Benefits of Digital cinema
Digital technology will bring about a boom in the Indian cinema. It will be a revolution that will change the face of the century-old cinema business just as Internet (e-mail) and mobile phones changed the face of communication; digital cameras changed the face of imaging; satellite & cable television changed the face of home entertainment; and MP3 technology changed the face of music. Digital cinema envisages providing a high definition cinematic experience using computer servers, telecom and satellite technology. And this is the need of the hour as films are the most perishable commodities after their release.
Spearheading this digital revolution is a new set of traditional film-making firms, real estate giants as well as tech-oriented service providing companies such as Shringar Films, Mukta Arts, Adlabs, Inox, Kanakia Builders and United Film Organizers (part of the Apollo Group) amongst others. In fact, United Film Organizers (UFO) Moviez, the digital cinema network launched by Valuable Media Pvt. Ltd. (a subsidiary of the Apollo International Ltd.) plans to create the largest chain of digital cinema houses (2,000 nos.) worldwide by 2007. The company plans to invest 500 digital movie halls by mid-2006 at an investment of Rs. 80 crore (Rs. 800 million) and scale it progressively to 2,000 cinema halls across India at a total investment of Rs. 300 crore (Rs. 3 billion). And technology companies such as DG2L Tech, Panasonic, Hughes Escorts Communication Ltd. and Famous Studios Ltd. (Mumbai) are partnering it.
Benefits of digital cinema
In the traditional system, the cost of the print (Rs. 60,000 plus) is prohibitive and restrictive in terms of ensuring the penetration of the films into the hinterland (Class B and C towns). "Digital cinema has a lower cost per print. Through satellite technology, it can penetrate 100 cities and towns without additional incremental costs. It offers savings in handling and transportation. It can also factor in last minute exhibition orders. It has a longer virtual shelf life as physical prints wear out. It can curb piracy. It can help film marketer`s factor in bigger promotional budgets due to these reduced costs. It has a lower break even point. And more importantly, it can effect savings in the running costs - 25 per cent less," says Rajaa Kanwar, Vice Chairman of the Apollo Group, which has recently made its foray into digital cinema. Digital cinema offers convenience and economic benefits, which even have social ramifications. "Even pure photo film companies such as Kodak realized the reality of digital cinema long back and are moving in that direction. The advantages of digital cinema include: piracy control; empowering the Government to get additional entertainment tax revenues; professional MIS systems and a back up of strong professional management teams. Digital cinema technology consumes 60 per cent less electricity and facilitates savings of 40,000 Kva p.a.," says Gaikwad. In fact, filmmaker Chopra adds, "Piracy eats away more than 50 per cent of the business. Also, astute filmmakers have stopped releasing their films in the hinterland and even in states such as Assam and Orissa as well as countries such as Morocco and North Africa. If 95 per cent of the Hindi films don`t make money, imagine how much piracy must be cannibalising... In the US, studios release 2,000 prints of each film and the opening weekends (not week) can earn more than $100 million."
Modus operandi
In the case of UFO Moviez, the film release process entails: getting an authority letter from the producer; encoding and encryption in the UFO Moviez format; distributor release order; delivery of film to the theatre; delivery of licence to smart card; MIS for producers and distributors. Through digital cinema, each theatre can also schedule any film out of a possible eight to ten films at any point of time. "The early availability of films at zero investment combined with high quality images and scheduling flexibility has helped early migrants to UFO Moviez to register around 96 per cent increase in revenue collection. The demand has ensured that our technology partners have expressed their intention to increase capacity," says Gaikwad.
Earlier, the digital drive was hampered due to the higher initial investment. "The other reasons, which can hinder the growth of digital cinema include: lack of corporate finance in this capital intensive business; transition from creative business to professional set-ups in terms of expertise and resources; and inability to accept a radically different business model where the risks are shared," says Kanwar. UFO Moviez plans to enter into franchisee agreement with theatre-owners on a revenue sharing basis as pure service providers without disturbing the existing business models operating in the industry between producers, distributors and exhibitors.
