Earlier this year, the $1.05-billion estimated Star network in India trailblazed the broadcast sector with a R500 crore estimated deal with actor Salman Khan for his films till 2017. Once the dust settled on that one, it was quick to sign a similar deal with actor Ajay Devgan for an estimated R400 crore. Star now has access to Salman Khan films such as Kick produced by Sajid Nadiadwala, Sohail Khan’s Radhe and No Entry Mein Entry produced by Boney Kapoor. The Devgan list includes a bevy of action-packed new releases such as Prakash Jha’s Satyagraha and Sajid Khan’s Himmatwala. The network has also bagged Bhaag Milka Bhaag for R20-25 crore for an undisclosed period, said media buyers.
Some of these deals are payable over time and the channel doesn’t have to pay the money upfront. And if Star is leading the way, the rest of the pack isn’t far behind. Shah Rukh Khan’s traumatic love story with the daughter of a mob boss, titled Chennai Express, has been lapped up by the Zee network for R40 crore. This involves multiple runs across a time frame of seven years. Zee has also bagged the rights for the Ranbir Kapoor starrer Besharam and the Sanjay Dutt starrer Zanjeer. Multi Screen Media (MSM) which runs Sony Entertainment Television (SET) has the telecast rights to films such as Gippi, Yeh Jawaani Hain Deewani, Aurungzeb and Krish3 and Shootout At Wadala. Viacom18’s GEC Colors has bought the rights to Eros International’s Ranjhaana and Special 26, produced by in-house company Viacom18 Motion Pictures.
Deepak Dhar, chief executive officer of production company Endemol India says, “Satellite rights contribute to close to 40% of the overall cost of production. It pretty much determines whether producers want to go ahead with the project. That’s why you have a lot of films made in the action-comedy genre. Television broadcasters love to buy the satellite rights of the film in this genre.” Dhar points out that pricing is likely to remain high on all new releases. “Somewhere, there’s a demand and supply problem. The broadcasters want a movie every weekend and I don’t think that there are those many movies being made. For a producer like us, that’s good news,” he added.
As per estimates given by Media Partners Asia (MPA), Star India has revenues of $1.05 billion and Zee Entertainment Enterprises had revenues of $0.7 billion in financial year 2012-13. Sony India has revenues of $0.6 billion while Network 18 (which includes Viacom 18) follows with $0.3 billion. Satellite rights to Hindi movies could be availed at R5-10 crore in 2005, but now the rates have climbed to as much as R25-30 crore for a five-year deal. If it’s a seven-year deal, it could shoot past R40-50 crore. Prices of English movies are comparatively stable. English movies are now priced between R10-15 crore for 5-7 year deals. Some years back, English movies could be bought at as less as R5-6crore.
A report on the media and entertainment sector by the Federation of Indian Chambers of Commerce and Industry (Ficci) in association with KPMG Advisory Services states that Star Network has invested approximately R3 billion in the acquisition of movies alone in year 2012. Zee Entertainment Enterprises is reported to have invested R2 billion in order to acquire ten movies last year. After syndicating, its library of over 500 films to Star India last year, Viacom 18 entered into an exclusive licensing agreement with Eros International Media for forthcoming releases and is reported to have acquired nine movies for satellite broadcast.
With the kind of prices that these films command, the roof threatens to cave in on the television broadcast business already reeling from multiple challenges. Neeraj Vyas, vice president and business head at Set Max, said that there needs to be some kind of rationalisation on rates for films. The broadcast industry, as per him, is going through a turbulent phase. The transition to 100% digitally addressable systems, the advertising cap being introduced by the Telecom Regulatory Authority of India (Trai) and the swings in television viewership data are posing some serious challenges to the broadcasters. “Everyone’s facing the heat. It’s time to take some hard calls on overpriced films,” says Vyas. He points out that a lot of the new cinema involves edgy fast-paced content that may do well at the box office in metros but does not resonate with people in smaller towns. The content that finds universal appeal is in short supply.
He hopes that “some sense prevails” as far as rival networks go because the bidding war is pushing the prices up the roof. “We prefer a cautious approach. If we feel that the film just does not justify the cost, we are not afraid to walk away,” he said.
Hemal Jhaveri, executive vice president and general manager at Star India, feels that market forces should be left to decide the pricing. The market will resolve its own problems. “It will correct itself,” he says.
Raj Nayak, chief executive officer at Colors, said that Bollywood entertainment is recession-proof and that means that prices will keep catapulting ahead. Still, these films account for the lion’s share of viewership. Colors does not have any exclusive tie-ups, but has an excellent working relationship with production companies such as Eros, UTV and group company Viacom 18 Motion Pictures, he said. “We look at buying movies if it makes a good business proposition. Once you buy a movie, it has to deliver good returns over a period of time. It goes well beyond premieres (first airings). While stars do matter in the films we purchase, the content takes an upper hand and so does the repeat value of the film. That way, the risks are minimised,” Nayak said. Colors’s library of films of 400-500 movie titles includes dubbed south Indian titles and some of the recent acquisitions include Ishq in Paris, Chashme Badoor and Yamla Pagla Deewana. Nayak asserts that these films give a great fillip to ratings. To be sure, Special 26 telecast on 30 June 2013 fetched the network a 3.4 rating, while Khiladi 786 fetched them a 5.1 rating.
