This document summarizes the Hindi film distribution industry in India. It provides an overview of the industry, including key statistics on revenue and growth. It then describes the value chain from production to exhibition. It details the roles of producers, distributors, and exhibitors (single screen theaters and multiplexes) and the various revenue models between these entities. Challenges facing the industry like piracy and lack of screens are discussed. The presentation concludes with recommendations to address these challenges through government support, transparency in data collection, and industry-wide agreements.

1. Sales &
Distribution
Management
PGP 2012-14
Term 5
26th Nov. 2013
Presented by:
Parambramha Panda
Puneet Manuja
Sanjana Pandian
Vishrut Shukla
Vyom Charaya

2. Cinema Quiz!
100
1000
1.2 bn
3 bn
?
?
?
?
11.5%
CAGR
Rs. 193
bn
7-10%
CAGR
Rs. 122
bn
2012
2017

3. Objective
• Understand distribution network of
Hindi Cinema
• To identify different channel entities
involved in the distribution network,
understand their roles, and study
the relationships ad interactions
between them;
• To trace recent trends in distribution
of movies, and analyse impact of
newly introduced channels, their
advantages and possible limitations;
• To arrive at recommendations on
‘how to leverage changes in the
movies distribution industry’ and
‘how to tackle to the potential
limitations’.
Methodology
• Secondary Research
– Industry structure
– Players at each level
• Primary Research
– a Hindi movie distributor of
Mukta Arts Distribution
Company
– a distributor of vernacular
movies in Tamil Nadu
– an exhibitor manager from
Cinepolis.

4. Industry Overview
• “Recession Proof” but still relatively small in size in terms of revenue
-
Low ticket realization
Low occupancy levels
High diversity of cinema produced
Lack of quality content and
Rising competition from Hollywood
• Bollywood > South Indian Industry > Others (Bengali, Bhojpuri etc.)
• Moving towards Digitization (80-90% in 2012, expected 100% by 2013)
• 12 screens per million in 2012 compared to 117 in US
• Average theatre ticket price increased by ~15% Rs. 40 in 2012 from Rs.
35 in 2011
• Traditional single screen theatre  multiplex
• New Media: Online media, movies-on-demand, TV & Satellite, Mobile
• Theatre-to-television window reduced to just 60-90 days

5. Industry Overview (contd.)
Channel-Wise Revenue Share of Indian Film
Industry (2008-2012)

6. Movie Distribution @ 30,000 Ft.
• Value Chain of Movie Making
Production
• Process of Movie Making
Distribution
Exhibition

7. Movie Distribution @ 30,000 Ft. (contd.)
• Interaction B/W Channel Entities
– Producer and Studio/Investor
– Studio and distributors
– Distributors and theatres
• Emerging Cycle of Movie Distribution

8. Hindi Film Industry in Detail

9. Hindi Film Industry in Detail (contd.)
• Production Stage
– Producer’s Revenue Stream
– Risk: (a) Completion, (b) Time & Cost Overruns, (c) Audience preference
– Financing: (a) Entrepreneur/HNI; (b) Banks; (c) IPO’s; (d) Distributors

10. Hindi Film Industry in Detail (contd.)
• Distribution Stage
– Distribution Territories (14)
– Distributors usually strong in
one or more territories

11. Hindi Film Industry in Detail (contd.)
• Distribution Stage (contd.)
– Tasks performed by the distributor
– Revenue Streams
– Revenue Models Between Distributors & Producers
• Outright Sales
• Territory Sale
• Theatrical Distribution Only
•
•
•
Commission Model
Revenue-Sharing
MG + Royalty Model

12. Hindi Film Industry in Detail (contd.)
• Exhibition Stage (contd.)
– Single screen vs. Multiplex
– Revenue Streams
– Revenue Models Between Distributors & Exhibitors
•
•
•
•
Theatre Hire
Fixed Hire
Revenue-Sharing
MG plus Royalty
– Multiplexes: drivers of growth in future. How?
– Balance of Power

