The release of Ramayana: Part One is nearing. There are now reports of a tussle arising between the distributor and exhibitors over the film’s revenue-sharing terms.
Contrary to some reports, the distributor is not demanding one blanket term. Instead, multiple proposals have been put on the table. One option is 55 per cent for the first 11 days, after which the film would revert to the existing revenue-sharing structure. The rationale is that Ramayana is arriving in the pre-Diwali period, a soft period for theatrical business, and the higher initial terms would compensate for that lower box office potential. Another proposal is a 60 per cent in the first week followed by 50 per cent in the second week before reverting to the standard slabs. There has also been discussion around introducing flat revenue-sharing terms linked to lifetime gross benchmarks rather than following the existing week-wise model.
This development presents a much bigger conversation than just Ramayana. I have written in the past that the theatrical revenue-sharing system in Bollywood has become outdated and increasingly unfair to distributors. If there was ever a time to talk about it, it is now.
The current system came into effect in 2009. Under the agreement reached then, distributors received 50 per cent in Week 1, 42.5 per cent in Week 2, 37.5 per cent in Week 3 and 30 per cent from Week 4 onwards, with a 2.5 per cent incentive or penalty in the first two weeks depending on whether certain collection thresholds were achieved.
These terms made sense at the time.
Back then, multiplexes were still in their early growth phase, and these terms were introduced to support their heavy investments in new cinemas. The higher exhibitor share was meant to compensate for their initial capital outlay. Otherwise, historically distributors had commanded a much larger share of the net box office, often 60-75 per cent and sometimes even 80 per cent. Furthermore, the multiplex business cycle was much shorter, with most films running only 2-3 weeks before moving out.
Things have changed significantly since then.
For one, the rapid expansion of multiplexes that characterised the 2006-15 period has largely plateaued. These chains are no longer opening new cinemas at anywhere near the pace they once were, so the original justification for subsidising exhibitors is no longer as compelling.
Box office today is more backloaded than it was a decade ago. We have seen examples such as The Kashmir Files, Chhaava, Mahavatar Narasimha, Hanuman Ansh, Dhurandhar and several others where a significant portion of the business has come after the first three weeks. In general, successful films are holding far better than they once did. Yet under the present sharing model, these films are being punished for exhibiting their staying power. A film may still be earning substantial revenues at the box office while the distributor is receiving a disproportionately small share of that business.
Coming back to Ramayana, are its makers justified in asking for better terms? In my view, YES. The existing structure itself is outdated, so there is nothing unreasonable about seeking an update to it that better reflects today’s market. More importantly, big event films negotiating superior revenue shares is hardly unprecedented. Avengers: Endgame, for example, reportedly secured around 65 per cent of the gross in the United States, significantly higher than the normal 45-50 per cent that studios receive. Around the world, major tentpole releases frequently negotiate premium terms because exhibitors recognise the value these films bring.
For that matter, these very same national chains already offer 55 per cent in the first week to major South Indian films, and in certain cases even 60 per cent. Likewise, they allow South Indian films to release despite four-week OTT windows while continuing to insist on an eight-week theatrical window for Hindi films, the very industry that played a pivotal role in their own expansion over the past two decades. These double standards have become increasingly difficult to justify. That is, before even getting into the concerns surrounding showcasing practices.
So what is the solution? In many ways, Dharma has finally taken a step that was long overdue. Whether Ramayana succeeds in changing the system is another question altogether. The film is now too close to release for distributors to realistically exert maximum pressure, and a single distributor, even with a film of this scale, may not possess enough leverage to fundamentally alter long-standing industry practice. What is really needed is a united stand from producers and distributors across the Hindi film industry. Instead of negotiating individually against an increasingly consolidated exhibition sector, the industry needs to collectively push for a modern revenue-sharing framework.
Personally, I believe the ideal solution would be to move away from rigid weekly slabs and instead adopt flexible flat-sharing terms linked to box office, which are negotiated film by film. As is done across the world. For instance, films crossing Rs. 300 crore net could receive a flat 50 per cent share throughout their run, while Rs. 500 crore plus blockbusters could receive 55 per cent. Smaller or wider releases could operate under lower slabs. The exact percentages are for exhibitors and distributors to negotiate, but the principle should be simple: reward successful films instead of penalising them for sustaining business beyond the opening weekend.
The current system served its purpose in 2009. It no longer reflects the realities of today’s theatrical market. Whether or not Ramayana ultimately succeeds in securing better terms, one thing is clear: the conversation is long overdue.
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