Tariff ek paheli: Plot twist may force drop in Indian film releases in US

Allu Arjun in Pushpa.

Trump's proposed 100 percent tariff on foreign films is likely to force a drop in Indian releases, say producers.

Such a tariff would directly increase the overall cost of bringing Indian films to the US market, noted Aneesh Arjun Dev, Founder & Managing Director of WAM India, a media and entertainment company, which also distributed 2024 Malayalam-language hit venture Marco.

"It is likely that if such a tariff is strictly enforced, we may see a temporary reduction in the number of Indian films released theatrically in the US, particularly from smaller production houses," he said.

Over a 100 films are estimated to have been released in the US last year.

Now only major movies would look at a release in the US and this would also be in a very calibrated manner by the production house after doing a cost benefit analysis, Vivek Menon, Managing Partner, NV Capital, pointed out.

Tariff tantrums

Dev added that aspects like pricing, promotional budgets, and even the scale of release may need realignment if such a tariff is levied as it would directly increase the overall cost of bringing Indian films to the US market.

Experts noted that under the proposed 100 percent tariff, the cost of buying a foreign film or an Indian movie in particular will double, which will deter US distributors from purchasing Indian films. For instance, if US distributors are paying around Rs 8 crore-10 crore to buy the rights of an Indian film, they would now have to pay a similar amount in taxes.

The US is one of the most important overseas markets for Indian cinema, especially for Hindi, Telugu, and Tamil films, Dev noted, adding that for certain titles, especially high-profile or content-driven films, the US can contribute between 10 percent and 25 percent of the total global box office revenue. "The Indian diaspora has historically shown strong support for films released in the US, making it a critical territory for both theatrical and digital revenues."

Movies like Baahubali 2, RRR, Pathaan, Kantara, all have enjoyed a good theatrical run in the US. Baahubali 2 which released in 2017 became the highest-grossing Indian film in the US at the time with collections to the tune of around $20 million, and the 2022-release RRR which earned $15 million also saw a rare re-release surge which is uncommon in the US for an Indian film.

Millions of dollars will be under jeopardy due to the tariff. In 2024, movies like  Pushpa 2, Greatest of All Time and Stree 2 alone grossed around $54 million at the US box office.

"Not only Hindi films, but even our regional films depend on overseas collections, and there is considerable demand for them in the global market. The American audience constitutes a sizable part of our box office collections and the US is also a favourite destination for our filmmakers to shoot. We are yet to see the fine print of this announcement but we surely would have preferred incentives and subsidies attracting more filmmakers to American shores," said Anand Pandit, producer of films like Total Dhamaal and The Big Bull.

Box office impact

"The distribution / production house gets anywhere between 30-40 percent of the overall theatrical revenues. These tariffs would affect these revenues but to what degree, we will have to see," Menon added.

Pandit also said that they are still processing the new development and it is unclear how such a policy would pan out or who would be affected most by it. "Is it meant to encourage American filmmakers to shoot in America or will it also impact those who travel from other countries to shoot in the US, is a question that we don't have an answer for just yet. However, the move does raise concerns as the global film market is deeply interconnected, with numerous production and distribution collaborations," he said.

US President Donald Trump on May 4 announced a 100 percent tariff on movies produced outside the country, saying the American movie industry was dying a "very fast death" due to the incentives that other countries were offering to lure filmmakers.

However, the White House on May 5 clarified that there is no decision yet on imposing tariffs on movies produced outside the country. “Although no final decisions on foreign film tariffs have been made, the Administration is exploring all options to deliver on President Trump’s directive to safeguard our country’s national and economic security while Making Hollywood Great Again,” a White House spokesman said.

While levying a 100 percent tariff on foreign films will have a negative impact on the business of Indian films, it will not be much, estimates Karan Taurani, Senior Vice-President of Elara Capital.

"Overseas box office is (on an average) 10 percent (for an Indian film) and out of that the US market is not more than 40 odd percent. And if this (100 percent tariff) rule does not pertain to OTT (over the top platforms) then there can be a positive impact and the negative impact will be offset because films can go directly to the OTT. Even the OTT platforms will give more money to producers because it is not a theatrical release and that will compensate for the loss of box office money and it will be a win-win for OTT platforms also as they can showcase movies which are released in Indian theatres but not in the US."

He noted that if the tariff is applicable on distribution of films then it will not be a huge cost burden. "If a film is made for Rs 50 crore then the cost of distributing the film in one circuit will not be more than a few crores. In this scenario the decline of films (releasing in the US) will not be 50 percent, it will be less," he said. However, if it is applicable on the cost of the film then it is a bigger problem, Taurani added.

Boost make in India

The answer to the 100 percent tariff by the US should not be a reciprocal tariff, instead, the government should take measures to incentivise Indian films, said Akshaye Rathi, film exhibitor/director, Saroj Screens.

"Dependence on external markets becomes lower, that's what we should work towards. There are so many markets like the Iranian film industry that do not have domestic monetisation opportunities. But we have it. But India is under screened and that is because of the high taxes and regulation and the unlawful heckling the industry has to go through that has impacted the growth of the industry. If we see China, 20 years ago the Chinese government incentivised building of cinemas and they went from 8,500 screens to 80,000 and in the last 20 years we are still hovering around 9,000 screens," he added.

In addition, Rathi said that the industry has to wait to see how Trump rolls out the 100 percent tariff.

"There could be a scenario where he could impose different tariffs for different countries depending on relations. For Hollywood, a huge chunk of revenue comes from other countries and Trump wouldn't want to agonise the people of those markets and curtail the business of Hollywood."

Shares of several major Hollywood giants slumped in premarket trading early on May 5 including Netflix, which was among the worst hit, as its shares dropped nearly 3.4 percent to $1,117, reported Forbes. Warner Bros. Discovery’s shares were down down 2.93 percent to $8.29 from Friday’s close, and Disney’s shares dropped 1.74 percent to $90.88.