High Time To Recognize Cost Of Exhibition

There are three parties involved whose investment enables any movie to exhibit in theaters.

a. Producer b. Distributor c. Exhibitor. 

  1. Producer’s investment is cost of production of final product. Till movie gets final shape after post production activities, every penny spent from producer’s pocket. Let’s suppose Rs. 1 Crore invested by producer to make a movie. 
  2. Distributor’s investment is the amount he paid for distribution rights + cost of distribution (prints and publicity cost). Let’s suppose distributor buy the rights of movie from producer for Rs. 1.20 Crore and another Rs. 10 Lakhs for print and publicity, leads to total investment of Rs. 1.30 Crore. 
  3. Exhibitor investment is investment to exhibit shows of movie. This exhibition cost is minimum amount he spent to maintain the screens. Let’s suppose movie is screening at 100 screens and 4 shows each. Per show cost of exhibition is Rs. 2000/-. Exhibition cost leads to Rs. 56 Lakhs per week for 100 screens. This means that there should be minimum 1.16 Crore Nett collections required from all screens in first week to enable exhibitor in breakeven point (if we assume 50% share of exhibitor).  
  4. Let’s suppose movie collects 1.5 Crore in first week. Distributor recovered 75 Lakhs in first week itself. Exhibitors also gets share of 75 lakhs. Means exhibitor enjoyed profits of 34 Lakhs in first week. 
  5. Due to good first week, exhibitor retains the screens and shows in second week. Movie collects another 1 Crore in second week . This enables another 50 Lakhs returns to distributors and 50 Lakhs to exhibitor. Distributors are happy as they recovered 1.25 Crore in two week itself. But exhibitor incurred losses of 16 Lakhs in second week.  
  6. Due to underperformance in second week (because exhibitors incurred losses), number of shows in third week reduced to 2 only in third week. Movie drops in third week and collects another 30 Lakhs. This gives another 15 Lakhs to distributors and exhibitor each. Distributors are happy as they are in profit now as they surpassed investment of 1.30 Crore (returns are now 1.40 Crore). But exhibitors was required 28 Lakhs for breakeven, but gets only 15 Lakhs, hence again lost another 13 Lakhs in third week.  
  7. Total cost for exhibitors in three weeks were 1.40 Crore. Total returns were also 1.40 Crore in three weeks. Overall profits earned in first week by exhibitor gets equated by losses in subsequent weeks. So it was breakeven deal for exhibitors. 
  8. Distributors earned small profits of 10 Lakhs in three weeks. 
  9. Producers earned table profit of 20 Lakhs.  
  10. Overall cost of movie was 1.30 (distributor) + 1.40(exhibitor) = 2.70 Crore, Overall returns was 2.80 Crore yields to 10 Lakhs overall profits.

Alas we hardly follow this scenario to include exhibition cost, Now this is high time to compare Nett collections against total cost of distributor and Exhibitors (Rather than share against distribution price).

Love, Sex Aur Dokha was cost around 2.5 Crore for distribution (including prints and publicity). Total cost of exhibition was around 3.5 Crore for first week on 485 Screens. Nett collection was around 6.5 Crore. This yields to 3.25 Crore shares to both distributors and exhibitors. Exhibitors lost around 25 Lakhs in first week while distributors earns handsome money of around 75 Lakhs in first week itself. LSD did around 1.75 Crore Nett in second week on around 300 Screens. Total cost of exhibition for second week was around 2.1 Crore. Exhibitors lost heavy amount of around 1.25 Crore in second week. In two weeks, LSD cost was around 2.5(DP) + 3.5(first week exhibition cost) + 2.1(second week exhibition cost) = 8.1 Crore(two weeks) and collections was 6.5+1.75 = 8.25 Crore. Overall 25 Lakhs profit but individually distributors are in heavy profits and exhibitors are in heavy losses.

— BollyBusiness

~ by Yakuza on April 4, 2010.

9 Responses to “High Time To Recognize Cost Of Exhibition”

  1. Mast article sir, Agree .. Cost fo exhibition should also be considered. Why only distribution profits considered as benchmark for verdicts … Great info sir. Thanks.

  2. outstanding topic.

  3. Good article Yak..

    would like to add something

    1)The minimum number of people required for any show are 6.
    2)The main income, of all exhibitors especially multiplexes come from sale of eatables from their cafeterias and not from ticket sales…ticket sales are like bonus…

    This is the reason why u see a new multiplex coming up every now and then.

    • Thanks topaz,
      Per day cost of maintenance of one screen (250-400 seater) is around 8000/- (including all expenses of staff, electricity etc). However this cost vary depending upon location.
      Income from eatables also linked to volume of audience. With barely 6 audience there will be hardly any sale of eatables.

      • 6 people in auditorium is a worst case scenario.

        If the collection of first week of LSD is 6.5 CRS Then add 80% of that as earning from eatables…you will see they are still earning..

  4. In the long run, no one will be in the business if it is only a loss making business, so I think at the end of the day Producers, Distributors and Exhibitors make up for much of their losses, some way or the other.

    That doesn’t mean there are no loss making businesses, but I think the amount of losses shown are exaggerated to a large extent.

    Those who make real large losses will not survive.

  5. It seems to me that its quite rare that everyone in the chain makes a profit nowadays when a film is successful. How can this be solved? The only way imo is to reduce star fees & reduce production costs.

    • Even with least cost of production Exhibitor can face losses. Look at example of LSD. Lower cost coupled with better release strategy can only do the trick for every one associated in business.

    • With almost NILL cost, RADIO was disaster due to heavy losses to exhibitors.

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