Market Trends - Multiplexes Replacing Cinemas Theatres

Multiplexes are not a new concept in India. Chennai (then Madras) had the Devi complex and Diamond/Sapphire/Emerald complex over three decades ago, while Mumbai had Shivam/Satyam/Sundaram complex for the same period of time. But the US had set up movie complexes in the suburbs about twenty years back and this concept is now spreading all over the world. Major movie production houses and media companies, including 20th Century Fox, Paramount, United Artists, Columbia-Tristar/Sony and Warner Brothers, operate multiplexes all over the world.

This concept has gathered momentum lately with the retail boom in India. In fact, several state governments have provided incentives to encourage the multiplexes all over India. The single screen movie theatre has now become a dying breed, with the failure of most Bollywood movies lately. A positive concession to the cinema theatre industry is the deduction of 50 to 100% of the profit earned by multiplexes that come up in the next two to five years. The waiver is restricted to multiplexes, which are essentially in metropolitan cities, but the concession has been extended to second line cities like Kolhapur and Baroda. This concession will spur development in state capitals and entertainment centers like Ahmedabad, Bangalore, Pune and Goa. Several companies are planning several multiplexes in the next 5 years. Companies include Pentamedia, which has 10-12 complexes on the anvil over 5 years and the Essel Group, which plans 12 multiplexes cum entertainment centers over 10 cities. Other groups include Adlabs, Runwal, Sringar Films, PVR Group and Inox Leisure. Overall there are plans for over a hundred such multiplexes coming up all over the country in the next 18 months. Inox Leisure is setting up 8 multiplexes including 4 in Mumbai, with its flagship at Nariman Point, covering 1 lakh sq. ft. opening in June 2003. PVR Group has planned a massive 8-screen complex in Phoenix Mill compound in Central Mumbai. The multiplex will include entertainment facilities and a shopping mall. Pune could well become the city of multiplexes with 41 applications submitted for clearances of the same in the next five years.

States which are offering concessions include Maharashtra, West Bengal, Gujarat, Rajasthan and UP. Maharashtra is currently the hot spot with 20 new multiplexes under construction, since they offer 100% waiver of entertainment tax for the first four years in Mumbai and for the rest of Maharashtra the exemption period is five years. The state has over 230 applications for exemption of entertainment taxes. Maharashtra has the most attractive policy for multiplexes, followed by West Bengal, Gujarat and Rajasthan. The requirements are at least three theatres with a minimum of 1000 seats, which must be completed within two years of the application being approved. HUDCO too has plans to use prime areas in major cities belonging to the Department of Post (DoP) for multiplexes.

Typically, the multiplex model is built around a primary anchor - movies. The revenue generating channels in a multiplex includes box-office collections, rent from display systems, restaurant rentals, food and beverage collections, product launch rentals and promotions by companies. The other revenue streams are often larger than box-foffice collections, but movies are the main pull of such complexes. Several of these multiplexes are being located in shopping complexes and average an investment of around Rs. 5 crore for a four-screen theatre. Having a multiplex ensures about 1,200 footfalls daily, which is great for a shopping mall. There are about 1000 screens planned over the next five years all over the country, joining the existing 12,000 screens. The screens per one million population for India are only 11 as compared to 117 in the US and 77 in France. Though this scheme has not boosted the existing single screen cinema theatres, several theatres are planning to upgrade to the multiplex concept and hence provide a boost to the big screen cinema. There is healthy competition among the multiplexes and the initial high-ticket rates will definitely come down to more acceptable levels. In fact, these may actually spur the declining cinema market in India. The smaller cinema halls provide the owner flexibility to rotate the movies economically. The cinema going concept has changed drastically, becoming part of the “broad spectrum” family entertainment. This is good for consumers and film buffs. The threat of over-capacity of cinema seats has not dampened the multiplex mania currently prevailing all over India.