In celebration of first Rs. 100 crores for an Indian movie

The movie ‘3 Idiots’ is supposed to have broken all records of total money earned for a Bollywood movie with collections rumoured to surpass Rs. 100 crores in its initial 4 days of run. One of the critical factor, I think, behind these huge collections is the high ticket pricing strategy employed by Raju Hirani [Raising the evening show ticket prices in multiplexes by 30-35% and morning show ticket prices by 100%]. No doubt, Raju Hirani created an entertaining movie and the audiences, yearning for a decent movie since a long time, flocked to theatres. But the high ticket prices did play a role in the high collections earned.

In another story, Moser Baer has started raising the prices of its home video CDs and DVDs. Hence, 2 yrs back, when a home video CD was sold for Rs. 24 and a home video DVD for Rs. 35, the prices today have been raised for CDs and DVDs to Rs. 50 and Rs. 99 respectively, although in select markets only as of now. And the overall revenue made by Moser Baer post this price increase seem to suggest that this increase did help Moser Baer in making more money.

The point I’m making here is that increasingly, Indian consumers are becoming price inelastic in some way, when it comes to consuming media of their choice. The affluent Indian living in metros doesn’t mind paying even upto Rs. 2000 for a family movie-out, or mind paying higher price for a genuine movie experience. To use an analogy, today the mobile companies in India are making more money than the music companies in India, because when it comes to getting music on a mobile, one can get the music of his/her choice right on the spot without any fuss.

The lesson for Indian media and entertainment players is that changing demographics along with rising incomes is leading to a change, in which creating a value product becomes vital; However, once you’re sure of the value of the product, don’t be afraid to experiment with the price of the product. At its core, a new movie is always a high risk product for a potential viewer because a movie’s actual worth can never be ascertained without consuming it. However, in case of blockbusters like ‘3 Idiots’ or ‘Avatar’, a certain amount of risk is reduced for the viewer due to the positive word-of-mouth and past associations with star cast/director/etc. of the movie (in case of ‘3 Idiots’, the factor being Aamir Khan followed by Raju Hirani’s team). Raju Hirani seems to have learned this lesson well and charged his audiences a higher ticket price for this risk reduction. That’s why today, he and his producers Reliance Entertainment are laughing all the way to bank.

 

Basics of Internet Audience Measurement Methods

Internet is believed to be one of the most measurable  mediums;  however, the fact that almost everything on the  internet can be  measured makes understanding internet  measurement all the more  complex. There are several  methods of measuring audiences online;  however, none of  these methods in isolation give one a complete    understanding of online activity.

The four distinctly different types of online audience  measurements  available are:

1. Site-Centric, in which the website server log entries are the immediate subject of analysis;

2. Ad-Centric, in which the ad server log entries are the immediate subject of measurement;

3. Browser-Centric, in which the contents displayed in PC browser are the immediate subject of measurement;

4. User-Centric, in which the person using online media is the immediate subject of measurement. (Richard W. Goosey)

This article shall focus on Site-Centric and User-Centric, which are the most common methods followed in the industry and analyze their advantages and limitations.

Site-Centric Measurement

Site –Centric measurement is a census –like method which can measure almost every site related metrics like no. of visitors, no. of page views, clicks, time spent on the site, time spent on each page, bounce rate, etc. This kind of measurement is very useful for website publishers as it gives them a very comprehensive way to measure all the activity on their site. This method can track page by page activity of a visitor right up to the conversion page in case of an ecommerce site. This data is really useful to understand which sections of one’s website are visited most and identify sections which may not be doing very well. It is one of the most reliable and accurate methods which captures both in house and out of house usage of the internet. Capturing out of house consumption of media is generally in most other mediums.

Site-Centric measurement generally works on a cookie mechanism. The moment one visits a site, a cookie (a small file) gets downloaded on their system and tracks all their navigation on the site. This data is reported back to a server which aggregates all this information and makes it available to the advertiser or the website owner. There are several paid and non-paid third party packages that one can use to track their website data. Google Analytics is the most commonly used application which gives one a very comprehensive analysis of their website traffic and activity free of cost.

