The fear is that Jio will now do to films what it did to telecom. Disrupt the industry in every possible way, particularly the business of screen-owners.
Reliance Industries (RIL) chairman Mukesh Ambani, last week, announced that Jio's high-speed broadband and home entertainment offering, Jio Fibre, would launch a 'First-Day-First-Show' plan in the middle of 2020. Premium customers would be able to watch newly minted movies from their living rooms.
Theatre-owners, the traditional destination where films release, are now a worried lot. There are about 9,000 screens in India - 6,000 of them are single screen cinemas while 3,000 are multiplexes. True, the experience of watching a film in a theatre and that in a living room is very different. Living rooms, for instance, can't give you a 4D experience. But given the traffic hassles in Indian cities, staying home to watch a new film for a lesser cinematic experience doesn't sound bad either.
Nevertheless, theatre-owners are forwarding an economic logic on why Jio's plans aren't that sound. BusinessToday.In spoke to an executive who runs a multiplex. He did not want to be quoted.
The business of film distribution has "windows", which is the time gap between a theatrical release and release in any other format. Currently, that window is for about eight weeks. The executive stressed that all stakeholders, including exhibitors and content suppliers, make sufficient returns for their investment when windows are adhered to in a disciplined fashion.
"The reason is that the yield-per-eyeball or the yield-per-person who is consuming content is the highest in theatricals. In India, the average ticket price is Rs 150. Out of this, almost 40 per cent travels back to the producer after taxes. So about Rs 60. This Rs 60 per person is the highest when you compare to the yield in television, Over The Top (OTT) media, or any other platform," he says. Therefore, from a producer's perspective, it makes sense to go to the highest yield platform first before turning to other distribution platforms.
What is the yield on television and OTT? "If you were to sell a film for Rs 50 crore to TV, crores of people watch it. If you divide Rs 50 crore with the number of people watching the film, the yield per eyeball will be much lower than Rs 60. It will be Rs 4-5, or even lower. OTT, similarly, is a much lower figure," the executive adds.
His second point has to do with the medium that is a true barometer of success. In TV and OTT, the consumer typically is not paying per use - it is part of their subscription package. It is, thereby, difficult to tell if consumers paid for a film or not. In theatres, one pays per use, for a particular film. In terms of a barometer of success, theatres are therefore much sharper and definite. The success or failure in theatres currently leads to price discovery for other platforms.
The executive stressed that what Jio is planning is not new. Several others have tried it in the past with limited success. "In the past, there were films made just for television. It fizzled out pretty quickly because consumers were not receptive to this experiment. Economically, it loses rationale. Instead of producing a film for multiple platforms and each platform giving you a certain amount of revenue, now you are focussed on just one platform. The cost of making that film still remains the same. So you put in much more burden on one distribution platform. It just doesn't work out because people who want to experience a film in theatres would continue to do so," he says.
Films meant just for OTT releases are typically produced with a tighter budget but have cutting-edge content. But because of the smaller budget, they tend to become less cinematic and more TV oriented. "That is how it has played out in the West. At the same time, these producers continue to churn out films for theatres. They co-exist, but both types of content are different in terms of identity," the executive stresses.