A Study of Sales & Distribution Mechanisms of Hindi Cinema

21,844 views

Published on

Term Project done as part of the Sales & Distribution Management course at IIM Bangalore

2 Comments
50 Likes
Statistics
Notes
  • Dear Vishrut, would really appreciate if you could share the ppt on krishankant312@gmail.com
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • Dear Sir, Please mail me the ppt to my mail id sushanta.solutions@gmail.com
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
No Downloads
Views
Total views
21,844
On SlideShare
0
From Embeds
0
Number of Embeds
196
Actions
Shares
0
Downloads
0
Comments
2
Likes
50
Embeds 0
No embeds

No notes for slide

A Study of Sales & Distribution Mechanisms of Hindi Cinema

  1. 1. Sales & Distribution Management PGP 2012-14 Term 5 26th Nov. 2013 Presented by: Parambramha Panda Puneet Manuja Sanjana Pandian Vishrut Shukla Vyom Charaya
  2. 2. Cinema Quiz! 100 1000 1.2 bn 3 bn ? ? ? ? 11.5% CAGR Rs. 193 bn 7-10% CAGR Rs. 122 bn 2012 2017
  3. 3. Objective • Understand distribution network of Hindi Cinema • To identify different channel entities involved in the distribution network, understand their roles, and study the relationships ad interactions between them; • To trace recent trends in distribution of movies, and analyse impact of newly introduced channels, their advantages and possible limitations; • To arrive at recommendations on ‘how to leverage changes in the movies distribution industry’ and ‘how to tackle to the potential limitations’. Methodology • Secondary Research – Industry structure – Players at each level • Primary Research – a Hindi movie distributor of Mukta Arts Distribution Company – a distributor of vernacular movies in Tamil Nadu – an exhibitor manager from Cinepolis.
  4. 4. Industry Overview • “Recession Proof” but still relatively small in size in terms of revenue - Low ticket realization Low occupancy levels High diversity of cinema produced Lack of quality content and Rising competition from Hollywood • Bollywood > South Indian Industry > Others (Bengali, Bhojpuri etc.) • Moving towards Digitization (80-90% in 2012, expected 100% by 2013) • 12 screens per million in 2012 compared to 117 in US • Average theatre ticket price increased by ~15% Rs. 40 in 2012 from Rs. 35 in 2011 • Traditional single screen theatre  multiplex • New Media: Online media, movies-on-demand, TV & Satellite, Mobile • Theatre-to-television window reduced to just 60-90 days
  5. 5. Industry Overview (contd.) Channel-Wise Revenue Share of Indian Film Industry (2008-2012)
  6. 6. Movie Distribution @ 30,000 Ft. • Value Chain of Movie Making Production • Process of Movie Making Distribution Exhibition
  7. 7. Movie Distribution @ 30,000 Ft. (contd.) • Interaction B/W Channel Entities – Producer and Studio/Investor – Studio and distributors – Distributors and theatres • Emerging Cycle of Movie Distribution
  8. 8. Hindi Film Industry in Detail
  9. 9. Hindi Film Industry in Detail (contd.) • Production Stage – Producer’s Revenue Stream – Risk: (a) Completion, (b) Time & Cost Overruns, (c) Audience preference – Financing: (a) Entrepreneur/HNI; (b) Banks; (c) IPO’s; (d) Distributors
  10. 10. Hindi Film Industry in Detail (contd.) • Distribution Stage – Distribution Territories (14) – Distributors usually strong in one or more territories
  11. 11. Hindi Film Industry in Detail (contd.) • Distribution Stage (contd.) – Tasks performed by the distributor – Revenue Streams – Revenue Models Between Distributors & Producers • Outright Sales • Territory Sale • Theatrical Distribution Only • • • Commission Model Revenue-Sharing MG + Royalty Model
  12. 12. Hindi Film Industry in Detail (contd.) • Exhibition Stage (contd.) – Single screen vs. Multiplex – Revenue Streams – Revenue Models Between Distributors & Exhibitors • • • • Theatre Hire Fixed Hire Revenue-Sharing MG plus Royalty – Multiplexes: drivers of growth in future. How? – Balance of Power