Though this method is one of the cheapest and most accurate ways to measure internet audience, it does have certain limitations. The biggest limitation of site-centric data is the fact that it does not tell us anything about the demographic profile of the user. One does not get to know the age, gender, etc. of the user whose website activity was tracked. For Advertisers, knowing the demographic profile the visitors of a website is a must. Also, this method cannot differentiate between two users working on the same machine; hence, it is believed that site-centric method measures devices and not people. Apart from there are some other limitations, like a refreshed page or aborted pages are also counted. Since the system mainly relies on the cookie mechanism, in cases where users delete their cookies often – data can get skewed.

User-Centric Measurement

User-centric measurement is the more traditional panel based method, where a sample is recruited and their internet behaviour is tracked. This system gives one detailed demographic data about the users in the sample and hence advertisers find this data very useful. Also, because the demographic data available in this method is similar to the data in most other traditional mediums it is easier to do a comparative study of media consuming habits of particular audience using this method.

In this method a panel is recruited and they are generally asked to download a tracking file on their computers. This file then helps track all the online activity of the user. Though this method too can track out of home activity of a user but this is subject to the fact that a respondent downloads the required file on their computers. There have been several cases where it has been known that users do not download the file on all the systems they use and this again brings in error in measurement. One of the advantages of this method is that it is conducted by third party and hence any biases are believed to be absent. ComScore and Neilsen /Net Ratings are some of the common bodies providing this kind of measurement data.

The biggest limitation of this method is the fact that the kind of data tracked is restricted by the size of the sample. It is expensive to recruit a large sample and hence data captured for a smaller sample is projected over a larger universe. Also, the motivation for respondents to download the file that allows tracking of their online behaviour is often questionable. Many people are unwilling to have their online usage tracked due to privacy concerns.

Way Forward

Both user-centric and site-centric measurement methods have their own advantages and disadvantages; however none of them in isolation is a complete solution. There is a need to integrate the advantages of both the methods and come up with a more comprehensive solution that will not only accurately capture all kind of online activity but will also give the publishers and advertisers rich demographic data about users. It is this comprehensive data that will help people better plan their media campaigns and will also allow for comparability of activity and behaviour across all mediums.

Several research organizations are coming together to share their expertise around digital media tracking and measurement. Efforts are also being made to link it with traditional media metrics. Hence, one expects an integrated method of measuring audiences online to soon evolve and provide publishers and advertisers with a more complete solution.

 

Are you prepared to take your brand social?

With so much being written and said about social media success and its potential, marketers today almost feel compelled to make their brand’s/product’s presence be felt on these mediums. Stories similar to that of social networking site Facebook  overtaking email as the web’s most popular communications tool ( March 2009 source: Neilsen Global Faces and Network Places) are sure to attract marketers.

True, the medium has great potential and almost every major brand is out there. However, before you hastily plan to follow suit, it is important that you have a strategy in place and are aware of the differences of this medium from the traditional media.

Here are a few things that marketers should keep in mind before advertising on social media.

Does your brand/product fit in?

One primary question that every marketer must ask before advertising in any medium is whether their brand is a good fit for that medium. This question becomes all the more important in case of Social Media as the marketer has very little control over the content of this medium. “Before committing to a social media campaign, ask yourself whether you are happy for your brand to sit alongside individual profile page images of last night’s heavy partying,” says  Laura James in her article. No matter how lucrative social media may seem, it is pointless spending advertising monies on a brand that just does not fit in with the kind of content users expect on these sites.

Do you have an objective for your social media campaign?

Once you have agreed on social media being the right platform for your brand or product, the next thing to do is to chalk out a clear objective for your campaign. Very often companies think that their traditional media advertising objective will work just as well on social media. Some companies even go to the extent of directly using their TVCs or print ads on social media. While this may work in some cases, it is not always the best thing to do. Ideally, one should put enough thought and have a properly planned objective for social media that is measurable. Based on this objective the company should plan their campaign. This is important because the type of content available on social media is different from traditional media and so is the media consumption.

