You are here: Home » Companies » Features
Business Standard

Box-office bonanza

Want up to 100 per cent returns on investment? Make a film. The author decodes the boom in Bollywood

Surajeet Das Gupta  |  New Delhi 

Karan Johar is an astute businessman. His Dharma Productions made Yeh Jawaani Hai Deewani with a budget of Rs 72 crore. It had all the ingredients of a masala film: exotic locales, peppy music and good performances by Ranbir Kapoor and Deepika Padukone. The production house, say movie pundits, made a profit of Rs 40 crore by selling the domestic and international theatrical, music, video and satellite rights to an assortment of That's a return of over 55 per cent. A better investment in these days of gloom and doom will be hard to make. Johar is not the only one laughing all the way to the bank. UTV Disney, which had bought the domestic rights of the for Rs 58 crore, has already got a 50 per cent return on the investment. The coming-of-age has raked in Rs 185 crore in domestic collections alone. Exhibitors are ecstatic. Kapoor has taken another step towards superstardom. He has become the second-most expensive celebrity endorser after Aamir Khan. Padukone has landed in the top bracket of actresses, along with Katrina Kaif and Priyanka Chopra.

Businessmen, CEOs, CFOs and investment advisors could also look at Aashiqui 2, which was produced by Vishesh Films and T-Series on a modest budget of Rs 17 crore and has collected over Rs 100 crore, which includes money from sale of various rights. Fukrey, another low-budget shot on location in east Delhi for Rs 11 crore, has been declared a sleeper hit. Raanjhanaa, made for Rs 35 crore and starring Sonam Kapoor and southern star Dhanush, collected close to Rs 30 crore on its opening weekend. Trade pundits say the movie will give handsome returns to its producer, Eros International. In fact, 2013 promises to be a year like none before - two films have done Rs 100 crore and more in box office collections and many big films are slated for release during the year: Chennai Express, Lootera, Dhoom 3, Krrish 3, Satyagraha, Bhaag Milkha Bhaag, Once Upon a Time in Mumbai Again and Ram Leela. In 2010, two films made it to the coveted Rs 100-crore club; the number rose to five in 2011 and nine in 2012. This year, the number is certain to cross 10. (THE REGIONAL FARE)

Suniel Wadhwa, who keeps tabs on the business of Bollywood, says that the net domestic box office collections (of movies which made more than Rs 1 crore) between January and June this year went up by over 20 per cent to Rs 1,136 crore compared to the same six-month period last year. In 2011, box office collections for those six months were Rs 609 crore. In 2012, domestic box office revenues went up 54 per cent over the previous year to Rs 2,448 crore. This year, all records will be shattered. Of course, this is not to say that every that gets released makes money. Over two-thirds of the released films still flop. And nearly half do not find buyers for their satellite rights. But overall revenues are up. Out of the 42 nationally released films so far, six to eight made return on investments between 20 per cent and 50 per cent, while another six to seven broke even and made money. (Click fro chart & table)

The market is on fire. In the last 18 months, footfalls to multiplexes have gone up, and cinema goers have shown that they are ready to pay more for tickets than ever before. As a result, multiplexes are mushrooming all over India, especially in smaller cities and towns. The number of multiplex screens has gone up from a mere 900 in 2010 to over 1,400 now, while another 100 or so are in the process of being added. The ramp-up would have been faster had it not been for the slowdown in the construction of malls across the country. Everybody is riding the gravy train: producers, directors, distributors, exhibitors, actors and technicians.

* * *

One reason why box office collections are up is that ticket prices have risen 10 to 15 per cent in the last one year. Exhibitors say costs, especially power, have shot up and that's why they have raised ticket prices. But such is the demand that the price rise has had no impact on ticket sales. The strong demand also explains why ticket prices have gone up in spite of the sharp rise in the number of multiplex screens. As a result, producers and exhibitors now get more revenue even if the number of tickets sold remains the same. Multiplexes contributed about 50 per cent of a film's box office revenue three or four years ago; they now account for up to 70 per cent. The migration from single-screen theatres (average ticket price: Rs 50-55) to multiplexes (Rs 140) has also contributed to the better collections. Multiplex chains say their revenue has gone up over 20 per cent, while single-screen revenue has fallen 8 per cent.

