Unscrambling digital cinema

Scrabble's unique business model gives a new direction to India’s digital cinema market.

It has turned the whole logic of digital cinema in India upside down. Scrabble Entertainment, a start-up funded by Manmohan Shetty, is digitising theatres (largely multiplexes) across metros and big cities in India. Old and new multiplexes from PVR or Inox, among half a dozen chains, are quickly signing on.

In just over a year, Scrabble has digitised 100 screens across 23 theatres with equipment approved by the Hollywood-endorsed DCI (digital cinema initiative) standards. That means a Scrabble theatre can play any Hollywood release in digital form. By December 2009, CEO Ranjit Thakur expects to wrap up 200 screens across 50 theatres in large Indian cities.

You could argue that in a market dominated almost completely by domestic cinema, why bother with DCI standards. They are meant for markets where Hollywood is big business. That is precisely why it is surprising that Scrabble is managing to get theatres or that it expects to break even in three years.

Why digital?
The whole point about digital cinema so far, has been digitising single (usually not very profitable) screens in small-town India and bringing them back into the market. That is because digital prints usually involve a one-time conversion cost of Rs 1.75-Rs 2 lakh while each regular 35 mm print costs Rs 50,000-60,000.

A film usually releases with anywhere between 600-1,500 prints. The bigger the print runs the better the chances of making money in the first week.

However, since costs limited the number of 35 mm prints they would slowly wind their way into small-town markets, by which time piracy killed all potential.

E-cinema solved that problem by making same day release possible in large parts of India. It is now normal for large films to release with 1,600-2,000 prints, almost half of them digital.

The first rollout, almost five years earlier, happened when Shetty’s Adlabs (now part of Reliance) tied up with Mukta Arts to form Mukta–Adlabs. Though the Mukta-Adlabs roll-out fizzled out after a few years, it showed the promise of digital cinema.

Later others such as UFO Moviez or Real Images used different business models to great effect. UFO for instance charges a per play fee. Their efforts have meant 2,000 digital screens in India. In a 9,000 (active)-screen fragmented Indian market, these are helping to get in a nice slice of revenues back into the industry kitty.

However, most multiplexes and metro theatres never saw the point of digitising. One, because unlike small-town theatres they have top-of-line equipment which is better than e-cinema, so there is no significant change in picture quality. Even if they wanted to the costs were prohibitive – Rs 40 lakh for DCI approved equipment against Rs 10 lakh for e-cinema.