Grossing a little over ₹600 crore, Salman Khan starrer Bajrangi Bhaijaan has been a blockbuster hit. Smashing all previous South Indian movie records, Rajamouli’s Baahubali: The Beginning too has raked in over ₹550 crore and is still running to packed theatres. Other movies, such as Piku, Tanu Weds Manu Returns and Avengers: Age of Ultron, released earlier this year, have also made good money.
It’s hardly surprising then that multiplex chains such as PVR and Inox Leisure put up a spectacular show in the April-June 2015 quarter and this should only get better. This is in contrast with their below-par performance in 2014-15, a result of a lacklustre show at the box office. Gross box office collections account for 60-70 per cent of the revenues of multiplex operators, with the remaining coming in from food and beverages and advertising.
With many star- studded films, such as Phantom, Prem Ratan Dhan Payo and Dilwale, slated for release this year, multiplex operators can expect higher occupancy levels at theatres in the coming months too.
Thanks to good movie releases, both Inox Leisure and PVR reported higher occupancy rates (the number of tickets sold, as a percentage of the total number of seats) in the June 2015 quarter, compared to the same period last year. The occupancy rate was up from 26 per cent to 33 per cent for Inox Leisure and from 32 per cent to 38 per cent for PVR.
Making the most of it
Multiplex players are also expected to reap the benefits of consolidation. With many acquisitions in the sector, such as that of Satyam Cineplexes by Inox Leisure and of BIG Cinemas and HDIL Entertainment by Carnival Films, the bigwigs are getting bigger. This, in turn, should strengthen their bargaining power versus movie distributors, with whom they share a chunk of their box office collections.
The big three of the industry today are PVR Cinemas with 474 screens, Inox Leisure with 377 screens and Carnival Cinemas with 341 screens, the last an unlisted player. Their expanding presence should also put them in a better position to cash in on successful movie releases in the form of higher footfalls. In the June 2015 quarter, both Inox Leisure and PVR reported higher footfalls – up 46 per cent and 25 per cent, respectively, compared with the same quarter, last year.
Higher footfalls and occupancy levels, in turn should translate into higher food and beverage (F&B) sales for multiplex operators. Accounting for a fifth of Inox Leisure’s revenues, F&B sales grew a year-on- year 57 per cent in the June 2015 quarter.
PVR, which derives 28 per cent of its revenues from this source, posted 46 per cent growth in F&B sales during the period. Also, unlike collections from movie screenings, which are shared with distributors, earnings from food and beverage sales accrue fully to the company.
High potential
Apart from adopting the inorganic route to growth, multiplex operators have also been setting up new theatres in Tier 2 and 3 cities, which have relatively lower screen penetration. Lower real estate prices are enabling multiplex players to bring down their cost per screen at such locations, making them as lucrative as the multiplexes in prime locations.
According to the FICCI KPMG Industry Report 2015, leading cinema chains added close to 100 new screens in Tier II and III cities across the country in 2014. This year too, smaller cities will continue to remain on the radar of multiplexes. For instance, most of Inox Leisure’s planned screen additions in 2015-16 will take place across smaller cities and towns.