The Hindu Business Line : Multiplexes look for hits

Late last week, the tiff between producers of films and multiplex owners over revenue-sharing came to an end. This should come as considerable relief to multiplex companies such as PVR, Inox Leisure, Cinemax and Fame India. The December and March quarters were already difficult ones for these players and the current row only made things worse. A look at the reasons from various dimensions.

The October-December period is normally a good one for most multiplexes. This period being filled with festivals and holidays brings in new releases, thus bringing people by the droves to the multiplexes.

But there were a series of bomb blasts in Bangalore and Ahmedabad last July. The tipping point was the terror attack in Mumbai in November 2008. This scared people out of their wits as result of which many movie-goers refrained from frequenting malls or multiplexes.

The March quarter is generally the ‘exam’ season and ushers in lower occupancy levels. This period is also marked by few hits or mega releases that could set the box-office counters buzzing.

Last year, there were hits such as Jaane Tu Ya Jaane Na, Singh Is King, and Gajini which raked in the moolah. But, this year, films such as Delhi-6 and 8*10 Tasveer with a heavy star cast did not do all that well.

Decline in revenues

Consequently, there were multiple implications for multiplex companies. Multiplexes such as PVR that enjoyed an average 33-35 per cent occupancy were staring at 27 per cent levels. Others such as Cinemax and Fame enjoyed less than 20 per cent occupancy. All of them have suffered a sequential decline in revenues on two counts. One, ticket sales were lower because of lower occupancy.

Two, food and beverages that are consumed by the audience account for over 15 per cent of these companies’ revenues also suffered because of this.

Finally, when multiplex owners were heaving a sigh of relief in April that the worst may be over, a double-whammy struck. One, the IPL that started in April and went well into May made audiences stay glued to their television sets.

Two, the row over producers and multiplex owners over revenue-sharing cropped up. This meant that no big releases starring mega-star casts were released from April 2. The entire holiday season, thus, remained untapped for the multiplexes. In fact, PVR has indicated that occupancy in the April-June quarter may be in the 15-20 per cent range.

Making the most of releases

After the tiff was resolved, multiplexes had to fork out greater revenue share from ticket sales to the producers.

Broadly, reports suggest that for the first three weeks after a movie releases, the revenue share will be 50-37.5 per cent compared to the earlier 48-30 per cent levels. If the movie is an exceptional hit, the revenue-share increases a little. This may put increased burden on margins for multiplexes.

These companies will look to make the most out of new releases lined up such as Kambakt Ishq and Love Aaj Kal starring some really big names in Bollywood, to take them out of the woods over the next few quarters.

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