SAILING AGAINST ALL ODDS

Submitted by admin on Mon, 09/04/2017 - 14:16

Thin margins, funding challenges, lack of IPR are factors that render India’s TV production houses value-less, though their business is pegged at Rs 4,500 crore. Is the industry ready to take a risk to create value?

 

By Simran Sabherwal

 

Rs 4,500 crore - this is the estimated size of the business handled by content production houses (across languages) for the Television industry in India, according to research consultancy EY. However, ask the production houses themselves, and the response is “There is zero value in our business”. This is primarily because Indian production houses don’t hold the Intellectual Property Rights (IPR) on their creative output, as the IPR rests solely with the broadcaster. Thin margins and no valuation restrict access to funding, impacting scalability and brand-building. Production houses believe that ownership and exploitation of IPR will help them go up the value chain and increase monetization opportunities. But are broadcasters willing to give up IPR or co-own content with the production house, compromising their revenue stream?

WHOSE RISK IS IT: BROADCASTER OR PRODUCTION HOUSE?

Currently, the operative model in the TV content production business is the commission model, wherein the production house on an average gets around 10% of the cost incurred on a show. However, a show needs to be on air for a minimum of six months for them to earn this 10% margin, and recoup the initial investments made on a daily show. But low success rate of shows means many of them across channels are taken off the air within six months of launch, and producers run into monetary losses because of it.

Even though producers stand to lose monies, most stakeholders say that the risk is the broadcaster’s and by retaining the IPR, the broadcaster negates this risk. According to a Star India spokesperson, who did not wish to named, “The business model of content production in India is different, compared to that in the West, as most of the IPR in India rests with the broadcaster. The entire development cost is borne by the broadcaster and if the commissioned show doesn’t work, it is the broadcaster who loses money. This actually balances things out. If the production house wants to retain the IP, then obviously they will have to give up something somewhere.”

Reiterating this rationale, Saurabh Tewari, Director, Parin Multimedia says, “If one show works on a channel and the other doesn’t, the broadcaster’s take is that while it made money on the successful show, it also lost money on the other one, while the production house would have recovered its cost anyway. It’s the law of averages and as per the broadcaster, it won’t work if the profit is shared. That’s a logic the broadcasters point out every time, and it’s a Catch-22 situation.”

 

CREATOR OR CONTRACTOR?

In most instances, the production house comes up with the concept of a show and pitches it to the broadcaster, but what finally emerges on screen is often a collaboration between both teams, in terms of storyline evolution, based on rating and viewer feedback. For the production house, there is no monetizable value post the airing of the show, but the broadcaster continues to monetize it through repeat telecast across networks, dubbing it or re-making it in regional language and even syndication. This has production houses claiming that though they are creative producers, in effect by contractual definition, they are line producers. However, with IPR directly linked to valuation, will broadcasters concede? Also the contracts signed between the broadcaster and production house are water-tight and leave no space for a royalty or IP discussion, even if the show does well.

Says Yash Patnaik, Founder & CMD, Beyond Dreams Entertainment, “Every trade comes with its own pluses and minuses. While we don’t own IP, and a lot of people complain about it, we also don’t take the risk of selling our product. We are in the B2B business and not B2C. When you are in B2B, you secure yourself and in the barter, what we give up is IP. The broadcaster -production house relation will continue the way it is, unless you have an out-of-the-box concept and the channels want it and you don’t want to sell.”

According to Siddharth Malhotra, Founder of Alchemy Films, “It’s a producer’s dream to own IP. Everybody wants it, but nobody has the guts to stand up against the channel. If the channel bids goodbye to you, there is another producer waiting to take your spot. So, there is insecurity and because there is insecurity, no one has the guts to stand up.”

