Working of Mltiplexses

UNIVERSITY OF MUMBAI

PROJECT ON

WORKING OF MULTIPLEXSES

SUBMITTED BY

MRUNMAYEE. V. BHAVE

PROJECT GUIDE

PROF. RAJWADE.

BACHELOR OF MANAGEMENT STUDIES

SEMESTER V

(2009-10)

V.E.S. COLLEGE OF ARTS, SCIENCE & COMMERCE,

SINDHI COLONY, CHEMBUR – 400071

UNIVERSITY OF MUMBAI

PROJECT ON

WORKING OF MULTIPLEXES

Submitted

In Partial Fulfillment of the requirementsFor the Award of the Degree of

Bachelor of Management By

MRUNMAYEE. V. BHAVE

PROJECT GUIDE

PROF. RAJWADE.

BACHELOR OF MANAGEMENT STUDIES

SEMESTER V

(2009-10)

V.E.S. COLLEGE OF ARTS, SCIENCE & COMMERCE,

SINDHI COLONY, CHEMBUR – 400071

Declaration

I student of BMS – Semester V

(2009-10) hereby declare that I have completed this project

on .

.

The information submitted is true & original to the best of

my knowledge.

Student’s Signature

Name of Student

C E R T I F I C A T E

This is to certify that Mr. Of

TYBMS has successfully completed the project on

___________________________ under the guidance of

___________________________.

Project Guide Principal

Dr. (Mrs) J. K. PHADNIS

Course Co-ordinator

Mrs. A. MARTINA

External Examiner

EXECUTIVE SUMMERY

What does the Chopra family, comprising Mr. and Mrs. Chopra and two teenagers, do on an

un eventful Sunday evening? The parents love Hindi movies, but kids don’t like them,

preferring to play video games and watch Hollywood films.

Do they spend the evening separately? No. they drive down to the nearest multiplex, which

has four small halls, two of which are playing the latest Hindi films, with the other two

featuring Hollywood films. There are gaming rooms too. The parents watch the latest

bollywood blockbuster, while the kids take in a Hollywood flick and spend the rest of the

time playing video games.

There are a number of families like chopras, starved of attractive entertainment options and

with rising disposable incomes, who want to spend a greater proportion of their expenditure

on entertainment.

About two decades ago, an outing to the cinema hall was an attractive entertainment option.

But in the last decade, with the liberation of the Indian economy, people’s tastes, lifestyle,

social behavior and culture have undergone fundamental transformation. The two main

catalysts for this change have been the development and growth of the electronic media as

sources of information and entertainment coupled with the increase in purchasing power of

the average person. This has a tremendous impact on the leisure and entertainment industry in

general and the film industry in particular, with far reaching consequences. With the rising

demand of entertainment and theaters the rising demand for multiplex theaters is no more a

suspense.

This project covers various aspects of multiplex as a business practice from its meaning to its

growth in India to the business practice and problems faced by multiplex and also the

analytical success of various multiplexes in India.

The multiplex in India got the success because of:

Benefits of revenue generation.

Government liberal policy.

Up gradation of technology.

The project also gives detail analysis about the major players of multiplexes in India and it

also shows the points to be considered while setting up a Multiplex.

Project Objective

Primary objective:

To understand the Business Workings of Multiplexes

Secondary Objective:

(To achieve the primary objective, we need to know the following things)

What is Multiplex?

How the overall supply chain function and relations?

Market depth, its growth, future scope?

Government norms and Incentive facility?

Environmental study for the business.

Key players.

Marketing strategies followed by the companies.

Infrastructure facilities available from demand and supply side.

Customers need wants and demands and satisfaction.

Risk and concerns of the overall business.

Motivation behind the business.

Knowledge from the business practitioners.

Current scenario of the business

How future will be bright in the business?

RESEARCH METHODOLOGY

Marketing research is useful to:

Launch a new product or service or Facility

Determine marketing opportunities

Solving the problem

Effectiveness of ad-campaign

The success defines co-ordination between Research and management. The research involves

a no. of interrelated activities which overlap and do not rigidly follow a particular sequence.

The major steps involved in marketing research process are:

1. Formulation of problem:

A problem well define is half solved. To identify research problems are of 3 types:

Overt difficulties: are those which are not hidden.

Latent difficulties: Which are not so hidden but if not checked would soon become

evident.

Unnoticed opportunities: once the 2 or more problems are identified the next is to

decide which of the problem is to be selected.

Formulation of problem:

Unit of analysis: The study of Multiplex as a business, its characteristics, problems,

functional areas, growth etc.

Time and space boundaries: The study of multiplex workings in India from its

existence in India till today.

Characteristics of Interest: to understand the workings and business practice of

Multiplexes.

Environmental condition: PEST analysis, SWOT analysis etc.

It is a Descriptive Research which is undertaken to know and understand the characteristics

of multiplex business. The collected data are of secondary type. The collected data is framed

in a presentable and analytical form.

