Why Indian box office collections depend on who you ask8 min read . Updated: 27 Jun 2016, 03:23 PM IST
For the 103-year-old Indian film industry, there is no single authentic source that reports box-office collections of movies
New Delhi/Bengaluru: Disney UTV’s The Jungle Book proved to be this year’s biggest money-spinner in India, as of June, with a net lifetime collection of ₹ 183.94 crore by the end of its seventh week. But depending on the portal you visit, this number changes. Trade magazine Box Office India puts Jungle Book’s collection at ₹ 180.22 crore while film portals Bollywood Hungama and Koimoi.com say the figures were ₹ 182.52 and ₹ 182.83 crore, respectively.
For the record, The Jungle Book is not the only film which has seen its total box office collections vary. Over the years, the film industry in India has seen contentious numbers spark controversies. For instance, in 2013, filmmaker Rakesh Roshan was accused of inflating the net domestic box office collection of his film Krrish 3 by ₹ 15-20 crore. Roshan had denied the allegation. Even today, there are multiple figures available for the collections of Krrish 3, varying between ₹ 198.65 crore and ₹ 244.92 crore.
To be sure, for the 103-year-old Indian film industry, which now stands at ₹ 13,820 crore in size (according to the FICCI-KPMG report of 2016), there is no single authentic source that reports the box-office collections of movies. For an industry that obsesses about numbers rather than the quality of the cinema it produces, the reporting of business has for long been ambiguous.
Box office defined
The domestic theatrical receipts constitute the film box office. Producers, once ready with their films, sell the theatrical rights to distributors across the country who further rent it out to exhibitors for a charge. The earnings from the ticket sales are then divided up the chain.
There are 11 distribution territories in India, as referred to by the film trade circuits—Central Province (parts of Maharashtra, Madhya Pradesh) Central India (parts of Rajasthan, Madhya Pradesh), Rajasthan, Punjab, Delhi-Uttar Pradesh, Bombay, Nizam (Hyderabad region, but not geographically), Tamil Nadu-Kerala, Mysore, West Bengal and Assam.
“Each distributor keeps track of how the film is doing in his specific circuit. Distributors have their own network with the theatre owners and they get daily collection reports which they share with the studios which release them in the market," said Atul Mohan, editor of trade magazine Complete Cinema.
Unclear screen count
The numbers with the distributors can hardly be correct if the total screen count isn’t accurate, which, in this case, isn’t. According to the KPMG-FICCI report, India has more than 8,000 screens (including over 2,000 multiplex screens) with a screen density of six per million people, compared to 23 per million in China and 126 per million in the US.
Girish Johar, global revenue (film division) at Essel Vision Productions Ltd, claims India has about “13,000 viewable cinemas". Mohan claims the number of film screens in India is about 10,000, as does this Business Standard report.
PricewaterhouseCoopers’s Global Media and Entertainment Outlook 2016-2020 report puts the number at 11,200 as of 2014.
A difference in the figure of roughly 5,000 screens must ring alarm bells, but such figures are routinely quoted in the media.
The UK had 4,115 screens in 2015, according to the UK Cinema Association.
So who benefits from the lack of exact data on screens? “The industry still has major benefits coming from single screens and there is a very remote possibility of tracking each of them," said Mohan.
China, which had roughly 4,000 screens in 2008, has added about 28,000 more screens since.
Net versus gross
Chaos over collection numbers in the Indian film trade also stems from the distinction between the net figure and the gross figure. The confusion arises because of the entertainment tax. The total theatrical collections of a film amount to gross figures. Once the entertainment tax has been deducted, the remaining sum is called the net.
Unheard of in most countries, the entertainment tax applies to the sale of each ticket. Being a state subject, entertainment tax varies. For instance, the Uttar Pradesh government imposes a 40% tax on each ticket, while in Tamil Nadu the figure is 15%.
So, for a ₹ 100 ticket, the gross figure remains the same in both Uttar Pradesh and Tamil Nadu but the net figure changes to ₹ 60 and ₹ 85, respectively.
Usually, the exhibitor makes 52% of the net figure and the remaining 48% is divided between the distributor and the producer based on their specific agreement.
Rajkumar Akella, managing director of Rentrak India, a global audience measurement firm, said until the goods and services tax is introduced, one can’t assess a film’s performance because in each state, the tax structure is so different.
