Friday, October 12, 2007
ENTERTAINMENT: The Plot Thickens
August 2007 Coverstory for IMAGES Retail
For once, the business of entertainment retail and the entrepreneurial skills behind Indian showbiz has become just as exciting as thriller movie plots and on-screen histrionic talents. There are as many mushrooming multiplexes as there are malls -- and more are joining the brigade with old-style single-screen theatres being converted into three and four-screen cineplexes by big movie exhibition retail chains. What’s more, the retail boom has even managed to affect the movie-making industry by engendering a whole new breed of ‘multiplex cinemas’ that urban Indian audiences are lapping up. With gaming zones, malls with attached theme parks, and satellite radio lounges pitching in too entertainment retail in India has never had it so good. SAON BHATTACHARYA catches the drama behind the curtains…
That movies are the biggest entertainment avenue for India’s billions is a no-brainer. And that the best development to have happened to the Indian entertainment business in years has been the growth of multiplexes is also a known fact. But having said that it also remains a fact that in India, there are only 12 screens per 10 lakh population compared to 117 screens per 10 lakh in the US and more than 40 screens for European nations. The multiplex business is clearly a fledgling industry at the moment with huge potential.
With the increasing acceptance of organised retailing in urban India, there has been a growing demand for quality retail space from large F&G retailers, fashion apparel chains as well as from multiplex operators. As a result, multiplex growth in the country has been proportional to mall growth. According to IMAGES F&R Research, currently India has about 200 operational malls, which is expected to rise to 600 by 2010-11. Within the next three years, therefore, the number of movie exhibition screens, seats and audience capacity are also expected to grow simultaneously.
But what is interesting to note at this stage is that even though multiplex space supply is almost at par with retail space supply, the cinema exhibition business is only about a fifth of the total retail business in India. This is an indicator of the fact that either multiplexes at present are in excess of the expected market size, or that multiplex business needs to explore virgin territories other than that of the over-supplied metros.
LEISURE & ENTERTAINMENT MARKET SIZE
Riding the economic growth and rising affluence levels that India has been witnessing in the last few years, the Indian entertainment industry has been growing at a rapid pace. From books and music to gifts and movies, there has been a growth in almost all segments of leisure and entertainment. According to IMAGES F&R Research estimates based on CSO National Accounts Statistics 2006 (Statement-14), consumer spend on leisure and entertainment grew 24.2 percent in 2004-05 over the previous financial year spend of Rs.29,360 crore.
The total entertainment retail market in India is currently estimated at Rs.35,000 crore, out of which the share of the organised segment is just about four percent -- at Rs.1,450 crore. Currently this organised segment has seen a growth of 14.3 per cent over last year, with a year-on-year growth of over 44 per cent in the last two years.
The Indian entertainment industry is further expected to grow to more than Rs.58,800 crore by 2010. The multiplex industry, for its part, is expected to grow at over 44 percent a year to about Rs.90 crore by 2008, while the Indian film industry (currently worth about Rs.8,000 crore or US$ 2 billion) is expected to grow to Rs.17,400 crore (US$4.3 billion) by 2011.
The Indian film industry continues to be the largest in the world in terms of the number of films produced. The encouraging growth in the number of multiplexes has also enabled moviegoers, especially in urban India, to add a new dimension to their movie viewing experience. However, the overall number of screens in the country remained approximately the same since multiplexes have only managed to compensate for the closure of several single screen theatres across the country.
The total entertainment retail market in India is currently estimated at Rs.35,000 crore, out of which the share of the organised segment is just about four percent -- at Rs.1,450 crore. Currently this organised segment has seen a growth of 14.3 per cent over last year, with a year-on-year growth of over 44 per cent in the last two years.
The Indian entertainment industry is further expected to grow to more than Rs.58,800 crore by 2010. The multiplex industry, for its part, is expected to grow at over 44 percent a year to about Rs.90 crore by 2008, while the Indian film industry (currently worth about Rs.8,000 crore or US$ 2 billion) is expected to grow to Rs.17,400 crore (US$4.3 billion) by 2011.
The Indian film industry continues to be the largest in the world in terms of the number of films produced. The encouraging growth in the number of multiplexes has also enabled moviegoers, especially in urban India, to add a new dimension to their movie viewing experience. However, the overall number of screens in the country remained approximately the same since multiplexes have only managed to compensate for the closure of several single screen theatres across the country.
MAJOR PLAYERS
Adlabs Cinemas
Adlabs Cinemas, owned by the Anil Dhirubhai Ambani Group (ADAG), was launched in 2000 with the opening of the world's largest IMAX dome theatre and a four-screen multiplex in Wadala, Mumbai. Adlabs operated four multiplexes (three in Mumbai and one in Nasik), with a total of 12 screens and an audience capacity is 4,385 seats in 2005-06. Revenues stood at Rs. 34 crore in the last fiscal, with an average transaction value of Rs.130.
Today Adlabs Cinemas operates approximately 80 screens across India. The company is currently on a massive tie-up operation with multiplexes and single-screen cinema halls, as well as greenfield sites across the country, especially in Gujarat. Currently some 350-odd acquisitions, long term leases and management contracts (with single-screen theatres) have been targeted in the first phase of expansions. Most of these new alliances are in tier-II cities like Indore, Meerut, Allahabad and Belgaum.
Around 700 movie halls will be targeted over the next few years, most of which will be converted either into multiplexes or into prime single-screen destinations like the company’s Metro Adlabs in Mumbai. What started with the Mehul Theatre in Jamnagar, Gujarat (an Anil Ambani stronghold), which was converted into a three-screen multiplex, will now spread across India’s fast growing, prosperous small towns. Adlabs plans to come up with an investment of about Rs.100 crore in Chhattisgarh, for instance, to develop four-screen multiplexes at Raipur, Bhilai, Bilaspur, Korba, Raigarh, Ambikapur and Rajnandgaon.
