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.

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.

Read the complete article at Allu Sirish's blog

Other articles by Allu Sirish:
Operation success, but patient dead : How TV media lost money the last few weeks!
My presentation at FICCI Frames
Corporatization of the telugu film industry: How to adapt Hollywood’s “studio model” locally
Small budget Telugu films
Movie Marketing or the lack of it in telugu cinema

About Allu Sirish: Sirish Allu is a 21 year old blogger from Hyderabad, India. He has completed Bachelors in Mass Media (Journalism) in R.D National College, Mumbai. He is a hardcore movie buff. Sirish Allu has been associated in the production of Geeta Arts films like Jalsa and Ghijini (Aamir Khan). Sirish Allu is the co-producer of Aamir Khan's Ghajini. You can visit Allu Sirish blogs at http://www.allusirish.in/