Profit and loss issues in Bollywood movies are a bit complicated. To understand it well, one must have a clear idea about the business model of Bollywood. The amount of money it takes to make a good Bollywood movie today is almost impossible for a single person to afford. The budget of an average mainstream Bollywood film is currently around 50 crores. Big production houses do the money-spending work of making these films.
Film shooting, production, post production – all these are the responsibility of the director. He is usually contracted against a fixed fee per movie. After all the editing, the film becomes the property of the producer when it is fully made. Then the producer or production company takes it to the distributor.
If the film’s net collection is more than the film’s budget, then the film is considered profitable. Even if the state government makes the state tax free, the central government has to pay a tax of 6%-9%, depending on the budget of the film.
There are three types of profit sharing systems between producers and distributors. Let’s talk about minimum guaranteed royalties at the outset. In this system the distributor pays a certain amount of money to the producer. Again the producer sells the film outright to the distributor. Now whether this film will be released in the river by the distributor or will be released in theaters is entirely up to the distributor. Even if the film earns money from time to time, it belongs to the distributor.
In the 3rd method, the producer pays the distributor based on the dividend. This is the most common method. Here all the risk is on the producer, the distributor has less risk. Distributors interact with sub-distributors in different parts of India. Sub-distributors are divided into separate distributions, called distribution circuits.
In the case of big-budget films, the verdict of the film often depends on the popularity of the actor. Meanwhile, Salman Khan got the benefit. Many of his epic films also survived box office flops. Actors are often seen entering into profit-sharing agreements with distributors. For example, Aamir Khan. He basically works on a zero salary and profit-sharing agreement. In this case, if the film is commercially successful, the actor will get 50%-80% of the dividend.
Many actors again work on the half-salary-half-profit-sharing model. For example, Salman Khan’s movie Sultan. Sultan’s total collection at the box office was around Rs 500 crore. Its entertainment tax was Rs 106 crore. Hence, the net collection of the film is Rs 394 crore. In fact, Salman charges around Rs 70 crore per movie.