The Business of Hindi Movies

The Business of Hindi Movies

Cost :
Budget : The Budget of a movie is referred to as the amount of money spent on making the movie, that is the production costs, the actors/performers/music directors and many more personnel involved the whole movie making process. The burden of the Budget cost is taken by the “Producer”.
Now the Producer can either invest his own money, take money from an financier on loan or Partnership.
Also a new trend with the incoming of Corporate is that they might provide the financing of a movie on the behalf of the Producer with profit sharing.
Selling Cost: When the movie is ready then either the Producer can release the movie through the distributors or he can sell the whole Product on a lump sum to an Interested Party.
The Former case is very rarely done nowadays. So, in most cases the Producer can sell the movie on a Premium to an Studio/Corporate.
Thus, the Producer can make an healthy profit even before the movie releases and now the main pressure to recover the investment is on the Party who bought the movie.
The Price which an Studio/Corporate pays to get the movie is called the “Buying Cost” or the “Acquisition Cost”.
Print and Publicity(P&P): On top of the Buying cost, the Corporate/Buyer now also has to invent an significant amount in the Print and Publicity costs of the Movie, to promote it on a wide scale and also to have an extensive release for the movie.
The whole cost/Total cost of the movie is thus, Selling cost+(Print/Publicity).
The above Total Cost is to be recouped by the concerned party by various channels of revenue.
Revenue :
The Revenue Channels for Hindi movies are generally considered as follows:
Indian Theatrical Share: 50%
Overseas Theatrical Share: 20%
Satellite : 20 %
DVD/Music : 10%
Indian Theatrical (Hindi):
The first and the major contributor for the revenue generation is the Indian Theatrical collections.
There are few terms in relation to Indian Theatrical run of Hindi movies:
Gross Collections : Gross is the total amount generated by a movie at ticket counters.
As simple as that.
Entertainment Tax : Most states levy an “entertainment tax” on movies least in India. On an average, across India it’s assumed to be 40%. The following is the general breakdown across the nation :

Nett Collections : After the entertainment tax is deducted from the Gross Collections, what is left is the “nett”. This is the money which is now with the Theatre owners.




Distributer Share: The Theatre owner now cuts his share/rent (also called Exhibitors Share) from the Nett and thus resulting the the real share which will actually go the Distributer. This is called the “distributor’s share” or “share” in trade parlance. This is really the money from which the movie’s budget/cost is recovered.
In General Share is around 50-55% of the Nett collections (if the movie has done a good mix of business at Plexes and Single screens)
But a approximation can be made as follows :

Lets look into the above in some detail.
Exhibition:

Multiplexes: With the rise of Urban/City Multiplexes bulk of the business comes from these Multiplexes only.
The revenue sharing model adopted by the 6 major Multiplex chains of India(Exhibitors) and the Producers Association is as follows based on the agreement reached on Friday, 5th June 2009.
“Producers/Distributors will get 50% of the nett collections from the multiplexes in the first week, 42.5% in week 2, 37.5% in the third week and 30% in and after week 4.
An additional 2.5% will be paid to producers/distributors in the first and second weeks if the nett collections across the multiplex properties owned and operated by the six national chains (PVR, Big, Inox, Fame, Cinemax and Fun) cross Rs. 17.5 crore during the entire first run of the film.
Conversely, if any film released with more than 500 prints collects a total of less than Rs. 10 crore across the multiplex properties owned and operated by the six national chains, a rebate of 2.5% for weeks 2 and 3 will be given to the chains by the producers/distributors concerned.” *
The reason Multiplexes want to keep more shares going into later weeks is because(and also in general),
1) The number of audience decreases as weeks go by but the cost of running the show remains same.
2) The cost of maintaining the Properties is a lot and they think they deserve the premium for the quality they provide to the audience.

