BackMultiplex operators seek higher revenue share
Multiplex chains are lobbying for a revision of revenue-sharing agreements from movie producers and distributors
Premium(HT )
Mumbai: Amid consolidation in the film exhibition industry, multiplex operators are getting ready to flex their muscles and seek a higher share of box-office revenue from movie producers and distributors, said five people close to the development.
Multiplex chains are lobbying for a revision of revenue-sharing agreements with producers and distributors to raise the base revenue limit to ₹ 30-35 crore from the current ₹ 24 crore, the people said on condition of anonymity.
“Given the consolidation in the multiplex industry, it is natural for the operators to touch upon the revenue-share terms," said Shravan Shroff, founder of multiplex operator Fame India Ltd. “I would expect a fair share of resistance to the upward revision of the base revenue figure by the producers and distributors."
Indian movie exhibitors have been in consolidation mode, aimed partly at increasing their bargaining power with film producers and distributors. PVR Ltd bought a 69.27% stake in Cinemax India Ltd, run by the Kanakia Group, in November. The acquisition made PVR the leader in the movie exhibition business, giving it 351 screens across 85 locations.
In 2010, Inox Leisure Ltd acquired Fame India from Shroff, giving it 256 screens.
Together, multiplex operators including Anil Ambani’s Big Cinemas and Fun Republic control around 1,000 cinema theatres.
The base revenue limit that exhibitors are seeking implies that any film collecting between ₹ 30 crore and ₹ 35 crore at the box office would earn the producer/distributor 50% of the revenue in week one, falling to 42.5%, 37.5% and 30% in the subsequent three weeks. Exhibitors would get the rest.
If a movie earns less than ₹ 30 crore, the producer/distributor’s share would decrease by 2.5 percentage points in weeks two and three; if the net collection crosses ₹ 35 crore, it would be 2.5% percentage points higher in weeks one and two.
In 2009, exhibitors engaged in a bruising battle over revenue sharing with producers and distributors that ended with the two sides agreeing to a 50% share for producers/distributors in week one of a film’s release in theatres, 42.5% in week two, 37.5% in week three and 30% in week four for a film earning between ₹ 10 crore and ₹ 17 crore net at the box office.
If a film collected more than ₹ 17 crore, the producer’s share would increase by 2.5 percentage points in weeks one and two (i.e., 52.5% in week one and 45% in week two).
If the film earned less than ₹ 10 crore net from the box office then the producer would make 2.5 percentage points less revenue in weeks two and three (i.e., 40% in week two and 35% in week three).
The threshold of ₹ 10-17 crore (net collection of a film) that determined the percentage to be shared by theatres with producers/distributors was revised in 2011 to ₹ 24 crore.
“As per the original agreement between theatre owners and producers/distributors, every six months a revision was to be made keeping in mind the increase in cinema screens," said an executive from Cinemax India, one of the five people cited above, who didn’t want to be named.
Deepak Asher, director of Inox Leisure and president of the Multiplex Association of India, declined to comment. Spokespersons from film production house Disney UTV and Eros International Media Ltd also declined to comment.
Media experts say that with successful movies earning upwards of ₹ 100 crore in box-office revenue, multiplex operators were bound to try and take advantage of the situation.
“Informal discussions have happened (with exhibitors). A formal meeting is yet to be scheduled. One has to collate data on the increase of screens before a call is taken on the revenue sharing terms," said an executive from a leading production/distribution house, who spoke on condition of anonymity.
India’s multiplex screens are forecast to number more than 2,200 by 2016, according to the 2012 media and entertainment report by the Federation of Indian Chambers of Commerce and Industry (Ficci) lobby group and consultancy KPMG.
“It is visible that with the consolidation in the sector (movie exhibition) big players will seek to differentiate their offering through value propositions," said Rakesh Jariwala, a partner who oversees the filmed entertainment practice at audit and consultancy firm Ernst and Young.
“As a consequence of the increased reach of these theatre chains, commercial terms (with producers/distributors) are likely to undergo change."
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