Friday, October 12, 2007
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.
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