By Anant Mathur (July 27, 2011)
Again, it's the budget that will make this film a loser for its distributor. In order to recover its cost the film will have to do a business of over 400 crores nett, here's why... The first week distributor's share is 50% of the nett collections, so even if Ra.One breaks all previous records for Hindi films and earns 120 crores nett (an impossible 1.5 times more than the current record of Dabangg) in the first week, the distributor only earn 60 crores. Week 2 distributor's share is 42.5%, let us stay positive and presume that the film only drops to 75% in collections and earns 90 crores in the 2nd week - the distributor's share is 38.25 crores - that's a total of 98.25 crores distributor's share for the first two weeks (almost twice as much as current record holder 3 Idiots). Week 3... considering the number of screens it will release on, by this time most people who still visit the movie theatres have seen the film and at best its collections will be 50% of the 1st week - third week's distributor's share is 37.5% which would translate the 60 crores nett collection into 22.5 crores distributor's share. 4th week onwards the distributor's share is 30% and again presuming that the film drops down to 30% of 1st weeks collection and earns 36 crores nett, the distributor's share comes to 10.8 Crores. After the first 4 weeks it's highly unlikely that the film will earn more than another 50 Crores nett theatrically in its life time (I'm being very generous here, the actual figure will be much less than that for week 5 and beyond) this would give the distributor another 15 crores. So lets add up all these numbers and being optomistic the most Shahrukh Khan's Ra.One can earn its distributor is... 146.55 Crores (far less than the distributor's cost of 175 crores). Of course all this depends on whether the film is liked by the audience or not, if not, then all these number will be much lower. Another thing to keep in mind is that Shahrukh is a multiplex actor, his films don't fare well at the single screen theaters, Dabangg and 3 Idiots did bumper business at single screens as well as multiplexes - the distributors get a larger share from single screens than multiplexes.
The highest grossing 3 Idiots earned the distributor, a record, 99 crores nett - giving them 59 crores in theatrical profits. It's unthinkable that Ra.One would have the ability to almost double that, especially when the biggest of films average less than 40 crores as the distributors share each year. The only other exceptions are Dabangg whose distributor share was 77 crores and Ready which has just crossed 64.5 crores). My guess is the maximum Ra.One will earn for its distributor is 135 crores worldwide (45 crores foreign plus 90 crores domestic - that's if it manages a nett business of $25 million overseas then the distributor's share is 45 crores which may not be possible for a Hindi film) add to that 35 crores from satellite rights and the film would still fall short of the distributor's cost. I'm being very optimistic here but the truth is, with a cost of 175 crores, Ra.One has lost before it even gets to the theater. In Hollywood, a number of films have crossed the $1 Billion mark, but you don't see them increasing the budgets of their films to $1 Billion simply because a handful of films have earned that much, budgets should be based on what the market can sustain not the revenue one or two film have generated. Also, in Hollywood, films don't just generate revenue from Theatrical and Satellite rights a major chunk of it comes from DVD/BluRay sales/rentals, Pay-Per-View, Netflix, Merchandising, etc. - avenues that don't exist for Bollywood films. Again, when only one Hindi film has ever crossed 175 crores in total nett collections how can filmmakers consider making a film which costs so much - contrary to what these corporate distributors believe - the market for Indian films is not so large that a film will make 400+ crores nett to recover the 175 crores in cost. In fact, only 8 films in the history of bollywood have every collected more than 75 crores nett, so 400+ crores is an impossible target. When no film has ever provided a distributor a share larger than 99 crores how can they release a film that's costing them 175 crores. We also need to keep in mind that there have already been many films that have made over 50 crores this year, by the time Ra.One rolls around, people won't have the same cash flow. Distributors need to wake up and learn basic Math, so films have a chance at the box office.
Well, that's my two cents before the release of this future flop. Below is a link for the trailer, judge for yourself...
© Anant Mathur. All Rights Reserved.
16 comments:
why dont you try a job in fox international...........like financial adviser...
Nice post.
