Knocked down by a model that relied heavily on acquisitions, Network18 founder-promoter Raghav Bahl has reworked on the movie production business that he has moved to a joint venture company with Viacom as a partner.
Having snapped up The Indian Film Company that was listed on London‘s Alternative Investment Market (AIM), Bahl will now have movies rolled out from Viacom18, the company that also houses Hindi general entertainment channel Colors, MTV India, Nick and Vh1.
A cautious spender this time, Bahl has earmarked Rs 1.20 billion for a seven-movie slate that will run through early 2012. The peak funding requirement in a three-year horizon will be Rs 2.50 billion
In an interview with Indiantelevision.com‘s Sibabrata Das, Viacom18 Motion Pictures chief operating officer Vikram Malhotra talks about the mistakes learnt from Studio18, the focus on building a sustainable capability and the company‘s revival plans.
Excerpts:
The Indian Film Company churned out several hits like Ghajini, Singh is Kinng, Jab We Met, Welcome and Golmaal Returns in the initial years. Why it suddenly collapsed and couldn‘t survive the downturn?
TIFC had a great run in the first two years. Then came the downturn in the industry. The business model of acquisition was fraught with risks and it lost more value share than the others.
One year of stupidity wiped out the hard work that TIFC had initially done. What did it do fundamentally wrong for this to happen?
In 2006 and 2007 capital was easily available to the industry and the acquisition model suited the business environment at that time. But the risks are much higher than the market and the operating margins much thinner. In the changed climate, the model needed to be revisited.
Was the team not capable to change in the changing times?
Clearly, the team at that time chose to stick to the then existing model and could not read fully into where the market was heading. The motion pictures business is a dynamic and competitive one and your eye needs to be constantly on the ball. A large part of the focus at that time was on distribution and not on building capabilities to create and produce films. This industry needs a model that is fundamentally sound but agile enough to suit the operating environment.
How is the business model more protected now?
We have moved away from the old business model of trading and acquisitions. We won‘t be making first copy ready made acquisitions. We are de-risking by building IP and our own creation. Even in co-productions, we will be involved at every stage. We will be a streamlined organisation that is nimble footed and is focused on profitability, sustainability and capability. We are, in short, rebooting the business.
Why was the movie business shifted to Viacom18 before working on a revival plan?
I can‘t comment extensively on this as it happened before my time here. But for Viacom18 which is in the entertainment broadcasting space, the movie production business is only a logical extension - particularly when the business was being revisited. Movies are a fundamental part of the entertainment space in India.
Studio18 is now rebranded as Viacom18 Motion Pictures. A linked advantage to this realignment of the business is the immense synergies that we will draw from the multiple media platforms that Viacom18 has.
‘We are 20-25% de-risked before entering into a movie project because of our integrated model. We have a good non-theatrical revenue opportunity with Colors, the upcoming movie channel, MTV and Nick‘
How much of the movie business is led by the need to feed content into Hindi general entertainment channel Colors, the upcoming Hindi movie channel, MTV and Nick?
We are, in fact, 20-25 per cent de-risked before entering into a movie project because of our integrated model. We have a good non-theatrical revenue opportunity with Colors, the movie channel, MTV and Nick. Incidentally, Colors currently happens to be the leading acquirer of motion pictures content.
Sources say the revival plan includes an investment of Rs 1.20 billion for the first line up of movies and a peak funding requirement of Rs 2.50 billion over three years. Why is Viacom18 taking such a cautious approach?
I can‘t comment on the financials. But fundamentally, we are going to be prudent in capital spending. We have lined up a slate of seven movies through early 2012, with Players being the most expensive (sources say Rs 400 million upwards). We are doing four films with first time directors.
We will kick off our slate with a rom-com titled ‘Tanu Weds Manu‘ that will hit the screens on 25 February. This will be followed by two films that are co-productions with Anurag Kashyap - Michael (Working Title) & Shaitan. These films are set for release in the first quarter of the next fiscal year.
The roster also includes Gang of Waseeypur (2 Series), Buddah (starring Amitabh Bachchan) by Puri Jaganathan, and David Dhawan‘s Chashme Baddoor.
We will weigh the financial success of each movie. The first two years will be a crucial build-up. In the third year, we will review the business and change track accordingly.
Is this the best time to stage a comeback with the inflationary costs correcting to a great extent?
Irrationality has definitely been thrown out of the window. There is a need for further correction in star costs but we will spend our pennies very carefully. Besides, our marketing costs will be 10-15 per cent lower due to the wide reach of our channels like Colors, MTV, Vh1 and Nick.
How wide will the movie slate be?
We are going to have a minimum threshold of six movie releases a year. We are in no hurry to deploy capital. We are in no hurry to produce the costliest movie. We are in a hurry to get it right. We are building our business brick-by-brick.
Will you be producing smaller movies under a different brand name?
An important part of the gameplan is to produce movies in the urban-youth genre under the brand of ‘Tipping Point Films‘. This kind of targeted movies will also be content for MTV. We have projects in the urban-youth genre in co-production with Irock Media.
As for animation movies, we are evaluating them along with our partnership with Nick. But there is nothing concrete on this front.
Is regional language movies on the agenda?
We are very keenly watching the regional space, particularly Marathi and Bengali. The cultural and economic dynamics are different. We will spend the next few months understanding that market.
Viacom18 has plans to launch Marathi and Bengali language entertainment channels. Will you wait till then before you decide on movie projects in these languages?
The movie projects are not linked to the launch of the regional channels. While we will share a relationship with the channels if and when they come, we are not inter-dependent for the launch of regional language movies.
What is the distribution gameplan?
We will distribute our own movies. We have our outfits in Mumbai, Delhi and UP territories. The distribution network is being expanded to the South markets, Rajasthan and the North. We will also handle overseas distribution. We will continue to build on our backbone and take up other movies for distribution if the costs are rational.
Will you get into the home video segment as well?
We are not entering this segment. The way consumption is happening is changing very fast - you have satellite release windows shortening, new media is growing and 3G is coming. Besides, one has to tackle piracy.
How do you plan to scale up?
The scale-up plan will involve creating franchise properties that will have a sliding cost model while upping box office revenues. Players is positioned as a franchise property. We plan to have 2-3 properties by 2012. We aim to be among the top three studios in the country within three years - at least in terms of profitability.