Digital is the way forward
Speaking about the phenomenal response obtained by digital cinemas, Kanwar says, "Worldwide, there is a tremendous excitement about this technology, which is being hailed as the next leap in film distribution and exhibition. We have already received business enquiries from Europe, Russia, Mauritius, the UAE and the Far East countries." As compared to players such as Mukta-Adlabs venture, Shringar Films and Inox, the strategy of the newer players like UFO Moviez is different. "We offer MPEG 4 Technology whereas others have been offering MPEG 2. We are the first to offer satellite links and the server information is encrypted. Viewers in the metros and hinterland get to see the films simultaneously, get a better experience and value for money," Gaikwad says. However, Chopra cautions that the digital cinema firms should first tap the A cities and towns and then spread their tentacles downwards towards the B and C class towns.
Technology can pull the Indian film industry out of the current mess by reducing production costs
When Sanjay Gaikwad put in his papers at Zee, patriarch Subhash Chandra kicked up a storm. Gaikwad was his blue-eyed boy. The chemical engineer who once headed technology at the group and eventually thought up Playwin, Zee`s foray into online lotteries, was enamoured by a set of numbers. Challenging them, he believed, held the potential to change how movies are made and telecast in India.
Chandra, however, would have none of it. The soft-spoken Gaikwad, who continues to hero worship Chandra, confesses to the terror he felt each time his phone rung. But it wasn`t going to wean him away from the challenge. The problem was this. For every one million Indians, only 12 cinema halls existed. In a star struck nation, therefore, that churns out 800 films annually, the number of screens ought to multiply exponentially. Instead cinema halls were shutting down. Why?
Producing a Bollywood flick can cost between Rs 2-15 crore. Of the 800 odd films, 60-70% are made on shoestring budgets that rarely exceed Rs 2.5 crore. The richer ones spend, on average, Rs 7-8 crore. Then there are the badshahs who can afford upwards of Rs 15 crore. Whatever the size of the producer`s wallet, there`s a cost that remains constant-Rs 60,000 for making a single print. For 500 prints it works to Rs 3 crore or 20% of the total cost of a movie.
In Hollywood, the dynamics are different. Budgets are so high that the cost of making 4,000 prints is barely 5% of the total cost. So, it becomes easy for a producer to carpet bomb cinemas with a new release and recoup investments on the first weekend . In India, however, to even attempt carpet boming, a producer would need at least 1000 prints.
It is this cost that compel low-budget filmmakers in India to create just about 50-60 prints. The super rich manage 500. Even with superb logistics in place, they can at best, hope to reach out to 600 cinemas in the first week.
This inability to launch nationally in the first week lies at the root of Bollywood`s problem. All films are launched first in urban areas. After that the prints are shifted to second rung theatres. Later, they are shipped to what are condescendingly called B and C class towns. By the time a movie hits these towns, it can take as long as five months.
It worked in the past when promoting films was a staggered affair. Close to launch date in a territory, the producer or distributor would start advertising. But today every new film is promoted heavily on television, access to which is ubiquitous. Which is why, print or no print, people know which film is playing in urban centres. In turn, they look to pirates for their Bollywood fix who use illegal video parlours to showcase their offerings. At last count, Maharashtra alone had 60,000 such parlours.
At the end of the day, producers and cinema hall owners lose because the economics of movie making don`t allow them to reach out to their audience ahead of the pirates. In the current set up, by the time a film finally hits the local screen, it opens to occupancy rates of less than 10%. Cinema hall owners are better off without the halls.
Gaikwad`s track record at Zee found admirers. "Today, I can raise $50-60 million without blinking,`` he says. Big money for a boy who grew up in a lowermiddle class Maharashtrian milieu and studied engineering in spite of a father who wanted him to be a doctor. He made up later by marrying a doctor. But that is missing the point.