Thanks I now have better understanding of how box office collections are calculated didn't know that the shares vary each week
you seriously need to get your math checked!! the distributor share is not the same as the cost of the film.
Looking like he is in the other camp. THere is no match of SRK and the seasonal hit heroes. LOL
In reply to Anonymous who said...
you seriously need to get your math checked!! the distributor share is not the same as the cost of the film. (October 27, 2011 12:52 AM)
Anonymous, I think you're a little confused (I recommend that you re-read my post) you should also seriously consider attending business school. Where did I say that it's the same? Obviously the distributor's share is not the same as the cost of the film. The distributor's share is the money the distributor earns and the cost of the film is what it cost to make, promote and release the film - how can they be the same thing - one is revenue, the other is expense.
A distributors share is what the distributor gets from nett collections each week. Nett collections are what is left after tax has been paid to the government from the gross collections. The nett collections are divided between the exhibitor and distributor.
The cost of the film is the cost of the budget + prints + promotion, all of which are paid for by the distributor. Any film, Hollywood or Bollywood, which is made for a theatrical release is paid for by the distributor. In some cases the producer also sells the satellite rights of a film to the same distributor as well. In most cases, the distributor has to recover his cost from the theatrical release because the producer holds on to the satellite rights. In Bollywood today, a producer always recovers his cost, but the distributors always have a tough hill to climb due to the large budgets of films.
If a film has cost a producer 135 crores he gets that from the distributor (the distributor then spends another 40 crores on prints promotion and publicity which bring his total expense to 175 crores - this is what he need to recover from nett collections). In the case of Ra.One, Shahrukh Khan (the producer) also gets money from Merchandising, Music, Satellite rights, etc. which the distributor doesn't get to share in. Shahrukh Khan will recover all his money from Ra.One. Whether the distributor will or not remains to be seen.
What are you getting at? The distributors do not pay for the total production cost of the movie. The produces i.e SRK's Red Chillies and EROS Entertainment do. Sure the budget goes up to Rs. 175 crore.
But whats important here is that the distribution rights for the movie have been sold at Rs. 77 crore only. Considering you math and everything you say is accurate (phew!), the distributors will make almost double the money if they manage to make Rs. 142 crores.
Lets come back to the producers now. Having made a film for Rs. 175 crore, they have already sold the TV rights for Rs. 35 crore and the distribution rights for Rs. 77. That already covers more than Rs. 110 crore.
Considering that Ra One is a children's movie, you can only expect kids to zoom in and buy the merchandise. The iPhone game is already in the top charts and is possibly the best iPhone app from India. Since its free, more people will try playing, even those who don't give a damn about the movie and with the ads in the game, thats a lot of money. Then there are toys, gadgets, actions figures blah blah and of course the Playstation 3 game which is officially certified by Sony (there are not too many).
Then, there are tie ups with brands. For example, the McDonalds Ra One meal. Wonder how much money they would make out of that.
Finally, there are sales of Music CDs and Movie DVDs, Bluray discs etc when they are available and wallah another good market to tap into.
Sure the movie isn't great.
But the distributors make 142 crores (acc to you) after investing 77.
SRK and EROS make atleast 250 crore(numberous tie ups, sales, merchandise in India and abroad) and theatre overs cash in lakhs or crores even if they manage to run the movie for a month.
Everybody is a winner.
And FYI, I did go to a business school. You should understand that a distributor doesnt pay all the money that was needed to make the movie. Nobody is that foolish.
At the end of the day, its all just good business.
In Reply to Anonymous
(October 27, 2011 11:13 PM)
I don't know where you're getting your information from but it's wrong. Eros has much more than 77 crores riding on it. I'm not denying that Ra.One is getting money from other sources but it's going into SRK's pocket - that's why people become film producers. Producers never put their own money into a film (unless it's a unique situation where a small budget film producer put up his house), I highly doubt SRK has 150 crores lying around to invest in a film (one thing he's not is stupid) he may have 150 crores but he won't put that much of his own money into any film.
