MOVIE DISTRIBUTION – DIFFERENT ERA DIFFERENT METHODS
Movie Distribution: Long before the multiplex era, all that existed were single screens. Single screens ranged anywhere from 300 seats up to 1,300 seats from small screen to large 70mm screens. The world of movie distribution has seen huge changes in terms of logistics and transparency. Also read about dramatic changes brought in by emergence of OTT platforms. Distributors had two ways to deal with the theatre owners, outright rent for a specified number of shows per week or a revenue sharing basis where the distributor took 70-75% of the total net collections (after taxes). Moreover, since the movies came in film rolls, they had access to limited number of prints for multiple screens spread across the length and breadth of the region for which the distribution was undertaken.
Theatres sharing the prints would strategically space the shows in a manner in which the film rolls could be transported from one screen to another which was a logistical nightmare. Any glitch would end up in interruption of the movie screening much to the ire of the audience, even worse would be rolls jumbled up practically hampering the experience of the movie watching audience. Digital era has changed all this and with the advent of multiplexes, movie prints and distribution have become logistically simpler. All you need is a hard drive or a satellite feed that can be decrypted with the help of a KDM (Key Delivery Message), for specific theatres and number of shows. Distribution is by and large still an unorganized sector in large parts of India. Ticket collections have however, become more transparent in the last decade or so, mainly thanks to consolidation by large multiplex chains. As for single screens, doubts still exist on transparency.
Types of Movie Distribution: Outright Purchase A distributor signs an agreement with the producer for a fixed amount for a certain geographical area. The price is arrived at taking into consideration, the population, number of screens and the budget of the movie. Once the distributor has bought the rights, the onus of promoting the movie by way of propaganda is entirely the distributors responsibility. The distributor has to book the theatres well in advance for a specified period and number of shows. Generally, a big budget movie with bigger stars would command a higher price considering the viability of releasing the movie in larger number of screens during the first week of the release. Any profit or loss, would be absorbed by the distributors. In this method, If the movie ends up with a good theatrical run, the distributors end up making more money than the producers. Price at which a territory sold to the distributor
8 crores
Print, publicity and rental costs
6 crores
Total cost incurred by the distributor
14 crores
Financials – Outright Purchase Method
If the net proceeds (after deduction for taxes) from the theatres exceeds 14 Crores, the distributor makes a profit. Similarly, he will absorb the loss. Sometimes, the theatre rentals are substituted with sharing of the proceeds between the theatre owners and the distributors.
Minimum Guarantee In this method, producer gives the rights of distribution for an agreed amount. In case, the distributors profit share crosses this amount, the producer and the distributor will share the profits made over and above the agreed amount. In case of a good run, producers and distributors both make money. This is typically used by huge production houses. Price at which a territory sold to the distributor, say 10 crores . In case the proceeds exceed 10 crores, the distributor and producer share the profits at an agreed percentage.
Distribution This is a method where the burden is totally on the producer. In this case, a distributor pays a fixed amount of money (refundable) to the producer to screen the movies in a certain geographical area. On screening the movies, the net collections from the theatres are given back to the producer. The producer gives an agreed amount of commission on the collections. At the end of the theatrical run, the advance is returned to the distributor. This method is usually adopted for small budget movies, with limited prints and small number of screens. The commission to the distributor differs based on the collections. If the collection exceeds the advance amount initially paid, the commission would also be higher. Based on the response to the movie, the producer has the liberty to change the method of distribution for other geographical areas. Advance paid by distributor to the producer for a territory
2 crores
Net proceeds collected by the distributor
4 crores
Commission paid by producer to the distributor (10% of net proceeds)
0.4 crore
Producer will refund the commission along with the advance to the distributor
2.4 crores
Financials – Distribution Method
In case the net proceeds are less than 2 crores, the distributor gets back the advance in full either without interest or a minimum rate of interest. In this case, the distributor is more like a financier. AUTHOR: Anand Gangadharan Anand is a Finance Professional based out of Kuwait. His interest in movies, as he puts it is hereditary in nature. He is also language agnostic when it comes to movies - covering Tamil, Telugu, Kannada,
Malayalam, Hindi and English. He probably owns the record of watching the most movies in Kuwait Cinemas and the OTTs have only made his interests in this media grow wider.
