For his latest money-spinner, Sultan, Salman Khan would have normally charged aboutRs.70 crore as remuneration. Instead, he chose to have a share in the profits, and may have taken home Rs.110-150 crore from the blockbuster, which made around Rs.600 crore in worldwide box-office collections, according to the film portal Koimoi.com.
Today, most of the top male stars, including Shah Rukh Khan, Salman Khan and Akshay Kumar, command a share—ranging from 50% to 80%—in the profits of a film, besides a flat upfront fee. Aamir Khan is the only A-list actor who insists on being paid entirely from the profits.
The trend of lead actors having a share in the profits is not entirely new though. Amitabh Bachchan is known to have kept “territories” of his movies as payment in the 1980s. This meant that back then the profits from any of the 11 distribution territories in India (such as Mumbai, Punjab, Rajasthan, among others) would go to him instead of the film’s producer.
“The top artistes started this thing because they knew there’s a market for them. People go for their name and the poster value they bring,” says Sanjay Bhandari, a bank loan consultant to the film industry.
“When they realized that their name sells very well, that they’re a brand in themselves and the commercial viability of the project goes up with their name, they decided to start sharing profits,” he explains.
The biggest advantage of the profit-sharing arrangement is that it brings down the cost of production, thereby minimizing the risk a film-maker faces.
“Say, Aamir Khan were to charge Rs.50 crore as remuneration, and the film’s cost of production is another Rs.40 crore. That makes for a budget of Rs.90 crore,” says trade analyst Komal Nahta. “When he charges in terms of profit, the cost of the film is only Rs.40 crore. So it’s a given that it will be a profitable venture for everybody.”
Nahta adds that a star stands to make a lot more money if the film is a big hit, like Salman Khan’s Sultan.
“It’s not a price he could have demanded for his acting but because he’s a partner and commands a fixed fee plus partnership, he gets that kind of money,” Nahta points out.
“For the A-list actors, it definitely works because they know their films will do well at the box office. And even if they don’t, they are already profitable before release since they are sold to distributors at prices which are higher than the cost of production. Regardless of whether the project works with the public or not, the actors and producers have made their money,” Nahta says.
A share in the profits also ensures an actor gives a project his best—from filming to publicity and marketing.
“When actors who’ve got a very important role to play in the process of film-making are partners, it makes their involvement that much higher,” says film-maker Vipul Shah. “And at the end of the day, if the film does well, they make more money, which is a big motivation for everybody to remain that much more committed to the film. Plus, if after all the hard work, for whatever reason, the film doesn’t do that well, the chances of somebody losing money are also reduced. If everyone were to take their entire fee upfront, the cost of the film would be so high that in case it doesn’t do well, the losses would also be equally high,” explains Shah.
To be sure, the profit-sharing arrangement remains the monopoly of male stars. As far as the leading ladies are concerned, the discussion remains limited to raising fees.
“The top female leads are all working with A-list actors. And you can only share profits with one actor in the film, you can’t do it with all because then what will the producer be left with? And obviously because our films are male-centric, it is the hero,” Nahta explains. “Secondly, heroes get paid 5-10 times more than the heroine, so it makes sense for them to take a share in the profits.”
For film-makers then, the big issue remains the high upfront fee most of the top actors continue to insist on.
“It’s simple. The first-day box-office collection is a response to what the fan following of the star is. So your flat fee should be akin to what your opening- day collections are, not more than that,” says Ajit Andhare, chief operating officer, Viacom18 Motion Pictures. “The problem is that at the current level, the flat fee is far higher than the first-day collection and some people demand almost twice their Day 1 earnings. So the producer has to spend a lot of time in recovering the flat fee itself.”
Insisting on a very strong fee, coupled with profit sharing, ensures that talent benefits even if nobody else does, says Andhare. “It’s a very adversarial situation that needs to move to a more equilibrium level where talent realizes that producers and investors are also in the business to make money and not for the sheer joy of making cinema,” he adds.