IMB 675

CORPORATIZATION OF BOLLYWOOD
AAYUSH AGARWAL, CHAITANYA KANSAL, AND
PRANAV GARG

Aayush Agarwal and Chaitanya Kansal (both PGP Class of 2017) and Pranav Garg (Assistant Professor of Strategy)
prepared this case for class discussion. This case has been developed from publicly available information and is not intended
to serve as an endorsement, source of primary data, or to show effective or inefficient handling of decision or business
processes. The authors thank Sonali Gupta, Rohit Singla, and Amar Sharma for their assistance with data collection.
Copyright © 2018 by the Indian Institute of Management Bangalore. No part of the publication may be reproduced or
transmitted in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise (including internet)
– without the permission of Indian Institute of Management Bangalore.
In August 2016, The Walt Disney Company India announced that it would exit the Hindi movie
industry, popularly known as Bollywood. Commenting on the exit, a Disney spokesperson said:1

Given the challenges with the current economic model for investing in the local film
industry, we intend to shift the focus of our film strategy to driving our Hollywood
movie slate in India.

Disney’s decision followed poor box office collections of a string of its productions – Katti Batti
(2015), Phantom (2015), Fitoor (2016), and Mohenjo Daro (2016). Made on a budget of $15 million,
Mohenjo Daro grossed $8.5 million; Fitoor (2016) grossed $3 million on a budget of $10 million. 2 In
contrast, Disney’s Hollywood production Jungle Book (2016) grossed $27 million in India alone.

Disney’s decision to quit Bollywood, just 4 years after it acquired a leading Indian production
company, UTV Motion Pictures, came as a surprise to many. 3 After all, The Walt Disney Company
had a rich legacy of producing cartoon shows and movies for almost a century. In FY 2015-2016, its
studio entertainment segment recorded global revenues and operating income of $9.4 billion and $2.7
billion, respectively.4 Patrick Frater, Asia Editor of the entertainment website Variety.com, remarked:5

It [Disney’s decision] is a bit of a shock. They spent half a billion dollars in buying a
majority [sic] in UTV and part of that was buying the leading studio and that has
come undone. It tells you that something else is going on in Indian filmmaking.

HISTORY OF THE HINDI MOVIE INDUSTRY

Beginnings (1900-1930s)

India’s tryst with motion pictures happened on July 7, 1896 when Lumiè r e Brothers’ L'arrivée d'un
train en gare de La Ciotat (The Arrival of a Train at La Ciotat Station) was screened in Bombay (now
called Mumbai). The event – described by the newspaper Times of India as “the marvel of the
century”6 – marked the beginning of India’s fascination with cinema.

In 1912, Dadasaheb Phalke – now regarded as the Father of Indian Cinema – established Phalke
Films in Bombay and made the silent spectacle Raja Harishchandra (1913), India’s first feature film. 7
Five years later, Phalke partnered with some local businessmen and established the Hindustan Cinema
Films Company. However, the production company declined after Phalke’s departure in 1920 owing
to creative differences with his business partners who were primarily concerned with making profits.

Alam Ara (1931) marked the arrival of sound in Indian cinema. Over the next decade, the industry
grew rapidly as several production companies emerged. 8 Most of them were promoter-driven and
employed actors, directors, and technicians full-time. These companies focused on movie production
and had limited capabilities to distribute or exhibit movies. However, exceptions such as Imperial
Films Company and Prabhat Film Company owned distribution and exhibition infrastructure. 9

The lack of distribution and exhibition capabilities forced production companies to depend on
distributors, who consequently charged exorbitant commissions. A prominent production company,
New Theatres (of Calcutta), shut down after being forced to sell its movies to distributors at a loss. 10
Meandering Ways (1930-1980s)

Production companies played an important role in discovering and launching new talent. Bombay
Talkies introduced female actor Devika Rani, now known as the First Lady of Indian Cinema. The
company also introduced leading male actors such as Dev Anand, Raj Kapoor, and Dilip Kumar.11
Ironically, production companies often became dependent on star actors and directors, whose
departure could spell doom for the company. For instance, Prabhat Film Company declined after its
leading director V. Shantaram quit to start his own production company. Bombay Talkies also waned
when star actor Ashok Kumar and director Gyan Mukherjee quit after delivering India’s first
blockbuster, Kismet, in 1943. The two formed their own production company, Filmistan. 12

Problems for established production companies exacerbated after World War II. Shortage of basic
commodities during the war enabled some individuals to amass wealth through hoarding and black-
marketeering. After the war, movie production was an attractive option for these profiteers to launder
their money.13 They lured actors and directors away from established production companies by
offering remuneration that the production companies could not match. Such departures accelerated the
decline of established production companies. 14 Over time, individuals from diverse backgrounds –
jewelry, manufacturing, real estate, and even crime – came to dominate production.15

When India attained independence in 1947, the movie industry was the fifth largest employer in the
country.16 Yet, political leaders had a dismissive attitude and did not consider filmmaking a worthy
economic enterprise. Mahatma Gandhi equated filmmaking to gambling and considered movies to be
a corrupting influence on society. 17 In contrast, the country’s first Prime Minister, Jawaharlal Nehru,
recognized the huge potential of movies as a mass medium. However, he too disapproved of their
content.18 Thus, the government established the Central Board for Film Certification (CBFC) in 1952
to regulate cinematic content. It also created the Film Finance Corporation in 1960 to promote movies
with high artistic content and balance the influence of commercially oriented Bollywood movies.19

The demise of established production companies by the late 1960s ended up cementing the position of
star actors. Instead of being contractually bound to one company at a time, they became freelancers.
They could work simultaneously with multiple production companies (often small) on a fixed fee per
movie basis. Each decade saw the rise of a new superstar actor with whom every producer wanted to
work. Alluding to this period, a report by the Indian Brand Equity Foundation noted: 20

With the growing popularity of Indian films, the importance of films to viewers
transformed into a ‘hero cult’ phenomenon, which made film stars the objects of
admiration and imitation. Gradually, fan clubs for film stars emerged and their
idolization reached incredible heights.

The prominence of stars in the industry was evident from the titles that the media accorded them.
Rajesh Khanna was nicknamed the King of Romance in the 1960-1970s and Amitabh Bachchan was
called the Shehenshah (King) of Bollywood in the 1970-1980s. Such was the appeal of these two stars
that BBC shot a documentary titled “Rajesh Khanna – Bombay Superstar” in 1973,21 and iconic
French director François Truffaut described Amitabh Bachchan as a “one-man industry.”22

The adulation for star actors notwithstanding, Bollywood struggled to establish legitimacy in the eyes
of the Indian government. Though several delegations of leading film personalities lobbied the
government to recognize Bollywood as an industry, government support remained elusive. 23
Adapting to Liberalization (1990s)

The liberalization of the Indian economy in 1991 led to the easing of state control in several industries
including television broadcasting.i Consequently, satellite television made its foray into India.
Viewers could now view multiple channels, beyond those run by the state broadcaster Doordarshan.
In addition to Zee TV, which was India’s first private Hindi channel, foreign channels such as BBC,
CNN, STAR TV, and MTV also made their way into Indian homes. Unlike cinema, television offered
diverse and affordable content in the comfort of one’s home. Filmmakers thus viewed television as a
threat.24 In response, more and more filmmakers started making big-budget movies with larger-than-
life sets, exotic foreign locales, and multiple stars – all in an effort to attract audiences to theaters. The
aim was to “project a cinematic experience and spectacle unavailable on television.”25 In 1996, film
critic Anupama Chopra noted:26

‘Mega’ is Bollywood’s mantra of the moment. Lakhs are passé and a crore is casual.
[…] filmmakers are vying with each other to create the Giant Film to beat all others. ii

As satellite television threatened Bollywood’s domestic revenues, Bollywood discovered a new

market in overseas territories. The United States of America, United Kingdom, Canada, South Africa,
Fiji, Singapore, Sri Lanka, and the Gulf nations became “Bollywood’s new golden goose.” 27 In 1999,
actor–producer Anil Kapoor said:28

Earlier we used to be scared about whether a film would run in the B- and C- clusters
in India. Now who cares about that Rs. 50-60 lakh? The overseas market can fetch
crores.

