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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2,383 Comments

  • Sir I am still confused
    Is every film sold outright by producer
    Has producer no share in overflow ?
    This way no producer is loser ever . But I have seen the fate of many producers who went bankrupt after their films flopped
    There must be some financial involvement of producers after film’s release .
    Please take the trouble in explaining this to my email ID Regards

  • Nice article. But you did not say what is the markup which the producer sell the movie to the distributor.
    Also is the P&A always born by the producer or by the distributor?

  • Your article was superb, but I have few queries, you said that distributor hires the multiplex as well as the single screens to showcase their movies? Now i want to know in case of single screens if the share is as high as 90% then does it include the remuneration of the people working in single screens? Also I have heard this concept that for a low budgeted movie less screens are good instead of more screens? If you can elaborate on this, I might post more questions and also come up with films with their box office figures to understand the ‘hit’/ ‘flop’ concept.

    Thanks!!

  • out of the 50% multiplex share of the distributor how much % is producers share? similarly out of 70 to 90% single screen share how is producers share ?

  • Very well explained and justifies your articles title.

    1) How different is this model for South Indian movies (Telugu and Tamil)?
    2) Do you have any information on how Tamil/Telugu movie distribution/exhibition work in the USA?

  • Hi
    is this possible that we could exhibit our film by ourself ? Can we hire or get rent a theater and exhibit with any distributer?
    Please reply me.
    thanks

  • I am willing to make a punjabi film. my budget is low but script is good. I also going to invest my money on this project.
    so I have some questions.
    1. what is need of distributor.
    2. how can I earn maximum money.
    in punjab there is no one provide you appropriate information.
    this is necessary form me because I wana make more and more films every year. not wana make single film.
    plz guide me.

  • kindly give details that how the distribution contract made

    secondly if profit sharing is there then how calculate profit (by sold ticket / then how we can get the axzet number of ticket sold in thousands of theater or multiplex)

    third , how calculate profit sharing (collection – production cost – marketing – other exp = profit)

  • Thanks for the article!

    Can you please confirm,

    Its only Distributors who loses money when its a FLOP or Producers also share a loss

    As you said, Producers sold rights to distributors. So producers dont lose money in this sense ?

  • Its a fantastic article, still I am desirous to know about Overseas Subsidy, How one receive this? who pay? besides its whats about Dubbing rights in regional languages?

  • For someone That’s studying Judicial right and Economy. And someone That’s in marketing business this is pure Trial Balance Or Profit and Loss A/C. Gr8 congrats Indicine

  • Nice article, I like it very much. My query- I want to know about contract in between producer and distributor.how much share producer gets from gross.

  • one question i have,
    i am making a horror movie with tight budget but i do not make high promotion of movie and every members are new in this movie then can i sell my movie in theater ??

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