Multiplex Business in India

Multiplex Theaters in India has come a long way since its inspection in 1997. Patterned along the ‘shopping mall’ model of the multiplex as developed and prevalent in the West, and sustained by the retail boom unleashed by the economic liberalization policy of 1991, the Indian multiplex site sports all the features of an up-market turf. The multiplex’s steady proliferation in the metropolis’s and simultaneous penetration into some smaller cities and towns testifies to its increasing popularity, coinciding with the rise of disposable incomes in the hands of the urban Indian family. Multiplexes has given options to audience. Period! Art films, regional films, non-orthodox Bollywood films and low-budget movies who were on the verge of dying have been given new lease of life after the Multiplex boom. Not only the producers, distributors and exhibitors are comfortable with such movies due to low cost but it has also scattered the options to audience.

While the capacity at a single screen cinema is usually in the region of 850 to 1000 seats, or sometimes a little over that, a single screen in a multiplex seats a far smaller audience, because when a cinema is converted from one to multiple screens the seats get divided among them, though not equally. Anupam PVR, India’s first multiplex situated in Delhi, was converted to four screens, two with a capacity of over 300 seats and the others with 150 seats.

The revenues being generated by multiplexes is estimated to be a whopping INR 12,000 Cr. as at the end of calendar year 2009. As per study conducted by PWC the revenue is forecasted at INR 17,000 Cr. at the end of the year 2011.

The exhibitor of a multiplex have certain revenues and cost associated. The revenue for an exhibitor are:

1. Ticket Sales.
2. F & B (Food and Beverage) Sales.
3. Advertising Revenue.
4. Parking Charges.
5. Management Fees.
6. Convenience Fees.

The cost for an exhibitor includes:

1. Distributors Share %
2. F & B Cost.
3. Entertainment Tax.
4. Rent / Revenue Share.
5. Overheads.
6. Personal Costs.

What are the characteristics which drive the market of Multiplexes in India? The following are some of them:

1. Favorable Demographics.
2. Rising Income levels.
3. Willingness of people to spent on recreation.
4. Growth in film industry.
5. Improving supply of infrastructure and retail industry.
6. Tax Exemptions.

As in case of any business there are certain threats associated with Multiplex business in India. Some of them are:

1. Alternative modes of entertainment.
2. Uncertainty over entertainment tax.
3. Piracy.
4. Television.

The number of mulitplexes in India currently stand at 850 which is expected to reach 1,400 in 2013. – Source: FICCI-KPMG M & E industry report 2009, KPMG Analysis

Some additional statistics of Indian Film Industry business in India –

• 1000 movies produced annually over the last 4 years (US $ 2.4 Billion in 2008)
• Revenues dominated by Domestic Box Office at 75%, unlike Hollywood at 11%
• Home Video Revenue currently at 8% expected to reach almost 20% by 2013
• Overseas Revenues are rapidly growing at 21% due to increasing popularity of Indian Movies abroad
• Digital Cinema enabling increased reach, helping curb piracy and increasing revenues for Producers
• Corporatization and Industry status augmenting financing
• Hollywood Studios partnering with Indian companies and movie makers

Though India produces the largest number of films in the year (annually more than 1,000), it accounts for only 1% of the global film industry revenues. Inspite of being 90 years old industry, the Indian Film Industry was accorded “Industry” status only in 2000. In addition the unorganized methods of financing made the investors pay high rate of interest. Only recently the industry have got access to organized finance. With vertical integration taking place between producers, distributors, exhibitors, broadcasters and music companies, Corporatization is taking shape in the Indian Film Industry.

At a time when single-screen theaters are dying due to lack of footfalls, people are queuing up at multiplexes which sells tickets at almost 5 times the prices prevailing in single-screen theaters at metropolis and tier 2 cities. This fact provides for ample testimony to the increasing prosperity as well as Indian consumer’s willingness to pay for superior-quality entertainment. Given the prevailing demand-supply dynamics, one can believe that the sector offers high visibility for steady cash flows.

With the boom and trend in multiplex in India one question which arise is whether single-screens are going to die? The perfect answer to this will be a big “NO”. The analysis shows that more than 70% of people prefer going to multiplex than a single-screen, but “The bigger the mod, the greater the thrill” is an old saying. In a country like India where people still feel and believe that a movie needs to have “PAISA VASOOL” value, it shows that the expenditure on a movie always been a question. Multiplexes offering tickets at around 150 bucks cannot call for large chunk of audience on account of high prices. On the other hand, if a common middle class family – comprising a husband, wife and two kids thinks of venturing out into a multiplex on a Saturday evening, the idea doesn’t seems to pleasing, if you count the cost!

Fact remains that still consumers are ready to spend more as the quality of viewing is much improved compared to a single-screen, the trend which is rising as time goes.

The new phenomenon which is gathering pace in and around cities and towns is Multiplexing of single-screens. So, don’t be surprised if you see a single-screen nearby getting converted into 2-3 screens multiplex. The trend which one can see will eventually make single-screens a rare species in India.

Note: The contents of the article are exclusively for Naachgaana.com. References have been derived from various sources.