Three weeks ago, a multi-starrer Tamil feature film, Bose was released in the South. The film, originally slated for release on 9 October, faced some last-minute release issues and as a result, the producer could release the prints only by 10 October at 5 am.

The `Madurai-Ramnad‘ distributor had to wait till 3 pm to start the first show of the movie in his theater centres on 10 October. At 10:30 am of the same morning, Bose was running houseful in five theaters in C class towns situated almost 600 kms away from Chennai.

How did those five theaters manage to release the film as per schedule while some of the city distributors could lay their hands on the print only after a good 10 hours‘ wait?

The answer lies in a technology-driven business initiative called distribution of movies using digital technology. The above-mentioned five theaters are equipped with the digital technology by which films in digitised format can be delivered and screened. In this case, the delivery of analogue prints, or the conventional 35 mm prints of the movie, was overtaken by the digital delivery.

The story so far

In 2003, Manmohan Shetty‘s Rs. One billion Adlabs introduced digital theatres in India. After doing a trial run on Devdas, Adlabs effected India‘s first digital film screening in April 2003 releasing the digital prints of, The Hero - The Love Story of a Spy.

Trying to hit the target: ‘The Hero‘, India‘s 1st digitally distributed movie

In September 2003, Adlabs joined hands with Subhash Ghai‘s Mukta Arts to form Mukta Adlabs Digital Exhibition. The firm, which has now 74 digital screens in Maharashtra, Delhi, Uttar Pradesh, Gujarat, Madhya Pradesh and West Bengal has invested Rs.100 million in the project. In June 2004, Mukta Adlabs Digital Exhibition joined hands with the Chennai-based Kalasa Entertainment Media Private Limited (KEMPL) for digital delivery of movies in the southern states of India.

Another key player in digital distribution Blockbuster Cinemas was born when a group of film distributors, exhibitors and music companies lead by Time Group‘s Dhiraj Shah got together to explore the possibilities of digital cinema. Tips, Venus, Bharat Shah-owned Mega Bollywood, Time, Baba, Tilak and Prachar hold equal stake in the firm. The group, which has invested Rs. 50 million in the digitisation project, claims to have installed approximately 100 digital screens across India. Reportedly, the Rs. 35-crore Ultra Group has also gone the digital way and has set up 11 digital screens in India.

The technology and the business model

The digital server-projector system

The digital distribution process starts with the digitisation of the 35 mm film. Then the digitised film is compressed using the open Motion Picture Experts Group (MPEG) format or proprietary compression. The compressed, digitised file is then delivered to the theater. Delivery-wise, the technology offers two alternatives; delivery via data-formatted DVDs and hard-drives or through electronic transmission methods like satellite delivery. In the theater, the digitised content is loaded onto a server and is uploaded into the digital projector for screening.

Mukta Adlabs tried the satellite delivery method once in the early stages of the initiative, but didn‘t go further sighting the feasibility reasons. "It is not making economical sense," offers Adlabs Films CEO Dr. Sunil Patil.

Blockbuster Cinemas, which is yet to take the satellite route, seems to have learnt a lesson from its rival‘s experience. Says, Blockbuster Cinemas partner and Time Group of Companies director Dhiraj Shah, "Satellite delivery is not viable in the present scenario and our company has no plans to go for that at the moment."

Mukta Adlabs and Blockbuster Cinemas have been outsourcing the technology from abroad. Mukta Adlabs has associated with a Singapore-based company GDC technology for purchasing the servers. Its DLP projectors use the Digital Micro-mirror Device (DMD) from Texas Instruments. Aditech Digital USA is providing servers for Blockbuster Cinemas.

Adlabs Films CEO Dr. Sunil Patil

Mukta Adlabs has now slowed down its retrofitting of theatres since it is replacing its existing digital projectors with new Panasonic projectors. According to Mukta Adlab‘s Patil, the company has earmarked Rs. 40 million, in addition to its original investment of Rs. 100 million, for the replacement. Patil said the first phase of the alteration process would with 38 theaters in Maharashtra.

