Indian box office tanks, Amazon and Netflix thrive, but will they be regulated?

The pandemic has further boosted the ascendant popularity of digital entertainment.
Written by Rajiv Rao, Contributing Writer

Movies to Indians are on the same par as cricket and religion. We produce more movies than Hollywood -- around 2,600 last year versus over 700 in Hollywood -- and we also have an overwhelming majority of the 1.4 billion people here chomping at the bit for the next big release.

The country has 29 states that have been divided by and large on linguistic grounds ever since its independence and almost every one of these states has a film industry. Bhojpuri cinema caters to 200 million people. Tamil cinema is watched by at least 40 million. Bengali cinema, 90 million. Bollywood -- or Hindi cinema -- is the big daddy, avidly watched by the whole country.

While I was growing up in Madras as an English-speaking boy -- whose family spoke our mother tongue, Kannada -- I would watch Tamil cinema on my black and white Dyanora television on Saturday nights via our one and only state channel (Doordarshan), then Hindi cinema on Sundays, and Kannada cinema whenever we could get it. All of this was in addition to English cinema, of course. So if you asked someone where they were when they watched Amitabh Bachchan climb the ceiling of a cave in the comedy film Mr Natwarlal, they would probably remember.

This is why Amazon and Netflix have been aggressively growing their following in the country. Imagine if India's per capita income increased from the current $1,500 to, say, $15,000 in 10 years -- a wildly optimistic scenario considering the kind of disastrous economics Prime Minister Narendra Modi has adopted during his tenure -- Hollywood studios would undoubtedly be making movies for, and in, the country.

OTTs soar while the box office sinks

The coronavirus pandemic, however, has smashed not only movie making but the existing box office in India as well, much like how it has affected the rest of the world. For a country that marks its weekends by which movie is releasing, COVID-19 has been nothing short of catastrophic. 

Box office revenue in India was around $2.4 billion in 2019, with Hollywood chipping in just 15% of that total. But now, the pandemic has probably robbed the Indian film industry of $330 million, according to trade analysts.

Meanwhile, Amazon and Netflix have been doing a roaring business. Gulabo Sitabo, India's first post-COVID lockdown Hindi film starring the ever-bankable 77-year old screen icon, Amitabh Bachchan, was supposed to launch on big screens across the country instead had its global debut on Amazon -- something that was unthinkable pre-COVID. Netflix says it has added six new Indian films that would have otherwise gone to cinemas, while Disney has at least seven such movies on tap.

Other over-the-top (OTT) players -- distributors of film and television content delivered via the internet versus cable or satellite -- including Disney Hotstar, as well as formidable local players such as ALTBalaji, have acted in similar fashion by picking up movies across Indian languages. The economics of the current situation makes the proposition a no-brainer to producers, especially those unaffiliated with the big studios, like those of the Gulabo Sitabo ilk.

According to media reports, Amazon Prime bought Gulabo Sitabo's premier rights for ₹60-65 crore (a touch over $8 million). It allowed the production to both immediately offset ₹30 crore of production costs, which is about the sum of the film's budget, and bank the rest of the ₹30 crore as profit.

A theatre release that brought in that initial ₹60 crore would have meant sharing half of that ₹30 crore profit with the distributor. For the film to have made the producers via theatrical entertainment as much as it did through Amazon, it would have needed an additional ₹30 crore in profit by comparison -- that is, a total close to ₹100 crore -- which is the exception, not the norm for the film industry.

Severely damaged by coronavirus, owners of theatre chains have expressed outrage for what they perceive to be disloyalty and abandonment. Their ire has been stoked even more by the realisation that film, thanks to smartphones, can now digitally reach 4,000 Indian cities and small towns without the need for a single digital projector to be turned on.

Of course, Indians do badly miss their big screens. One survey reported that 82% missed going to theatres a lot during the lockdown. But producers, rattled by the pandemic, will increasingly want to cash out rather than wait in uncertainty for a vaccine and the resulting normalcy to return. 

Meanwhile, outfits like Netlfix are burning rubber to gain traction in a hot market. Netflix's CEO Reed Hastings said that he plans to spend $400 million over the next year to produce more local content. 

"There is a school of thought that cinemas are anachronistic and as entertainment gets more individual and sachet-sized, they will fade," Utkarsh Sinha, managing director of investment bank Bexley Advisors, said to Yahoo Finance. "If that school of thought is right, this pandemic could certainly be the point of inflection."

The looming spectre of regulation

However, all this excitement for digital entertainment has the government in a tizzy and there has been ample talk of regulating foreign players who are supposedly bent on corrupting the Indian psyche. Speaking at a virtual event earlier this month, Minister of Commerce and Industry Piyush Goyal has asked the industry to self-regulate themselves.

"There have to be limits to allow global content to resonate … Many countries have cultural depravity and children develop bad habits but there are discipline and moral upbringing in our country," Goyal said. 

He noted that "high cultural and traditional ethos and moral values" need to be preserved.

Yet in a country that still promotes a devastating and ruinous caste system, the overtly demeaning sexualisation of women in Bollywood, and whose citizens are avid porn consumers, talk of "moral upbringing" almost verges on satire. 

Under Goyal's vision, there will be no Brokeback Mountain, Utsav, nor Mulholland Drive -- his comments implicitly point to a genuine dilemma around censorship that OTT players will at some point have to face, whether they like it or not.

In India, all films have to go through the Central Board of Film Certification before they are screened in cinema or television. In fact, except for digital, all content -- print, radio, TV, and films -- are subject to some kind of regulation or the other. It makes giving digital a pass problematic.

The Secretary for the Ministry of Information and Broadcasting, Amit Khare, has declared that "OTT being a digital platform will fall under the purview of the Ministry of IT but now we are proposing a decision that the content should fall within the purview of I&B ministry". 

Khare said, however, that it was not the government's wish to impose a "very heavy regulatory structure", whatever that means.

Two factions are neatly arraigned against each other. On one side, India's leading OTT entity Hotstar, along with comrades Jio Eros and SonyLiv, have voted in favour of self-regulation and formed a Digital Content Complaint Council (DCCC) to enforce industry self-regulation. Meanwhile, Amazon Prime, Netflix, Zee5, AltBalaji, Arre, and MX Player have decided to opt out and are dead against it.

Either way, cinema seats continue to remain empty and if we don't see a vaccine soon, there will simply be no content to self-regulate.

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