Discretionary spending on entertainment set to rise in India

Twenty years back, no one would have imagined paying as much as Rs 800 to watch Dhoom-3 in the multiplex and that too in the IMAX format. The latest flick to create new records at the Indian box office, has indeed set fresh benchmarks for the entertainment industry.

It is the first Indian movie to be shot in IMAX, and the one which is almost completely digitally distributed. As 2013 draws to an end, the Indian movie industry is perhaps finally ready to move away from its obsession with the Rs 100 crore club and aim even higher.

The beginning

The multiplex revolution began in the late 1990s in India. One of the first multiplexes to open in the country was PVR Anupam in New Delhi, with four screens in 1997. Thanks to the real estate boom and growth in discretionary spends, the multiplex has managed to sweep the Indian movie buffs off their feet.

Now there are several big national players, including PVR, Inox, Fun Cinemas, Big Cinemas, while an international player — Mexican chain Cinepolis — is trying to make inroads. Several strong regional multiplex players have also emerged. Private Equity and institutional investors are also keenly watching and investing in some of these companies.

Multiplex chains are even now experimenting and investing in premium multiplex formats such as the PVR Director’s Cut and other entertainment formats — gaming and bowling. Pramod Arora, Group President, PVR, said, “movies are like a religion in India. It remains one of the most social and cheapest forms of entertainment available. With higher disposal incomes, discretionary spends on entertainment are only set to increase. The multiplex industry is expected to be the sunrise sector. We have just scratched the tip of the iceberg.”

Under-screened nation

For a country with such a large population, there are only about 12,000 screens in the country. Roughly about 10 per cent of these are multiplex screens, while the rest are still single-screen cinemas. Nearly a third of the box office collections come from these estimated 1,200 multiplex screens.

The largest multiplex chain PVR, which acquired competitor Cinemax last year, has 404 screens and plans to rapidly increase it to 500 screens before the end of this fiscal year.

The growing number of malls is expected to fuel the growth of multiplexes. Not only do the malls offer multiplexes the best locations, as anchor tenants multiplexes, too, contribute heavily in generating footfalls for the mall. Multiplex players are largely following the lease model and rarely look to acquire or invest in building standalone cinemas.

Megaplexes

Smita Jha, Leader - Media and Entertainment, PwC India, believes multiplexes are on the way to becoming the dominant box office contributors. At the same time, she believes the concept of megaplexes will become more and more prevalent in the country. “It will be difficult to run single screens or 2-3 screens. It wouldn’t be economically viable to operate and we will see a rise of the concept of megaplexes,” she said.

Multiplex players believe this would mean that cinemas will increasingly offer 12-14 screens under one roof in South India and 8-10 screens in North India. Jha said the multiplex boom has changed the way movies are being made today, with equal opportunity for small budget, art movies and the usual masala flicks.

A movie like Lunch Box can get a good window of release across the plexes, while a masala flick like Dhoom-3 can now manage to open at over 4,500 screens on the first day.

This has also made the first three days of release the most important for the movies in terms of box office collections. Even as ‘hit’ movies continue their run at the box-office, there are enough screens available for the next new movie flick which is up for release.

With players such as UFO Moviez and Real Image offering digitisation solutions to multiplex players, movie production house can now reach out to larger audiences even in smaller places.

According to a CII-PwC report, nearly 75-80 per cent of the cinema screens have been digitised. This has reduced distribution costs for movie production houses, as the cost of digitally transmitting a film is far less than the combined print and transportation cost of a film distributed in the traditional way.

Most films are now simultaneously released in 2,500-3,000 screens. Industry players believe that digitisation of cinemas has led to an uptick of box-office collections across films of all budgets, said the report. Digitisation of screens is a big reason why films can even touch the Rs 100-crore mark.

It has also helped control piracy and has given a push to new technologies. In the last two years, more Indian movies are being released on 3-D screens. Arora of PVR believes with Dhoom-3 being shot in IMAX, it shows how important for international box office collections.

Gourmet food

Forget the popcorn, the experience of watching a movie is now also about being able to grab gourmet food, which is delivered to your seat. Food and beverages have become a key component for multiplexes as additional revenue streams. In high-end multiplex formats such as PVR Director’s Cut, the movie buffs have now the choice of enjoying three-course meals in the in-house restaurant.

Online ticket booking

With the growing use of smart phones and tablets, multiplexes are getting ready to cash in on the e-commerce boom. Arora says nearly 21 per cent of the company’s tickets are booked online.

He believes with the growth of mobile devices and rise in the habit of online shopping, this will only grow further.

(This article was published on December 27, 2013)
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