Blogs

Indian movie theatre industry

  • 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. 
Your Rating

Failure of Amazon in China, an analysis

E-commerce market in China Online consumer product retailers in China Performance of Amazon in China   Amazon is a global e-commerce player selling a wide...

An analysis of Malaysian rubber glove industry

How big is the international rubber gloves market? Reasons behind the healthy and steady growth Malaysia’s role in the industry Why are companies struggling for stable...

Tire manufacturing industry, analysing the cost and margin trends

The global market for tire manufacturing stands at $180 billion. Michelin anticipates the long-term demand to rise at the rate of 5 to 10% a year in developing markets and 1 to 2% a year in mature...

Can lithium-ion anode demand for needle coke reduce availability for electrode players?

What is needle coke? Uses of needle coke Lithium-ion battery manufacturers demand needle coke   Needle coke? Needle coke is a specialised form of petroleum coke...

Blockchain, an emerging concept, a disruptive technology (Part 1)

What is blockchain? How is blockchain revolutionary? Cryptocurrency, the new money ICOs, the new way of raising money Summary Blockchain is a software architecture...

Rapidly growing Indian online food delivery industry and its unrealised profits

Evolution of online food delivery industry in India Geographical penetration and scope for expansion Key players and their zeal to balance revenue and costs   Online...

Is the radio broadcasting industry in the U.S. dying? An analysis

Radio, the most powerful medium of reach in the U.S. Why the industry is moving at a slow pace? Radio’s health is still sound, will it continue in the long-term?   ...

Rice industry outlook 2018

Major rice producers and consumers Global rice trade Factors dominating the trade   Rice is the 3 rd largest produced agricultural commodity in the world, after...

Sri Lankan economic and political crisis

Sri Lanka’s latest political crisis, who governs the nation? Poor economic indicators adding to the nation’s woes   Sri Lanka is currently embroiled in a political crisis,...

Baidu’s Apollo, the underdog of autonomous driving platform

Overview of the autonomous vehicle sector in the global automobile industry Search giant Baidu’s entry into the autonomous driving space Baidu’s approach in becoming a front-runner...

Rise of Ant Financial, will the success story continue?

What is Ant Financial? Journey to become king of unicorn Will regulatory curbs hinder its success journey?    Ant Financial, an affiliate and integral part...

Carbon black industry, strong potential for supernormal profitability?

What is carbon black? Its uses Impact of the environmental curbs in China   What is carbon black? Carbon black is a fine carbon powder and it is a disorderly...

What’s in store for India’s first commercial REIT as it hit the market with Blackstone teaming up with Embassy Group

Overview of the partnership and assets of Embassy Office Parks Comparison of the Indian commercial office market space with other developed markets Road ahead for India’s...

Indian wood panel industry, growth drivers and present trends

Current market scenario in the Indian plywood industry Growth in the housing sector and rapid urbanisation to provide the boost GST rationalization to reduce price difference...

OYO Rooms, an Indian start-up to enter Japan

Growth story of OYO Rooms in India Business model of OYO Rooms Analysis of strategy to enter Japan   OYO Rooms, the Indian start-up has decided to venture in Japan...

Unnoticed growth of the media and entertainment industry in India

Overall industry brief Growth of the M&E industry and its segments Major supporting elements of this growth   Media and Entertainment (M&E) is a very wide industry...

Battle for the textile and apparel industry in Southeast Asia

The reasons for China’s decreasing presence in the industry Initiatives by the governments in Southeast Asia to boost the textile trade Vietnam and Bangladesh’s quest to conquer...

SAP’s acquisition of Qualtrics, a costly affair or a strategic move?

History and evolution of SAP and ERP. Will experience measurement add value to SAP ERP?   On November 12, 2018 ERP software giant SAP announced an $8 billion acquisition...

Evaluating the performance of Apple products and its decision to enter the video streaming business

Tim Cook’s announcement to launch new services Performance of Apple at a glance The current and the future outlook of global video streaming business   On March...

Housing finance market in India. Is affordable housing driving the growth?

Overview of the housing finance sector in India Key players dominating the segment and their dynamics Factors driving aggressive demand for housing   The housing...