Direct Release Economics Unfavourable For Indian Market

Karan Taurani, VP- Research Analyst (Media & Consumer Discretionary) Elara Securities shares his views on Amazon and MGM's merger agreement

We believe the acquisition of MG Studios by Amazon is more for increasing content depth of a platform (acquiring digital rights of new films and push new content for subscribers and maintain stickiness) ,than to impact cinema business. Netflix did witness the negative impact when Disney pulled out its content and started Disney +; making own web series/franchise content and films has become more important as owner of the IP and content is King.

We expect more such consolidation to play out in the global markets where content and library is becoming more important as consumers move rapidly from traditional media (cinema and tv) towards digital. However, we don’t see much of an impact of the above on content flow for india as Indian cinema has the scale to generate healthy collections at Box Office - we saw this with the likes of Warner Bros, which released its films on hybrid mode or OTT globally, but released the films (Wonderwoman, Godzilla, Tenet) only in cinemas.

The above is primarily due to the scale of opportunity Indian cinema has for these films due to ; 1) dubbing of content into multiple languages (Hindi and regional languages) 2) new marketing initiatives (having voice overs of leading Indian actors ) 3) new form of scripting for regional and hindi languages so that audiences can relate to the subject; no production house would want to lose on the above opportunity.  

There may be some selective English films content which may come direct on OTT too if a platform aims to temporarily invest in subs addition, however the economics won’t be supportive as it won’t be possible to replicate theatrical collections . Also, the overall impact of these select films won’t be much as English genre has only 12% contribution to India’s box office.

India continues to have an appetite for a big base of audience who like watching like scale driven films in cinemas due to limited outing options and cinema being a family outing, unlike the west wherein people go to cinema only for select films. 

We believe Amazon’s acquisition of studios will only impact window period (other release formats - OTT and satellite) which is very high in global markets (about 120 -150 days) vs India which is already low at 40-60 days. Expect more large films to hit either the simultaneous release route or lower window period globally, except India.

We believe there is a very low likelihood of simultaneous release of a Hollywood film in India through a PPV (pay per view) format as piracy is a big threat and Indian audience pay for an overall experience of watching the film in a big screen + family outing.

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