Economics of Film Distribution with Yusuf M Shaikh
He is a traditional distributor and comes from a family of distributors and exhibitors. Yusuf M Shaikh, Head – Distribution, Acquisition & IPR, Percept Pictures, gives Pandolin an insider’s perspective into film distribution and an understanding of the economics involved in the field that can make or break a film.
Is there a “traditional” model for distribution in India? How does it work?
Earlier it was an age-old distribution model, comprising of 14 territories with each territory having 5-7 buyers. The distribution community has always been a community of risk takers. Corporates have come in now and they carry a film till its release, usually hiring a traditional distributor to run the show for them. As traditional distributors we would calculate a price that could be given to a film that one buys. Such distributors still exist but the capital that is required to invest in a movie has become so big that it is no longer an individual’s cup of tea. Previously the model was very different, there were no multiplexes, so you would buy a movie and because you were the sole distributor cinemas would contact you to buy the movie off you. So the model was that I buy the movie for say, Rs.100, my calculation is that will I be able to cover minimum Rs.70 out of Rs.100 on table. So I risk only Rs.30. And that depends on your vision, if you can envision that all the exhibitors are going to run after this movie when it comes up for release, then you can convert Rs.100 into Rs.150. But if your vision fails and the movie that you buy for Rs.100 reaches only Rs.20 or 30 then you are looking at a glaring loss. So we would analyse risk and even today there are traditional distributors who envision the graph of a movie in that same manner. For example, when I was doing my calculation for 2 States, considering its recently released, I told people that it will double or triple the investment, so go and grab this one. That vision and homework keeps going on forever.
It is all very scientific because you have your numbers, your calculations as to which cinema the film will go to, in which season, who will be the audience and so on. Even with the big studios coming in, this groundwork is the same. But you need to have deep pockets and those old distributors are not in a position to have that kind of money or risk it. So earlier, if you invest Rs.100 in a movie you expect to collect Rs.70-80 on the day of the release and the remaining Rs.20-30 you put from your own pocket. But today if you invest Rs.100, the movie’s value could be Rs.150 on the day of the release, but the collection on table, money wise, from the exhibitor community will still remain Rs.25 because the model of paying advances has changed, the model of exhibition has changed. Previously I would collect Rs.70 out of Rs.100 from 25 select cinema owners, today there are 250 cinemas. So my best way to go is to give it to all 250 and they pay me 50-55 per cent of the revenue that is collected after release. But you don’t expect 250 people to pay you every week. The multiplexes too follow a model of rolling, so a movie releases and they give you some advance, then another releases and they give you some advance on that. So if the movie is to collect 10 lakh in the first week, they will give you two lakh, because you are releasing in 250 cinemas. They don’t know whether the 10 lakh which is expected will get divided among other cinemas or not, so they say that your money is safe with us, make a contract and take it after one week or so. In a nutshell, the previous model was how a distributor used to dilute his investment by giving the movie to cinema owners and the new model has the cinema owners still running the movie but they will pay you only after it has completed the run.
What type of films are distributors looking for? How has this changed over the last 5 years? How do you see it changing in the future?
Traditionally, the Indian market hasn’t grown out of making the star-driven potboilers and a distributor, when he wants to risk, will risk only on those. Those are the masala entertainers, 3 day wonders, if they click they become very big, if they don’t you recover 80-90 per cent of the investment. But those things have started going wrong because the audience wants something new, something fresh. So a Jai Ho has performed below its capacity only because people are tired of seeing the same old thing. But a 2 States will do better business than Jai Ho and the ROI is also five times more. However when it comes to risking that kind of money on new artists, a distributor will not do that. So you need an anchor like a Karan Johar or a Sajid Nadiadwala, who believe in the content and they go ahead and make such new age cinema that is clicking in a big way. So a Karan Johar made a Student of the Year at 40 crore, which is actually the cost of making a big hero movie, because he believes in fresh content. He has been backing films like Hasee Toh Phasee, with youngsters, which he knowns is the kind of content that the youth want. Today the market needs new content and people willing to risk money on that kind of content. But distributors don’t know which movie to back and even if they know, they will not have backing of exhibitors to dilute that risk. So the risk will remain. You can have a movie like Gori Tere Pyar Main not doing well though it had all the ingredients. And distributors are always willing to risk only on the formulaic films. It’s not about risking money, it’s more about the financial backing that they have. For example, a Sajid Nadiadwala too is a distributor, but he has people backing him with money because they believe in him. Hence he has the freedom to make the kind of cinema he wants and can risk some money. That is what any distributor wants.