13. Model 1: Simulate Profits of Distributor
Profitability Analysis
Revenue
Cost
Profit
ROI
Hindi
Fixed cost (Model 1)
Commision based (Model 2)
Superhit Hit
Average
Flop
Superhit Hit
Average Flop
146412 105604.8
42943.6
18375 29282.4 21120.96 8588.72
3675 Revenue
89000
89000
89000
89000
1000
1000
1000
1000 Cost
57412 16604.8
-46056.4
-70625 28282.4 20120.96 7588.72
2675 Profit
64.5%
18.7%
-51.7%
-79.4% 2828.2% 2012.1% 758.9% 267.5%
Vernacular
Fixed cost (Model 1)
Commision based (Model 2)
Superhit Hit
Average Flop
Superhit Hit
Average Flop
32033.85 23561.75 12721.58
4145.4 3203.385 2356.175 1272.158
414.54
8100
8100
8100
8100
100
100
100
100
23933.85 15461.75 4621.576 -3954.6 3103.385 2256.175 1172.158
314.54
295.5% 190.9%
57.1%
-48.8% 3103.4% 2256.2% 1172.2% 314.5%
ROI
Sensitivity Analysis – Movie Success
Model 1 Model 2
0.4 -33004.8 10199.05
0.1 -9021.22 14995.76
0.4 -12311.1 14337.78
0.1 11672.46 19134.49
Scenario 1
Scenario 2
Scenario 3
Scenario 4
Superhit Hit
0.1
0.2
0.3
0.1
Vernacular
Average Flop
0.2
0.3
0.3
0.4
0.2
0.2
0.3
0.2
Model 1 Model 2
0.4 5290.367 1239.037
0.1 10878.46 1797.846
0.3 10010.44 1711.044
0.4 6374.384 1347.438
Single
Screen
50
100
150
200
50
2772.78125
11830.7188
20888.6563
29946.5938
200
-13082.7
-4024.75
5033.188
14091.13
50
100
150
200
Multiplex Screen
50
100
150
200
6754.55625 10697.525 14640.49 18583.46
10566.1438 14509.1125 18452.08 22395.05
14377.7313
18320.7 22263.67 26206.64
18189.3188 22132.2875 26075.26 30018.23
Fixed Cost Model
Single
Screen
Hindi
Multiplex Screen
100
150
-2512.375 -7797.53
6545.5625 1260.406
15603.5 10318.34
24661.4375 19376.28
Commission Model
Fixed Cost Model
Sensitivity Analysis – No. of Screens
Commission Model
Scenario 1
Scenario 2
Scenario 3
Scenario 4
Superhit Hit
0.1
0.2
0.3
0.4
Hindi
Average
Flop
0.2
0.3
0.3
0.4
0.2
0.1
0.3
0.2
Single
Screen
Single
Screen
173056.4
50
50 33674.56
100 53306.7
150 72938.84
200 92570.98
Vernacular
Multiplex Screen
100
150
47816.99 61959.41
67449.13 81591.55
87081.26 101223.7
106713.4 120855.8
200
76101.84
95733.98
115366.1
134998.3
Multiplex Screen
17340.64
50
100
150
200
50 6102.456 10016.7 13930.94 17845.18
100 9065.67 12979.91 16894.16 20808.4
150 12028.88 15943.13 19857.37 23771.61
200 14992.1 18906.34 22820.58 26734.83

14. Hindi Film Industry in Detail (contd.)
• Other Stakeholders (Context & Environment)
– Role of Government and Regulators
– Role of Trade Associations
• 2009 conflicts
• International Distribution of Bollywood Movies
– Overseas distribution happens via theatres, DVD rentals, online streaming
and cable companies such as Time-Warner and Comcast
– Bollywood film producer requires an international distributor as well as a
distribution agreement which will specify the following - content type
(DVD, theatres etc.) and location
– Problems with overseas distributors

15. Emerging Trends in Bollywood
•
77% screens already digitized
Stakeholders
Business Model
Digital Players
 Virtual Print Fee
Fixed monthly Fees
 The pay-per-show
Charged per show
 Cinema Advertising
Rs. 210 Cr industry growing
at a CAGR of 11%
Exhibitors
• Quality picture & sound
• “First day First show” Access
even in C & D centers
• Ability to shift across movies
Producer & Distributors
• Wider Simultaneous release
• Faster Break-even
• Cost savings

16. Emerging Trends in Bollywood (contd.)
Satellite / Cable TV Distribution
 Covers 1/3 rd of the production costs
Increased price & Competition
 Win –Win contract
DTH
 54.53 million DTH subscribers
Pay-per-view model
Satellite & DTH rights usually bundled
Subscription based Video on
Demand model
Rs.249/month
Mobile platforms like iOS,
Android, Tablets etc.,
Entertainment on-the-go
Contracts to preload mobile
application
NEW MEDIA RIGHTS
Youtube Movie Rental
& Purchase service
starting from a cost of
Rs.50
Google Play Movies
 Established By Eros International
Cashed on its movie library
Internet-enabled devices
 50,000 paying subscribers
 $50 million Revenue contribution

17. Emerging Trends in Bollywood (contd.)
Piracy in Bollywood
 Indian film industry continues to
lose around Rs. 50 billion in
revenues and over 50,000 jobs
every year due to piracy
Multiplexes tickets costing
anywhere between $2.50 and $5 —
is quite high in a country where the
average per capita income itself is
just between $1,400 per year
Piracy accounts for at least 40% of
revenue loss per year
Digitization
helps curb piracy
VoD and online distribution
channels help curb piracy to great
extent
Other Emerging Trend
Crowd Funding: small
contributions made by a
large number of investors
for financing the movie
project.
Valueplexes:
 United Media Works’ Nukkad Entertainment – a chain of
small-sized digital cinema halls aimed at attracting audience
from the lower middle and lower income groups
 Ticket prices in 1200-1500 sq. ft.120-seater, no-frills
theatre are Rs. 30-50 only
experience
will just be of a
multiplex
food,
beverages on
sale and air
conditioning
as well.

