The Indian exhibition sector reflects a country that is regional in organization and is moving fast, but still has a long way to go.
Data is not to be trusted, as many thousands of cinemas have closed while the new class of multiplexes (each quite small by Westerns standards) is having an impact disproportionate to the actual number — sometimes accounting for 40% of a movie’s B.O.
What is clear is that theatrical revenues are growing. This has to do with a growing middle class, the changing retail environment and a flood of cash from stock market and private equity sources for the building of more attractive cinemas.
“The number of multiplex screens will be around 450 at the end of 2007, just 4% of the total,” U.K. cinema consultancy Dodona Research says. There is a rush to build, and some companies have announced plans for literally thousands of new screens.
Many Indian state governments gave entertainment tax breaks to new multiplexes to encourage development. But the older, single-screen theaters still had to pay up, to the owners’ irritation. In Gujarat, for example, the state levy doubles the cost of a ticket.
But the inequalities may soon be reduced as this five-year tax break for plexes is now nearing the end, Dodona reports.
Multiplex construction was initially concentrated in the four major metropolises, but with development of shopping centers slower than some had forecast, developers have refocused on smaller cities and large towns. PVR (formerly Priya Village Roadshow) and E-City Ventures are leading the charge in those smaller cities.
That development is accompanied by expansion of digital cinema, which cuts costs of releasing and allows wider, more coordinated release patterns. Day-and-date releasing across more of the country replaces a system where prints previously traveled from metro areas to smaller cities and from cities to towns. It capitalizes on faster media and may help fight piracy.
Indian digital pioneers UFO Moviez, Pyramid Saimira and E-City employ different business models. UFO notably offers end-to-end solutions that range from projectors to film distribution and even advertising through a system of regional hubs serving franchisees. E-City, which aims to deliver films by satellite, goes from installing hardware to long-term revenue sharing. Pyramid, formed originally by producers, now takes joint-venture positions and acts as distrib, but is now getting back into production via a fund and a Singapore subsid.
Currently there are 1,300 digital screens, and the trio expect to be on 5,000 by 2011.
Dodona forecasts a race over the next five years between the major plex players in order to establish regional hegemonies. That in turn sets the stage for more arm wrestling between distribs and producers, especially as production budgets rise and the first weekend perf becomes more crucial.
Last summer, Fox and Warner clashed with the plexes over the terms of trade for “The Simpsons Movie,” and recently Eros and Sony, respectively, tussled with theaters over screen space and revenue shares for their Diwali blockbusters “Om shanti om” and “Saawariya.”
Luckily, both opened strongly, but with ever more cash at stake, it is unlikely always to be that way.