Bollywood Economics 101
and how bollywood movies make money
I watched Brahmastra a couple weeks back.
The movie faced a lot of criticism & the reviews weren’t that great. To be fair, a lot of it was true. Dialogues (ft Alia Bhatt). The Script. Character building. The movie was very weak in those departments.
Where the movie did shine, was VFX. And, that’s where they spent most of their money. It costed INR 410 crore to make the movie, making it one of the costliest Bollywood movies of all time.
While I was walking out of the movie theatre, the business geek inside me asked:
How are they going to make money on this movie? Wait…how does Bollywood work? What cut of the box office collection does the producer get? How much do the distributors & cinemas keep?
I had no idea. And so, I started digging.
Where is the MONEYYYYYY?
Before we answer that question, let’s understand the business model of a typical bollywood movie.
I. The Producer
This is the person with a purse full of money [sometimes borrowed] with a dream of bringing a story to life. They hire the crew members, the hotshot actors, pay for the movie sets & its promotion and advertisement.
The producer owns the rights to the movie and they SELL these rights to distributors, TV channels, OTT platforms, music companies etc.
In our example, the producers of Brahmastra are Dharma Productions (Karan Johar), Starlight Pictures (Ayan Mukerji - also the Director of the movie), Prime Focus & Star Studios (subsidiary of Disney).
II. The Distributor
Distributors are in the business of buying & selling movies. They buy the ‘theatrical rights’ of a movie from the producer & distribute it to multiplexes.
For that, they get a cut from the net box office collection. The distributors’ share can range anywhere from 30% - 70%.
A producer can also be a distributor of the movie. But that’s a little more risky because you’re taking the risk if the movie doesn’t work out.
Risk hai, toh ishq hai
In our example, Brahmastra was distributed by Star Studios & Walt Disney.
III. The Multiplexes & Single Screens
This is where the movie is actually exhibited. They make money from ticket sales, F&B sales (by selling the most expensive popcorn on the planet) and advertisements.
Out of the total box office collection:
A certain portion is deducted as Entertainment Tax which is paid to the state government. This tax ranges anywhere from 15-50% depending on the state in which the movie is being released.
Out of the net box office collection, the multiplexes keep a certain share - ranging from 30-70% of ticket sales. This share keeps increasing after the 2nd week of the movie launch.
The rest goes to the distributors.
Brahmastra grossed INR 370 crore worldwide upto 23 September 2022. Out of this, we can assume [conservatively] that 70 Crore would be paid out as Entertainment Tax.
Out of the INR 300 crore left, let’s say 50% is kept by the multiplexes as their share. The distributor gets the balance (i.e. INR 150 crore)
If we assume an additional INR 50 crore from sales of digital rights, satellite rights & all other ancillary incomes, the producers/distributors are still looking at a loss of > 200 crore.
Q. Who made the most money from Brahmastra?
A. Most probably, the respective state governments collecting the Entertainment Tax.