While Bollywood was going overseas, government apathy and financing constraints continued to
impede its growth at home. Producers could not avail institutional financing as Bollywood was not
officially recognized as an industry. Thus, producers largely depended on financing from unorganized
sources such as informal moneylenders. These moneylenders charged exorbitant interest rates owing
to the inherent uncertainty around a movie’s performance (see Exhibit 1).29 Further, pressure to make
mega movies to counter satellite television increased some producers’ reliance on the underworld’s
deep pockets. The underworld, in turn, saw movie financing as a way to launder money.

Seeds of Corporatization (2000 onwards)

In 1998, Sushma Swaraj, the then Union Minister for Information and Broadcasting, announced that
filmmaking would be formally recognized as an industry in India. She remarked:30

If you are committed to good cinema, you will have to provide good finance. By
according the status of industry, we have given pictures [movies] the much-needed
eligibility to seek funds from legitimate places. Thus, a semblance of order is now
possible in what has been a rather confused and convoluted state of affairs.

i
Other modes of entertainment also proliferated. In the broadcasting space, privatization of the FM radio industry in India started in 1999. In
2005, the Indian government allocated licenses to 245 operators. (Source: “India FM radio industry to touch USD 656 million b y 2019”;
www.techsciresearch.com). Online modes of entertainment such as YouTube emerged after 2000.
ii
Rs. 1 Lakh = Rs. 0.10 million; Rs. 1 crore = Rs. 10 million
In 2000, the government included filmmaking as an “approved activity under industrial concerns” in
the Industrial Development Bank of India Act (1964). 31 This was the first step in making institutional
financing available to Bollywood. In 2001, the Reserve Bank of India issued guidelines to banks on
movie financing. The government also announced a slew of concessions including excise exemptions
on audio and video cassettes, and lower import duties on film reels. 32 The government also permitted
100% foreign direct investment (FDI) in all aspects of filmmaking such as “film financing,
production, distribution, exhibition, marketing, and associated activities.”33 In 2001, Sushma Swaraj
led a first-of-its-kind delegation to the Cannes Film Festival to promote Indian cinema globally.34

The policy change was expected to result in more transparent financing, better corporate governance
and increased state scrutiny of production companies, and greater professionalization, thereby
ushering in the corporatization of Bollywood. Veteran filmmaker Subhash Ghai commented:35

Obviously, banks will have to evolve different parameters for the industry. […] But
there will be a system. Workers will feel secure with provident fund. The bigger
producers can start a studio, do an international project, make a Titanic. There will be
independent producers like there are in Hollywood.

Dwelling on the expected impact of institutional financing on Bollywood, Amit Khanna, an

experienced industry executive remarked:36

So the ego-massaging multi-crore rupees payments will only be made when a star is
worth it. There will be a transparent accounting system and underworld rumors, a bad
memory. […] This [institutional financing] is a paradigm shift and it will take time.
But the process is now irreversible.

EVOLUTION OF A MOVIE’S LIFECYCLE IN BOLLYWOOD

Reflecting on the evolution of filmmaking in Bollywood over the previous two decades, star actor
Shah Rukh Khan remarked in 2011:37

So much has changed as the years have gone by. Banks have come in. The retail
section is more organized, whether it’s through multiplexes or single-screen theaters.
It’s a brave new world.

The brave new world emerged from developments in different stages of a movie’s lifecycle – pre-
production, financing, production, distribution, marketing, and exhibition (see Exhibit 2).

Pre-Production

The pre-production stage involves activities such as casting, scripting, and location scouting among
others that are undertaken before a movie’s shooting begins. Before corporatization, most filmmakers
started a movie project with an idea and a male star in mind. Signing a male star was important as
finances were mostly raised on the strength of the star cast rather than that of the movie’s script. 38
Movies were often made without bound scripts. 39 Once the male lead was signed, the producer and
director decided the rest of the cast. The male star often had a say in the casting decisions as well.
The formula to make a hit movie in Bollywood comprised a concoction of star actors, several songs,
picturesque locations, and a script that had mix of action, drama, and romance. UTV founder Ronnie
Screwvala reminisced that in the mid-1990s, Bollywood was dominated by small, family-run
operations which stuck to one formula – the song-and-dance-laden love story.40

Prior to corporatization, opaque accounting practices, verbal contracts, and cash transactions were
prevalent as funds mostly came from unorganized sources. 41 A simple handshake was enough to seal
the commitment of the movie’s actors and director. The only formal contracts signed were standard
one-page documents for selling music rights and distribution rights. 42

With corporatization, transactions in the industry became more professionalized. This professionalism
was evident in the rise of suits – lawyers, accountants, talent scouts, casting agents, and business
executives – all of whom became critical in the pre-production stage. Filmmakers increasingly began
hiring lawyers to draft contracts for casting, remake rights, co-productions, and revenue sharing. 43
International talent management agencies such as ICA Talent and William Morris Endeavour set up
offices in India. Production companies started hiring professional managers, many of them with
business degrees, skills in consumer marketing, and/or experience with leading corporates.
Professional scriptwriters also rose to prominence. Many of them started using professional software
for writing and formatting screenplays as actors increasingly demanded bound scripts.

The nature of remuneration and contracts in Bollywood also changed after corporatization. Although
a fixed fee per movie continued to be the dominant remuneration model, some actors moved to a
hybrid model of a fixed fee and a share in the movie’s profits. 44 Formal contracts with actors,
including multi-movie deals, also gained prominence. Some stars who signed three-movie deals
include Hrithik Roshan with Adlabs in 2006, Kareena Kapoor with Shree Ashtvinayak Cine Vision in
2007, and Priyanka Chopra with UTV in 2007. 45,46,47 Newcomers such as Ranveer Singh, Anushka
Sharma, Parineeti Chopra, Arjun Kapoor, and Ayushmann Khurrana also signed three-movie
contracts with a leading production company, Yash Raj Films (YRF). Under this arrangement, YRF’s
talent management division handled endorsements, events, non-YRF movies, and image management
for these actors.48 In return, the newcomers paid a percentage of their earnings to YRF.49

