Deloitte India's Jehil Thakkar on the future of Indian cinema industry

• Just when Bollywood seemed to be getting back on track with releases being planned and film shoots announced, a second surge in the number of Covid-19 cases has brought everything back to square one.
• If there are no cinema halls, movies will go to OTT, but they will co-exist. A lot of good films cannot be held back, and for good reasons, they have gone to OTT, which may not have been their first choice. But they had to do it because of the pandemic.
• Jehil Thakkar, Partner and media & entertainment industry leader, Deloitte India shares how the cinema industry will change after all of this is over.

Once again, the boards outside box-office windows across India read ‘Closed’, with no clarity as to when they will open. For theatres in states where there is no government advisory, lack of business is forcing theatres to down their shutters. On the other hand, COVID-19 and its accompanying health issues and restrictions have brought the film industry to a complete halt in terms of shoots, production and releases. The domino effect is massive as several other sectors in entertainment, media and many other businesses depend on films.

The theatrical business, which in India forms the main revenue source for most films, has dropped to a trickle and is likely to remain there for the short term. As the second wave of COVID-19 accelerates across the country, theatres and production will be more widely impacted. While majority of the box office revenue in the country is generated now through multiplexes, single screens do remain a critical part of the distribution chain. The COVID-19 related lockdowns have hurt this part of the value chain much more than the multiplexes, which tend to be part of more resilient larger organisations. Many of these single screens and a few independent multiplexes may not ever open again. We lost a few in 2020 and we may lose some more in 2021.

What many in the industry fear is the acceleration of a shift in viewing patterns. Consumers will make very judicious choices about the kind of film they want to consider viewing in the theatre. A larger than life, star film is more likely to draw an audience rather than a dialogue-based comedy or drama – which consumers may prefer to watch at home. This change had already been in process in large markets like the US and had begun to make its presence felt in India too.

Going to see a film in a theatre is a family or community occasion across India, so we may see the Hindi film industry stage a strong comeback in the theatres later in 2021 if we see the COVID-19 tide recede. But what the pandemic may have forever changed is an established practice that saw films progress from one medium to another — from theatres to OTT to television, with fixed exhibition windows and gaps between each. With cinema halls still half-empty, and increasingly strained due to the lockdown in many parts of the country, many producers are opting to release their films on streaming platforms without waiting for a theatrical release; ‘windowing’ is, in effect, out of the window. The days when every film, without exception, would first go to the cinemas may not ever come back. We saw these industry practices break down in the US and are seeing this in India too.

Over the last year – we saw many films that were intended for theatrical release but then premiered on OTT – as producers ran out of patience. While the performance of these films was mixed, many producers were determined to hold back films and wait for the situation to improve. There was a window of hope that theatrical revenue would return – especially early in the year as audiences trickled in and some films – Hollywood and south Indian releases – performed better than expected. These films may now yet again explore a release on OTT as the promise of return to normalcy stretches out.

Even under-production films will see some costs rise due to COVID-19 related SOPs, lengthening timelines and regulatory restrictions.

Another factor that will influence this trend is the hunger for content and capacity from OTT platforms. With over 45 OTT services in India, there is a battle for consumers. Quality content is key to drive consumers to platforms and also to convert them from free to paying subscribers. Production capacity too in the industry is limited. Production companies that can churn out film level production values at scale consistently are limited. Many OTT players, with large budgets for originals, are trying to up production capacity, which in turn may affect films and drive budgets and costs higher.

The pressure to release capital and escalating costs may drive producers to explore all possible release windows in the short and medium term.

To be sure, box office in India has a future and a robust one at that. The film sector will adapt and rejuvenate, as it always has. According to a Deloitte study, 83% of India watches video content on their mobiles, and this still makes the cinema experience something unique. Pundits had predicted the demise of the cinema when television was launched, then again when the video players were introduced and then again when DVDs came out. They were wrong every time. For the industry, no doubt these are challenging times, but this too shall pass and the show will go on.