Bollywood’s Business Model | How Does the Film Industry Make Money? | Content on the Edge

Bollywood’s Business Model | How Does the Film Industry Make Money? | Content on the Edge

Hello, Readers of Content On The Edge! Salman Khan, a Bollywood star, appeared in the movie Race 3 when it was released about four years ago. Both the audience and the critics gave this movie dismal reviews. It is viewed as a colossal failure. But did you know that this movie still made money in spite of everything? This movie had a 1.8 billion dollar budget, yet it made more than 3 billion.

WHY SOME MOVIES FAILS WHY SOME SUCCEED?

On the other side, the 1970 Bollywood film Mera Naam Joker offers a striking contrast. Raj Kapoor, who was at the height of his fame at the time, served as the movie’s director, producer, and star. Today, people still revere this movie as a cult classic. One of the top movies of its era. However, this movie made such a loss that it caused Raj Kapoor to experience a financial problem. If anyone made money off of this movie, it was a Soviet-based business.

This explains why some popular movies end up being duds for some audiences while monetarily unsuccessful movies succeed. Come, let’s learn about the Bollywood film industry’s business model in this article. How are movies released? We have forgotten this information, Sir. “People aren’t visiting theaters as frequently.” “I don’t think anyone can assess what people prefer on this earth,” It’s a full business, and I recently spent a lot of money on marketing. “Truly content right now is skin,” “We’ll be flush with cash!” “I believe it is an Indian film that is succeeding when you say a South Indian film is successful.” Friends, the largest film maker in the world is the Indian film business. India produces more movies than any other country in the world combined. In India, between 1,500 and 2,000 films in 20 different languages are produced annually. For a long time, Bollywood, the Hindi film business, had been India’s most well-known film industry. Even still, just 16% of Indian movies are produced in Bollywood. among all the films produced in India. Bollywood, however, has the biggest revenue market share.

BOX OFFICE

Bollywood movies made up about 45% of the box office receipts. Because this was the situation before to the epidemic, I’m using the past tense. The Telugu film industry is currently the largest in India. This year, they have a 28% box office share in the domestic market. Bollywood’s share has also decreased to 27%. The market share of South Indian language films has increased overall, rising from 36% in 2019 to 59% by 2020–21. Although Bollywood is gradually losing ground, all of these movies operate according to the same commercial model. We must first comprehend the process of film making in order to comprehend how a movie makes money. A movie’s production can be broken down into four stages.
The film’s plot is developed during the development stage. The movie’s dialogue and script have been written. The primary cast and supporting cast were then chosen during the Pr-Production phase. actors who will appear in the movie. A crew is also hired at this point. The shooting gear is set up, regardless of where it will be rented from. The shooting sites have been chosen. Additionally, travel plans and lodging are made. Additionally, permits and insurance are obtained at this point if the movie needs any kind of authorization to film. The third stage, production, then follows. At this point, the movie is actually being shot.

MOVIE OR FILM PROCESS

The film enters editing after it has finished filming. The post-production stage, when this editing takes place, is where the finished film is assembled. It costs a lot of money to complete each step in the full process. In addition to the performers’ salary, the authors, the crew, and the costs associated with renting or purchasing filming equipment as well as obtaining the necessary licenses must all be paid. At least in certain movies. There is a significant overall expenditure. It is extremely uncommon for one person to have this much money. An average popular Bollywood movie has a budget of $500 million. Budget estimates for the upcoming movie Brahmastra range beyond $3 billion. Even the wealthiest Bollywood stars, such as Ranbir Kapoor or Akshay Kumar, wouldn’t have the resources to fund a single movie. Large organizations known as “Production Companies” take on the responsibility of managing expenses as a result. One of the most expensive Bollywood movies is Brahmastra. Because of this, numerous production firms are investing money to make this movie, rather than just one. Star Studios, Prime Focus, and Dharma Productions. The Producers are the people who pay for the costs of the movie out of their own pockets.

BUSINESS OF FEW MOVIES

If you recall, Bheja Fry, a great comedy movie from 2007, was one of the cheapest Bollywood movies ever made. This movie’s production will probably cost roughly $7 million in total. A wealthy person can easily pay $7 million. There was just one sole producer for this movie because of this. Solar Doshi manufacturer of Bheja Fry alone. Film producers are like entrepreneurs in that their work is quite dangerous. They make investments to cover the costs associated with producing a movie. They will see a good return on their investment if the movie is successful. But if the movie is a failure, they lose their money. As you are aware, the majority of movies are failures. A movie becoming a hit is extremely uncommon.

To make a movie, the producers essentially use their own funds. The budget is the amount of money spent on a movie. And they want the movie to be successful so they can profit from it. The Director is in charge of actually making the movie. shooting, editing, and post-production, to keep track of all the many tasks, and to actually create the movie. The directors are typically similar to the actors. They receive pay for their work. They receive a salary for each movie. especially when it comes to low-budget movies. For the big-name directors, like Steven Spielberg, they frequently collaborate on a profit-sharing basis. However, the directors and actors have a very small influence in our business strategy. When the movie is finished, the producers load it onto a tiny hard disc and deliver it to the distributors.