  13. 13. Model 1: Simulate Profits of Distributor Profitability Analysis Revenue Cost Profit ROI Hindi Fixed cost (Model 1) Commision based (Model 2) Superhit Hit Average Flop Superhit Hit Average Flop 146412 105604.8 42943.6 18375 29282.4 21120.96 8588.72 3675 Revenue 89000 89000 89000 89000 1000 1000 1000 1000 Cost 57412 16604.8 -46056.4 -70625 28282.4 20120.96 7588.72 2675 Profit 64.5% 18.7% -51.7% -79.4% 2828.2% 2012.1% 758.9% 267.5% Vernacular Fixed cost (Model 1) Commision based (Model 2) Superhit Hit Average Flop Superhit Hit Average Flop 32033.85 23561.75 12721.58 4145.4 3203.385 2356.175 1272.158 414.54 8100 8100 8100 8100 100 100 100 100 23933.85 15461.75 4621.576 -3954.6 3103.385 2256.175 1172.158 314.54 295.5% 190.9% 57.1% -48.8% 3103.4% 2256.2% 1172.2% 314.5% ROI Sensitivity Analysis – Movie Success Model 1 Model 2 0.4 -33004.8 10199.05 0.1 -9021.22 14995.76 0.4 -12311.1 14337.78 0.1 11672.46 19134.49 Scenario 1 Scenario 2 Scenario 3 Scenario 4 Superhit Hit 0.1 0.2 0.3 0.1 Vernacular Average Flop 0.2 0.3 0.3 0.4 0.2 0.2 0.3 0.2 Model 1 Model 2 0.4 5290.367 1239.037 0.1 10878.46 1797.846 0.3 10010.44 1711.044 0.4 6374.384 1347.438 Single Screen 50 100 150 200 50 2772.78125 11830.7188 20888.6563 29946.5938 200 -13082.7 -4024.75 5033.188 14091.13 50 100 150 200 Multiplex Screen 50 100 150 200 6754.55625 10697.525 14640.49 18583.46 10566.1438 14509.1125 18452.08 22395.05 14377.7313 18320.7 22263.67 26206.64 18189.3188 22132.2875 26075.26 30018.23 Fixed Cost Model Single Screen Hindi Multiplex Screen 100 150 -2512.375 -7797.53 6545.5625 1260.406 15603.5 10318.34 24661.4375 19376.28 Commission Model Fixed Cost Model Sensitivity Analysis – No. of Screens Commission Model Scenario 1 Scenario 2 Scenario 3 Scenario 4 Superhit Hit 0.1 0.2 0.3 0.4 Hindi Average Flop 0.2 0.3 0.3 0.4 0.2 0.1 0.3 0.2 Single Screen Single Screen 173056.4 50 50 33674.56 100 53306.7 150 72938.84 200 92570.98 Vernacular Multiplex Screen 100 150 47816.99 61959.41 67449.13 81591.55 87081.26 101223.7 106713.4 120855.8 200 76101.84 95733.98 115366.1 134998.3 Multiplex Screen 17340.64 50 100 150 200 50 6102.456 10016.7 13930.94 17845.18 100 9065.67 12979.91 16894.16 20808.4 150 12028.88 15943.13 19857.37 23771.61 200 14992.1 18906.34 22820.58 26734.83
  14. 14. Hindi Film Industry in Detail (contd.) • Other Stakeholders (Context & Environment) – Role of Government and Regulators – Role of Trade Associations • 2009 conflicts • International Distribution of Bollywood Movies – Overseas distribution happens via theatres, DVD rentals, online streaming and cable companies such as Time-Warner and Comcast – Bollywood film producer requires an international distributor as well as a distribution agreement which will specify the following - content type (DVD, theatres etc.) and location – Problems with overseas distributors
  15. 15. Emerging Trends in Bollywood • 77% screens already digitized Stakeholders Business Model Digital Players  Virtual Print Fee Fixed monthly Fees  The pay-per-show Charged per show  Cinema Advertising Rs. 210 Cr industry growing at a CAGR of 11% Exhibitors • Quality picture & sound • “First day First show” Access even in C & D centers • Ability to shift across movies Producer & Distributors • Wider Simultaneous release • Faster Break-even • Cost savings
  16. 16. Emerging Trends in Bollywood (contd.) Satellite / Cable TV Distribution  Covers 1/3 rd of the production costs Increased price & Competition  Win –Win contract DTH  54.53 million DTH subscribers Pay-per-view model Satellite & DTH rights usually bundled Subscription based Video on Demand model Rs.249/month Mobile platforms like iOS, Android, Tablets etc., Entertainment on-the-go Contracts to preload mobile application NEW MEDIA RIGHTS Youtube Movie Rental & Purchase service starting from a cost of Rs.50 Google Play Movies  Established By Eros International Cashed on its movie library Internet-enabled devices  50,000 paying subscribers  $50 million Revenue contribution
  17. 17. Emerging Trends in Bollywood (contd.) Piracy in Bollywood  Indian film industry continues to lose around Rs. 50 billion in revenues and over 50,000 jobs every year due to piracy Multiplexes tickets costing anywhere between $2.50 and $5 — is quite high in a country where the average per capita income itself is just between $1,400 per year Piracy accounts for at least 40% of revenue loss per year Digitization helps curb piracy VoD and online distribution channels help curb piracy to great extent Other Emerging Trend Crowd Funding: small contributions made by a large number of investors for financing the movie project. Valueplexes:  United Media Works’ Nukkad Entertainment – a chain of small-sized digital cinema halls aimed at attracting audience from the lower middle and lower income groups  Ticket prices in 1200-1500 sq. ft.120-seater, no-frills theatre are Rs. 30-50 only experience will just be of a multiplex food, beverages on sale and air conditioning as well.
