One major problem is that single screen cinemas lack infrastructural support. Old cinemas, which are 30 to 50 years old, are in a shambles and also haven’t been able to upgrade to the latest technologies. The sound and projection systems have not been changed, especially in small centers which have a lower ticket prices.
There are various licensing issues along with government regulations which are from an altogether different era. So, basically, they have infrastructural problems and many are unable to upgrade to the latest technology. That’s how they are losing out.
Each state has different rules for cinema licensing and that is one of the biggest hurdles for exhibitors. There are new laws that have come into place but the infrastructure doesn’t support them. Also, it takes a lot of money to upgrade and maintain these cinemas. This can only be done with the help of the state government, which can offer subsidies to these cinemas.
Multiple taxes and exorbitant entertainment tax were gobbling a very large chunk of profits. We are hoping the introduction of GST should help. The uniform GST will definitely help margins because, in many states, single screens are paying more than multiplexes in taxes!
With mergers taking pace in these changing times, it is a huge plus. This ensures brand association along with technological upgrades. With mergers and acquisitions, you become part of a bigger brand. Having said that, and this is my personal experience, it becomes a loss-making venture if the new owners do not preserve the charm of the old single screen.
With international content along with regional content making it big at the box office, the opportunities to gain business are huge. Today, we have content in every genre in many languages. We can only hope that licensing procedures for cinemas improve and GST brings in much-needed uniformity in taxation.
I believe the growth percentage has been very decent considering the regulations that the multiplex industry is engulfed with. In 15 years of its existence, the multiplex industry today has the maximum number of screens in the country than before and it is growing at a very steady pace, each successive year.
Easy regulations will definitely play a significant role in increasing screens. Even to this day, we have just about eight to nine screens per million people in the country. The scope to expand is huge.
Cinema exhibition in India is a state subject. Government regulations differ from state to state. We believe that regulations should be brought under a single umbrella.
In order to open a multiplex, there are a number of licenses that are needed. It will be helpful if there is single window clearance for licenses and all other necessary government authorisations.
Restrictions in ticket rates in certain states also pose a threat to the overall growth of the multiplex industry in the country.
Multiplexes largely operate on leased premises and incur significant costs on rentals and infrastructure, on which exhibitors pay service tax. In the absence of any significant service tax or excise liability on output, the service tax paid on input is not available for set off, and hence, expenses are high.
Like any other industry, multiplexes depend heavily on stipulations of the government. With change in policy every year, this sector has witnessed minimal growth.
In addition to the abovementioned problems, the need for a single window clearance and bringing the necessary regulations under one umbrella, piracy is another major issue that is nibbling into the industry. Along with the government, the industry has taken major steps to control piracy in India. It’s a concern but we are trying our best to stop it.
There are dozens of theatres ready in various parts of the country, awaiting a license to start. Getting permissions to open a multiplex remains the single biggest challenge for expansion of multiplexes today since every state has a different set of rules.
Multiple licenses needed from multiple departments – fire & safety, to food, to electricity amongst many others. Single window clearance for all these licenses will ease the process of setting up a multiplex tremendously.
When companies come together through the mergers and acquisitions process, there are numerous issues that must be analysed to determine if the benefits of such a move outweigh the risks that are involved. Having said that, it adds more equity to the entity and opens up newer avenues for both companies. It is a cost-effective method to fuel expansion. It can create multiple growth opportunities.
INOX started the consolidation business in the Indian multiplex industry way back in 2007 by acquiring CCPL (Calcutta Cine Private Ltd) and its 89 cinemas. This was followed by two acquisitions: Fame India Ltd, in 2011 and more recently Satyam Cineplexes in 2014.