ADAG’s ultimate grand plan is to utilise Reliance Infocomm’s existing fibre optic network to digitally screen movies from a central location across Adlabs Cinemas’ vast movie hall network. This strategy might also help in bringing down current multiplex ticket prices -- at least in small town India. At its current rate of expansion and acquisitions, Adlabs Cinemas will easily emerge as the largest player in the organised entertainment retail segment in India.
Pyramid Saimira Theatre Ltd
Pyramid Saimira Theatre Ltd (PSTL) is a movie theatre chain with a presence in malls, multiplexes and standalone theatres. PSTL has been acquiring theatres on long-term lease or on ownership basis. The operations of the company are centred in South India, with a retail presence in cities like Chennai, Madurai, Salem and Tirunelveli. The chain currently operates 325. The company plans to tie-up with 120 single-screen theatres in metros and 235 theatres in tier-II and III cities. PSTL has already tied-up with existing movie halls and malls in Punjab, Himachal Pradesh, Haryana and Rajasthan, for conversion into digital-friendly theatre formats.
Unlike Reliance, PSTL is involved in setting up an integrated Network Operating Center (NOC) which will convert 35 mm films into digital or d-cinema, and transmit these films via a satellite medium to various theatres across India in a secured encryption mode.
The company eventually plans to create a franchisee model for theatres in tier-II and III locations, where existing theatre owners will manage the theatres under PSTL’s branding, with a minimum assured quality. PSTL will manage the entire content, without any fixed cost exposure. By 2012, PSTL plans to operate 2,000 screens in India.
PVR Cinemas Ltd
Credited with spearheading the multiplex revolution in the country in 1997, PVR Cinemas Ltd has now established more than 82 screens at 21 complexes. The total audience capacity of PVR is 21,316 seats at present. PVR was the first movie exhibition company to introduce computerised ticketing. It was also the first to accept credit cards in India for the purchase of movie tickets; the first to offer cinema tickets over the internet with an online payment gateway; as well as the first to receive institutional funding in the cinema industry -- from ICICI Venture. It has currently entered into a joint venture with Ram Gopal Verma’s K Sera Sera for distribution rights of movies in select cities.
PVR Cinemas Ltd has recently forayed into the distribution of Hollywood film titles through its subsidiary, PVR Pictures. PVR has also gone for a new brand, PVR Talkies, for its presence in tier-II and III locations. The company plans to operate 208 screens in five years’ time.
Fun Multiplex Pvt Ltd
Fun Multiplex Pvt Ltd, part of E-City Ventures, is represented in the multiplex industry by its Fun Republic and Fun Junction formats, apart from leased theatres. The company currently operates 95 screens across 25 cineplexes in 10 cities (Ahmedabad, Mumbai, Chandigarh, Delhi, Ghaziabad, Jaipur, Agra, Lucknow, Panipat and Gulbarga).
Fun Multiplex plans on running a total of 150 screens by end-2008, with plans of operating another 300 screens by FY 2011 across 23 cities in India. The company also aims to bring 1,500 cinema screens under its fold by 2011 (including digital, single screen refurbishments as well as multiplex formats).
INOX Leisure Ltd
INOX Leisure Ltd is the entertainment venture of the INOX Group, a subsidiary of Gujarat Flurochemicals Ltd. INOX pioneered the concept of regional film screening in India; while INOX, Pune, was the first multiplex in the country to introduce the concept of a Preview Club.
The multiplex chain is currently running 54 screens at 15 multiplexes in India. The multiplex chain has a total audience capacity of 16,700 seats at present, and plans to operate 165 screens by 2012. Its merger with CCPL (89 Cinemas) has given INOX access to an additional eight multiplexes in West Bengal and Assam.
Shringar Films Pvt Ltd
Shringar Films Pvt Ltd was founded in 1975, with the distribution of Bollywood films as the company’s core area of operation. Operating the chain of Fame Cinemas, the company gave Mumbai its first five-screen multiplex and its first IMAX theatre. It today has a total of 30 screens in seven complexes. By 2009 the chain targets a sprawling presence with approximately 52,000 seats.
M2K Cinemas
M2K Cinemas from the M2K Group initially started off with a multiplex at Rohini, Delhi. Its second outlet was also at Delhi’s Pitampura area. At present M2K Cinemas operates five screens at two multiplexes. The company plans to add 500 multiplexes by 2010.
UFO Movies Digital Cinema Solutions
UFO Movies Digital Cinema Solutions is a global end-to-end Digital Cinema System equipped with advanced features such as real time satellite delivery, Smart Card-based licensing and high-end management information systems. UFO Movies delivers digitally mastered, high-quality movie images through satellite directly to cinema halls.
At the recently concluded IIFA awards in the UK, UFO Movies received the ‘Innovation in Indian Cinema Award’. The largest digital cinema chain in the world, it has plans to digitise 2,000 screens by FY 2007-08. At present UFO Movies has digitised more than 750 screens in India and has plans of digitising many more.