Before corporatization, Bollywood producers could get away with making adaptations of foreign
movies, often violating copyright of the original producer. However, when foreign production
companies entered Bollywood after corporatization, they became increasingly aware of alleged
plagiarism by Bollywood producers. This led to several litigations. In 2007, Sony Pictures
Entertainment threatened a $30 million lawsuit against the makers of Partner (2007), alleging it to be
an unauthorized remake of Hitch (2005).50 Amidst rumors of producer Vipul Shah planning a remake
of The Curious Case of Benjamin Button (2008), Warner Bros. issued a public notice against any
adaptation of the movie. 51 In 2009, the Bombay High Court stayed the release of BR Films’ Banda
Yeh Bindaas Hai after 20th Century Fox alleged that the movie was an unauthorized remake of My
Cousin Vinny (1992).52

One consequence of these litigations was that Bollywood producers started acquiring the rights of the
original movies before remaking them. Producer–director Karan Johar bought the rights of Stepmom
(1998) before remaking it as We Are Family (2010). Mukesh Bhatt acquired the rights of The Hidden
Face (2011) and Metro Manila (2013) and remade them as Murder 3 (2013) and City Lights (2014),
respectively. Star actors also became increasingly conscious of intellectual property rights. Akshay
Kumar insisted on a clause that allowed him to acquire the rights of his movies after 12-15 years of
their release.53 Similarly, Shah Rukh Khan also started acquiring the rights of many of his movies. 54

Financing

With little support from the Indian government, financing had always been a major challenge for
Bollywood filmmakers prior to corporatization. While many mainstream producers had to rely on
unorganized sources, independent avant-garde filmmakers were left to seek funds from public
institutions such as the National Film Development Corporation (NFDC).

Financing saw a change when Bollywood gained industry status. With the amendment of the IDBI
Act (1964) in 2000 and issuance of guidelines for movie financing to banks by the Reserve Bank of
India in 2001, banks started issuing credit to movie producers. Between 2001 and 2010, IDBI Bank
disbursed loans worth Rs. 2,000 crores. 55 The Export Import Bank of India financed hits such as Veer-
Zaara (2004), Dhoom (2004), and Dhoom 2 (2006).56 Banks offered loans at interest rates of 10-15%
per annum compared to private moneylenders who charged 36-48% per annum.57 Over time, however,
banks became more selective in lending. In 2012, Dewang Rawal, President of YES Bank, indicated
that banks were keen to invest in “bankable” companies such as Yash Raj Films and Dharma
Productions led by promoters, Aditya Chopra and Karan Johar, respectively.58

Besides funding from banks, filmmakers also started tapping into other sources of institutional
financing. In 2006, production and distribution company Eros International raised $100 million from
the Alternative Investment Market (AIM) of the London Stock Exchange. 59 In 2013, however, it
delisted from the AIM to list on the New York Stock Exchange (NYSE: EROS).

Venture capital (VC) and private equity (PE) funds also started funding Bollywood movies. Some of
the VC funds include Bend It Media (set up in 2014 by director Gurinder Chadha and Hollywood
producer AVT Shankardas; $30 million), Indus Media Capital (set up in 2014 by former Reliance
Entertainment CFO Venkat Devarajan; $50 million), HBS Raksha Movies Fund (set up in 2014 by
producer-director Ramesh Sippy; $35 million), and Third Eye Cinema Fund (set up in 2014 by former
CEO of Pfizer India Kewal Handa with movie directors Ashutosh Gowariker, Nagesh Kukunoor, and
John Mathew Mathan as advisors; $40 million). 60 In 2014, Abundantia Entertainment received an
undisclosed amount from media company RW Media and PE fund Callista Capital in return for a 49%
equity stake, marking the first PE investment in Bollywood. 61

Production

Once all the necessary ingredients for making a movie such as the story, cast, locations, and initial
financing are in place, the shooting or production of a movie begins. Prior to corporatization, movie
production in Bollywood was a long-drawn process, often lasting many years. Movies were not shot
in a single stretch from start to finish but in discontinuous phases called schedules. One reason was
that producers had to raise funds from multiple unorganized sources and often received money at
irregular intervals. Another reason was the unavailability of dates from leading actors, who often
worked on multiple projects simultaneously. They showed up on the movie sets many hours late or
sometimes not at all. Back in 1995, film critic Anupama Chopra observed:62

The demand [of stars] far exceeds the supply. The industry has four or five saleable
stars and an average of 150 films in production at any given time. […] [Suniel]
 Shetty, a hot favorite, is booked till end-1997 and has thirty producers waiting to sign
him. Shah Rukh Khan is booked for the next eighteen months. Akshay Kumar, also
hot after Yeh Dillagi and Mohra has twelve films on the floor and a thirty-producer
waiting list.

A few years after Bollywood gained industry status, companies backed by leading Indian business
groups forayed into production (see Exhibit 3). Notable among them were Applause Entertainment
(Aditya Birla Group), Cutting Edge Entertainment (Tata Group), and Reliance Entertainment
(Reliance Anil Dhirubhai Ambani Group). In 2008, Anupama Chopra noted:63

As Bollywood has shed its image as an industry notorious for its organized-crime
links and unaccounted-for cash and become a streamlined, corporate entity, dozens of
players with deep pockets have entered the fray.

Industry veterans hailed the entry of corporate producers as a solution to the industry’s financing woes
and as the harbinger of much-needed professionalism. Filmmaker Shekhar Kapur remarked:64

The entry of corporates is a boon for the film world as it eliminates the biggest
hurdle—financing of films. It will be beneficial for all-round growth and encourage
more creative people to make films.

Star actor Amitabh Bachchan viewed the entry of corporate producers as a win-win for them and the
industry:65

It is a very smart move by the business houses. In the long run, it is definitely going
to pay rich dividends. The best thing about this is the discipline that big organizations
bring with them. Our industry sorely lacks it.

Close on the heels of Indian corporate producers, major Hollywood studios (production companies)
also entered Bollywood through acquisitions, joint ventures, or greenfield entities. iii Their entry was
facilitated by the Indian government’s decision to allow 100% FDI in filmmaking through the
“automatic route” that exempted companies from seeking government approval prior to entry. 66 Sony
Pictures co-produced Saawariya (2007) with the movie’s director Sanjay Leela Bhansali. Disney,
Viacom, 20th Century Fox, and Warner Bros. followed with Roadside Romeo (2008), Tanu Weds
Manu (2011), Dum Maaro Dum (2011), and Chandni Chowk to China (2009), respectively. In 2008,
producer–director Karan Johar wrote a blog post welcoming the foreign companies (see Exhibit 4).

Concurrent with the entry of corporate producers, Bollywood witnessed an increase in the number of
domestic–foreign co-productions and in the number of sequels (see Exhibits 5 and 6). Further, while
formula-based big-budget movies continued to be made, companies also started making small-budget
movies with novel content, upcoming actors, and new directors under separate sub-banners.67 Such
sub-banners include ALT Entertainment (part of Balaji Motion Pictures) and UTV Spotboys (part of
the erstwhile UTV Motion Pictures). In a 2009 interview, UTV’s Ronnie Screwvala said: 68

iii
After acquiring a minority stake in leading Indian production company UTV Motion Pictures in 2008, Disney fully acquired the company
in 2012 and delisted UTV from the Indian stock market. Viacom started Viacom18 Motion Pictures under a joint venture with Indian media
company Network 18. Rupert Murdoch’s 21st Century Fox formed a joint venture called Fox Star Studios between its own subsidiaries 20th
Century Fox and STAR. Sony and Warner Bros. started their own wholly owned subsidiaries.
 Though the big films are star-driven, like Hollywood, we, too, have our second line.
We experimented with Fashion as a mid-size Rs. 30-crore movie with an all-female
cast. Udaan, Tere Bin Laden and Peepli Live are other small success stories.