The last time I checked Bollywood films are made for the big screen, not for TV and not for the internet. Distributors have to pay for the theatrical release (that includes print and publicity - which for Ra.One is 50 crores in addition to the cost paid to the producer), so even if we go by your 77 crores, eros has invested another 50 crores on top of that bringing the total to 127 crores. Even If we go by that number - Ra.One would still need to earn close to 300 crores in order to break even.
When in a weeks time SRK comes out and says he's giving a share of his profits (from merchandising etc.) back to the distributor to recover their cost, perhaps you will understand then.
Anant Mathur if u r civilized person u should nt comment like this that raone won't be no..1. From this comment i can make a guess of ur personality. Anyway as far as my brain is concerned its a appreciable step from srk n everyone is nt capable of understanding this unique piece in bollywood.
In Reply to Manya Sharma...
(October 28, 2011 9:08 AM)
Manya, please don't take this post so seriously, it's not a reflection on SRK personally, it's an analysis of the possible box office results of a film which was posted months before the release of Ra.One.
Analysis are based on facts and historical data - they have nothing to do with my personal feelings for a star or filmmaker. In my post I have not said anything about SRK personally. If it was any other star and the budget was this much the analysis would've been the same.
Many others have done analysis like this since my post about Ra.One. You have a right to disagree with it but I have a right to inform my readers based on facts because Bollywood is devious for leaking false information about films just for the sake of promotion.
At the time of this post it was reported by the distributor that the cost of Ra.One was 175 crores after the release they're claiming it's 135 crores. Depending on how much money it makes, that number may even come down to 100 crores in the coming weeks - that's the Bollywood game. I based my analysis on figures that were available in July 2011 when I wrote this post.
Thanks for you comments and I hope Ra.One shatters all the records and makes money for it's distributor, because I always feel bad when distributors lose money. Of all the parties involved in a film it's the distributors who always suffer losses.
Thanks for the insight. i believe these negative thinking, even though with evidence have to stop to bring Bollywood movies close to hollywood. Movies like dabang , ready and bodyguard are laughed at abroad. These low budget movies dont make sense to non hindi speaking audience. Hats off for SRK to try to bridge this gap
In Reply to Anonymous...
(October 30, 2011 4:50 AM)
I don't know why you're taking my analysis as negative comments. I am not implying anything negative towards SRK or that these types of films shouldn't be made - my point is to control the budgets so that films like these can make money and be profitable.
Filmmakers in India tend to show-off too much - they have to have the best technicians from abroad who cause the budgets to shoot up. I ask you why do we need technicians from Hollywood when we have amazing local talent for 1/10 the cost. It's a total show off thing - look what we can do. But someone has to think of the distributors, if films don't make money their trust level for that producer goes down and next time they won't pay as much for their next film. You have to remember that distributors don't get to see the films they're paying for before their release - they're blindly paying for a film based on the star cast and based on the budget the producer said it cost to make the film in. On top of that the distributor has to pay for prints, publicity and promotion.
As for your point about Ready, Dabangg and Bodyguard being laughed at - they're comedies they are suppose to be laughed at. But seriously, I live abroad and I can tell you no one here makes fun of films like Dabangg, Ready or Bodyguard - these films are entertainers - here people love Bollywood song and dance stories even the running around trees - especially the non-Indians.
Indian films should be made for Indian people if non-indians like them that's good but the moment we try to bridge the gap as you say, we lose our own identity. You don't see Hollywood filmmakers trying to bridge the gap, they make films about what they know and not what the Indian people might want to see in their film. Similarly we need to make films with the Indian people in mind. If an Indian person were to get superpowers he would be totally different than an American person who gets superpowers simply because of the cultural difference and their attitudes towards life. Our Indian hero would have a ton of potential to be a different kind of hero. We don't need to mimic the west just to prove a point. Everyone knows Indians can make good films we don't need to prove that anymore what we need are original stories. Whether they're about Superheroes, Space, the end of the world, or zombies - these films are based on American culture and mythology - this is what we need to bring into our films and not just taking american films and creating a frame-by-frame copy.