DISTRIBUTORS

The films must be distributed so that they can be seen in theaters and on OTT platforms. The film’s marketing is frequently handled by the distributors as well. They therefore invest their money on the movie’s promotion and advertising. The sale of the movie’s satellite and digital streaming rights generates revenue for the distributors. To purchase this right, the TV station that will air the movie for the first time must pay the distributor. so that only that TV Channel is used for the first television broadcast of the movie. The World Television Premiere occurs when this is completed. You may have caught this. The OTT platforms are also sold the movie by the distributors. And the distributor is paid for this by the OTT platforms. You might use the most recent movie, Bhool Bhulaiya 2, as an example. T Series produced it, and AA Films handled distribution. Deals are frequently made between the distribution firms and the OTT platforms prior to the film’s release.

They agree on a price to sell the movie for and choose a time frame for its premiere on their OTT platform. In this situation, the movie in question was a Super Hit. This movie stayed in theaters for another two to three weeks. However, because the distributor and Netflix already had a deal in place, whereby the distributor sold the movie to Netflix for $300 million, and whereby they had agreed on a date after which the movie could be released on Netflix, regardless of the fact that the movie was still playing in theaters, Netflix released the movie on their platform in order to protect its revenue. They would profit if they as quickly as possible released the movies on their platform. This has a negative effect on the film collections from the theaters. But the distributor is the one who bears this risk. The movie might have failed.

OTT PLATFORMS

In such case, it would have been wiser to release the content more quickly to OTT platforms. Friends, the production and distribution companies for big-budget movies frequently overlap. Large production organizations like Yash Raj Films, Dharma Film Productions, UTV Motion Pictures, Fox Star Studios, and Reliance Entertainment also function as distribution businesses. The production business keeps distinct budgets for production, marketing, and distribution if the producer and distributor of the movie are the same. Then, when the movies are being screened in theaters, you must buy tickets to see them.

Box Office is the name of the counter where tickets are purchased. The money a movie makes from ticket sales is referred to as the “box office collection.” The theater’s owners are in charge of collecting this sum. the cinemas’ proprietors. The theaters are required to pay GST to the government on this money. GST at a rate of 12% if the ticket price is less than $100 or at a rate of 18% if the ticket price is greater than $100. The balance is known as the film’s net collection after GST has been paid. A movie can be said to be lucrative if its Net Collection exceeds its Budget. The State Governments levied an Entertainment Tax prior to the implementation of the GST. Before, it differed from state to state. When a state declared a movie “Tax Free,” it signified that the movie’s entertainment tax had been refunded.

The price of the tickets was decreased. As I mentioned, there are currently two GST rates: 12% and 18%. The Central and State governments then split the GST. So today, only the SGST portion of GST is exempted when a state deems a movie tax-free. The CGST must nevertheless be paid. Therefore, the exemption is now either 6% or 9%. Depending on the ticket’s cost. Basically, this is the government’s engagement in the movie business model. You may say that it is the government’s method of controlling the movie business. However, since the advent of OTT services like Netflix, they now offer unpaid entertainment online. As a result, the government is unable to tax it. This feature of crypto is fairly comparable. When cryptocurrency first emerged, it was not subject to governmental regulation. However, the government has since added a cryptocurrency tax. make sure there are no channels through which they are not collecting taxes. Friends, it’s interesting to observe the agreement between the distributor and producer when they aren’t the same organization. There are three fundamental ways that profit might be divided among them. Minimum Guaranteed Royalty comes first.

PAYMENT STRUCTURE

No matter how successful or unsuccessful the movie is, the distributor must still pay the producer a minimum guaranteed sum. If the movie is successful, the producer will also receive a portion of the earnings.
for example, royalties. The producer and the distributor split the risk in this situation. The second method is when the distributor buys the movie outright from the producer. After then, the distributor is free to determine how to proceed with the movie. The distributor will benefit more if the movie is a financial success, and will also be responsible for covering any losses. The producer is secure in this instance. The producer doesn’t take any risks. When the producer sells the movie to the distributor, they walk away with their predetermined profit. The distributor is in charge of the rest.

This is what took place with the movie Mera Naam Joker. one of the best movies directed by Raj Kapoor, This movie was created and released in India by RK Films. The producing company of Raj Kapoor. All of Raj Kapoor’s resources went towards producing this movie. Additionally, he mortgaged his home. But despite all of the effort put into it, this movie ended up being a huge failure. This movie had a ten million dollar budget at the time. Its Net Collections, however, were only $8 million. How can the losses be covered? Raj Kapoor made the decision to totally sell off the film’s distribution rights in Russia—at the time still part of the Soviet Union—to a business based there. He sold the rights for 1.5 million without the need for intricate negotiations. Because Raj Kapoor believed he had already taken a significant risk and now desired a guaranteed sum of money.

