Ideological Mismatch

The Walt Disney Company India CEO, Siddharth Roy Kapur, has been consistently denying that the parent company has decided to write-off the Indian studio business. Employees working in the Indian arm of the entertainment conglomerate, though, are openly talking about the studio's imminent closure.

In fact, the news doing the rounds is that Andy Bird, Chaiman, Walt Disney International, The Walt Disney Company, is expected to travel to India to make the announcement.

So, what could have gone wrong? Why would The Walt Disney Company want to write-off a Rs 2,000 crore investment it made to essentially fulfil its Bollywood ambitions? Disney had acquired UTV Software in 2012, which apart from its studio business, was also into TV broadcasting (UTV Movies, UTV Action, Bindass etc) as well as gaming. The studio business contributes over 50 per cent to the revenue of the Rs 1,500 crore company. But the studio arm is known to have accumulated losses of over Rs 300 crore.

Industry observers attribute the failure to a huge ideological mismatch between Disney and UTV. Disney's vision at the time of the acquisition was to create locally relevant content across multiple platforms, which would reflect the local consumer's habits and tastes, and at the same time be in line with the core values of the company.

In order to truly connect with the Indian masses the obvious route was Bollywood films and certainly not through its then Rs 100 crore kid's broadcast network. The plan was to take forward the Walt Disney ethos of creating intellectual properties and building franchises, much like the way it has done with Jungle Book, Avengers or Star Wars.

When Disney decided to acquire UTV, the company was far from being profitable (in fact many even claim that had Disney not bought it out, promoter, Ronnie Screwvala would have had no option but to file for bankruptcy), but it did have an impressive list of successful films like Rang De Basanti, Jodha Akbar, Kai Po Che!, etc. to boast about. It also had an equally strong slate of upcoming films.

However, post acquisition, it is this very slate of films that led to a mismatch. Unlike Walt Disney, which believes in having complete control of the intellectual property rights of any film it produces, UTV's model was one of co-production. It mostly acquired films from production companies and thereafter invested in advertising and promotion and also distributed them. Since very few of the films were co-produced in the true sense, with the studio playing a role right from the script stage, the studio got limited returns. For instance, if a film such as Yeh Jawani Hai Dewaani -- co-produced by Dharma Productions and UTV -- earned around Rs 100 crore revenue, UTV would have earned at the most Rs 20-Rs 30 crore, when the acquisition cost of the film would have been in the range of Rs 50 crore - Rs 60 crore.

A model such as this didn't work well with The Walt Disney Company, which doesn't believe in the concept of co-production.  After having acquired creative giants such as Marvel, Lucas and Star Wars, the company firmly believes in having full control of the entire value chain and thereby owning the IP. The only film that the studio has co-produced recently is Big Friendly Giant.

"Soon after the acquisition, which opened a Pandora's box, the parent company realised that the studio did have a pipeline of films, but it owned the IPR of none. For most of them, for instance films such as Kick and Highway, the studio merely had theatrical rights. The only film in which the studio probably had a more intense involvement was probably Mohenjo Daro, which was being co-produced with Ashutosh Gowariker," remembers a former Disney India employee, who claims that the parent company pressed the panic button soon after the acquisition happened.

This, he says, would have triggered the exit of Ronnie Screwvala, who had maintained that he would stay with the company for at least five years post the sell out in 2012. In fact, The Walt Disney Company's Chairman and CEO, Robert A. Iger, is known to have made two hush-hush visits in 2013 to take stock of the situation.

After Iger's visit, the global Disney team at once took charge and took a few hard calls. Apart from films such as Mohenjo Daro (in which the company has invested close to Rs 140 crore but has managed to earn a meagre Rs  65 crore) and Dangal, which were already greenlit, the studio decided to refrain from acquiring films outrightly from production companies. It was decided that they would at the most be involved in theatrical rights and that's about it. "This created a problem because production companies were not prepared to give a fair share to the studio, unless it was an outright acquisition. Sajid Nadiadwala, for instance, does his own deals right from selling music and satellite right. Therefore, unless it is an outright acquisition, he will never agree to give a studio its due just for theatrical release," explains a senior film industry expert.

No wonder, in films such as Baaghi or even PK, which earned huge sums at the box office, Disney India's  returns were in the of 5-10 per cent. In fact, the highest grossers for The Walt Disney Company India in the last one year have been films such as Jungle Book (which earned Rs 200 crore) and Captain America Civil War (which earned Rs 75 crore), which were part of the studio's global portfolio.

In line with its ethos of creating IP and building franchises, the parent company declared that it would produce only Disney branded films, which were to be based on the broad framework of being 'uplifting, heart-warming, family entertainment, loaded with values'. Here again, the studio, says this former Disney employee, has been challenged to get the right kind of script. The studio so far has come up with two Disney branded films, Khubsoorat and ABCD2. While the former was a moderate success, the latter was a success with a box office collection of Rs 100 crore (the cost of production was Rs 60 crore).

The biggest challenge that Walt Disney India is facing is its over dependence on film production  companies. According to yet another former Disney India employee, apart from the bouquet of kids channels which are profitable, the rest of the broadcast bouquet-with channels such as Bindass, UTV Movies etc-is also far from being profitable.

The company also ventured into the live entertainment space last year, with the launch of the Disney theatrical, Bold and the Beautiful. However, the big news is that the parent company's decision to write-off its Bollywood investment. Industry observers say the studio hasn't greenlit any film for 2017. Post the release of Mohenjo Daro earlier this month, the other two films slated for release are Dangal and Jagga Jasoos.

The other news doing the rounds is the exit of Disney India MD, Siddarth Roy Kapur and his core studio team.

So, does it mean the end of the road for The Walt Disney Company's Bollywood journey? Industry observers say that Disney enters a market with a long-term vision. They firmly believe that the company would take a short break, get its act together and reboot its Bollywood ambitions sooner or later.