Rising costs and audience fragmentation have reset the relationship between Bollywood and one of its key customers – Hindi broadcasters.

What was recently a seller’s market, with TV companies vying for hit movies in the battle for ratings, has now tipped in favor of the buyers, who have recalibrated their approach.

Prices and audiences were diverging, prompting broadcasters to take action, noted analysts from Media Partners Asia (MPA), writing in the latest edition of MediaRoute26 India, an industry research and analysis digest.

At the market peak, some TV rights deals were inked before theatrical release, although few movies delivered on expected audiences, who now have more channels to choose from on TV.

Today, many contracts include a performance component, sometimes with a minimum guarantee. The ratio of box office takings to rights costs for the year’s five biggest hits dropped 24% between 2013 and 2014, MPA analysts calculated.

Smaller movie channels, meanwhile, are steering clear of competition for recent titles by targeting older audiences. Networks are also defraying costs for recent hits by airing them on general entertainment channels, where rates are higher.

One large broadcaster, Star, has also tried dealing directly with Bollywood talent, signing five-year deals with two leading men, Salman Khan and Ajay Devgn, in 2013.

A POPULAR GENRE

Hit movies are important ratings drivers for Hindi movie channels, which tend to air 10-12 premieres each year. The bulk of airtime is given over to repeats, with libraries holding around 1,000 titles.

Nonetheless, movie channels remain popular among a broad range of demographics, and are often used as a cost-efficient way to make sure ad campaigns are seen by enough people.

Last year, Hindi movie channels attracted US$215 million in ad spend, according to analysts from MPA. That makes Bollywood the third-biggest Hindi TV ad medium after general entertainment and news.

Two major Hindi movie channels, Sony Max and Star Gold also air sporting events, shoring up ratings. In terms of reach and viewing time, Sony Max led the genre in 2014, followed by Zee Cinema, with Star Gold lying third.

Ties between channels and studios can evolve further, MPA analysts argued, highlighting the ability of TV networks, which operate on smaller production budgets, to experiment with new content themes and characters.

Success can be expanded into bigger franchises, present in multiplexes as well as people’s homes. Meanwhile, TV networks such as Star, Disney-UTV and Viacom18 have also expanded into movie production.

Relatively few films in India have been inspired by other media, from classic novels to comic books, indicating a greenfield opportunity waiting to be tapped.

“The need of the hour today is to establish a more symbiotic relationship between TV and movie studio verticals,” MPA analysts wrote.

“The economics of Hindi movie channels can no longer be seen in isolation. Content investments and monetization need to be anchored to a TV network approach.”