“In Bollywood, you go by net box office. Down south, or in most regional industries, they talk about the producer’s share which you get once you remove the rentals and the exhibitor’s share which provides a distorted picture of the potential of the south Indian film industry," said Akella. He adds that a lot of south Indian films have crossed Rs100 crore but that is not reflected because they are not talking in terms of net or gross box office, but instead the producer’s share after deducting the share claimed by distributors and exhibitors.
Filmmaker Sudhir Mishra, notwithstanding reports of inflated numbers, said there is transparency in the reporting of box office figures. “The problem is the spin which is given to the figures. The reporting by those who know the business is not wrong. There may be a 2-5% inflation because of single screens in smaller centres but most of the reporting is accurate," said Mishra.
“Since these are publicly listed companies, they can’t inflate figures too much. But there is definitely 10-15% inflation. We often get phone calls to maintain the figures as they have been disclosed by the studios and I have to oblige," said a trade expert on condition of anonymity. “It’s a psychological thing. Suppose the film has collected Rs27 crore but they want to show it has crossed the 30-crore mark."
In the absence of a centralized system, the primary source for a film’s business reporting, in most cases, is the film producer. Due to vested interests, the chances of inflated figures increase. The attempt to give a spin to the numbers or inflate them is primarily to create a false impression of profit in the business so as to, in Mishra’s words, “lure investors". The phenomenon is not unique to Mumbai. Film industries in the south also suffer the malaise.
“You will have to take these figures with a pinch of salt. Some times with a bucket full of salt. In India, the ticketing system is shrouded in a mystery," said independent trade analyst Sreedhar Pillai. He added that in case of a film’s failure, stars in the southern film industries try to exaggerate the box office figures through their fan clubs. “To get the correct numbers, you will have to be close to the producer, the distributors and some of the theatre guys. There is no other way," he said.
The chief executive officer of PVR Pictures Ltd Kamal Gianchandani, on the other hand, said that since the exhibitor reports are automatic, computer-generated, in terms of verification, the business happens in good faith. “In case the exhibitor is defaulting or misrepresenting numbers, typically distributors get to know over a period of time. Then they start appointing people who keep a watch on box office. The distributor reserves a right to appoint a person at the box office while the tickets are being sold. But normally this doesn’t happen especially with the reputed chains."
Impact on industry
The fate of people in the film industry is sealed every Friday; right from the choice of subjects to the budgeting of a film, everything is directly dependent on the box office.
Mohan said if the collections are good, the star hikes his price and the maker also sells his next movie at a higher price. “Let’s say, Bajrangi Bhaijaan was sold for Rs7 crore in CP (Central Province) and it did a business of Rs10-11 crore. So the next Salman Khan film will be sold for at least Rs8-9 crore. Bajrangi Bhaijaan may have been sold for Rs.5 lakh per week by the distributor. For the next Salman film, the theatre owner may have to shell out Rs.6 lakh."
Gianchandani concurs. “The amount that the actor can charge for the next film is definitely correlated to the actual collections of the previous film."
Ram Mirchandani, chief operating officer at Endemol Shine India that released the Amitabh Bachchan-starrer Te3n recently, stresses the need for a centralized system that tracks box office collections.
“Is there something credible and official like Rentrak? I don’t think so. It should happen. Someone smart should just put it together and make it official and credible—like the Bible. It’s a huge opportunity and everyone will subscribe to it. It’ll be very healthy for the industry because right now, it’s a combination of information you garner from everybody from distributors to websites to portals. It’s very piecemeal," said Mirchandani.
Mohan doubts if such a system could be introduced. “No producer will want to share he exact figures. If they did that, they will have to share the revenue also. So will the distributor who has acquired the film for a certain price," said Mohan.
Rentrak though is cautiously optimistic as it looks to bring stakeholders to the table and convince them of the gains to be made from a more reliable and transparent system. “That is easier said than done. We’ve actually been fighting our battles in convincing the industry and the stakeholders about the merit of this system which will help the industry as a whole and allow it to move forward in a very progressive manner," Akella said. “We’re supported by the Producers’ Guild, major studios and cinema chains in this initiative. And, in the near future, you will see a lot of things changing very rapidly."
Till then, filmwallahs will continue to report speculative numbers, like they did for the upcoming Rajnikanth-starrer Kabali, which is said to have done a business of ₹ 200 crore even before its release. However, the film’s public relations officer Riaz K. Ahmed said: “There’s nothing official about these figures. We haven’t started the business yet. We have, so far, sold only audio rights and portion of the overseas rights. That alone will not add up to Rs200 crore."