With the world reeling under the impact of Covid-19, life as we know it has changed completely. Since February countries have been under lockdown to contain the pandemic and the entertainment industry is one of the hardest hit as a result. Research firm Ampere Analysis reports that the global entertainment industry is set to “lose $160 billion of growth” thanks to Covid-19 over the next five years. And the Indian entertainment industry is also facing huge losses due to the shutdown of theatres and big releases getting stalled indefinitely.
Now, however theatres in the United States are scheduled to reopen in July with Christopher Nolan’s ‘Tenet’ arriving on July 17 and Disney’s ‘Mulan’ arriving on July 24. In the Middle East, Dubai has opened its screens with stringent safety measures in place. Meanwhile, exhibitors in India are hopeful that the government will allow the reopening of cinemas in the next few months. But even if cinemas do re-open here, there are likely to be restrictions of occupancy and fewer shows a day similar to the UAE. Given the uncertainty of timeframes, some producers of A-lister films like ‘Gulabo Sitabo’ and ‘Shankutala Devi’ moved to release their films directly on to OTT platforms to ensure they don’t face further losses due to the pandemic. So how profitable will a theatrical release during the COVID times of 2020 eventually be for a producer or an exhibitor?
Film analysts are quick to point out that even during normal times, the occupancy in theatres stands at 30-40% unless it’s a big-ticket film where one sees housefuls shows, especially over weekends. Ashish Saksena, COO – Cinemas, BookMyShow, explains, “The dynamics of the movie business have changed over time, with producers and actors now collaborating to work through back-end profit sharing. While the ROI (return on investment) may be impacted to some extent, the craze for a film or lack thereof is evident from the first look or trailer itself. Time and again, we have experienced the roaring success of films that appeal to audiences, beating the odds of a deferred release, amongst others. That being said, theatrical releases are a major revenue stream for films, contributing over 60% of a film’s overall revenue collection. The substantial contribution from this avenue increases the dependency on this format significantly to recoup costs, making it unavoidable in a film’s journey.”
However, some Bollywood producers state that given revenues from theatricals at this point stand at zero, any revenue generation would be better than this static position. “From a holistic point of view, it’s not about how much would be the occupancy but the fact that cinemas are open for business and audiences are welcome. Under certain preventive caveats, of course. Once the cinemas open and audiences start the community-viewing experience again, things will slowly but definitively crawl back to normalcy. And then an Event Film will bring them back to life — closer to where we were before March 2020. That’s what Christopher Nolan’s ‘Tenet’ will do for international markets and hopefully, Akshay Kumar’s ‘Suryavanshi’, Vijay’s ‘Master’, Mohanlal’s ‘Ram’, S S Rajamouli’s ‘RRR’ and Ranveer Singh’s ‘83’, will do for Indian markets. In a nutshell, producers and distributors are waiting for cinemas to open so that the train starts moving and once they do, the business economics will start improving,” asserts Sunir Kheterpal, CEO – Azure Entertainment.
Overseas theatricals (US, Middle East, Australia, UK, Singapore & Malaysia) are also an important revenue stream for the Indian film industry. According to a 2019 FICCI and Ernst & Young LLP report, while domestic film revenues for Hindi films was around Rs 33 billion in 2018, overseas theatricals brought in more than Rs 30 billion with China being the largest international market for Indian content. In 2019, there was a dip in revenues from overseas theatricals for Bollywood with Salman Khan’s ‘Bharat’ being the top grosser at about the US $11 million. With the coronavirus crisis in 2020, how much will the big Hindi films rake in from overseas theatricals is an important question. But the film trade is very optimistic about the revenues from overseas theatricals as well given that cinemas have slowly started to operate in numerous countries. Reiterates Saksena, “Typically, the overseas contribution to revenues at 30% is seen for blockbuster films and we don’t expect much delay or concerns here given that overseas cinema openings are set to match with India to a large extent. While markets such as the United States have already placed their cinemas in phase 1 of the opening process, the Middle East has started with a staggered opening of cinemas too. Based on our conversations with global and domestic industry partners, cinemas in the United Kingdom are also expected to open by the time we are ready in India once the situation starts normalizing.”
Even though theatres may be shut and the film industry at a standstill, producers, distributors and exhibitors in India have been engaging with one another and putting in place guidelines to ensure that they are ready to start functioning, in full compliance with health and safety norms, when the government lifts restrictions and allows opening of cinemas. Red Chillies Entertainment, Chief Operating Officer, Gaurav Verma, says, “The coronavirus pandemic is a global crisis. While theatres are opening in the US now with big films scheduled for July, we have to see if it’s across all the big cities and even in India if they start opening up cinemas, there may be some pockets, unfortunately, where theatres won’t open. Post that, it will take time for the situation to come back to pre-COVID times. At this point, the film industry is taking precautions and everyone is getting ready to start working again. Drills are being undertaken and everyone is participating. At the end of the day, what is happening with the pandemic is scary. Till the time it settles down, I don’t think the film industry and exhibitors will push for the opening of cinemas. On one side, we are producers, distributors, and exhibitors, but on the other side, we care about the safety of cinema-goers. Safety first always. Everyone is engaging with the government currently so that it’s also aware of what steps the producers, distributors, and exhibitors, are taking in terms of health and safety.” Despite the tough times, the Indian film industry is going through, it is working collaboratively to find the best possible solutions to make the cinema experience a fantastic one for the audience once theatres reopen.