THE CHANGING SCENARIO OF SUPPLY CHAIN MANAGEMENT IN BOLLYWOOD: DIGITAL CINEMA

INDEX

TITILE PAGE

ABSTRACT

LITERATURE REVIEW

OBJECTIVES

METHODOLOGY

INTRODUCTION

FINDINGS AND DISCUSSIONS

LESSONGS FROM BOLLYWOOD

CONCLUSION

REFERENCES

ABSTRACT

The purpose of this project is to introduce the Supply Chain andits Management for the much loved Movie Industry in India. The

scope of the project is limited to what happens after the finishedproduct (movie) has been readied i.e. once the actual production isover.

Film distribution is the process of making a movie available forviewing by an audience. This is normally the task of aprofessional film distributor, who would determine the marketingstrategy for the film, the media by which a film is to be exhibitedor made available for viewing, and who may set the releasedate and other matters. The film may be exhibited directly to thepublic either through a movie theater or television, or personalhome viewing (including DVD-Video or Blu-ray Disc, video-on-demand, download, television programs through broadcastsyndication etc.

LITERATURE REVIEW

Ever since the turn of the Nineteenth century, celluloid film hasbeen regarded as the soul of the movie industry. It has been used

as the medium for recording, storing and projecting images. Formore than 100 years this medium of entertainment has given us itscapability of producing screen images of great beauty andexpressive power. However, the supply chain management ofdistributing and exhibiting a motion picture has changed a littlesince the Lumiere brothers presented the first motion picture to anaudience in 1895. Now, a new system could displace film as themedium of choice for film studios and cinemas completely. The“new system” is the result of the trends and issues that areaffecting the movie industry globally. An example of the issues isthe considerations for new revenues for the theatres. In the US,theatres are generally open from noon onward. When open, onaverage, only 11% of the seats are filled.

India has roughly 11,000 screens out of which around 800 screensare multiplex screens. However, the revenue share is highlyskewed in favour of multiplexes which generate around 50% ofoverall theatrical revenues.:

Of the 11,394 screens in the country, 800-odd are part of multiplexchains. They sell tickets at anywhere between Rs 120-150 againstthe all-India average of Rs 30-50. Overall, theatre revenuesaccounted for 76 per cent (or Rs 9,700 crore) of the Rs 12,600crore that Indian films made in 2008. Multiplexes bring in 55-60per cent of a film’s theatre revenues, while the remainder comesfrom the 10,500-odd single screens.

Hence, the producers-distributors want a bigger share of revenue-share pie from the multiplexes now. Now, it’s a known fact theMumbai territory brings in the highest amount of revenues forindustry. But in Maharasthra, due to Government waiver,multiplex chains save all of the 45% entertainment tax — whichgoes into their pockets only. From the rest of 55% money, therevenues used to be split in the ratio of 48% for first week, 40%for second week and less than 35% for third week.[These ratiosare valid all across India, not just for Maharashtra]. The reason for

the standoff was that producers-distributors now wanted 50-50revenue share for all the weeks.

In an analysis done on 18th April 2009, IndianTelevision tried togauge the financial impact of a long running standoff on both theparties. It estimated a loss of Rs. 850-900 million for the industryin case the strike lasted for over a month. Well.. the losses shouldturn out to be biggger now.

In a further analysis on 30th May 2009, they tried to analyse bothparties’ stands, jotting down pros and cons of their currents standsand ramifications of any potential reconciliation efforts. From themovie industry front, folks were more or less united with Aamir Khan even going upto the extent of asking his fans to avoid hisown movie “Raakh”, which was being released in single screentheatres.

But now, finally, the issue has been settled. “The final agreementwith multiplex owners will give producers a 50% share of boxoffice takings in the first week, 42.5% in the second and 37.5% inthe third, with the final week yielding 30%. The settlement alsoallows for a 2.5% swing either way in the event the films makeabove Rs17.5 crore or less than Rs10 crore. In case of the latter,the films are released with at least 500 prints. “(source: Mint)

Some people have been left over voicing over three other equallyimportant concerns of the industry. First of these issues isAccounts settlement. Ideally, the producer should get his share ofmoney within a week or two of the ticket sales, but multiplexchains usually take 2-3 months sometimes taking upto 7-8 monthsfor settlements. So, even though as the Indian Media andEntertainment industry tries to scale up to global standards, thebusiness practices still confirm to Unorganized sector behaviour.

The other issue is control over release strategy of movies. Sinceeach print usually costs Rs. 60,000 to the distributor, Distributors

usually want to release movies only in select locations so as tomaximize their revenues.

