INDIAN INSTITUTE OF MANAGEMENT, INDORE

RAU-PITHAMPUR ROAD, INDORE, MADHYA PRADESH

SALES AND DISTRIBUTION MANAGEMENT

ASSIGNMENT ON
MOVIE INDUSTRY (Part B)
Submitted to Prof. Manoj Motiani and Prof. Kapil Khandeparkar

Submitted By:
Chinta Nikhil | Meera Midha
Sourabh Karmakar | Chandra Prakash Verma
Pranesh P S | T M Divya
N Gautham Eshwar | Shweatali Pagar
Group 6 | Section SDM3
On 12th March 2016

Sales and Distribution Analysis of Movie Industry

Analysis of Distribution Chain in a Movie Industry
The movies that have made headlines for their record collection on various box offices have always
amazed us. The major credit always goes with the actors or the directors. With time, other key stake
holders have also gotten due appreciation. Now-a-days writers, musicians and other people related
to the movies also make headlines for their efforts and contribution in the making of the movie.
The underlying structure of bringing a movie to your nearest theatre is a long process. Various
stakeholders play their part to make a movie what it is. With the growth of the movie industry, the
number of players has also increased but the basic structure is still the same.
The

main

four

Producer

contributors

in

the

Distributor

distribution

of

SubDistributor

movie

are

as

follow:

Theatre

Producer:
Every movie starts in the mind of a script writer, who then approaches a director. The director then
starts working on the script and decides whether he can work further on the it or not. Usually, the
casting of the movie (at least the leads) is decided by this time and the director then, approaches the
producer who agrees to finance the movie along with the amount that can be spent on it. Production
being the most lucrative part of the chain with a potential for very large upsides, has attracted many
actors as well in recent times. Large production houses producing multiple movies simultaneously
prefer to be in pure play production and remain apathetic towards the distribution network. But there
are some production houses like Aamir Khan Production who have taken the work of the distribution
of movie also.

Distributor:
The largest risk in the chain is borne by the distributers. They buy the rights of the movie from the
producers, usually during the production of the movie itself. There are various parameters that
distributors look before buying the rights of a movie.
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Cost: Being the single largest source of income for the produces, a large amount of money is at stake
during these negotiations. The distributors are at an advantage at this stage though since they have
the number of screens in which they can screen the movie, the number of upcoming movies, when
they would be releasing. He also knows the exact number of sub-distributors he is going to need and
also the hype the movie has in his market. The price is arrived at after hard negotiations keeping all
these factors in mind.
Star Cast: It has been found that there is a strong correlation between the collections of the films and
its star cast. It has been noticed that the Khans and a few other individuals pull larger crowds to the
theatre on an average, making it an important factor inconsideration during fixing the price of the film
Timing: It has been a common practise in the industry to release films around festivals and holidays as
they generate greater revenues.

Sub Distributor:
Though distributors buy the rights for all the territories across the country and for the overseas
business also, it is not feasible for them to manage each region individually and in most cases sell the
rights to these regions to interested local players. These regions also called circuits have different
prices based on the local conditions. These second line distributors are also known as Sub-distributors.
On occasion, producers circuit rights to regional distributors circuit wise directly.

Movie Theatres:
India houses over 10000 movie theatres and the sector is largely unorganized as most of these
theatres are single screens and are highly segmented. In the absence of any large unions, these
theatres dont follow any particular standard and work by their own rules. Though most theatres
across the world have digitalized their operations, only 4500 theatres are digitalized in India while
remaining still rely on the old method of using reels. Large theatre chains such as Cinepolis, PVR, Big
Cinema and others are yet to fully enter tier 2 and 3 towns. In most cases the theatre owners share
profits with the distributors from whom they get the reels.

Business Model
The theatres and the distributors usually share the profits on a 60-40 or 50-50 basis depending on the
negotiations. The right to display and the timings of any movies lies solely with the movie houses and
can decide to stop the display of any further shows of the movie. Incase the distributor insists on the
movie being displayed, they would have to pay for the shortfall of tickets of each show.

Other contributors in the distribution Chain:

Licensing Firms:
These firms play a prominent part in tier 2 and 3 towns. Usually, the movie theatre owners do not
have direct contact with the distributors but instead licensing firms play the part of the mediator here.
They contact several distribution houses and fetch deals for the movie theatres and charge a fixed
commission for the service they provide.
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UFO:
UFO Movies is the digital satellite service that has played a major role in the digitalization of the
movie industry around the world. They have helped the industry by plugging leakages in the system
which used to drain the revenues of the various players in the system.
UFO movies upload the movie onto a central server after taking permission from the distributors. Their
digitalized machines with unique ids are installed in the movie theatres which are in contract with
them. Distributors then get in touch with the movie theatres and finalize the deal, which is then
communicated to UFO. An encrypted copy of the movie is sent to the theatres along with a one time
password making the file usable only once. In case of power cuts, the theatres can ask for an additional
key. Each key gives access to two full shows, one of them is a preview version which does not have
good picture quality and is used only to check if the whole movie is properly downloaded. In cases of
any errors in the download, the theatre owner can request for another file with the corresponding
password. This ensures that the distributor has control and knowledge over the number of shows that
is being aired in the theatres. UFO charges the theatres for the machines on a monthly basis and the
distributors pay to UFO on movie basis.