Have you defined measurable success parameters?

Based on the objective of the social media campaign, one should also define success parameters. While defining these success parameters companies need to ensure that these parameters are measurable. In cases where a direct measurement of a certain parameter is not possible, proxy variables should be used. Most social media campaigns have one umbrella goal of ‘user engagement.’ However, user engagement by itself makes no sense unless it’s measurable. Marketers should avoid terms like ‘user engagement’ which has been much abused in social media and instead look at other parameters like no. of comments, no. of tweets, forwarded links, or some other similar activity that actually shows engagement. Marketers need to understand that social media advertisements are not only about views, clicks and click-throughs. One needs to look beyond the normal online advertising metrics and come up with parameters more suitable to the differential user behaviour on social media.

Are you regularly conversing with your audience?

One of the biggest mistakes that a marketer can make on social media is launch a campaign and forget about it. Social media unlike most traditional forms is not a passive medium. Launching a campaign on social media is only the first step in the process. Marketers need to ensure that they have a team in place to regularly monitor their social media campaign and the user activity around it.  This is a medium where users will share their experience whether good or bad about a product/brand. All user sentiment and feedback should be given due respect. Companies need to be aware of the fact that people will talk about their product/brand online and it only makes sense that they engage with the users to positively influence what the users have to say.

Are your campaigns creative and engaging?

A study done by Jam/My Space early this year in UK said that about 26% of social media users said that they already felt bombarded by too much clutter/advertising. It’s important that marketers ensure that their ads on social network sites are engaging and not distracting. A good idea can be coming up with interesting Facebook/Orkut applications around your brand which are also entertainment for the user.  While using banner and other form of display ads using background colour similar to that of the site that you are hosted on can often work wonders as users often think they are a part of the site. If an advertisement can add value to a user’s overall experience on a site, nothing like it.

Are you being honest in your campaign?

Social media users are extremely savvy and will quickly spot any fake claims made by companies. Hence, marketers should restrain from launching any fake blogs (‘flogs’), sites, communities etc. Nor should they make any fake claim about their products. The chances of any fake activity being quickly identified by users are high and the consequences disastrous. Sony’s fake blog ‘www.alliwantforxmasisapsp.com’ which they claimed to be launched by a PSP fan was identified by users as Sony’s own imitative within hours.

Are you prepared for criticism?

Social media is a dynamic medium where users generate and control most of the content. In spite of all efforts that marketers may make to be culturally sensitive and truthful, they still may offend some users. Also, there could be situation where a users blog about some bad experience they have had with your product/brand in the past. Any social media campaign is vulnerable to criticism from users and hence marketers should be prepared for it. Several companies like Dell, have acknowledged the criticism they have received from users and engaged with them on social media to rectify the damage.

Advertising on social media is exciting; it has great opportunities for brands but at the same time it has several risks if you go wrong. It is important to understand that your brand is different from others, what worked for someone else may not work for you. Hence, any marketer who plans to enter social media should do so with a well planned strategy and reason. Joining the race because everyone else is out there is just not reason enough!

 

The bingHoo! Alliance

After declining Microsoft’s $44 billion acquisition offer in early 2008, Yahoo has decided to reject its own search technology for Microsoft’s latest ‘decision engine’ – Bing. Though the deal is to some extent a celebration of Bing’s success, however, it isn’t solely so. Yahoo’s motivation behind the deal has been to reduce costs by outsourcing the search technology and improve their cash flow thorough the ad revenue sharing model that has been worked out between the two companies.

The highlights of deal between the two companies are:

+ The agreement between the companies is for 10 years.

+Microsoft’s Bing will be the search technology used on all yahoo sites. However each company will continue to run their display ad businesses separately.

+ Microsoft will acquire a 10 years license of Yahoo’s search technology and can use their expertise and algorithm to better their search engine.

+Yahoo will continue to syndicate its search affiliate partnerships.

