The recent acquisition of 39 screens of DLF’s film exhibition business — DT Cinemas — by market leader PVR Cinemas and Cinépolis is yet another step towards consolidation in the organised film exhibition business. From nearly twodozen two-and three-screen multiplex exhibitors, the organised film exhibition business is today largely split between four or five players. Together, these players — PVR, Inox, Carnival, Cinépolis — control around 80 per cent of the 2,000-odd multiplex screens.
PVR, which has a total screen count of 557 across 48 towns, paid Rs 433 crore for the 32 screens of DT Cinemas — an average of Rs 13.53 crore per screen. Cinépolis, with 269 screens, paid Rs 64 crore for the seven screens — an average of Rs 9.14 crore per screen in an otherwise complicated business deal which took virtually a year to close and only after it was given the go ahead by the fair trade regulator — the Competition Commission of India
“The acquisition of DT Cinemas will help in consolidating our position in the National Capital Region (NCR) and Chandigarh. The acquired 32 screens are present at upscale locations, which are easily accessible by affluent movie connoisseurs,” explains Nitin Sood, chief financial officer, PVR Cinemas. But it is Ajay Bijli, who explains the group’s near-term ambition. “We are the leading multiplex player in India and we will surpass the 600-screens mark in the current financial year,” says Bijli who is the chairman-cum-managing director of PVR Cinemas. The DT Cinema acquisition also helps PVR extend its network of relationship with marquee mall developers like DLF, L&T, Prestige, Mantri, Oberoi, Xander etc.“This will give us access to the best catchment areas and help us in rolling out screens faster,” says Sood.
But like PVR, Cinépolis, the fourth in pecking order of India’s biggest multiplex brands, is also growing its screen presence rapidly, largely by the way of acquisitions. It too aspires to cross the 300-screen count shortly and double its presence over the next 60 months. “The consolidation of the industry is natural. People who really want to be in the industry will start to acquire from other companies,” says Javier Sotomayor, managing director of Cinépolis India.
Around two years ago, it had struck a deal with the Essel Group Company and acquired over 80 screens of Fun Cinemas at a reported value of around Rs 480 crore.
Says Sotomayor: “We have been growing internationally as a company in the film exhibition business.” Cinépolis, that started its India operations in 2009, was founded in 1971 in Morelia, Mexico. It is the world’s fourth largest movie theater company, operating more than 465 multiplexes with over 4300 screens in 13 countries. It is also the largest operator of luxury cinemas in the world. In India, Cinépolis has pumped in Rs 600 crore so far and has a screen count of 269. It plans to invest another Rs 200 crore within the next year or so. Its aim is to figure in the list of top two multiplex operators as early as possible. It will soon enter Guwahati, Greater Noida, Chennai, Trivandrum, and Gurgaon.
Mumbai-based Inox Leisure, the second largest multiplex operator after PVR says it will tie-up with real estate firms and mall developers to add more screens. Inox is looking to invest around Rs 800 crore in the next four years and has a roadmap to increase its screen count by over 300 screens says Alok Tandon, CEO, Inox Leisure. In 2014, it had acquired all 38 screens of Delhi-based Satyam Multiplex.
Screen Business Multiplex screens are central to the growth of the Indian film industry today. They generate a large chunk of the revenue due to higher ticket prices and multiple screening options on any given day. However, the country is still hugely underserved. Sample this: India has only around 2,000 multiplex screens whereas China has 20,000 and USA has around 40,000 screens. Ironically, India has the largest number of film releases in a year thanks to Bollywood and the regional film industry. India is the largest global market in terms of the number of films produced annually (close to 1200 films a year) and the second largest in total yearly footfalls (about 1.93 billion footfalls).Sadly though, the average ticket prices continue to be among the lowest in the world.
The single-screen theatres, which were once the backbone of the film industry, have been bowing out before the multiplexes over the last few years. A recent report by Crisil says that as opposed to 9,675 single screens in 2009, the numbers have contracted to 7,600 in 2015. This year, it may go below the 7,000mark.
That’s not surprising, considering single screens do not work for the business. Explains a film distributor: “Single screens suffer due to lower occupancy levels and lack of flexible content compared to multiplexes. Apart from this, higher revenue sharing with distributors, lower food and beverage income and lower advertising revenues make the overall economics of a single screen unprofitable.”
A typical single screen has around 500-1,000 seats with very low occupancy levels and average ticket prices in the range of Rs 30-100. A multiplex has around 1,000 seats distributed across four to five screens that can show flexible content, which offers a lever to increase occupancy.
Trade experts have predicted a consolidation in the business whereby not more than three or four players will own most of the multiplexes in coming years. As a result, the cinema goers will have to spend more at these multiplexes very soon. Increase in average ticket prices or expensive popcorns, snacks and beverages at the multiplexes is already happening across locations. Agrees Sood of PVR. “The multiplex industry in India is taking the same shape as matured markets in US, UK, and Korea where the industry is consolidated among the top 3-4 players.”
Consolidating Business
But why are these operators in a hurry to own and control more and more multiplex screens? The answer is simple. To get better control on the wallet-share of the patrons. PVR says it will invest about Rs 250 crore on opening new screens and refurbishing existing ones in coming months.
The second quarter results of PVR Cinemas give a glimpse of the direction of the multiplex business. The consolidated profit after tax or PAT for the second quarter (JulySeptember 2016) stood at Rs 29.2 crore as against Rs 30.7 crore in the same period last year, a dip of 5 per cent. “As compared to second quarter of FY 15-16 which saw big films like Bajrangi Bhaijaan, Baahubali, Drishyam, Welcome Back, Mission Impossible, the film performance in the second quarter of FY 16-17 was muted and only Sultan and Rustom did some decent numbers,” the company explained.
The average ticket prices for PVR increased by 8 per cent, the average spend per person on food and beverage increased by 22 per cent while advertising and other revenues grew by 44 per cent. Says Bijli, “We are optimistic regarding the box office prospects in forthcoming quarters on back of strong content pipeline and consumer demand.”
According to Sood, the contribution of regional movies to PVR’s ticket sales has also gone up over last 4-5 years. “This is driven by rising popularity of regional content as well as PVR’s higher growth in South India (125 screens, almost a quarter of the PVR current portfolio is in the southern part of India),” says Sood.
On its part Sotomayor of Cinépolis says it too will be expanding in a big way. “We have defined a clear expansion strategy in India. That expansion strategy is to be present in the top 60 markets in the country. Within these 60 markets, we will try to get the best locations possible.”
ashish.sinha@businessworld.in; ashish_BW
BW Reporters
Ashish Sinha is an experienced business journalist who has covered FMCG, auto, infrastructure, tourism, telecom among several other beats. Ashish has keen interest in the regulatory scenario impacting different sectors. He writes on aviation, railways, post and telegraph, infrastructure, defence, media & entertainment, among a wide variety of other subjects.
