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Business Model Of Bollywood | How This Film Industry Earns Money?

Updated: Aug 18, 2022

India produces the largest number of movies in the world.


We make more than 1800 movies in a year out of these 1800,

not all of them get success.


Only 10 or 15 movies out of them are super hits and if this is the ratio then

it is a very risky game even after that, every year more and more movies are produced in India.


Bollywood Logo

What is the reason behind this?


In India, the movie we call flop, too makes a good amount of money.


It earns profit even before the movie gets released so which model is used in Bollywood because of this even a flop film is in profit?


Especially the movie with big banners and what is the reason that a small film with a good story, script and acting does not make money.


So it is called that in India, people do not like good acting and story

everyone wants something spicy.


It is not like that.


A movie like A Wednesday is being liked by people very much

then also they are not able to earn money.


Whereas a movie with a big banner regardless of being good or bad people give money to watch them in the theatres.


Because the model is implemented in such a systematic way that even though if we don't want but yet we give money to watch a spicy movie in the movie theatres.


And the movies which have a good story, we watch on tv or on laptops at home.


See when a movie is made, it is not like that a person invests his all money

and lost everything when it gets flopped.


So assume if you want to make a movie, you will need A Producer.


A producer is a man who invests money in a movie.


A movie is made in four phases and all these four phases require money.


The first phase is development, in which scriptwriting, story, and dialogue are decided.


The second phase is pre-production, in which shooting,

logistics, location, team, and actors and actresses, all are decided.


The third phase is production, in which the shooting of a movie and execution

is involved.


The fourth and last phase is post-production in which editing, visual effects,

and sound designing is done.


The money spent on all these four phases is given by the producer

and after spending this much money, a producer needs a distributor.


These distributor's work is to deliver the movie to cinema halls in all parts of India.


Below distributors are sub-distributors whose zones are divided.


The distributor of UP West, all the cinema halls in that area will come under him.


And whoever will be of the Mumbai, all the cinema halls of that area will come under him.


So in this way, a movie reached the whole part of India.


If we remove the sub-distributor for a while, then as soon as the movie gets completed the agreement is made between the producer and the distributor.


The producer does not distribute the movie in the cinema hall himself.


He gives them to the distributors and distributors deliver the movie to the

cinema halls.


When you watch a movie, there are names highlighted in the starting

like UTV Motions, Ultra Media, Eros International, and Fox Star Studios.


These are the names of the distributors.


If I explain to you with an example assume a movie is made of a 100 crore

generally, a producer sells the movie to the distributors for 200 crores


And he gets out of the game.


And distributors sell the movie to cinema halls and earn profit


This is called Outright Purchase.


The second case is MG Royalty which is called minimum guarantee royalty.


In this case, the distributor purchases the movie from the producer and he has to give a portion out of the amount of profit when he earns more than a certain amount of profit from the producer.


In some cases, the producer himself becomes the distributor,

due to which layer gets eliminated and they earn more profit.


But the work of distribution is not easy that is why only big banners put their hands in this. Like Yashraj, Dharma Productions, Red Chillies Entertainment, etc.


You may have seen that big stars do only one or two movies in a year.

whereas small actors do 4 or 5 movies in a year

then also a net-worth of big stars is much more than a small actor.


Big stars take a share from the profit rather than taking fees

and in a way, a big star in an unsaid communication becomes a co-producer.


As soon as a movie comes to the distributors, they invest a large amount of money in marketing and promotion of the movie.


And there is a very big difference between a small and a big movie.


No matter how good a small movie is, how good its story but a big banner will make you remember its intensive marketing that this is the date on which a movie will get released and if you have not watched the movie, then you will lack behind.


A huge amount is injected into meme pages and Twitter trends

that if you don't know about the movie then you will not understand the meme.


People talk around you, then you get the curiosity of watching the movie.


For criticizing the movie also you have to watch the movie first

and this is the reason whether the movie is good or bad it earns money.


Everybody enjoyed criticizing The Thugs Of Hindustan


The movie is made in 240 crores, the total collection of this movie is 371 crore

and then also it made a profit of 131 crores.


In Bollywood, there is the use of advanced technology in many ways, not only CGI and VFX but also analytics to understand what the audience wants to see.


A hit movie, which you may have heard called "Shaadi Mein Zaroor Aana"


In this movie, data science is used to analyze what the audience wants to watch

and these things are used in the movie also in a movie's digital promotion also,


Viewership analysis is observed and it also benefitted.


A movie is a hit or super hit, it is decided by box office collection.


See the counter on which you buy tickets is called the box office.


The money which comes from selling the tickets from all the box office


Is called box office collection.


And from that money, the GST tax which goes to the government,


After that, the money left is called the net collection.


A producer not only sells a movie to the distributor but along with that, he sells different types of rights also like satellite rights, meaning that the movie will be shown on which tv.