+Yahoo will become the exclusive worldwide relationship sales force for both companies’ premium search advertisers. Microsoft’s AdCenter will be the platform for both the companies self serve advertising. Prices for all search ads will continue to be set by AdCenter’s automated auction process.

+Microsoft will share revenue for the traffic generated on networks owned and operated by Yahoo.

The pact between the two companies is of immense interest to all SEOs and SEMs. It’s been a while since the Google has had any real competition in the search space. Advertisers and SEOs are of the view that this deal will bring in competition and be beneficial for the industry overall.

The current search market shares of the leading companies in the search space are as follows.

Source: ComScore June 2009 Report.

Below, I have tried to analyze the impact of the Microsoft –Yahoo deal on the different companies.

Yahoo

One is not too sure if the alliance will impact Yahoo’s long term business positively. Industry analysts fear that the announcement of this deal will make Yahoo another AOL – a company that owns vertical categories like finance, news, etc but does not own any content. And worse, a company that is dependent on a third party for major chunk of its revenue. Yahoo investors are already reacting negatively to the announcement. This is visible in way Yahoo shares have declined after the official announcement. But again with Yahoo’s search technology deteriorating, a pact similar to this was perhaps the only way for Yahoo to survive the next 10 years.

Microsoft

After three failed attempts at improving their search technology and taking on Google, Microsoft’s release of Bing gives them a moment of respite. Moreover, with Yahoo’s decision to use Bing as their search technology on all their properties- they will now become the number 2 player in the space with a combined market share of about 30%. Though this number is big enough to lure advertisers, a lot will also depend on the fact that whether current Yahoo users will continue to be loyal to the company once it switches over to the Bing technology.

The real success of the deal for Microsoft will be realized only if they manage to get a share of the 75-78% search ad spends that are currently spent on Google properties or their partners. Once the integration happens, initially one does expect a bit of the advertising share to move from Google to Microsoft & Yahoo. However, Microsoft & Yahoo will need to ensure that they are able to deliver quick results for their advertisers and sustain them. Search industry has strong loyalists and not too many people are willing to risk their advertising dollars. If Microsoft & Yahoo fail to provide the early pool of advertisers who try them out good value for their money, there are chances that it may all backfire. Dissatisfied advertisers who then move back to Google will perhaps not return.

Nevertheless, this is perhaps the best chance Microsoft has had in years to take on Google and one expects that they will invest a lot of money and talent to ensure that they make a mark this time. The Yahoo-Microsoft deal is really about Microsoft vs. Google!

Google

Is Google too worried? Perhaps, not. In spite of the alliance between Microsoft and Yahoo, it will take them years before they can match the overall strong value proposition Google offers to its advertisers or reach any where close in terms of market share.

Also, the deal will come into effect only after it has gone through the strict scrutiny of the US, Department of Justice.  There are chances that the logic Microsoft used a year back in opposing the deal between Google and Yahoo, be used against them in this proposed alliance. Google too will be asked their view on the deal, but perhaps they would not have any strong objections. However, even if the approval is granted, both companies will take about 18 to 24 months to actually carry out the entire integration which will be a messy affair. Yahoo search engineers will move to Microsoft and it will take time before things settle down. Google no doubt will use this time well enough. One can expect them to improve their search product and further strengthen their proposition and market share.

For a company like Google this isn’t the first time someone has tried to challenge their position. Will this time be drastically different? One does not have enough reasons to believe so. The Bing-Yahoo deal may bring out an unequivocal second player in the space, but it would not change the game. The alliance comes as no big surprise to Google and one can be sure that they are well prepared.

 

Romancing DTH: Movies take a step forward

With the digital revolution gathering pace in the country, content providers are now looking at innovative measures to make money off the DTH platform. The latest move in this regard is being undertaken by  UTV Motion Pictures Plc.’s. Their new movie Phir Kabhi will be exclusively released on the direct-to-home (DTH) platform next month. According to Livemint, the movie made on a budget of 3 crores, will not have a theatrical release and shall make money exclusively on a pay per view basis. The move seems to be based on sound logic as any movie typically spends 30 – 40 % of its budget on promotions, and small budget movies investments in theatrical publicity and distribution costs many times do not justify the revenues they bring in. So using the DTH platform for distribution seems like a sensible idea. Let us look at the scenario from a numbers point of view.

