Here's How Big Banner Films Releasing on OTT Platforms Make Money

Can online streaming platforms sustain a model where they pay in crores for big star releases on their platform?

6 min read
Here's How Big Banner Films Releasing on OTT Platforms Make Money

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When the country went into a lockdown imposed by the coronavirus outbreak, all major industries faced a huge roadblock. But as the unlock process started, we saw business operations resume and work slowly coming back on track with a whole lot of new protocols in place. When it comes to film and TV industries, the Maharastra Government and bodies like Indian Motion Pictures Producers' Association (IMPPA) are negotiating terms to start shooting.

Very recently, the IMPPA approached the Bombay High Court against the state government guidelines prohibiting actors, technicians and other individuals in the age bracket of 65 or above from participating in work on the sets.

Apart from shooting in a post-COVID world, we are seeing new movies release online every other week. Big budget ones, such as the Amitabh Bachchan and Ayushmann Khurrana-starrer Gulabo Sitabo and Vidya Balan's Shakuntala Devi, have also seen OTT releases.

With no guidelines in place for theatres to re-open and the uncertainty lingering about whether people will throng cinema halls, superstars are forced to showcase/premier films directly on streaming platforms.

The Quint spoke to a trusted source in the film business who helped us explain how online streaming platforms are buying rights for films.

What Are the Major Costs Involved in Filmmaking and Film Marketing?

There are two aspects to any film that gets released. The first major cost incurred is the cost of production. Cost of production for any film includes shooting, dubbing, styling, makeup and the fees of cast and the crew. The second stage is print and advertising, which is the cost of marketing a film. In most cases, the bigger the production the more money goes in marketing a film.

In a pre-COVID world, producers invested a lot of money in creating buzz around the film. All promotions, city tours, music concerts are part of the advertising aspect of films.

During the COVID situation, the print and advertising aspect is reduced to nil. A simple example would be that the massive billboards we have always seen in malls and shopping areas that are put up to grab eyeballs have diminished owing to lesser people stepping out.


How Do Producers Make Money by Distributing a Film in a Normal Situation?

Producers get 50 per cent of the theatrical collection of any film. Major costs are recovered through the satellite and digital rights being sold to a network. The cost of these rights is determined by the star cast and scale of the film and is decided prior to the release of a movie.

The Quint's source says that back in the days satellite rights would be a very strong medium to premiere a film post-release. In 2012, when Agneepath released, the movie's satellite rights were sold for Rs 65 crore.

Today with online platforms gaining popularity, the cost of rights for the satellite has reduced. Producers prefer movies to go on digital platforms first and then finally prefer satellite premiers.

Varun Dhawan and Shraddha Kapoor's Street Dancer first came on Prime Video and later on Set Max.


How Were Films Like 'Laxmmi Bomb', 'Bhuj' Negotiated? 

According to The Quint's source, Laxmmi Bomb's price for releasing on the digital streaming platform has approximately been Rs 140 to 150 crores. When a cost for a film like this is negotiated, the producers and the studio marketing the film decide on the basis of the actor's track record. Akshay Kumar's previous releases have done good business at the box office. Talking about the two recent releases, Good Newwz did a business of over Rs 300 crores and Housefull 4 made about Rs 280 crores.

Had a film like Laxmmi Bomb released in theatres, the business would depend on the content but experts believe that Akshay Kumar's fan following could have pulled in a crowd to collect close to Rs 200 crores at the box office.

But for a platform like Disney+ Hotstar, when they acquire rights for digital and satellite.

Movies like Gulabo Sitabo, Shakuntala Devi fall in the bracket of Rs 50 crores. Gulabo Sitabo's value was ascertained on the basis of the business of October, Shoojit Sircar's last release.

Did the producers sell the movie for a loss?

No. Laxmmi Bomb is a Fox Studio film which is a sister company of the platform streaming it, Disney+ Hotstar. In fact, not just Laxmmi Bomb, films like Sadak 2 ,Lootcase are also Fox Films.


What about a film like Bhuj, which is not a Fox Studio film?

Ajay Devgn's last release Tanhaji: The Unsung Warrior was made at a budget of Rs 150 crores and it roughly collected Rs 360 crores at the box office. Whereas when the actor has attempted a movie like Baadshaho (made at a budget of Rs 90 crores), it managed to collect a mere Rs 120 crores. Taking the estimates, the online streaming platform settled for a cost of approximately Rs 130 to 140 crores.

The Quint reached out to Disney+Hotstar for a remark on the figures quoted and is awaiting a response.


Why Did It Make Sense for Some Producers to Resort to Online Releases?

Remember how films used to clash on big festive days? We have heard of star animosities, or pushed film releases owing to the clash of two big budget films. If the producers of Laxmmi Bomb decided to hold off the release, there were high chances of it releasing on the same date as a Salman Khan-starrer Radhe, both of which were eyeing for Eid this year. When two big releases collide, there's always a risk of one doing better than the other.

Added to that, you need the cash to flow in order to roll out future announcements and projects.


Why Hold Off Releases of Films Like 'Sooryavanshi' and '83'?

Sooryavanshi and '83 are two films that have been completed, waiting to be released. Sooryavanshi is a formula Rohit Shetty film that stars Akshay Kumar, Katrina Kaif, Ranveer Singh and Ajay Devgn. 83 is a Kabir Khan film that stars Ranveer Singh and Deepika Padukone backed by Reliance Entertainment.

With such a strong line-up and the humongous budget of these films, it made sense to go in for theatrical releases, because when these films finally release the marketing team will not have to spread a word about their releases.

Experts say that part of the reason why promotions became important in the past few years was because of the number of films being made in Bollywood. Today, with no films releasing in theatres, it will be easier for these two to have the word spread.

Sooryavanshi’s promotion cost would have easily been Rs 15-20 crores but post COVID-19 even Rs 10 crores is more than enough because people will throng theatres for the cast.


Will This 'Online Release' System Work?

People from the business say that while online release is the way ahead, it isn't a sustainable model to go by. This is "demotivating" for any filmmaker. The Quint's source says with OTT releases this there is no way of knowing whether the audience liked your film or not. Online streaming platforms refrain from sharing the number of people who watched a film or a show and that leaves very little room for filmmakers to ascertain popularity of a genre or film.

The Quint's source explains that most online streaming platforms start with initial funding that can be used to expand businesses. At this point, with theatres out of business, acquiring rights for big banner films like Laxmmi Bomb and Bhuj makes sense. Any digital platform will not be able to pay the cost of Rs 140 crores or so going forward. However, this makes one-time sense or what the experts call the 'honeymoon period' because it is a golden opportunity to have stars like Akshay Kumar and Ajay Devgn release their films for the first time on a streaming platform. This will help the platform increase their subscriber base and penetrate tier 2 and 3 cities.


Some actors have been rejoicing the online releases of films. Vijay Varma, in an interview with The Quint, had said, "I am happy that the online streaming platforms don't reveal numbers for how much they get films on for." Kunal Khemu too in an interview said that movies releasing online is a blessing in disguise for actors like him.

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Topics:  Bollywood   Netflix   Live Streaming 

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