Hollywood Releases Skip Indian Multiplexes Over Revenue Sharing Terms

Susie Allnutt/Marvel Studios/Paramount Pictures

'Final Destination 5' and 'Captain America' only open on single screens as negotiations over revenue-sharing terms remain unresolved.

NEW DELHI -- Hollywood releases Captain America and Final Destination 5 will not be cashing in at India's multiplexes in what could have been a lucrative holiday box office weekend.

With negotiations between studios and the Multiplex Association of India still unresolved over revenue sharing terms, the impasse extends last weekend's non-release of Rise of the Planet of the Apes at multiplexes which led distributor Fox Star Studios to expand the film's release only via 450 single screens.

Among India's total estimated 9,000 screen count, multiplexes account for an estimated 1,500 screens, which can contribute to over 50 percent of a film's total revenues given the high-value urban metro market served by multiplexes, especially for Hollywood movies.

Typically, between single screens and multiplexes, major Hollywood releases with dubbed language versions can open here with about 400 to 700 prints.

As reported earlier, the tussle over revenue terms between producers and multiplexes goes back to 2009 which resulted in a strike by Indian film producers until an agreement was hammered out between both parties. The agreement – which expired on June 30 – finalized a profit sharing equation where producers would get 50 percent of the opening weekend revenues followed by 42.5 percent in the second week, 37.5 percent in the third week and 32.5 percent in the fourth week.

Following the agreement's expiry, revenue terms were once again open to negotiation. Industry observers have speculated that multiplexes are now demanding an increase in their revenue shares which would mean a revision of producers' shares at 45 percent in the first week, 37 percent in the second week, 32.5 percent in the third week and 25 percent in the fourth week.

But the revised terms are first being negotiated for Hollywood releases while Indian films are still opening as per earlier terms. Major Bollywood release Aarakshan (Reservation) opened Friday in multiplexes but the film has faced its own hurdles given its controversial take on India's education system which has led the state governments of Punjab and Uttar Pradesh not approving the film's release in those markets. Smaller films are also opening in multiplexes such as Hindi suspense title Phhir (Again). The showdown between multiplexes and studios could have thwarted the earlier release of Warner's Harry Potter and the Deathly Hallows Part 2 but a last-minute settlement was reportedly reached where revenues will be shared on terms decided for upcoming releases.

“The multiplexes are renegotiating revenue terms first with the Hollywood studios and then use that as a base to restart negotiations with Indian producers,” Mumbai-based consulting firm PricewaterhouseCoopers India entertainment industry analyst Timmy Kandhari told The Hollywood Reporter. “Its really about who blinks first. Hollywood studios seem to have more staying power – and are willing to take a temporary hit - which explains why they are not accepting the revised terms from multiplex operators but for the moment, both parties are losing out. However, I do feel that both will arrive at a solution at some point."

As an example of potential loss of revenues, Apes grossed about 59 million rupees ($1.3 million) in its opening weekend according to Fox Star Studios but “this figure could have been double had the film opened in multiplexes,” according to Kandhari.

Considering Aarakshan – whose cast includes Bollywood icon Amitabh Bachchan – was the only major domestic release this weekend, industry observers speculated that Hollywood titles Captain America and Final Destination 5 had a good chance of wowing audiences over the holiday weekend.

At press time, distributors for Final Destination 5 (Warner Bros Films India) and Captain America (Viacom18 Motion Pictures) did not offer any comment and neither did the Multiplex Association of India whose members include major chains such as Big Cinemas and PVR Cinemas.

While multiplexes have carved a major urban market, single screens have also seen a reinvention thanks to digital conversion, mostly notably by Mumbai-based digital cinema solutions provider UFO Moviez which operates 2,500 screens nationwide. However, most of UFO's digital screen network does not comply with Hollywood's Digital Cinema Initiative (DCI) technical specifications which means Hollywood releases cannot open on these screens. UFO also offers a DCI compliant solution via an affiliaite company Scrabble which has converted mostly multiplex screens in urban markets.

“Hollywood studios are really missing out on an opportunity by not opening on a majority of our screens which cater to a growing market in mostly non-metro areas,” UFO Moviez India CEO Rajesh Mishra told The Hollywood Reporter. “Hollywood releases are trying to expand their market share via regional language dubbed prints for which non-metro markets can be a major segment. While Indian films continue to play successfully on our (non-DCI compliant) network, its Hollywood that is losing out.”