Film Trade Analysis - Box Office Breakdown

Generally we care about profits in real life and we may fall into the misconception that the announcement made by a producer for a film are his profits.

For example:
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 trade.

Then what are Gross , Net , 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 which are as follows

Maharashtra, Gujarat, Punjab ,Other Northern - 50%.
Uttar Pradesh - 60%
West Bengal - 30%
Kerala - 25%.
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%.

Net Collections : After the entertainment tax is deducted, what is left is the "net".This is the actual money that's left in the hands of the theatre owner.

Gross Collection - Entertainment Tax

The exhibitor deducts his rent from the net and forwards the remaining money to the distributor. This is called the "Distributor's share" or "Share" in film trade market.

Share = Net Amount - Theater Rental

This is the money from which the movie's budget is recovered.

Share collection varies based on theater rentals,

Theater Rentals : There are two types of agreement a distributor can make 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 net 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 the remaining 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.While 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.

How is the money retained

Consider a film made with a budget of 20Crore
Producer/Producers bare the whole cost during the film making and they sell copies of filmreels to Distributors at a cost from which they can retain back their money(Collecting ± 20 crore depending on cast and crew)
If distributors do not come forward to buy the film there will be very less chances for it to reach the silver screen
Distributors fix a rental cost depending on the area/screening theater/no.of weeks
Exhibitors pay's the rent and the remaining money left after retaining the rental cost is forwarded to the distributor

  • Exhibitors earn profit when it runs housefull
  • Distributor earns profit when their exhibitors are able to obtain money far greater than rental costs
  • Producers earn profit when they sell more reels to distributors thereby recovering their production costs and bagging profits
Audience -> Exhibitors -> Distributors -> Producers