#ExpertOpinion: Do theaters feel the heat of the OTT wave?

With OTT exclusive content, are theaters in for a rough ride? Experts delve deeper...

A recent Boston Consulting Group report revealed that the OTT segment in India which is currently pegged at 0.5 billion dollars will grow to 5 billion dollars by 2023. The growth is attributed to rising affluence, increase in penetration of data into rural markets and adoption across demographic segments including women and older generations.

‘Originals’ and ‘Regional’ are the new buzzwords in town. According to reports, Amazon Prime Video plans to invest around Rs 20 billion, while Netflix has set a budget of Rs over 6 billion on original content. 

In past few days apart from original series, ‘Movies’ have found themselves a new platform to get premiered, some even before their theatrical or satellite releases. Moviemakers are directly opting for OTT platforms for digital premieres of their films and skipping the idiot box.   

theNewsMinute quote Kannada film director Prasanth Raj, saying, his film Orange is the first movie to be acquired by Amazon ahead of its theatrical release and this was an 8-month-long process.

Meanwhile, Rajma Chawla directed by Leena Yadav and produced by Gulab Singh Tanwar and Aseem Bajaj did not opt for a theatrical release. Starring biggies like Rishi Kapoor the film was premiered at the BFI London Film Festival in October 2018 and was released on Netflix on 30 November.

OTT over Theatre halls? 

“The theatre business in India is under stress. Lack of screens means that a film needs to maximize its revenue in the first week before a new film kicks it out of the theatres. This leaves no room for ‘word-of-mouth’ to positively affect business," shared Siddharth Anand Kumar (VP, TV and Films Saregama India and Producer at Yoodlee Films ).

Yoodlee films collaborated with Netflix for its first original film - a dark comedy- Brij Mohan Amar Rahe, Ajji and Kuch Bheege Alfaaz.

Kumar continued, “You need to create a strong inorganic pull to bring people to the theatres. This is done by spending large amounts on publicity and hiring viable stars to draw audiences in. This stranglehold situation was suffocating the "indie" film industry in the country.”

Now with OTT on the rise, the filmmaker is able to connect to their audience without these factors, allowing them to take greater risks in a choice of story, aesthetics as well as casting. This will and already has started to change the kind of films of being made by producers such as Yoodlee. 

Also Read: Changing dynamics of Movie Marketing: Are digital efforts translating into in-theater leads

Manish Kumar, CEO & Co-founder, DigiOsmosis listed down two cases in which a movie might get premiered on OTT platforms:

1) A movie gets made but the production house gets no distributor because the quality or the scale is not good enough to collect the bare minimum revenue; also releasing a film in theater requires a huge amount of money and the producer might be unsure whether he'll be able to recover it. In this case, if an OTT platform might like the content enough to pay the cost that has gone in making the movie plus some profit, it might be better for the producer to premiere it on an OTT platform.

2) There movies which are made specifically commissioned by an OTT platform. A film can be made in Rs 5crs but the marketing of the film might require another 5crs. Now the budget of the film went up to Rs 10Crs so to make 20% profit the film needs to make Rs 11Crs. Story might be great but there are possibilities that the film might not be able to make that kind of a money, and if an OTT platform pays Rs 6crs for the film, the producer gets to make the film, the audience can still watch it through OTT and he still gets his 20% profit

Echoing similar views as Manish, Sethumadhavan Napan, COO/Producer at DAR Motion Pictures reasoned that can be either due to content is more suited for a slight niche audience, not being suited for a wide theatrical release or  If there's anything controversial with the subject that's likely to meet up with some difficulty in the run-up to the release or if the commercial viability based on a theatrical release becomes difficult.

Shelf life of the trend

While OTTs have been posing huge challenges for the theatre world, it remains to be seen how far the trend trots. “Digital first content is a story which is happening,” quips Uday Sodhi, EVP, and Head- Digital Business, SPN. He would further imagine movie economics will also become exciting for the filmmakers today that they want to release it first on the digital platform. “I think we are far away from really seeing a big trend like this but these are early signs that people will prefer digital medium to release their content first,” Sodhi added.

