Rental
Process
As we have discussed already, In
Chennai and other big cities, the theaters operate on rental basis. It does not
matter whether it is a single screen or multiplex, the theaters operate on
rental basis. The rent differs from one theater to another based on factors
like locality, capacity and facilities. In Chennai, a moderate theater with AC
and DTS can fetch around a lakh rupees as weekly rent. Rent can be split and
charged (rent for screening the noon show only). Theaters like Devi have
charged INR 2.5 Lakhs as weekly rent. We have paid this amount for ‘Uyirile
Kalandhadhu’, which we released in Devibala. The quirky thing to notice in this
trade is, the theater owners would deduct the rent for second week when they
hand over the first week collection to the distributors. The term this as ‘Protection Money’, explaining that the
producer or distributor need not struggle to pay off the second week rent,
perhaps the collection in that week is not good enough. It is indeed a
protection for the theater owners; not for the distributors! However, now in
many theatres in Chennai and other big cities, movies have started to release
in percentage basis.
Minimum
Guarantee (M.G)
Just like the distributors buy the
film from producers in M.G, theater owners would screen the movies, albeit the
big ones, via M.G route. For example, a distributor has bought a movie’s rights
for 80 Lakhs for Chengelpet area, where release centers are about 50
theaters. (Release centers are theaters
that screen only new movies) For Chengelpet area, a big movie with a mass hero
may even be released from 18 to 25 theaters at the same time. Before the
release, every theater owner, based on his past experience on the same hero’s
films or similar gauge, would estimate and arrive at a prospective collection
amount for the movie and makes an agreement with the distributor.
For this instance, M.G for this
movie, which would be released in fifteen` theaters, is rupees 5 Lakhs per
theater. The distributor gets 5 lakhs X 15 Theaters = 75 Lakhs against his
distribution cost of 80 Lakhs. Literally he is releasing the film with INR 5.0
Lakh investment. Add a few lakh expenses with this for advertisement and posters,
the capital invested by the distributor may look very meager. Is distribution
really this cheap? While it looks as if it is, the fact is it is not.
It is impossible to release a movie
with a puny investment like 5 lakhs. For big actors’ films, business talks get
initiated almost immediately after the film hits the shooting floor. The buying
spree and race intensifies if that actors’ previous movie has been a hit. In a
competitive scenario like this, distributors even pay few lakhs to the producer
as advance, when the movie has only just started shooting. This way, for a
movie right which costs a crore rupees, they pay few lakhs in advance, part
amount just ahead of audio release and rest of the amount will be paid ahead of
the movie release date, after which they own the copy of the movie. Production phase of big budget films like
these would be generally longer, in some cases exceeding even a year. When you
account the capital locked and the interest amount for the same factored from
the distributor’s side, one can appreciate the investment required for
releasing a film.
When an actor’s movie becomes super
hit, his next film’s producer hits the jackpot. It was the time Vijay’s
‘Ghilli’ was running full houses. Well ahead of ‘Ghilli’, producer-director
Madhesh has completed puja for the film ‘Madhura’ with Vijay and one of my
distributor friends was interested in Madhura’s Chengelpet rights. He was
bowled over with price demanded came back running. He was not alone. Many other
distributors were not coming forward to buy ‘Madhura’ as the asking price was
stratastopic. Precisely at this juncture, ‘Ghilli’ released.
The humongous success of ‘Ghilli’
has fetched a massive selling price for the same ‘Madhura’, which was detested
by the same distributors. Hold your breath! ‘Matura’s Chengelpet rights alone
were sold for around one crore rupees. Make a guess the price originally
demanded by Madhesh? 75 Lakhs! Again, this is Cinema Industry for you!
Coming back to the M.G between
theater owners and distributors, in our case the M.G agreement was made for 5
Lakh rupees for a theater, is divided in percentage between the theater owners
and distributors, generally as below.
