How do movies make money

Time to Read: 5 mins

The Indian film industry, the 5th largest film industry in the world with a profit of 1.9 Billion USD, comprises of Bollywood (Hindi Language film industry) and several other languages based regional film industry. Bollywood, the largest sector in the Indian film industry, represents 43% of box office revenue and the south Indian film industry (Tamil, Telugu, Malayalam, Kannada, and Tulu) represents 39% of box office revenue. Huge numbers? Isn’t it? but how do these movies, then making so much money?

This much revenue, the industry is making but have you ever wondered Who invest that much money at first? How profits are made and shared? How we, contribute to movie profits and box-office success? You might have come across the terms like “BIGGEST BOX OFFICE COLLECTION”, “HIGHEST GROSSING MOVIE”, etc., but who is responsible behind all these? Let’s decode the Indian film industry today.

Introduction to the Indian film Industry

Almost every week, some movie hit the theaters and the world-wide audience reach there to watch the art, acting, hard work, performed for the movie and obviously to entertain themselves. But all these come with a cost, where people go to multiple theaters like INOX, PVR, and Single Screen, etc. and spend a good amount to enjoy the movie.

Hence, to bring more and more audience and to earn more profits, the release date of movies often fall on either festival or on days close to weekends. But this profit goes into whose pocket? How profit is shared? For knowing all these, we actually have to start from scratch i.e. people make profits only after some investment. Then, who invests money in movies and earn profits later, so, let’s crack that but before we get into the details, see the below infographic that gives you insight that how actually do these movies make money :

How do movies make money

Who invests money in movies?

Big players of any field know that money only makes money, (Check here) some investment related techniques). In other words, big players are those who have a huge sum of money and they invest their money somewhere to generate huge profit out of that. In the film industry, we call those big players as a PRODUCER.

The Production Company invest money in the movies and then expect good returns. Often, you might have heard that “XYZ movie was made in 100 crores”.  Who invested 100 crores? Guessed it? Yes, the PRODUCER. Let’s see where exactly the Producer invests the amount.

  1. Story Writer – A good story is a baseline for a good movie
  2. Song Composition – Music drives the movie and Lyricist, Music Composer is responsible for this
  3. Location – Great locations add beauty to the movie and increases look and feel
  4. Actors Selection – Actors like Salman Khan, SRK, etc. charges huge fees as their brand value is very high
  5. Director – Director is the captain of the movie team whose work is to extract the talent as per needs from the associated team members and direct the film
  6. Several other things are there for which investment is done like for camera work, animation, etc.

Along with money, there is a collective hard work and collaboration of a team that turns a story, with the addition of music, location, etc. into an enjoyable and historical movie.

Marketing of the Produced film

After movie production, the marketing of the film starts and a film distributor is responsible for this. Generally, the distribution company and the production company are different. Most important finances of a film are based on Distribution deals.

How the distributor earns money?

Distributors sell movie rights in various ways to earn money.

  1. Theatrical (movie tickets) – Allowing movie available to sub-distributors who make movies available in theaters and then sharing profits from money earned through movie tickets
  2. TV broadcast“World Television Premiere” this term you might have come across. By selling this right to TV channels, distributors make huge profits.
  3. Online Streaming services – HotStar, Netflix, Amazon Prime, etc. buy movie rights, so as to promote their platform which in turn generate profits for distributors
  4. Music Rights – Even profits come by selling music rights as music can be used for various purposes like Caller Tune, Ringtone, and Songs for TV Serials or web series, etc.

So, distributors make money in every possible way. You might be thinking that chances of making money are more in case of distribution then why do not producers themselves take the distribution company? The Simple reason is a network, if producers feel they have a large network and can manage the distribution of films to various sub-distributors and finally to theaters then they can, actually they do. However, many producers in the industry are there who are having their own production as well as the distribution company. But, DON’T FORGET THE RISK, which a distributor goes through.

What are the RISKS that distributors face?

Let’s explain this with an example:

  • Let’s say, it takes 150 crores to make a movie which Producer invests
  • The Producer then sells movie copy to distributors for say 200 cr.
  • The Producer is now safe as already the producer made 50 cr. (200 cr.-150 cr.) profit
  • The whole marketing and selling of films now depend on the distributor
  • Any kind of loss if happens, then the distributor will suffer

So, it’s a business my friend, and with business comes the risk which is converted into money later, if all goes well.

You saw, now how the distributors make money but then how do we, people contribute to the movie box-office success by watching the FIRST DAY FIRST SHOW, FIRST WEEKEND SHOW, etc.?

How people contribute to movie profits?

We, consumers, buy movie tickets of various theaters like PVR, INOX, etc. and pay the price for enjoyment. Hence, we are the ones who influence the reception of the film and box-office success. Let’s understand the workflow now.

Film Screening

  • Distributors are responsible for the marketing of the movie. In a lucid way, the movie should reach to a wider audience, and for that, the movie should hit the theaters.
  • So, the distributors actually distribute movies to sub-distributors based on regions, who are responsible for the movie to be shown in theaters.
  • Now, movies are exhibited to theaters and the responsible persons for this are called as exhibitors. The Exhibition is actually the retail branch of the film industry.
  • Finally, the movie is running in the theaters and at the same time making profits from the bought tickets.
  • Then, the final profit sharing happens between movie exhibitors and distributors in a ratio which basically depends on the movie week like in the 1st week, generally, the distributor takes a higher percentage of profit and the profit share gradually shifts towards movie exhibitors (theaters) as the week progresses.
  • Basically, distributors make more profit during the initial weeks but if the movie is running for a long time, then it is more beneficial for exhibitors (theaters).

Hence, now you know how do movies make money. The whole industry is like an ecosystem where they pay for every small but artistic thing and people make huge profits. However, the whole functioning and procedure may look very easy. But it’s not because it takes a lot of hard work and commitment to achieve that.

Hope, you liked our decoding technique. Please give your feedback below and suggest topics, you want us to write on.

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