“There are two primary forms of entertainment in India,” Sunil Khaturia says. “Cricket and the movies.” Khaturia, who is senior vice president of Mumbai-based Scrabble Entertainment, Pvt. Ltd., is sitting inside a Bollywood screening room, the vibrant colors of the hit film Son of Sardar splashed across an enormous screen along one wall.
While the game of cricket hasn’t changed all that much over the past 200 years, the movie business is nearly unrecognizable from just five years ago. Nowhere is the transformation happening faster today than in emerging markets such as India and the Middle East. And no one is better able to explain why than Khaturia and his colleagues at Scrabble.
Take Son of Sardar, for example. As Khaturia speaks, the film is showing on more than 2,000 screens around the world en route to a net $20 million in its first four weeks of screenings — numbers once unthinkable for a Bollywood release.
What’s the secret? Great action sequences, sure, not to mention powerful marketing. But you could argue that the true star of so many recent global hits is this little company you’ve never heard of until now, named on a whim after a board game.
Let’s go behind the scenes of the movie business to understand why — and what more exciting place to start than right here in Bollywood?
The Digital Divide
Remarkably, even though Son of Sardar was a worldwide hit, not every theater around the globe was able to show it.
As Hollywood and Bollywood studios have abandoned cumbersome, fragile celluloid prints for digital, cinema owners in places like the Indian subcontinent and the Arabian Peninsula have been challenged to keep up. The prohibitive cost of digital projection systems — $50,000 per screen and up — makes it incredibly daunting, especially for family-owned cinemas in a business environment where investment capital is limited. The shift is arguably the biggest in the cinema business since silent film gave way to “the talkies.”
Enter Scrabble, the brainchild of Khaturia’s boss, CEO Ranjit Thakur, a Mumbai-based entrepreneur with deep roots in entertainment. The screening room we’re sitting in with his team is inside Scrabble headquarters, which since 2008 has been a central force in helping the biggest studios and the smallest cinema owners alike capitalize on the new era of digital cinema.
Scrabble’s business model is deceptively simple: Sign Hollywood and Bollywood studios and distributors to a Virtual Print Fee (VPF) contract to ensure a stream of box-office-worthy content. At the same time, subsidize, install and manage state-of-the-art digital projection systems for cinema owners in exchange for their subscriptions.
It’s the classic model of giving away razors to sell the blades — or, in this case, content. Scrabble has signed agreements with cinema owners and major studios around the world, and is supporting its global business network with new offices in Dubai, London, and Burbank, Calif.
Yet Scrabble is about more than making a fast buck from flicks. The company has a commitment to connecting studios to moviegoers while easing the transition from analog to digital for cinema owners. Think of it this way: They’re in business to help other businesses succeed.
“We want to help [cinema owners] make the digital transition for the lowest possible expense,” Thakur says. “It’s that simple.”
Cinema owners love the Scrabble partnership. “Scrabble has absolutely helped my bottom line,” says Karan Anand, director of Al Nisr Cinema Company, which operates a number of theaters in the Middle East, including Lamcy Cinema in Dubai. “It boosts our box office in a number of ways, including new revenue from alternative programming like pay-per-view sports and events.”
Scrabble, for its part, keeps discovering that success breeds success. For example, the more theater installations it does, the more it’s able to leverage volume discounts on procurement.
“It’s a win-win for everyone,” says Pruthu Shah, head of Scrabble’s Middle East Region. Shah worked closely with Anand to digitize Al Nisr Cinemas and loves nothing more than seeing customers lined up to buy a ticket and some popcorn at Anand’s theaters. “The studios are very happy with us because, in a way, we’re digitizing entire regions for them.”
Lights, Camera, Delivery
You might imagine that a studio could deliver a feature film to an exhibiting cinema the same way you send a home video to your aunt Verna: over the web with the click of a mouse. It turns out, however, that movies’ massive file size — some as large as 200 GB, nearly the size of your computer’s entire hard drive — make the web prohibitively slow and expensive for content delivery.
So, unless your theater has a direct satellite connection, the Skyfall showing at your local multiplex has to begin with the physical shipment of an encrypted hard drive to a point of distribution. And that’s exactly what Scrabble does, every single day of the week.
As you can imagine, timely and secure hard-drive delivery — hundreds are shipped all over the globe to support the launch of a single film — is critical to the Scrabble business. The company has turned to FedEx Express for nearly its entire worldwide logistics operation.