UFO Movie Server

UFO

The movies are loaded on the server which is linked

with a number of movie theatres.

Download
Download

Once the movie theatre gets in agreement with the

distributor, he can download the movie to its system.

One time Password

License Key

UFO allocates an OTP by which they can run the movie

once.

Non Commercial Users/theatres:

There are some theatres which have not been established for commercial purpose. They do
not charge the audience for the ticket but are instead set up under special conditions like
serving the audience of a particular educational institute or military areas across the nation.
Since audience do not pay any money to the organization, the rights to display are priced
accordingly. It is up to the desecration of the particular distributor to extend his movie to such
movie theatres. The contract is usually based on a fixed amount rather than on a sharing basis.

IIM Indore uses such a facility to screen movies every Saturday in the Auditorium with the
sports complex managing the whole transaction.
The movie theatre is affiliated to the UFO movies. The digitalization has been done by UFO
and the organization pays particular fees per month for the service. As it is a non-commercial
theatre, the organization only pays amount per movie basis, not on the basis of the number
of the seats sold. The institute has contract with Swastika Chitra which is a licensing firm
based in Indore. Apart from the payment for the movies, the firm has to pay the licensing fees
to the firm.

Film Promotion
In theatres

Trailers (these have also been provided to consumers by channels of internet and
electronic media) are a mainstay of film promotion, because they are delivered directly
to movie-goers. They screen in theatres before movie showings. Generally they tell the
story of the movie in a highly condensed fashion compressing maximum appeal into two
and half minutes.
Film posters
Slideshows - stills, trivia, and trivia games from the film, shown between movies
Showtimes.
Standees (freestanding paperboard life-size images of figures from the film)
Cardboard 3D displays, sometimes producing sound

Television and radio

Hollywood movie distributors spend about $4 billion a year to buy paid advertising (30second TV commercials, newspaper ads, etc.) and over half that total is placed on
broadcast and cable TV, which are the main vehicles for advertising movies to audiences.
Rates approved by DAVP (data is for some of the major TV channels)

Product placement: paid active or passive insertion (as on-set posters, and action
figures) of film brand in drama or sitcom shows, or as passing mentions in dialogue. The
film Memoirs of a Geisha was placed throughout an episode of the TV show Medium.[4]
Extended placement: full episodes of television talk shows, entertainment news
programs or network news programs, devoted to compensated exposure of the film,
stars, clips, director, etc.
Vines : 60 second videos
Production and paid broadcast of behind-the-scenes documentary-style shows, the type
of which are mainly produced for HBO, Showtime, and Starz
Advance trailers, longer previews, or behind-the-scenes footage on rental videos and
DVDs

Internet

Virtual relationship hyperlink marketing, wherein a major search engine offers articles
seemingly presenting interesting news related items, but which are actually back-end
loaded with a links page containing multiple "mental references" to film characters,
storylines or products. Example: Bond, Transformers, etc..., are connected to scientific
invention news stories about advanced weaponry or robotics discoveries, which quickly
leads the reader to pages loaded with the latest 007.
Creation of standalone studio-sponsored per-film websites such as "example-themovie.com".
Online digital film screeners: These digital film screeners have the benefit of letting you
send individual copies of your film or a promo to the press, sales agents, distributors etc.
Using them its simple to send individually controlled copies of your film to various
recipients with different expiry dates. Along with the security of individual expiry dates,
you can see reports of who viewed your film and track their viewing of the film.
Viral marketing: free distribution of trailers on movie-oriented websites and video usergenerated-content websites, and rapid dissemination of links to this content by email
and blogs. Includes alleged leakage of supposed "rushes" and "early trailers" of film
scenes.[5] Sometimes, the efforts go further such as in the lead time to the successful
premiere of the film, The Muppets which was preceded by several original film shorts on
YouTube over a number of years while the film was in production.
IMDB listing : Getting an IMDB listing just gives you and your film added credibility
Creation of Internet Marketing campaign using Paid Advertisement and Social Media
Marketing

A survey research of social media marketing on likelihood of ticket sales

(http://digitalcommons.calpoly.edu/cgi/viewcontent.cgi?article=1082&context=grcsp)
Of the participants, 38 were female and 6 were male. The ages of the participants mainly fell into
two groups, 19-25 and over 45. There were 17 and 19 responses in these two groups, respectively