For once, the business of entertainment retail and the entrepreneurial skills behind Indian showbiz has become just as exciting as thriller movie plots and on-screen histrionic talents. There are as many mushrooming multiplexes as there are malls -- and more are joining the brigade with old-style single-screen theatres being converted into three and four-screen cineplexes by big movie exhibition retail chains. What’s more, the retail boom has even managed to affect the movie-making industry by engendering a whole new breed of ‘multiplex cinemas’ that urban Indian audiences are lapping up. With gaming zones, malls with attached theme parks, and satellite radio lounges pitching in too entertainment retail in India has never had it so good. SAON BHATTACHARYA catches the drama behind the curtains…
That movies are the biggest entertainment avenue for India’s billions is a no-brainer. And that the best development to have happened to the Indian entertainment business in years has been the growth of multiplexes is also a known fact. But having said that it also remains a fact that in India, there are only 12 screens per 10 lakh population compared to 117 screens per 10 lakh in the US and more than 40 screens for European nations. The multiplex business is clearly a fledgling industry at the moment with huge potential.
With the increasing acceptance of organised retailing in urban India, there has been a growing demand for quality retail space from large F&G retailers, fashion apparel chains as well as from multiplex operators. As a result, multiplex growth in the country has been proportional to mall growth. According to IMAGES F&R Research, currently India has about 200 operational malls, which is expected to rise to 600 by 2010-11. Within the next three years, therefore, the number of movie exhibition screens, seats and audience capacity are also expected to grow simultaneously.
But what is interesting to note at this stage is that even though multiplex space supply is almost at par with retail space supply, the cinema exhibition business is only about a fifth of the total retail business in India. This is an indicator of the fact that either multiplexes at present are in excess of the expected market size, or that multiplex business needs to explore virgin territories other than that of the over-supplied metros.
LEISURE & ENTERTAINMENT MARKET SIZE
Riding the economic growth and rising affluence levels that India has been witnessing in the last few years, the Indian entertainment industry has been growing at a rapid pace. From books and music to gifts and movies, there has been a growth in almost all segments of leisure and entertainment. According to IMAGES F&R Research estimates based on CSO National Accounts Statistics 2006 (Statement-14), consumer spend on leisure and entertainment grew 24.2 percent in 2004-05 over the previous financial year spend of Rs.29,360 crore.
The total entertainment retail market in India is currently estimated at Rs.35,000 crore, out of which the share of the organised segment is just about four percent -- at Rs.1,450 crore. Currently this organised segment has seen a growth of 14.3 per cent over last year, with a year-on-year growth of over 44 per cent in the last two years.
The Indian entertainment industry is further expected to grow to more than Rs.58,800 crore by 2010. The multiplex industry, for its part, is expected to grow at over 44 percent a year to about Rs.90 crore by 2008, while the Indian film industry (currently worth about Rs.8,000 crore or US$ 2 billion) is expected to grow to Rs.17,400 crore (US$4.3 billion) by 2011.
The Indian film industry continues to be the largest in the world in terms of the number of films produced. The encouraging growth in the number of multiplexes has also enabled moviegoers, especially in urban India, to add a new dimension to their movie viewing experience. However, the overall number of screens in the country remained approximately the same since multiplexes have only managed to compensate for the closure of several single screen theatres across the country.
The total entertainment retail market in India is currently estimated at Rs.35,000 crore, out of which the share of the organised segment is just about four percent -- at Rs.1,450 crore. Currently this organised segment has seen a growth of 14.3 per cent over last year, with a year-on-year growth of over 44 per cent in the last two years.
The Indian entertainment industry is further expected to grow to more than Rs.58,800 crore by 2010. The multiplex industry, for its part, is expected to grow at over 44 percent a year to about Rs.90 crore by 2008, while the Indian film industry (currently worth about Rs.8,000 crore or US$ 2 billion) is expected to grow to Rs.17,400 crore (US$4.3 billion) by 2011.
The Indian film industry continues to be the largest in the world in terms of the number of films produced. The encouraging growth in the number of multiplexes has also enabled moviegoers, especially in urban India, to add a new dimension to their movie viewing experience. However, the overall number of screens in the country remained approximately the same since multiplexes have only managed to compensate for the closure of several single screen theatres across the country.
MAJOR PLAYERS
Adlabs Cinemas
Adlabs Cinemas, owned by the Anil Dhirubhai Ambani Group (ADAG), was launched in 2000 with the opening of the world's largest IMAX dome theatre and a four-screen multiplex in Wadala, Mumbai. Adlabs operated four multiplexes (three in Mumbai and one in Nasik), with a total of 12 screens and an audience capacity is 4,385 seats in 2005-06. Revenues stood at Rs. 34 crore in the last fiscal, with an average transaction value of Rs.130.
Today Adlabs Cinemas operates approximately 80 screens across India. The company is currently on a massive tie-up operation with multiplexes and single-screen cinema halls, as well as greenfield sites across the country, especially in Gujarat. Currently some 350-odd acquisitions, long term leases and management contracts (with single-screen theatres) have been targeted in the first phase of expansions. Most of these new alliances are in tier-II cities like Indore, Meerut, Allahabad and Belgaum.
Around 700 movie halls will be targeted over the next few years, most of which will be converted either into multiplexes or into prime single-screen destinations like the company’s Metro Adlabs in Mumbai. What started with the Mehul Theatre in Jamnagar, Gujarat (an Anil Ambani stronghold), which was converted into a three-screen multiplex, will now spread across India’s fast growing, prosperous small towns. Adlabs plans to come up with an investment of about Rs.100 crore in Chhattisgarh, for instance, to develop four-screen multiplexes at Raipur, Bhilai, Bilaspur, Korba, Raigarh, Ambikapur and Rajnandgaon.
ADAG’s ultimate grand plan is to utilise Reliance Infocomm’s existing fibre optic network to digitally screen movies from a central location across Adlabs Cinemas’ vast movie hall network. This strategy might also help in bringing down current multiplex ticket prices -- at least in small town India. At its current rate of expansion and acquisitions, Adlabs Cinemas will easily emerge as the largest player in the organised entertainment retail segment in India.
