Adlabs wants to be the sole vendor for Indian films in the US

The Anil Dhirubhai Ambani Group’s Adlabs Films did what every other big-conglomerate company was doing. When the going was good and the money cheap, it made aggressive acquisitions in the movie exhibition business in the US, leasing out chains of theatres from coast to coast. So, as India based conglomerates struggle to keep their new acquisitions viable in a recessionary environment, is the entertainment wing of the ADAG any different? DNA caught up with Anil Arjun, CEO of Adlabs Films, for his views.
Excerpts from an interview:

How is the US business doing and was the move prompted by pure business calculations or by glamour?
Today, 170 of the total of 440 screens that we run are in the US. The film exhibition business contributes around 50% to Adlabs’ revenues (after the recent spin-off of the radio division). Film exhibition is the only retail business that is growing in the US. The US box office has grown 15% in the first half of 2009, including a 5-6% hike in ticket prices.

What is your business model in the US?
Except one or two, all the theatres are multi-screen facilities. We have targeted areas with large South Asian populations and about 40% of our exhibitions in the US are from India. Today, around 25% of the collection for a Hindi film comes from outside India. Out of this, for a film like Ghajini, 28% of their total US collection came through our network of theatres. Our intention is to provide a single vendor option for Indian film producers who want to reach the two million South Asians in the US. That said we also cater our offerings according to the neighbourhood. For example, in Chicago, we have seen that Polish and Korean films tend to do well due to the demographic make-up of the area in which we have our multiplex.

How much have you invested in the US exhibition venture?
We have not revealed the initial investment, partly because these transactions were done with different chains at different times. But as of now, we are engaged in renovating the 170 screens spread over 27 properties in 25 cities. The total investment in this — upgrading the toilets, putting in better food and beverages stalls etc — would be around Rs 32-35 crore.

Do you have similar plans for entry in other markets?
Two weeks ago, we entered into a branding agreement with Pathe Cinemas in The Netherlands to brand three screens in The Hague, Rotterdam and Amsterdam. These are screens located within multiplexes run by Pathe and I think, in Europe, you are likely to see us take a similar approach, rather than leasing entire multiplexes...In fact, there are several markets where the Indian diaspora is present in sufficient numbers, but there is no organised flow of Indian movies to these places. That said, we will always work on a revenue-sharing formula and will not take the responsibility of marketing a film and making it a success. That will help us maintain the flexibility in catering to the needs of the neighbourhoods we operate in.

You have recently exited the film production business and are now confining yourself to producing only TV shows. Does that mean you are seeing less potential in the film industry?
Not at all. We have only decided that we will not produce films, i.e, we will not put in the risk capital. However, we will very much be present in all the other areas of film production as a service provider. Even now, around 40% of our revenues come from film-related services.

Besides the staple film processing, we have inaugurated our media BPO business near Pune in May. Though we have started out with one contract, from the National Film Archive of India, we are actively scouting for similar contracts, including from the US. We intend to raise the headcount there from 300 to 1,200 by June next year. We are also exploring if we can also use our presence in the US through Lowry Digital, which has already restored more than 400 films. Besides this, we are also focusing on the film production infrastructure market — such as renting out lights, camera and studios.

How big is the film infrastructure market in India and what are your targets?
The market is very big. For example, Bollywood makes around 150 films a year and, on an average, each film spends around Rs 10-15 crore for production alone, excluding the expenses on talent. We generate only around 25% of our revenues (equivalent to around Rs 160 crore) from this business and we are by far the biggest player in this business.

So, this is a highly fragmented market. Traditionally, each cameraman brings his own camera, but this is changing along with advancements in the exhibition techniques. Nowadays, multi-camera shoots and other advanced shooting techniques are becoming common and the demand for equipment can only be met by organised players like us.

In this direction, the first phase of our two lakh square feet studio in Goregaon (in Mumbai) will be ready in October. Once finished, it will be the largest such facility in India and will be able to accommodate eight simultaneous shooting crews.