UTV Software Communications Ltd, the Bombay Stock Exchange-listed media firm with substantive interests in Hindi film production, issued a detailed clarification on the imapsse between multiplexes and producers, and how it will affect the firm’s business.
Heart of the issue: Plexes, in the last year, have restricted box office sharing to content creators to 48% in week one, 38% in week two and down to 30% from week three. Furthermore, commencing Dec 08, they collectively (and in direct disregard to an MRTP order against them) initiated steps to further reduce this already imbalanced share. Importantly, for movies with no star cast (and there are an increasingly higher number of them and successful ones) they accorded even lower terms i.e. 45% in week one – dropping to 35% in week two. It is important to note that the new genre of smaller movies actually have a longer life in theatres and their box office in week 2 is as much as week one, sometimes higher.
UTV offers the following illustration: In Mumbai, if a multiplex ticket is priced at Rs200, given that entertainment tax is 45%, Rs90 is deducted straightoff. Of the remaining Rs110, 48%, which is Rs53 per ticket, is then given to the distributor. This is only 26.5% of the total ticket value. In week 2, this figure is an even lower Rs42.
In comparison, even with a lower ticket price of Rs100 at a single screen cinema, of the Rs55 net of the 45% entertainment tax, upto 80% is retained by the producer, either on a rental or a revenue share basis. This works out to Rs44 and the producer gets the same amount for all weeks. UTV also points out that the realization per show is higher as single screen cinemas can seat a larger number of people.
Plexes have grown the Indian box office market, which now accounts for 30-50% of total revnues from a film, the statement says. The rest is made up of sattelite rights, digital rights, music rights, home video rights and overseas rights.
Prevents selective distribution: UTV says the plexes behave like a cartel and insists that if a film has to be shown, a print must be provided to every single cinema of their chain, thereby disabling a selective and inexpensive distribution strategy for smaller films, impeding the growth of that genre.
Lower dependency on theatrical revenue: Due to continued focus on pay-per-view and video-on-demand revenues, the dependency of producers on Indian theatrical revenues have come down. In the past, this dependency used to be 90%. For the year ended 31 March 2009, Indian theatrical revenues contributed only 29% to UTV Motion Pictures revenues. “…we believe commercials will not be substantially affected.” The statement also says the release schedule of UTV moviles will not be affected as the firm did not have any releases planned during this period.
The Multiplex Association has said it will release a white paper to explain their stand soon.
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