Film processing and printing, exhibition, digital projection, film financing and production. Manmohan Shetty, managing director, Adlabs Films Limited, has quite a few irons in the fire. The flagship film processing business ensures a steady flow of income, but Shetty isn't content with cornering the bulk of the film processing pie. So, since going public in 2000, Adlabs has embarked on an ambitious expansion plan that has seen it diversify into allied areas. "We would like to grow into a complete company in the entertainment space," is Shetty's vision for the integrated enterprise. Seated in his plush office at Film City, Goregaon, Shetty took Viveat Susan Pinto of agencyfaqs! through his company's growth plans, and shared his thoughts on some of the larger issues plaguing the film entertainment industry...

Q. From a film-processing laboratory to interests in printing, exhibition, digital projection and production of films, Adlabs has come a long way over the last twenty-five years. How would you assess its performance so far? While film processing is still the major revenue generator for Adlabs, are you actively looking at other sources of revenue?

A. In terms of film processing, Adlabs corners 65 to 70 per cent of the market. And let me tell you that it is difficult to grow beyond that. Which is why we diversified into other areas, namely, multiplexes, funding and producing of films in Entertainment One, and digital projection. Again, this is not all. We have other areas to explore as well. For instance, we do not have processing facilities in south India. We are looking at having such facilities in cities such as Hyderabad and Chennai. Also, we are looking at distribution.

Having said that, our growth will be fuelled primarily by the multiplexes and production businesses, while in the area of digital projection, we have joined hands with Subhash Ghai's Mukta Arts since September 2003.

Q. Speaking about digital projection, how will you ensure a simultaneous release of films in B&C class centres along with the metros? Are you confident of a minimum amount in collections, considering B&C class centres are not exactly cash rich in nature?

A. The idea is to take advantage of increased occupancy levels by showing a film in the first week itself. Unlike in the past, awareness levels about the release date of a movie today is much higher in smaller towns and areas, and we intend taking advantage of this trend by installing digital projectors and ensuring that the movie is on display in the first week itself.

This way, people in B&C class centres are encouraged to frequent theatres, rather than watching pirated copies of movies or visiting video parlours. We are banking on the fact that if occupancy level in a given theatre is, say, 20 or 30 per cent, with an enhanced viewer experience coupled with on-time release, occupancy levels should at least double. Which means that 20 per cent becomes 40 per cent, and that extra 20 per cent should go towards covering our equipment costs, apart from providing revenue.

Q. What is the investment like in such a venture?

A. Per theatre the investment comes to Rs 9.5 lakh. So far, 75 cinemas have been digitised, and at this point, we would like to take a break and review the situation before going forward with further digitisation. Of course, our initial target, when we started, was between 300 to 400 cinemas. But at this point, we would like to see how the present lot is performing before we go forward.

Q. Where have you concentrated your energies in terms of digitisation?

A. Cinemas in the present lot are mainly centred in Maharashtra, Gujarat and Delhi. We haven't moved to other areas so far.

Q. Sahara is looking for a 20-30 per cent stake in Entertainment One. The proposed revaluation, excluding the Aamir Khan-starrer The Rising, was to happen this month. What's the score on that front? Are you hopeful of a positive outcome?

A. The revaluation hasn't happened so far. It will take some more time.

Q. 2003 saw Entertainment One deliver a hit in Prakash Jha-directed GangaaJal. What plans do you have for the subsidiary this year? Any particular genre you intend concentrating on in terms of delivery of hits?

A. We are capping a certain amount in Entertainment One, which is around Rs 18 crore. This way, we can get involved in more films for the same amount and divide our risk. Again, we are not interested in big-budget movies. We are looking at medium-budget films, whose production cost is roughly around Rs 7-8 crore. I am not saying that we would like to look at films with a budget of Rs 2-3 crore. We just got involved with two such projects, that is, Main Madhuri Dixit Banna Chahti Hoon and Inteha, and our experience has not been so fruitful.

We would like to get involved in films with a certain budget and divide the risk. This way, we are at least not losing capital. For instance, we are jointly producing Govind Nihalani's Dev with Applause Entertainment, and Vipul Shah's Waqt with Eros Entertainment.

Q. Dividing risk also implies that decision-making is collective. Are you prepared for it?

A. I don't mind it. There will come a time when you want to make a larger budget movie, and the risk has to be shared. Again, when introducing new talent, I may not want to go independent on the project because I cannot sell it. However, when three people come together and take a gamble on it, the risk is shared. Growth in the industry will come when new talent is introduced in the form of fresh faces and filmmakers, not by producing love stories with actors over forty years of age. Fortunately, there is no dearth of girls, but boys are a problem. There are no heroes or leading men who can shoulder the responsibility of a film and grow the industry.

