Hyderabad
January 16, 2010
Now that I’ve got your attention, let me clarify – its
every bit true. Read on to understand how the number game in the movie
business works. Dov S. Siemens, the Hollywood guru who conducts
filmmaking workshops worldwide, told in one such seminar. “Remember,
we’re not in the film-making business. We’re in the film marketing
business.” There was a silence in the audience when he said that. “Tell
me which industry proudly boasts to its consumers the cost of its
product or how much money it made?” Producers use movie collections as a
publicity tool. Its a testament to the fact that the movie was watched
widely. Yet, those collections cannot accurately disclose if the movie
is a superhit or if its profitable.
Numbers
are very misleading. When a producer announces his movie grosses 100
crores, many people presume "collections – budget = profits". This is
far from it. Like any other business, the film trade has ‘layers’ of
middle men between the filmmaker and end consumer, who are all
inalienable parts of the business.
One
of the most common terms we hear used in the trade is “gross”, “nett”
and “share”. If you understand these three terms, you would understand
the basics of film trade. Most of the times, what you read in the papers
is the “gross collections”. Gross is nothing but number of tickets sold
x ticket price. It’s the total amount generated by a movie at ticket
counters.
Most
states levy an “entertainment tax” on movies. States like Maharashtra,
Gujrat, Punjab and others northern states charge in the range of 50%.
There is a variation. Uttar Pradesh charges 60%, while West Bengal
charges 30%, its 25% at Kerala. Kannada films in Karnataka are tax-free
while non-Kannada films pay 70% tax! Tamil films in Tamil Nadu are
tax-free while non-Tamil films pay 25%. Andhra Pradesh charges only 12%,
one of the least in India. On an average, across India it’s assumed to
be 40%.
Nett
Collections : After the entertainment tax is deducted, what is left is
the “nett”. This is the actual money that’s left in the hands of the
theatre owner. He deducts his rent from the nett and forwards the
remaining money to the distributor. This is called the “distributor’s
share” or “share” in trade parlance. This is really the money from which
the movie’s budget is recovered.
Theatre
Rentals : There are two types of agreement a distributor can enter with
an exhibitor (theatre owner or multiplex chain). For single screens
it’s usually, a flat weekly rental. The exhibitor retains the money till
his weekly rent is recovered. Anything that is collected afterwards
goes to the distributors. Their revenues are not linked to the boxoffice
performance of a film. On the other hand, multiplexes charge a
percentage of the nett collections. Hence their prosperity is linked to
the boxoffice performance of the movies they release. Most multiplex
retain 45% in the first week, forwarding the remaining 55% to the
distributor. In the second the mutiplex’s share is 50% or 55% (depending
on terms) forwarding balance to the distributors. From the third-fourth
week onwards, the multiplex retains as much as 60-70% of the
collections of a film, as the audience drops. The whole tiff between
Hindi film producers and multiplexes were because, producers felt
multiplexes charge too much rent and leave very little to themselves.
Multiplexes argue their pricing is fair, as customers pay premium price
over a single-screen because of their amenities, which cost a lot to
maintain.
As
a thumb rule, as per present trends in the Bollywood industry, the
'share' of a film is 50-55% of its nett. For illustrative purposes, lets
take a Bollywood movie which released all over India, with a good mix
of multiplex and single screens (like Love Aaj Kal, Ghajini or Rab Be
Banadi Jodi) to see how much “share” it collected.
| Term |
Amount |
Explanation |
| GROSS |
100,00,00,000 (Rs 100 cr) |
1.25 crore tickets sold at an average price of Rs 80 per ticket. |
| NETT |
60,00,00,000 (Rs 60 cr) |
On an average its 40% across India, so deduct 40 crores |
| SHARE |
Rs 30-35 crore |
From the nett, various theatre owners deduct their cut (as rent) and forward balance to distributor. |
The
average ticket price here is Rs 80. This could be lower for a mass
movie, as it would release in more single screens where ticket prices
are lower. So typically, for a Hindi film a movie that grosses 100
crores only yields Rs 30-35 crores in revenue! So, is “share – budget”
the producer’s profit from boxoffice? Not yet. Usually, a movie cannot
be released by the producer himself throughout the country. Due to the
vast geographical area, he engages distributors. Distributors charge a
10% commission for their services. So in the above case, if we presume
the share is Rs 35 crore, we deduct Rs 3.5 crore as distributor’s fee.
The balance amount is Rs 31.5 crores. This is the actual amount that
goes to a producer.
So,
lets take the case of Geetha Arts’ last Hindi film – Ghajini. The movie
released in over 1400 screens, had a blockbuster run and grossed Rs 220
crores at the Indian boxoffice. The nett collections of the movie are
Rs 115 crores. Which implies that the various state governments of India
earned Rs 105 crores as entertainment tax through this film. This is a
sum, neither the producers Geetha Arts, distributors Studio 18 nor our
lead actor Aamir Khan made from the film! From the Rs 115 crore nett
collections, exhibitors (various multiplexes and theatres) retained Rs
65 crores as rentals. Rs 60 crores is the “share” of Ghajini. This is
the money that came into Studio 18’s hands by distributing the film.
After
reading this article you'd be surprised if most journalists don't know
these themselves. I've read umpteen articles where newspapers, including
reputed business dailies mix up gross, nett and share for revenues of a
film and tries to assess their profitability. One of the reasons behind
me writing this article is to educate journalists and movie buffs on
how the movie business works. Also to clarify to some irritating
friends, who jokingly ask "Where is your 200 crore from Ghajini?" when I
refuse to unwisely spend money. Also, I take this as an occassion to
remind people that film-producing is not as glamorous as it seems to be.
In this business, every rupee earned requires a rupee and half of
effort. This is why, most people except seasoned producers dont survive
in this industry despite producing hit films.
You
know what? Though Ghajini is the ‘highest grossing Indian film of all
time’,its not the biggest money spinner in India? Rajinikanth’s Sivaji
is. The movie’s share from both languages (Tamil and Telugu) is 64
crores. Till 3 Idiots arrived, this movie holds the number one spot in
actual revenues. Our very own telugu film Magadheera amassed a share of
Rs 58 crores. Wondering how South Indian films are able to generate
revenues matching that of Hindi cinema, despite having a far lesser
reach? My next article on how Southern cinema (esp Telugu) is a goldmine
that needs to be tapped.
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