Before we get down to the numbers though, the three factors which could influence the outcome of such an experiment are

a) No of DTH subscribers in India

b) Average time spent in watching Television

c) Average revenue per user (ARPU) for a DTH operator

The Business Standard reports that the number of DTH subscribers in India stand at 13 million as of May 2009, growing steadily at 18 % quarter on quarter.

The movie is expected to sell between Rs 50 – 75 per view. For the sake of our calculations, let us assume that the movie sells at Rs 60 per view. The DTH operators would take a cut in these revenues, which could be estimated at a 30% . Thus UTV would make Rs 42 on every view.

With a budget of 3 crores, it would require 7.15 lakh views for the movie to recover its production cost. That forms about 5.5 % of the total DTH base in the country. A figure which seems achievable and we could be optimistic about the movie making money.

Let us now consider the average time spent watching television as a parameter. According to a WARC report in May 2009, Indians spent an average of 18 hours a week watching television.

A look into the genre breakup of TAM ratings would reveal that GEC’s (Hindi and Regional), followed by News form the bulk of the viewing for the Indian audience.Though this data is for CS ( Cable & Satellite) homes, there is no reason to believe that it would vary significantly for DTH homes.

It could therefore be a difficult task for Phir Kabhi to fight and be a part of those 18 hours of TV viewing. They would have to rely strongly on the DTH operators pushing the movie to the viewer.

The moment we add ARPU’s into this equation, the picture doesnt seem as promising. In the DTH business, the figure remains as low as Rs 150. Expecting a DTH user to pay 40% of his money for single piece of content is a tall order.

So on two counts out of three, the situation seems a bit dicey for UTV to take such a move. Though, it would be interesting to see how things play out when the movie gets released.  The experiment seems interesting, and there is much hope for the future. According to E & Y estimates, the DTH subscriber base would stand at 25 million by 2012. By then, a rise in ARPU’s could just do the trick for both the DTH players as well as content providers.

 

Newspapers: On Crossroads

The recent Indian Newspaper Congress 2009 has been debating about how the newspaper industry has been faring and what is the road ahead for one of the oldest mediums in a billion plus semi literate country. Worldwide the print industry is in bad shape, with the digital revolution being attributed as the single biggest cause for the death of the industry. Closer home, things haven’t been going great as well. The latest round of IRS 2009 threw up strong indicators as to where we are headed. Just a snapshot of the English dailies would indicate that most of the newspapers, including pioneering and long standing brands are seeing decline in their figures (with the exception of mint). At best, they have flat growth curves. The question we need to ask ourselves is where exactly did the newspapers falter. As I see it, they have failed to address a few key issues

1. Failure to Anticipate change

The web arrived in India more than 15 years ago,blogs made their inroads into cyberspace 10 years ago, cyber cafes started cropping up in every nook and corner of the country. Instead of having some foresight and anticipating the rise of the Internet, newspapers chose to ignore. In an era of visual appeal, newspapers lose out on what they can offer to a reader who lacks time. No longer does everyone has time to read 1000 word editorials, that too when news has been dissected the previous day across mediums. A classic case of an ostrich burying its head in the sand.

2. Failure to reinvent:

By making light of the Internet, newspapers sat pretty on their circulation and readership numbers. Never did they bother to change their formats, services and layouts. It was assumed that the Indian consumer would happily eat whatever was served to him. Had the newspapers kept in line with the times, they would have understood that their competition is not the other dailies in their vicinity, but the Economists and the Wall Street Journals of the world. Add to that the rise of citizen journalism, news aggregators, blogs and message boards, it was surely some serious competition cutting into their share. Not only did the consumer evolve, but so did the advertiser. Falling advertising revenues today is not just an equation of circulation and readership figures, but a function of engagement, which I shall explain next.