 

A CHICKEN AND EGG SITUATION

With no valuation, a major challenge for production houses is access to funding. Says Abhimanyu Singh, CEO, Contiloe Pictures, “Most production houses are funded with internal accruals and the biggest challenge in scaling up is funding. There is no value in the company apart from what you create and sell, after which you have no skin in the business. Funding will come once you retain intellectual property rights, but for this, there is a price to be paid, which you cannot pay because of lack of funding. It’s a chicken and egg situation. If there are no residual rights or royalties, there is no value you are driving into the company, so why will a funder come and fund you?” Another challenge in attracting venture capital funding is that VCs have an exit strategy in place, but investing in a production house is a tricky proposition because they themselves have no clarity of the shelf life of current and future projects. One may have five shows on air one year, and only two the next; hence making a clear growth projection is difficult.

A CASE FOR HOLDING IPR

In this scenario, production houses believe that there is a case for retaining IPR and then monetizing it. Asit Kumarr Modi, Director of Neela Tele Films, that holds the character rights (and not episode rights) for the popular Taarak Mehta ka Ooltah Chashmah airing on Sony SAB, says holding rights is the difference between running a business or a contract job. Modi says, “IP holds value in the long run only if you create a valuable property, else it has no value. As I hold the rights for Taarak Mehta ka Ooltah Chashmah, I have other opportunities to monetize it. I can make an animation show with the characters, dub it in languages other than Hindi, make the show in other languages and if the show ends on the channel, I can take it to a different channel.” But, what’s certain is that content will be king though majority of it will not have any value, and only quality concept-based content that has the potential to travel will generate IPR interest.

“However, in case of drama, the IPR is of value only if the drama has a wide geographic appeal, and shelf-life and travels beyond your own market. Indian dramas are so deeply focused on India and the Indian middle class that content doesn’t travel in a substantial way. So, the value of that IP may not be substantial,” says a Star India spokesperson.

OWNING THE IPR, THEN WHAT?

The question that also arises is what happens once a production house retains its IPR. How does it monetize it and more importantly are Indian companies equipped to do it like international counterparts? According to Vipul Shah, Chairman and MD, Optimystix, “Even if I hold IPR and want to syndicate a show in another country, I don’t have the bandwidth to sell it and don’t know how to do it. It requires muscles and size to go and pitch. It’s romantic to say I have the IP rights but most production houses don’t know how to monetize it. You need a team which knows what content will work in what country and then go and sell it globally. This ecosystem has still not been developed. You need strength and size to be really successful in syndication and selling shows.”

Ekta Kapoor, Joint Managing Director, Balaji Telefilms, concurs with Shah and says what’s important for successful monetization is volume of content. In an earlier interview to exchange4media she had said, “Television economics is such that if tomorrow you own the IP, your own monetization will become very weak because you will have just one show to sell. When channels sell shows in bulk, they end up monetizing it better. Whether they should share that profit with producers is a debate worth taking on. But to own IP of TV shows, with the kind of volume that we own on TV, may not be the best thing to do.”

 

EXPLOITING THE IPR

So, how does the production house generate value and increase their revenue stream? Sunjoy Waddhwa, CMD, Sphereorigins believes a start could be made if production houses partner with broadcasters in the exploitation of IPR. Waddhwa says, “We are not saying we want to own the product, but we ask for a small percentage of the revenue that may come if the content is successful and is on a second run or a repeat, dubbed or syndicated. This currently doesn’t happen, and is exploitation without owning the IPR. In our case, royalty is equal to exploitation of IPR, because the IPR is being exploited by the channel. However, starting this process and getting it into the contract will definitely take a lot more time.”

 

CO-OWNING THE IP

The other model that could emerge is co-owning the IPR between the broadcaster and production house, with both the parties putting in money. Here the broadcaster de-risks itself and the production house also has a skin in the game. Sources say co-owning IP was tried out between a broadcaster and a major production house for a show that starred a major Hindi actor, but neither the show nor the deal worked out, as ownership was not clearly demarcated. However, this is a model that could also evolve looking ahead.