CONTENT

1. Introduction to Multiplex

2. Film Industry

Indian Film Industry

Corporatisation of Indian Film Industry

Globalization of Indian Cinema

3. Film Exhibition

4. Multiplex Phenomena

5. Emergence of Multiplexes in India

6. It’s Raining Multiplex

7. Film Exhibition Business in India – Tremendous Scope

8. Multiplexes feeding India’s movie mania

9. Filmmakers thank the multiplex for increased freedom

10. The Boom Sweeps India

11. Multiplex v/s Single Screen theaters

12. Multiplex v/s Megaplex

13. Growth Drivers of Business

14. Key Players in Multiplex Business

15. PEST Analysis

16. Segmentation, Targeting and Positioning [STP]

17. Service Marketing Mix [7 P’s]

18. Service Marketing Triangle

19. Basic Functional Areas

20. Risks and Concerns

21. Project Report

Proposed Facilities

Condition to Establish New Multiplex

Policy Formulated on Multiplex

Government Regulations

Entertainment tax benefits

Procedure to setting up a Multiplex

The Multiplex Model

Cost and Revenue Break ups

Yield Management

22. Current Affairs

23. Recommendations

INTRODUCTION TO MULTIPLEX

A movie theater, cinema or Multiplex is a venue, usually a building, for viewing motion

pictures ("movies" or "films"). Most movie theaters are commercial operations catering to the

general public, who attend by purchasing a ticket. The movie is projected with a movie

projector onto a large projection screen at the front of the auditorium. Some movie theaters

are now equipped for digital cinema projection, removing the need to create and transport a

physical film print.

A multiplex is a movie theater complex with three or more screens. The largest of these

complexes are sometimes referred to as a megaplex. Definitions of what constitutes

Multiplex v/s Megaplex is related to the number of screens. Often the comparison is

arbitrary. For example 12 to 16 screens may constitute a multiplex, whereas 14 to 20 may be

branded a megaplex. Megaplex theaters sometimes feature stadium seating and other

amenities often not found at smaller movie theaters. Multiplex theatres often feature regular

seating; however, the screens are often smaller than those found in traditional movie palaces.

During a high period of growth in many towns the competition presented by a multiplex

would often put the town's smaller theaters out of business. Multiplexes were often developed

in conjunction with big box stores in power centers. The expansion was executed at the big-

box pace which left many theater companies bankrupt during this hasty development process.

Daily operations of the local theaters were not much affected despite these corporate level

issues.

In India, the mushrooming of multiplexes since the mid-90s has changed the dynamics of the

Indian Film Industry. Production costs are now recovered in days, not months and viewers

have really caught on to the concept. There have been concerns over high ticket prices and

the phenomena has predominantly been restricted to the larger cities, but Indian cinema

chains like PVR (Priya Village Roadshow), Inox, Fame, Big Cinemas (Adlabs - ADAG) and

CineMax are slowly but surely changing the rules of exhibition in the world's largest film

industry, Distribution, production and the industry as whole.

Historical Perspective:

Before 1900 the first public exhibition of projected motion pictures in the United States. The

first permanent structure designed during 1900-1919 for screening of movies in the

California. By 1915, feature films were so successful that the five cent ticket admission prices

would expand to ten cents, hence ending the era of movie theaters. During 1920 to 1980, the

movie revenues exploded, independent promoters and movie studios raced to build the most

lavish, elaborate, attractive theatres. These forms morphed into a unique architectural genre

the movie palace a unique and extreme architectural genre which boasted a luxurious design,

a giant screen, and, beginning in 1953, stereophonic sound. The movie chains were also

among the first industries to install air conditioning systems which gave the theatres an

additional lure of comfort in the summer period. Several movie studios achieved vertical

integration by acquiring and constructing theatre chains. However, the introduction of the

low-cost VHS (video system for home) and televisions has decommissioned many cinemas.

After 1980 People can pay to watch movies at home, through cable television or streamed

from the Internet: pay-per-view (PPV) and video on demand (VOD). This may have

contributed to an industry wide slump in the late 1980s. The theater industry responded by

building larger auditoriums with stadium seating layouts, installing more screens (to allow for

more variety and more show times), upgrading sound systems and installing more amenities

and higher-quality concessions. The growing popularity of high-definition television sets,

along with HD DVD and Blu-ray Disc players has probably also contributed to the decline in

cinema attendance. 3-D films started around the 1990s and hit the industry hard enough to

become popular. Visitors borrow or keep special glasses to watch it. Depending on the

system used, these are e.g. polarized glasses. IMAX is a system using film with more than 10

times the frame size of a 35mm film to produce image quality far superior to conventional

film. IMAX theaters use an oversized screen as well as special projectors.

The Indian Film Industry:

It is the largest in the world in terms of ticket sales and number of films produced annually.

India accounts for 73% of movie admissions in the Asia-Pacific region, and earnings are

currently estimated at US$8.9 billion. The industry is mainly supported by the vast cinema-

going Indian public. The Central Board of Film Certification of India cites on its website that

every three months an audience as large as India's billion-strong population visits cinema

halls. Indian films are popular in various parts of the world, especially in countries with

significant Indian communities. The Hindi film industry, based in Mumbai is the largest

branch of Indian cinema.