Jhaveri said that it takes a certain “leap of faith” to strike the kind of big-ticket deals in satellite rights, the way Star has. “Look at the track record of these stars. Bodyguard starring Salman Khan generated a rating of 10-plus and is the highest grosser in terms of television rating records. Singham starring Salman Khan fetched a rating of 8.7 and we re-launched Star Gold,” he said.
Most of the soaps on television deliver a rating less than 3, add media buyers. A top grosser gives an immediate fillip to ratings, they add.
Pay by performance model
Most of the deals on new Bollywood films have been struck prior to their release, with the condition that television broadcasters will pay the producer extra if the film outperforms at the box office.”If the film crosses R100 crore at the box office, the broadcaster may have to fork out R5-10 crore extra. It could be more, depending on the contract. Broadcasters are forced to play ball. Else the deal is off,” says a leading film producer who did not want to be named.
But the sword cuts both ways, say broadcasters. There are caveats that protect the broadcaster’s interests as well. If a film limps along at the box office, the broadcaster slashes a good part of the agreed price.
The Ficci-KPMG report states that the ratings generated by blockbuster movies in 2012 has declined vis-a-vis that of 2010 and 2011. In a bid to control movie costs, networks had started to acquire movies before their theatrical release, sometimes even at the concept stage. However, many channels are reported to have suffered losses from such investments.
Amrita Pandey, executive director, International Distribution, Syndication, Disney Media Distribution, Studios, Disney UTV said that each deal is structured differently. Some deals offer broadcasters long-term rights while others have a built-in bonus if the film crosses a certain box office benchmark. “There have been a few deals where non-exclusive rights were licensed across a couple of broadcast networks. The time gap between television premieres and theatrical release dates has also reduced. This helps the ad sales revenues for the movie.” she said.
“We have acquired Chennai Express, Besharam, Zanjeer and Ghanchakkhar among others. All these movies have been pre-release buys,” said Ruchir Tiwari, cluster programming head at Zee Entertainment. He concedes that pre-buying is risky business and involves betting on the right horse, even before the shoot commences. Sometimes the broadcaster has very little idea about the storyline.
“It really boils down to the science of evaluating the fate of the movie and how audiences react. We deal with almost all producers and studios and majority of our buys are long-term and on an exclusive basis,” added Tiwari.
Ashish Patil, business and creative head at Yash Raj Films (YRF), says that striking deals pre-release comes with its own share of perks. The broadcaster promotes the film aggressively, often at his own cost in order to enhance the film’s chances at the multiplex. “The broadcaster promotes the film in reality shows and other segments. If the new release is a sequel, the network airs the previous version in order to aid recall,” says Patil.
Race to Hollywood
The voracious appetite of broadcasters has ensured that there is a ready market for Hollywood titles as well. The networks sign up with film studios for exclusive deals. While Star Movies has acquired titles such as Iron Man 3, Life of Pi, Ice Age 4, Battleship, Prometheus and Continental Drift, Sony Pix has titles such as Men in Black 3, Hobbit, Total Recall and Resident Evil Retribution.
Star Movies says that it premieres over 70 new titles each year. Kevin Vaz, president at Star Network says that Star Movies has signed up on movie deals with some of the biggest international studios -- Universal Studios, Walt Disney Animation Studios, 20th Century Fox and Sony Pictures. No competition comes close to this, he said. “Since we already had output deals with the biggest studios, we launched Star Movies Action with three of the biggest premieres, namely, Taken 2, Chinese Zodiac and Abraham Lincoln: A Vampire Hunter. There is one new movie that premieres every week on the channel. As market leaders we want to give the viewers a chance to catch their latest Hollywood titles which they may have missed in the theatre,” he said. Vaz is not too concerned over about the prices in the English movie category which he thinks is largely stable. “The pricing of the movie titles really depends on how the film has done at the box office. If it’s a film like The Avengers or Iron Man which have performed exceptionally well at the box office, they will naturally command a higher price,” he says.
Not everyone is as nonchalant about the prices. Saurabh Yagnik, business head at Sony Pix, says the English movie business is dominated by four main broadcasters— Pix, HBO, Movies Now and Star Movies and each one’s share varies from 18-22%. Together these comprise at least 75-80% market share in the English movies space.
Given the competitive intensity,
channels lock in English movie titles even at unjustifiable pricing. Prices for Hollywood films have more than doubled in recent years, he states. A report by Sony Pix says that around 140-150 movies premiere on English movie channels every year, but only a handful make it to the top. But English entertainment is a robust R500 crore advertising market and has a healthy rate of growth, says the report.
The fall guy
A big casualty of this satellite movies war is the rapidly declining home video business. The home video market continued to decline in 2012, with its market size shrinking by 15% from R2 billion to R1.7 billion, said the Ficci-KPMG report 2013. Hiren Gada, director of Shemaroo Entertainment, said that viewers were less inclined to buy CDs and DVDs because they knew that the film will premiere on television shortly. “We can’t really do much about it. The producers will do what fetches them financial returns. But at some point, these early premieres on television will impact the multiplex business as well. That will be when the producers will be forced to take notice. While earlier, a good film would last for more than four weeks at the box office, today a film is off the theatres in two weeks,” he said. Gada says that in the coming days, broadcasters may also have to tighten budgets on movie acquisitions. The external environment is such. The market will correct itself, he believes. Meanwhile, the home video segment is already reinventing itself and focusing on digital deliveries, Gada said.