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Films in 2015 could witness muted growth
MUMBAI: While 2014 was stated to be a lacklustre year for the film industry, 2015 could also witness similar muted growth owing to the uncertainty around content that is already in the pipeline and slow real estate growth, which is expected to impact the delivery of new screens, states the FICCI-KPMG report on the media and entertainment industry.
However, from 2016 onwards, the industry is expected to get back on its growth trajectory and the domestic theatrical segment is expected to touch Rs 204 billion by the end of 2019 and grow at a CAGR of 10 per cent during 2014–2019.
The industry was estimated to be worth Rs 126.4 billion in 2014. Although the share of other revenue streams is on the rise, domestic theatricals are expected to continue to dominate in the next five years.
Domestic theatrical revenues remain the main source of income for movie-makers in India. The segment contributes 74 per cent to the industry total. In 2014, the overall industry performance was dampened by a drop in footfalls in the first three quarters and slower growth in average ticket prices (ATP).
Dependence of top 10 movies higher
The report mentions that the gross box-office collections of top 10 Hindi films in 2014 grew by 2.4 per cent over 2013 and 11.7 per cent over 2012. However, for the next 10 films, box-office collections dropped by 3 per cent in comparison to 2013 and 11.3 per cent for 2012.
The trend has continued across the board with box-office collections of films ranking 21 to 50, sliding further compared to previous years (2012 and 2013). The drop has been extreme in case of films ranking 41 to 50 where the total box-office collections of these films dropped by 48 per cent in 2014 over the previous year.
Category-A films with top-league actors continued to perform well at the box office. However, the same was not true for films that lacked both strong content and a top actor to attract audiences to the theatres. Industry discussions indicate that film content in 2014 did not deliver at par with 2013.
Moreover, television broadcasters became strategic with their film acquisition budgets, significantly impacting the cable and satellite rights (C&S) of most films. While prices of category-A films continued to hold ground, the rest of the films took a beating either in terms of price or in their ability to sell.
The need of the industry is to take a step back and deliberate on how it can address the fundamental issues plaguing the profitability of the sector and what measures it can take to build sustainable business models.
Disney India MD Siddharth Roy Kapur said, “The audience today is evolved and has become much more discerning. The choice of what content to consume on which platform has become very specific. They also decide much in advance whether they will make the effort to watch a movie in the theatre or simply wait for it to appear on another platform. As a result, 2014 saw a plateauing of box-office collections, even though average ticket prices went up. In the current environment, the industry needs to give utmost importance to developing strong content that creates the compelling draw for an audience to make it to a theatre.”
Again, in terms of improving the fundamentals of the industry, 2014 was a stagnant year. The need of the hour is for all industry players to work together to formulate ways to manage risk better and not lose money at the box office considering the direction of satellite prices.
Marketing and distribution
The report further adds that digitisation of screens has allowed distributors to release films simultaneously across thousands of screens, as a result of which almost 60–80 per cent of theatrical revenues are now collected in the first week of release, compelling filmmakers to generate enough buzz to attract maximum footfalls within the first weekend itself.
Thus, marketing budgets, which were negligible a decade back, now account for a significant portion of the overall cost of production.
Given the varied number of marketing and promotional avenues, the huge print and advertising (P&A) costs are becoming a challenge for films with tight budgets, as there is a minimum spend required to reach a threshold audience base. P&A cost for a Category A film (released across 3,000+ screens) can be anything above Rs 200 million; for a Category B film it could range between Rs 150 and 180 million, and for a Category C film at least Rs 100 million, states the FICCI-KPMG report.
While the metros, especially Mumbai and the NCR region, still contribute about 60 per cent of the total box-office collection in India, they have reached a saturation point and the next phase of growth is expected to come from Tier II and III cities.
In a landmark year for regional cinema, 2014 saw the number of regional movies touch a high point, with about 287 Tamil movies and 255 Telugu movies, compared to 216 Hindi movies.
