Thottal Thodarum

Mar 20, 2015


Rental Process 
            As we have discussed already, In Chennai and other big cities, the theaters operate on rental basis. It does not matter whether it is a single screen or multiplex, the theaters operate on rental basis. The rent differs from one theater to another based on factors like locality, capacity and facilities. In Chennai, a moderate theater with AC and DTS can fetch around a lakh rupees as weekly rent. Rent can be split and charged (rent for screening the noon show only). Theaters like Devi have charged INR 2.5 Lakhs as weekly rent. We have paid this amount for ‘Uyirile Kalandhadhu’, which we released in Devibala. The quirky thing to notice in this trade is, the theater owners would deduct the rent for second week when they hand over the first week collection to the distributors. The term this as  ‘Protection Money’, explaining that the producer or distributor need not struggle to pay off the second week rent, perhaps the collection in that week is not good enough. It is indeed a protection for the theater owners; not for the distributors! However, now in many theatres in Chennai and other big cities, movies have started to release in percentage basis.

Minimum Guarantee (M.G)
            Just like the distributors buy the film from producers in M.G, theater owners would screen the movies, albeit the big ones, via M.G route. For example, a distributor has bought a movie’s rights for 80 Lakhs for Chengelpet area, where release centers are about 50 theaters.  (Release centers are theaters that screen only new movies) For Chengelpet area, a big movie with a mass hero may even be released from 18 to 25 theaters at the same time. Before the release, every theater owner, based on his past experience on the same hero’s films or similar gauge, would estimate and arrive at a prospective collection amount for the movie and makes an agreement with the distributor.

            For this instance, M.G for this movie, which would be released in fifteen` theaters, is rupees 5 Lakhs per theater. The distributor gets 5 lakhs X 15 Theaters = 75 Lakhs against his distribution cost of 80 Lakhs. Literally he is releasing the film with INR 5.0 Lakh investment. Add a few lakh expenses with this for advertisement and posters, the capital invested by the distributor may look very meager. Is distribution really this cheap? While it looks as if it is, the fact is it is not.

            It is impossible to release a movie with a puny investment like 5 lakhs. For big actors’ films, business talks get initiated almost immediately after the film hits the shooting floor. The buying spree and race intensifies if that actors’ previous movie has been a hit. In a competitive scenario like this, distributors even pay few lakhs to the producer as advance, when the movie has only just started shooting. This way, for a movie right which costs a crore rupees, they pay few lakhs in advance, part amount just ahead of audio release and rest of the amount will be paid ahead of the movie release date, after which they own the copy of the movie.  Production phase of big budget films like these would be generally longer, in some cases exceeding even a year. When you account the capital locked and the interest amount for the same factored from the distributor’s side, one can appreciate the investment required for releasing a film.

            When an actor’s movie becomes super hit, his next film’s producer hits the jackpot. It was the time Vijay’s ‘Ghilli’ was running full houses. Well ahead of ‘Ghilli’, producer-director Madhesh has completed puja for the film ‘Madhura’ with Vijay and one of my distributor friends was interested in Madhura’s Chengelpet rights. He was bowled over with price demanded came back running. He was not alone. Many other distributors were not coming forward to buy ‘Madhura’ as the asking price was stratastopic. Precisely at this juncture, ‘Ghilli’ released.

            The humongous success of ‘Ghilli’ has fetched a massive selling price for the same ‘Madhura’, which was detested by the same distributors. Hold your breath! ‘Matura’s Chengelpet rights alone were sold for around one crore rupees. Make a guess the price originally demanded by Madhesh? 75 Lakhs! Again, this is Cinema Industry for you!
            Coming back to the M.G between theater owners and distributors, in our case the M.G agreement was made for 5 Lakh rupees for a theater, is divided in percentage between the theater owners and distributors, generally as below.

Collection Split Ratio
Theater owner
First week
Second week
Third week

            In the above process, the theater owners would only show the collection data through ticket sales to the distributors until the collection crosses the M.G amount of 5Lakhs. Only the collection beyond the M.G amount is shared between them as per the table above. All these statistics and rules are applicable only when the speculated collection takes place! Even if the film does not collect the M.G amount of 5 Lakhs, distributors remain unaffected because the loss due to low collections would not be borne by them based on M.G agreement.

            Please do not jump the gun that distributors make good profits always. The M.G process we have discussed so far is applicable only for big movies with big stars and directors, for which the distributors pay big prices too. Case of other movies is different altogether. Nowadays, the M.G sharing is done per se since there is tax exemption for movies with pure Tamil titles. Previously, the split was done in two modes and the agreement was done in accordance.

Share in Gross income (or)
Share in Net income.

As you may be aware, Gross income is with tax and the net is post tax deduction. Distributor favors gross split as it is beneficial to him. Whereas, theater owners have double profit in net income sharing. He could reduce the tax amount from the ticket sales and the rest only is put on the table for sharing. But how is it bringing his home double profit? More on theater owners’ tax dodging practices later.
Advance method

            Advance method is just like M.G except in this, in case of loss is shared between the theater owner and distributor whereas in M.G the loss is borne only by the theater owner. If the advance paid by the theater owner for the distributor is 5 lakhs, the same percentage ratio would be in practice. After the advance amount of 5 Lakhs is realized in collections, the extra income is shared between the theaters and the distributor, just as in M.G. But this is where the similarity ends.

            Perhaps the advance paid to the distributor (5 lakhs) is not realized in theater collection (ticket sales), the theaters are not in trouble here. Because, in advance method, the rest of the amount in the advance paid minus the collections has to be paid by the distributor to the theaters. This is why advance method is favorable for theater owners. But all these things would happen if the movie’s distribution house is ethical and renowned. Advance would be paid only if the distributors or the distribution company is trustworthy enough to pay the money back in case of poor collections. There are lots of theater owners who have risked their advance money with infamous distributors and struggle to get it back. Hence, the theater owners would not risk their money if it were not a reputed distributor. Advance method would is followed for films with average cast and crew and theaters which relatively generate more revenue, irrespective of which kind of movie is screened there. For micro-budget movies, there is a practice to collect only the print expense of the movie the minimum advance from the theaters. Sharing would be based on the same ratio as we have seen here.


            In terms method, without any advance or M.G, the theater owners would fix the ratio sharing with the distributors and allow them to release their movie in their theatres. Most small budget movies are released in this route. Many small movies, which are released directly by the producer himself without distributors are released with this terms agreement. This is relatively trouble-free method. At times, however, theater owners tend to cheat at the producers or distributors, not allotting their fair share.

            Hire is the process of renting one copy of a film for complete ownership for a single release or single run. In other words, the ownership is valid only till running the film in a theater and hirer get the collections.  Mostly, hire process is followed for films that surprisingly do well post their release. For such movies, theater owners would advance with the hire deal to the distributors or producers who release the film, strike a hire deal and release in their theaters. For a movie, which is hired for 2.0 Lakhs, all it collects goes only to the theater owner; so is the loss. Interestingly, in many times, these hired movies only would bring the profits home to the theater owners, hence considered lucky for them.

            Also novices and learners in the distribution business, learn the tricks of the trade by screening a film in a known theater, primarily with hire process. It is best suited for start up distributors.

More on multiplexes and their agreements later.
Cable Sankar - Translation Of My Book In Tamil "CINEMA VYABARAM" Done By Rangs. Published in 

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