Pyramid Saimira Theatre Ltd
Pyramid Saimira Theatre Ltd (PSTL) is a movie theatre chain with a presence in malls, multiplexes and standalone theatres. PSTL has been acquiring theatres on long-term lease or on ownership basis. The operations of the company are centred in South India, with a retail presence in cities like Chennai, Madurai, Salem and Tirunelveli. The chain currently operates 325. The company plans to tie-up with 120 single-screen theatres in metros and 235 theatres in tier-II and III cities. PSTL has already tied-up with existing movie halls and malls in Punjab, Himachal Pradesh, Haryana and Rajasthan, for conversion into digital-friendly theatre formats.
Unlike Reliance, PSTL is involved in setting up an integrated Network Operating Center (NOC) which will convert 35 mm films into digital or d-cinema, and transmit these films via a satellite medium to various theatres across India in a secured encryption mode.
The company eventually plans to create a franchisee model for theatres in tier-II and III locations, where existing theatre owners will manage the theatres under PSTL’s branding, with a minimum assured quality. PSTL will manage the entire content, without any fixed cost exposure. By 2012, PSTL plans to operate 2,000 screens in India.
PVR Cinemas Ltd
Credited with spearheading the multiplex revolution in the country in 1997, PVR Cinemas Ltd has now established more than 82 screens at 21 complexes. The total audience capacity of PVR is 21,316 seats at present. PVR was the first movie exhibition company to introduce computerised ticketing. It was also the first to accept credit cards in India for the purchase of movie tickets; the first to offer cinema tickets over the internet with an online payment gateway; as well as the first to receive institutional funding in the cinema industry -- from ICICI Venture. It has currently entered into a joint venture with Ram Gopal Verma’s K Sera Sera for distribution rights of movies in select cities.
PVR Cinemas Ltd has recently forayed into the distribution of Hollywood film titles through its subsidiary, PVR Pictures. PVR has also gone for a new brand, PVR Talkies, for its presence in tier-II and III locations. The company plans to operate 208 screens in five years’ time.
Fun Multiplex Pvt Ltd
Fun Multiplex Pvt Ltd, part of E-City Ventures, is represented in the multiplex industry by its Fun Republic and Fun Junction formats, apart from leased theatres. The company currently operates 95 screens across 25 cineplexes in 10 cities (Ahmedabad, Mumbai, Chandigarh, Delhi, Ghaziabad, Jaipur, Agra, Lucknow, Panipat and Gulbarga).
Fun Multiplex plans on running a total of 150 screens by end-2008, with plans of operating another 300 screens by FY 2011 across 23 cities in India. The company also aims to bring 1,500 cinema screens under its fold by 2011 (including digital, single screen refurbishments as well as multiplex formats).
INOX Leisure Ltd
INOX Leisure Ltd is the entertainment venture of the INOX Group, a subsidiary of Gujarat Flurochemicals Ltd. INOX pioneered the concept of regional film screening in India; while INOX, Pune, was the first multiplex in the country to introduce the concept of a Preview Club.
The multiplex chain is currently running 54 screens at 15 multiplexes in India. The multiplex chain has a total audience capacity of 16,700 seats at present, and plans to operate 165 screens by 2012. Its merger with CCPL (89 Cinemas) has given INOX access to an additional eight multiplexes in West Bengal and Assam.
Shringar Films Pvt Ltd
Shringar Films Pvt Ltd was founded in 1975, with the distribution of Bollywood films as the company’s core area of operation. Operating the chain of Fame Cinemas, the company gave Mumbai its first five-screen multiplex and its first IMAX theatre. It today has a total of 30 screens in seven complexes. By 2009 the chain targets a sprawling presence with approximately 52,000 seats.
M2K Cinemas
M2K Cinemas from the M2K Group initially started off with a multiplex at Rohini, Delhi. Its second outlet was also at Delhi’s Pitampura area. At present M2K Cinemas operates five screens at two multiplexes. The company plans to add 500 multiplexes by 2010.
UFO Movies Digital Cinema Solutions
UFO Movies Digital Cinema Solutions is a global end-to-end Digital Cinema System equipped with advanced features such as real time satellite delivery, Smart Card-based licensing and high-end management information systems. UFO Movies delivers digitally mastered, high-quality movie images through satellite directly to cinema halls.
At the recently concluded IIFA awards in the UK, UFO Movies received the ‘Innovation in Indian Cinema Award’. The largest digital cinema chain in the world, it has plans to digitise 2,000 screens by FY 2007-08. At present UFO Movies has digitised more than 750 screens in India and has plans of digitising many more.
Retail Entertainment Cover Story (cont'd)
D-CINEMA: THE NEW TECHNOLOGY
Digital cinema, or d-cinema, involves the production, delivery and projection of feature films, trailers, advertisements and other audio/visual programmes to theatres, using digital technology. The d-cinema system uses a ‘store-and-forward’ model to distribute cinema that has been digitised, compressed, encrypted and delivered to theatres using either physical media distribution or through electronic transmission methods (such as satellite or fibre-optic cables).
The number of screens around the world capable of digitally projecting movies is more than 4,000 at present; and according to industry forecasts, there will be more than 17,000 d-cinema screens in the world by 2010. Right now North America is the leading region for d-cinema screens, followed by Asia and Europe.
Some of the major advantages of d-cinema over 35 mm prints include:
· Elimination of print costs and hence, widespread release of all movies at no extra cost
· End-to-end protection of content against all forms of piracy with encryption technology
· Good AV quality at every run of the movie
Says R Kanwar, MD, UFO Movies, “We strongly feel digital cinema is the panacea for all the ills faced by the film industry. For issues such as low revenues, piracy, logistics, picture and sound quality, the only answer is digital.”
