Javier Sotomayor, MD Cinepolis India; Devang Sampat, Head-Strategic Initiatives and Praneet Mishra, GM Marketing of Cinepolis chain of multiplexes in conversation with the team Box Office India
BOI: Devang you have been in the industry for a really long time now, what is the status of the exhibition space right now?
Devang Sampat (DS): I guess it is growing very well. People are becoming more serious now towards the exhibition space. Initially it was like if you don’t have anything to do they opened a cinema and keep the cash bell ringing. But now it is becoming more of a serious business where the scale is important and the focus is important. Initially, more of real estate trading used to happen in the exhibition space for many operators. Now this has changed to focusing on the processes along with working on the new technology and trends.
BOI: When did this change happen?
DS: I guess the professional change happened when Cinepolis entered. Few changes were in terms of how the model between exhibition and distribution should work or how the developer should work. Those kinds of key initiatives and also more like the change from four screens to 14 screeners. That’s the time the change came about. And now the seed for change has started growing with a rapid speed.
BOI: Cinepolis is of course an international chain. What was it about India that made you enter this market?
Javier Sotomayor (JS): It was the fact that India has all the ingredients. It has the second largest population in the world, the youngest country in the world which means more youngsters. I mean there are approximately 60 crore people under the age of 30. The country has a rising middle class, a growing GDP and being a democratic country was also important. China, on the other hand is not an open market. India is a movie crazy country and most importantly this is a non-Hollywood dependent country. There are very few countries in the world that are non-Hollywood dependent in terms of movies. We have properties in 12 countries and the balance 11 countries are all Hollywood driven. They are 95 per cent dependent on Hollywood films. That means a bad year for Hollywood films would translate into a bad year for us as well. So the fact that India had Bollywood and a lot of regional cinemas was one of the main reasons.
BOI: Everything looks promising on paper. You have been here for some time and you even have theatres here. Have you faced any issues which you didn’t foresee at the beginning?
JS: Yes and we had foreseen many issues but the attractiveness remained the same. India is a single market and the most attractive market for us at this point of time. In a broad sense I cannot tell you if there is a big issue but I can say that things have taken longer than we had initially thought that they would. Having said that when we came in 2007 a lot of companies, existing and other companies had made big announcements. Like they would have 1000 screens in two years or 2000 screens in three years. And the entire multiplex industry has not gone that far till now. So it is same for everyone and we are pretty much in sync with the real estate industry. To some extent I believe that the pace at which the shopping mall industry is evolving is the same pace at which the multiplex industry has been evolving.
BOI: The multiplex sector in the past couple of years has been driven by consolidation, a lot of mergers including yours where you acquired Fun Cinemas. So do you think this phase of consolidation is going to continue?
JS: I think the big players are now pretty much done. But at the same time there are a lot of small operators out there and a lot of individual operators. No one would know the real number of such operators. And I think mergers and consolidations in that regard will remain because the organic growth as I already mentioned is not that steep. So I think the big companies would still look to acquire small and regional players. So that the organic growth would speed up and in our case organic growth has and always will remain our strategy. We have a very healthy pipeline and out of which how many will see the light of the sun we don’t know as of now. But we are optimistic about our figures. But if there is any organic opportunity to grow in that sense our strategy will make it happen.
BOI: Can you give us a highlight of your expansion plans, in terms of markets you are looking at and the regions you are aiming at.
JS: Ever since we got here and that is the reality for any given territory which we go in for we look for a nationwide presence. In that sense, we are looking for expansion in places which I believe we already have. That has been the reality ever since we have landed here. We had shortlisted a list of 60 cities out of which we want to be present pan India. When we opened our first property I still remember people here and some media had the impression that we have a strategy of being present in tier II cities. And that has never been the strategy, however the initial pipeline we had and the first leg of cinemas we went live with usually was with tier II cities. So that was the impression we gave to people which I understand and acknowledge the fact but I think people took it too seriously. And now they tell me what our initial strategy was and when I tell them that is not true they don’t believe (Laughs).
But I think that was the way it was perceived. I remember the first property we opened was in Amritsar but we also had projects signed in Mumbai, Pune, Hyderabad and Bangalore. However it so happened that the first one out of all these that came together was Amritsar.
BOI: What are the advantages of being an international player? Are there any learnings from other markets that can be applied here or vice-versa?
JS: I don’t know whether per se being an international player has an advantage. Having said that, the scale that we have internationally, does have an added advantage in terms of the latest equipment and technology.
DS: (Cuts in) You know the complete approach of being a well-driven organisation on an International level and being able to take decisions based on a lot of International, Bollywood and Hollywood data and from there getting in to a process of taking decisions based on our analysis of these collective datas have been a key strength.
