(1/n) Thread on Indian multiplex

Indian multiplexes have almost 2950 screens out of total 9600 screens but it earns more than half the total revenue of theatrical releases from these multiplexes!
(2/n) Slowly and steadily multiplex screens are rising in Indian market due to higher discretionary spending habits of people and also due to requirement of latest technologies along with higher movie watching experience.
India's current cinema screen penetration is the lowest in the world after China, the US and the UK at six screen per million of population. In 2018, 1,776 films were released in India,
(4/n) while only 878 films (including foreign titles) were released in the US. India also outdoes the US in terms of cinema admissions — in 2018, over three billion tickets were sold in India, while the US and Canada together saw only 1.3 billion ticket sales.
(5/n) However, as per a FICCI-EY report, the number of screens in India is a fraction of what the US has — 9,601, as against the 55,623 screens in the US, as of 2018.
(6/n) Different streams of revenue for a multiplex

- Film Exhibition - Close to 50 cent of total revenue comes from film exhibition segment
- Film Distribution - Very small proportion of revenue comes from this segment
- Food & Beverages - Almost 25 cent of total revenue comes
(7/n) from it
- Sponsorship - Advertisement revenue be it offline or online advertisement comes under this
- Convenience Fees - As more and more people have started booking tickets online, this revenue stream has seen a lot of upsurge off late.

Leading Multiplex Chains

3 Cinepolis
4 Carnival

PVR and INOX are the listed players in Indian market. PVR is the market leader in terms of number of screens along with the highest gross revenue.
(9/n) PVR - Segments
Film Exhibition - Main revenue source for the multiplexes. Around 55% of total revenue comes from this.
Film Distribution - Very little proportion of total revenue comes from this. Operation margins are around 8 to 10 cent
(10/n) Food & Beverages - Proportion of F&B constantly rising & it has apron 70/75% gross margins.
Advertisement - Online & offline advertisement revenue falls under this head. Offline revenue is approx 10 cent of total adv revenue & as per management it has lot of headroom
(11/n) INOX - Segments
Film Exhibition - Main revenue source for the multiplexes. Around 55% of total revenue comes from this.
Food & Beverages - Proportion of F&B constantly rising & it has apron 70/75% gross margins.
(11a/n) Advertisement - Online & offline advertisement revenue falls under this head. Lot of growth will come from this segment as per the management.
(12/n) So the overall mix has remained the same since 2015. But Food & Beverages proportion has been rising slowly.
(13/n) Pvr Inox
Income from sale of movie tickets 16% 14.89%
Sales of Food & Bev 20.45% 21.08%
Advertisement Income 16.24% 17.90% (Revenue CAGR from 2014/15 to 19/20)
(14/n) comparison
(15/n) Distributors' Share is given as a percentage of NBOC (Net box office collection).

As per PVR concall -

We typically pay 50% in week one, 42.5% in week two, 37.5% in week three and 30% in week four.
(16/n) Graphical - Inox Distributor’s share
(17/n) ATP
(19/n) Spend per head
(20/n) As per PVR AR
(21/n) Advertisement Revenue

PVR & INOX both do not want to increase the number of minutes of advertisement on screen.

Currently INOX caps it at 19 odd minutes and PVR caps it at around 22 mins per show per screen of advertisement.
(22/n) Both chains looking to increase yields by increasing the rates of advertisement

It is still the cheapest medium of advertising and has a lot of headroom for improvement as per both the chains
(23/n) Also they aiming to increase offline advertisements as the proportion of it is just 10 cent to the overall advertisements. They see a lot of scope to increase the revenue from offline advertisements.
(24/n) Advertisement expenses have started to fall since the start of FY 2020. As the economy slows advertisement spends are cut by the corporates. Both managements have guided lower growth from adv segments in FY 21 n FY 22
(25/n) OTT Vs Theatrical Release

Concalls Of PVR over different quarters

Talking about the gap between movie release on OTT and Theatrical release

1) Windows in that context we have full confidence that our content partners will respect this sacrosanct model which has been in
(26/n) in existence for very long duration, which has basically benefited all stakeholders in, film business.
the windows between theatrical release and release on any other platform will be sacrosanct. 2) the windows between theatrical release and release on any other platform
(27/n) platform will be sacrosanct.
3) As far as OTT is concerned or for that matter of fact even pay television or satellite television or any other form of watching film at home or on the go is concerned you can do it only after eight weeks of a film theatrical release.
28/n Concalls of INOX over different quarters

Talking about direct release on OTT platform

1) No direct release to OTT which was the agreement earlier
29/n 2) Hopes movies will not be released directly on OTT platforms But also accepts some smaller budgets may be released there directly
(30/n) 3) Threatening the OTT direct release with cut in producer's share

Now the scenario has changed as a result of COVID.
Lot of movies have been directly released on OTT platform skipping the usual practice of releasing the movie in cinemas which may put pressure on
(31/n) cinema exhibitors either to pay more to distributors or producers of the content or may have to reduce the ticket prices to attract more people & ultimately increase the occupancy at multiplex level.
(32/n) I really don't think OTT can take away entire business of multiplexes as IMHO cinemas are there to give an experience of watching any movie which OTTs or for that matter televisions have failed to give us. One may argue that in short term some movies may be directly
(33/n) directly released on OTT and that may very well happen as well but in longer term people will go out to watch the movie on the big screen. People may start comparing costs of watching movies in cinema & on OTT and may pick & choose which movies to watch where but in longer
(34/n) in longer term cinemas will come out stronger purely because of latest technologies which they can use and the experience they can provide to the consumer coming for movie watching. It may happen that movies being made for OTT release & theatrical release r completely diff
(35/n) One of the PVR concalls where someone asked about the cheaper mobile plans by netflix

I think this move is a validation of the fact that OTT on television is a failure in this market and if people are going to watch OTT on phone that experience is really substandard as
(36/n) as compared to cinemas.