Dependable overnight shipping and streamlined customs procedures in places like Dubai allow Scrabble to get even the biggest Hollywood blockbuster into cinemas around the world in time for opening weekend. Pre-alerts from FedEx allow Scrabble to manage its release schedule down to the precise minute, which is critical when late-arriving content from the studios puts Scrabble in a tight spot.
A Movie Every Three Weeks
Fifteen minutes away from Scrabble headquarters, in a shiny office building overlooking the Western Express Highway in Mumbai, is a classic Scrabble customer: Viacom 18 Motion Pictures. It produces one to two Hindi films locally every month — and has a deal to distribute an additional Hollywood film or two throughout India every month for Paramount. As a result, Viacom 18 has a steady stream of content that needs to reach cinemas in India and the Middle East, fast.
“Scrabble is a one-stop-shop for me,” says Neeraj Gosswami, associate vice president of sales and distribution for the company. The walls of the Viacom 18 office are decorated in enough SpongeBob Squarepants murals to make the five-year-old inside anyone smile. Whether Gosswami needs local Hindi content mastered and subtitled or Hollywood content cloned, Scrabble gets it to the theaters on time.
“The key to Scrabble’s value proposition to us is its operations in both Mumbai and the Middle East,” Gosswami says. Scrabble’s Dubai location becomes extra-strategic, since the weekend there falls on Friday and Saturday, with Sunday as a workday. “We’ve had films that have reached Scrabble in Dubai on Friday,” he says, “and within three days they are in all of our international markets well in time for the following Friday release.”
It’s a cool winter day in Dubai — if you imagine 88 and sunny feeling cool, which it does in the United Arab Emirates. We’re zipping along the Sheikh Zayed expressway toward Scrabble’s office in a car driven by Shah.
Thakur sent Shah — by himself — to Dubai in the summer of 2011 to launch Scrabble’s Middle East operations and begin signing theater owners to contracts. Shah worked out of his own small apartment at the time.
“There are 600 screens in the entire Middle East,” Shah says, gesturing out the car window. “When I got here, only 40 were digital. In the last eight months, we’ve signed 550 screens.” If it sounds as if Shah showed up and shot fish in a barrel, he quickly disabuses you of that notion. He says it took several months of presentations and persuasion to get the first contract signed, due in no small part to cultural hurdles.
In almost no time, Dubai has become an essential hub for Scrabble. “In Dubai, it’s really easy to get [hard drives and projectors] in and out of customs,” Shah says. “Our hard drives move internationally via FedEx and we have no problems.”
Indeed, Dubai’s tax-friendly business climate has been good to Scrabble, which might otherwise rack up six-figure import-export duties every year. “For example, when we import digital projection systems, we pay only 5 percent customs duty,” he says. This compares with duties as high as 80 percent in other countries where Scrabble does business. “Since we’re investing in these systems, it really helps with our bottom line.”
With success comes vitality. Scrabble has moved into gleaming new offices in a Dubai high-rise just off the expressway, with more than two dozen client services representatives, logistics managers, cloning technicians and subtitling technicians. The workforce continues to grow rapidly.
For Shah and Scrabble as a whole, success in digitizing so many theaters in both India and Dubai raises an immediate “What next?” question. The answer is Eastern Europe, Mexico and South America. And Thakur has asked Shah to lead the charge — small wonder, given his recent success.
Of the dozens of workers employed by Scrabble in Dubai, it’s hard to find one more grateful than Shah himself. “I owe everything to Ranjit,” he says. “He gave me my big chance.”
Three reasons why the emirate has become the darling of international business.
Dubai has diversified its economy to a point where its oil reserves produce just 5 percent of its GDP. The result, for businesses around the world, is a center for global commerce unlike any other. Here’s why:
- It’s a logistics powerhouse. Dubai is strategically located in the heart of the Middle East, a geographically efficient distribution hub for companies doing business in Europe, Asia and Africa. No wonder its airport is the eighth busiest cargo hub in the world, according to Airports Council International.
- It’s tax friendly. Individuals pay no sales, income, property or capital gains taxes in Dubai. Most types of corporations pay no corporate income tax. As if that weren’t enticing enough, more than a dozen Economic Free Zones allow companies (like Scrabble) to do business without paying import or export duties on certain types of products.
- It has jobs. All that economic activity creates jobs. As of late 2012, the unemployment rate in the U.A.E. was below 5 percent overall, and below 4 percent for ex-pats, who make up nearly 90 percent of the population, according to the National Bureau of Statistics.