Print

Paid advertisement in newspapers, magazines, and inserts in books. (rates per sq.cm
3800approx Delhi NCR, metros and roughly Rs.500(this rate varies from city to city) for
rest of India)
Cross-promotion of original book or novelization, including special printings, or new
cover jackets.
Comic special editions or special episodes (INR 1200,000 for Inside front or back cover)
(http://www.themediaant.com/magazine/india-today-magazine-advertising)

Merchandising

Paid co-branding (Eragon in American Chopper-two episodes), or co-advertising (Aston

Martin and James Bond films)[6] of a product with the film
Promotional giveaways: branded drink cups, toys, or food combinations at fast food
chains

Promotional tours and interviews

Film actors, directors, and producers appear for television, cable, radio, print & online media
interviews, which can be conducted in person or remotely. During film production, these can take
place on set. After the film's premiere, key personnel make appearances in major market cities or
participate remotely via satellite videoconference or telephone.

BookMyShow Interface between end customer and Movie theatres

Bookmyshow was the first mover in the entertainment e-ticketing market and today it has become
Indias largest online ticketing venture in entertainment industry.

How it evolved?
Bookmyshow is a part of Bigtree Entertainment Pvt. Ltd, India's premiere comprehensive ticketing,
information and analysis solutions provider. It was started in 1999. In early days, they used to buy
ticket in bulk from theatres in advance and then sell this inventory to customers. This used to cause
many problems but the major one was losses due to demand fluctuations. To bridge the gap
between demand and supply they thought of automating the ticket booking system. Around 20022004 they started developing software solution for automated ticketing. They sold this ERP solution
to theatres to help them keep real time track of tickets sold. Soon they used extension of this
software and gave birth to Bookmyshow, an online platform to book tickets for movies.

Business model:
In the distribution chain, Bookmyshow act as a link between end consumer and theatre.
Bookmyshow offers an online platform for users to book tickets for the movie shows at partnered
theatres. It allows users to select their city, movie they are interested in, preferred theatres from the
list of partnered theatres, show timings, preferred seat location and online payment option. It
addition to this it also allows users to rate the movies and view the ratings given by various users.
The platform is linked with the ERP solution of the partnered theatres which allows the company to
manage real time bookings.
Apart from movie tickets, bookmyshow also sells tickets of sports events like IPL matches, F1 races;
award shows, concerts and other events. Movie tickets continues to be major source of revenue for
Bookmyshow. Around 70% revenue is generated from movie ticket sales and remaining 30% from
the sale of event tickets. IPL has mainly helped Bookmyshow to continue its revenue even in off
season of IPL when there are very few movie releases.
The major source of revenue for bookmyshow is from the convenience fee. They charge
convenience fee over and above the ticket price of around 10-30%. The commission fee is based on
ticket price and changes with it. In case of live events and sports matches, Bookmyshow gets higher
commission for each ticket sold (as they helps the event organizers to set up the ticketing
infrastructure). Other revenue streams are revenue from advertisements, promotions, exclusive
ticketing partnerships (Mumbai Indians, Kings IX Punjab) etc.
It is currently funded by Network 18, Chase Capital Partners, SAIF Partners and Accel Partners.

How does it work?

Bookmyshow acts as an aggregator and performs following major functions:
1.

Collate, host & update information & content on events in a city

2.

Render the promotional content on listed events to customer

3.

Manage a portal for customers to book ticket and manage all associated processes around it.

Bookmyshow has partnered with almost all of the multiplexes and many local movie theatres in
Indian market. They currently are operational in around 200 cities in India. The major advantage for
the partner theatres is the access to large user base of bookmyshow.
It has tie-ups with almost all major multiplexes like Big cinemas, PVR, Cinemax, Satyam cineplexes,
INOX etc. It is responsible for marketing and selling tickets for these multiplex chains as well as the
partnered local players. Besides selling tickets, bookmyshow also help partner theatres to target the
right content to right customers using its analytical tools and various marketing initiatives. BMS also
helps the theatres in CRM initiatives to understand customers preferred choice of seats, concession
how often he is buying, what he is buying, his cycle, lifetime value and other soft offerings.

Challenges faced:
1.
2.
3.

Ticket values and therefore margins are lower especially in case of local players.
As one goes into tier II and tier III cities online payment becomes a problem.
Movie ticket pricing is a highly regulated regime with different rules for different states,
and ticket pricing has to be announced in advance to the authorities.