  18. 18. Model 2: Predict Revenue Decline Revenue Breakup -Weekwise 1 Relationship between Screens and First Week Revenue 0.8 140 0.7 % of Revenue y = 0.0501x - 32.721 R² = 0.5638 160 First Week Revenue 0.9 0.6 0.5 0.4 0.3 0.2 120 100 80 60 40 20 0.1 0 0 0 0 2 4 6 Week 8 10 1000 1500 2000 2500 3000 No. of Screens Input Analysis • Using data from 15 small, medium and large budget movies the scatter plot of revenue breakup week wise was generated. • It was found that revenue decline followed exponential distribution as shown in the scatter plot. • Around 70% of revenue is generated in the first week of release. In the second week, it drops to 17%. • Significant correlation was found between number of screens the movie was released in and the revenue generated in the first week. 500 12 Number of Screens Estimated First Week Revenue Threshold Value Actual First Week Revenue 2000 67.5 1.8 45 Crores Output 80.0 60.0 40.0 20.0 0.0 1st Week 2nd Week Intial Estimate 3rd Week 4th Week 5th Week Estimate from First week Actuals 6th Week 7th Week Threshold
  19. 19. Challenges and Concerns • • • • • • Piracy: The problem of piracy still remains acute. As per the Motion Pictures Distributors Association (MPDA), India is among the top nations in the world in terms of video piracy. MPA estimates that losses due to piracy in 2012 were to the tune of $.1 billion, an increase of 15.79% from that in 2008. Under-Penetration of Theatre Screens: There are just 14 screens in India per million people whereas in the US, there are 117 screens per million. Regulatory Hurdles: High entertainment tax, at some places, as high as 40-50% is proving to be a major impediment to the growth of the exhibition part of the movie chain. This has also led to many corrupt trade practices such as theatre owners under-declaring occupancy rates to save taxes. Also, the fact that film actors, artists and technicians need to pay service tax, increased the costs of production of movies. Ticket Price Controls: Some state governments such as Tamil Nadu’s have put a cap of a maximum of Rs. 50 per ticket in single screen theatres and Rs. 120 in multiplexes. This has led to loss of profitability for distributors and producers in such states as compared to others and also results in black-marketing of tickets. Lack of Reliable Data of Ticket Sales: There is rampant under-reporting of revenues by domestic exhibitors and international distributors when the revenue-sharing model is applicable. Channel Conflicts: Lack of clarity over when the movie will be released on the nontheatrical media may lead to conflicts and tensions between distributors / exhibitors and the producers.
  20. 20. Recommendations • State Support: The government must provide tax incentives to multiplexes as a signalling to encourage growth of the exhibitor industry and must play an active role in development of infrastructure for new screens. For unique formats such as Nukkad, such high taxes make the model unviable. The government must also relax ticket pricing control measures to allow market demand set the prices and prevent distributors from losing money in such territories. • Tailored Content Pricing Strategy for BoP Concepts: For Nukkad, the producers and distributors need to work out a unique pricing strategy as such exhibitors are low-cost service providers. • Transparency and Predefined Agreements on Data Collection: The industry needs to adopt strict standards of ticket sales reporting so that each channel member gets appropriate revenue. For overseas distribution, Indian production studios can setup own entities abroad like PVR has done. • Piracy: The film chambers of commerce must take stronger initiatives to tackle camcording, online content posting, illegal streaming of movies on cable TV channels etc. as well as promote public awareness on the importance of content protection. Automatic scanning of online media for pirated film material should be implemented so that such acts can be reported and these instances brought down from public access as soon as possible. • Industy-Wide Agreement on Timelines for Monetization from New Media: As suggested in one of the papers covered in the literature review, the industry as a whole will benefit by agreeing on a minimum amount of time before which producers will not start monetizing return on movies through online, TV and satellite and home-video sources. Our quantitiative model demonstrated a proof of concept of how it can help predict that minimum timeframe for various combinations.
  21. 21. Thank You!

×