Studios zoom in on small-budget films for profits

Farhan Akhtar's musical film Rock On has been rocking for Anil Ambani's Reliance Entertainment.

In the first week after its release, the movie, with a small budget of Rs 8-9 crore (Rs 80-Rs 90 million), has recovered its cost of production.

Industry estimates the film to have earned over Rs 9 crore (Rs 90 million) from box-office collections in the first week, with just 210 prints.

Small-budget films seem to be raking in the moolah for production houses. Little wonder that filmmakers like Ghai, Mahesh and Mukesh Bhatt and Pritish Nandy have over the years stuck to making small-budget films in the range of Rs 10-15 crore (Rs 100-150 million).

The renowned Bhatts' (Mukesh and Mahesh) recent offering, Jannat, featuring Emraan Hashmi earned them almost three times the cost of the film (Rs 10 crore or Rs 100 million).

Here's how: According to Mahesh Bhatt, Jannat recovered its production cost by selling the satellite rights for Rs 10 crore and music rights for Rs 4 crore (Rs 40 million).

Therefore, the theatrical earnings from the 150 prints released were a bonus (nearly Rs 24 crore or Rs 240 million).

Even a Bollywood film like Ugly Aur Pagli with Mallika Sherawat and Ranvir Shorey, which has faced the heat from film critics, has earned its producer Pritish Nandy a handsome return on investment.

"The RoI is attractive if the budgets are managed well. Our strategy has been to have a bouquet of films. Big stars are not available as they have limited dates. Therefore, one has to look at other ways to keep the camera rolling," said Rahul Puri, executive director, Mukta Arts.

The collective return on investment from the four films Ghai produced last year was around Rs 25-30 per cent.

In comparison, the bets are higher for Bollywood's most sought-after production house, Yash Raj Films, promoted by Yash Chopra.

"The stakes are higher for big-budget films that rake in all the star power. Take for instance, last year, five of Chopra's movies, even with the Bollywood's best of star cast, were not able to garner high returns. To add to it, the big-starrers have over 600 prints," said a film analyst.

To be sure, Yash Raj Films had earned a return of just 10 per cent from five blockbusters last year. However, the fortunes can escalate if big-budget films do well. In 2004, he earned a 150 per cent RoI from Hum Tum, Dhoom and Veer Zaara.

"Films do well because of a big idea, not because of big budgets. Return on equity on a Rs 10-crore (Rs 100-million)budget movie versus Rs 55-60 crore (RS 550-600 million), what is more profitable?

"It is important to create wealth where everyone is happy. Large studios ride on the illusion of success rather than actual success," said Mahesh Bhatt.

So is the model sustainable with corporate giants encroaching the Bollywood space?

"Studios have a slate of films, of which not all can be big-starrers. If a studio has 5-6 big movies in its kitty, almost 20 are of small budget.

Also, when small-budget film-makers slate their movies, they sell them as a package to distributors, which cover their risk. That is the logic of having a portfolio.

However, in case of certain movies, the production house does not sell all the territory rights. It keep at least one or two key territories and if the film does well, it can then earn the upside of it," said Puri.

A lion's share of earnings for such films comes from satellite and home video, while the remaining is contributed by theatres. In case of big-budget movies, nearly 70 per cent of the income comes from box-office collections.

For instance, the much-acclaimed movie Iqbal, with actor Shreyas Talpade (Rs 2.75-crore or Rs 27.5-million budget) earned Rs 1.3 crore (Rs 13 million) from the box office, while satellite rights fetched Rs 2.25 crore (Rs 22.5 million) and home video rights Rs 50 lakhs (Rs 5 million).

However, industry points out that the contribution from the box office is on the rise, with the number of prints virtually doubling. Iqbal was released with 50 prints, later Ayesha Takia-starrer, Dor, was released with 100 prints.

"If we had to release Iqbal or Dor today, we would have at least 150 to 175 prints," added Puri.

However, industry players said small films need to be marketed well since the film usually picks up in the second week, unlike big-budget films, where the opening week is huge.

These films strive on word-of-mouth publicity. Also, they miss out on the overseas revenue, where the market is difficult to crack majorly because of the absence of stars that draw audiences, said industry analysts.