Despite the enthusiasm surrounding the entry of Indian and foreign corporate producers, many of
them met with limited success (see Exhibit 7). Aditya Birla Group’s maiden film Dev (2004)
flopped.69 Sony’s Saawariya (2007) released on the same day as Red Chillies Entertainment’s Om
Shanti Om (2007).70 Prior to the release of the two movies, Shah Rukh Khan – owner of Red Chillies
Entertainment and the male lead in Om Shanti Om – labeled it as a battle between the local David and
the global Goliath.71 While Saawariya flopped, Om Shanti Om was a blockbuster, prompting Michael
Lynton, the then Chairman of Sony Pictures Entertainment, to remark:72

You don’t go up against Shah Rukh Khan, no matter how good your product is.

However, Richard Fox, the then International Executive Vice President at Warner Bros., was more
optimistic despite the failure of Warner’s first Indian production Chandni Chowk to China (2009):73

It’s a marathon, not a sprint. You can’t pound your chest when you have success any
more than you can hang your head when you have a disappointment. We don’t regret
anything.

Reflecting on the performance of Hollywood studios, producer–director Karan Johar said in 2009:74

I think the studios have adjustment issues, cultural issues and inadequate human
resources. They understand the business, but how well do they understand the pulse
of this audience?

While Karan Johar raised doubts about the ability of foreign production companies to understand
Indian cultural sensibilities, filmmaker Subhash Ghai criticized corporate producers in general: 75

When big corporate companies entered the film industry, the cost of production as
well as the cost of stars witnessed a drastic jump. A star used to take Rs. 3 crore for a
film, but his or her fees jumped up to Rs. 30 crore. These big companies changed the
grammar of business. There’s a lot of competition and to please investors, filmmakers
used to say, ‘See we are working with a Khan’. The economics went for a roller-
coaster ride and after an imbalance, filmmakers suffered losses.

Some Bollywood stars joined the ranks of top earning actors globally. In 2016, male stars Shah Rukh
Khan and Akshay Kumar were featured in the Forbes List of Highest Paid Celebrities in the World. 76
Female star Deepika Padukone made it to the Forbes List of Highest Paid Actresses in the World. 77
Until the 1990s, stars would limit their public appearances, presumably to preserve the enigma
surrounding their stardom. However, in recent years, actors have become active on social media, host
television shows, and endorse several brands. Anupama Chopra remarked:78

But now, there is no such thing as overexposure. In fact, Bollywood actors don’t
seem much like actors anymore. They are brands.
Several stars have forayed into businesses. Some of them own sports teams, restaurants, and apparel
brands.79 Many have also become movie producers (see Exhibit 8). In yesteryears, mostly established
actors such as Raj Kapoor, Guru Dutt, and Dev Anand ventured into production. In recent years,
however, relatively new actors such as John Abraham and Anushka Sharma started producing movies.

Some directors too changed their remuneration structure. Trade expert Amul Mohan said: 80

The trend is not so much as hiking their fees as much as big directors turning profit-
sharing producers, like Rajkumar [Hirani] did with PK and Rohit Shetty did
with Chennai Express. Rather than taking a nominal fee, it makes sense for well-
established, successful directors to get into it as profit-sharing partners.

Production companies also found new ways to generate revenue from a movie (see Exhibit 9).
Earlier, domestic box office collections were the primary revenue source for a movie. Since the late
1990s, however, overseas box office collections started increasing. Selling broadcasting rights to TV
channels also became an important source of table profits for producers.iv The sale of satellite rights
could contribute up to 50% of the revenues of a flop movie. 81 Brand placements in a movie and co-
branding partnerships also added to table profits. Made on a budget of Rs. 80 crores; the movie MS
Dhoni: The Untold Story (2016) earned Rs. 45 crores from the sale of satellite rights and Rs. 15 crores
from brand placements. Examples of co-branding include the haircare brand Sunsilk in 2 States
(2014), auto company Volkswagen in Ra.One (2011), direct-to-home operator Dish TV in My Name
Is Khan (2010), and travel portal MakeMyTrip in Yeh Jawaani Hai Deewani (2015). Some production
companies also diversified into movie-related businesses. For instance, Yash Raj Films started a
music label (YRF Music), a merchandise store (YRF Store), and a Bollywood-inspired fashion label
(Diva'ni). YRF also started distributing movies, both its own and those of other banners.

Distribution

Distributors serve as intermediaries between producers of a movie and exhibitors who showcase the
movie in theaters. Movie distribution in India is structured into multiple levels. Large distributors
control the six major territories (Delhi–U.P., East Punjab, Central Province–Central India–Rajasthan,
Bombay, Eastern, and South). 82 These territories are further divided into sub-territories controlled by
smaller distributors. Since the late 1990s, overseas territories such as North America, United
Kingdom, and the Gulf countries became important markets for Bollywood movies.

Before corporatization, distribution followed an acquisition model. In this model, distributors

acquired exclusive rights to a movie for their respective territories. The acquisition was done under a
Minimum Guarantee (MG) arrangement wherein the distributor pledged to pay a minimum amount to
the producer regardless of the movie’s performance. Star actor Amitabh Bachchan explained:83

The producer or director comes up with an idea, they’ll [sic] choose some saleable
names, put them together and get hold of a saleable music director, take the proposal
to a set of distributors, sell them the idea, they will then make the advances of money.
This money will be used to shoot the first schedule. […] Then they will show the first
two reels to the distributors, who will advance some more money. In this similar
fashion they will complete the film.

iv
Table profits is industry parlance for profits earned prior to the release of a movie.
Distributors financed movie acquisitions through three channels – capital from unorganized sources,
proceeds from sale of rights to sub-territorial distributors, and advances from exhibitors. After a
movie’s release, box office collections were shared between exhibitors and distributors. Any surplus
net of the distributor’s costs (prints, publicity, theater rental) and commission (typically 20-25%)84
was shared between the producer and the distributor.

In the past, distributors faced several challenges in releasing movies. Movie releases were often
constrained by the limited availability and high cost of film reels. These reels were not manufactured
in India; their import was regulated through quotas and permits. Hence, distributors were forced to
release a movie first in major cities and only later in smaller towns. By the time the movie reached
smaller towns, pirated prints were already in circulation, hurting the movie’s box office collections.

Another challenge emerged with the advent of satellite television in the 1990s. Keen to leverage the
popularity of Bollywood movies to increase their own viewership, satellite channels approached
producers to acquire television rights to movies. A channel’s interest lay in broadcasting the movie
soon after its theatrical release, regardless of whether it was still running in theaters. However, an
early television premiere cut into the profits of exhibitors and distributors. The lucrative offers made
by satellite channels were too compelling for producers to defer the sale of rights and delay the
television premiere. This misalignment in interests between producers and distributors created a rift.
In 2003, tensions reached a tipping point. Protesting against the distributors’ demand for an exclusive
six-month window for theatrical exhibition, producers did not release any movie for four weeks.

