My recent obsession with South Indian movies has brought me to a point of writing a 1300 word article on the economics of adding subtitles to South Indian movies screened outside South India which have ‘A’ listers in the lead role.
South Indian film industries have made some really amazing movies since they started. Nayakan, a Tamil movie directed by Mani Ratnam in 1987 staring Kamal Haasan was one of the first Indian movies to make it onto the Time’s All-Time 100 list.
Of late South Indian movies have been gaining a lot of attention. With improved story lines, production quality and direction, south Indian movies are setting new trends in film making. We find a lot of Bollywood movies like Drishyam being inspired by South Indian movies. There also exists a huge Hindi speaking population in the heartland who like the sense of humor and the story line in most of the ‘typical’ South Indian movies. This has given way to a new segment where these movies are dubbed into Hindi and then played. Some on the national movie channels find it more profitable to play such movies all day long as compared to Bollywood movies. Bollywood and regional film industries are experimenting with launching movies in dual languages. Movies like Rakta Charitra, Bahubali are joint productions showing an evolution in the industry interactions.
Given all these developments, there is a lot of interest in South Indian movies among people who don’t know the language. Hypothetically, if a person were keen on watching a South Indian movie and doesn’t fully understand the language, his/her options are to watch it with subtitles or watch a dubbed version. Very few movies are dubbed into other languages. Of late, some of the movies have been dubbed into Hindi to cater to the large audience in the Indian heartland.
As theaters don’t screen these movies with subtitles, the only option is to torrent it or buy a CD. Let us understand the cost difference in these two scenarios. A typical Blu-Ray disk would cost around Rs. 999 , while the cost of torrenting the movie is Rs. 33.57 (Just the per unit cost of the internet plan multiplied with the file size). The cost difference is large enough to incentivice people to torrent the movie. The primary reason is, that the makers of the movie are selling only a CD. They aren’t selling the whole experience of the movie, but only a part of it. So apart from cost, there is not real difference between downloading the movie and buying a CD.
A better way to rake in additional revenue would be to target these frontier/fringe customers. A low cost solution could be to add English subtitles to these movies which are being telecast outside the home state. Here the suggestion is outside the home state and not South India as there is a large audience in South India that would love to watch these movies who don’t understand the language completely to appreciate the nuances in some critical dialogues. And outside South India are us, South Indians who would willingly pay a premium (the cost of the movie ticket) to experience the movie and not just watch it.
Let us understand the cost dynamics of the subtitles. By nature, it would be a fixed cost. Money is anyways spent on creating the subtitles for the CDs. So really, the cost we’re talking about is the extra cost which maybe incurred on adding it to the film while it is being screened at theaters. However, let us go with the most extreme scenario where subtitles have to be made from scratch.
First, let us look at cost per customer. Let us say the cost incurred in creating the subtitles is Rs. X. In the first year there are say 1000 people who watch the movie. The cost per customer would then be – X/1000. The revenue would be cost of the ticket multiplied with the number of additional viewers (1000 in this case). Now these people love the movie, walk out and tell 5 people that the movie was amazing and that they should watch it. Some part of this crowd would want to watch the movie. So the cost further gets divided. This is the case with one movie. Over a period of time, once this trend catches up, there will be sizable additions to revenue with marginally zero additional cost per customer (as the audience would be so large that the cost would tend to zero).
Here, let us introduce the concept of strategic fit and complementarities. At the moment, I am studying about economies of scale in my business strategy course at college. Some of the concepts in the horizontal boundaries of a firm got me thinking about these subtitles, so bear with me while I also cover the theory here.
I am going to quote a lot in this para as being an economist I truly believe in comparative advantage. When someone can do something better than me (and has), that ‘something’ being an explanation of the concepts, why should I spend time doing it again? Economists use the word economies of scope to describe the “synergies enjoyed by a firm that produces an array of complimentary products and services”. These practices “display complementarities when the benefits of introducing one practice are enhanced by the presence of others”. In business literature, this is known as “strategic fit”. David Besanko and his fellow authors, in their book Economics of Business Strategy state “Strategic fit among processes is essential to firms seeking a long-term competitive advantage over their rivals. Through strategic fit, the “whole” of a firm’s strategy exceeds the “sum of the parts” of its organizational process Moreover, it is difficult for other firms to copy the strategy because they would have successfully copy each individual process”.
So now that we’ve familiarized ourselves with the theory, let us apply it to the context. By adding subtitles, these movies are able to tap into another market segment which would not have been possible earlier. This has a direct impact on revenue. Other competitors (the non A listers’ movies) cannot copy this successfully as they lack all these elements (The A listers!!! And of course the plot, ‘A’ lister Director, and so on). Hence, it creates a sustained advantage in the long run.
There is one concern here. The impact of subtitles on the existing customer’s experience. A survey conducted indicates, 69.99% of the participants feel that adding subtitles would either have a positive impact or would have no impact on their movie experience. 100% of the participants who live outside south India felt adding subtitles would have a positive impact on their movie experience.
Now let us look at some other dynamics. As people keep watching these south Indian movies, they will learn the language. This could create incentive for them to watch other movies of the same language. This is good for the whole industry and the audience base increases and it doesn’t happen at the cost of the ‘A’ lister’s movies. They are ‘A’ listers after all! Their movies are amazing most of the time!!
In all this, there may be a hidden opportunity to avail some “grants” from the government for increasing the awareness about the state language and culture thereby benefitting the state’s citizens.
So when you look at something as simple as adding an English subtitle to a movie, it could have a lot of impact.
 Disclaimer: This is only a hypothetical scenario and not a declaration of using torrents. That is a separate issue.