The movie became a hit when it was released in the Soviet Union in 1972. In the Soviet Union alone, this movie brought in a total of 168.1 million dollars in 1972. The current value of this sum, after accounting for inflation, is $1.07 billion. The Soviet Union distributor made a tonne of money. Raj Kapoor, however, did not receive any of the profits as a result of the way the transaction was constructed, which transferred the risk to the distributor. Because of this movie, he was forced to suffer losses. Is this business model unexpected? The third approach is the most typical. The distributors receive the movies from the producers, who then earn commissions. such that a percentage of the overall income would be paid to the distributors. In this case, just the producer is at risk. Additionally, the distributor doesn’t face many risks. It implies that the producer in this instance is responsible for spending the money on marketing and distribution. Once you comprehend this, we can proceed to the following phase of the procedure. In the various parts of the nation, the distributors make contact with the sub-distributors.
The Distribution Circuits are the several regions that make up the nation. There are 11 of these Circuits for Hindi movies. The sub-distributors then make arrangements for the films to be screened and shown at movie theaters.

Actually dealing with the Exhibitors is handled by the sub-distributors. The Exhibitors are who? They are the theaters or the businesses that own the theaters. A revenue-sharing agreement is reached between the sub-distributor and the movie theaters. The deal largely hinges on how many screens the movie gets. The majority of cinemas in the nation are of the Single Screen Theater variety, where the arrangement between the two is often 25% to 75%. 25% of the proceeds from ticket sales would go to the exhibitors, and 75% would go to the sub-distributors. The manufacturers and distributors are then given a sizable chunk of the sub-earnings. distributor’s This ratio may also occasionally be 30:70 or 20:80. Multiplexes, which are located in malls, are the second kind of movie theater in the nation.

These have a varied split of the profits between the exhibitors and the sub-distributor. Each week, it continues to change. It is often split 50/50 during the first week. And as each week goes by, the distributor’s stake continues to decline. Second week: 60:40; third week: 70:30. For the producers and distributors, however, this is unimportant because most movies make the majority of their money during the first week of release. especially the box office duds. Samarat Prithviraj, a recent film starring Akshay Kumar, serves as an illustration. It was a very expensive movie. It had a budget of approximately $3 billion.

The movie’s producer and distributor was YRF. This movie made 550 million in its opening week. However, this movie has made about $860 million in total.
Most of the revenue potential of the picture was reached in the first week. The earnings start to fall off in the second week. For most movies, it is the same. a movie that made over $2 billion in losses and was a complete failure. And as you know, this loss will have to be paid by Yash Raj Films. Whether a big-budget movie starring A-list stars will succeed or fail frequently hinges on the actor’s reputation. As a result, the actors may enter into profit-sharing agreements with the producers and distributors. a technique via which performers also work as producers.

So that the risk of investing in the film doesn’t have to be held by the producers alone, the actor shares the risk too. According to rumours, Aamir Khan receives no pay at all. He enters into a profit-sharing arrangement instead of charging a salary, and if the movie is successful, he will receive somewhere between 50% and 80% of the profits. But if the movie doesn’t do well, he won’t get paid and would have to take a loss. Many actors on the model make a portion of their income from profits. One of the highest-paid actors is Salman Khan.

YRF PRODUCTION

He is rumored to make $700 million each film in pay. But he had agreed to a profit-sharing arrangement for his movie Sultan. The movie Sultan made $5 billion in total revenue. Of which the Entertainment Tax made up $1.06 billion. 3.94 billion was the Net Collection. YRF produced and released this movie. If we assume 20%, 20% of $3.94 billion equals $790 million. 10%–20% of the Net Collection was given to YRF. YRF has spent almost 200 million of this on marketing the movie. After that is subtracted, we are left with 590 million. The distributor of the movie, YRF, made a profit of 590 million. They independently estimated the profit they made as the movie’s producer. 7.90 million subtract from 3.94 billion to get 3.15 billion. Of this it is estimated that the exhibitors contributed 1.57 billion. 1.58 billion is equal to 3.15 billion minus 1.57 billion. YRF had a production budget of 700 million. Therefore, they had a net profit of $880 million. They had made an additional $200 million from deals to sell other picture rights, bringing their total earnings to $1.08 billion. Additionally, they had received 590 million from distribution. So YRF made a total of 1.67 billion from this movie.

According to rumors, Salman Khan and YRF agreed to a 50% profit-sharing arrangement in their profit-sharing agreement. So Salman Khan would receive 50% of YRF’s earnings. Specifically, 835 million. Salman Khan reportedly made this sum from this particular movie because he had agreed to a profit-sharing arrangement. Due to the success of the movie, it ended up being more than his usual income. Friends, this is how the film business model functions.
Thank you so much.

Watch Video below by Nitish Rajput on Bollywood and earning business.