With corporatization, both domestic (e.g., Eros) and foreign (e.g., Fox Star) companies entered the
distribution business as pan-India aggregators of territorial distributors. These companies were willing
to pay producers huge sums to acquire pan-India distribution rights of movies, thereby emerging as
intermediaries between producers and territorial distributors. Territorial distributors, while still
important for releasing a movie in smaller towns, ceded ground to corporate distributors.

In addition to the acquisition model, corporate distributors have also adopted a co-production model.
In the co-production model, they are actively involved in a movie’s lifecycle from conceptualization
to release. In 2016, Ajit Andhare, the then COO at Viacom18 Motion Pictures, explained:85

When you run with a purely acquisition-led approach, you’re paying significant
premium, have little control over the product and you’d end up in very one-sided deal
structures, which is hardly collaborative. This is where chasing only big films can
land you (in trouble). The question is what is your paradigm? Is it volume, top line or
[sic] big film-focused or is it based on content and business fundamentals such as
story material, bottom-line, risk mitigation and cost efficacy?

The rise of corporate distributors also impacted movie exhibition. In the mid-2000s, corporate
distributors such as Eros and Adlabs drove efforts for the adoption of digital technology in single-
screen cinemas. Digital technology eliminated the need for film reels and enabled direct transmission
of movies to theaters via satellite. 86, 87 Movies could now be released simultaneously across more
screens (see Exhibit 10). This eliminated the time lag between releasing a movie in major cities and
in small towns. With movies reaching a larger audience faster, distributors could recover their
investments sooner. In effect, a movie’s theatrical shelf-life shortened, and alleviated the distributors’
grievances against producers on an early sale of a movie’s television rights.
The shortening shelf-life changed the yardstick for the success of a movie. Earlier, a movie was
declared a success if it achieved a silver jubilee, 88 that is, a 25-week run in the theaters. After
corporatization, a movie was called a success if it entered the “100-Crore Club.”89 The term refers to
movies that collected more than Rs. 100 crore at the box office, net of entertainment taxes.

Marketing

Prior to corporatization, a movie’s pre-release marketing included displaying larger-than-life posters

in public spaces, releasing its trailer in theaters and on television, and advertising in newspapers. After
corporatization, the nature of pre-release marketing changed. Movies began being marketed through
city tours, television appearances by lead actors, social media campaigns and contests, merchandising,
and other innovative methods. A case in point is Shah Rukh Khan’s Ra.One (2011) for which
promotions began 10 months before its release. They included events in 36 cities across the world and
a video game launch. Anupama Chopra noted:90

The promotion for Ra.One was so pervasive and its marketing so aggressive that it
felt at times that viewers had no option but to go see it.

A 2013 estimate suggested that over the previous decade, marketing budgets had shot up from 5-7%
to almost 30% of a movie’s cost. 91 Increasing marketing budgets were not limited to big-budget star-
led movies only. Some low-budget movies were also marketed aggressively. While the marketing
budget was almost equivalent to the production cost for English Vinglish (2012), it exceeded the
production cost for Vicky Donor (2012).92 In general, however, smaller filmmakers felt threatened by
the exorbitant amount spent by large production companies on marketing a movie. In 2013, an
anonymous filmmaker told the newspaper DNA:93

We feel cornered into partnering or tying up with a studio because that’s the only way
we are ensured that our film can match up to the high levels of marketing that’s the
norm these days. There’s just no limit to how much these studios are willing to spend
and it’s impossible for an independent filmmaker to match up to that hype that they
create and so naturally our films suffer even if the content may be just as good if not
better.

Marketing was not limited to individual movies only. Bollywood began marketing itself as an
industry. Establishment of the International Indian Film Academy (IIFA) Awards in 2000 was a way
to reach out globally. Since then, the awards ceremony has been held annually in foreign cities, many
with a sizeable Indian diaspora. In 2002, Amitabh Bachchan, then IIFA’s brand ambassador, said:94

We want to take our industry to new places. […] By opening the international
communication channel, it [IIFA] enhances business opportunities for the industry at
a large [sic] and encourages a cross-over of cultures.

Exhibition

Exhibition refers to the screening of a movie in theaters. For a long period prior to corporatization, the
Indian government imposed a moratorium on non-essential construction so that raw material – that
was scarce – could be used for nation-building activities.95 The government’s apathy towards the
movie industry manifested in the form of a ban on theater construction in many states.
Theater construction received a fillip once the government granted industry status to Bollywood and
permitted 100% FDI in exhibition. Many states started offering tax sops to exhibitors and real estate
developers.96 This contributed to an increase in the number of multiplex screens from 80 in 2002 97 to
2,200 in 2016. Multiplexes emerged mostly in malls located in prime urban locations. Corporate firms
entered the exhibition business and grew through both acquisitions and organic expansion. By 2016,
domestic companies PVR, INOX, and Carnival Cinemas, and Mexican company Cinepolis
collectively controlled more than 70% of multiplex screens. 98 Single-screen theaters, earlier the
mainstay of the exhibition business, were either shut down or converted into multiplexes. Their
numbers dropped from 9,710 screens in 2009 to 6,000 screens in 2015.99

The growth of multiplexes led to tensions among producers, distributors, and multiplex owners.
Unlike single-screen theaters, multiplexes offered a luxurious movie experience, albeit at much higher
prices. Thus, even though multiplexes constituted about a quarter of India’s movie screens, they
accounted for a third of the box office receipts. 100 Multiplexes became an important revenue channel.
Soon, conflicts over revenue sharing emerged. Bollywood expert Tejaswini Ganti noted:101

The importance of multiplexes within the Hindi film industry was highlighted in 2009
when a dispute over revenue sharing between Hindi film producers, film distributors
and multiplex exhibitors resulted in a sixty-day moratorium on Hindi film releases.
Though the conflict was with six national multiplex chains, the United Producer
Distributors Forum—a coalition of the most powerful producers and distributors in
the industry—withheld the release of films throughout India and the world from April
4 until June 6, 2009, when the disputing parties finally reached a resolution.

Eventually, multiplex chains bowed to pressure from the producer–distributor combine and agreed to
a lower share in box office collections (see Exhibit 11).102 Independent of these developments, some
multiplex chains ventured into production, only to withdraw a few years later. For instance, PVR
started producing movies in 2007 but pulled out in 2012 following losses at the box office. 103

Star-led movies have been the major beneficiaries of the growth in multiplex screens (see Exhibit
12). These movies account for the bulk of the releases on prime dates of a year. Not surprisingly, most
movies in the “100-Crore Club” feature star actors.104 In a 2016 article, The Economist commented
about the triumvirate of stars – Aamir Khan, Salman Khan, and Shah Rukh Khan:105

Each dominates a different annual holiday. […] Between them, the trio have [sic]
released a film on 14 of the past 15 big festive weekends, occasionally switching
round. Other actors and their producers must launch their films at other, less
profitable times, such as Independence Day—or await an off-year for the Khans.