Globally if we see the producers they have released some movies but at the same time they have also delayed the releasing of some movies.
(37/n) For another argument regarding simultaneous movie release on all platforms

OTT doesn’t give amount of revenue needed for big box office collections
OTT doesn’t give clarity as in the total collection in numbers whereas box office collection was known to everyone
(38/n) from theatrical release of the movie

Last but not the least the movie watching experience.
AMC updates - Amazon thinking of investing in AMC cinemas - Rationale

A distribution channel for Amazon content being produced, a guaranteed outlet for its own production
(39/n) Can create additional revenue stream for the contents

Well, there is no word on the investment as yet so we ll have to wait & watch for the further action in that direction.
(40/n) Other Updates


They have opened one property with multiple screens in Colombo Srilanka. They see a lot of traction in that market

They cancelled the plan to set up screens in Saudi - middle east
(41/n) Focus is to open more screens at tier II , III & IV cities in India to increase the reach.

VR technology is still in its nascent stage so difficult to commercialise the same as of now.

Trying to develop the popcorn brand by increasing retail sales outside of multiplex.
(42/n) They hold close to 70% stake in Zea Maze (developing Popcorn brand - still making losses)

As per one of the concalls of PVR in quarter 3 of FY 2020 - You will not see very high growth rates at least in the near term, but we still expect to deliver growth, maybe single
(43/n) single digits in the ad revenue in the near term and as and when I think the box office outlook improves and we see some bit of improvement in the economy this will also move up.

SPI chains of cinema taken over by PVR operates in southern region of India at 50% to 51% of
(44/n) occupancy which is considerably high looking at the national avg of 30% to 35%. EBITDA around 20% to 25% which is good and it can capture some local content easily.
(45/n) INOX

They have started taking group bookings for sports / concerts. Generally for the weekdays. They had the rights to telecast world cup cricket matches
Looking to increase yields in advertisement segment.
(46/n) Trying to increase the occupancy from 28% to above 30%

Making lot of efforts to increase the SPH to ATP ratio.
FY 21 will be EBITDA negative

Looks very difficult to even be able to work at 50 cent of capacity post Covid.
(47/n) Some Common Points

Have partnered with swiggy & zomato for online delivery of their signature products directly at home

Both PVR & INOX chains focusing to increase the premium screens. Trying to increase the proportion of premium screens to total screens
(48/n) Premium screens have almost double ATP and higher SPH to ATP ratio. Also it attracts better rates for advertisements.

All the new properties which come up takes about 4 to 5 years time to reach break even

On an average setting up cost of a screen is 2.5 Crore to 3 Crore
(49/n) After every 6 to 7 years renovation is carried on to the screen which usually comes to 30 cent of total set up cost of screen

Other overheads are around 40 lacs per screen per annum.

Ultimately number of people walk-in into a cinema has a direct impact on our EBITDA.
(50/n) Only and only good content can increase the footfall in multiplexes.
As per one concall of PVR,they mk operational losses if it is only one segment of movie exhibition whch is their core seg to get rev. All othr Sgmts r directly #or indirectly dependent on movie exhibition
(51/n) Key Risks ( From Annual Reports)

1 OTT direct first day releases

2 Piracy

3 Ticketprice regulation in some of the states

4 Restrictions on number of shows

5 Regulating the food & beverages prices inside of multiplex

6 Development of real estate slowing
(52/n) 7. License requirements to start operating


India's current cinema screen penetration is the lowest in the world after China, the US and the UK at six screen per million of population.
(53/n) It is this under penetration that has helped the likes of Reliance Jio find a business opportunity in producing and releasing films on the Jio platform, first day first show.
In fact, Media and Entertainment industry expert, Ashish Kaul expects Jio's first-day-first-show
(54/n)offering to generate huge revenues especially in areas with limited access to cinema screens.
"A family on an average spends Rs 1,500 each time it visits a multiplex. If Jio will charge even Rs 200 to watch a movie on the first day of release, there will be enough takers."
(55/n) While business models are still evolving, Kaul is confident that if Jio offers its first-day-first-show offering as a pay service, the revenue of the Rs 13,000-odd crore film industry could go up by 15 times.
(56/n) But,will Shahrukh Khan or Salman Khan prefer to release their films only on Jio?
It is unlikely,as filmmaking for digital platforms requires an altogether diff sensibility.
Besides,film is all abt experiences. Consumers world over visit cinemas for the exp they offer
(57/n) At the same time, India will remain a screen deficient market for some time to come as all the companies will now be trying to consolidate smelling the new competition around the corner in form of OTT.
(58/n) End of Thread
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