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November 08, 2007

Multiplexes: The New Game in Tinsel Town

Businessworld article on the business of Bollywood points out how multiplexes, while accounting for just 4% of the 13,000 screens in India, generate 30% of the box office collections.
It is the exhibition end that is emerging as Bollywood’s most modern arena. Multiplexes, expectedly, have led the charge. Over the last 5-6 years, aided by waivers offered on entertainment tax by various state governments, multiplexes have grown as part of the new mall culture. Today, multiplexes offer 450 screens at 130 locations with 140,000 seats per show. Of the 13,000 screens in the country, the multiplexes’ share is only 4 per cent. Yet, they have transformed film entertainment by generating nearly 25-30 per cent of the Rs 3,000 crore annual box office revenue. Furthermore, by offering a high quality viewing experience with comfortable seating, and a package of food, beverages and gaming, multiplexes are a whole new show in filmed entertainment.

The multiplex business is dominated by six corporate groups — Adlabs, PVR Cinemas, INOX Leisure, Shringar Cinemas, Cinemax and Fun Republic, most of which are listed entities that follow fairly transparent accounting practices. “With an occupancy of 35-40 per cent, we were able to go into the black with a Rs 9.8 crore profit for FY2007, from an earlier loss of Rs 4.9 crore,” said Shravan Shroff, ED of Shringar Cinemas.

This transformation in film exhibition is also driven by aggressive adoption of digitalisation by companies such as Pyramid Samira who are putting up a chain of digital theatres in south India. Simultaneously, Apollo Group subsidiary UFO Moviez is retrofitting theatres in small towns and rural centres to allow for satellite delivery of movies. “The industry has been losing huge revenue as new launches reach smaller towns often a month later. Besides a loss of box office revenue, this encourages piracy,” says Sanjay Gaikwad, UFO’s CEO. So far, 900 screens have been digitalised at a cost of Rs 110 crore. Increasingly, filmmakers are turning to a combination of print and satellite digital releases. For instance, Heyy Babyy was released on 364 UFO digital screens and 325 traditional print screens, says Gaikwad.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.