Whalesbook
The Shift in Streaming Deals
Streaming platforms are enacting a significant change in how they acquire films, moving towards a model that more directly links payments to a movie's performance in theatres. This new approach involves reducing or eliminating the fixed base price, which was a minimum guaranteed payment offered to producers. The goal is to create a more transparent system and to share the financial risks associated with theatrical box office outcomes more equitably.
This strategy shift is particularly notable as platforms aim for greater profitability. They previously paid inflated prices for content to expand their libraries rapidly, which, in many cases, did not translate into proportional gains in subscribers or revenue. The current adjustments reflect a more discerning and financially cautious approach to content acquisition.
Financial Implications
Digital rights are a crucial revenue stream for film producers, often contributing between 40% and 80% of a film's total income. Historically, streaming platforms offered slab-wise revenue payments. This meant a producer received a fixed base price, plus an additional bonus if the film crossed certain box office collection milestones set by the platform and producer. However, with the new policies, the base price itself is subject to downward revision if a film falters in theatres.
Distributors and trade analysts indicate that this move has been triggered by the poor reception of several underperforming films on these streaming services. By adjusting base prices, streamers aim to mitigate losses incurred from films that fail to attract audiences both in cinemas and on digital platforms, thereby not significantly boosting subscriber numbers.
Market Reaction and Industry Impact
The decision by major streamers to revise film acquisition terms has sent ripples through the film industry. Films like 'Sikander' (Hindi) and 'Thug Life' (Tamil) have reportedly seen changes, with 'Akhanda 2: Thaandavam' (Telugu) being a recent example. Netflix revised its base price for this film by 25%, reducing it from ₹90 crore to ₹67.5 crore, directly following its underperformance in theatres.
This change is seen by some as a necessary correction to prevent market distortions. Practices such as bulk booking tickets or releasing films on streaming platforms before the traditional eight-week theatrical window, intended to quickly recover cash, may be curtailed. Veteran filmmaker Vipul Amritlal Shah commented that if makers receive an upside bonus, they must also be prepared for downward revisions if a film flops.
Future Outlook
Following industry consolidation, streaming platforms are exercising more realistic criteria for buying films. Independent consultants suggest that the appetite for content is not as voracious as it was three years ago. Producer Rajesh R Nair advocates that if a streamer reduces a film's base price, they should not insist on releasing it before the eight-week window, allowing films more time in theatres to potentially contain losses. The overarching sentiment is a move towards buying the right film at the right price, emphasizing commercial viability over sheer volume.
Impact
This trend could lead to a more disciplined approach in film financing and production, encouraging producers to focus on content with stronger audience appeal and theatrical viability. It may also result in more negotiation and potentially lower upfront payments for films with uncertain box office potential, impacting the overall financial ecosystem of the Indian film industry. The reduced risk for streamers could eventually lead to more sustainable business models. 7/10
Difficult Terms Explained
Base price: The minimum guaranteed amount a streaming platform pays for a film's digital rights.
Slab-wise revenue payments: A system where payments are made in stages, with bonus amounts for achieving certain box office collection milestones.
Incremental subscribers: New paying customers gained by a streaming service.
Consolidation: When companies in an industry merge or acquire each other, leading to fewer, larger players.
Eight-week window: The period after a film's theatrical release during which it typically cannot be shown on other platforms.