Meenakshi Varma Ambwani
Entertainment business generally does well during a downturn. Even this time, the so-called recession-proof industry appears to be doing just fine. Ajay Bijli, chairman and managing director of PVR Ltd, discusses with ET the impact of economic slowdown and credit crunch on the multiplex industry.
What is the impact of the slowdown on the entertainment industry?
I, like some of my peers in the industry, hold the view that the entertainment industry is largely recession proof. It is mostly dependent on the supply of good content. At the beginning of the year, during the Indian Premier League (IPL), production houses delayed releasing their movies, that was when footfalls in multiplexes witnessed a drop. Again during the terror attacks in different cities, movie buffs didn’t feel safe enough to go to multiplexes. But in the last few months it has become clear that whenever good movies have been released, movie buffs have come to the multiplexes. The recent release Rab Ne Bana De Jodi is a case in point.
I think it’s not economic slowdown that has affected sales of tickets, it is the quality of content which governs footfalls generated in the multiplex. Fortunately, India is still a growth story and to a certain extent the slowdown is more psychological than real. Hence, I do not see the slowdown, as I would like to call it, having any impact on the entertainment industry. I believe that the Indian entertainment industry will continue to grow in healthy double digits.
But has the slowdown affected the multiplex growth plans and the deals that are struck between real estate developers and multiplex operators?
There have been instances in recent times where some multiplex players have walked out of deals that they struck with real estate players for an amount which was not economically feasible for them anymore. This has, in fact, led to a correction in rentals. As far as PVR is concerned, we have accelerated our pace and are now seriously looking at markets and opportunities, which were unaffordable earlier. Newer formats such as revenue-sharing with developers are also in the offing. I’m sure if mall construction is delayed, multiplex expansion plans could be delayed as well. So it all depends on how adversely affected the real estate developer is with whom one has an agreement.
How has the credit crunch affected the multiplex industry?
Any good project, which is based on sound business model, will not have problem getting funding. Once people begun to overcome their mental block on recession, with so much of liquidity being infused into the economy, investments will get channelled into good projects. Yes, I agree that a correction in real estate prices is taking place, which is good for the industry. Overall, I see a tremendous growth and at the same time consolidation in the industry. There is going to be more transparency and openness in real estate deals and only serious players will be able to survive in the long run.
How do you see the future of multiplex and its growth vis-a-vis single screens, given that multiplex screens account for less than 10% of the total screen count in India?
Firstly, the contribution to box office collections is more important than screen count. PVR with 101 screens contributes 13% of all-India theatrical collections of all Hindi movies. I still maintain that India is a screen-starved country compared to the movies being made here and also in comparison with some of the mature markets in the world like the US and UK. For example, a UNESCO study says that India has 12 screen per million vis-à-vis 117 screens per million in the United States.
Multiplexes are now expanding to smaller town and cities, the collection base for the entire industry is bound to grow. If we look at the international trend, single screen theatres have given way to multiplex because of the business dynamics. The days when a 1,000 plus seating capacity theatre could be run profitably are shrinking. With multiple entertainment options emerging, both out of home and in home, the shelf life of movies are getting shorter. Instead of single screen theatres coming up mostly it is multiple screens being built and that too in a family entertainment complex like a mall. The idea is to have one stop entertainment hubs.