You r a crazy blogger
see the results of ra one
they will never match with ur estimation
so dont try to be over smart
understood
So, in first five days, film has scored more than 170 Crore...
All your calculation seems to be FULL WRONG ... what u say now ?
In Reply To Anonymous Who said...
So, in first five days, film has scored more than 170 Crore... All your calculation seems to be FULL WRONG ... what u say now ? (November 6, 2011 7:30 PM)
Oh, I have lots to say now. Firstly, I fail to believe anyone is this dumb. It's not my fault you've misinterpreted the figures, still, I'll clarify so you understand the business. The 170 crores is the worldwide gross. This figure doesn't deduct the tax paid to the government. Without the tax the nett collection, which is shared 50/50 in the 1st week by the exhibitor and distributor, is approximately 121 crores (worldwide) out of that the distributors share is 50% or 60.5 crores for the first week - Ra.One cost distributors 175 crores - so you tell me how they'll recover their cost when they're loosing 114.5 crores so far (worldwide). Did you see how much it fell from the sixth day onwards? In the post I'm only talking about the domestic (all India) nett collections. The all India nett collections of Ra.One are 98.5 crores out of which the distributors share is 49.25 crores for the extended first week (9 days) that's a loss of 125 crores if you're still paying attention. FYI, Ra.One didn't break the record of My Name is Khan in the overseas either, it will finish at number 4 or 5 in collections there.
All though it'll be one of the highest grossing films of all time, Ra.One's budget will keep it from recovering it's cost. If you read the post you would've realized that Ra.One needs to collect 400 crores nett (560 crores gross) to recover it's cost, the reasons are listed in the post, even if we go by your 170 crores gross it's still 70% less than what the recovery is. So far Ra.One has collected less than 25% of what's required. Remember in my post the example I gave suggested that Ra.One could earn 120 crores in domestic nett collections in the first week, it even failed to do that. In the second week I said 90 crores but it looks more like 15-16 crores at this point. It's not my fault the film couldn't live up to all the hype. I gave it more than a fair chance at the box office if it failed to even come up to that it's only because enough people didn't watch it or didn't go to watch it again. The highest distributor's share for a Hindi film so far is approximately 100 crores for 3 idiots, at the time of this reply Ra.One's share was half of that.
My point in the post was that it's the budgets not how films fare at the box office which render them flops. Same has happened to many other films and will continue to happen unless the budgets remain below 50-60 crores. The only reason Dabangg, 3 Idiots, Ready and Bodyguard are hits is because they all cost between 40-60 crores - these films recovered their costs from the nett domestic box office collections alone - if they had a budget of 175 crores they'd be flops too. Ra.One could've been easily made for 50-60 crores had they used local talent instead of trying to compete with Hollywood by hiring Hollywood talent just to show off that they could. In Hollywood there are many films which have grossed over 1 billion, but you don't see them rushing to expand their budgets to 1 billion - they want distributors to make money so budgets are 1/5 of what they expect the recovery to be - in India the budgets are 2 or 3 times what the recovery can be. Until filmmakers understand this simple fact films will continue to be flops even though they made truck loads of money. You must also remember that Shahrukh didn't charge acting fees for Ra.One because he was the producer. If he had it would've brought the budget close to 190 crores.
I suggest you visit the following links for more details regarding the collections of Ra.One:
http://en.wikipedia.org/wiki/Ra.One
http://www.boxofficeindia.com/boxnewsdetail.php?page=shownews&articleid=3649&nCat=
http://bollywoo.blogspot.com/2011/11/deflating-raone.html
In Reply To Anonymous Who said...
You r a crazy blogger
see the results of ra one
they will never match with ur estimation
so dont try to be over smart
understood
(November 5, 2011 6:01 AM)
Anonymous, you're right I must be crazy. Apparently, I gave Ra.One too much credit. The final Theatrical Nett Collections of Ra.One in India were: Rs. 114.78 Crores. The distributors share was a mere Rs. 57.97 Crores. See link below for more detail:
http://boxofficeindia.com/arounddetail.php?page=shownews&articleid=3935&nCat=
Post a Comment