Understanding the Complex Collection Model of Indian Films

Indian cinema, often referred to as Bollywood, is a bustling industry with its own unique collection model. This article will elucidate the intricacies of how a film's actual collection is calculated, including the crucial roles of producers, distributors, and exhibitors. Understanding this model is essential for both filmmakers and audiences alike.

The Role of Producers and Distributors

The backbone of the Indian film industry is the intricate collection model, which revolves around the collaboration between producers and distributors. Producers invest in films, covering everything from actor remuneration to marketing and advertisement costs. These expenses collectively form the film's Budget. Post-production, these funds are PA Promotions and Advertisement Expenses are crucial for the film's success.

Distributors play a critical role in this model. They are responsible for selling the film to theatres through a process known as 'Theatrical Rights.' The price at which the producer sells the film to the distributor is referred to as the Theatrical Rights. Distributors often have exclusive agreements with 14 circuits in India, representing different regions such as Mumbai, Delhi, North, South India, and more. For instance, Yash Raj Films distribute their films themselves, while films like Housefull 2 had a contract with a third-party distributor, EROS.

Exhibitor Theatre's Contribution

The theatres, or exhibitors, are the final link in the collection chain. They are responsible for screening the films and collecting ticket sales, which is the primary source of revenue. There are two main types of theatres in India: single screens and multiplexes. Each type has different agreements with distributors, focusing on the number of screens and the monetary returns to be received.

Entertainment Tax: A Significant Deduction

Entertainment Tax, an estimate of 30%, is deducted from the total collections. This tax is enforced by individual state governments, leading to variations in the tax rate across different regions. After deducting the tax, a percentage of the total net gross is paid back to the distributors. This amount is known as the Distributor Share and is typically calculated on a weekly basis:

Week 1: 50% for Multiplexes, 70-90% for Single Screens Week 2: 42% for Multiplexes, 70-90% for Single Screens Week 3: 37% for Multiplexes, 70-90% for Single Screens Thereafter: 30% for Multiplexes, 70-90% for Single Screens

Case Study: Multiplex vs Single Screen Dynamics

To illustrate, consider a scenario where a film releases with an average ticket price of Rs 120 at a Multiplex and Rs 60 at a Single Screen in Week 1. Entertainment Tax, at 30%, is deducted from both settings. Here's a breakdown:

Multiplex Scenario

Footfall: 100 people Average Ticket Price: Rs 120 Gross Collection: 100 x 120 Rs 12,000 Entertainment Tax: 0.3 x 12,000 Rs 3,600 Net Collection: 12,000 - 3,600 Rs 8,400 Distributor Share: Fixed 4200

Single Screen Scenario

Footfall: 100 people Average Ticket Price: Rs 60 Gross Collection: 100 x 60 Rs 6,000 Entertainment Tax: 0.3 x 6,000 Rs 1,800 Net Collection: 6,000 - 1,800 Rs 4,200 Distributor Share: Between 2,940 and 3,780

Key Highlights:

Multiplex vs Single Screen: Multiplexes consistently lead in collections due to higher ticket prices, despite single screens contributing significantly and ensuring a steady income. Hit vs Flop: A film's financial success is not solely determined by its box office collections. The Distributor Share takes into account the film's cost, making a film a Flop if it nets 60 crore despite high costs, while a Hit is considered even with a net collection of 40 crore due to lower production costs. Footfalls: The number of people attending the theatre is an essential yet often overlooked factor in gauging the impact of film collections. Even if more people visit a single screen, the multiplex often prevails due to higher ticket prices.