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Films - Screened out

Introduction

The Indian film industry grew by at 9.3 per cent in 2015 to reach INR138 billion. It is expected to continue growing at a CAGR of 10.5 per cent to size up to INR227 billion by 2020.1

Domestic theatricals, the key constituent of the revenues for the industry, experienced an assortment of developments in 2015. The collection for Hindi films (Bollywood) was almost flat as compared to previous years due to lack of strong content. However, the regional markets witnessed a strong growth as good regional content gained acceptance even among the non-native audience. Also, Hollywood continued its double digit growth trajectory in India on the back of its action-hero film franchises and wide distribution and marketing. With the increased share of Hollywood and regional content, the domestic collections grew by 8.5 per cent in 2015 to reach INR101 billion.1

On the other hand, the overseas collections grew by 11.5 per cent, mainly due to the star-led films that drove the collections from diaspora markets.1 A few smaller content-driven films also fared better, especially in the non-diaspora markets, contributing to further growth of the segment.

With an 8.1 per cent growth over the previous year, cable and satellite rights (C&S) rights contributed 12 per cent to the industry’s overall revenues in 2015 and continued to be the second largest contributor.1 The C&S market seemed to have stabilized and most of the C&S deals got linked to the box office performance of the films.

Noteworthy amongst the other ancillary revenues were the digital revenues, which are still evolving. In 2015, the digital rights were sold bundled with the TV rights. However, in the coming years digital is expected to emerge as a strong revenue stream as newer players continue to enter the Indian market and build their libraries. Also, with the digitisation and consolidation phase coming to a close, the leading exhibition players are now focussing on developing their non-theatrical revenue streams, leading to a steady growth of the latter.

There is immense potential for the Indian film to unlock and it is high time that both the government and the industry start thinking of innovative solutions to increase the reach of films, both domestically and internationally.

Key Trends

• Indian audience has become more discerning and is focussing on strong content. This is reflected in:
  - Success of content-based movies in Bollywood
  - Failure of high-budget films lacking good content (despite their star cast)
  - Acceptance of regional films having strong content
• Increased demand for special-effects event films and wider distribution has driven growth of Hollywood in India.
• Growing focus on overseas markets by adding new markets and increasing screen penetration and marketing in existing markets has yielded results.
• Initiatives for content development, franchisee-building are being undertaken by production houses.
• Increased emphasis on managing economics and budgets has led to popularity of revenue-share models and rationalization of marketing spends.
• Mature players in exhibition industry are exploring in-cinema advertising - it witnessed a strong 281 per cent growth in 2015 – and provision of innovative value-added services and luxury viewing experience to drive growth.
• Evolution of the digital channel – digital window shifted before C&S window for a few movies in 2015.

Key challenges

• Creating a profitable model for films
• Increasing the screen penetration
• Monetising the digital channel

Future outlook

• Content has become indispensable for the success of a movie and it is imperative that the producers take cognisance of the changing tastes of the consumers and reassess their budgets and business models to create profitable films.
• With the box-office collections from domestic market plateauing, the industry could look at newer markets to drive growth. Stronger distribution in international markets and co-productions with the local players could improve the reach and hence the revenues for the industry.
• The domestic audience has become more experimental and open to new concepts, platforms and other sources of entertainment. In these times, the under-penetration of screens and lack of accessibility to good cinema, visibly threatens the growth of the industry.
• The industry needs to look at innovative models for building exhibition infrastructure and the government needs to revisit the archaic laws to make cinema more accessible to the audience. The industry has a potential to unlock revenues of about INR40 to 50 billion by retrofitting the single screens into twin-screen multiplexes.1
• The industry is inching closer towards digital as a potential revenue stream which could disrupt the industry and completely alter its outlook, provided the industry is able to leverage and monetise it aptly.

 

Sources
1 KPMG in India analysis
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