Another issue that has been affecting the industry for years is thepiracy. Some of this piracy involves high-quality bootleg copies ofmajor films, but the majority of the theft of is made by very low-tech means. Better anti-piracy technology as well as earlierworldwide theatrical releases would greatly reduce this loss,estimated to exceed two billion American dollars per year. Amongother current and future trends predicted for the motion pictureindustry competition from Netflix, HDTV, pay per view (PPV),DVD, Video Stores More screens, fewer numbers of seats perscreen More prints per film More expensive motion picturesDigital postproduction 3D-Stereoscopic Images IndustryAwareness of need for better quality control

All of these have been the contributing factors to develop a newsystem for the industry. The “new system” is known variously asDigital Cinema (D-Cinema). This system is slowly replacing theconventional 35mm film and projectors with computersworkstations and high-resolution electronic video projectors. TheD-Cinema system will ultimately influence and changed themanagement of the supply chain within the movie industry. Onecould agree that, by distributing digital files it would theoreticallyyield great benefits in terms of image clarity and quality, lowercost, greater security, and more flexibility in the cinema. Changingthe Supply Chain Management of the Movie Industry. DigitalCinema in its purest form is the process of mastering a motionpicture in digital form, distributing the digital files to theatres bythe means of digital fixed media (DVD), satellite, or overbroadband connections, and displaying the motion picture using adigital projector. The Digital Cinema system appears to offer themovie industry it’s significant benefits on reduction fordistribution cost Increase revenues for exhibitors Improveaudience satisfaction.

OBJECTIVE

Project involves analyzing:

The role of various stakeholders in Movies Supply chain. How movies get distributed to different cinema halls. How new technologies and innovative methods are helping

Distributors in supply chain management. Channel Conflicts present in Bollywood supply chain

management Piracy as the biggest hurdle to the film industry

METHODOLOGY

Secondary Research:Data was collected through research papers, case studies onBollywood movies like Bahubaali and articles on supply chain infilm industry. Industry analysis was carried out to understand themarket as whole before deciding the scope of research.We addressed questions regarding who buys and distributes therights of a film and how are they bought.

Under industry analysis, various topics were explored, such as: Emerging technologies Channel conflict in film industry, Cycle of movie distribution Uncertainty and contractual hazard in film industry

Piracy in film industry

INTRODUCTION

Before indulging into the discussion of supply chain managementin film industry, here are some facts and figures about its currentstate:

• $138 billion Estimated size of Indian Bollywood Industry• World 1st Number of films produced in a year. • 2.6 Billion number of tickets sold in a year.• 1200 Single Screen.• 11000 Multiplex Screen

Cinema Hall Distribution In India

Supply Chain Management for movies

Entities responsible for the management of movie’s release are:

• Producer: Who invest money in Film?• Distributor: Who buy rights from producer to distribute prints

to the exhibitors? Can buy rights for:

Few territories All territories

• Exhibitors: Who show movies to customer i.e. Cinema Halls• Customers: People like us who watch movies

Flow Chart

FINDINGS AND DISCUSSION

1.Change in Technology

Traditionally, the movie industry relied upon physical film printson celluloid film that were copied and distributed to theaters.These prints can cost anywhere from a few thousand US dollarsand up for each print, not to mention the cost of distribution,collection, and storage.

Celluloid Film

Digital Hard Drives

More recently, the industry migrated to digital distribution ofmovies on computer hard drives. A typical movie can consumefrom 80 to 300 or more gigabytes depending upon if the content isa 3D movie, 4K to 16K (Ultra High Definition) or an IMAX film.While distribution of hard drives makes for a more compactdelivery method, essentially the same issues exist as with thedistribution of cellulose film.

Physical distribution of any media format requires, quiteobviously, time for shipping—the implication is that either moviesmust be distributed early enough to allow arrival at distantlocations or that the movie can’t open on the same day at alllocations. Secondly, since the physical media can only be

produced in finite numbers, the audience excitement surroundingopening day will have died down by the time copies of a filmarrive in second tier theaters or theaters in outlying areas. This hasa direct impact on the gross monetary intake the film canpotentially generate.

2.Piracy in Film Industry

One major problem in Indian film industry is of piracy. It'sprevalent all over the world, but in India, a film-crazy nation, ittakes on a whole new persona of its own.

In India, the Hindi and the Tamil movie industry have hegemonyover the rest when it comes to numbers. The fact that theseindustries also churn out a massive number of movies every year,most of which are targeted to lower middle class income groups,or as the producers like to call it, the masses, make the piracyscene even more intriguing.

India does not make too many films that are visual extravaganzasas people would prefer to check them out later as soon as a camprint is released. This way, they save a whole lot of money.