Recent progress in global d-cinema systems:
· The agreement by major Hollywood studios on a single digital standard for world-wide distribution
· The development of business models that appropriately share the cost between the studios and the exhibitors according to the benefits each derive from the process
· The availability of systems that can deliver picture quality, reliability and security standards better than 35 mm film.
In India, however, movie exhibition companies have begun their own Made-in-India experiments. E-City Entertainment, for instance, uses a model that combines the use of the 35 mm prints as well as digital programming.
Explains Atul Goel of E-City Entertainment, “ The E-City digital business model takes theatres on lease or revenue sharing. We are also into a commission structure or service fee structure for theatre owners, and eventually we lead to retrofitting which is where we add value for the theatre owner. We have targeted centres with collections greater than Rs.1 lakh/week on an average. And later when we convert those single screen theatres into a three-screen multiplex, the average collection per month raises from the current Rs.4 lakh to Rs.12 lakh. This actually delivers value to the distributor, because in the same ratio the distributor’s shares go up (probably the producer’s too). And so we create value for the entire value chain.”
Adds Ajay Bansal, CEO, Satyam Cineplexes, “Worldwide digital cinema is considered to be the next big thing in the entertainment revolution. Currently this format is at an evolutionary stage, and once it stabilises we expect digital cinema distribution to be on the way forward. It offers several benefits to the producers and exhibitors such as control over piracy, the biggest threat to the entertainment industry. It also offers ease of software distribution by providing digital content to any part of the country through satellite or otherwise.”
RETAIL BOOM TRANSFORMING ENTERTAINMENT
A recent ACNielsen study conducted to analyse the entertainment consumption pattern in India showed that multiplexes are clearly a SEC A hub, with a high student patronage. The study also revealed that 60 percent of mall (and multiplex) visitors owned plastic money, while 81 percent visited malls to watch movies. Other industry studies have also shown that malls and multiplexes are mutually beneficial to each other. While the average Indian consumer’s movie mania, coupled with star visits and movie campaigns benefit malls with footfalls, brand promotion campaigns at malls, food court and supermarket retailers also attract footfalls that ensure quality viewer back-up for the anchor multiplex in a mall.
Mall management is critical for the success of mall multiplexes since most multiplexes are located on the top-most floor; and a mall consumer’s retail experience starts at arrival. While standalone multiplexes are more in control of their audience’s experience, on the other hand additional facilities and services at malls entice customers to visit multiplexes.
Does this spell death for single screens? It is true that mall multiplexes score over standalone entities, because of their food courts, multi-cuisine restaurants, quick-buy counters and gaming zones that provide quality family entertainment. Moreover, once digitisation becomes the industry norm, exhibitors will have to shift to modern exhibition formats.
But for the moment it would do the industry good to keep in mind the fact that multiplexes constitute just about one percent of the country’s total number of cinema halls, and four to five percent of the total screen space.
Says Bansal of Satyam Cineplexes, “The multiplex industry in India is at an inflection point. Movie watching is the number one entertainment option for Indians and India boasts of the largest film industry in the world. Yet, out of 12,000 screens in India, only 300-odd are currently operated by multiplexes. This situation is changing rapidly.”
“Government encouragement to multiplex operators in the form of entertainment tax exemption is also giving a fillip to the multiplex industry. Keeping all these in mind, we expect the multiplex market to continue to grow rapidly in India, with multiplex screens growing to around 2,000 screens in the next five years,” he adds.
Moving into Tier-II Locations
Having begun to experience over-supply in urban areas, cinema exhibition companies are beginning to venture beyond metros into tier II and III cities and towns, such as Lucknow, Indore, Nasik, Aurangabad, Kanpur and Amritsar to name a few.
Major multiplex players like PVR Cinemas, Adlabs Cinemas, Inox Leisures, Shringar Cinemas, Fun Multiplex and Pyramid Saimira have arrived at small towns like Darjeeling, Pimpri, Latur, Agra and Visakhapatnam. Given that India’s small towns hardly have any other entertainment options, these chains hold huge retail potentials at these locations.
Many in the industry feel that small towns with their share of box office collections will soon drive the film exhibition space. Currently about 65 percent of total box office collections in India come from tier-II and III centres, with indications that this figure will soon rise to as high as 70 percent by 2012.
Transforming Creativity
The rise in multiplexes has also provided a fillip to low budget and experimental films -- now termed as ‘multiplex’ films -- that are released in these smaller sized auditoriums and have their own niche audiences among India’s urban movie-goers. So much so that the new ‘multiplex’ form of the movie business has changed movie scripts, production, budgets, distribution and film promos too.
Independent and experimental filmmakers agree that their kind of cinema would never have had a chance of being screened at the larger, 1,000-seater single-screens of yore. But for multiplexes with their higher-priced tickets and smaller capacities, movies like Mr and Mrs Iyer, Bheja Fry, Life in a Metro, etc. would never have seen the light of day ten years ago. Multiplexes help ensure a faster ROI for producers, besides the larger choices and quick turnarounds have also helped in an increased film output.
Digital cinema, or d-cinema, involves the production, delivery and projection of feature films, trailers, advertisements and other audio/visual programmes to theatres, using digital technology. The d-cinema system uses a ‘store-and-forward’ model to distribute cinema that has been digitised, compressed, encrypted and delivered to theatres using either physical media distribution or through electronic transmission methods (such as satellite or fibre-optic cables).
The number of screens around the world capable of digitally projecting movies is more than 4,000 at present; and according to industry forecasts, there will be more than 17,000 d-cinema screens in the world by 2010. Right now North America is the leading region for d-cinema screens, followed by Asia and Europe.
