How Film Producers Make Money In India

At present, the total revenue of the Indian film industry is Rs. 13,800 crore. But do you know that how Box office collection is calculated? If not, then read this article to understood that how the total collection of a film is calculated.

At present, the total revenue of the Indian film industry is Rs 13,800 crore which will become Rs 23,800 crore by 2020. If the income from television, film, music and other related industries is mixed together, then its total size was $ 22 billion in 2017 which will become $ 31 billion by 2020.

But do you know that how the earning of a movie is calculated? In this article, you will get the full detail about this calculation.

Let's first of all we should get familiar with the terms used in this article;

The Producer: This is the person who invests in the films. The money that a Producer invests in making a film is called the "Budget". It comprises of everything from fees of the actors, remuneration to crew members, technicians and other costs. Apart from these costs, once a film is completed, the producer has to bear Promotion & Advertisement expenses of the movie.

The Distributor: The Distributor is the most important link between producers and theatres. The producer sells the "Theatrical Rights" of his film to "All India distributors" or a third party. Sometimes the producer sells distribution rights to the distributors even before the release of the film. In this situation, the gain or loss are swallowed by the purchasers of theatrical rights.

The Indian film industry is majorly divided into 14 circuits and each circuit has its own "distributor representative". The name of 14 circuits are; Mumbai, Delhi/UP, East Punjab, Central India, CP Berar (Central Provinces),Bihar, Rajasthan, Nizam, West Bengal, Tamil Nadu, Mysore,Kerala,Orissa and Assam.

Theater Owner: On pre-defined agreements with the theatre owners, the distributors hire their theatres to showcase films. There are two types of theatres in India;

(i). Single screen

(ii). Multiplex chain

Both of these have different kind of agreements with distributors.

This agreement primarily focuses on the "number of film screen" and "profit returns" to be paid by the theatres to the distributors.

Here it is necessary to tell that the total collection is done by the theater owners. Entertainment tax (about 30%) is deducted from the total collection. Entertainment tax is charged by different state governments and it is charged at different rates in every circuit. Finally, after repaying the entertainment tax, the remaining amount is returned to the distributor as per the agreement between the theatre and distributors.

Now let us know how the box office collection is calculated?

Distributors receive the returns from theater owners on a weekly basis. As if the film is released in multiplex, 50% of the first week's collection, 42% in the second week, 37% in the third week and thereafter fixed 30% share is given to the film distributors.

But if the film is released on a single screen, generally the theater owners have to give a 70-90% share of total collection to the distributor from the very first week till the movie is shown in the theatre.
how box office share calculated

Thus the profit and loss of the distributor can be calculated as;

Benefit / Loss of the distributor = Cost of buying the film – Chare of the distributor

Suppose that the average price of a ticket in a multiplex is 200 rupees and total 100 people watched movie and 100 shows of the movie were held in whole week. Thus the total collection of the week will be; 200 x 100 x100 = Rs. 20,00,000. If entertainment tax (Rs. 6 lacs at the rate of 30%) is deducted from total collection then amount left with the theatre owner will be just Rs. 14 lacs.

According to the agreement; theatre owner will give 50% share to the distributor i.e. Rs. 7 lacs.

So the amount received by the distributor from the first week of the show of the film will be Rs. 7 Lacs.

Total collection in the second week (if 100 viewers and 80 shows are considered) will be= 200 x 80x 100 = 16 lacs

Total amount in the hand of theatre owner after deducting the entertainment tax will be= 1600000-480000=Rs. 11,20,000

The share of the distributor in the second week will be; 42% of Rs. 11,20,000= Rs. 4,70,400

In the third week the distributor will get 37% share of the total collection and from the third week onwards; the distributor will get the fixed share at the rate of 30% of the total collection.

The same type of distribution policy is applied to the films displayed on the single screen. But the distributor will get the share at the fixed rate of 70-90 percent.

It is important to mention here that apart from the share in the total box office collection the distributor receives income from non-theatrical sources like music rights, satellite rights and overseas subsidy etc.

So from the above explanation you must have understood that how box office collection is calculated and how the distributors and theatre owners get their share in this profit chain. Hopefully your concept will be cleared in this regard.

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