In Tamil, films like ‘Lingaa’ and ‘I’ stood out as experimental films. The growth of the Tamil industry can be partially attributed to a number of small-budget films with fresh content.
The Telugu film industry, which is similar to the Hindi film industry for its dependence on star power, had a softer year. While the number of movies produced during the year increased, the highest-grossing movie ‘Race Gurram’ collected just Rs 570 million at the box office compared to the highest-grossing movie of 2013 which collected Rs 1.81 billion. The movies ‘Minugurulu’ and ‘Manam’ were praised by the critics, and were among the 30 films shortlisted by the Film Federation of India (FFI) for the 87th Oscar Awards.
The report mentions that other regional industries also saw an increase in the production of movies. While the four South Indian markets, Tamil, Telugu, Kannada, and Malayalam, led the pack, the Marathi and Punjabi film industries also performed well at the box office in 2014.
Marathi film ‘Lai Bhaari’, made with a budget of Rs 80 million, collected over Rs 350 million at the box office. The animated Punjabi movie ‘Chaar Saahibzaade’, which was made on a budget of Rs 200 million, generated Rs 700 million.
However, the Bengali film industry did not have a great year as quite a few Category-A films failed to attract audiences to the theatres.
The regional space needs to improve as Kannada and Malayalam films still lag behind in terms of content and production values, in spite of the rise in the number of productions in a year. Bengali films, on the other hand, need to cope with the lack of serious players in the production space, limited cable and satellite options, very few stars, and, most importantly, limited multiplex infrastructure.
2014 is stated to be a good year for Hollywood films in India, with the gross box-office collections of top 10 films increasing from Rs 3.2 billion (2013) to Rs 4.2 billion (2014).
In 2014, franchise movies like ‘Amazing Spider Man 2’, ‘Transformers 4: Age of Extinction’ and ‘X-Men: Days of Future Past’ performed well at the box office and generated close to Rs 2.1 billion in gross box-office collections in India.
Though franchise and superhero films draw a wider audience, small-budget movies with stronger scripts also performed well. ‘Fault in Our Stars’ (83 screens) and ‘Gone Girl’ (155 screens), while competing with big-budget Bollywood movies, reported Rs 52.9 million and Rs 34.9 million gross box-office collections in their respective opening weekends, states the report.
Overseas theatricals witnessed a 3.5 per cent increase from Rs 8.3 billion in 2013 to Rs 8.6 billion in 2014, while the overall contribution stood at 7 per cent of the total revenue. Overseas markets together contributed less than 5 per cent to the total theatricals.
In 2014, Indian films further increased their reach. Movies like ‘Bang Bang’ and ‘PK’ released respectively in more than 800 and 6,000 screens worldwide in the overseas market.
The industry also added new geographies to its distribution portfolio with new markets like Lebanon, Iraq and Burma. Premieres at international locations and tie-ups with international agencies were done to increase traction in foreign countries and promote Indian films.
The FICCI-KPMG report further states that regional cinema is now able to make bigger inroads in the overseas market, growing in both traditional markets like the US, the Gulf, and non-traditional markets like Japan, France, Denmark, Taiwan, Korea and China.
Nevertheless, the Punjabi film industry is facing challenging times owing to a drop in demand from the UK, while Bengali films are still restricted to film festivals and the art-house circuit. In the UK, Indian movies are struggling to connect with the third-generation Indian diaspora, thus leading to a decline in collections from the region.
Cable & satellite
With a share of 12 per cent in 2014, C&S rights continued to be the second-largest contributor to the overall industry revenue. The film revenues from sale of C&S rights de-grew by 2.7 per cent to Rs 1,470 million in 2014.
In 2014, broadcasters were more careful when acquiring movies than in the previous years. While filmmakers demanded a higher price in order to recoup the ever-increasing production costs, broadcasters took a stand against rising movie acquisition costs.