- Overview of the Indian movie theatre industry
- PVR and INOX’s operational and financial comparison
- Way forward for the industry
The movie theatre industry in India has undergone a significant transformation, right from small rolling-image boxes on street to mobile-theatres in villages and towns to a single-screen and finally ruling multiplexes across the length and breadth of the country. India is one of the major emerging market economies in the world, with a GDP range of 6-7%, per capita income growth of around ~9% and the nation is the 3rd largest economy in terms of purchasing power parity, which is attracting a huge growth in the entertainment and recreation sector. The growing middle class and a rising working population are generating huge domestic demand for goods and services, which also includes the entertainment sector.
In the current blog, Televisory mainly focused on the movie theatre industry within the entertainment sector in India, wherein we looked at the recent trends, growth drivers and compared the two major players in the country; PVR and Inox. Televisory believe that on a macro perspective, the growth of the Indian movie theatre industry looks steady from both the supply and the demand side. An increasing number of films produced in a year, better infrastructure, a rise in income levels across brackets and a willingness to spend on recreation are the primary growth factors. The industry also receives favour from country’s demographics, where ~58% of the population stands between 10-44 years of age, which are its main target.
But despite the positives, if we look at the total estimated count of screens in the country, the number has declined during the last decade from 10,635 (2009) to 9,530 (2017). On the other hand, multiscreen theatres have increased consistently in the same period, though many single-screen theatres have shut, particularly in the Tier-1 cities due to an increase in the cost of operations. Other factors affecting the closure of single-screen theatres were high entertainment taxes, an increase in distributors’ share, low ticket prices, non-viability of running on a standalone basis and low occupancy rate. While internal dynamics are creating issues for small payers in different regions of the country, there still is a lot of opportunities when one looks at the overall screen intensity in terms of the screen per million population. India’s screen intensity is just eight, which is a fraction of the major developed and developing economies across the globe and provides a huge potential for the sectoral growth in the medium to long run.
The two major players in the country for the multi-screen movie theatre industry are PVR and INOX, with combined 1,250 screens as of September 2018, that is ~45% of the market share for this segment and control of over 10% of the total movie theatre screens in the country.
The total number of screens controlled by these two players have increased at a CAGR of over ~12% each, though PVR has an upper hand in terms of revenue growth and margins. It has nearly 1.3X screen size against Inox, though its revenue stands at ~1.7x of INOX. In terms of revenue composition, PVR manages a moderately better sale from food, advertisements and other related items as equated to Inox and thus has a better per screen revenue from INOX. This also led to better EBITDA margins for the company as compared to the INOX in past few years.
According to the above details, both the companies are increasing their number of screens in the last few years and continue to target high numbers in Tier-2 and Tier-3 cities going forward. However, the industry as a whole, including the above two players are facing the issue of low occupancy, which stands ~31% and ~26% for PVR and INOX, respectively. The companies are gradually moving towards screens with a fewer number of seats, in order to better manage costs while also maintain decent occupancy rates in the future. The movement of consumers towards online streaming broadcasters like Netflix and Amazon Prime in the last few years is also creating some hurdles for the screen operators as at least a percentage of movie viewers in the Tier-1 cities are getting pushed to these sources of entertainment as compared to the direct entertainment in form of movies.
Notwithstanding the challenges, backed by the overall growth in the economy and in the entertainment sector, local and foreign companies are continuing their investment in the Indian movie theatre industry as they see a major opportunity amid low screen density. Cinepolis, the Mexican theatre chain is the only FDI in the country’s cinema exhibition space. It started operations in 2009 with 65 screens, gradually expanded to 315 screens in 2017 and planned to take the count to ~400 screens by the end of last year.
A number of acquisitions is continuing to take place in the industry, with a few players having deep pockets and a long-term vision and are consolidating their position across regions. Currently, the top four players dominate nearly 70% of the multiplex chains. We are moving towards a scenario where a few players control a major share in both the single and multi-screen category as these and other regionally dominant players move further deep into the small cities and towns.
Alongside, the industry is continuously going through innovations and technological upgradation on the creation of content and its consumption. For instance, Carnival Cinemas launched India’s first film subscription service ‘MoviEcard’ in May 2017. This allowed subscribers to purchase a single film ticket per day for a flat subscription fee of INR 149 per month and a nominal offline redemption fee of INR 30. The programme was launched with an intent to shift the audience from TV, laptop, tablet and mobile screens to cinemas, thereby increasing weekday occupancy for all films. Separately, there is an increasing focus on Virtual Reality (VR), Augmented Reality (AR) and Mixed Reality (MR) as these technologies are being increasingly used in everyday content and communication. Out of these, VR is looked upon as the next platform for film viewing globally after 3D 4K technology. There is also a possibility that existing players start a budget model in Tier-2 and 3 cities and pockets of the Tier-1 cities, in order to tap the unseized market and increase the national screen density at a fast pace. For example, PVR Talkies caters to Tier-2 and Tier-3 markets with a hygienic environment and basic facilities. Thus, with box-office revenues continuing to a galore for Hindi, English and regional languages, prospects do look positive for the industry’s growth as a whole over the medium term.
Major risk factors for the industry: change in government policies affecting the revenue model of the players or further hike in taxes.