Manish also noted that it has still not touched a phase when a big budget film with a huge star cast gets premiered on OTT without even releasing in theaters. “Even in near future, Premier of a big budget movie on an OTT platform is only possible if it's a huge marketing plug wherein the content is exclusive to that OTT platform so it helps the platform gain more users.”

However he feels that it will exist to continue as it would generate bigger opportunities in which filmmakers, content creators, and actors. 

“Yes, this new wave is here to stay & will continue to only flourish over time.”, asserted Napan.  A lot many more filmmakers & production houses are likely to consider this route as it makes a lot of sense in many ways to adopt it. This is a trend which has potential & is the way forward as a strong alternative release channel for films.

Kumar pointed out that the first Indian new wave came in the early 80s when NFDC financed filmmakers like Shyam Benegal, Govind Nihalani who went on to discover acting talents like Om Puri, Smita Patil. The filmmakers were freed from the trappings of the commercial film system and the work they produced endures to this date.

He added, “The environment is circling back to a similar scenario today as the advent of the internet film is changing the rules of distribution and hence the rules of producing. New talent will be found and new styles of storytelling will be invented. This, in turn, will help the audience evolve as well.”

A threat to the Theatre World?

Most BTowners believe that this has no threat to theatres as they continue to rake in viewer support and footfall to the cinema halls every Friday. Box office is still the primary mode of revenue collection for most for most of the filmmakers.

Sodhi, too, doesn’t think this is going to be a threat to the theatre business. “US, for example, in spite of having such a large digital audience, the theatre collections are very robust. The kind of movies will change. There are multiplex type movies which are for a certain audience. Those might find a digital-first premiere logic. However, your big budget Baahubali type of cinema will first go to the theatre because big monetization happens there.”

Seconding Sodhi’s thoughts, Hiren Gada, CEO, Shemaroo Entertainment Ltd said that for big budget and genre movies, theatre is a very large source of serving and raking big bucks. Theatre business is a transaction model. That window is limited in terms of weeks. "I don't see this model shifting anytime soon. Content is at the central part of any service and trying to create certain exclusivity as well as a certain module to both attract an retain the consumers. That is why so many different modules are now emerging.”  

According to statista.com, by 2021, Indian box office revenue will amount to Rs 146.5 billion Indian rupees. Backing the stats, Manish asserted that just because OTT is growing rapidly, theaters are not going to lose their charm in any way, theaters will just get redefined for a different kind of content, the audience will go to a theater for the overall movie experience with a high amount of VFX and 3D, spending time with family and friends so it would become experiential. 

Also Read: 7 Movie Marketing trends that are re-shaping the industry

Theatrical vs Digital- Financial dynamics

“Well,  if it's an OTT release then either the film is acquired after it's already made or else it's commissioned by the specific OTT platform to be made by the production house,” reveals Napan.  In the former model, the production house tries to get a decent price for the film, at least get a little more than the cost of production. If it's a latter model then the production house gets the required budget from the OTT platform to make the film.

There's no profit to be made by the production house if it's a film commissioned by the OTT platform, while a profit is possible in case of a simple acquisition. It's all about the deal made & the terms, there's no one clear player with the upper hand.

On the other hand, Kumar feels that the audience is going to eventually get the upper hand, as they will be served better content at a time and screen of their choosing. “When there is greater transparency in budgets then creators get to participate in the potential upside of a successful film.”

Yoodlee Films has published an SOP that outlines the rules of engagement and offers up to 30% of the film's profit back to the talent.

While many continue banking on the might of the digital world, Cinema halls are least affected. However, reports suggest that the broadcasting space is been facing challenges with the OTT players acquiring digital rights of movies even before theatrical release and the shrinking of the window between satellite TV and digital premieres.

Eros Now, which is focussing on creating digital-first movies, premiered Manmarziyaan and Happy Phirr Bhag Jayegi on the platform first ahead of TV. To name a few similar cases are Bengali film Pasto had a digital premiere on Hoichoi, while ZEE5 has also joined the bandwagon following a similar route.