Some of the major advantages of d-cinema over 35 mm prints include:
· Elimination of print costs and hence, widespread release of all movies at no extra cost
· End-to-end protection of content against all forms of piracy with encryption technology
· Good AV quality at every run of the movie
Says R Kanwar, MD, UFO Movies, “We strongly feel digital cinema is the panacea for all the ills faced by the film industry. For issues such as low revenues, piracy, logistics, picture and sound quality, the only answer is digital.”
Recent progress in global d-cinema systems:
· The agreement by major Hollywood studios on a single digital standard for world-wide distribution
· The development of business models that appropriately share the cost between the studios and the exhibitors according to the benefits each derive from the process
· The availability of systems that can deliver picture quality, reliability and security standards better than 35 mm film.
In India, however, movie exhibition companies have begun their own Made-in-India experiments. E-City Entertainment, for instance, uses a model that combines the use of the 35 mm prints as well as digital programming.
Explains Atul Goel of E-City Entertainment, “ The E-City digital business model takes theatres on lease or revenue sharing. We are also into a commission structure or service fee structure for theatre owners, and eventually we lead to retrofitting which is where we add value for the theatre owner. We have targeted centres with collections greater than Rs.1 lakh/week on an average. And later when we convert those single screen theatres into a three-screen multiplex, the average collection per month raises from the current Rs.4 lakh to Rs.12 lakh. This actually delivers value to the distributor, because in the same ratio the distributor’s shares go up (probably the producer’s too). And so we create value for the entire value chain.”
Adds Ajay Bansal, CEO, Satyam Cineplexes, “Worldwide digital cinema is considered to be the next big thing in the entertainment revolution. Currently this format is at an evolutionary stage, and once it stabilises we expect digital cinema distribution to be on the way forward. It offers several benefits to the producers and exhibitors such as control over piracy, the biggest threat to the entertainment industry. It also offers ease of software distribution by providing digital content to any part of the country through satellite or otherwise.”
RETAIL BOOM TRANSFORMING ENTERTAINMENT
A recent ACNielsen study conducted to analyse the entertainment consumption pattern in India showed that multiplexes are clearly a SEC A hub, with a high student patronage. The study also revealed that 60 percent of mall (and multiplex) visitors owned plastic money, while 81 percent visited malls to watch movies. Other industry studies have also shown that malls and multiplexes are mutually beneficial to each other. While the average Indian consumer’s movie mania, coupled with star visits and movie campaigns benefit malls with footfalls, brand promotion campaigns at malls, food court and supermarket retailers also attract footfalls that ensure quality viewer back-up for the anchor multiplex in a mall.
Mall management is critical for the success of mall multiplexes since most multiplexes are located on the top-most floor; and a mall consumer’s retail experience starts at arrival. While standalone multiplexes are more in control of their audience’s experience, on the other hand additional facilities and services at malls entice customers to visit multiplexes.
Does this spell death for single screens? It is true that mall multiplexes score over standalone entities, because of their food courts, multi-cuisine restaurants, quick-buy counters and gaming zones that provide quality family entertainment. Moreover, once digitisation becomes the industry norm, exhibitors will have to shift to modern exhibition formats.
But for the moment it would do the industry good to keep in mind the fact that multiplexes constitute just about one percent of the country’s total number of cinema halls, and four to five percent of the total screen space.
Says Bansal of Satyam Cineplexes, “The multiplex industry in India is at an inflection point. Movie watching is the number one entertainment option for Indians and India boasts of the largest film industry in the world. Yet, out of 12,000 screens in India, only 300-odd are currently operated by multiplexes. This situation is changing rapidly.”
“Government encouragement to multiplex operators in the form of entertainment tax exemption is also giving a fillip to the multiplex industry. Keeping all these in mind, we expect the multiplex market to continue to grow rapidly in India, with multiplex screens growing to around 2,000 screens in the next five years,” he adds.
Moving into Tier-II Locations
Having begun to experience over-supply in urban areas, cinema exhibition companies are beginning to venture beyond metros into tier II and III cities and towns, such as Lucknow, Indore, Nasik, Aurangabad, Kanpur and Amritsar to name a few.
Major multiplex players like PVR Cinemas, Adlabs Cinemas, Inox Leisures, Shringar Cinemas, Fun Multiplex and Pyramid Saimira have arrived at small towns like Darjeeling, Pimpri, Latur, Agra and Visakhapatnam. Given that India’s small towns hardly have any other entertainment options, these chains hold huge retail potentials at these locations.
Many in the industry feel that small towns with their share of box office collections will soon drive the film exhibition space. Currently about 65 percent of total box office collections in India come from tier-II and III centres, with indications that this figure will soon rise to as high as 70 percent by 2012.
Transforming Creativity
The rise in multiplexes has also provided a fillip to low budget and experimental films -- now termed as ‘multiplex’ films -- that are released in these smaller sized auditoriums and have their own niche audiences among India’s urban movie-goers. So much so that the new ‘multiplex’ form of the movie business has changed movie scripts, production, budgets, distribution and film promos too.
Independent and experimental filmmakers agree that their kind of cinema would never have had a chance of being screened at the larger, 1,000-seater single-screens of yore. But for multiplexes with their higher-priced tickets and smaller capacities, movies like Mr and Mrs Iyer, Bheja Fry, Life in a Metro, etc. would never have seen the light of day ten years ago. Multiplexes help ensure a faster ROI for producers, besides the larger choices and quick turnarounds have also helped in an increased film output.