Nikhil Mirchandani, CEO & Founder of Hoop Entertainment, says that the fraternity is now waking up to the importance of owning or even co-owning IP. Mirchandani, former head of Shashi Sumeet Group, says, “Some broadcasters are really strict about their IP sharing rules while some are willing to look at it. Also when the costs are really huge and you can get the production house to actually subsidize or co-fund the project, then co-owning could be a model that should be looked at. People are opening up to co-owning the rights now as they want the risk to be shared.”

 

NP Singh

CEO, Sony Pictures Networks India

“In comparison with Western markets, India is very unique. Traditionally, broadcasters have commissioned shows and own the entire IPR and monetize it. My belief is that’s how it will continue, going forward as well. There may be one off exceptions, as the rules of the game are changing.”


 

Ekta Kapoor

Joint Managing Director, Balaji Telefilms

“The debate about Intellectual Property Rights (IPR) being with producers has been going on for a long time. Channels have had great profit on certain shows and they have lost a lot of money too on others. While there is a debate on whether we should own the IPR or not, we are in the process of having our own app where we own the IPR and we become the channel. At the end of the day, it’s going to be a big war and it will take time.”

 

Abhimanyu Singh

CEO, Contiloe Pictures

“If you compare the valuation of broadcasters and production houses, there is a vast difference. With such a difference, how can production outfits become brands? It’s important that we transition from a service-based industry to a value-based one, only then will you see great content coming out of the production side of the business in India and content-makers become brands.”

 

Asit Kumarr Modi

 Director, Neela Tele Films

“The producer adds a 10% fee above the production fee. Is the value of your creative fee that much? If you hold IPR, there will be a difference in the cost with the channel and you will have to bear it as your valuation will increase. It’s about looking at a short-term gain or a long-term gain. Currently, the valuation of most production houses is zero. Television channels should keep different formulas ready, so that producers too can own the IP, which is beneficial for both.”

 

Ashish Pherwani

Partner and Leader - Advisory, Media & Entertainment, EY India

“The role of production houses is changing into a B2C role with them using customer insights for real-time content decisions and mobile and broadband networks to enable interactivity with their ultimate consumers.”

 

Sunjoy Waddhwa

CMD, Sphereorigins

“Indian production houses will need to invest in formats. Producers should scale up, make their own formats and try and sell the formats and engage with foreign viewers. It will be a role reversal in a sense and there are many countries who are similar to India.”

 

Saurabh Tewari

Director, Parin Multimedia

“The biggest problem that every producer faces is decreasing market-share. The budget for a daily show today is more or less similar to the budget a decade ago. So, the audience share and budget is decreasing and the cost of production is going up. While you call yourself a producer, technically you are just a line-producer or a production manager.”

 

Vipul Shah

Chairman & MD, Optimystix

“Production houses for the Indian Television industry are not a scalable business. You have four broadcasters and more than 40-45 active production houses in Hindi. In the margin plus business, we all share the pie. Sometimes, I cut into your share or vice-versa, but the pie is same and it is not going to change.”

 

Yash Patnaik

Founder-Chairman, Beyond Dreams Entertainment

“I would love to retain the IPR, but the commission business model will remain the mainstay at least for the time being. There are two different IPs – on the concept and on produced content – and geography and time will decide their exploitation.”

 

Nikhil Mirchandani

CEO & Founder, Hoop Entertainment 

“About 80%-90% of all ideas come from the production house. The agony for producers is that the idea is theirs and they are also responsible for ratings, so why don’t they have skin in the game?”

 


Siddharth Malhotra
Founder, Alchemy Productions

“Today it’s very tough for a producer to make more than 10%, as the fixed cost is high. In addition, a channel asks for a bank but doesn’t approve scripts and episodes on time. There are technical rejects on your episodes for which you are penalized.”

 

Deepak Dhar

MD and CEO, Endemol Shine India

“For a local producer, it’s going to be challenging to syndicate content, but we can stick our neck out and say this is a set of numbers because we have got local sale syndication teams across the globe and they can serve the Indian diaspora sitting out of anywhere and everywhere.”

