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Bollywood’s New Business Model ExplainedSerenzy | January 4, 2012, 6:09 AM | 5 comments | 912 views
Note: One of the most interesting reads on current BO scenarios….Must Read for out NG Users(espc. the BO Users over here)
The year 2011 may have thrown up a number of hits, super-hits and successful films but let’s face it – the industry should not be getting as excited and feeling as elated as it is. For, if one scratches the surface beneath the success stories, the picture that emerges is not very rosy. Here’s why…
In recent times, a number of films have proved to be plus fares not as much for their content as for the boom in satellite market and subsidies offered by governments of different countries to producers shooting their films there. That is to say, the money is coming in not so much from the public at the box-office but from other sources.
Don 2, Desi Boyz Benefited From Non-Theatrical Revenues In fact, it wouldn’t be incorrect to say that films like Ra.One, Desi Boyz and Don 2 have the satellite channels and subsidies to thank for their plus status. Note, for instance, that Ra.One benefitted to the tune of Rs. 28 crore which it got by way of subsidy from the UK government. The makers of Desi Boyz also gained from the UK government’s largesse – they got around Rs. 15 crore. Don 2, which was shot extensively in Germany, is expected to gain by Rs. 15 crore which would be the amount of subsidy its producers would receive from the German authorities.
The fate of a film at the box-office no longer matters as much as it used to till two years ago. That’s why the attention given by filmmakers to scripts is going down. The satellite rights of all the three aforementioned films were pre-sold. In other words, the television channels acquired the satellite rights of these (and many other) films before they hit the screens, which means that the price for their satellite rights were decided irrespective of their performance at the ticket windows. What one is trying to arrive at is that the fate of a film at the box-office no longer matters as much as it used to till, say, two years ago. Not only has the share of box-office earnings in the total revenue pie of a film reduced but the importance of the distributors’ shares in deciding the other earnings of a film has also declined considerably. That’s, perhaps, why the attention given by filmmakers to scripts and content is going down. With satellite channels being ever hungry for film software, producers are assured of hefty sums of money from sale of satellite rights. And if they can shoot their films in foreign lands and thereby manage to get part of their cost subsidised, it makes matters so much easier for them. Satellite rights and subsidies, together with audio rights could help a producer of a star-cast film recover upto 60-70% of his entire cost, sometimes even upto 80-85%! In this scenario, producers were bound to become lackadiasical in their approach to making films – and they have. For, as long as their film doesn’t see them in the red and rather yields profits, what’s their worry? Who cares whether the moolah comes from the public or from other sources so long as it goes towards offsetting the cost.
In real terms, those films are not being seen by enough people which is why their collections come crashing down after the first weekend Ra.One, Desi Boyz and Don 2 are just three examples. Producers of many big-budget and star-cast films have similarly gained from the largesse of television channels and governments of foreign countries rather than because they made good or great films. If they still laughed all the way to the bank, it is because of the undying demand for films from television channels and due to foreign governments wooing Bollywood producers. It may be a paradox that governments of various countries offer subsidies to Bollywood producers who shoot their films in those countries because they believe that such films, when viewed by people in large numbers, would give a fillip to tourism in those countries. For, in real terms, those films are not being seen by enough people which is why their collections come crashing down after the first weekend.
Of course, this happens in Hollywood too. Often, box-office revenues of a film are far outweighed by revenue from other sources like, say, DVD sales. But for DVD sales to be brisk, the pre-supposition still is that the public must like a film. However, there’s no such requirement when a TV channel acquires the satellite rights of films at obscene prices or when a country offers huge monies to producers to shoot their films on their hand.
There is another way of looking at this scenario. Maybe, the budgets of our films have gone up because revenues from non-theatrical sources like the above have increased phenomenally in recent times. Maybe, producers are spending heavily only because they can see returns. Maybe, that’s why box-office revenues aren’t keeping pace with the costs and yet, producers are laughing all the way to the bank. Put differently, if the satellite market were to crash tomorrow or most of the foreign governments were to pull back their subsidy schemes, producers may become tight-fisted and spend much less on their films. In such a scenario, box-office returns may not after all look so small in comparison to the investment in the films because the figure with which the revenues would be compared would itself have dropped down dramatically. Some readers have complained that Koimoi has started calling films successful even when they don’t run for more than a couple of weeks.
Just a related aside here. Some of our readers have complained to us that we have become partial towards producers and distributors in recent times and have started calling films successful and hit even when they don’t run for more than a couple of weeks in cinemas. The above should clear the air. Our stand is clear: if revenues, from whatever sources, of a film exceed the investment in it, we have to term it a success even if the theatrical earnings are comparatively low. Imagine calling a film which gives a 25% return on investment a flop merely because it got most of the earnings from non-theatrical sources. Yes, some exhibitors may not have earned much from such films, and, in some cases, may have even lost in them (if they had paid fancy MGs) but that can’t be enough reason to call a profitable film flop. The profit a producer often makers in his film is so high (in crores of rupees) that even if one were to deduct the combined losses made by the exhibitors (in lakhs of rupees or, in extreme cases, a couple of crores) in that film, the final figure would still be that of a hefty profit. Would it be fair to call such a film a failure?
Not to our mind! Bollywood’s Old Guard Needs To Change The old guard needs to change its outlook because business of films has changed – and is changing every day. Finally, when the history of cinema is written, a profitable film will be termed so, irrespective of how it became profitable – from the cinemas or because of other revenue sources. The bottomline is comparison of cost with revenue. Nothing else matters when one is talking of the economics of films. Creativity is a different subject altogether.