At the same time, footfalls in multiplexes are going up too. Occupancy rates have gone up by 2 to 3 per cent across screens (average occupancies can be 26 to 30 per cent) in the last year or so. More important, digitisation has made it possible for movies to be launched in many more screens quickly than was possible through physical deployment of bulky prints. From a share of 50 per cent three years ago, 80-90 per cent of the films are now distributed through the digital format. This has helped producers to reach a larger number of screens much faster, especially in the first week, so that they can improve their revenue - the first week contributes 60 to 80 per cent of a movie's total box office collections. For example, a movie like 3 Idiots in 2010 was shown in 1,000 screens and that was considered an unheard-of scale; this year, Yeh Jawaani Hai Deewani was released in 2,000 screens. The number didn't surprise anyone because it has now become the norm for all big movies. In fact, over half the movies released this year - 22 out of 42 - were shown in more than 1,000 screens.

Bigger releases also mean more people coming to the movies. A good indication of the boom is PVR, by far the country's largest theatre chain which runs over a fourth of all multiplex screens in the country. Ajay Bijli, its suave managing director, says that average revenue per screen has gone up 20 per cent in the last one year. Of this, 13 per cent has come from the increase in footfalls and the rest from higher ticket prices. Sensing the boom, Bijli is looking to increase footfalls to his screens from 55 million last year to 69 million this year. To make that happen, he wants to add 90 screens in the next few months which will take his tally to over 440 screens across the country. The new screens will expand PVR's presence from 38 cities to over 50 cities. Explaining the logic for this expansion, Bijli says: "With our expansion into newer cities like Kochi, Bhilai and Patankhot, we will bring in new customers to the movies who earlier were not seeing films in halls."

* * *

Industry folks know that there is a huge upside still left. According to estimates of Motion Picture Association of America and PVR, as many as 3.3 to 3.5 billion cinema tickets are sold every year in the country. About half of these are for Hindi films. As 43 per cent of the Indian population of 1.2 billion knows Hindi, in simple terms every Hindi-speaking person who is above the poverty line sees 4-5 Hindi movies a year on an average and spends anything between Rs 450 and Rs 500 on tickets. In contrast, this person spends two to three times more on his mobile phones bills. This means cinema has the potential to get a bigger share of the consumer's wallet. For that to happen, the cinema infrastructure needs to improve. For instance, Uttar Pradesh, the heartland of Hindi movies, has only 150 multiplex screens for a population of 180 million - that's less than one screen per million! Tanuj Garg, the CEO of Balaji Motion Pictures, says, "Only 2 per cent of our population goes to cinema halls. There is a huge untapped potential. We are on the cusp of change as there will be an increase in the number of screens." Still others say that the movie-goers don't add up to more than 7 per cent of the population. If that is the case, between 24 and 85 million people sustain the movie business in the country, though some say that this number is too low. But think of the opportunities if the number doubles.

The growing market place, especially the rapid increase in multiplex screens, has also made it possible for low-budget movies targeting a niche audience to get good returns. Siddharth Roy Kapoor, managing director of studios, Disney UTV, says: "Today small or big is really an idea. Multiplex-going audiences are happy to pay." Adds Wadhwa: "Audiences are starting to get really hungry for content and that's why some small budget movies have done so well." So, apart from Aashiqui 2, movies like Kai Po Che, ABCD and Jolly LLB, most of which were made within Rs 20 crore, have provided healthy returns to their producers.

Also, new alternative sources of revenues are becoming big, even challenging the traditional dependence on theatrical rights for a movie's success. That is because TV channels, starved for good content, are ready to pay hefty amounts for satellite rights of films that have the potential to do well. Says Hiren Gada, director of Sheemaro Entertainment: "Domestic theatrical rights are only 50 per cent of overall revenues; satellite rights could be anything between 20 per cent and 30 per cent." But, he adds, "The theatre business is the riskiest because if it doesn't work, the revenues from the satellite rights also shrink." For instance, Dharma Productions has sold the satellite rights of Yeh Jawaani Hai Deewani for Rs 30 crore to Sony, nearly half of what it got from selling its domestic theatrical rights.

As the industry prepares to release potential blockbusters, there is palpable excitement all around. There is no other business like show business.

(Gaurav Laghate contributed to this report)

First Published: Fri, June 28 2013. 21:50 IST