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January 05, 2010

Multiplex Economics

Business Today has an article outlining the improving economics of multiplex theatre chains.
Apart from new movie releases, most of the multiplex companies have reported sharp improvements in their bottom line during the second quarter by cutting costs. The biggest overheads for operators are rentals, electricity, staff salaries and marketing. Following the slowdown in consumer spending and a weak movie pipeline last year, many cineplexes renegotiated their rentals.

..Typically, the box office fetches 65 per cent of an exhibitor’s revenues, food and beverages (F&B) 20 per cent, and advertisements 15 per cent. Of the ticket sales, after deducting entertainment tax, the distributor takes away 48 per cent in the first week and less later.

A multiplex makes its money from high-margin areas like advertising and the F&B business. “Currently, the average per head spending on F&B is at around Rs 30 (Rs 20 in non-metros and Rs 40 in metros). With right marketing initiatives, we expect this to go up to Rs 38 in the next six months,” says Sampat.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in