To buy the Mukta Adlabs digital cinema package, a theater-owner needs to shell out approximately Rs. 1 million. But most of the digital installations the company has done till now is on lease basis where the cost ranges from Rs. 7000 to Rs. 8000 per week.

As per available information, the Blockbuster Cinemas‘ projector cost is between Rs. 2,50,000 and Rs. 4,10,000. The air conditioner and the UPS system cost approximately Rs. 50,000. Blockbuster Cinema ‘s rental scheme has the server rent fixed at Rs. 3,000 a week per theatre and the rate is reduced to Rs. 1,500 if the movie manages to have a two-week run in the theatre.

Where digital distribution scores...

While speaking on digital cinema in a seminar organised by Cinema Systems India in April 2004, Senthil Kumar of Real Image Media Technologies said, "We spend about Rs. three billion approximately in India on film prints every year. With three billion you can convert about 1,500 cinemas each year. So in about 5 years we can convert all of India‘s cinemas into digital just with the saving on film prints, forget about the 40 per cent or 50 per cent, or how much ever India looses on piracy. So economically this is a very viable thing."

What the fast delivery and simultaneous release advantages have brought to the exhibitors is a significant increase in theatre occupancy. Digital delivery gives a body blow to film piracy as end-to-end encryption, digital finger printing and the competence to release a large number of prints uproot the vice.

Talking about the advantages of digital delivery of movies, Patil has more to offer, "The biggest advantage is that while an analogue print costs about Rs. 65,000 to Rs. 95,000 depending on the length of the film; the digital print costs just Rs. 2,700. So, you can have more number of copies at a lesser cost.. Due to the high cost of analogue prints, the number of prints being made is limited. By the time the print reaches smaller towns, the pirated copies of the movie are already in circulation and that cuts down the theater occupancy to a great extent."

"The charm lies in simultaneous release," agrees Shah.

"Digital delivery has given a new lease of life to the rural box office"

Patil makes an amusing observation when he says, "The films are available on the first-day-first-show basis. As a result, even a ‘potential‘ flop can do well in the box office since it reaches out to all sections of the audience before the word-of-mouth spreads."

Patil is happy that, with digitisation the money that belongs to the industry is coming back to the industry in a shorter period. "Otherwise it takes six months," he points out.

Patil says the advent of digital distribution has also brought a significant improvement in theater occupancy in the B and C class theatres. "Earlier the occupancy was eight to ten per cent, now it is as high as 40 per cent. Some good weeks even bring 60 to 65 per cent."

An employee of one of the Mumbai-based digital cinemas we spoke confirms Patil‘s claims. "After installing the digital systems, our theater occupancy has increased from 20 per cent to 50 per cent," he says.

The reality check

"No profits at all," is Dhiraj Shah‘s outright response when queried on the returns from digital distribution. Obviously it is shocking since we have been raving at the beauty of digital distribution. But that is the truth coming from a seasoned entrepreneur.

"At present there is no return. Even you can say that we are doing a service to the industry at the moment by grooming the digital distribution system. But definitely, we have a long-term goal in mind," offers Shah.

According to Shah, the number of digital screens across India at present is in the range of 180 and one can‘t expect the business to be profitable at this stage with such a dismal figure. He puts the magical number that can make the business viable as 500 to 1000. "There is no other option," Shah asserts. He says his effort is to reach 500 in a couple of years from now.

Shah identifies the main hindrance to the growth of digital distribution as the conflict between distributors and exhibitors.

"With the advent of digitisation, distributors feel that they are losing out on the revenue-sharing front as the system has put exhibitors in an advantageous position. Distributors want easy money, the full cake."

Will these smiles last?

Senthil Kumar threw light on the other side of the coin when he said, "The question here is that the guy in the theater has to pay for the equipment so far (unless there are other business models) and the benefit really goes to the distributor. So the question is, how to distribute this money so that the whole thing works."

