The slowdown in the real estate sector has cast a shadow on the development of malls and hence fewer multiplex options are available, indirectly affecting the multiplex industry. In the last couple of years, we have observed that developers have not been constructing malls as they feel that these are not economically viable and have longer gestation periods compared to residential properties, where prices rise rapidly.
Additionally, the recent growth of e-commerce in India has majorly impacted retail growth in shopping malls across India. With the delivery of many malls across the country being delayed by a couple of years, the industry has lost out on many additional multiplex screens, which could have garnered more revenue to the industry.
In this scenario, I believe that the process can be sped up by converting single screens into multi-screens or demolishing existing ones and making new cinemas across the country. This would be a quicker solution, whereas multiplexes can run shows throughout the day as it runs with a smaller capacity and better appeal. However, the new REITs policy being approved by the government can again fuel the growth of malls in India.
The Constitution of India puts cinematography both in the Union List and State List for different purposes. While the central government is given the authority to certify films for exhibition (Censor Board), the state government is given the authority to regulate cinema theatres, the norms governing them, admission fee in theatres, restriction on late nights shows, number of shows etc has become a major hindrance to the growth of the multiplex industry in India.
Being a multiplex owner, we have to deal with multiple authorities, which also vary from state to state, to get approvals for licensing processes. In some of these states, the final license to run a cinema is issued by local authorities like the collector or commissioner. Also, in a few states like Maharashtra, the final cinema license is issued by the state government. In Andhra Pradesh, Telangana and Tamil Nadu, a government order is required for the number of shows and ticket pricing.
Over the last few years, profitability of single screen owners was unattainable as modern multiplex cinemas – with plush seats, better sound and viewing technology, a wide range of food on offer and better hygiene – became the venue of choice for upmarket cinemagoers. The single screens in the country are lagging far behind in offering such treats to our new generation. In my opinion, they may continue if they are able to upgrade to a more comfortable and luxurious experience.
A major concern is the lack of IT infrastructure to curb piracy. The industry has not been able to fully monetise its content due to rampant piracy as the government of India is not using its IT infrastructure to put an end to it. The government needs a robust legal ecosystem.
Technology is a double-edged sword and completely depends on the person using it. Technology has introduced new mediums to consume media and quality has also improved by leaps and bounds, eg, Dolby Atmos, laser projection and Imax. On the darker side, there’s piracy, which takes away a major chunk of revenue by allowing downloads of movies and music. With improved Internet speeds, it has become a menace.
The problem of piracy assumes different proportions in a country such as India with an area of 3.3 million sq km and a population of over 1 billion, speaking 22 different languages. It impacts all segments of the industry, especially films, music and television.
Most of the credible efforts to combat piracy have been initiated by industry bodies themselves. On the part of the government, lack of empowered officers for enforcement of anti-piracy law remains the key issue that is encouraging the menace of piracy. This, coupled with lengthy legal and arbitration processes are viewed as a deterrent to the crusade against pirates. We expect they should take more proactive measures to resolve this problem, which has a larger impact not only on the movie exhibition industry but also to the exchequer.
As mentioned earlier, we have to take permissions from so many authorities to get approvals to start our operations. Since there is no uniform law in India for movie exhibitors, the number of authorities varies from state to state, which takes up a lot of our time, resulting in business losses.
The emergence of multiplex screens in the last decade has dramatically changed the film exhibition space in the country, though there are still huge opportunities available for a rapid increase in the number of cinema screens in India. With this gradual growth story, the industry has also observed consolidation with a positive outlook along with the changing economic and social conditions of the country. Having said that, the industry is more keen on consolidation as it’s easier to merge or to acquire a movie exhibition company than to open a new cinema hall due to complex clearance processes in the country.
With acquisition, a company not only increases economy of scale but it also enables an enhanced penetration ratio. With this increased penetration, the company is able to generate more advertisement revenues. M&A also helps control operational costs as the core team of the organisation remains. On the other hand, M&A means merging two different technologies and cultural changes (as they may not follow the same technology and operational methods), which may raise concerns to manage a large format. Besides, single brand recall value also fades.