Why OTTs now want films to release in theatres first

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OTT platforms — which emerged as the messiah for movies during the pandemic by becoming their primary source of revenue and audience — are not buying them anymore without a theatrical release first. 

OTTs are now insisting on a theatrical release of a movie before picking up its digital rights. Hindi films such as Gehraaiyaan, Freddy, Cuttputlli, etc., that went straight to OTTs in 2022 even after theatres had reopened, were mostly pandemic commitments, industry insiders say.

“We encourage our producers to take their film to the theatres first, and then to OTTs. It shows us the producer has confidence in the content. Also, it helps the overall marketing of a film,” says Ajit Thakur, CEO of Tamil and Telugu OTT platform aha.

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For OTTs, it makes sense to pick up the so-called “sure-shot” films to ensure a good return on investment. These films have already done business at the box office and don’t require marketing spending because viewers would know about them. Netflix, for instance, has been picking up the rights to most of the theatrical hits across Tamil, Telugu, and Hindi, including blockbuster RRR in Hindi. 

Pankaj Jaisingh, CEO (Distribution Business) of UFO Moviez says Rocketry: The Nambi Effect, a film distributed by UFO, must have made 30-35 per cent of its revenue from the theatres and the rest from the sale of digital and satellite rights. “But that [70 per cent] came in because you had the foundation of the theatrical release,” he says.

“Today, it’s critical for a small- or medium-budget film to perform well theatrically. Otherwise, OTT platforms will not touch it, unless it goes at a low price in a bundle of 5-10 movies,” he says. 

But releasing a film in theatres is an expensive affair. The head of a film production company requesting anonymity says most films set aside Rs 5-10 crore for print and advertising (P&A) costs. Add to it marketing costs and non-production costs can account for around 25 per cent of a Rs 25-30-crore film’s budget.

How can a smaller film made on a Rs 5-10-crore budget even compete, the stakeholders ask? “Whereas OTTs pay you an assured amount; there are no marketing expenses for the producer. That’s why OTTs are saying, go to the theatres first,” says Jaisingh.