50:50 revenue sharing norm in the US a bluff?

April 9th, 2009 - 5:43 pm ICT by Sampurn Wire  

Bollywood producers have gone on an indefinite strike from April 4th and will not be releasing any new film till the matter between them and the multiplex owners over revenue sharing is resolved. In this on-going producers v/s multiplex owners war, the most important demand of the producers is that they want a 50:50 revenue sharing with the multiplexes as they claim it to be the norm world over, especially in the US. But we have found out that it is not really the standard norm in the US as the revenue-sharing terms in two leading chains of the US – Cinemark Cinemas and Regal Entertainment Group are either a sliding scale or are performance-driven for years now.

We have copy pasted below extracts from the Form 10K of the Securities and Exchange Commission of the USA. Form 10K is the annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934. The Securities and Exchange Commission (SEC) is the US equivalent of the SEBI in India.

Form 10K of Cinemark Cinemas states –

Film rental costs are accrued based on the applicable box-office receipts and either the mutually agreed upon firm terms or sliding scale formula, which are established prior to the opening of the film, or estimates of the final mutually agreed upon settlement, which occurs at the conclusion of the film run, subject to the film licensing arrangement. Under a firm terms formula, the Company pays the distributor a mutually agreed upon specified percentage of box-office receipts, which reflects either a mutually agreed upon aggregate rate for the life of the film or rates that decline over the term of the run. Under the sliding scale formula, film rental is paid as a percentage of box-office revenues using a pre-determined matrix based upon box-office performance of the film. The settlement process allows for negotiation of film rental fees upon the conclusion of the film run based upon how the film performs. Estimates are based on the expected success of a film over the length of its run in theatres. The success of a film can typically be determined a few weeks after a film is released when initial box-office performance of the film is known. …. The final film settlement amount is negotiated at the conclusion of the film’s run based upon how a film actually performs.

Form 10K of Regal Entertainment Group states -

Film Rental Fees: Under a sliding scale formula, the distributor receives a percentage of the box-office receipts using a pre-determined and mutually agreed upon film rental template. This formula establishes film rental predicated on box-office performance and is the predominant formula used by us to calculate film rental fees.

When we tried speaking on this regard to the warring producers, not a single one we contacted was willing to speak on record over it. One veteran producer even stated, “You cannot apply the same norm of that in the US to India. The multiplex screens in that country are more than single screens whereas it is the opposite in India.”

Well if is so then why fight giving the wrong example? -Sampurn Media

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