In 2012, Ajay Devgn Ffilms (ADF), the production company of prominent actor Ajay Devgn, filed a
complaint against Yash Raj Films (YRF) with the Competition Commission of India. ADF’s Son of
Sardaar (starring Ajay Devgn) and YRF’s Jab Tak Hai Jaan (starring Shah Rukh Khan) were
scheduled to release on the same festive weekend. 106 ADF accused YRF of using its forthcoming
movie Ek Tha Tiger (starring Salman Khan) as leverage with exhibitors to gain screens for Jab Tak
Hain Jaan. This action allegedly limited the number of screens available for Son of Sardaar.107 The
Commission, however, did not find merit in ADF’s complaint.
The growth in multiplexes notwithstanding, exhibitors faced challenges in getting audiences to
theaters. The popularity of the Indian Premier League (a cricket league launched in 2008) exacerbated
the challenge. Such was its popularity that producers were wary of releasing movies while the league
was in progress. It effectively reduced the calendar for exhibiting movies by eight weeks in a year.108

An emerging trend has been the use of targeted exhibition by filmmakers in contrast to the traditional
wisdom that a movie be released across the largest possible number of screens. Haresh Chawla,
founding CEO of media company, Network18, explained: 109

The real deal lies in understanding how a film will behave with its audience and then
creating a bespoke distribution plan around it. […] If a film is focused on the youth,
then try to get more screens at theaters around colleges and in cities where the student
population is higher than average; more morning and afternoon shows so that kids
can go in groups from their colleges, etc. If the film appeals to women or families,
like Kahaani, then more evening and night shows so that ladies of the house can step
out after their chores for the day are done.

Developments in exhibition notwithstanding, the Indian audience continues to be underserved. A

2016 KPMG report stated that the number of screens (per million people) in India, China, and the
USA were 6, 23, and 126, respectively.110 Envisaging growth in exhibition, Rohit Inamdar, Senior
Vice President of rating agency ICRA, noted:111

ICRA expects the number of multiplex screens to cross 3,000 by 2019. Since most of
the upcoming malls are being constructed in tier II and tier III cities, a majority of
new screen additions would also happen in these places.

THE PATH AHEAD

Bollywood had come a long way from the first silent movie Raja Harishchandra (1913) to the Aamir
Khan and Disney co-production Dangal (2016). The latter became the fifth-highest grossing non-
English movie in history globally. In 2015, Bollywood constituted 43% of the Indian movie industry’s
gross revenues of $2.1 billion, forecasted to reach $3.7 billion by 2020. 112 During this journey, the
industry faced and navigated several challenges – the rise and fall of established production
companies, government apathy, poor infrastructure, and advent of satellite television, among others.
Yet, the industry’s stakeholders were still grappling to find a equilibrium.

Viacom18’s Ajit Andhare highlighted frictions between talent and production companies: 113

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.

However, some others saw the ‘adversarial situation’ differently. Kishore Lulla, Chief Executive of
Eros International, felt that the industry cannot do without star actors:114

A star guarantees the first weekend box office, and it is this business which decides
all the other revenue streams. Without a star it’s too risky.
Some industry observers believed that the problems lay elsewhere. One blamed the production
company heads – many of whom are professional managers – and claimed that they had little
understanding of the creative aspects of filmmaking. 115 Echoing a similar view, Bollywood trade
analyst Komal Nahta felt that the operating model of corporate producers was flawed: 116

The most important quality a producer should possess is the ability to assess which
scripts will work and at what price. Because corporates came in ill-equipped, they
started applying business principles to the film industry and went completely wrong.
It took 10-15 years because they had deep pockets. An individual producer would
have shut shop in 3-4 years.

Sameer Nair, Group CEO, Balaji Telefilms believed that hits and flops are a part of the game.
Quelling rumors of Balaji’s impending exit amidst a bad year at the box office, he said in 2016:117

There is no question of stopping or shutting down. There is too much hullabaloo and
gloom. Sometimes movies and studios do well, sometimes they don’t.

Vijay Singh, CEO, Fox Star Studios, struck a balanced note when reflecting on Fox Star’s learnings: 118

The key learning is that it’s all about the content and therefore the script is the hero.
Stars are important to scale up a film but the reality is that they can only help open a
film. And, of course, a successful film is one that is made at the right budget. Whilst
the industry is moving in the right direction, all stakeholders need to consciously
work towards a more balanced risk-reward model such that they participate in the
upside, starting with actors taking a combination of fixed fees and box office bonuses.
And finally, film marketers need to challenge themselves to develop innovative
marketing plans which work on tighter budgets and leverage the opportunity thrown
up by digital and social media. It is an exciting place to be in given the power of good
content. The opportunity is huge as the social impact of Bollywood is manifold larger
than the current size of the industry!

As these debates continued, Amazon and Netflix threw their hats into the ring. 119 They began
acquiring rights to stream movies of leading producers, both current (e.g., Dharma Productions)120 and
erstwhile (e.g., RK Films).121 Netflix also licensed the movie catalog of Shah Rukh Khan’s Red
Chillies Entertainment 122 and of Aamir Khan’s eponymous production company. 123 Moving beyond
streaming, Netflix also announced plans to produce Bollywood movies. CEO Reed Hastings said:124

We hope to produce the best Bollywood movie that’s ever been produced. Today, I
know that may seem impossible. But there was a time when we couldn’t even
produce a US TV series, and now we have some of the best.

What impact will the entry of Amazon and Netflix have on the industry? How will the production
companies refine their operating model to improve business performance? How will the bargaining
power of talent vis-à-vis production companies evolve?

Interesting times lie ahead for Bollywood. As Shah Rukh Khan’s character in Om Shanti Om (2007)
said, “Picture abhi baaki hai” (The movie is not over yet).
Exhibits
Exhibit 1: Top grossing movies and success rate of movies in the industry

Fraction of industry revenue

Top 20 grossing movies per year
100

81.6
78.7 79.9 78.7 78.0 79.2
78.0
80

76.9 75.5
74.9
71.4 70.7 71.6
69.1 67.4 68.5 68.8
66.7 65.9 65.7
63.7 63.7
Percentage
60
40
20
0

Basis of revenue: Worldwide Gross Revenue

Notes: Graphs are based on case writers’ calculations using data from www.boxofficeindia.com and IMDB; A successful movie is one of
the following: All-Time Blockbuster, Blockbuster, Super-Hit, Hit, or Semi-Hit (as classified by www.boxofficeindia.com); One limitation of
using categorical measures for a movie’s performance is that these measures are imperfect proxies of a movie’s revenue (and return on
investment); Reliable data on movie budgets are difficult to obtain; Unorganized represents movies made by unorganized production
companies; Organized represents movies whose producer(s) include at least one organized production company (these include listed firms,
professionally-managed firms, and some actor-promoter-led and non-actor-promoter-led firms); Industry Average represents success rate
for all movies made in the industry.
 Exhibit 2: Stages in a movie’s lifecycle

Before Corporatization

Territorial
Distributor
Cluster
Distributor
Territorial
Distributor
Pre- Single
Financing Production Audience
Production Screens

Cluster
Distributor

After Corporatization

Territorial
Distributor
Cluster
Distributor
Territorial
Distributor
Pre- Corporate Single
Financing Production
Production Distributor Screens

Cluster
Distributor
Audience

Multiplex
Chains

Notes: While a movie can be exhibited via additional media such as satellite television, direct-to-home, and video-on-demand, the exhibit
above focuses on a movie’s theatrical exhibition, which is the main source of revenue for movie producers and distributors.
Exhibit 3: Movies released by organized and unorganized production companies

Ratio of movies released

Ratio: Movies involving no organized producer / Movies involving at least one organized producer
10.8 10.8
10

