Indian Box Office Model – Explained in detail

The whole idea behind this write up is to make each and everyone understand the complex box office model in India. Any questions, please ask in the comments section below.

Producer:  The person who invests in films. The money that a Producer invests in making a film is called the “Budget”. It includes everything from remuneration of the actors, technicians and other crew members to transportation and other costs. Apart from this, once a film is complete, it has to be marketed and that calls for “PA (Promotion & Advertisement)” expenses.

Distributor: The Distributor forms the most vital link in this money chain by acting as a medium between Producers and Theatres. The Producer has to deal out their film to the All India Distributors. The price at which the producer sells his film to the distributors is termed as “Theatrical Rights”. The producer can either directly sell the Theatrical Rights to Distributors or make a contract with any Third Party which in turn has the responsibility to deal with Distributors. In that case the Producer will get his share from the third-party even before his film releases and all Profit/Loss will be incurred by third-party only. For example, Yash Raj Films distribute their films themselves, while Nadiadwala Grandson’s had a contract with EROS for Housefull 2. Indian film industry is majorly distributed in 14 circuits and each have its distributors to represent them :- Mumbai, Delhi/UP, East Punjab, CI (Central India), CP Berar (Central Provinces), Rajasthan, Bihar, West Bengal, Nizam, Mysore, Tamil Nadu, Assam, Orissa and Kerala.

Exhibitor (Theatre): In layman terms, Exhibitor is nothing but a theatre owner. The theatres form the end of the box office model. On pre-defined agreements with the exhibitors, the distributors hire their theatres to showcase films. There are two types of theatres in India: (i) Single Screens (ii) Multiplex Chains and both have different kind of agreements with distributors. This agreement focuses mainly on “Number of Screens” and “Monetary Returns” to be paid back by theatres to Distributors. Entertainment Tax (All India average of 30% approx) is deducted from the total collections at the ticket window. This tax is enforced by individual state governments and thus differs from circuit to circuit. After taxes, a percentage of the total nett gross is paid back to the Distributors. This return is known as “Distributor Share”.

Box Office Model

Box Office Terminology:

  • 1) Cost of Film = [Budget + PA (Promotion & Advertisement) Expenses]
  • 2) Non Theatrical Revenues = Satellite Rights + Music Rights + Overseas subsidy etc.
  • 3) Footfalls = Total number of tickets Sold
  • 4) Gross Collections = Total money collected from ticket sales
  • 5) Net Collections = [Gross collections – Entertainment Tax and others]
  • 6) Distributor Share is generally calculated as below:
  Week 1 Week 2 Week 3 Thereafter
Multiplex 50% 42% 37% 30%
Single Screens 70-90% 70-90% 70-90% 70-90%

 

This means 50% of the collections (after entertainment taxes) goes to the Distributor in the first week of release and so on.

  • 7) Profit / Loss (Distributor) = [ Amount at which film was bought – Distributor Share ]

Let us now go through a scenario to better understand about these terms.

Case Study – Suppose a film releases with an average ticket price of Rs 120 at Multiplex and Rs 60 at Single Screens in Week 1. 100 people visit a multiplex and single screen each. Entertainment Tax to be deducted from gross collections is same as 30%.

  Multiplex Single Screen
Footfall 100 100
Average Ticket Price 120 60
Gross Collection 100 * 120 = 12000 100 * 60 = 6000
Entertainment Tax 0.3 * 12000 = 3600 0.3 * 6000 = 1800
Net Collection 12000 – 3600 = 8400 6000 – 1800 = 4200
Distributor Share Fixed 4200(50% — > 0.5 * 8400 = 4200) Between 2940 and 3780(70% — > 0.7 * 4200 = 2940 /90% — > 0.9 * 4200 = 3780)

 

Highlights

Multiplex v/s Single Screen: It is quite an inevitable fact that Multiplexes have been dominating the box office with every passing year; still the strength of Single Screens can’t be ignored. Single Screens may be termed as the backbone of Distributor Share for the consistent contribution they make and even today, when it comes to making/breaking big records, a film cannot bypass Single Screens.

