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Distribution

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  • 1. Film Distribution - Overview BackIndia boasts of about 13,000 theatres enjoying a weekly admission of about 100 millionpeople or 5000+ million per year. Distributors are the last link in the movie chain which takefilms to the people.Although distribution and exhibition are the end points in the value chain of the filmbusiness, they are of utmost importance because "goofing" up at this stage means that thefilm , however well made, will be a flop at the "Box Office". With post productionaccounting for 20% of the film budget and taking 20% of the total time, any savings in thiswould go directly to the bottom line. Digitalization has the potential to bring in the desiredsavings and drive up profits substantially.Typically a distributor buys rights for a territory and recovers costs from the exhibition ofthe film. The distributor buys into the risk with the producer.Today, before a film is released, no distributor knows the fate of the movie. Copies are madebased on a guesstimate and the stakes are high. The copies are sent to various distributors inthe country, who in turn rent them out to theatre owners.If the estimate goes awry, all that the theatre owner, the distributor or the producer can doabout it is grin and bear the costs.The digital world, however, works differently. The problem of physically moving the reelsfrom one place to another does not exist. All it requires is a license to make another copy.And, making copies is as easy as clicking a button. The cost of distribution is significantlylower. The theatre owner will no longer be forced to show a movie that is doing badly. Hesimply has to switch over to the one that the audience wants to watch.Further, with overseas becoming a major territory and considerable costs associated with thesame any savings in the distribution costs will be a great boon for film producers anddistributors alike. Distribution of films around the world has become such a big business thatit fetches about as much business as Delhi-Uttar Pradesh, one of the six distribution territorieswithin India.With tickets in US being priced at $8 and those in UK being priced at 8 pounds the collectionfrom the 10 million population from overseas is same or more than the collection from the150 million population in of Delhi and Uttar Pradesh .Other disadvantages of physical distribution are because of the high costs of making excessprints and because of the physical nature (rather than digital nature) of prints people inremote corners of the country deprived of seeing a hit film till the print is available for them.Further, if a movie is a flop then because the film is not simultaneously released (because ofthe physical nature of prints) all over the country at the same time bad publicity may spreadand therefore no one may want to see the movie.A primer on digital technology in film distributionDigital cinema or eCinema or eMovies is the latest buzzword that has the potential to
  • 2. profoundly affect the distributors in the industry.Electronic cinema refers to film-less digital distribution and exhibition system of films usinghigh quality digital projectors that are brighter and have higher resolution versions of videoprojectors. With this, feature films can be projected in small to medium size theatres withDVD playback equipment .It is expected that by 2005, movies as bitable digital data files will increasingly replacephysical prints as the preferred medium of distribution.Financial BenefitsElectronic cinema like any disruptive technology has the potential of drawing the studios,production houses and exhibitors alike and gaining considerable marketshare at the expenseof traditional film distribution. The benefits to distributors will be in the form of:Print costs are currently about 15-25% of a films production cost. A print costs around80,000 rupees, a set of DVD-ROMS will cost as low as 8000/- A whopping 90% saving. InUSA, release prints cost $2,000 each. Further, shipping and insurance add another $1,000 perprint to the distribution costs. Thus an average big- budget release chalks up print anddistribution costs in excess of $15 million. Imagine the benefit if these costs were slashed byupto 90%.Digital production will be completed in lesser time and thus speed up the entire process fromfinish to release as innumerable disks can be made in a day.The film could be released in more cinema halls simultaneously as the cost for the distributoris relatively high. Thus, no more worries for theatre owners and exhibitors and distributorswho have to physically carry the film reels from one theatre to another and time showsaccordingly, thus enabling faster recovery of investment. Further , by the time bad publicityof a flop movie spreads it will have recovered a table profit.Every print is a perfect copy. Thus gone will be the days where the print is really bad if wedont see a movie in the first month. All the quality issues from the right hue to color drift toprint degeneration by repeated theatrical telecasts will be a thing of the past with the adventof digital technologies. Film Buffs do not mind paying a few rupees extra if they will receive"Picture Perfect" Movies due to digital technology.Exhibitor is at greater ease of operation- as all trailers, feature films and advertisements canbe pre-programmed. There would be no operator errors and no operator manipulations.Boost box offices. As has been said by all the gurus in the Internet world, industries wherethe final product can be digitized will be turned upside down. As the compressiontechnologies develop and prints are digitized, the economies of scale that can be achievedwill be significant . Just imagine the day when a movie is digitized at a central location andthen transmitted to various theatres in the city at the same time thus avoiding the painful taskof making countless prints and moving these prints from one place to another . Anyone whohas gone to a Hindi movie in the US would have observed how the print is brought to thetheatre just before the show and then taken to the next destination immediately after the