But with the rise of the multiplex culture in the country and agrowing young earning class, most of the urban youth now hasaccess to most films. About 4-5 years ago, the scene was different.Only the metros would get access to the blockbusters while tier-IIand tier-III towns would usually have to wait three or six monthsbefore they could get any chances to screen the films. And thisresulted in a higher demand for pirated copies. The main reasonwas that back then they used physical prints while today thetheaters mainly use digital prints which cost about 1/5th of theirreel counterparts. So, yes, it is true that the frequency ofcamcorder piracy in India has gone down. There has been a 16%

drop in the entire Asia Pacific region from last year. In India, asopposed to 44 cases of camcorder piracy, there were 40 this year.One of the major breakthroughs this year was the arrest andsubsequent shutdown of piracy teams like Yamraaj andNickkkDoN, both from Indore. Earlier they were mostly piratingIndian films, but now, with the arrival of multiplexes, they arepirating Hollywood films too.

Who is camcorder piracy movement hurting the most?

It's mainly the two extreme ends of the movie budget spectrumthat are hurting the most.

Small-time Bollywood filmmakers Some known names in the regional cinema business

They are struggling against it because unlike studios behindmainstream Bollywood titles, they are not exactly in a position todictate terms with the distributors. On the other end, Hollywoodfilms, for which India is one of the biggest international markets,also lose big money due to camcorder piracy. But they lose moremoney when they actually release blu-ray prints, because that'swhen the torrent sites come into play, almost annihilating thehome-video business for these films. But that's a whole otherstory.For now, the biggest winner in India (if the fight againstcamcorder piracy is won) will be regional cinema studios andsmall time indie filmmakers—because unlike mainstreamBollywood or international studios, they have much to lose frompirates

SOLUTION: In Order to sole the dual problem of Shipping andPiracy, a new technology has come called Satellite ContentDelivery.

Satellite Content Delivery

Satellite distribution has an inherent benefit over other electronicdelivery methods of being a “send once, receive by many” system,called multi-casting. Satellite also provides ubiquitous coverage—as long as line of sight to the geostationary satellites above theearth’s equator is visible, coverage is available. Just like direct tohome (DTH) satellite television, the content is uplinked to thesatellite and multicast to the intended receivers. This eliminatesthe variances in quality and availability of terrestrial bandwidthsuch as DSL, cable or fiber for theaters in different areas, ensuringa single, uniform system for reliable and timely delivery of thecontent. When combined as part of a comprehensive solution,such as the Enterprise Package Delivery (EPD) system, satellitedistribution is ideal for the delivery of multi-gigabyte moviecontent.

EPD (Enterprise Package Delivery)

A content distribution service, which provides a reliable, means oftransferring digital packages as files from a sender to a virtuallylimitless number of receivers simultaneously. The EPD senderaccepts content from a provider, manages the multicast groups,

initiates the file transfer, and controls the transfer operation. EachEPD receiver joins the multicast group, receives the file sent bythe sender, notifies the local receiver application of arrivingcontent, and typically provides reception status to the sender. TheEPD sender can be programmed to deliver content at scheduledtimes, scheduled data rates, and to selected groups, individualreceivers, or all receivers.

The EPD system ensures that each receiver, in this case thetheaters, receives all of the movie content and is able to store thecontent in a secure server. In order to ensure delivery, the EPDsystem for theaters relies on acknowledgments which are sentback via the satellite return channel. Content is stored securely inencrypted files on a local server until it is ready for viewing, plusmovies can be automatically purged after a predefined period oftime—thereby eliminating the possibility of piracy. Variousmethods to protect the content are available including keydistribution via the satellite link to unlock the content for single ormultiple screenings.

On occasion last minute changes dictate the editing of a film, forexample, due to a ratings body a film may be rejected for certainaudiences. Satellite with EPD can drastically reduce the costsassociated with these last minute changes and can even preempttransmissions already in progress.

Although the size of any given movie content file is enormous, themulticast capability of the satellite makes it very economical todeliver. Coupled with the ability to distribute this content on off-peak hours (e.g. at night) when utilization of the satellitebandwidth may be lower and thus less expensive, satellitebecomes an unbeatable value proposition for distribution.

Innovative Solution Of movie Distribution

VOD

VOD is the prime thorn in the side of movie theaters, which

view on-demand as a means for distributors to bypass bigscreens altogether. While this has yet to involve any giantreleases, small and mid-range films have increasingly proventhat debuting on VOD shortly ahead of a theatrical release, orday-and-date on VOD and in theaters simultaneously, is aprofitable strategy.