At what stage should a filmmaker start thinking about distribution and what are some proactive tips they can utilise?
There is no such stage. When you have an idea, you lock that idea. At whichever stage you think that you have secured the idea for yourself, you start talking about it. The market is moving so fast that if you have an idea and you reveal it much before you are ready with it, someone else will grab it. So secure yourself with it – go into the shoot or purchase the rights and only then slowly, reveal it to people. If Karan Johar and Sajid Nadiadwala would have started speaking about the book, 2 States, much before they bought it, someone else could have bought it. I made a movie, which is India’s first reality film. For six months while I made the movie I didn’t tell anybody. If I reveal the idea in the market anybody could have said that I will do it before you. It only takes planning, execution and smartness to do it in a good time. And our idea has more ingredients to it but we are not giving it out now. So you get people excited slowly. And then the costing part comes in. So for example, whether a 2 States should be made in 20 crores or 100 crores, who knows? Initially they were planning a big budget film with Shahrukh Khan and Vishal Bhardwaj but to the mind of the people that were investing, they were thinking that the whole thing isn’t gelling. Slowly they realised that this is a concept, a small idea that can become big with the youth, so they decided on an Arjun Kapoor and Alia Bhatt, where the cost is less. So when it comes out, the risk is less, but when it clicks the revenue is more. And the movie has worked beautifully so the idea has picked up. So you need to visualise and plan accordingly.
A lot of independent filmmakers in Hollywood have adopted a DIY approach to distribution because of getting burned on deals which yield nothing for them. Do you see this happening in India?
Yes it is happening in India. But how do you do it without money. For example, I have a movie, I have produced it, believed in it till now and put all the money. But now I need a distributor who will invest further, the marketing and distribution money. You either need a brand or money, unless I have the capacity to further invest in it myself, I have to take someone’s hand. So people can talk about distributing their own films but somebody has to risk money, a producer has to risk that money – to make the film, then he can say that my film is open to the world. You need money to make the film, post that whether or not you get a distributor, that is phase two. You need backing. That is one aspect.
The second aspect is that a product in the film business has to excite the audience. So when you’re saying that I make a movie, I put out promotion material. As the audience, how do you decide whether you want to see a movie or no, not by merely reading about it in the paper. You want to see an audio visual of it, a trailer. So I put out a trailer, get the audience excited and expect lakhs of people to say wow. Among these people is a distributor who feels that the movie has potential, he then comes to me and is willing to invest. Without doing this procedure how do you expect anybody to like or dislike your film. Independent distribution, you can say is when a studio is not backing you but then you need to have your own funds or somebody to back you or you start something like crowdfunding. But for crowdfunding as well you need to excite the people to shell out some amount.
What are some of the most influential and profitable ancillary markets (VOD, mobile, television, etc) in film distribution? How do you see this changing?
