Eros International is arguably the most interesting studio experiment in India. The 33-year-old company wants to be to the Indian film industry what Warner Brothers or Fox are to Hollywood — large monolithic studios with global distribution and marketing muscle that is difficult, if not impossible, to replicate.
In the last three years, Eros released 290 films, an average, very close to, 100 a year. These could be produced (10 per cent), co-produced (60 per cent) or acquired (30 per cent). These are distributed across theatrical, home video, TV, overseas or any other avenues possible. Over the next 18-24 months it plans to spend Rs 900-1,000 crore on ‘content capex.’
To fund parts of it, Eros International Plc, the holding company first listed on AIM in 2006, and in October this year, Eros International raised Rs 350 crore from the Indian stock markets. “That (Rs 350 crore) will buy us just one years’ worth of content,” says Sunil Lulla, executive vice-chairman and managing director. He reels off names of several big film in Hindi, Tamil, Telugu and Marathi among other the company will be involved with in some way or the other.
While corporatisation, a process that began formally in 2000, has helped the industry clean up its act, scale has remained elusive. India is the largest film-making country, but the least profitable. For about 1,000 films a year, the industry makes just over $3 billion, compared to Hollywood’s $40 billion for 700 odd films. This is not just about GDP and economic inequality between the two countries, it is also about a massive, heterogeneous market and a fragmented industry.
There are at least half a dozen popular languages, a splintered retail system that is just getting organised, and thousands of one-man outfits that make films. There is the odd ‘production house’ that does two to three films a years. But usually reaching even 10 has proved difficult for the best.
That is till UTV came along. In the last five years Ronnie Screwvala’s company has rewritten the rules of the business, to create what is arguably one of the biggest studios in the country. It released 18 films in 2009-2010, at over half, its Rs 664-crore revenues coming from films, it was by far the biggest in this space till the Rs 655-crore Eros decided to pitch its tent in India in 2006.
“We develop, produce and co-produce our own films, we don’t look so much at acquisitions,” says Siddharth Roy Kapur, CEO, UTV Motion Pictures. So while UTV is controlling the film process from the idea to commerce, Eros is buying it. Over four years it has pumped in Rs 1,200 crore into the market, says Kamal Jain, group CFO.
| THE BIG STUDIOS EMERGING FROM INDIA | |||||||||
| 2008-09 | 2009-10 | 2010-11 | |||||||
| Releases | Revenues Rs cr | Profits Rs cr | Releases | Revenues Rs cr | Profits Rs cr | Releases | Revenues Rs cr | Profits Rs cr | |
| Eros | 94 | 628 | 110 | 115 | 655 | 121 | 39** | 316** | 81** |
| UTV | 15* | 276.2 | 53.7 | 18* | 315.4 | 95.09 | 10 | 450 | 150 |
| *includes 3 Disney films released in 2008-09 and 10 in 2009-10, **Eros figures for first half of 2010-11 only Releases refer to all films produced/acquired/co-produced and distributed by a studio Revenues refer to revenues from the film business only. Profits refer to operating margins from the film business | |||||||||
That is because acquisitions are how Eros began. Till the mid-nineties, Eros’s Kishore Lulla was every producer’s one-stop shop for selling overseas rights and ‘world rights’ as they were called. Usually these were sold for a song and never heard of afterwards. Then as the NRI market opened up, the big guys broke ranks. In the late nineties, Yash Chopra set up his own distribution office in the UK and the US. Soon UTV came along. Eros, meanwhile, burnt its hands with B4U, a television channel it launched in India. What makes it so sure about hitting the big time, this time around?
“We own multiple rights to more than 1,000 films. That is the key difference between us and other players. If I don’t produce a film, I can keep monetising the library. Eventually, 33 per cent of my revenues will come from the library (from 14 per cent currently),” argues Jain.
For example Eros recently signed a Rs 64-crore deal with Zee TV to do just that over 5-7 years. The library and pre-sales deals is what de-risks its model with 90 per cent of the revenues coming in before the film is released.
Isn’t this what happened in the nineties. What Jain or the other studios call pre-sales, was referred to as ‘table profits’ when single producers ruled. They took away a chunk of the money on a film before it was released through music rights, overseas or satellite right sales. What it did was create a terrible inequity in the revenue distribution across the value chain with theatre-owners taking the worst hit.
What is different this time? “We are content aggregators. We aggregate a film across all formats,” explains Jain.
To Lulla’s mind, the biggest strength that Eros has is the one it started with – distribution. It is, he reckons, the stuff, which makes, say a Warner Brother’s or a Fox, the global powerhouses they are. “If WB or Fox pick up a film, they know before starting what the recovery will be from a city in South Africa or Australia. Therefore, distribution is not just about the physical fact of releasing a film. In Hollywood no film is released without one of the big studios,” says he.
Eros has a base in more than 50 countries, so its ability to monetise is better, says Lulla. Currently 30 per cent of all revenues come from the overseas market. As the company and market grows, the proportion will go down simply because the domestic market is huge. In absolute terms however the overseas market will only become bigger.
Let us watch then if we do have one global goliath from the Indian market, even if its roots are foreign.