  • 3. show.With files replacing prints, a single screen can show multiple films and if audiences on agiven night do not want to see "The Chick Flick – Charliess Angels" the theatre owner mayswitch to "Kasoor". Thus, depending on audience taste, revenues can be kept high ."Cut and Paste" leading to considerable time and cost savings. Havent we all seen so manysimilar scenes in Movies like a sunrise in Mauritius or a view of the Savannahs . With the riseof digital technology, it will be possible to cut and paste any scene from a movie into anotherfile a la Powerpoint and thus avoid expensive shooting overheads and star tantrums. Why itwill be acceptedMost of theatres in India have old projectors; hence they can straight away jump from oldprojectors to state-of-the-art digital technology provided government provides tax benefitsand these equipment get the status of infrastructure equipment .It is not too big an increase in cost for new multiplexes.DVD ROMS cannot be decoded outside a Digital Cinema playback unit, thus it provides astrong safeguard against piracy- the biggest problem faced by the film industry today.Every show can have watermarks indicating theatre, time and date. Thus, foolproof reportingof playback data also prevents unauthorised shows. International experience"Star Wars: Episode 1, The Phantom Menace" is the first major studio film to be shown theE-Way. Sometime in the middle of 1999, a few theatres in New York began screenings of the"Phantom Menace" using digital technology. They used Texas Instruments and CineCommdigital projectors for the test screening. This experiment allowed lay audiences to see digitalprojection systems running real movies, while movie industry experts could comparecompeting projection systems operating in real theaters. Further proliferation of digitaltechnology happened when Miramax exhibited "An Ideal Husband" in the USA .Officials at 20th Century Fox Inc. and Cisco Systems Inc have digitally transmitted aHollywood movie across the country over the Internet and then digitally projected to acinema audience, going from the studio in Hollywood to a theater in Atlanta without evertouching the film. The idea was to demonstrate the potential of digital distribution, whichmany believe will one day supplant traditional canisters of celluloid, and to allow Fox to havethe world premiere of its new animated feature, "Titan A.E.," at Atlantas Supercomm tradeshow .Using Ciscos latest technology, the movie was hurled from Qwest CyberCenter in Burbankto the Woodruff Arts Center in Atlanta, where it was projected on a Barco/Texas InstrumentsDLP Cinema digital projector.Obstacles that will have to be overcome to ready digital technology for the massesProjector costs will have to drop quickly. While digital projector prototypes cost $250,000today, mass production will reduce the price to between $100,000 and $150,000 by 2001.
  • 4. As of now capturing "Live Action" digitally is prohibitively expensive and while specialeffects are now created digitally, live action is not. This will change as digital contentdominates feature films. More films like "Raju Chacha" where digital technology is used willbe created as costs fall.Dramatic reduction in distribution costs will cause industry wide encryption standards tobecome prevalent. CineComm incorporates Qualcomms patented compression algorithm andencryption scheme into its projection system to guard against piracy. EMovies will besuccessful only if arguments over cost sharing between exhibitors and distributors are sortedout . Most probably since crores of Rupees will be at stake these differences will be surelysorted out.Another issue is that many in Hollywood think, that once their films are upon the Internet,they will be pirated like music has been in recent months. As a result, Cisco 7140 VirtualPrivate Network, a method for isolating and protecting data traveling across the internet,including fire walls, security routers and encryption devices is being developed. ConclusionE-cinema envelops the entire process from filming to storage, transmission, distribution andprojection of movies, all of which can be done digitally.The technology demonstrations have already started in India. The next year awaits the HDTV(high definition TV) telecine and mastering facilities.Shekhar Kapoors digital studio and Sony Corporations digital motion picture camera are justthe beginning . When e-cinema really takes off in the country, it will spark a revolution in theindustry .As for transmission, the film can travel instantaneously over computer networks in the"frictionless economy". Film distribution, now a complex affair, will take place at the "click"of a mouse.2006.... Multiple versions of a film exist with different scenes , extra songs , films beingedited accurately after release- with remote controls , multiple language sound tracks andeven multiple language sub-titles exist at the same time.It probably only a matter of time till technology drives the change in the film world, makingthe industry more corporatised, and, therefore, suited to digital cinema.
