CINEMA BUSINESS -4

3. Film distribution

Immediately after the film production is complete, the producer or the production house would be arranging for sales shows for the film. These sales shows are called previews. All-important key distributors would be invited for this preview. The people who watch the movie include distributors and people who are middlemen called mediators. This group determines and fixes the price of the movie based on the cast of the film, technicians’ quality and the previous movies’ success rate of the hero or the director. And to tell you the fact, most of the times, these decisions have gone only wrong!

Films of big stars attract huge competition for the buying rights. Many times, the sales would have been over even before or without the preview show. The reason behind this is huge opening these films enjoy. Due to this opening, distributors calculate the returns can be reaped in the first week itself. Films which have been purchased like this over speculation and without preview shows too, have bombed in box office and lifted from screen within a week’s time as well. Yes, this trade is unpredictable.

That was the peak of Surya-Jyothika love episode and the Kollywood was raving about the tiniest gossip about the pair. Any little news about them, the industry went gaga over it. At this point, the movie Uyirile Kalandhadhu was set to release with Surya and Jyothika as the lead pair. Movie had already set huge expectations. Me and my friends, who have let Sethu slip through our fingers knowingly, were determined not to miss this opportunity. We were very confident and started to talk with the producers to buy the Chennai city rights through ‘outright’ route. The deal was sealed for INR 6.0 Lakhs with five copies of the print for Chennai city. But the turmoil and agony we had gone through to release the movie in the city was unimaginable. I’d explain that later. Now let us look in to the distribution modes of the movie.

Outright

So what is all about Outright? Outright is the process of buying the total distribution rights of Chennai city with a specified number of prints for a lump sum amount. Once a film is bought for outright, thereafter the complete rights of screening that particular film in Chennai city would be entirely owned by the buyer. After outright purchase is over, there are not much activities are binding the buyer and seller (i.e. the distributor and the producer). In other terms, booking the theaters for the movie, advertisement expenses, and poster expenditure all would be borne by the distributor who bought the movie by outright. Movie’s buying price, advance payment for theaters and advertisement expenses would be costing two times the buying price of any film.

I had told you that we bought the rights of Uyirile Kalandhadhu for 5 prints. Our purchase price was INR 6.0 Lakhs. Beside this, we shall be contacting important theaters of Chennai city and book their screens with complete data of our film screening with them from and to dates and with number of shows. This is called screen booking. For this booking activity, we must pay at least two weeks’ screen rent as advance. Producer would hand us over with advertisement stills and clippings of the film. The telecast and propaganda costs are to be borne by us, who bought the rights by outright route. This was the time only the rental route was famous in Chennai city. We took the risk of adopting outright route and spent 6.0 Lakhs in movie rights and beside this spent lot of money for advertisement and screening. Guess what had we ended up with? Loss of INR 13.0 Lakhs, dear readers.

M.G (Minimum Guarantee)

As the name implies, this is the methodology of selling a movie by estimating (or should say guesstimating? – PUN intended!) that a movie would collect a certain amount in theaters and based on that estimation, fixing the rate of the movie. The estimated collection amount is known as Minimum Guarantee.

When our team was in talks to purchase ‘Thulluvadho Ilamai’ city rights, the asking price was INR 5.0 Lakhs through minimum guarantee system. We proposed outright method. If we buy the film by minimum guarantee for INR 5.0 Lakhs, until the movie collect 5.0 Lakhs in theaters, we need not pay anything to the producer apart from the buying price. When the collection exceeds the outright amount, whatever remains above the outright amount has to be shared between the producer and the distributor as per the sharing agreement made between them during the purchase. Perhaps the movie does not collect the MG amount of 5.0 Lakhs, the producer would not be affected in anyway. However, the distributor would bear the whole loss.

In this case, ‘Thulluvadho Ilamai’ was bought by one of our friends in MG method. It was reported to have collected INR 16.0 Lakhs. Thus, the balance amount of 11.0 Lakhs would be shared between the distributor (our friend) and the producer as per the ratio based on the agreement already made between them, when the film is sold. Many distributors would not share the amount and would show only the loss account to the producers. Producers too know that this may happen after the release and as it happens in any business, they would always make the most out of the film before the release. After all there is very little they could do after the movie is released.