3.Missing out on the engagement bandwagon

While the country grew at a brisk pace, the number of brands invading people’s lives took a jump. Thus came about the need to break the clutter and engaging your audience. Again, print lost out to Internet, mobile and TV (to some extent). The average time spent on reading a newspaper started coming down. It should have been enough to press the panic button.

4.Missing the pulse of a young India

Even if we overlook the other factors, the single biggest factor which lead to the decline is that newspapers failed to reach and connect with young Indians. In a country where we are unwilling to pay for music or software, expecting us to pay for content, is a bit too much of misplaced optimism. The industry will be run by advertising revenues, always. There is a need to reinvent the medium, and make it relevant to the youth. We needn’t look far, as the FM Radio industry in India is galloping towards growth, at a time, when radio as a medium was pronounced dead.

5. Regional is the way to go

Clearly, its the regional newspapers who have been showing positive signs. English is read or understood by very few people. Out of a base 8,235 crore, only around 3 crore read English.The regional dailies have been growing at a healthy pace,bucking the trend. This could be attributed primarily to two reasons. First, the lack of regional content online is an issue which is yet to be resolved. In a country where at least 40% of the population speaks Hindi, Tamil content is more read across the country than Hindi. So,a lot of regional content consumers frankly dont have much of a choice. The second, is that the intersection set of the Internet savvy consumer and regional content consumer is so small, that it may not make sense for anyone to look in that direction. Not yet, but with increasing internet penetration in India, the story may play out differently in the coming years.

All obviously is not lost for the industry, as we are still amongst the most vibrant print media economies of the world with newspapers being launched every now and then. What needs to be done today is to embrace the change around us. A strong brand will endure the test of the evolution of media, provided it takes the right steps ahead.

 

The Evolution of Media

No, I am not writing a post on the rise of Social Media (not yet!). The recent producer – multiplex owners conflict made me wonder as to how important is entertainment to us. It suddenly made me think about the ever changing entertainment needs of human beings and the way we consume media today. Thus this post on the evolution of Media. These thoughts are not purely mine, as the person who got the ball rolling in the first place was a certain learned guy, and yes, I borrow heavily from him.

Here, I attempt to make the connection between the evolution of our societies and the evolution of our media.  The point I am trying to make is that entertainment is an evolutionary by product, defined by how changing social and economical conditions have led to changing media habits, as opposed to the view that only technology has been instrumental in changing the media space. The supporting argument I make here is that the evolution can be traced to the concept of leisure time.

In the Agricultural age, people worked by the day and rested by the night. Since agriculture was the main mode of commerce, most people had plenty of time free in the evenings. People came together to discuss important issues as well as entertain themselves. Community events were the order of the day and thus the art forms of dance, theatre, operas and folk songs were popular.

With the industrial age coming into being, the concept of working time changed. People were no longer restricted to working only in the day, as 24 hour work cycles with 8 hour shifts became the norm. The labour classes had work, but were essentially poor. Not just economically poor, but time poor as well. The luxury of free time was reduced and thus there was a need for the source of entertainment, which was not live, easily repeatable and cheap. Thus came about the evolution of Cinema, which came to be known as the poor man’s opera.

As people started moving from rural to urban areas for work, becoming tiny cogs in the giant machine of industrial revolution, distances from their hometowns increased. The desire to know about events around their homes, a desire never felt before owing to their proximity to their homes, suddenly erupted, which led to the invention of News, and with the printed word being in force, the steady rise of newspapers.

And as I jump into the information age, skipping the advent of the radio and TV, today we work not just in 24 hour cycles, but in different time zones. We are extremely cash rich but hopelessly time poor. The need for entertainment still remains with us though. We no more had the time to go to places to consume entertainment. The content became mobile, rather than the consumer. The path between content and consumer, which was defined by content previously, now, starts from the consumer. It is we who decide when, where and how we will entertain ourselves. We wish to challenge the dimensions of space and time to suit our needs. Entertainment is being dished to us today in our hands, through a zillion mediums and more.

