Karan Johar, one of Bollywood’s leading filmmakers and producers, recently shared his thoughts on the dynamics of big-budget films and the financial realities that come with them on CNBC TV18's Global Leadership Summit. Known for making some of the industry’s most notable films, Johar’s perspective sheds light on the balancing act of funding large-scale productions and maintaining profitability, as well as his strategic shift toward middle-budget films.
The Challenge of Recovering Big Investments
For Johar, one of the major challenges with big-budget films is the journey to financial recovery. He noted, “Bigger the money spent is also the bigger, larger journey to recovery.” When a film’s budget reaches the range of 200 to 300 crores, it’s not just about creating a blockbuster hit; it’s also about managing the substantial costs associated with production, marketing, and distribution.
Johar acknowledged that funding such massive productions isn’t feasible for a single production house, even for one as established as his Dharma Productions. “If I make a film that is over 250 crores, 200-300 crores, it’s not possible to fund that totally at our stage, even now,” he explained. To address this, his production house often partners with larger studios to cover these expenses. However, this collaboration comes with its own trade-offs: “Even when we made big hits, we were always sharing the profit,” Johar said.
The Value of Intellectual Property (IP) and Long-Term Benefits
Beyond the immediate earnings, Johar emphasized the importance of owning intellectual property (IP) as a way to build long-term value. “The IP has been a huge part of, you know, our valuation as well, built over, you know, a large period of time with all the films that we’ve done,” he stated. Holding on to IP rights not only enhances the production house’s valuation but also provides the potential for future monetization.
This strategy allows Dharma Productions to capitalize on successful films even after their theatrical release, whether through streaming platforms, merchandise, or other revenue streams. However, Johar also recognized that to make larger films financially viable, partnering with studios is often necessary, which means sharing control over the IP and the profits.
Shifting Focus to Middle-Budget Films
In a shift away from massive budgets, Johar sees significant opportunities in the middle-budget segment, which he believes offers a better cost-to-profit ratio. “Because I believe the real bread and butter, the real money comes from that middle-budget film,” he explained. According to him, films in the 65 to 80 crore range have the potential to achieve strong profitability without the extensive financial risk of big-budget productions.
Johar mentioned that these middle-budget films can be entirely funded by his production house, allowing them to retain full ownership of the IP and maximize profitability. “Those are the films that you can actually fund entirely on your own and you can enjoy and reap the benefits of that big breakthrough profit that is to happen,” he shared. Unlike big-budget films, which often face challenges in recouping their costs, middle-budget films allow Dharma Productions to achieve higher margins with a lower risk.
Debunking the “Bigger is Better” Myth
While large-scale films may seem like the best path to massive returns, Johar emphasized that this isn’t always the case. “As much more when everybody thinks bigger the film, bigger the money made, it’s not always true,” he said. The significant costs involved in these projects mean that while the revenue may be high, the profits are often limited due to the large sums needed for recovery.
Johar is now focused on strategically balancing his portfolio. He still sees value in producing large-scale films with the support of a studio, but he’s increasingly focused on middle-budget films where his production house can control the entire process and benefit fully from the film’s success.
New Ventures and Future Plans
Looking forward, Johar hinted at new projects and business verticals, showing that he’s ready to evolve Dharma Productions further. “In the near future, we’re going to make some announcements about verticals that we’re going to begin, and we do hope that everyone eventually wakes up to the fact that we now truly mean business,” he teased.
Karan Johar’s insights highlight the complexities of balancing art and business in Bollywood. By shifting his focus to middle-budget films while retaining an interest in big projects, he’s setting a path that could redefine the industry’s approach to profitability and sustainability.
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