Dilemma for film makers as top stars eye digital pound of flesh

Some of the top male stars, to compensate for reducing their initial fees for film projects, are demanding a share of the revenue generated from digital sales with OTT platforms as a final reward. On the other hand, some streaming platforms are willing to comply with these agreements, which attracts the audience of big stars that increase the perceived viability of the projects. In this case, the producers, who bear the entire financial burden of financing the film, are undercompensated, relying heavily on profits from theatrical releases, if any at all. This trend of diverting digital income to the stars as remuneration puts producers in a vulnerable position, and their potential earnings are significantly reduced.

“This doesn’t happen anywhere in the world. All actors want to earn their income somehow and scraps are left to producers who make, market and promote films. This is why the producer ecosystem is collapsing; everything is talent-driven,” said a senior film producer, requesting anonymity. The person said this was similar to the deals major players would strike with broadcast networks eight to 10 years ago. Stars like Salman Khan, Ajay Devgn, Varun Dhawan and Hrithik Roshan had signed multi-film contracts with Disney Star network for prices between ₹300 crore to ₹1,000 crore. It meant that the channel signed a contract with the star for the satellite rights of a specific number of his upcoming films for a certain period. The reason why the agreement could be reached with the actor rather than his producers, who would be assumed to have the copyright of the film, is that the actor agreed to coordinate the supply of films to the channel by reducing his remuneration for the film .

However, as the production and marketing costs of films rise, producers feel that it is only fair to give them an adequate share of ancillary rights. This is especially important when box office returns have turned unpredictable and few films are finding takers in cinemas. In fact, most stars are not able to draw people to theaters based on their name alone. According to a recent Ficci-EY report, only domestic theaters are valued in India ₹10,500 crore. Furthermore, while the revenue share between the producer or distributor, and the exhibitor continues to vary depending on the individual film, in the first week of a film’s run, which is when most earnings come in, the exhibitor takes a 52.5% share. For any film, the producer’s final share cannot exceed 45-50% of the film’s box office earnings. In fact, according to a report by Care Ratings, the profit margins of 51 film companies studied were between 3-5% in FY17 and FY18.

“The role of the producer has become significant; it is important to note what expertise he or she can bring to the table. Companies like YRF will never agree to such deals (where the star takes a share of OTT rights) because they have full creative control over projects and pay people they hire. However, there are many others who are just signing names and financing films without understanding the business, playing blind,” said the producer of a second film.

Updated: 22 June 2023, 11:40 PM IST