New Initiatives and Future Strategies:

They are focusing on integrating the business. As said earlier, they have started with the rating
system to provide users with an easy access to the movie ratings so that they dont have to visit
other sites to check on the movie reviews.
Recently they have also started merchandising of products built around a movies theme or
characters. They recently implemented this for Star Wars and are focusing on coming up with more
such initiatives.
It successfully signed a deal with G7 (group of 7 theatres in Bandra, Mumbai) and Maratha Mandir,
the iconic 1,000-seater single screen theatre near central Mumbai and is continuing to expand its
partner theatre network.
It had acquired Chennai based online movie ticket seller TicketGreen to expand its reach in south
and is aiming for the same strategy to grow further.
Along with booking tickets, Bookmyshow is also focusing its attention on the generation of user
content through its review platform, the creation of special marketing campaigns for new movies
and data analytics.
It also wants to bring offline users on board through text message-based solutions. It wants to create
SMS-based solutions for class of users who live in cities and dont use smartphones. In addition,
there is a lot of scope for growth in tier-II and III cities. The firm is looking at strategic partnerships to
tap this market.

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Netflix Future of distribution in Movie Industry

Netflix is a global provider of movie and TV show online streaming services. It started as a DVD-bymail service in 1998 and started streaming services in 2007. It has over 74 million subscribers and
operates in over 190 countries. Beginning with House of Cards in 2013, Netflix now produces
hundreds of hours worth of original programming which it releases on its online platform for
streaming. The company spends about $100 million of its annual content budget on original shows,
before obtaining exclusive theatrical content from various production houses such as The Walt
Disney Company and Dreamworks Animation Skg Inc

Distribution of independent films

Distribution system:
Pay TV
Channels:
Netflix is compatible with the following devices:

Amazon Fire TV, Kindle Fire, Kindle Fire HD, Kindle Fire HDX
Android smartphones and tablets
Android TV devices
Apple: Apple TV, iPad, iPhone, iPod Touch
Barnes & Noble Nook Color, Nook Tablet, Nook HD
D-Link Boxee Box(only supports Netflix USA and Canada; not Netflix in other countries)
Google Chromecast can receive a Netflix stream from a supported mobile device or
Chrome
Insignia Blu-ray Disc players and home theatre systems
LG Electronics: some Blu-ray Disc players, TVs, and home theatre systems
Google TV devices
YouView set-top boxes in the UK
Microsoft: Windows 10 Windows 8, Windows Phone, Xbox 360, Xbox One
Nintendo: Wii, Nintendo 3DS and Wii U
Panasonic: some Blu-ray Disc players, televisions and home theatre systems
Philips: some Blu-ray Disc players and TVs
Roku streaming player
Samsung: some Blu-ray Disc players, home theatre systems, smartphones, TVs, and
tablets
Seagate FreeAgent Theater+ HD media player
Sharp: some LED/LCD TVs and Blu-ray Disc players
Sony Blu-ray Disc players, televisions, PlayStation 3, PlayStation Vita and PlayStation 4
TiVo DVRs (HD, HD XL, Series3, Premiere, Premiere XL, Roamio, and Bolt boxes)
Viewsonic VMP75
Vizio: some Blu-ray Disc players and TVs
Western Digital WD Live Plus media player
Yamaha BD-A1020

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Additionally, Netflix also provides the following software support, provided certain hardware
requirements are met:

OS X
Microsoft Windows
Android
Google Chrome OS
TVOS
iOS
Windows Media Center
Windows Phone

Netflix is available over video game consoles such as Xbox and Nintendo, HDTV set models in a
partnership with Vizio and LG, set-top boxes such as the Netflix Player by Roku and various handheld
devices as listed above.
Netflix also has a key role to play in the distribution of independent films.

All Episodes at once:

Based on a survey that showed that users of Netflix like to binge watch TV shows and series, Netflix
decided to release all episodes of a season of original shows at once.

Sales management system:

Social media promotions:
Netflix engages in a wide variety of social media promotions in order to keep customers engaged
and aware of recent schemes and promotions. For example, the following are images of the
promotions for Christmas (promoting Bill Murray films) , and the decision to release entire seasons
at once:

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Profiles:
Profiles on Netflix allow up to five users (say, members of the same household) to have their own
personalized experience, built around the movies and TV shows they enjoy. Each Netflix account can
have up to five different profiles. Each profile has its own personalized recommendations, recently
watched lists, ratings and reviews etc.

Personalized video recommendation system:

Netflix has an extremely personalized video recommendation system with over 80,000 micro-genres
that allows the company to offer hyper-specific content to users in the Recommended for You
section.

Promotions:
Netflix has various promotional offers available to get first time customers to try out their
subscription services. This includes the Free one month trial scheme, various coupons for Free
Subscription (6 months, one year etc.), Free Credit coupons, free coupons for trial with Dish etc.. The
reason is that they only need to acquire customers once, and then they can keep charging customers
for their services every month in the future. The one month free trial enables the user to instantly
watch unlimited movies and TV show episodes over the Internet on any Netflix enabled device or
over the computer.

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