Gulabo Sitabo’s planned Amazon Prime release highlights multiplexes’ woes

This spells bad news for multiplexes which are bleeding money on fixed costs, without a single rupee of revenue coming in. If more movie production houses take the digital route for releases, that could have far-reaching implications for the very business model of multiplexes.

It is hard to blame movie production houses for ignoring the multiplexes plea, given that big budget movies are financed by debt, and those need to be repaid. Longer the delay in releasing the movie, more the interest costs to be shelled out by the producers.

And even if the production houses were to wait, there is no guarantee that people will come rushing to movie halls once the lockdown is lifted. To make matters worse for multiplexes, new social distancing norms could reduce the seating capacity of the auditoriums.

According to media reports, the cost of production of Gulabo Sitabo is around Rs 30-35 crore, excluding promotional expenses.

Karan Taurani of Elara Capital says that OTT platforms are unlikely to pay more than 20-30 percent over the cost of production as they too will have budget constraints. By going for a digital release, movie producers will have to settle for much less than what they could hope to make if the movie releases in theatres and gets a good audience response.

Taurani expects Gulabo Sitabo to make money from satellite rights as well, but which could be 50 percent lower than the money for the digital rights.

Overall, the movie could still make a return on investment of 40-50 percent in these uncertain times.

Taurani says that mostly smaller movies may go for digital release, rather than the movies produced by the big banners. That is because there will be a crowding of heldover big budget movies at theatres whenever normalcy. Smaller movies will be at a disadvantage because they will not get enough screens or solo release dates.

“This (Gulabo’s release on Prime) is more of a temporary phenomena which will negatively impact Box Office in the short term, but there is no threat of OTT on cinema occupancy in the longer term,” Taurani said in a note to clients.

“We don’t see a scope of larger films going directly on digital-unless it’s a force move by Disney Fox (example of Laxmi Bomb which may be done to provide a breakthrough for Disney +, or else we don’t see any other OTT buying the movie at a hefty price above the cost of production),” Taurani said.

Multiplex chain INOX on Thursday expressed displeasure for releasing the movie directly on OTT platform skipping theatre  window run.

The decision of the production house to deviate from the globally prevalent practice of releasing movies first on multiplex is alarming and disconcerting, it added.