How a Film Gets Financed

Where the money for Indian films comes from - producers, studios, distributors, pre-sales and private investors - and why film is a risky investment.

Making a film can cost anywhere from a few crore to several hundred crore rupees. Where does the money come from?

Sources of funding

Producers investing their own money or family money.
Studios, which fund and distribute many films.
Distributors paying advances for rights.
Pre-sales of satellite, digital and music rights before release.
Private investors and financiers.
Bank loans, since film got industry status in 2001, making formal finance easier.

The old days

Before industry status, films were often financed through informal lenders, sometimes with high interest and murky sources.

Why films are risky

Most films don’t make a profit; a few hits pay for many flops.
Success depends on word of mouth, which is hard to predict.
Costs are sunk before anyone knows if audiences will come.

Reducing risk

Pre-selling rights can cover much of the budget before release.
Star power is seen as insurance, though not always reliable.
Co-production spreads risk.

The pre-sold film

A producer makes a 60-crore film. Before release, she sells digital rights for 30 crore, satellite rights for 10 crore and music rights for 5 crore, covering most of the cost even if the box office disappoints.

Thinking most films make money

Most films lose money; a few big hits carry the industry.

Key takeaways

Films are funded by producers, studios, distributors, pre-sales and loans.
Industry status in 2001 opened formal finance.
Most films don't make a profit.
Pre-selling rights reduces risk.