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BW Businessworld

India’s Feature Films Business Is Being Redefined

Over the first four days of domestic release, Rustom collected Rs 68.23 crore and Mohenjo Daro Rs 40.90 crore

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 As I begin writing about the new economic trends in India’s feature film business, two Hindi films have been released recently; Mohenjo Daro and Rustom.
Mohenjo Daro was made at a production budget of approx. Rs 115 crore, wherein Hrithik Roshan reportedly charged a fee of Rs 50 crore.

Rustom has been reportedly made at a production budget of Rs 35 crore without accounting for Askhay Kumar’s fee since he will share in profits. This point itself illustrates that the economics of the film business may now be undergoing a radical change.

Why is this the case? To begin with, it aligns the interests of the producer and the key talent. It also sends a strong message about the key talent ‘believing’ in the screenplay and related merits of the film.

Over the first four days of domestic release, Rustom collected Rs 68.23 crore and Mohenjo Daro Rs 40.90 crore. Producers usually earn about 25-30 per cent of domestic proceeds.

Even if Mohenjo Daro got a good value for the film’s television rights, the film’s producer, The Walt Disney Company, may incur a big loss on this film. Such losses are now deeply impacting the economics of the film business. In fact, it looks like the ‘party of paying out large monies’ for ‘big scale productions’ may actually be coming to an end sooner than we know it!

Around 2005, the total revenues of all the key Hindi feature film production companies was around Rs 1,500 crore, with Yash Raj Films consistently leading the charts.

By 2007-2008, several companies (EROS; TV18; & UTV) raised over Rs 1,200 crore from investors interested in targeting the Indian film business. This resulted in a change in the pricing dynamics of the film business. The supply of money was easy and the pool of talent limited. This may have resulted in the frenzy to book key talent at any cost.

In 2006, Aamir Khan became the highest paid actor with a fee of Rs 5 crore for his lead role in Fanaa. He was the first actor in the Yash Raj Films’ all-hits-era to be paid such a high fee. But barely two years later, Akshay Kumar was reported to be charging a fee of over Rs 20 crore. Did this increase in key talent fees happen too quickly?

Over the past few years, it appears the producers who take a majority of the risk, remain (almost) the last entity in the value chain to recover their money, and earn even moderate profits.

A few years ago, the television satellite companies paid producers handsomely and actually may have bailed ‘them’ out. However, now even these companies are waking up to the new economics of the film business and are no longer willing to pay exorbitant monies.

What are the new economics of the film business? Well, there are undercurrents that show that the number of film production companies that were willing to ‘invest’ in the film business at any cost will now become more prudent. This new era will certainly impact film production costs going forward. At the same time, the global OTT companies are entering the entertainment content business in India, which means that there may continue to be a big demand for key talent.