  • 5. The satellite revolution in film distributionThere are nearly 1,500 screens in India which currently use satellite to relay movies directlyto the screensNew Delhi: From celluloid prints to digital format, the Indian cinema and its distributionchannel has come a long way. But, now taking a step further, the Indian cinema industry isslowly turning a new leaf in the distribution network, „satellite distribution of movies.““India is a country with diverse geographical conditions and difficult terrain. Hence, satellitedelivery takes care of all logistical problems associated with film distribution and exhibition.It ensures that even the remotest corners of the country receive all films - first day, first show.Also it builds in a lot of flexibility with regard to theatre programming. It is equivalent toVideo on Demand,” says Raaja Kanwar, Vice-Chairman, UFO Moviez, specialising indistribution of movies through satellite. It recently won the „Innovation award in IndianCinema´ at IIFA Awards in Yorkshire early this month.Sensing, the future growth prospects of the technology and also the cost cutting factor, majorcinema theatre groups are now planning to enter the satellite distribution market.“We view it as a critical market. We are already using the latest digital format. Satellitedistribution is something for which we are in talks with some companies. But, by next year,we might just have our own satellite distribution company for our own theatres,” says AshishShukla, Chief Executive, PVR Cinemas, the largest multiplex chain in the country.According to industry estimates, there are nearly 1,500 screens in India which currently usesatellite to relay movies directly to the screens.“The emergence of digital cinema is now causing a revolution in the Indian motion pictureindustry. Digital cinema, also known as e-Cinema, is the projection of film through a digitalvideo system. Recording of movies onto electronic media instead of film enables almostinstantaneous distribution of these films to theaters,“ says an executive with Hughes, anothermajor player in the Indian satellite distribution market.“Digital or satellite distribution is beneficial both for the cine goers as well as the filmmakers.One gets to see news films at the right time and there would be standard quality on audio andvideo across geography including B & C, tier II and tier III areas, ” says P.S. Saminathan,Managing Director, Pyramid Saimira Theatres Ltd (PSTL), a Chennai based digitalentertainment company.Also, this will bring non-film contents to theatres. As far as filmamakers are concerned,digital distribution will make entire film to have simultaneous release thereby reducing therisk of the film significantly,” he adds.PSTL, which has 29 multiplexes and 325 screens, has already tied up with many multiplexesin construction in North India.“We plan to concentrate in Punjab, Delhi, Haryana, and Rajasthan regions initially. Weexpect the entire market to go completely digitalized in the next three to four years. Towards
  • 6. this end, we are also assuming huge capacity for satellite distribution to our theatres,” addsSaminathan.With satellite distribution, piracy, one of the main concern of the cinema industry getsreduced. “Since, there is no print or any diskette, chances of piracy gets reduced. Moreover,since everything works out to be cheaper in the long run,” says a senior executive with adistribution network firm.FILM DISTRIBUTION MANAGEMENT:For a new distribution concern, it is very essential to know the business orengage a good manager who has good knowledge of the theatres and shouldhave good experience to judge the transparent dealings of an exhibitor. Tomanage the office, the distributor needs a staff consisting of an accountant, amanager, a person to take care of the prints and staff for publicity.FILM RIGHTS:The most complicated part is acquiring distribution rights. First it is veryimportant to know the producer well and the complete details of the film. Toselect a film which will be a box office success is very difficult. To reduce therisk factor, it is always advisable to deal with established producers becausetheir percentage of success is higher. No producer can assure 100% success.But when a product is acquired from a reputed big banner, the percentage ofsuccess is always higher because big producers are experienced and they willnot compromise as their reputation is at stake. There are 3 different dealings inacquiring film distribution rights:1. Outright basis: It means that you are the sole owner for the period agreedand all collections from the box office belong to the distributors. He does nothave to share any profit or loss with the producer. The distribution rights aregiven area wise and the normal period is one year. When a film is taken onoutright basis, there is no need to send statement to the producer. Thedistributor is not accountable to anybody. It is very rare that pictures areauctioned, if there is more than one buyer, and then producers try to get betterprice by creating competition. The distributor‟s stakes are very high in thisarrangement. If the film is a big hit, then he makes a killing or if it loses, heloses heavily. The producer, in this arrangement, makes good money but if thefilm is highly successful, his share of profits remains the same. On the otherhand, if it fails, he still has made his money.2. MG basis: MG stands for minimum guarantee demanded by the producerand in such case the distributor pays the agreed MG. In this case, if the totalshare from the realization of the picture is less than the MG, then distributorswill not be able to claim any refund. But in case of distributors share beingmore than the MG, then he is allowed to deduct the MG amount paid.Distributors commission @ 15-20% as mutually agreed. Any excess afteradjusting a,b,c, is shared with the producers in the ratio of 50:50 or otherwise asmutually agreed upon.
