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Breaking the myths about box office hits

The sensible and prudent way to look at the box office numbers is to see what are the key sources of a producers revenue

Surajeet Dasgupta  |  New Delhi 

“Happy New Year” the Shah Rukh Khan mega movie started with a bang, recording the highest box office collections for any film in Bollywood. The multi starrer film has raked in over Rs 137 crore in the domestic box office till Tuesday (first five days). And if you include its collections globally (Rs 48 crore) in the weekend , it has rustled up Rs 185 crore across the world.

That is not bad.But should the distributers (who have the rights in India and abroad) Yash Raj Films (YRF) be laughing their way to the bank even as the movie is being dubbed as a hit? The answer is they should keep their fingers crossed.

That might look surprising. After all the distribution company had to pay a minimum of Rs 125 crore to the producers Red Chillies before it can make any profit-which on the surface looks they have made. But here is the first myth about box office numbers: producers or distributers who buy the movie have to share a substantial portion of their box office earnings with the exhibitors like PVR, INOX, DT just to name a few. In the first week that number is close to 50 per cent going down slightly as the weekend is over. But in India the box office fate of most movies is decided in the weekend. Even abroad exhibitors follow a similar structure- though the specific number may vary from country to country.So in the case of “Happy New Year”, it simply means that YRF has to make at least Rs 250 crore from box office collections before it can think of profits.

There is of course the second myth of box office magic numbers. Media as well production houses go to town shouting from their roof tops when the movie hits the magic Rs 100 crore box office number. But in reality it means nothing when it comes to profits for the producers or distributers. That is because what matters to them is their return on the investment that they make-and that is rarely publicized.

The Rs 100 crore number makes no sense, because it has to be seen in relation to the cost of the movie. So in the case of “Happy New Year” which was made for Rs 125 crore, reaching the magic Rs 100 crore number means that based on the distributers share of the revenue (Rs 50 crore) you are still nowhere near on recovering your cost of distributing the movie.

The sensible and prudent way to look at the box office numbers is to see what are the key sources of a producers revenue.They include his share of box office collections and how much money has he made by selling his broadcasting and music rights. Producers have two cost components: money they spend on making the movie and the marketing and publicity costs which for many movies is getting bigger and bigger.

Let’s take the example of “Mary Kom”, a successful small budget film. For the producer, the movie was made with a total budget of Rs 18 crore (including marketing). The movie earned over 104 crore from box office collections in Indian and abroad. After keeping the share of the exhibitors aside as explained above, the producer made about Rs 52 crore. But he also sold the broadcasting rights of the movie for Rs 14 crore and music rights for Rs 3 crore which he does not have to share with anyone. So the producer made a return of nearly four times of the money he invested.

So only when you look at return on investment(ROI), you can judge how much moolah a producer or distributer has made.For instance, it is pretty clear that the ROI for the producer of “Mary Kom” is much higher than the producers of some of the big budget blockbusters like Hrithik Roshan’s “Bang Bang” (32 per cent return on investment) or a Salman Khan’s Kick (which made 45 per cent return on investment). So small could be big too for producers.

First Published: Fri, October 31 2014. 11:22 IST