Revenue share battle back in action again

Both distributors, multiplexes want more.

A tussle has again begun between multiplexes and large production and distribution houses on a revenue-sharing agreement for movies.

The first Bollywood casualty of this being Reliance Big Pictures’ Singham, starring Ajay Devgn, which releases on Friday. According to sources in the production and exhibition industry, the advance booking for the movie did not open on Wednesday, as the multiplexes demanded a higher share in the revenue to be generated.

“The multiplexes are insisting the distributors take 45 share per cent in the first week, 37.5 per cent in the second week, 32.5 per cent in the third week and 27.5 per cent in the fourth week,” said an official.

In June 2009, the multiplexes and distributors had signed a two-year memorandum of understanding. This was after Bollywood producers decided not to release new films until their demand for a flat 50 per cent revenue share was met. The standoff lasted for over three months, with the industry losing Rs 350 crore.

They agreed the producers would get 50 per cent in the first week, 45 per cent in the second week, 37.5 per cent in the third week and 30 per cent in the fourth week. If the movie earned over Rs 17 crore at the box office, the producers were to gain an additional 2.5 per cent. This memorandum of understanding expired on June 30.

TUG RESUMES
A new round of negotiations has begun on this issue with top executives of various film studios and leading multiplex chains like Cinemax, PVR, Inox and BIG cinemas, said a senior multiplex official.

Last week, the release of Harry Potter and the Deathly Hallows Part 2 ran into rough weather, following a deadlock between Warner Brothers India, distributor of the film and multiplex operators. Multiplex chains asked for 55 per cent revenue in the first week of Deathly Hallows 2, as opposed to the 50:50 agreement for earlier films.

The issue was resolved just a day before release, with the profit sharing ratio in favour of multiplexes. However, the delay in negotiations led to cancellation of paid previews on Thursday night and also affected business in a few centres on Friday mornings, as the prints were not despatched.

Experts say the crux of the battle lies in both sides wanting to take a bigger share of the Rs 3,200-crore annual multiplex box office market for Bollywood films. There are about 1,050 multiplex screens in the country and Bollywood films generate 60-65 per cent of their revenue from these multiplexes, while the single screens generate the remaining share, industry sources say. There are a little over 6,000 single-screen theatres operational in the country.

According to a Ficci-KPMG study, the overall size of the film industry is estimated to be around Rs 8,330 crore, with 62 per cent coming from the domestic box office market.