  • 7. 3. Commission basis: This is the safest way to distribute the picture because itis purely on commission basis. Distributor advances funds to the produceraccording to the merit of the picture and from realization of the picture, hededucts advance paid to publicity expenses and agreed commission and excessis paid to the producers and in the case of shortfall, producer has to refund theunrecovered amount with commission. In this third type of dealing, there is norisk or loss. Minimum profit is assured.Hollywood products are mostly distributed by their own offices in India.Sometimes they also sell the rights if they get a good price and that happens incase of only big product.Bollywood pictures are distributed state wise and divided into territories likeDelhi, UP, Bombay (consisting of Maharashtra, Gujarat and Saurashtra), WestBengal, Bihar and various other states as it is easier to exploit the pictures byarea wise distribution.DISTRICTWISE DISTRIBUTION:Only regional films can be released district wise. Kannada movies aresometimes released by the producer himself taking the help of area wisedistribution by paying them nominal commission. Sometimes pictures arereleased district wise either by taking MG or advance from area wisedistributor. Kannada film distribution is divided into 7 territories: 1. Bangalore, Kolar and Tumkur (BKT) 2. Mysore, Mandya, Hassan and Coorg (MMCH) 3. Chitradurga and Davangere districts 4. Shimoga and Chikmagalur 5. Hubli and Belgaum (Bombay Karnatak region) consists of Bijapur, Gadag, Dharwad and Belgaum. 6. Hyderabad Karnataka area consists of Gulgbarga, Raichur and Bidar. 7. South Kanara.ARRANGEMENT BETWEEN THE DISTRIBUTOR AND EXHIBITOR: After acquiring the rights of a film, the distributor approaches exhibitors toscreen his films. The distributor has to pay for the number of prints that hewants to exhibit. Obviously, a much hyped movie will have more prints as theywould like to screen maximum number of times and recover as much money ina short span. If such a film is a hit, then those concerned make more money. Ifit is not still, the hype created helps to recover a substantial amount in the firstweek. Friday, Saturday and Sunday are considered as the 3 crucial days todecide the fate of a film. Distributors opt for a combination of celluloid anddigital prints for screening (this also depends on the theatres as they should beable to screen digital prints). While a celluloid print costs approximately Rs60,000 per copy, a digital version with a fixed number of screenings (usually
  • 8. 21) costs Rs 7,500. The exhibitor pays 50% to the distributor from the firstweek‟s collection, 42.5% in the second week and 30% in the third week. About30% of the total box office collections go to the government in the form oftaxes. The distributor can also opt to rent out theatres in which case, a fixedrent is given to the exhibitor irrespective of the occupancy and whateverrevenue is generated through sale of tickets goes to the distributor. Dependingon the arrangement with the exhibitor, the distributor has to share his revenueon the model agreed upon with the producer. Here is where trust plays a vitalrole. If a producer is convinced that this distributor is fair to him, he will preferto offer his forthcoming movies to the particular distributor. In multiplexes, thesystem of issuing computer-generated ticketing has made the DCRs (dailycollection reports) more trustable. However, majority of the single screentheatres issue paper tickets and the distributor has to either trust the exhibitor orhave his own means of assessing the ticket sales. A distributor can sub-distribute the film to others within his territory. A distributor buys the movie‟srights while it is still under production wherein it helps the producer to completethe movie. This also puts the distributor in a disadvantageous position as he isnot sure how the final product is going to be; he has to take risk based on theproducer/director/cast‟s reputation. Producers who are new to the film industrycannot raise money by selling the rights in advance as no distributor would wantto risk himself. They have to find their own resources to complete the movieand then they can exhibit the movie to potential distributors. If they still cannotfind any takers, then they have to take the risk of releasing the moviethemselves.With the advent of various other forms of watching movies other than only intheatres as it used to be (pirated DVDs, TV channels airing films), the life of afilm is now numbered in days. The days of movies doing silver are goldenjubilees are gone.The last 3-4 years have seen the advent of corporates entering the distributionsegment. Companies like UTV, Eros, Reliance, or Fox buy the film from theproducers after paying a fixed sum (on an outright basis). The producer sellshis product for a profit but foregoes all other rights. He is thus safe and he has aguaranteed profit. Whether the film is a box office hit or a flop, his share ofprofit still remains the same. The corporate in turn deals with distributors areawise to recover their investment. A recent example is „My name is Khan‟where Fox bought the rights from Karan Johar but the film did not do theexpected business.The satellite and DVD rights rest with the producer and usually after theproducer feels that they have made sufficient revenues by showing in theatres; itis released to channels/DVD rights.
  • 9. Activities involved in marketing management of films.Distribution,Promos/ trailers/ teasers cuttingMedias for promotionPress meets,Merchandising