DS: Yes, I am commenting on how we are equipped from our studies of different markets and not being an international player. Many a time, distributors keep on asking for more shows of their film but we go back to them with the right approach and logic. For example if a Fast & Furious 7 is releasing, we study how its previous installments have done in all the markets and also in India. On the basis of that we allot shows to it. And also how many shows to assign in English, Hindi and other dubbed languages. How many Hollywood shows have to be given. This data when we show to our distributors, even they acknowledge it.
I was complementing certain extensions to what you were saying with those things we got experience and the scale to which we have grown in the 12 international markets including India.
JS: That has to be there because of what we done in the past 43 years in the exhibition sector internationally. The question was just for the sake of nationality. Yes, it took us sometime to understand the market as we didn’t have the feel of the market. Now I believe that we have pretty much good sense of the market but we are still learning. That local advantage is knowing how different states of the country work.
BOI: How different is the Indian market from the North American market and the other international markets?
JS: Very different in many things you know -- right from the business development module to programming. In India you have lot of content in so many languages. In the West you might have just five releases a week whereas here you may have seven releases a week along with which you have Hollywood films releasing too. I think what our programming staff in India does is very difficult. Programming in different parts of the country is very difficult. Now I can understand that programming in Andhra Pradesh will be different from programming in Punjab but that’s something unheard of to people elsewhere. If you tell them they will say, ‘Why? isn’t that in India?’ Yes, it is but the language is different, the taste of the movie is different. You have some Hollywood blockbusters which are dubbed in Hindi, Tamil, and Telugu and in so many other languages. And it can be wastage of a well-captured opportunity, right? If you take a right decision it can be fruitful. And even in the same region, the cities are different. Like Bangalore is different from Tamil Nadu and Andhra Pradesh and so you programme movies according to cities. So programming is a good example of difference between the US market and the Indian market.
BOI: In the West they have an exclusive period of content for the theatres and it is a big deal. Over here you don’t have the window of exclusivity and you have films on television coming quickly post the release. What do you think about the content window?
JS: You do get that window here also. Right?
BOI: But that’s hardly followed.
DS: (Cuts in) No a six-weeks window is being followed.
JS: Six weeks and in other countries the window is of 60 days which is longer right.
DS: But Hollywood is following here in India. On television they don’t release movies at least for four months.
JS: Yes, because in 60 days, they pass the content to the next window like DVD, premiere of the month and CD it would be six to eight months and all. But I guess that’s a big problem we are facing around the world and that’s piracy. Because piracy doesn’t respect that window and it’s a problem worldwide. You get to see people watching pirated movies everywhere, on their mobile phones and computers.
BOI: Praneet, if you can talk about your journey in Cinepolis.
Praneet Mishra (PM): When Cinepolis came to India, the entire industry was a universal commodity. Probably Cinepolis came at a time when brands were getting established. So we entered at the right time. I think we have done a good job in that, in establishing the services and multiplexes. Our brand is not just a commodity which is available. One multiplex in Mumbai is different from the other in Amritsar. That is something we have put in our effort to create that brand according to customers comfort. And this will help the industry in the long run. That is one thing have realised through the journey.
PM: The primary difference is the product we have. From the day Cinepolis entered India, it was a 100 per cent digital company. None of the other players existed at that time. Also, because of the global scale, we have an exclusive tie-up with Real 3D which was better than the rest of the 3D that was available in India. We also had a concept called Coffee Day, which was food inside the cinema. Earlier it was only the option of popcorn and cola that was available, but when a person plans with his family, they should have the complete option. We also had an open lobby, where you don’t need cinema tickets to enjoy the experience of hanging out in the cinema. We also have a loyalty programme which none of the other players had.
BOI: What is the loyalty programme?
PM: We have the loyalty program called Club Cinepolis wherein there are some exclusive benefits that are given to the members; those would be some of the differentiators.
JS: We also have better in auditorium experience. Our in-audi experience is our biggest differentiator, we have less number of seats but that doesn’t mean we make smaller auditoriums. What we do is that the leg room we provide is greater than any other multiplex player in the industry, so if the person is tall, he won’t feel his leg touching seat of the person in front of him. If my kid is sitting behind a tall person, his view won’t be blocked. And also we provide better thickness and we don’t comprise on the slope of our seats. The distance from the first row to the screen is the highest.
We know that in the same space we can have 20 per cent more seats, yes for the first six months we would get 10 per cent higher revenues but if some other player comes in the similar vicinity with better experience than it won’t be easy. So, the technique that we choose is easy for the customer to understand, they will understand when they go to another multiplex the next time and they feel that their knees are touching the seat in front. When they feel that someone is crossing the corridor to go to the aisle, they have to stand, then automatically they will say, ‘Oh in Cinepolis it doesn’t happen like that’ and they will appreciate those features along with other added features. With these features we try to mix different experiences to provide a unique experience.