Entertainment Retail Cover Story (Cont'd)
OTHER ENTERTAINMENT RETAIL SEGMENTS
Major players in the Indian entertainment sector, such as the multiplex cinemas, may soon feel competition from new entrants in this segment -- the gaming industry. Kick-started in India with the entry of Microsoft’s X Box gaming retail format, gaming zones are increasingly becoming a rage among urban Indian youth. With the launch of Zapak, the ADAG venture expects the Indian gaming market to each Rs.895.2 crore by 2009.
Another new entertainment segment has been the direct to home (DTH) home viewing services. The yet-to-be-formally launched Reliance Entertainment division under the Anil Dhirubhai Ambani Group (ADAG) will have a Digital Cinemas sub-division as well as a DTH services division (Reliance Bluemagic) that will soon be launched in India. Apart from the free-to-air DTH services of Prasar Bharati, DishTV and Tata Sky are two private players operating in the same space. South India-based Sun TV is also in the process of launching its DTH service soon.
Reliance Mobile World (again under ADAG) too offers one-stop-shops for entertainment, communication, gaming and m-commerce. According to current retail plans of the group, these outlets will initially provide movie tickets for 57 screens of Adlabs Cinemas, Inox, Cinemax, Fame Adlabs and PVR Cinemas across Mumbai, Kolkata, Hyderabad and Bangalore (with 10 more cities to be added soon to the list).
World Space Radio
World Space is a global satellite radio service that offers a wide range of programmes through a compatible satellite radio service devise. Almost two-thirds of the customer-base of World Space, the US-based satellite radio broadcaster, is in India and the number is growing. Apart from their kiosk presence within airport lounges, music and book retailing outlets, World Space also runs its exclusive brand outlets in India -- the World Space Lounges.
There are currently six World Space Lounges present in cities like Delhi, Gurgaon, Bangalore, Chennai, Kochi and Hyderabad.
Zapak Digital Entertainment Ltd
Zapak Digital Entertainment Ltd (ZDEL), the online gaming company from the Anil Dhirubhai Ambani Group is looking at being India’s largest and most preferred gaming destination by providing the most comprehensive mix of gaming content and services. The company is aiming at launching 100,000 kiosks by 2009. It has also forayed into launching Zapak GamePlex, a one-stop destination for beginners and hardcore gamers alike. ZDEL eventually plans to reach out to 200 cities through a franchise model, supported by ADAG’s plans to invest Rs.447.6 crore over three years in this retail format.
XBOX 360
With its high-definition graphics and compelling digital entertainment features, the Xbox 360 outlet delivers gaming experiences across multiple genres of gaming devices. Launched in June 2006, Xbox 360 also offers features digital cameras and MP3 players for enhanced entertainment, apart from its core gaming experience.
Amoeba
Amoeba, a 40,000 sq.ft family entertainment centre, was set up by the HM Group in Bangalore. While there's a 12-lane bowling alley and food court on the first floor, the second floor, Leisure Zone, is an electronic gaming centre with over 90 simulation and virtual reality game consoles. There's also a coffee bar, a cyber café and a children’s playpen at the centre.
Others
A recent feature in the country seems to be malls with theme parks, such as Eldeco Infrastructure & Properties’ Eldeco Station 1, an interactive, theme-based in Faridabad. Adventure Island & Metro Walk, Rohini, promoted by Unitech Amusement Parks Ltd (a 50:50 JV between Unitech and International Amusement Ltd), and the Noida Entertainment City (E-City), promoted by International Recreation Parks Pvt Ltd (another JV between Unitech and International Amusement Ltd), are some of the upcoming attractions in this space.
INDUSTRY CHALLENGES
The modern cinema exhibition business is an infrastructure business and requires huge investments. Apart from real estate costs and taxes, high-end cinema screening equipment are not manufactured in India. What is, therefore, required is a reduction in customs duty and a tax holiday, especially for the digital cinema industry, along the same lines granted to the multiplex industry. Although this year’s Budget brought down the duty on digital cinema equipment, the levying of additional customs duty and countervailing duty has almost nullified the impact.
Ticket Pricing
In small towns too the retail boom has been driving the multiplex industry. Across India multiplexes occupy the top floor of malls as the anchor tenant, ensuring footfalls. But the similarity stops there, since multiplexes are forced by the economic profiles of such locations to cut costs in the form of no-frills exhibition spaces, and of course lower ticket prices too -- PVR Talkies being a case in point.
Not only tickets, but F&B costs are also lower in small town India. While the F&B costs in metros fetch 20-25 percent of the revenue, it is 15-20 percent in non-metros. Since F&B margins of multiplex operators are as high as 60-65 percent, lower revenues from that segment delays the business from breaking even in tier-II and III towns and cities.
Location, location, location
There is a clear indication, as mentioned earlier, of an oversupply of multiplexes in metropilitan centres. Gurgaon’s famed ‘Mall Mile’ being just such a case in point. Multiplexes are largely a weekend-driven business and excess capacities could mean cannibalisation within the industry, leading to as low as 30 percent occupancy at multiplex auditoria.
There is a need to venture into smaller markets therefore; and the industry needs to look at locations beyond the top 20-30 cities. There is potential to locate multiplexes in about 700 locations in India at present, with an unfragmented core catchment of about five lakh people. Typically most multiplexes today are located in at high-end spaces. So once rentals go up, CAM charges escalate and the industry’s tax holiday comes to an end -- the business will be forced to do a re-think.
Right now, despite mercurial real estate costs, the industry has not really been affected because most multiplex owners have already tied-up with developers for at least the next couple of years; and being anchor tenants, they end up getting special rates too.
The important point to keep in focus, however, is that single-screen theatres remain the choice of the majority in semi-urban and rural India. The lower economic segment of urban India too prefers the ticket prices of single-screens to the over-priced multiplex ones.