Hit vs Flop: General norm is that the collection of a film judges how big success it is. But, this is false. In reality it is the Distributor Share which decides a film’s fate because it takes into account both the film’s cost & its box office performance. A film may be called a FLOP fare if it collects 60cr net because of its huge costs to the makers and distributors. On the contrary, another film may turn out to be HIT even if nets 40cr only due to low budget.

Footfalls – An Untold Story: While writing this article, I realized that there is a parameter which is not quite explored/considered in judging box office numbers. And that is Footfalls – i.e the number of people going to watch a film in theatre. One may figure out quickly from above facts that even if more people visit a Single Screen than a Multiplex, Multiplex always has a lead due to high ticket prices.

Love to have your feedback/comments.

Article by Archit Mishra  (Read more articles from the author)

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2,463 Comments

  • @raj
    this stupid will never understand
    economics of production no matter what you try to explain to him
    cause he is arrogant
    and the old saying says two never learns arrogant and shy people

  • excellent description of box office and hit-flop in detail but a small mistake in the end. Hum aapke hai kaun is the most viewed film in the history of indian cinema in theatres but only ahead by slight margin from next best Gadar. Then 3 idiots, sholay etc.

    3 idiots released in dec 2009 made 270cr gross domestic.
    GADAR would have made 286cr gross domestic while HAHK wud have made 300cr+ according to ticket rates during dec 2009

  • @ Navin,

    Thanks for the compliment, and it is the makers of Sholay who deserves it for making a memorable film for generations to follow.

  • @indicine and Archit Misra

    If a distributor gets a movie from the producer for 50 Cr which was made with a budget of 40Cr and the distributor share is 80Cr. Will the 30Cr profit that distributor gained be shared with the producer?

  • Nice. Very nice.

    Why does Amitabh Bachchan say that films need to cost a total of 15 crores. He himself made Paa in less than 15 crores. He found it difficult. What is the reason?

  • If the film is a huget like CHennai Express, can the producers get any more money than what they sold to the distributors/

  • My first Comment On Indicine, Firstly, A great Article Above !!! AWESOME !!!
    I would Like to Know from the same Author, The journey of a Cinema print in to a Disk . (Starting from the editing Desk to the broadcast on TV). How CD/DVD Companies buy the prints and from Where.

    Thanks in advance.

  • let me explane this, consider 3 idots total collection is 300 Cr and Production Budget is 50Cr how will be remaining 250 Cr (300-50) Profit will share to Producer, Distributer and Therter Owner.

  • Thank u indicine 4 a great article. Is there any site where footfall of all bollywood movies r available. BOI has list bt nly top 20 films n nt updating at all nw..

  • Do you mean that after handing over the rightsof movie to distributor ,producer doesn’t have any concern how does movie perform at box office.? waiting for answer…… thanks

  • Great Article, big help, Just wanted to Understand how and when the Share of the Producer is Provided to Him, is it weekly, Monthly?, also about other Earnings once the Rights are sold for Television Viewings Music and other Rights will there be any royalty earnings will be there after selling rights?

    Plz Advice

    Thanks

  • Hi there,

    Thanks a lot for the information. But i would like to know more about how the box office model works overseas for a indian movie.

  • Data on the seat capacity for multiplexes and others rather than the no. of screens may be very useful. Large no. screens with small no. of seats distorts a films box-office performance analysis.

  • Respected sir,
    I am eager to know by which mode the exhibitors pay the distributors their share by cheque,DD,NEFT or RTGS? Another thing is do the exhibitors use to pay in weekly basis to the distributors?

  • so the producer does not have any share from ticket selling? only there’s distributor share? i don’t think so

  • finally, after searching on google a lot about on how exactly a film or producer earn money , indicine detail about it is really understandable… thanxxxxxxxxxxx

  • good job Keep it up… and could u plz tell me
    what would be the general commission payable by the third party to the distributor if the movie is released through the distributor

  • the extra amount which is collect for balcony tickets is enjoyed by the exhibitors or even distributor holds the share in it???

  • an amazing article, loved it
    My question is : the box office business of any movie that we see in Wikipedia, for example: PK-650 crore so is this the total net profit or just a producers share, does these numbers also includes distributors shares ?

  • nice article………..please can u enlighten me about how to become distributor for marathi films and where can I get contact list of all theaters in maharashtra ……

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