An NRI, whom he refuses to name, offered to put up $1 million on any project Gaikwad was involved with. He took the money and set up a company to manage the backend of lottery businesses trying to replicate Playwin`s model. In less than a year, the company started to make money. Gaikwad claims transactions on the platform are now in excess of Rs 75 crore every month. It helped bankroll UFO Moviez. Meanwhile, the Apollo Group`s Kanwars got interested and committed Rs 300 crore over two years. They liked the solution Gaikwad had. At its core, it used technology to simply eliminate prints.
HOW IT WORKS:
After acquiring the producer`s consent and the film has been canned, Gaikwad`s team converts the movie captured on traditional film into a digital format called MPEG 4. This reduces miles of physical print to 8 Gb of data on a computer`s hard disk. The file is then transmitted to Gurgaon, near Delhi, where Hughes Systems maintains machines to store these digitised movies. From here, the film is transmitted over satellite to any part of the country.
That is pretty much the reason why over the last four months, over 30 Bollywood flicks like Salam Namaste, Apaharan, Bluffmaster, Garam Masala and most recently Shikhar reached Muzzafarabad, Bilaspur, Ranchi, Raipur, Rajkot and Sangli-first day, first show. These include India`s biggest banners and here`s why. Take Shikar`s case.
Typically, a big budget producer allots 10 prints to Madhya Pradesh (Central Province in distributor lingo). Shikar hit 26 screens. Not because the producer released as many prints. But because the 10 prints apart, 16 cinemas in the region signed up to receive the movie via satellite broadcast. Currently, 160 cinemas use the technology. Another 400 have signed up and are committed to switching over.
Once a cinema hall signs up with UFO, it installs high end computers, digital projectors and a smart card with a password. The movie is broadcast via high speed satellite links to the cinema hall where it resides on the computer. The smart card comes programmed with licences from the producer. So, if a hall is authorised to telecast a film 35 times over one week, it can do just that. At the end of 35 shows, the movie deletes itself-unless the licence is extended.
The computer can store as many as 12 movies. For a single screen owner, it translates into an ability to screen different movies at different times. Rural India apart, it is the kind of thing that has given a new lease of life to single screen cinema halls in Mumbai like Roxy, Central Plaza, Liberty and Palace. In the past they had to stick to running a single movie. Now they have the flexibility to show different movies at different times.
Since the time they`ve switched to this model, Gaikwad claims their collections are up 100%. And how does he make his money? To start with, he charges the cinema halls Rs 375 per show. It can change depending on how well a cinema is doing.
In the meantime, he is pitching to people across the country with 10,000 sq ft of real estate to spare. If they sign up, he spends Rs 25 lakh to put up a pre-fabricated cinema with 250 seats and powered by solar batteries. In return, he takes up a 150 sq ft kiosk to run his lottery business-or anything else he thinks is viable. And he holds the rights to five advertisements before the movie starts and five during the interval. These ads, will sell at Rs 150 for a 10 second spot for each show in a single hall. He expects the ads to generate Rs 80 crore.
The first pre-fabricated cinema will open up in Indore next month. Meanwhile, Prakash Jha has entered into an arrangement with the company to set up cinemas in Bihar, Jharkhand and Eastern UP. If, by 2007, Gaikwad ramps up to the projected 2,000 cinema halls, producers can hope to recoup their investments from a movie in the first weekend-like in Hollywood. Will the plan work? On the face of it, it stands a good chance. Bollywood likes it. And the technology he has deployed creates significant entry barriers. Apparently, nobody else in India has the expertise to deploy it. He conveniently holds an exclusive licence. Now keep your fingers crossed.
Joining the bandwagon: Bihar has offered the project a three-year tax break. Officials in Maharashtra have expressed interest in pushing the project through. Every government in south India is examining it closely. And here`s why Cinema halls in small towns create employment. The technology eliminates the cost of prints and makes life easier for regional filmmakers. These cinema halls can be used to promote them. It can also help tackle piracy. Maharashtra, in particular, finds this interesting because the government believes piracy is a cash cow for the Mumbai underworld. Hitting piracy will choke their earnings pipeline.
