The industry trends change every few years. But post-pandemic, the changes have been sudden and also unexpected. Girish Johar, producer and eminent film business analyst, in an exclusive interview with Bollywood Hungama, opened up on aspects like the evolving OTT and satellite landscape, the rise of music streaming platforms etc, in simple layman terms.
EXCLUSIVE: “Rs. 100 cr satellite deals are HISTORY; OTT now pays based on box office; no hits, no high price!” – Girish Johar
How has the satellite rights market evolved in the current landscape? With OTT platforms becoming primary players, has their rise eroded the value or demand for satellite deals?
Satellite was the second platform for a producer in terms of premiering content, the first being theatrical. Now, it has come down to the third position. Value-wise as well, it has decreased. Earlier, we were seeing satellite right deals going to triple digits for the biggest of films. That has drastically fallen by more than 50%. It is clear that satellite rights exploitation has shrunk.
Do you mean to say that films were offered more than Rs. 100 crores for their satellite rights?
Yes, it has happened pre-pandemic. That was the time when films were doing quite well theatrically. The satellite market was booming. Also, the performance of the satellite market is related to how the economy is performing. Before the pandemic, things were better; the satellite also had a lot of retention of the audience.
During the pandemic, OTT platforms were dishing out staggering sums for direct-to-digital premieres or movie acquisitions. Has that trend stabilized or reversed now? What are the commercial realities driving this shift?
I am of the firm belief that what OTT was supposed to grow in 5-6 years, it grew in just 2 years, thanks to the lockdown. Now, it is seeing a de-escalation in growth. Hence, the market of OTT is now not growing as expected. To explain in simpler terms, they were supposed to move at a speed of 10 km/hr and then have an average growth of 15-20%. But they ended up pacing at 100 km/hr in the pandemic. And now their growth has been reduced to 15-20%. This has happened as things are normal and people are venturing out more. However, one of the significant reasons for this is the limited internet penetration, which is currently only available in the top 10-20 cities. And the internet is the basic requirement to consume content on OTT. Many in tier-2 and tier-3 cities continue to rely on mobile data. They still face the issue where they are downloading some content and it takes a while to do so or the video keeps buffering, leading to irritation. Hopefully, satellite internet will help provide faster internet across the length and breadth of the country.
Is there a performance-linked pricing model now with OTT players, where payouts are based on box office rather than flat fees?
OTT has gotten smarter with the times. Earlier, they used to pay whatever the producers demanded – 2x or 3x the cost of the film. They soon realized that merely acquiring film would not guarantee newer subscribers of existing subscribers. Acquisitions do help but only up to a particular level. Hence, they have linked the digital rights price to that of the box office performance of the film. The box office is a true test of the content. Thanks to this, they feel that the producer will be more realistic about the price he asks for the OTT rights. Also, if the film fares well at the box office, there’s no harm in paying a higher price. So, this practice is like a safety net for the OTT.
This strategy was implemented because films that did well in cinemas also performed well on OTT. Hence, this is a safer business model for them.
There exists a base price and slab pricing mechanism when it comes to fees paid by OTT platforms. Can you explain this model?
A producer vis-à-vis his cast, concept, budget etc, will ask for a percentage ratio of the film. The OTT will say ‘We can give you 30-40% of the budget’. The amount varies from producer to producer, film to film and brand to brand. However, if the film over-performs, the maker can be paid more. For example, if the film collects Rs. 5 crores more than expected, the producer will be paid Rs. 1 crore more than the base price. Instead of Rs. 5 crores, if it collects Rs. 10 crores more than the expectations, then the producer will be paid an additional Rs. 2 crores. This way, the producer is assured that he will be paid a base price and he’ll also have a chance to earn extra on the basis of the film’s success.
With the streaming boom via platforms like Spotify, Apple Music, and YouTube Music, how has the valuation of film music rights changed? Are producers seeing stronger monetization today or is the valuation coming down?
For big content, it has helped. Your distribution cost is lowered as you no longer need to distribute physical copies, that is, audio CDs and cassettes. At the same time, that price is now invested to promote the album on digital. You need to inform the listeners that the songs of your album are available on streaming music platforms like Spotify. Nevertheless, the digitization in the music industry has definitely helped. In the long run, if you have your own channel and brand, you get to earn significantly. It has given the makers a long tail rather than being paid one time around the time for release.
Do you mean that even after 10-15 years, one can earn from the music of their film?
Yes. For instance, Metro…In Dino is releasing right now but the makers of Life In A Metro might continue to earn from its soundtrack though it dropped some 18 years ago.
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