BEHINDWOODS COLUMN

Advance method

Advance method is just like M.G except in this case loss is shared between the theater owner and distributor whereas in M.G the loss is borne only by the theater owner. If the advance paid by the theater owner for the distributor is 5 lakhs, the same percentage ratio would be in practice. After the advance amount of 5 Lakhs is realized in collections, the extra income is shared between the theaters and the distributor, just as in M.G. But this is where the similarity ends.

Perhaps the advance paid to the distributor (5 lakhs) is not realized in theater collection (ticket sales), the theaters are not in trouble here. Because, in advance method, the rest of the amount in the advance paid minus the collections has to be paid by the distributor to the theaters. This is why advance method is favorable for theater owners. But all these things would happen if the movie’s distribution house is ethical and renowned. Advance would be paid only if the distributors or the distribution company is trustworthy enough to pay the money back in case of poor collections. There are lots of theater owners who have risked their advance money with infamous distributors and struggle to get it back. Hence, the theater owners would not risk their money if it were not a reputed distributor. Advance method would be followed for films with average cast and crew and theaters which relatively generate more revenue, irrespective of which kind of movie is screened there. For micro-budget movies, there is a practice to collect only the print expense of the movie the minimum advance from the theaters. Sharing would be based on the same ratio as we have seen here.

Terms

In terms method, without any advance or M.G, the theater owners would fix the ratio sharing with the distributors and allow them to release their movie in their theatres. Most small budget movies are released in this route. Many small movies, which are released directly by the producer himself without distributors are released with this terms agreement. This is a relatively trouble-free method. At times, however, theater owners tend to deceive the producers or distributors, not allotting their fair share.

Hire

Hire is the process of renting one copy of a film for complete ownership for a single release or single run. In other words, the ownership is valid only till running the film in a theater and hirer gets the collections.  Mostly, hire process is followed for films that surprisingly do well post their release. For such movies, theater owners would advance with the hire deal to the distributors or producers who release the film, strike a hire deal and release in their theaters. For a movie, which is hired for 2.0 Lakhs, all it collects goes only to the theater owner; so is the loss. Interestingly, in many times, these hired movies only would bring the profits home to the theater owners, hence considered lucky for them.

Also novices and learners in the distribution business, learn the tricks of the trade by screening a film in a known theater, primarily with hire process. It is best suited for start up distributors.

More on multiplexes and their agreements later.

Distributor / Theater collection calculation and accounting

No matter how the agreement and deals are put in order, accounting of collection lies on statistics of no of tickets in the theater, show-wise price of tickets, etc. To track, collect, record and verify this data, the distributor would send an agent from his side to every theater along with the print. This agent is called ‘Representative’ of the distributor. Representatives are paid salary of Rs.100.00 per day. He also stays in the theater till the movie run ends there. Some big names in distribution arrange the stay for them at nearby lodges too.

Representative’s job is to note down the ticket’s starting serial number for each denomination when the ticket sale starts at the box office. Once the sales booth is closes, he would also note down the closing serial number of ticket book. Immediately he would inform the number of tickets sold, with their rate, to the distributor over telephone. Beside this, the theater manager publishes the collection data through the ‘Daily Collection Report’, also called DCR every week. The DCR and the representative’s report must match up with each other. 99% they do. Based on the DCR, daily gross collection and net collection post tax deduction, etc are worked out.

At times, these representatives and theater employees join hands and counterfeit the ticket sales data. At times like these, when in doubt, the distributors would do surprise audits and cross checks and the alliance would be caught red handed too. So, how does the trickery happen here? Cheating is possible to replace tickets with coupons or even permitting entry in to theater without ticket. A coupon is an entry token without any tariff or entry fee printed on it. In theaters, issuing coupons in the place of tickets facilitates tax cheating. Though these theaters cheat the government by evading tax, distributors have great respect for these theaters as long as they are trustworthy with them.

Ticket rules and guidelines

Imagine a theater has a total of 1000 seats on Rs.10.00, 40.00 and 50.00 values. After the ticket book is printed, every week, all the ticket books would be taken to District Commercial Tax Office (DCTO). At DCTO, a seal would be imprinted at the backside of every ticket. At counter, these are the tickets, which are issued at the box office of theaters when you produce the reservation coupon or buy ticket directly. These are, in short, taxed tickets. Taxed tickets have to be converted with the number of tickets sold at the box office on regular basis. In other words, each ticket sold at the box office has to be a taxed ticket. According to the serial number of the taxed tickets sold, the theater must pay the tax to the government. This is one of the key reasons for releasing the movies on rental basis from distributors. This phenomenon again, more often witnessed in the cities like Chennai and other big cities. As usual in this process also, people have developed clever tactics for deceit.

These practices take place in theaters not only in metros but also across the state. However, Chennai city status is relatively strict due to tight vigil and higher viewer ship resulting in greater transparency. In other areas DCTOs are paid weekly bribes and special raid squad is paid monthly bribe. The bribe is usually paid in the weekends, where the DCTO and raid squads collect directly from theaters!

It is natural to wonder even if the theater owners make any profit out of the theaters. You bet they do! Consider this scenario. In a business day, a theatre shows the ticket sales as five Rs. 10 and twenty Rs.40 and fifteen Rs.50 tickets. The tax payable is flat 15% of all these shown account ticket rates calculated. In reality, on the same day, the theater would have enjoyed full house with all shows. For a theater with 800 seats, which has run full house in all 4 shows, it tax pays tax only for 45 tickets they have shown in accounts. Excluding this, the tickets of denominations Rs.10, 40 and 50 are sold at a flat rate in the release time of big films. Distributors too, welcome this as this promises additional income for them. This is also the main reason why expert theater owners prefer sharing the collection in net, whereas veteran distributors choose to go with gross route.

[..to be continued