9.0
8

7.6
Ratio
6

5.2 5.2
4.8

4.1
4.3 4.2 4.4
4

3.6 3.5
3.3 3.3
2.9
2.8
2.5 2.5
2.1
1.9
2

1.6
1.2 1.2 1.4
1.2 1.0 1.0
0.8 0.9 0.7
0

Producer unknown for 576 movies (52% of movies pre-1994 and 2% of movies 1994 onwards)

Percentage of industry's worldwide revenue

Movies involving no organized producer
61.1
60

54.6
51.2

40.5
40

37.3 38.2
36.8
Percentage

35.0

30.9 30.2

21.8 22.7
20

16.7
15.2

9.0

3.0 3.4
2.1 2.3 1.8 1.8 1.9
0

Producer unknown for 576 movies (52% of movies pre-1994 and 2% of movies 1994 onwards)

Notes: Graphs are based on case writers’ calculations using data from www.boxofficeindia.com and IMDB.
Exhibit 4: Karan Johar’s letter to foreign production companies 125

The East Side Story

Thursday, July 03, 2008 8:54:48 PM (India Standard Time, UTC+05:30)

This is a humble and honest plea to anyone about to enter our domain. To the Disneys, and the Foxes, and the
Sonys, and of course, those Warner Bros. With your vivid, soaring, global logos, your Oscar counts, and your
bags of cash, we, the Indian film industry, welcome you to India.

Splashed on yards of paper; the trades, the economic pages, even the society columns, the news of almost every
leading Hollywood studio sniffing around for real estate on our side of the world was hardly shocking news. We
saw it coming for a while. It does, after all, make perfect, financial sense. It’s the biggest benefit of these soon to
be solidified deals; the coming together of capital for scintillating, ground breaking, and oftentimes
overindulgent, cinema. It's what we here in “Bollywood” do very well. So welcome, swagatam, take a moment,
put down that copy of Variety, and give this a thought:

In our film fraternity, relationships are stronger than contracts. They always have been. It’s why I can drop the F
word (fraternity, what were you thinking?) so often and know in ever [sic.] sense, that it’s true. Our word is as
permanent as ink, despite the bad apples that sometimes give us an amateurish reputation. We’ve been nurturing
these equations for years, and we do it sans agents and managers and assistants. Those of us lucky to be raised
within the industry have the word of our fathers, our siblings, and those friends that might as well be family.
We’re small, and we may bicker, but we’ve sat in each other’s living rooms, and we’ve built this industry to
what it is.

A gesture of support, or an extension of an apology appeals to us more than those big corporate presentations.
We like bold and we like technology, but give us a narration, not a pie chart! We might be a little old fashioned
in our pitches, but we make films because the nation’s heart thumps for it. Appeal to that sentiment, and
understand our culture. Employ people who understand this about us, as an industry, and as a country. We’re
emotional, and we’re more connected than you’d think, but we have our patterns. Try to understand who we are
as an industry, what works for us and more importantly, for our audiences. What do they reject with morchas
and embrace with jubilees? When sitting with your analysts, conduct a human analysis, not a business one.
Deconstruct us if you must, but understand us at the end.

Alright, I’ll admit it, I was trying to reel you in with emotion. Now let’s talk business. This isn’t the age of
vaudeville, we like our returns more than the next guy. Win my heart, but definitely, absolutely, help me win
some of that gold. We Indians have some sharp acumen, so give us both. Blend the business with the creative.
Understand why we know that an item song done right will make you money, and we’ll try to make heads or
tails of your paperwork. We’ve been doing this for years, and our mines are filling up fast. To successfully
comprehend us, try a cocktail of de-Americanization, and matkis full of Indianization.

Don't mock. Appreciate. All our formulas? They work! Ask anyone in Peru. Of course, you know this already;
you’ve done your market research, but start to have a little fun with it now. We’re a country that experiences
almost everything in tsunami-proportioned waves. Cinema, Cricket, Politics. Eat, Sleep, Breathe. This is our
pulse and our tipping points, and our fads are certainly worth a study. Tuck away some of that logic, we’re built
on escapism after all. What’s the point of entertainment if it’s not just a little bit shocking? In the next meeting,
replace “just because” with “what if?” and your entire frame will start to speak cinema scope.

Before I run the risk of sounding too preachy, it is imperative to communicate that the impetus of this thought
comes from a place of deep sincerity, written from a spirit of hope, and with the anticipation of successful
partnerships in the offing. The future is looking well lit for both of us. We like your films. We copy half of
them. We even gape at your process and infrastructure, but respect that we’ve got one too. This “Bolly” isn’t in
a wood, it’s in a jungle, and you've got to understand the law of this jungle.

Love and koffee,

Karan.
Notes: This post originally appeared on Karan Johar’s blog www.mynameiskaran.com. The blog seems to have been discontinued as of May
2017.
Exhibit 5: Comparison of domestic movie productions and domestic-foreign co-productions

Number of movies released

200 1 denotes only domestic production; 2 denotes domestic-foreign co-production

187

163

150 149
150

139
135
129 128
122 123
117 119
114
Number

111111 110111
108
103 101
100

99

90

70
62
59
56
51 50 52
47
50

30
21 21 22
18
12
9
6
1 24
0

1 2
Only 10 movies were pure foreign productions; Producer unknown for 576 movies (52% of movies pre-1994 and 2% of movies 1994 onwards)

Percentage of movies successful

1 denotes only domestic (co)production; 2 denotes domestic-foreign co-production
100
80
Percentage
60
40

28.6 27.8 28.6

22.7
20

16.7
14.8
13.1 12.8
10.0 9.8 11.1
7.8 9.2 8.3
6.3 7.0

0.0 0.0
0

1 2
Definition of a successful movie: All-Time Blockbuster / Blockbuster / Super-Hit / Hit / Semi-Hit

Notes: Graphs are based on case writers’ calculations using data from www.boxofficeindia.com and IMDB; Domestic productions include
movies made both by solo and by a group of producers; One limitation of using categorical measures for a movie’s performance is that these
measures are imperfect proxies of a movie’s revenue (and return on investment); Reliable data on movie budgets are difficult to obtain.
Exhibit 6: Number of sequels and remakes in the industry

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Number of sequels 2 1 2 2 0 2 2 1 2 2 1
Number of remakes 14 11 4 8 7 11 11 11 15 14 15

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of sequels 1 8 4 3 1 5 2 10 11 6 7
Number of remakes 26 17 19 15 10 16 8 13 11 15 9

Notes: Tables are based on case writers’ calculations using data from www.boxofficeindia.com and IMDB.