 

 

MONETIZING BEYOND THE TRADITIONAL FORMAT 

Implementing the global best practices in Television production and educating producers about content monetization beyond the traditional format are just some of the tasks before The Film & Television Producers Guild of India. Kulmeet Makkar, Chief Executive Officer, The Film & Television Producers Guild of India, talks to us about taking the first step with a major broadcaster on the hot topic of IPR and revenue-sharing

 

Q] How do you see the relationship between broadcaster and production houses today?

Ideally for the business to grow, there should be a creative partnership between the people on ground and the broadcasters. Unfortunately, in the past, it has been a relationship between a service provider or a line producer and the principal or the licensee. Today, people who understand creativity should participate more and the broadcaster should use their expertise and make them partners to create better content which can actually help the Television industry grow.

 

Q] Has the time come for production houses to look at monetization of their creation after the show ends its first run?

It’s long overdue. I know that a recent discussion with a major broadcaster was extremely open. We debated every important issue for the production sector, including IPR, long-term sharing of revenues and creative partnership. The broadcaster in question was looking at working with the Television production sector and wanted to create value that’s beneficial for both – the producer as well as the Television sector. In fact, the broadcaster said that if the Television production house delivers more than what is expected and has the creative capability, they would have no problem looking at syndication revenue sharing. I am hopeful that other broadcasters will also come on board. We are looking to take up this issue with all the broadcasters and try and create a win-win model for all.

 

Q] How difficult is it to get funding?

In 2002, the Reserve Bank of India (RBI) changed its policies with regard to IPR. As per the circular issued by RBI, IPR cannot be used as tangible collateral asset for a loan. This happened after IDBI bank had issued loans against IPR and the films never got released. This was an unfortunate change as now we are finding it difficult for banks to fund Film and Television content. IPR needs to be treated as a national asset. Recently, Prime Minister Narendra Modi announced an IPR policy and to support that, we must support IPR from the financial perspective. The issues of the past can be resolved, but IPR must be valued the way we value tangible assets.

 

Q] What is the Guild doing to help producers monetize their content better?

As a guild, I must confess that until recently, our focus was mainly films. However, we are now focusing a lot more on Television. We understand that production could be for any platform - Films, Television or Digital. We are a producer’s body and we must give equal weightage to producers across platforms. We have most of the active Television producers on board and are working with them to create best practices required for the industry to grow. We are in talks with international production associations and will collaborate with them to bring in the best practices of Television production to India and change the way we operate. As a Guild, the value we are looking to provide to the production sector is to enhance the quality and process of production which not only is cost-effective but also delivers better content; that’s our mission. In addition, we would like to create platforms for our members to understand the processes where they can monetize the content better. With new platforms emerging, we are looking to educate producers and conduct sessions and seminars for our members to understand and learn how to monetize content beyond the traditional format.

 

THE WAY AHEAD

So, how will the ecosystem evolve? Will the broadcaster give the production house a share of syndication revenue or co-own the IPR, or will a production house self fund and license the product to a broadcaster? As per a Star India spokesperson, “It is early days to comment on whether a broadcaster and production house can co-own IPR; it’s not off the table but that’s a bilateral mutual conversation between the two concerned parties and will vary from broadcaster to broadcaster.”

On his part NP Singh, CEO, Sony Pictures Networks India says, “When you compare with the Western markets, India is very unique. Traditionally, the broadcasters have commissioned shows and own the entire IPR and monetize. My belief is that’s how it will continue, going forward as well. There may be one off exceptions here or there, as the rules of the game are changing.”

The rules sure are changing, as some production houses are now willing to take a risk to retain the IPR, while for others it is a wait and watch situation. Parin Multimedia’s Tewari is working on a show, that is under development, where he looks to retain the IP or have a share of the syndication revenue. For the moment, though, all eyes are on Porus, the historical show from Swastik Productions, where the production house has retained its IP, licensed the show to Sony and is now in the process of looking at other avenues to monetize and generate value and revenue.

@ FEEDBACK

simran.sabherwal@exchange4media.com

Category: 
Volume No: 
14
Issue No: 
13