Aamir Khan with NDTv – Revenue sharing business model in movies

I like to share gist and my views on that interview. Before getting into details, let me start with an intro of who the person is. ‘Aamir khan’ name speaks for itself in India.Last few years has been dream run for him with movies like Taare Zameen Par, 3 Idiots.He is  one of the few multi-talented people in movies with mix of intelligence and care for masses.He gave an interview regarding the revenue sharing business model that he generally follows in his movies.He talked about inner details of how movie market works from promotion to profit distribution.For his full interview, click here.
                Personally, I always felt that profit sharing is the best strategy to have in movie business. As I have grown up in India where Movies and cricket are the main sources of entertainment from childhood till now, I have been following both very closely.Setting cricket aside for another day, movies are entertainers as well as business to make profits in no time. So these profits should be reached to all levels of movie industry who kept time and sweat for the movie. In our usual movie world, movie will be sold to distributors before its release. Depending on the stars craze among local people, movie can be sold to huge amounts (can be even Rs. 100 crores). After the release,
its up to  distributors to bear loss or profit. Because of this, distributors suffer a lot  if it is high budget movie flop. Movie success always relied on story rather than on star cast in it. So if the quality is maintained , rather than selling it for huge amounts ,producer can sell to small profits and  share the profit/loss  from collections it gets. Thus, distributors can bear a smaller loss and can recover from it with time and it will be  a win-win situation for everyone.
Profit for films is calculated this way:
Gross = All the money generated by movie (collections at box office,satellite rights,overseas etc)
Net = Gross – Entertainment tax (usually ~30 %)
Distributor share = Net – Theater charges (20 – 60%)
Profit/Loss = Distributor share
These equations tell you why distributor takes hit if poor storyline movie is being bought for high price out of speculation . This way I think Aamir way of business in movies is the way for future movies and here to stay.