BOI: A debate that usually crops up is on the pricing and whether we should have different pricing points for different kinds of movies. If there is no A-list starrer and if we want people to sample a new comer’s film, we should have lower ticket prices. As one of the leading exhibitors what is your take on it?
JS: Actually, the average ticket pricing in India is one of the lowest. Everything has to be put in perspective. But I will say we have a presence in some countries and their economies are comparable to India and the prices are much higher. So in that sense I am not sure if the ticket prices are high. But there are differentiated prices for movies and we are encouraging and have started discount days. We have a thing called Wow Wednesdays, where you get reduced prices on Wednesday, the full idea is to open to different types of people who can’t afford the regular prices, and they could come on Wednesday and find good source of entertainment. We have different prices based on time; we have morning shows for the low price apart from the regular weekend prices. We are trying to target different audiences on different points of time and on different points of the weeks and with different kind of movies as well.
DS: Yes, it fits as well, instead of dividing pricing by movie we divide pricing by time of the hour and slots. In many complexes we have five different prices in one day and we monitor it. Again generalising prices in India how we are not generalising the programing of India. Prices vary, like in Ahmedabad the night slot is the strongest, as people like to go for late night movies, but if you look in other cities like Patna, the 6:00 PM slot is stronger than the night slots and it is a more premium slot so we do divide that. Plus the combination of the Wow Wednesdays is also available.
Also, whenever there is a blockbuster, there is a blockbuster price, for that are the 8 to 10 weeks out of 52 weeks where we can demand a premium and catch up on the inflation our country has. Those are the weeks where the prices are high but if you look at movies like Fast & Furious 7 and Detective Byomkesh Bakshy! we had differentiated pricing. There is differentiated pricing, but that’s marginal. Plus, there is a big multiplex where we need to cater to all kinds of segments. That’s our rule and we do that and we have day wise preferences. For working professionals, it’s not possible to go on weekdays and they prefer weekends. Whereas for the other masses it is not the same. We have seen in Bhopal, as the Wow Wednesdays there is for ` 50 and so even auto guys can watch the show at our premium multiplex at that cost. Same film, same experience is usually priced at Rs 250 on Weekends. So five times cheaper for the audience which cannot afford the usual prices. For us, it’s not a movie, it’s an experience. That’s all that matter we don’t comprise on experience.
BOI: What is your take on regulatory inventory. Last week we had the Maharashtra government saying that we should have Marathi films in certain time slots, there are price caps in certain regions. What do you feel about that?
JS: We believe in openness. We have seen in different countries that have those relations may not necessarily help the local content quotas that some countries have and the industry is pushing. We have seen in industries like Mexico, Brazil, France and Italy, it’s not in the benefit of the industry. So it’s not in the benefit of the customer which is at the end. A good movie will have demand and it could be in Marathi or Hindi or in any other language. We appreciate it and we want to have that good movie at the convenient time. If we push things over, we are not necessarily helping the economy or the culture. Sometimes we know we value the fact of the cinema culture and it’s the greatest idea to keep the culture of a region or country alive. If we push it and If you have to sit and provide certain type of content on certain time of the day, if it’s not a good content, you will hit the industry, you will also be hitting the production industry. And the culture won’t be able to prevail as it has to have some sense, so that’s what we believe in - open market driven discussions. I also think that competition is good and it can only make you better. I think Marathi industry has evolved and has reached this level because it has competition and it has to compete. They have to develop good stories and good production and they have to compete with Hollywood and Bollywood, and that’s why they have evolved to this stage. If you force it, unconsciously you will create a certain level of comfort, they will be like the release thing is fixed and people will watch the film but it’s not true. You can’t force people to buy tickets.
BOI: What are your future plans?
JS: Like we said we would like to continue to do what we do. We have a strong pipeline in India and we want to continue to grow in that space and we also feel there are several untapped markets, even in major metro cities that need multiplexes. So that will be the plan. We are planning 400 screens by 2017. That’s the goal we have.
DS: We have seen over the years that it has been difficult to belt 50 screens a year for any operator and it also took us a long time to even start more than three to four screens in a year. Now that we have seen the ground realities and understand the growth and the year on year growth of 70 screens by today’s time, that is the goal we have kept to have 400 screens by 2017 with the visibility of government delay.
BOI: What kind of contribution does India have in your global revenue?
JS: We don’t have accurate numbers rights now.
DS: As contribution, we can say, we are running 3500 plus screens globally and the top 20 screens are from India, as far as the per screen admits are concerned.
JS: I think the cinema admits will be around seven to eight per cent.