Distribution challenges for Tamil cinema

They also stated that film distribution rights for TN for above Rs.5 crore cannot be sold to a single distributor and producer has to sell to individual distributors in different territories on distribution or outright basis to minimise loss to a single distributor. If this decision is enforced, it will have major consequences on producers who were used to sell their films on MG basis and leave the risk of film onto distributors. The films are normally sold in either of the following five distribution methods. 

Minimum Guarantee (MG): In a MG deal, distributor pays non-refundable MG for the territory and bears the distribution expenses. Publicity is taken care by producer. Once the distributor recovers the MG along with distribution expenses and commission at 10 – 15% of the earnings, the overflow is shared at 50:50 between producer and distributor. 

Royalty (also called MG Royalty): In a royalty deal, distributor pays a non-refundable royalty amount and also spends on publicity and distribution. Once the distributor recovers MG Royalty amount along with publicity, distribution expenses and commission at 15 – 20%, the overflow is shared at 50:50 between producer and distributor. 

Outright basis: In an outright deal, distributor buys film for the territory on non-refundable outright basis and takes care of publicity and distribution expenses. In this deal, no further overflow is payable to the producer. What is received as outright amount is final for producer and both profit and loss is borne by the distributor. 

Advance basis: Here distributor pays refundable advance amount for the territory. The distributor shall recover his advance amount, retain a commission of 5-10% and pay the balance to producer. If the film does not recover the advance amount along with commission payable, the producer must return balance amount within 30 days of release. 

Plain distribution: Currently, most small budget films are distributed in this way. The distributor does not pay any advance or MG amount and distributes the film on a commission of 5-7.5% on amount earned. The entire risk of film is on producer as he has to spend on publicity and distribution without any guarantee of earning from the distribution. 

Most disputes between producers and distributors happens on MG or MG Royalty deals made for specific or entire TN and hence the federation has now imposed a ban on such deals. Recent loss claims arose for films Lingaa, Puli, Kabali and few more, from distributors who bought on MG basis and lost heavily. Super Star Rajinikanth started the practice of refunding when distributors lost in Baba (2002) and since then they started expecting whenever they lost money. 

Most distributors today are buying at high prices with the hope of recovering part of their losses from producers if they lose. Hence, Rajini in his recent speech advocated the need for distributors to do a thorough study, discuss with experienced distributors before buying films on fancy MG prices and advised distributors not to get carried away by the hype created by producers, while buying. 

This trade restriction by the federation may not stand the test of law as Monopolies and Restric tive Trade Practices (MRTP) Act and Competition Commission of India (CCI) Act are clear on the free trade practices to be followed in any business. However, the strong distributor federation shall strive to implement its decision somehow. 

Outright deals may happen for select films that carry good pre-release buzz. Hence, producers must be aware of challenges ahead and prepare to release their films on either advance or plain distribution basis. While these methods may not guarantee money the way it is through MG deals, if the film is liked by audience, the lower commission and no overflow payable in advance or plain distribution terms may actually turn out to be beneficial to producers in long run.