Period
|
Collection
Split Ratio
|
|
Distributor
|
Theater
owner
|
|
First week
|
60%
|
40%
|
Second week
|
55%
|
45%
|
Third week
|
50%
|
50%
|
In
the above process, the theater owners would only show the collection data
through ticket sales to the distributors until the collection crosses the M.G
amount of 5Lakhs. Only the collection beyond the M.G amount is shared between
them as per the table above. All these statistics and rules are applicable only
when the speculated collection takes place! Even if the film does not collect
the M.G amount of 5 Lakhs, distributors remain unaffected because the loss due
to low collections would not be borne by them based on M.G agreement.
Please do not jump the gun that
distributors make good profits always. The M.G process we have discussed so far
is applicable only for big movies with big stars and directors, for which the
distributors pay big prices too. Case of other movies is different altogether.
Nowadays, the M.G sharing is done per se since there is tax exemption for
movies with pure Tamil titles. Previously, the split was done in two modes and
the agreement was done in accordance.
Share
in Gross income (or)
Share
in Net income.
As
you may be aware, Gross income is with tax and the net is post tax deduction.
Distributor favors gross split as it is beneficial to him. Whereas, theater
owners have double profit in net income sharing. He could reduce the tax amount
from the ticket sales and the rest only is put on the table for sharing. But
how is it bringing his home double profit? More on theater owners’ tax dodging
practices later.
Advance
method
Advance method is just like M.G
except in this, in case of loss is shared between the theater owner and
distributor whereas in M.G the loss is borne only by the theater owner. If the
advance paid by the theater owner for the distributor is 5 lakhs, the same
percentage ratio would be in practice. After the advance amount of 5 Lakhs is
realized in collections, the extra income is shared between the theaters and
the distributor, just as in M.G. But this is where the similarity ends.
Perhaps the advance paid to the
distributor (5 lakhs) is not realized in theater collection (ticket sales), the
theaters are not in trouble here. Because, in advance method, the rest of the
amount in the advance paid minus the collections has to be paid by the
distributor to the theaters. This is why advance method is favorable for
theater owners. But all these things would happen if the movie’s distribution
house is ethical and renowned. Advance would be paid only if the distributors
or the distribution company is trustworthy enough to pay the money back in case
of poor collections. There are lots of theater owners who have risked their
advance money with infamous distributors and struggle to get it back. Hence,
the theater owners would not risk their money if it were not a reputed
distributor. Advance method would is followed for films with average cast and
crew and theaters which relatively generate more revenue, irrespective of which
kind of movie is screened there. For micro-budget movies, there is a practice
to collect only the print expense of the movie the minimum advance from the
theaters. Sharing would be based on the same ratio as we have seen here.
Terms
In terms method, without any advance
or M.G, the theater owners would fix the ratio sharing with the distributors
and allow them to release their movie in their theatres. Most small budget
movies are released in this route. Many small movies, which are released
directly by the producer himself without distributors are released with this
terms agreement. This is relatively trouble-free method. At times, however,
theater owners tend to cheat at the producers or distributors, not allotting
their fair share.
Hire
Hire is the process of renting one
copy of a film for complete ownership for a single release or single run. In
other words, the ownership is valid only till running the film in a theater and
hirer get the collections. Mostly, hire
process is followed for films that surprisingly do well post their release. For
such movies, theater owners would advance with the hire deal to the
distributors or producers who release the film, strike a hire deal and release
in their theaters. For a movie, which is hired for 2.0 Lakhs, all it collects
goes only to the theater owner; so is the loss. Interestingly, in many times,
these hired movies only would bring the profits home to the theater owners,
hence considered lucky for them.
Also novices and learners in the
distribution business, learn the tricks of the trade by screening a film in a
known theater, primarily with hire process. It is best suited for start up
distributors.
More
on multiplexes and their agreements later.
Cable Sankar - Translation Of My Book In Tamil "CINEMA VYABARAM" Done By Rangs. Published in Behindwoods.com.
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