Battle between films and tele-dramas

My friend, a magnate in the film industry, was outraged. “These damn tele-dramas have destroyed our local film industry,” he said, still beaming with fury. “The government should either ban them or tax them heavily so that they would pack up and go.”
“Why do you say so?” I asked him. “We had a good and regular film-going population before TVs came here. Now, our film halls are empty. We can’t run a film even for one week. So, everyone has left the film industry and instead embraced the tele-drama industry.”

I waited till he calmed down. I felt that he had been genuinely concerned about the plight of the local film industry after the advent of TVs. The earlier film-going population has now been confined to homes. Their homes have now become centres of entertainment.

“Your problem has arisen because of the superior business model used by the tele-drama industry. Instead of following the same old model, you should also change your model,” I said. He looked at me quizzically. I started to explain.

“You’re a direct seller of your product. Just like a coconut producer selling coconuts to consumers. You break the film into parts in the form of tickets. Each ticket entitles a buyer to a seat in a film hall to watch your film. You can play this game up to the capacity of the film hall. Nothing more. So, your market is restricted to the installed seating capacity of film halls. It’s a very small fraction of the total population of the country. As a result, even if you want more people to see your film, you can’t get them to do so.”

“How does the tele-drama industry sell its products?” he asked. “They aren’t direct sellers,” I answered. “In fact, they don’t sell it to consumers at all. There, the market is a little different and inverted. Tele-drama viewers don’t buy a product at all. Instead, they get themselves sold to sponsors of tele-dramas through the TV channel operators.”

He looked at me as if he couldn’t understand the operation of this peculiar market. “In the business model of tele-dramas, there’re four parties. Tele-drama producer, TV channel operator, sponsor or advertisers and the TV viewer. It’s the TV viewer who ultimately enjoys the tele-drama and therefore, he’s the final consumer. But, it’s not he who pays for the tele-drama. It’s the advertiser or the sponsor who pays for the tele-drama. How it happens is that the channel operator sells the viewers as a group to the advertiser and the advertiser pays a bigger price if the group of viewers is also larger. In other words, viewers unbeknown to them, sell themselves to the sponsor through the channel operator by voluntarily agreeing to switch on the particular channel. So, he has no cost, only the pleasure. In the case of a film, there’s a direct cost to the viewer and if that cost is prohibitive, he wouldn’t watch the film”

“Amazing!” He said. “I didn’t think of that aspect earlier.” “Yes, it’s a little amazing,” I agreed. “The beauty of that model is that the sponsor or the buyer has an enormous buying power and the marketing of the tele-drama is done, not by the producer, but by both the channel operator and the sponsor. So, unlike your films where buyers are scattered and it’s costly to reach all of them effectively, tele-drama producers don’t have to incur any marketing expenditure. So, their total cost is much lower.”

“But the viewer who sells himself to the sponsor has to stomach the bombardment of advertisements by the sponsor. So, his total pleasure is reduced significantly,” he intervened.

“That’s true,” I said. “What the sponsors would do is to make the advertisements look like very short tele-dramas. So, viewers would watch not only one long tele-drama, but a number of short ones as well. In that way, they don’t feel any reduction in their pleasure.”

“I now understand. Our business model is defective and our costs are higher. So, we can’t compete with tele-dramas,” he confessed. “Not only that. From the point of view of film-goers, there’s an additional cost of time and traveling, because he has to go out to watch the film. A similar cost is not involved in tele-dramas. There, the product is delivered to the house of the viewer. So, his additional inconveniences and costs known as transaction costs are much lower.” “What can the film industry do to overcome them?” he wanted to know. “A lot,” I said. “First, instead of relying solely on film halls to deliver the films to viewers, you should try to use modern technology such as DVDs or CDs to make them available to a larger audience at low costs. You could also have open cinemas in which people could also dine, whilst watching the movie. Then, there’s the necessity for producing films to the global market, so that the limitations of the small domestic market can be overcome. That’s what both Hollywood and Bollywood have done. They earn millions of dollars by producing films to the global market.”

“We’re a small nation. So, we can’t think in terms of the global market.” He drew my attention to a different problem we’re facing.

“But, South Korea didn’t think that way. They deliberately encouraged their film producers to produce for the bigger East Asian market in both Japan and China. Today the film industry has no competition from TV. You should also do that. Initially, you could have joint productions with Bollywood, so that you could penetrate the bigger South Asian and the Middle-Eastern markets. Therefore, you shouldn’t have objections to Indian movie stars playing in local films and Indian technicians working in the industry.

They’ll train our artistes. That would clear the path for you to produce for the bigger global market,” I told him. “The bottom line….,” I said, “is that business models need changes and new marketing strategies need be adopted, if one wants to succeed in the market.”