From the distributor‘s side, an official from Mumbai-based Neptune Films feels that chalking out a perfect revenue-sharing strategy in digital distribution would be difficult.

"Revenue sharing system is never going to be a static one. It varies depending on factors like the time of the release and the production cost. Movie to movie, it differs," he points out.

Pune-based Global Institute of Convergence Studies director Prof Ujjwal K Chowdhury feels that apart from this conflict between distributors and exhibitors on revenue sharing, what stagnates the growth is vested interests of the established producers of mainstream cinema to keep the entry-level barriers in film-making higher and out of the reach of the independent filmmakers and small-budget producers.

In this context, all the producers we spoke to were all for the potential of digital delivery. But they made it a point to express their dissatisfaction towards the technical quality of the present system. Producer Narendra Goel of Goel Films, while agreeing that digital distribution holds the future for the film industry, opines the technology needs to be fine-tuned.

"The quality ratio between analogue prints and digital prints is 8:2 at present. That means the analogue prints are six times better in quality than the digital prints."

Goel still believes that it won‘t be a problem for smaller centres since the audience out there is not quality conscious. "Producers with smaller budget will hug the innovation while big producers will wait for some time," comments Goel.

Global Institute of Convergence Studies director Prof Ujjwal K Chowdhury

Chowdhury agrees to Goel‘s comments on the technology-front. "The digital medium needs more R&D before being launched full hog. Clarity and resolution need to be improved. Digital projection costs also have to reduce drastically with bulk purchases being done in near future," he says.

How to script a happy ending?

Shah believes that revenue-wise or technology-wise, the scenario is not going to change immediately as the progress is very slow. Declaring that the word ‘investments‘ holds the key, Shah reveals Blockbuster Cinema‘s strategy for the future:

"We invite investors to associate with us in this venture. We are inviting all exhibitors to invest four lakhs to seven lakhs per theater. Also, independent investors should come forward and replace traditional distributors. One day we will have to make the distributors out of the picture."

According to Shah, the team of producer, exhibitor and the investor will have to play a vital role in popularising the technology and making it a success.

Talking about investments, we have the players even eyeing foreign investments. Reportedly, Blockbuster Cinemas‘ has been targeting foreign investors though Shah says nothing has been materialized in this regard so far. Kalasa Entertainment Media Private Limited (KEMPL), which launched its digital cinema initiative in June, has received $ 0.5 million from Sat Pal Khattar, a founding partner of Singapore-based law firm Khattar Wong and Partners.

KEMPL CEO Ramesh Subramaniam

"We are expecting another $ 2.5 million from foreign investors in the next two months," says KEMPL CEO Ramesh V Subramaniam. "Indian venture capitalists from Mumbai and Bangalore have also showed interest in investing in digital cinema," he adds.

The company plans to double its digital cinema installations to 10 in Tamil Nadu within a month.

Is there a chance that multiplexes also will be included in the game plan? The basic theory is that digital distribution won‘t work in multiplexes because of the difference in revenue models.

"Multiplexes will start taking the technology a bit later, because right now they are making good revenues. So for them the cost doesn‘t really matter, but still I think by the end of this year there will be some multiplexes armed with digital screens," opines Patil.

Chowdhury observes that every multiplex is either making or contemplating to have a digital projection facility alongside.

An aspiring player in digital distribution, Shringar Cinemas director Shravan Shroff is reportedly pondering on taking digital cinema to Pakistan and Bangladesh markets. The Chennai-based Real Image Technologies is planning to introduce its digital theatre system `QCinema‘ worldwide, starting with India, in the near future.

Stating, digital distribution of films is revolutionising the Indian film industry will be an over-estimation in the present circumstances. Still, it can be said that the technology has the potential to do so and it has made its humble beginning. The way the industry handles the innovation will decide its fate.