The distributors of blockbuster ‘Ullaththai Alliththaa’ have earned at least as twice as the producers of the film. This movie has created just normal opinion among distributors who judged this as ‘just another film’ with Goundmani, Karthik, Ramba, Sundar.C’s direction, Comedy Genre and medium budget. Because in a hurry, producers sold the movie in outright method. The film too, did not do so great for the first two weeks. After that it picked up by talk of mouth and went on to become one of the biggest hits of that decade. It was the distributors who have been hugely benefited by this film.

Ditto for Sethu. Movie was super hit. However, the producer has not realized big profits. One accountable plus is, if the same producer produces another film immediately, that movie can enjoy good business due to his previous success. That too only if the producer ventures in the new film immediately, when his previous success is still fresh in the Kollywood’s ever evolving memoir. If not immediate, the successes would be soon forgotten. In film industry, you have to be always keep the others informing and updating that you are alive. ‘Sethu’’s producer took a few years break before he produced his next venture ‘Kummaalam’. This was a box office failure. Also, he could not earn much out of this second movie. One of the main reasons is the gap of four years. Had he produced the same movie immediately after the success of “Sethu’, the scenario could have been different.

The profit sharing ratio in Minimum Guarantee (M.G) trade is different topic altogether, which we would discuss later.

  

Distribution

            In distribution route, a movie rights can be owned with an advance payment for a specific area, and the distributor can release the movie in the theaters of that specific area. This does not involve any other methodologies like outright or MG we discussed above. Generally, movies without big star cast and movies with new comers or big banners’ small budget films are traded through distribution route.

            Minnale is Gowtham’s debut movie with Madhavan, Reema Sen as lead pair. One of my friends has paid advance of approx. INR 10.0 Lakhs for Chengelpet area and released the movie through distribution route. In this process, he would collect the minimum amount of MG money or advance payment from eight to ten theater owners from Chengelpet area and allow them to run this movie in their respective screens. All these incomes, like advances received, thereafter the collection from every show, must be entirely communicated to the producer by the distributor. Totally in the first run, whether the collected total amount exceeds the distributor’s advance of INR 10.0 Lakhs or not, the producer is subjected to pay 10 – 15% of the total collection as commission to the distributor. Finally, he has to return the advance of 10.0 Lakhs to the producer as well.

Please refer the following example to understand it better.

Description	Amount (INR)
Advance paid by the distributor to the producer	1,000,000.00
Total collection of the movie in the first run (including all theaters in the area of distribution)	1,500,000.00
Commission to the distributor from producer (@10% of the total collection)	150,000.00
Amount receivable by the distributor (Advance + Distribution commission from the producer)	1,150,000.00

            In this process, it would be sufficient for the distributor to show the accounts and records of the collection to the producer, as he has already paid an advance to the film. Similarly, when the movie screening completes, he could reduce his advance and commission and return the balance to the producer. (Retain INR 11.5 Lakhs and return 3.5 lakhs in the above example)

On the other hand, if the total collection is less than the advance paid by the distributor, say 5.0 Lakhs, the producer has to return the advance of 10.0 lakhs plus a minimum five percent of commission to the distributor. In this case, the advance is ten lakhs and the 5% commission of the advance amount works out to INR 50000.00. So the total amount payable to the distributor is INR 1050000.00 However, my friend here had gotten back INR 17.00 Lakhs inclusive of the advance he paid within the period of one month. That is Cinema Industry trade for you!

There are occasions, where a film is originally released via distribution route and later would be sold with area rights and earn good returns for the producer. Siva Manasula Sakth’ and Thiruda Thirudi were such movies released in distribution route in the beginning but later sold on area basis, making the cash registers ringing for their producers. However, I have taken a wrong decision with Thiruda Thirudi business, ended up with a loss of INR 8.0 Lakhs.

Now, the commission percentage to the distributors has been reduced from 10 – 15% to   5 -10%. I would not blame producers for this, as the main reason is the fraudulence of the supplier. Only established suppliers are granted with 10% commission and small distributors get only 5%. I will explain how the distributor trick the trade and hurt the producers with fake accounts as we move on.

Cable Sankar - Translation Of My Book In Tamil "CINEMA VYABARAM" Done By Rangs. Published in Behindwoods.com. 

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