulpit. Maybe they are.

Speak then to David Hancock, chief analyst, media and entertainment, at the U.K.-based media analytics firm Omdia, and author of a report on the Cinema Landscape in 2021. Global box office fell from US$26 billion in 2019 to US$3.7 billion in 2020, wiping out 71%. 

But, “cinema chains haven’t gone bust, only three (New Vision Theatres in the U.S., MBO in Malaysia and UA Cinemas in Hong Kong) have shut down,” Hancock says. Of the 84 releases from Hollywood studios this year, 54, including Top Gun: Maverick and No Time to Die, have been held back for the second half of 2021. 

That brings us to the first reason why streaming replacing theatrical is difficult, if not impossible. 

One, cinema screens bring in over 60% of the US$2.7 billion that Indian films earned in 2019. Theatrical performance impacts the price of every other revenue stream – TV, OTT, overseas. For example, on television, films are the second most popular genre, accounting for almost 25% of all viewing in India. In 2019 broadcasters paid US$306 million or about 12% of cinema revenues for the rights to screen films. This is estimated to have brought them three times as much in advertising money. If a film has been exposed on a streaming platform first, its ability to attract advertising goes down. 

Why then do broadcasters pay that kind of money? 

Cinema is part of an ecosystem that stretches across formats, geographies and audiences; OTT is one part of that ecosystem. Without theatres fully revived, the ecosystem doesn’t function. And streaming cannot replace 60% of the business. Until 2019, streaming brought in 10% of the revenue that theatrical did. Last year, although digital revenues doubled, business still fell.

“Movies and OTT tell two different stories – one is over three hours and the other over 5-10 hours. It is impossible to tell the story of Applause Entertainment’s Scam 1992: The Harshad Mehta Story (a critically acclaimed series on SonyLIV) in two hours. These are two different and robust businesses. Look at it in continuum – free-to-air TV, OTT, pay TV, film – all will have robust growth,” says Danish Khan, business head, Sony Entertainment Television, SonyLIV & Studio Next, Sony Pictures Networks. 

What changes is the windowing or the gap between release in theatres, TV and streaming/OTT. 

That brings us to the second reason theatrical is here to stay. The case for narrowing the gap for streaming/home video release after theatrical from an average of 90 days (in the U.S.) has strengthened as studios such as Disney move to OTT. 

“Covid-19 has changed the balance of power and a more flexible windowing system will be a long-lasting effect. Digital releasing will become more widespread, including some day-and-date with cinemas. However, more flexible windows does not mean that windows are dead or undesirable. The theatrical experience sits above the others in impact,” says Hancock. This narrowing then makes the theatrical window, which brings in 60% of the revenue, even more important.    

The third reason is that streaming has segmented both the formats on which we see films and the kind of films we watch, creating new opportunities for theatrical. 

“People have made up their minds what they will watch on each of these formats. Bigger films will do well in the theatre and smaller on OTT. Between the Southern languages and Hindi, there are some very big movies up for release – KGF2, RRR, Radhe Shyam, Sooryavanshi, Laal Singh Chaddha, Brahmastra,” points out Shailesh Kapoor, CEO, Ormax Media. One estimate says 40 tentpole films are awaiting a theatrical release. 

Also, “OTT has aided exposure to cinema in other (Indian) languages, that is the biggest change because of Covid,” says Kapoor. Thanks to high-quality dubbing and subtitling, Malayalam films are finding a market in the North, Hindi and Marathi films in the South. This creates a completely new market for a multilingual film or a ‘domestic crossover’ that leverages the huge volumes (over a billion tickets sold every year) and the heterogeneity of India. Ormax tracking shows that seven or eight of the upcoming pan-Indian multilingual films alone could earn box office of between US$94 million to US$134 million.

As Devang Sampat, CEO, Cinepolis India puts it; “We are one blockbuster away from recovery”. 

Published in ContentAsia's September 2021 magazine