For example if a movie does the “Industry Standard” business week after week we can get the below kind of Shares from the Multiplex system(using the above table):

Now the above is just an example, of course the share might go up or lower depending how the movie does in the first 2 weeks(as those 2 weeks have the highest shares coming) and also how much the movie makes in the later weeks.
Independent Multiplexes : Now the Top 6 Plex chains of India give about 70% of the revenue of Total Plex business. There are many Independent Multiplex spread all across the Nation who contribute the rest 30% of the revenue.
Now the share from these Independent Plexes depends from movie to movie and each time a producer has a deal with them but usually it hovers around the ~50% mark only.
Single Screens: Though the revenue from single/double screens has been on a decline for several years now and the trend is supposed to continue, as of now they do provide some substantial amount as long as the movie has elements to work in the Single Screens.
The share system for single screens is little different from plexes. The Screens are actually given on rent to the producer to play their movie at a fixed rate and the rest of the revenue (after subtracting the rent) goes directly to the producer.
Usually Big movies are booked for 2 to 3 weeks at single screens and depending on the movies performance the booking is increased or decreased.
Lets take a few examples here,
Lets assume a given Single Screens charges 20,000 rupees per day as its rent for running full shows of a movie. The maximum revenue the movie can do with full capacity is say 100,000 per day, now by the end of the first week:
1) Suppose movie has done 100% full week the nett revenue will be 7*100,000 = 7,00,000 and the rent will be 20,000*7 = 1,40,000. The share % going the producer will be (7-1.4)/7 = 80%.
2) Suppose movie has done 70% full week the nett revenue will be 7*100,000(.7) = 4,90,000 and the rent will be 20,000*7 = 1,40,000. The share % going the producer will be (4.9-1.4)/4.9 ~ 71%.
3) Suppose movie has done 50% full week the nett revenue will be 7*100,000(0.5) = 3,50,000 and the rent will be 20,000*7 = 1,40,000. The share % going the producer will be (3.5-1.4)/3.5 = 60%.
4) Suppose movie has done 30% full week the nett revenue will be 7*100,000(0.3) = 2,10,000 and the rent will be 20,000*7 = 1,40,000. The share % going the producer will be (2.1-1.4)/2.1 = 33%.
Now there might be different rent charges for different single screens, the screens of Bihar are the cheapest and the one’s in the Delhi region are the costliest.
But we get an idea that a movie gets its share from single screens depending on how it has done there, it can go as high as 80% and go as low as 35% depending on how it has done there.
But in general movies which do well in Single Screens get around 60-65% share from the total nett revenue.
If we take an average of the shares from the 3 Major Theatrical Revenue sources which are,
6 National Multiplex chains ~ 45-46% share.
The Independent Multiplexes across India ~ 50% share.
Single Screens ~ 60-65%
We will get around 50-55% share average, granted the movie has done uniformly well in plexes and single screens and also took a decent opening and then trended by industry standard (ie what most big hits do).
The rest 45-50% of the nett is kept by the Multiplexes.
After taking a look at the Exhibition side lets take a look at the Distribution side.
Distribution:
The Movie is then sold to various Circuit Distributors in one of the following methods:
1) Released on Commission by the Distributer on the behalf of the Producer. Here the Distributer keeps a certain % of the nett revenue as his share, and gives the rest of the proceeds to the Producer.
2) Released on Minimum Guarantee: Here the Distributer pays a certain MG (Minimum Guarantee money) to the producer and releases the movie.
If the Distributer recovers his MG, its called “Recovery”.
If the Distributer earns 25% more than his MG investment he keeps it and its called his “Commission” which will take care of his local Print and Publicity and also some profit for him.
Anything beyond the 25% is called “Overflow” which is to be shared 50:50 between the Distributer and the Producer.
When the movie is sold to the distributer its generally sold from circuit to circuit, at varying costs depending the weightage of the area/territory.
A 100% for Mumbai means that the cost for with movie is sold in Mumbai is taken as standard 100% and other territories are sold at some ratio of it. So a 60% for Delhi represents that the trade expects Delhi to do 60% of the business done in Mumbai circuit
The various Territories for Hindi Movies in India are:
There are also some other very small territories like Assam, Orrisa, Tamil Nadu, Kerala and Andhra .

Overseas Theatrical Share: The Overseas Theatrical Market is also of very high importance. The Overseas Numbers are always given in Gross rather than in Nett.The Major Markets are USA,UK,UAE and Australia as of now.
The Shares from USA are around the 50% mark, that from UK around 35%. Overall Overseas shares for movies are around 42-45% of the total Gross.
Satellite: Satellite bid prices have been off the roof for most of their history. Most of the deals are done before the movie is released, though if the satellite rights are not sold by the time the movie is released then the price is definitely effected by how the movie has fared on the Boxoffice.
Other Rights: DVD and Music are the most prominent from of extra revenue a movie can earn. There are industry prices for most of these, though it too depends on the scale and performance of the movie too.
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