Major players in the Indian entertainment sector, such as the multiplex cinemas, may soon feel competition from new entrants in this segment -- the gaming industry. Kick-started in India with the entry of Microsoft’s X Box gaming retail format, gaming zones are increasingly becoming a rage among urban Indian youth. With the launch of Zapak, the ADAG venture expects the Indian gaming market to each Rs.895.2 crore by 2009.
Another new entertainment segment has been the direct to home (DTH) home viewing services. The yet-to-be-formally launched Reliance Entertainment division under the Anil Dhirubhai Ambani Group (ADAG) will have a Digital Cinemas sub-division as well as a DTH services division (Reliance Bluemagic) that will soon be launched in India. Apart from the free-to-air DTH services of Prasar Bharati, DishTV and Tata Sky are two private players operating in the same space. South India-based Sun TV is also in the process of launching its DTH service soon.
Reliance Mobile World (again under ADAG) too offers one-stop-shops for entertainment, communication, gaming and m-commerce. According to current retail plans of the group, these outlets will initially provide movie tickets for 57 screens of Adlabs Cinemas, Inox, Cinemax, Fame Adlabs and PVR Cinemas across Mumbai, Kolkata, Hyderabad and Bangalore (with 10 more cities to be added soon to the list).
World Space Radio
World Space is a global satellite radio service that offers a wide range of programmes through a compatible satellite radio service devise. Almost two-thirds of the customer-base of World Space, the US-based satellite radio broadcaster, is in India and the number is growing. Apart from their kiosk presence within airport lounges, music and book retailing outlets, World Space also runs its exclusive brand outlets in India -- the World Space Lounges.
There are currently six World Space Lounges present in cities like Delhi, Gurgaon, Bangalore, Chennai, Kochi and Hyderabad.
Zapak Digital Entertainment Ltd
Zapak Digital Entertainment Ltd (ZDEL), the online gaming company from the Anil Dhirubhai Ambani Group is looking at being India’s largest and most preferred gaming destination by providing the most comprehensive mix of gaming content and services. The company is aiming at launching 100,000 kiosks by 2009. It has also forayed into launching Zapak GamePlex, a one-stop destination for beginners and hardcore gamers alike. ZDEL eventually plans to reach out to 200 cities through a franchise model, supported by ADAG’s plans to invest Rs.447.6 crore over three years in this retail format.
XBOX 360
With its high-definition graphics and compelling digital entertainment features, the Xbox 360 outlet delivers gaming experiences across multiple genres of gaming devices. Launched in June 2006, Xbox 360 also offers features digital cameras and MP3 players for enhanced entertainment, apart from its core gaming experience.
Amoeba
Amoeba, a 40,000 sq.ft family entertainment centre, was set up by the HM Group in Bangalore. While there's a 12-lane bowling alley and food court on the first floor, the second floor, Leisure Zone, is an electronic gaming centre with over 90 simulation and virtual reality game consoles. There's also a coffee bar, a cyber café and a children’s playpen at the centre.
Others
A recent feature in the country seems to be malls with theme parks, such as Eldeco Infrastructure & Properties’ Eldeco Station 1, an interactive, theme-based in Faridabad. Adventure Island & Metro Walk, Rohini, promoted by Unitech Amusement Parks Ltd (a 50:50 JV between Unitech and International Amusement Ltd), and the Noida Entertainment City (E-City), promoted by International Recreation Parks Pvt Ltd (another JV between Unitech and International Amusement Ltd), are some of the upcoming attractions in this space.
INDUSTRY CHALLENGES
The modern cinema exhibition business is an infrastructure business and requires huge investments. Apart from real estate costs and taxes, high-end cinema screening equipment are not manufactured in India. What is, therefore, required is a reduction in customs duty and a tax holiday, especially for the digital cinema industry, along the same lines granted to the multiplex industry. Although this year’s Budget brought down the duty on digital cinema equipment, the levying of additional customs duty and countervailing duty has almost nullified the impact.
Ticket Pricing
In small towns too the retail boom has been driving the multiplex industry. Across India multiplexes occupy the top floor of malls as the anchor tenant, ensuring footfalls. But the similarity stops there, since multiplexes are forced by the economic profiles of such locations to cut costs in the form of no-frills exhibition spaces, and of course lower ticket prices too -- PVR Talkies being a case in point.
Not only tickets, but F&B costs are also lower in small town India. While the F&B costs in metros fetch 20-25 percent of the revenue, it is 15-20 percent in non-metros. Since F&B margins of multiplex operators are as high as 60-65 percent, lower revenues from that segment delays the business from breaking even in tier-II and III towns and cities.
Location, location, location
There is a clear indication, as mentioned earlier, of an oversupply of multiplexes in metropilitan centres. Gurgaon’s famed ‘Mall Mile’ being just such a case in point. Multiplexes are largely a weekend-driven business and excess capacities could mean cannibalisation within the industry, leading to as low as 30 percent occupancy at multiplex auditoria.
There is a need to venture into smaller markets therefore; and the industry needs to look at locations beyond the top 20-30 cities. There is potential to locate multiplexes in about 700 locations in India at present, with an unfragmented core catchment of about five lakh people. Typically most multiplexes today are located in at high-end spaces. So once rentals go up, CAM charges escalate and the industry’s tax holiday comes to an end -- the business will be forced to do a re-think.
Right now, despite mercurial real estate costs, the industry has not really been affected because most multiplex owners have already tied-up with developers for at least the next couple of years; and being anchor tenants, they end up getting special rates too.
The important point to keep in focus, however, is that single-screen theatres remain the choice of the majority in semi-urban and rural India. The lower economic segment of urban India too prefers the ticket prices of single-screens to the over-priced multiplex ones.
