Bollywood movies

Decoding the Economics of Movies: How Bollywood Movies Make Money When They Fail at the Box Office

What happened to other movies at the box office tells the story of a bigger problem. Films falling apart, one after the other, means that more money is leaking out of the industry than it is making. Today we try to understand what happens to investors, filmmakers, actors and exhibitors and how they maintain themselves in the given situation.

Recover the money from the sale of the rights

Even if a film fails at the box office, the directors manage to recoup the base cost of the film. Film trade expert Girish Johar explains how.

According to Johar, most of the money comes from the sale of digital, satellite and music rights. He said: “The way a film makes money beyond ticket sales is by selling the digital, satellite and music rights to the film. Many makers also earn discounts they get by shooting overseas, for example shooting in London. Next is the worldwide box office. Then there are the tertiary rights that the producer sells, for example remake or prequel/sequel rights, dubbing rights, etc. But it all depends on the performance of the film. If the movie does well, all those rights can be monetized. Otherwise, everything falls apart. »

Film producer Anand Pandit, who last supported Amitabh Bachchan and Emraan Hashmi’s Chehre, noted that each person handles losses differently and not all money lost is always recovered. He gives an example from his film and says, “Each producer will answer this question differently because in each case the circumstances are different. My Gujarati film Fakt Mahilao Maate, for example, opened to an outstanding response and as with big films that fail at the box office, there are no constants in cinema because there are so many variables in the filmmaking process. Failure and success are part of this business and every Friday comes a new surprise.

Pandit also mentioned that not all losses are recoverable, but selling rights help producers cover the cost base to some extent. He said: “Not all losses are recoverable, but there are cases where films that failed in India have done extremely well in overseas markets and the revenue from the sale of OTT and satellite rights also helps. producers to recover a certain percentage of the costs.

How important are box office numbers

If filmmakers make their money selling OTT, satellite and music rights, how much do ticket sales matter? According to Johar, ticket sales are of utmost importance in the field of filmmaking, as 50-60% of revenue comes from the box office. He said: “Traditionally, the box office is around 50-60% of all film revenue, unless the film is fully commissioned or fully acquired as an OTT release, where OTT platforms buy the film.”

Johar further expressed concern about how films that fail at the box office affect the entertainment industry.

He said: “We have to recognize that the losses increase with each film. And, whatever the losses, we expel the money from the system. The money is no longer in the system. If a movie does well at the box office, then the exhibitors win, the distributors win, the producers win, and if there’s a percentage split, then the actors win too. But due to the poor performance of the films, this chain is broken, and the losses increase with each passing day. Indirectly, over a period of time, this affects the treasury of the fellowship. With the big movies collapsing, we already have over 1000 crores in losses this year. To recoup that kind of money, movies have to outperform three to four times more than usual.

Exhibitors are the real losers

While filmmakers and actors have their ways of recouping their costs, exhibitors and distributors, on the other hand, lose more with each film that fails. Film exhibitor Akshay Rathi sheds light on the current situation of most exhibitors in India today. He said: “For exhibitors, in addition to ticket sales, other income comes from food and drink. But exhibitors must also maintain their rooms, projectors, etc. and this cost must be lower than the income generated by the sale of cinema tickets. »

According to Rathi, after Kartik Aaryan’s Bhool Bhulaiyaa 2, there hasn’t been a single hit that has attracted moviegoers to theaters, and that’s a red flag. He said: “But today with ticket sales being low and movies not doing well, other costs have gone up and we are taking big losses. This year, since Bhool Bhulaiyaa 2 ended, at least in the Hindi cinema fraternity, no other movie did well.

Actor fees, profit sharing and compensation

When we talk about actors, one of the big conversations is about their fees. How much do they charge? Do they indulge in profit-sharing? Giril Johar explained, “Actors are generally categorized into those who support fixed fees and those who participate in profit sharing. The percentage split is only for A-grade actors who have acted in the past and have status. A producer will not give a percentage to a young budding actor, he prefers to pay him a small remuneration.

When asked if actors really compensate exhibitors when their films don’t work, Rathi replied: “It happens in very few cases. Top players like Shah Rukh Khan, Rajinikanth to redeem their superstar and ensure the value chain associated with their movies doesn’t lose money, give back to exhibitors and distributors, but that’s very rare.

Box Office Remedies

In a time when movies are failing at the box office, do we have a definitive cure for the problem? Anand Pandit felt that controlling the film’s budget can be step number 1 towards a more efficient way to ensure that money is not wasted. He said: “There is no set formula to guarantee success and as a producer all I can do is budget a project smartly, invest in a good story, cut costs there where necessary and to spare no effort to ensure that the cast and crew perform at their best. Yes, it is necessary to evolve with the public and give them something that will excite them enough to return to theaters and that will happen sooner rather than later because our cinema, historically, has evolved to keep up with the times.

Akshay Rathi, on the other hand, said setting cinema ticket prices so that people of all walks of life can watch movies should help. He said, “Our disposable income is not our strength. The mass, the population is our strength. So, rather than trying to get a lot of money from a few, we should consider fixing ticket prices. People from all walks of life watch movies, so we need to have a price option that works for everyone. Many businesses depend, directly or indirectly, on films. Most malls in Mumbai have attached multiplexes, so we need to make sure everyone can watch movies. Ticket prices play an important role here. If the film is set in a preferred location, tickets may be priced accordingly. The same goes for smaller places that can’t offer that premium movie-watching experience. So we need to focus on placing and pricing our content in a way that allows people from all walks of life to go watch these movies.