Over the years, the content has undergone a fair amount of change, but essentially it is the medium which has seen radical changes.

With leisure time decreasing rapidly over the last 300 years, where are we headed now? Is the industry ready for the solution for the time starved, entertainment hungry, impatient, ruthlessly demanding consumer? If the evolution of Media is indeed linked to the concept of leisure time, will the evolving media be a step ahead of the consumers or will just try to follow and catch up ?

 

Producer-Distributor vs Multiplex standoff in India

All ye Hindi movie buffs out there, it is time to rejoice as the over two months long standoff between movie producers/distributors vs the 7 exhibitor chains(multiplex chains) has ended.

For those unaware of full proceedings, the issue goes like this: India has roughly 11,000 screens out of which around 800 screens are multiplex screens. However, the revenue share is highly skewed in favour of multiplexes which generate around 50% of overall theatrical revenues. As Vanita Kohli’s article in Business Standard puts it:

According to Prakash Chafalkar of The Multiplex Association of India, of the 11,394 screens in the country, 800-odd are part of multiplex chains. They sell tickets at anywhere between Rs 120-150 against the all-India average of Rs 30-50. Overall, theatre revenues accounted for 76 per cent (or Rs 9,700 crore) of the Rs 12,600 crore that Indian films made in 2008. According to Kapur, multiplexes bring in 55-60 per cent of a film’s theatre revenues, while the remainder comes from the 10,500-odd single screens.

Hence, the producers-distributors want a bigger share of revenue-share pie from the multiplexes now. Now, it’s a known fact the Mumbai territory brings in the highest amount of revenues for industry. But in Maharasthra, due to Government waiver, multiplex chains save all of the 45% entertainment tax — which goes into their pockets only. From the rest of 55% money, the revenues used to be split in the ratio of 48% for first week, 40% for second week and less than 35% for third week.[These ratios are valid all across India, not just for Maharashtra]. The reason for the standoff was that producers-distributors now wanted 50-50 revenue share for all the weeks.

In an analysis done on 18th April, IndianTelevision tried to gauge the financial impact of a long running standoff on both the parties. It estimated a loss of Rs. 850-900 million for the industry in case the strike lasted for over a month. Well.. the losses should turn out to be biggger now.

In a further analysis on 30th May, they tried to analyse both parties’ stands, jotting down pros and cons of their currents stands and ramifications of any potential reconciliation efforts. From the movie industry front, folks were more or less united with Aamir  Khan even going upto the extent of asking his fans to avoid his own movie “Raakh”, which was being released in single screen theatres.

But now, finally, the issue has been settled. “The final agreement with multiplex owners will give producers a 50% share of box office takings in the first week, 42.5% in the second and 37.5% in the third, with the final week yielding 30%. The settlement also allows for a 2.5% swing either way in the event the films make above Rs17.5 crore or less than Rs10 crore. In case of the latter, the films are released with at least 500 prints. ”(source: Mint)

Some people have been left over voicing over three other equally important concerns of the industry. First of these issues is Accounts settlement. Ideally, the producer should get his share of money within a week or two of the ticket sales, but multiplex chains usually take 2-3 months sometimes taking upto 7-8 months for settlements. So, even though as the Indian Media and Entertainment industry tries to scale up to global standards, the business practices still confirm to Unorganized sector behaviour.

The other issue is control over release strategy of movies. Since each print usually costs Rs. 60,000 to the distributor, Distributors usually want to release movies only in select locations so as to maximize their revenues. So, for e.g. release a movie in Cinemax Versova and Fame Lokhandawala but not in Mulund. But this would hurt the theatrical collections of buyer multiplex chain for its Mulund location.. Hence, the standard practice is to have buffet approach — either the producer/distributor has to agree to provide copies to all the screen of Exhibitor chain, or face zero presence in that chain. But then, in heat of the moment and mounting losses, probably no one bothered to discuss nitty gritties. [For more on these issues, you can listen to the podcasts attached to these articles on Mint (1 and 2).]