Exhibit 7: Comparison of success of major production companies since 2005

Percentage of successful movies

After year 2005; For select production houses
100
80
Percentage
60

50.0

40.5
40

36.0 35.3
34.1
28.6 29.5 29.2
26.4 26.2

19.4
20

13.7
9.1
0

Definition of a successful movie: All-Time Blockbuster / Blockbuster / Super-Hit / Hit / Semi-Hit

Notes: Listed companies (Balaji, Eros, UTV); Professionally-managed companies (Disney, Fox Star, Reliance, Viacom); Actor-Promoter-
led company (Hari Om); Non-Actor-Promoter-led companies (Dharma, Phantom, T-Series, Vishesh, Yash Raj); Listed companies and
Professionally-managed companies are ‘corporate producers’ while the other two are not; Graph is based on case writers’ calculations using
data from www.boxofficeindia.com and IMDB; Calculation of success rate is based on each company producing/co-producing at least 15
movies; One limitation of using categorical measures for a movie’s performance is that these measures are imperfect proxies o f a movie’s
revenue (and return on investment); Reliable data on movie budgets are difficult to obtain.
Exhibit 8: Percentage of movies by types of production companies and their success rate

Listed Professionally-managed Actor-Promoter-led Non-Actor-Promotor-led

Year
% movies % successful % movies % successful % movies % successful % movies % successful
1994 0.0 N/A 0.0 N/A 0.0 N/A 11.7 66.7
1995 2.0 0.0 0.0 N/A 1.0 100.0 21.2 33.3
1996 2.0 100.0 2.0 50.0 1.0 100.0 15.8 25.0
1997 4.4 50.0 1.1 0.0 1.1 0.0 27.8 40.0

1998 3.6 75.0 0.0 N/A 1.8 50.0 13.5 26.7

1999 2.7 66.7 2.7 0.0 1.8 0.0 16.1 33.3
2000 3.0 75.0 0.7 0.0 1.5 0.0 14.1 15.8

2001 5.3 12.5 0.0 N/A 2.7 50.0 11.3 17.6

2002 7.2 10.0 1.4 50.0 2.2 33.3 20.9 6.9
2003 8.1 0.0 0.7 0.0 1.3 50.0 14.1 28.6
2004 14.1 4.3 1.8 0.0 2.5 25.0 19.6 31.2
2005 13.9 23.1 2.7 20.0 2.7 0.0 17.1 25.0
2006 15.5 35.0 3.9 20.0 2.3 33.3 23.3 36.7
2007 21.0 26.9 10.5 0.0 4.8 50.0 19.4 29.2

2008 30.7 14.3 14.9 0.0 6.1 28.6 17.5 25.0

2009 28.2 9.1 18.8 9.1 6.0 28.6 23.1 18.5
2010 31.4 22.7 20.7 3.4 6.4 33.3 21.4 16.7
2011 20.5 26.9 15.0 21.1 8.7 27.3 23.6 26.7
2012 15.3 40.0 22.1 31.0 8.4 72.7 23.7 48.4

2013 13.0 16.7 21.7 30.0 5.8 37.5 21.0 37.9

2014 13.1 21.1 17.9 30.8 6.2 33.3 25.5 29.7

2015 7.8 54.5 17.0 20.8 6.4 44.4 27.7 30.8

Notes: Table is based on case writers’ calculations using data from www.boxofficeindia.com and IMDB; Listed represents a publicly-listed
production company; Professionally-managed represents a production company run by a professional management; Actor-Promoter-led
represents a production company owned by an actor; Non-Actor-Promoter-led represents a production company owned by a promoter;
% movies is calculated as the number of movies produced by the specific category of producer as a fraction of all movies released in a year;
% successful is calculated as the number of successful movies divided by the total number of movies produced by the specific category of
producer; A movie is defined as ‘successful’ if it is categorized as an All-Time Blockbuster, Blockbuster, Super-Hit, Hit, or Semi-Hit by
www.boxofficeindia.com; One limitation of using categorical measures for a movie’s performance is that these measures are imperfect
proxies of a movie’s revenue (and return on investment); Reliable data on movie budgets are difficult to obtain.
Exhibit 9: Revenue sources for a producer and share of stakeholders in a movie ticket’s revenue

Share in a movie ticket’s revenue Rupees

Ticket price 100.00
Minus average entertainment tax @ 35% 35.00
Net box office collection 65.00
Minus average exhibitor share @ 50% 32.50
Net collection for distributor 32.50
Minus distributor expenses @ 10% 3.25
Net collection for producer 29.25

Notes: Ancillary revenues in the pie chart include sale of music rights, merchandise, etc. The table represents a scenario wherein t he
producer and distributor are the same entity; hence the net collection for the producer includes the distributor’s commission. The taxes
mentioned in the table are for the period before the Goods and Services Tax was implemented in India on July 1, 2017.

Source: “Business of Rs. 100-cr films: Who gets what and why” by Binoy Prabhakar, Economic Times, August 26, 2012

Exhibit 10: Trends in number of screens, footfalls, and first weekend revenue of a movie

Screens Ratio of
Average share
average Average
of first
Average Ratio of star-led revenue of footfalls
Year weekend in
star-led to per movie
number per to non-star-led movie’s India
movie movie non-star- (millions)
revenue (%)
led movie
1994 94 1.5 3.2 4.79 15.2
1995 108 1.7 3.2 4.43 18.3
1996 100 1.7 2.9 4.09 16.7
1997 117 1.5 1.9 4.83 16.0
1998 96 2.0 4.0 3.37 17.0
1999 103 1.8 2.9 3.43 17.0
2000 95 2.1 3.6 2.80 18.1
2001 76 2.6 3.7 2.30 18.2
2002 106 2.2 3.6 1.95 21.8
2003 106 2.6 4.9 1.60 25.8
2004 117 2.2 3.8 1.22 30.1
2005 121 2.7 3.4 1.16 30.1
2006 187 3.4 6.0 1.96 34.2
2007 284 3.2 6.3 2.08 36.8
2008 380 2.2 3.4 2.02 38.0
2009 417 2.9 6.5 1.71 42.2
2010 462 3.3 8.9 1.62 44.3
2011 569 3.6 7.3 1.96 42.2
2012 668 3.9 8.2 2.43 43.3
2013 841 2.7 6.3 2.45 41.0
2014 866 3.8 9.9 2.18 40.8
2015 812 3.6 6.6 2.06 41.1

Notes: Table is based on case writers’ calculations using data from www.boxofficeindia.com and IMDB; Column 3 has been calculated as
the ratio of the average number of screens for star-led movies to the average number of screens for non-star-led movies; Columns 4 and 6
use domestic gross revenue (that is, box office collections before deducting taxes) as the basis for calculations.
Exhibit 11: Average distributor share in movie revenues from theaters

Distributor share
100
80 Percentage of India net revenue
Percentage
60

46.7 48.3 48.2 48.6 48.1 48.6 46.8

43.9 43.8 42.7 41.4 44.1
41.9 42.6 40.5 40.4 39.4 39.7 40.3 40.3
39.7
37.9
40
20
0

Notes: Graph is based on case writers’ calculations using data from www.boxofficeindia.com and IMDB.

Exhibit 12: Percentage of star-led movies in total productions and their domestic revenue share

Percentage of star-led 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
In total number 16.4 20.8 15.2 24.7 17.9 20.2 12.0 7.6 11.1 9.9 11.5
In industry revenues 42.4 53.7 43.1 44.3 54.8 58.3 53.3 42.0 43.6 45.9 48.0

Percentage of star-led 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
In total number 10.7 13.0 9.7 14.0 12.7 13.5 12.6 10.7 7.1 8.2 7.8
In industry revenues 42.1 58.4 49.6 44.5 57.5 63.1 57.6 57.5 38.2 52.4 43.6

Notes: Tables are based on case writers’ calculations using data from www.boxofficeindia.com and IMDB.
ENDNOTES

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