Mid-budget films are the backbone of cinema, says Karan Johar at Global Leadership Summit

Johar emphasised the value of intellectual property built over time and the financial advantages of mid-budget films, describing them as the ‘real bread and butter’ of the industry.

While big-budget projects often require studio partnerships due to their high costs, Karan Johar highlighted the profitability and sustainability of mid-budget films, which offer greater returns with manageable risks.

Below is the verbatim transcript of the interview.

Q: What would you say to those who might be looking into this industry and have all these myths surrounding it that sort of keep them away from investing in it, because, it has been an industry which a lot of people have circled around, but we have never had this kind of a structured investment from someone from outside the business who has come in. You have had a lot of strategics coming in, of course, you know the studios from the West, you have had Netflix, the Amazons and, hopefully, the Apple TVs, etc, who are also looking at it. But on the content side, I believe there is tremendous potential in taking the sector forward, being able to hold on to IP, and being able to monetise that in the way it should be. But what has held it back has been the lack of capital and the myths that are around the industry that have just lingered on for this long. So it will be great to hear from you on what you would say to people who might be looking at this business.

Poonawalla: I think a lot of other corporate houses or funds and investors, perhaps haven’t traditionally invested in this area, is because, generally, an investor wants a clear line of sight on growth, scaling up profitability, etc. We all know this industry has its ups and downs with films doing well, some doing badly, and some may go over budget. Now, if we can manage that risk, keep growing in terms of scale, of creating more and more content. You have got so many OTT platforms and now some others coming about, I am very bullish in this area.

Now, when exactly is it that we are going to hit big profit numbers or whatever, it is tough to say. So you have to have a little bit of passion and patience in this area. It can’t be like what you have seen in e-commerce or in other manufacturing sectors. There has always going to be some kind of gestation period. So we are going to go through that over the next five years. And if we have this conversation in two or three years, I can tell you if some of those myths were true or not.

Q: As far as you are concerned, this obviously is a big move forward. Do you see yourself becoming a studio now completely and holding on to the IP that you are creating, and therefore being able to monetise that and building value for the long term?

Johar: The good thing is that the IP has been a huge part of our valuation as well, built over a large period with all the films that we have done. We have held very strongly onto our IP for everything that we have done.

The real issues sometimes were because of the funding that you had to always partner with an existing studio on the bigger and larger films. And with that, even when we made big hits, we were always sharing the profit. In this scenario, it gives us the opportunity to increase and enhance our profitability by owning the film entirely.

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But yet, there will be those massive brahmastras that we will make that will need the support of a studio. If I make a film that is over ₹200-300 crore, it is not possible to fund that totally at our stage, even now. But yet, it is the middle-budget film where the cost to profit is super high. Those are the films that you can fund entirely on your own, and you can enjoy and reap the benefits of that big breakthrough profit that is to happen. Because I believe the real bread and butter, the real money comes from that middle-budget film.

Because in the big budget films, while you might make that money up, and it is a large journey to cover that money and then the cost of capital, the margins are not very large. But when you strike it in a ₹65 crore to ₹80 crore window film, and you hit the large number that is the film I am chasing. So more than the tent-pole film, I am chasing the middle-budget film that gives me a larger return.

Everybody thinks the bigger the film, the bigger the money made. It is not always true, because the bigger the money spent, is also the bigger, larger journey to recovery. And then the verticals – we are in the near future going to make some announcements about verticals that we are going to begin and we do hope that everyone eventually wakes up to the fact that we now truly mean business.

Q: Would you do the same thing on the streaming side as well, when you are making series, etc. would you adopt the same model? Maybe the larger tent-pole ones are ones that you don’t necessarily need to fund yourself, but the middle ones you might look at going in and investing…

Johar: No, so I don’t believe in that model. I believe a series should be green-lit by a platform, and then you should go ahead and make it because we have seen those content-creating houses that have put in a lot of investments, and created tremendous creative equity by making series. But many of those lie unsold, and eventually you need to kind of make sure that your series, that you are putting all that might on the money on, gets a platform in a house so very clear that in Dharmatic Entertainment, we want to widen the scope of our work, for sure, but we may want to make sure that it is attached to a platform before we start putting any money into it.

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