The final issue concerns with the quoted amount of theatrical revenues itself.

The real issue is not what the share distribution of the pie is, the real issue is what exactly the pie *is*. Many producers and distributors quote inflated collection figures in trade papers which are very different than what is actually being indicated by the multiplex collection feeds. This is not to speak of internal squabbles between the producers and distributors themselves once its time to split the presumed overflows. [via IBOS]

As far as my personal opinion is concerned, I personally don’t have a stand on this issue, except for the fact that single-screen theatres(which in turn means small towns and villages also) have been totally ignored out of this discussion, as if they don’t matter. Also, the amount of disorganization in industry is appalling and leads to loss of scale in terms of revenue potential, quality. After all, everybody in industry is here to entertain people and make money.. and if despite all these no-settlements or settlements, the industry continues to make pathetic movies and deliever flops after flops, the audiences will hardly care for them.

 

And the biggest Music company in India is..

An interesting development happened this month in India’s music industry. Music Bharti, the music related arm of Bharti — the biggest telecom operator in India, became the biggest music company in India by revenues.

As I see it, it signifies following things:

1) Despite being in the market for so long, and having huge marketing budgets, the old conventional players like Saregama, HMV, Sony-BMG have not been able to maintain their leadership. This means that Piracy is killing the traditional music business comapnies in India. Bharti Music does not suffer from the problem of Piracy.

2) Being the biggest telecom company in India with over 70 million users, and has the biggest one-to-one distribution network in India. This coupled with aggressive marketing, Indians’ tendency to splurge on their mobiles with hello-tunes, ringtones, caller tunes and what not, has opened up a totally legal way of making money from music. No traditional music company can hope to reach this distribution scale without spending helluva money.

As Chris Anderson talked about this in his book The Long Tail, the marginal cost of adding another song to its library is zero for Bharti, and it results in virtually unlimited choice to its users. For a music buyer, the chances of a song being available with Bharti Airtel would be higher compared to finding it in a neighborhood music shop.

However, One important point that is missed in the headline is about the profits. Bharti still has to license its music from the record labels, and that would cost money. Now, as I know it, the power has been with the telecom operators when it comes to content developers of games and applications. However, with music contracts, I don’t know as of now. But it can be argued that when even the multiplex owners have more power over the movie revenues in India (cause of ongoing tussle between multiplex owners and Hindi commercial cinema industry), then consolidated telecom firms would definitely have more power over the music companies. So, the ground has shifted for the music companies.

In US, it was Apple with its iTunes. In India, it’s Telecom companies that are calling the shots. Where would the music companies go to find their profits?

Update: The folks at Medianama have done some calculations and asked some industry people to do the maths of money split-up between telecom operators, platform owners and content owners/aggregators. In case you’re interested, do read the links.

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Crossposted on HalfRebel.

 

Understanding India’s telecom growth story: Huge margins at lowest prices

If you’re a new blogger, there’s a temptation to go out and pour your heart into the blog. Fortunately, I believe that stuff is better left for girlfriends to suffer, and would stick to Media only here.

So, here’s a blog that I usually follow for updates on telecom industry. One question which has forever eluded me is how do telecom companies in India make so much money (40% margins after EBIDTA). Mohit Agarwal, a senior consultant working in Nokia, tries to demystify things on his blog here:

Here’s one of the many reasons mentioned by him:

Paradigm shift from ARPU to revenue per min – Indian carriers stopped looking at the ARPU as one of the performance measures. They started considering themselves as the producers and sellers of minutes. Hence the new metrics emerged like the revenue per min and the cost per min. This meant that they needed 40% margin on every minute they sold to achieve the objective of 40% EBIDTA margin. Once they defined the tariff per minute that they could realize from subscribers, they got the target for cost per minute. I would rate this single change in the mindset as the biggest game changer.

Here’s the link to his post.