Faced with delays and uncertainty, content production companies are staring at large losses as they continue to incur fixed costs. Contiloe Pictures founder and CEO Abhimanyu Singh said fixed costs account for 20-25% of total expenses and this, together with infrastructure costs on studios and equipment, could drain the budget by some 30-35%.
Dennis Nagpal, executive producer and founder at New Delhi-based production house Good Vibes Entertainment, which shoots digital films for corporates, says since the time companies switched to work-from-home, a lot of corporates cancelled shoots, impacting the firm’s business. If the situation fails to stabilise, the company will look at slashing salaries of permanent employees by 50%-75%.
The firm was supposed to finish pre-production of a Web show in April and commence a 75-day shoot starting May, Nagpal says. “Once the circumstances ease, we will try taking as many projects as possible, even if the budgets are not great and profit margins are low,” says Nagpal.
Analysts said television production companies are typically commissioned to make specific content. Companies usually get paid on a per-episode basis, which may go up to a few lakhs. They do not follow a royalty-based model. Hence, with production being stalled and no new content being made, firms will take a significant hit. While certain big production houses may have contracts with TV channels mandating sharing of ad revenues every time a series is aired, it is not generally the norm, noted experts.
For theatrical releases, revenues could be delayed. Contiloe delivered State of Siege, a Web series for over-the-top (OTT) platform Zee5, just days prior to the lockdown but production for television channels — two dailies — has ground to a halt. “We’re looking at losing some 44 episodes of shooting if we stop work for a month,” says Singh. Production of a new digital show is scheduled to start around August-September but Singh fears this may not hit the ground on time, as the calendar of the cast and crew members would be upset. “We may need to change members of the cast and crew and postpone the shoot if we need to retain a particular artist,” Singh told FE.
It takes anywhere between 12 and 15 months to ready (starting from order to delivery) an OTT original series of 8-10 episodes, reckon experts. Ajit Andhare, COO at Viacom18 Studios, said the larger problem is the loss of revenue from the theatres, which accounts for over 60% of total revenues. “A realistic view would be that it will take at least six months before we are back to normal business,” Andhare said. Going by the net box office collections of around Rs 4,200 crore in 2019, the quarterly loss could be around Rs 1,000 crore, Andhare pointed out.
Revenue generated from the sale of movie tickets is shared by film exhibitors, distributors and production companies. An industry executive on condition of anonymity said film exhibitors get the lion’s share of revenue from ticket sales — anywhere between 50% and 60% on an average. Distributors get the remaining share and they give a certain percentage from their kitty to the production companies, depending on the terms of their equation.
OTT platforms do have a buffer in their libraries but delayed production schedules will hit revenues. For Viacom18 Studios, shooting for film Laal Singh Chaddha and a digital show scheduled to be shot across 12 cities have been stalled. The project Shabaash Mithu is under pre-production but it may need some revisit as far as production plans are concerned, says Andhare. Some OTT firms like Hungama Play, however, said its library of original shows for the current quarter is ready with no show currently in the shooting stage.