Bit Torrent

Bit Torrent has long been the bane of the movie industry, asthe peer-to-peer file-sharing platform has been ground zerofor online piracy. However, Bit Torrent is now also makinginroads into legitimate distribution via Bit Torrent Bundles, aservice that allows artists and companies to create DIYonline-distribution campaigns that reach a global audience.

3. Channel Conflict

Lack of clarity over when the movie will be released on the non-theatrical media may lead to conflicts and tensions between

distributors / exhibitors and the producers.

Cycle of Movie Distribution

Now the trend has changed and most of movies got released onnon theatrical media( TV , Online ) within 2 to 3 months .

Eg. Bajrangi bhaijaan and Bahubali

Real situation examples of Channel Conflicts:

Conflict over Baahubali stalled release of Prithviraj,

Dileep movies:September 2015 was supposed to be a big month forMalayalam cinema with Prithviraj’s ‘Ennu Ninde Moideen’,Jeethu Joseph’s Dileep starrer ‘Life of Josutty’ and AsifAli’s ‘Kohinoor’ slated for release. But none of the movies were released in theatres across thestate following a conflict between the Kerala Distributor’sAssociation and Film Exhibitor’s Association. The frictionbetween the associations became a full-blown battle in Julywhen the Film Exhibitor’s Federation headed by LibertyBasheer decided to not allow the release of Telugumovie Baahubali till the case on piracy of 'Premam' moviewas solved. This resulted in Baahubali getting released onlyin 100 odd theatres, though distributors had planned torelease the movie in around 200 theatres. Terming the FilmExhibitor’s Federation’s move to stall the movie’s widerelease Baahubali’s distributors in Kerala protested againstthis. Liberty Basheer meanwhile had been demanding thatsome movies should first be exclusively screened in theatresowned by members of the Federation. The war of wordsresulted in the Film Exhibitor’s Federation imposing a ban onCentury Films. As a mark of protest against the ban,Distributor’s Association decided to boycott members of theFilm Exhibitor’s Federation, and stall release of new moviesin their theatres.

A dispute in Bollywood over revenue: movie producers and

distributors have been refusing to release movies to bigtheater chains until they get a guarantee of 50 percent of the

revenue from ticket sales on all movies for the first fourweeks of their run

Multiplex vs Distributors: In early 2009, a dispute arose

between multiple Bollywood film producers/distributors andmultiplex owners, with the former stopping the release ofseveral of their films till their demands were met. The disputehinged on the producers’ demands for a greater share in therevenue collections made by the multiplexes. The multiplexowners on the other hand claimed that the producers’ andtheir lobbyists were ganging up against them unfairly, stirringapparent antitrust issues.

LESSONS FROM BOLLYWOOD

Suddenly, Bollywood is not just all about entertainment. More andmore business schools are incorporating popular cinema in theirsyllabi. It is a more interesting way of looking at managementissues such as leadership and recruitment

The taste of students is changing and visuals have a greater impactin today’s times and Not surprisingly, the idea is being welcomedby both management experts and students. Clearly, what’striggered the B-Schools’ interest in cinema is the wide spectrum of

subjects that Bollywood today deals with. Directors stress thattheir subjects are well researched and often reflect real-lifesituations.

'Lagaan' is a case study in reputed management institutions acrossthe world. When Bhuvan, played by Aamir Khan, in Lagaan spotsa spinning talent in the handicapped and so-called untouchableKachra and recruits him in the playing eleven, it may have beenjust another dramatic scene for an average cine-goer but it was alesson worth teaching at a management school. The way Bhuvangoes about recruiting his team members is a perfect corporatelesson. He identifies hidden talents when others see none, andthat’s precisely what companies expect from their recruitmentmanagers. The message, however, is not the only reason a film is studied.Krrish is the subject of a case study at IIM, Indore, because of theway the film was packaged and marketed. In fact, Krrish becamethe first movie to be studied internationally, with the HarvardBusiness School and the University of Hong Kong collaboratingwith IIM, Indore, on a case study. IIM, Indore, has alreadyincorporated the film in its curriculum.

The use of Bollywood films as case studies may be new in Indiabut in the US, films such as The Lion King and Jurassic Park havefor long been a part of management studies

CONCLUSION

Satellite distribution, coupled with EPD systems, provides theideal solution for studios and theaters to cut costs, reduce piracy,and generate addition revenues.

Industry wide Agreement on Timelines for Monetization fromNew Media : Industry as a whole will benefit by agreeing on aminimum amount of time before which producers will not start

monetization return on movies through online , TV and satelliteand home video sources .

REFERENCES

White Paper , Hughes Digital Cinema and Content Delivery

Analyzing the Effect of Digital Technology on Channel Strategy, Department of Marketing, GriffithUniversity

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