Q. The NRI markets are as lucrative for an Indian film as the domestic market. As a player in the production space, do you have plans for executing projects that are 'crossover' in nature?

A. What 'crossover' actually means is whether the goras or whites will see an Indian film abroad. Indians seeing such a film in the US does not mean that a film is a 'crossover'. We tend to take exceptions as examples. Bend It Like Beckham and Monsoon Wedding were exceptions. For the last three years, we have been talking about these two films. What about the others.

The Rising should be the right 'crossover film' because it is an Indian production, which has an English as well as Hindi version. Lagaan would have been a crossover film. Not Bend It Like Beckham and Monsoon Wedding. Those were not made by filmmakers residing in India. Why are we even counting them as Indian films?

Q. Multiplexes are another ambitious venture for Adlabs, and there's a national plan on the cards. But with overcapacity and a reduction in ticket prices being a constant threat, how will you ensure that it is a viable business operation despite the tax holiday?

A. It is difficult to predict what will happen tomorrow. Remember, the entertainment industry will always be there, whatever the changes at the ground level. If multiplexes do not work, they could always be stand-alone theatres in a few years from now.

Q. What are your revenue projections for the multiplex business this year?

A. We would be putting around Rs 10 crore or so every year for making 7-8 screens because that is the cash profit we are making with the existing investment, and this amount can be ploughed back into the industry without debt. An extra screen could mean that I go into debt. Hence, it is difficult to plan and project at this point.

Q. Adlabs made an operating profit of Rs 28.32 crore in March 2003 - on sales of Rs 74.07 crore - which is significantly higher than the operating profit of Rs 17 crore earned the previous year. What are your targets for this year?

A. We should see a jump of 15 per cent in operating profits this year.

Q. What are your views on the convergence of the entertainment, information and telecommunications segments, as well as the rapid de-regulation in the industry?

A. I think it is a little too early for this synergy to happen. Unless people start thinking about it, it won't happen. It is in the process of happening, but nothing great is going to change in the next two to three years.

Q. But the synergy is visible in the fact that consumers can watch movies or trailers and get cricket scores on their mobile phones.

A. Yes. It is happening. But what I mean by 'synergy' is when one is able to use Reliance fibre optic cable to show a movie in a theatre. In other words, one can directly link up to a satellite and watch a movie in a theatre. That is probably the ultimate in distribution, which is still a long way off. Unless one doesn't think on those lines, it will not happen.

Q. How have the consumption patterns relating to entertainment changed over the years?

A. The point is that when a consumer purchases a ticket, he or she should get his or her money's worth. The filmmaker could make the consumer laugh, cry or scream. The point is that he or she would like to be engrossed in the experience of watching a movie. For that, it is essential for the filmmaker to know what the consumer would like to see today or tomorrow, and write scripts accordingly, today. Right now, for that matter. Whether more multiplexes come up or not is not the point, these merely enhance the viewer experience. The point is there have to be more successful films for viewers to watch because that is how the industry will grow.

In the end, monies come from the box office, sale of music and television rights, and these revenue streams are tied to the success of a film. Filmmakers and scriptwriters should have their fingers on the pulse of the population to gauge what will work today as well as tomorrow, and not produce rehashed versions of some film gone by. That is not how the industry will grow. Unfortunately, filmmakers are not investing their time and energy in better scripts, which worries me. It is a genuine problem.

At a broader level, however, there is an awareness of this malaise that has crept into the industry, and on big-budget projects, care is taken to avoid duplication. Having said that, one still sees a general lack of interest to evolve or do something different.

Q. What are the key areas where more investment is required to fuel growth in entertainment?

A. Investment is required in multiplexes and film production, not distribution.

Q. Despite major changes in the industry, reliability on the distribution network still persists. Timing is highly crucial in both the music and film industries. Are the distribution networks in India comparable to global standards?

A. Distribution is no issue at all. It is just a word thrown around often. As a producer, I could still approach an exhibitor for my film without touching base with a distributor. Every filmmaker knows when he should do what. There is an industry pattern in this regard and most stick to the trend.

Q. Finally, what steps could the industry take to curb piracy?

A. There is no solution to piracy. It has grown so big I say do not try to fight it. Use technology to reduce it. For instance, digital projection is one such area that can help reduce piracy. Cable TV operators, video parlour owners will continue to show pirated movies. The point is, try and keep pace with technology to beat them.

January 19, 2004
You can write to Manmohan Shetty at
mshetty@adlabsfilms.com