Now, digital rights a Bollywood hedge

Top 10 movies in first half of 2017 made Rs 307 cr by selling digital, satellite rights

Bollywood films are increasingly becoming more dependent on the money they make by selling the satellite and digital rights to pull their business through.

The top 10 Hindi movies, in terms of net box office collections in the domestic market, made Rs 307 crore by selling these rights between January and July this year. The amount is nearly 37 per cent of what they were able to generate through domestic net box office collections (Rs 823 crore). 

Looking at it from another angle, nearly 42 per cent of the money invested in these movies (Rs 714 crore) by producers was recovered through this channel, providing them a substantial hedge against movies flopping at the box office.

The fortunes of many top Bollywood actors, including Salman Khan and Shah Rukh Khan, would have been worse off if they had not sold the digital and satellite rights of their films at a hefty premium. 

For instance, Salman sold the satellite rights of his last movie, Tubelight, for Rs 55 crore, which helped him pare his losses. He was able to recover over 40 per cent of the cost of making the movie (Rs 130 crore) just by selling these rights. The movie could make just Rs 114 crore at the domestic box office. 

Similarly, Shah Rukh’s Raees was able to recover half the cost of making and marketing the movie through the sale of these rights at an estimated Rs 54 crore. His movie made money because of his popularity overseas (where the movie did well) and the hefty price he received for the rights sale.  

The euphoria to grab the satellite and increasingly valuable digital rights has emanated because of a dramatic change in the media landscape — the battle for content in the over-the-top (OTT ) space between broadcasters like Star, Sony and Viacom, the entry of big global boys Netflix and Amazon Prime, and the increasing realisation of telecom operators that they would need good content to increase data usage and ensure stickiness of their consumers. 

This is clearly reflected in the fact that two telcos — Airtel and Reliance Jio — bid a staggering Rs 3,280 crore and Rs 3,075 crore, respectively, for the digital rights of the Indian Premier League (IPL) for five years this week. This also indicates a change in the strategy of Airtel, which had preferred to stay away from buying content saying it was not their area of expertise.  

Amazon Prime Video and Netflix are engaged in a slugfest to buy content, especially movies which attract the most eyeballs after cricket. Netflix has already entered a long-term agreement with Shah Rukh’s Red Chillies for streaming his forthcoming movies as well as those from his library. Not to be outdone, Amazon Prime has tied up with Salman in a five-year agreement, which will entail the streaming rights of his forthcoming as well as older movies. In both the cases, according to industry sources, the movies will be streamed before they are shown on TV. 

According to film trade analysts, Netflix bought the digital rights of Bahubali 2 for Rs 20-25 crore, while Amazon Prime has sealed the streaming rights of the much-awaited Padmavati for a similar amount. The two companies, however, have not commented on the deal. 

Television broadcasters are not leaving the race, as all of them now have OTT platforms, which they have to feed with at least some exclusive content to have an edge. Zee Network recently grabbed the broadcasting rights of Rajnikant’s science fiction 2.0 at a staggering Rs 110 crore, setting a new record.

Industry estimates that OTT players will spend at least Rs 6,000 crore in buying content in the next one year.