I see it changing big time. According to me there are two very big changes that have happened in the last five years. For some reason, cinema going has become premium which was never so in India. It used to be the cheapest form of entertainment. Today, we ourselves, exhibitors and distributors have made it a premium experience. So watching a movie in a cinema is the most expensive way of watching it. Today in Rs.10 you can get a VCD, official DVDs from Moser Baer are available at Rs. 30-35. The cheapest form is to download it free from the net, though unofficial and pirated. So the change that is going to happen is that people are moving away from cinema. There is the youth who like their entertainment and go to cinemas, catch the morning show which is cheap. And the youth goes for the movie on the spot, everyone else usually waits for reviews, feedback etc. Or sometimes there are big names with credibility, so you go and watch the film. Then there are people like us, 10-15 per cent who watch almost every film, either because they like it or are students of cinema and so on. Otherwise it has changed radically. Next option is, if there is a medium sized film, I feel like I can see it at home. There are films which we categorise as DVD/home video worthy. You don’t feel the need to go to the cinema to watch them. But the biggest change that is going to happen now, in the next five years, is that there will be a huge influx of cinema like home theatres. So you will have middle class, upper middle class and the rich class having cinema halls in their houses. Right now an A class theatre can be made in your own house for as less as 50-60 lakh rupees, best sound, theatre quality production and choicest of seats, only you need to have a room. In a span of five years, you will have, at least, a million cinema halls like that. The middle class will say that the rich guy has a 50 lakh rupee theatre, I will make the same theatre at 10 lakh in my house, and there will be companies that will make it for them. In terms of quality, 2K is the highest resolution that is approved by Motion Pictures Association, which says that cinema has to be in 2K digitally. So what we are saying is that I have the money to invest in a 2K projector in my house and I can see a Spiderman in the same quality. Now my only concern is to let the Spiderman distributor give me the film. He might not give it to me. But what is stopping a Hindi producer. Hindi movies are available on a lesser resolution, which is UFO and can be more easily accessible to all.
So people will start watching movies from cinemas in their home. For me that is a big plus, because they were never the ones coming to a cinema hall and will add to my revenue in the future. So I could give it to a top notch guy at Rs.5000 for one show or give it for Rs.500 to a guy in one of the smaller towns, who watches this movie with 30 of his neighbours. If I have million such households in the next five years and if you add up the money for an A or B class film, that will be a humongous figure. That is the new big thing. Today I know of 1500-2000 such A class theatres in people’s houses. Be it a Shahrukh Khan, Sachin Tendulkar or any big name, they have theatres in their home and watch all movies there. And we supply to them. So tomorrow what is stopping you and me. As a visionary, I think this can happen, it will happen.
How has new media and online distribution affected the landscape? What about platforms like iTunes, Netflix and the likes?
Tomorrow the quality of watching a movie on internet can improve vastly, it will happen in the next 5 years, because the throughput will be so huge that it can probably give the highest quality of cinema. Right now you have to downgrade the quality and give for the internet, even HD is not as good as a cinema hall. But all these platforms are going the same way, reaching out to you at your comfort. People are happy to see a pirated film on the small screen of their mobile too. The choice is given to the consumer, there is a wide variety and you need to decide what is your capacity to pay. So everybody is trying to get a marketshare of the particular audience. An iTunes is saying that if I get all the iPhone consumers to watch all the movies on iPad and give them the best possible experience, I’ll have a market share. And then there are other companies giving you other formats. And as an audience you decide which is the best suitable format for you.
What are the biggest mistakes you see filmmakers making as far as distribution goes?
There is this strange new formula that has come into the market, which I don’t agree upon or believe to be true, which is that the first three days are going to decide the fate of a film. Everybody believes that they have to crack it in the first three days. That myth is getting blown now. You see the business of Queen. The film was good so the second week is better than the first week. I meet producers who ask me for a commitment of say 1500 cinemas, this whole formula is incorrect. How do you supply a movie when there is no demand? So the mistake that the distributor makes is that, if the movie has a demand in only 100 cinemas or 200 cinemas, and you try to put it in 1500 cinemas, you’re diluting its impact and increasing your cost by five times. Distribution is always a demand-supply situation. I know my distribution from the fact that when I put up a poster in my cinema hall, there are inquiries about the movie, when it is releasing etc. Audiences who are seeing the poster or trailer are expressing interest. So you have created a demand and you need to study the market. You gauge audience reaction, see if your poster is making magic. Then you do a cluster and study all those people across the country and see which age group has a higher traction, the target audience, the season and so many other aspects. Without studying that science if you say that i am releasing the movie in 2000 cinemas, then it will not work. So first create a demand, if there is demand then you may as well supply or else if the demand has not come you wait for it. So Queen consciously released in 400 cinemas and said they would go to 800 if there is demand in the next week and that is exactly what happened. For Ship of Theseus, Aamir Khan told to release it only in 40 cinemas because he knew that the kind of film it is, you have to let it grow, let people talk about it. Eventually the movie ran for six weeks. Distribution is a lot of research, homework and study and it can make or break a film.