Friday, April 17, 2009

The Bollywood Strike: How a new US model could help test the waters

The Bollywood multiplex strike has far reaching implications on the economy of India's biggest industry.

It's not the first time this has happened either. Last year India's premier production house Yash Raj Films had a similar standoff - albeit smaller - that saw them take the misguided stance of releasing their much anticipated movie Tashan in standalone cinemas (i.e. cinema halls with single screens). The result: a high profile flame out that put the brakes on the careers of Saif and Kareena and began Akshay Kumar's alarming slide at the box office.

In its current form the strike is hurting a slew of good releases - hugely screwing the creative team behind each of these movies - potentially throttling or derailing careers (is that Akshay sobbing in the back that I hear?)

Just in case you need a recap and don't have time to read this great Strike tutorial, here is what has transpired.

Producers: We should be getting 50% of ticket receipts!
Multiplex owners: Hell no and why now anyway?
Producers: Because we are hurting. It costs more money to make flicks these days.
Multiplex owners: But you guys still deliver enough flops that we need to make money off the big hits to cover our expenses!
Producers: So how would 50% hurt?
Multiplex owners: Ok, how about we share more if the movie is a hit and less if it flops
Producers: Given our track record this is a bad idea. But aren't you making money off sales of those diamond encrusted samosas?
Multiplex owners: Who told you they were diamond encrusted?
Producers: We took a guess based on their price!
Multiplex owners: You're wrong and we don't make enough money off them because they are quadruple fried and the price of oil has gone up.
Producers: What about the money you make off parking?
Multiplex owners: The mall owners take that - haven't you done your homework?


But there is a way to test the waters with a different distribution model. You can try it right here in the US. It's almost guaranteed to work. And Bollywood producers have virtually nothing to lose.

Recently I was invited by a composer pair to check out a movie for which they had composed the background score. The movie - a scary flick starring a veteran who chaffs at being still called a "newcomer" - wasn't playing in theaters. I realized I had three options: (1) order some pissy Shemaroo type copy (if I can find it) and wait for it to arrive (yawn!) (2) go buy a (pirated) copy for $2 at the local store or (3) ask my friend to download a (pirated) copy for me. Then pray the copy won't suck outright in all cases.

Needless to say, any which way I looked, the best options ended up with me and a pirated copy spending an evening together.

Hold that thought while we discuss another bit of economics at play. To understand this part, it helps to have a decent grip on The Long Tail phenomenon in ETail. (Read at least the introduction and first chapter of this groundbreaking book if you are interested).

The basic idea is this: although conventional wisdom says you need to sell a lot of a little to make money (the 80/20 principle), there is just as much money in selling a lot of a lot (i.e. the long tail). For the first time in retail history, the latter scenario is viable thanks to the Internet.

What is the biggest problem with Bollywood multiplex releases in the US?

Its only viable in cities with a high density of desi people (the primary Bollywood goers). In cities with a smattering of desis, keeping a Bollywood movie on a screen - even for a limited time - is not financially viable. By going the traditional (multiplex) route, producers lose out on all these small niche desi audiences all over the world. I am willing to bet these micro-markets add up to a lot of money. The only problem is - how do you deliver your movie effectively to these people without having to rent a theater?

The answer, of course, is staring every Bollywood producer in the face: its called Online Video (or if you under 15 - its called YouTube). Online Video took off a few years ago. Last year it became a commodity play. This year, there will be a shakeout. Next year - it will become a platform that every retailer will be able to embed in their online offering. Many are already doing it.

Legal, online (streaming or downloadable), on-demand Bollywood movies is a great idea. Its one I would pay up to $8 a pop for - more for a movie with Bips in it. It can be delivered anywhere to the desi diaspora. You have much better control over the quality of your product. And it'll give the pirated DVD market a serious run for its money.

My phaltu Drift advice to the Bollywood producers is this: don't wait for Hollywood to bring everything to you. You can leapfrog Hollywood here - and the economics are in your favor. There are several models available.

Strike a deal with Netflix, digitize all your flicks and take a cut for every stream or download. Strike the same deal with Blockbuster Online.

Strike a similar deal with Comcast On Demand and have copies delivered to DVRs.

Stick the damn thing on the terrific, break up the movie in chunks and make money off ads in and around the movie. (Google will be more than happy to strike a deal for their InVideo product)

The only fall out (other than the fact that someone will have to do some smart, creative business development) is that this will piss off US multiplex owners. Bully for you, I say.

Multiplexes - if they don't reinvent themselves - are going down in any case. Work out a deal with them where you give them two weeks (the average run time of a Hindi movie in theaters in the US) before you make online streaming available.