18. Model 2: Predict Revenue Decline
Revenue Breakup -Weekwise
1
Relationship between Screens and First Week Revenue
0.8
140
0.7
% of Revenue
y = 0.0501x - 32.721
R² = 0.5638
160
First Week Revenue
0.9
0.6
0.5
0.4
0.3
0.2
120
100
80
60
40
20
0.1
0
0
0
0
2
4
6
Week
8
10
1000
1500
2000
2500
3000
No. of Screens
Input
Analysis
• Using data from 15 small, medium and large
budget movies the scatter plot of revenue
breakup week wise was generated.
• It was found that revenue decline followed
exponential distribution as shown in the
scatter plot.
• Around 70% of revenue is generated in the
first week of release. In the second week, it
drops to 17%.
• Significant correlation was found between
number of screens the movie was released in
and the revenue generated in the first week.
500
12
Number of Screens
Estimated First Week Revenue
Threshold Value
Actual First Week Revenue
2000
67.5
1.8
45
Crores
Output
80.0
60.0
40.0
20.0
0.0
1st Week
2nd Week
Intial Estimate
3rd Week
4th Week
5th Week
Estimate from First week Actuals
6th Week
7th Week
Threshold

19. Challenges and Concerns
•
•
•
•
•
•
Piracy: The problem of piracy still remains acute. As per the Motion Pictures
Distributors Association (MPDA), India is among the top nations in the world in
terms of video piracy. MPA estimates that losses due to piracy in 2012 were to the
tune of $.1 billion, an increase of 15.79% from that in 2008.
Under-Penetration of Theatre Screens: There are just 14 screens in India per
million people whereas in the US, there are 117 screens per million.
Regulatory Hurdles: High entertainment tax, at some places, as high as 40-50% is
proving to be a major impediment to the growth of the exhibition part of the movie
chain. This has also led to many corrupt trade practices such as theatre owners
under-declaring occupancy rates to save taxes. Also, the fact that film actors, artists
and technicians need to pay service tax, increased the costs of production of
movies.
Ticket Price Controls: Some state governments such as Tamil Nadu’s have put a cap
of a maximum of Rs. 50 per ticket in single screen theatres and Rs. 120 in
multiplexes. This has led to loss of profitability for distributors and producers in
such states as compared to others and also results in black-marketing of tickets.
Lack of Reliable Data of Ticket Sales: There is rampant under-reporting of revenues
by domestic exhibitors and international distributors when the revenue-sharing
model is applicable.
Channel Conflicts: Lack of clarity over when the movie will be released on the nontheatrical media may lead to conflicts and tensions between distributors /
exhibitors and the producers.

20. Recommendations
•
State Support: The government must provide tax incentives to multiplexes as a signalling to
encourage growth of the exhibitor industry and must play an active role in development of
infrastructure for new screens. For unique formats such as Nukkad, such high taxes make the
model unviable. The government must also relax ticket pricing control measures to allow market
demand set the prices and prevent distributors from losing money in such territories.
•
Tailored Content Pricing Strategy for BoP Concepts: For Nukkad, the producers and distributors
need to work out a unique pricing strategy as such exhibitors are low-cost service providers.
•
Transparency and Predefined Agreements on Data Collection: The industry needs to adopt strict
standards of ticket sales reporting so that each channel member gets appropriate revenue. For
overseas distribution, Indian production studios can setup own entities abroad like PVR has done.
•
Piracy: The film chambers of commerce must take stronger initiatives to tackle camcording,
online content posting, illegal streaming of movies on cable TV channels etc. as well as promote
public awareness on the importance of content protection. Automatic scanning of online media
for pirated film material should be implemented so that such acts can be reported and these
instances brought down from public access as soon as possible.
•
Industy-Wide Agreement on Timelines for Monetization from New Media: As suggested in one
of the papers covered in the literature review, the industry as a whole will benefit by agreeing on
a minimum amount of time before which producers will not start monetizing return on movies
through online, TV and satellite and home-video sources. Our quantitiative model demonstrated
a proof of concept of how it can help predict that minimum timeframe for various combinations.

21. Thank You!