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Viacom18 Motion Pictures is on top of the charts among movie production and distribution houses in terms of return it has made on investment on its movies this year. With an average return on investment (RoI) of 118.89 per cent on its movies based on figures collated between January 1 and October 31 this year, the production house has left behind heavyweights such as Yash Raj Films (YRF), Dharma Productions and UTV Motion Pictures (part of the Disney Company in India).
In the No 2 slot but far behind is Dharma Productions with an RoI of 37.85 per cent. Disney is pretty close with an RoI of 37.53 per cent. The company operates three production banners in the country - UTV Motion Pictures, Walt Disney and UTV Spot Boy. The top three are followed by Bhushan Kumar-led T-Series (31.45 per cent) at No 4 and Balaji Motion Pictures (26.05 per cent) at No 5.
The big boys such as YRF, Fox Star Studios, Reliance Entertainment and Eros are yet to break even on their film investments this year, as each has a negative RoI for the movies released till October 31. (MONEY MATTERS)
The RoI for arriving at the pecking order is based on the total investment made on the movie, including marketing costs, in relation to revenues it has earned from its share of box office collections (50 per cent for first week), music as well as satellite rights wherever it has been sold. Sometimes, when the production house distributes the movie, the acquisition cost at which it buys the movie has been taken into consideration. However, the numbers do not include their share from the box office collections as many of them have still not shown the movie in all the countries that they would have liked to.
"Viacom18 has hit the bulls-eye this year. They have ticked all the boxes. For positive returns on investment, the costs have to be rationalised while the turnover of the movie has to be good. There have been low-cost movies that have made losses. The studio got the costing right along with the content, which gave it a chance to rake in high profits," says Komal Nahta.
"We must also keep in mind that Viacom18 made two films and got them right. The other studios had much more in terms of investments and output, which meant the law of averages will catch up and the success rate will drop," says a film industry professional on condition of anonymity.
Nahta, however, cautions that for the big movies, it is paramount to consider the international box office figures. "The four big Bollywood stars in the international circuit are SRK (Shah Rukh Khan), Salman (Khan), Aamir (Khan) and Hrithik (Roshan). When making movies with them, the international box office revenue forms a major part of the total turnover of the movie. For example, Happy New Year is expected to earn Rs 45 crore in producers' share alone. That is a significant percentage of the cost recovered," he says.
On an average, movies with these four stars in the lead are released in 700-850 screens abroad. The traditional Bollywood markets abroad - the UK, the US and West Asia contribute to about 70 per cent of the total overseas box office for Indian movies.
When one considers the international box office collections of big-budget movies, most of them did break-even and book profits. The only exception was Jai Ho, which despite its international run, continues to be in the red for Eros.
When approached about the low RoI on their movies, Eros and Reliance Entertainment refused to comment. Queries sent to Yash Raj Films remained unanswered. It should also be pointed out that while movies such as Bang Bang (Fox Star Studios), Mary Kom and Queen (Viacom18) have been produced and distributed by the studios films such as Jai Ho (Eros), Holiday and Singham Returns (Reliance Entertainment) have been acquired and then distributed by the studios. The cost of acquisition is usually higher than the actual cost of production and this also affects the RoI, reveal analysts.
A professional with a leading studio points out that the scale at which a movie is mounted decides its success. "You have to understand that a Rs 10-crore movie needs to make around Rs 20 crore total for the producer to break even. When the cost of the movie goes up, the recovery becomes steeper. For a movie costing Rs 100 crore (start to finish), it has to make a minimum of Rs 205 crore (including ancillary revenues) for the producer to recover costs. At the end of the day, the costing is done keeping in mind the RoI. It may be less for some of the bigger movies, but no producer goes into a project anticipating huge losses," he says.
When approached about the low RoI on their movies, Eros and Reliance Entertainment refused to comment. Queries sent to Yash Raj Films remained unanswered. It should also be pointed out that while movies such as Bang Bang (Fox Star Studios), Mary Kom and Queen (Viacom18) have been produced and distributed by the studios films such as Jai Ho (Eros), Holiday and Singham Returns (Reliance Entertainment) have been acquired and then distributed by the studios. The cost of acquisition is usually higher than the actual cost of production and this also affects the RoI, reveal analysts.
In India, the producer gets 46-48 per cent of the total box office collections (after tax) in a movie's lifetime. The rest goes to the exhibitors. This brings into the picture the ancillary revenues that are available to a producer in order to hedge the risk presented by the box office. A major chunk of this revenue stream is the satellite fee a producer charges broadcasters to telecast his movie.
All the big-budget movies, with the exception of Kick, have broken even and/or made profits after the broadcast revenue is factored in. The Salman Khan-starrer, released on Eid, cost UTV Rs 100 crore, including the cost of acquisition, promotion and marketing and prints. The producer made a six per cent profit on the movie from domestic box office alone. Adding music rights fee of the film takes the RoI from Kick to 11 per cent.
However, in case of the other big-budget movies such as Holiday, Humshakals, Singham Returns and Jai Ho, the producers have had to rely heavily on the revenue from satellite fees. In case of movies starring Salman Khan and Ajay Devgn, the actors have signed independent deals with Star India for all movies released between 2013 and 2017. Thus, producers miss out on the revenue from satellite fees, which form a major component of the total revenue stream.
It is, however, important to note the pecking order from the second spot downwards can still change in the last quarter of the year, with Happy New Year yet to complete its run at cinema halls, and some anticipated movies such as Kill/Dil (YRF), Action Jackson (Eros) and PK (UTV Motion Pictures) yet to hit the movies halls.