There might be one more excuse - you can't reach your largest audience (India) effectively with any of these models because enough people aren't online with cheap, fast connections yet. Fair enough. But you can still make enough money off international audiences with this model. The cost of entry is falling literally on a quarterly basis. Early momentum in this space will set the studios up nicely when the burgeoning number of Indians going online reaches critical mass.

And guess what it'll take to start delivering the same content and quality to new Indian audiences?

That's right - almost (next to) nothing!


Anonymous said...

Love it!!! Great job Aspi, I have to first congratulate you on this business write-up. Finally you have put together your left and right lobe of the brain and what amazing results!!!
I hope the producers are reading this, because me too as a desi out of India, has a hard time finding movies on DVD. Given our situation, which is a 60" HD TV, it is impossible to watch pirated movies without being confused between Bips and Priyanka. I think the only issue here is our thinking and I am sure the producers are wired the same way we are. What happens after downloading?? How many times will that copy be circulated, pretty common in Desis!! So, unless there is a way to 'burn after seeing', or rather the movie stops to play after 24hrs, it will be tough to convince them of this idea. I still would agree, about 'movies on demand' I live in the highest populated Desi state in US and still the only way to get new releases is thru theaters. I wish comcast or cablevision or Verizon had Hindi movies on demand. I think it would amaze these producers how people would actually pay to watch them. This is actually a great channel of distribution even in India. Most middle class do not want to go to old theaters but would not mind paying the 50 rupees to see movie on a movie channel by demand in the comfort of their house. Big screens are gaining popularity even in 2 and 3 tier cities in India.
Either way, I agree the producers and media together can have a greater success if they think of this as a global distribution not just national viewing audience!! especially given the success of Slumdog Millionaire.

Anonymous said...

While agreeing with all the concerns about piracy, my opinion is that the way to reduce piracy is to make it unviable for various reasons. my preference for movies is a DVD - make the DVD available within a week of the movie being out. Piracy due to price will always exist - but you will at least eliminate piracy due to lack of accessibility.


Beth said...

Brilliant! Let's hope the right people are listening.

Anonymous said...

related article, just different countries:
let's see who gets ahead Hollywood or Bollywood!!

Temple said...

Hi Aspi - Beth told me about your solution to the Bollywood dramarama and I think you're onto something. I do buy pirate DVDs because I can't get reasonably priced originals of many older movies, and because I selfishly don't want to wait 6 months after a new release. Video on Demand is an excellent answer - I know I would pay to download a legal movie in good quality.

Abhishek said...

Umm...bandwidth? Also is the computer a substitute for the theatre experience?

Aspi said...

Temple, so would I.

Abhishek, the answer is - as you are alluding - not today. But the answer also is: its immaterial. People pay for access as much as they do for the experience.

Case in point: the rise of web apps. They are slower and harder to use than their desktop versions. But the fact that they are accessible universally makes them viable.

The cinematic experience is just one component of many things a consumer chooses.

Temple said...

@ Abhishek - I agree re the cimnema - I enjoy the experience of seeing a movie in a theatre but I know many people who don't ever go to the movies and only watch DVDs. I think we all have a different ideas about what constitutes a great movie experience. The technology that would allow me in Australia better access (especially to movies that don't get a screen release here like Dev D) and less guilt over the pirates does exist and is improving rapidly. I downloaded the beautiful "Sita Sings The Blues" from and it wasn't a hassle. At the risk of of dragging this blog into disreputable waters, the adult film industry has been a pioneer of internet based distribution and video on demand and while yes, their product is not one to be viewed en famille, their sales are growing as is the investment in quality solutions. My cousin lectures in and about Second Life on virtual learning which is in it's infancy really but growing rapidly. I think the technology is there and getting better but the producers and distributors have yet to come up with a strategy to use it.
Having said that, I will always want to see one of the big Diwali releases in a cinema with my friends, listening to the crowd reactions.

Amrita said...

I believe the rajshris of all people are on the case. I think that's how Vivah became a hit - coz they were selling it online for 9 bucks or something.

I'm kind of surprised they haven't set a trend yet - isn't SRK supposed to be extremely tech savvy? Surely he and his best friend have heard of the Rajshri model?

Amrita said...

Well, somebody is reading your blog over at Hulu -

Aspi said...

Amrita, thanks for the info and link. But I'm thinking: Noooo to both :)

The best way to leverage your archives is to put it up on an existing widely populated Web 2.0 site that streams (not start your own like Rajshri). Why? Cross-recommendations - the reason why the long tail swishes around so much.

AND I think the studios will have better leverage if they strike a deal directly with the streaming sites instead of using saavn as proxy.

It's important to make the right start otherwise you're never sure if it was the market or the model that never took off. But the Indian film industry is a very territorial and focussed on near-term profit.