Satellite rights soar as takers of limited ‘good’ content rise

MUMBAI: The year gone by saw multiple television channels hitting the airwaves. What’s more, going forward, the number is only set to increase. Content is getting scarce, leading to escalating prices for satellite rights of movies. The range varies from Rs 120 – 150 million depending on the film’s star cast and box office performance. Even with channels fighting for rights to movies like Jab We Met and Welcome, the studios are taking it right to the bank.

With new marketing and distributing strategies for these movies, the one question that seems most apparent is how long the channels will be able to sustain these high prices?

What’s more, unlike the traditional five year period that rights were earlier sold at with no bar on number of screenings, the game has now moved to a per screening basis. On the other hand, since content is scarce, channels have also started syndicating movies with each other; thus, giving rise to a new revenue stream. spoke to movie channel heads and film producers to better understand the dizzying heights of satellite rights’ prices.

Acquisition prices hit the roof and beyond

A few reasons have been sighted for the exorbitant rise in prices of film satellite across the board over the last two to three years. Movies today also have much higher budgets than before and therefore recovering investment does result in a higher satellite right acquisition price.

While in 2006, satellite rights of films like Fanaa, Dhoom:2 and Kabul Express went to Sony for anywhere between Rs 200 – 250 million; films like Kabhi Alvida Na Kehna’s satellite rights fetched approximately Rs 140 million.

In 2007, satellite rights of blockbuster films like Om Shanti Om and Welcome were pegged in the range of Rs 150 – 200 million. On the other hand, a film like Awarapan was sold for Rs 40 million. Moser Baer, which picked up the satellite rights of Apne, sold it to Star for Rs 70 million.

At a time like this, movie channel heads of MAX, Zee and Filmy unanimously opine that the demand for content has increased manifold owing to the entry of new players like 9X, NDTV Imagine and UTV in the same segment. Industry experts say that the number of movies that have a TV audience remains constant every year and new channels are willing to pay more for new titles that will help them build a loyal viewer base.

The primary reason for the unrest with the prices for movie rights is that content owners benchmark the sale price of their new movies against the previous exclusive rights price. Also prices are going to dizzying heights because the overseas market for Indian cinema has grown bigger and there is a realization that content can be exploited in so many more ways including digitally. The current prices are so overheated, that Hindi movie channels will have a tough time breaking even, let alone make profits according to industry experts.

Since movie rights acquisition has become an expensive business, channels are devising newer ways of recovering their investments. Zee Cinema business head Mohan Gopinath says, "Every channel evaluates its model on profit & loss and then figures how much they can afford to spend on acquiring movies. Depending on their reasons, the channel decides if it’s reasonable to buy a movie at a particular price."

On the other hand, Max doesn’t believe in acquiring movies at prices that won’t be recoverable. Max business head Sneha Rajani says, "When the movie fairs well at the box office, the movie makers want to pass on the movie to the channels for higher prices. I don’t know about other broadcasters, but we do not acquire movies at such unrecoverable amounts."

Commenting on ways to combat the ever-increasing prices, Filmy business head Shaliesh Kapoor adds, "Some channels are now going the barter way by sharing content and titles to be able to earn some ancillary profit out of it. For new channels it is more difficult as they need to establish themselves in the clutter."

Meanwhile, advertising revenues have and will continue to be the mainstay to recover costs. When a new movie is slated to air on TV, advertisers are willing to shell a premium amount for a slot during the movie. When Filmy aired Guru for the first time, the rate for a 10 second ad was approximately Rs 40,000.

Kapoor adds, "There is a drastic difference in ad rates for library movies and the premium/newly acquired movies. One can and does charge anywhere between 20-50 times of the normal rate for a big title. Often many advertisers come on board based on the strength of the title."

Freshness of content has also assumed place of priority now and makers are doing what they can to preserve it. Reliance Big Entertainment chief operating officer – movie channels Ashutosh opines, "Excessive exploitation is something we have to restrict. There have been channels that have telecast the same movie 10 times a month!"

While earlier there were no contractual bars on channels from syndicating the movies, slowly the same is being brought in. Sources say that Yash Raj Films contractually restricts Sony from syndicating their titles to other channels. Moreover, now with producers themselves syndicating rights to various channels on a per screening basis, the contracts have further been modified.

Jab We Met, arguably the biggest hit of the year, was reportedly going to bring in Rs 150 million in revenues for the Indian Film Company in five years. For JWM, a new strategy was devised. The movie was sold to Zee Cinema for an undisclosed sum and subsequently to three other channels on a per screening basis. The Indian Film Company and Studio 18 CEO Sandeep Bhargava says, "What channels need to understand is that they are buying the rights for themselves and for reselling them. We will continue to do this with almost all films."

The main difference, as cited by Bhargava, between the traditional and this deal will only show with a bag of films and not just individually. The monies involved will be much higher when a collection of movies are sold together. Also the profits generated would go to the movie makers and owners instead of one channel syndication content to another. Another reason is to keep the content as fresh as possible with limited exposure.

Adlabs Films acquisition and distribution COO Sunir Kheterpal believes that content is scarce and therefore a new breed of content sharing will have to be introduced. "Syndication and sharing of content will be the order of the day in the present circumstances," he says.

The terrestrial rights, video on demand rights for DTH platforms, pay per view rights for international television channels, internet and broadband rights are all being sold separately adding up to an impressive sum.

Future Outlook

Although channels remain tight-lipped about the soaring prices, trends point towards a rise in prices, based on sharing or syndication of content instead of exclusivity. As movie making becomes heavy on the pockets, satellite right acquisitions have also increased by about 25 per cent since 2005.

Channels remain unperturbed with the high amounts that Jab We Met’s satellite rights commanded. In order to maintain a loyal viewer base, sometimes exclusivity is the key. For that, high prices will have to be paid for premium exclusive movies.

Further Kapoor stresses, "The makers of Welcome are demanding Rs 17-20 crores for it and that’s why no channel has bought it yet. It’s already been a few months since it’s released and they’re still in talks with channels. They will have to lower their prices."

Increasingly now, movie channels are entering into deals with each other for movie sharing and syndication and to combat the escalating prices. Sahara inked a barter deal with Star, the terms of which state that both channels will screen 20 movies from each other’s film libraries three times. The titles include Guru and Rang De Basanti. The new general entertainment channel 9X has also closed a deal with Sony, wherein titles have been bought on a per telecast basis.

Going forward, production companies like UTV now have their own television movie channel, where the content can be exploited. Reliance Big Entertainment is also stepping up on launching its movie channels this year. The satellite space will further see a change with more such channels from film production houses coming up.

The new model for distribution of cinema is definitely changing the economics of the satellite rights acquisition business. On one side, syndication of content will become synonymous with this business, whether done by producers, aggregators or channels. On the other, this game no longer belongs to the small players. Deep pockets are called for or else niche is the way to go. For a bouquet player, shared content will be the way to go.