The number of movies produced in India is the largest in the world. Approximately 23

million Indians go to see a film every day. According to a survey done by Earnest & Young,

more than 70% of the Indian Film Industry believe that the film business in India is expected

to grow by more than 15% in the next three years. Going forward with improvement in

distribution, exhibition infrastructure, the advent of digital cinema and better exploitation of

films, the industry is likely to grow at a compounded annual growth rate of 18% to gross

$2244mn by this year. The overseas market has become increasingly lucrative for Indian

producers with most films realizing 15-20% of their income from overseas.

Industry Facts:

Revenue for 2004 was estimated at Rs. 59 billion (US$1.3 billion), which was less

than 1% of global film industry revenue and a fraction of the U.S. Film industry

revenue, which was US$9.49 billion in 2003. (Source CII )

Nearly 80% of Indian Industry revenues come from Domestic and Overseas

Theatrical.

On the contrary US Film Industry earns only 35% from box office sales and

remaining 65% is derived from other revenue sources.

This clearly signifies the onset and potential of Multiplexes in the Indian Film

Exhibition Sector.

Number of Films produced in 2007:

SR. Language Number of films

1 Hindi 223

2 Tamil 162

3 Telugu 245

4 Malayalam 77

5 Kannada 75

6 Bengali 42

7 Gujarati 16

8 Marathi 73

9 English 9

10 Oriya 21

11 Bhojpuri 76

12 Punjabi 12

13 Telugu(dub) 17

14 Tamil (dub) 11

15 Others 31

Total 1,090

Source: Film and Television Producers Guild of India

Corporatisation of Indian Film Industry:

The trend of corporatisation of the Indian film industry, considered to be one of the most

important aspects for the growth of the industry, continued to gather momentum in 2006.

Some of the key indicators of corporatization in 2006 include:

The IPOs of production house: Like UTV and Saregama in 2005, 2006 witnessed

the IPOs of Prime Focus Ltd. and K Sera Sera Productions Company. Percept Picture

Company received funding from Bennett & Coleman.

Several companies entered into long term contracts: with directors and actors

to secure their content pipeline Adlabs signed contracts with Hrithik Roshan with Rs. 350

million for 3 films, Akshay Kumar for Rs. 180 million for 3 films and Vipul Shah for Rs.

2 billion for 8 films and are reportedly signing a Rs. 120 million- 3 film deal with John

Abraham. UTV reportedly has set aside Rs. 1 billion for contracts with individual

directors while Sahara Motion Pictures locked in Madhur Bhandarkar for 3 films.

Industry sources also indicate that more than half of the releases in 2006 were by

corporate rather than individuals.

Corporate are also establishing their presence in the film distribution space with media

conglomerates like UTV Software, Sahara Group and Eros International entering this

segment.

Globalization of Indian cinema:

Today, Indian cinema is becoming increasingly westernized. This trend is most strongly

apparent in Bollywood. Newer Bollywood movies sometimes include Western actors (such as

Rachel Shelley in Lagaan), try to meet Western production standards, conduct filming

overseas, adopt some English in their scripts or incorporate some elements of Western-style

plots. Bollywood also produces box-office hit like the films Dilwale Dulhaniya Le Jayenge

and Kal Ho Naa Ho, both of which deal with the overseas Indian's experience.

However, the meeting between west and India is a two-way process: Western audiences

mostly of Indian origin are becoming more interested in India, as evidenced by the mild

success of Lagaan, Bride and Prejudice and Sivaji: The Boss. The earnings from overseas

market have wooed the Indian Filmmakers. The films are specially targeted to woo the

overseas audience. For instance Dostana, Dhoom, Dhoom 2, Krrish, kabhi alivda na kehna

and many more. The market is enough to get return on investment. The Indian actors and

other film personalities become global stars. On the contrary, Western producers are funding

maverick Indian filmmakers like Gurinder Chadha (Bride and Prejudice) and Mira Nair

(Monsoon Wedding). Both Chadha and Nair are of Indian origin but do not live in India, and

who made their names in Western independent films; they have now been funded to create

films that "interpret" the Indian cinematic tradition for Westerners. A similar filmmaker is

Deepa Mehta of Canada, whose films include the trilogy Fire, Earth and Water. The

Hollywood film personality has started eying on Indian Film market respectfully. Indian

cinema is also influencing the English and American musical; A. R. Rahman, a film

composer, was recruited for Andrew Lloyd Webber's Bombay Dreams; and a musical version

of Hum Aapke Hain Koun has played in London's West End.

FILM EXHIBITION

Film screening:

A film screening is the displaying of a film, as part of its production and release cycle,

before it is widely released to movie theaters. In general, "screening" applies to showing

under special circumstances: either the environment or purpose will be different than that

experienced by a mass market moviegoer. To show the film to best advantage, screenings can

occur in plush, low seat-count theaters with very high quality (sometimes especially certified)

projection and sound equipment, and can be accompanied by food and drink and spoken

remarks by producers, writers, or actors. Screenings typically occur outside normal theatrical

showing hours. The different types of screenings are presented here in rough chronological

order of their use:

Types of screenings:

Critic screenings occur for national and major market critics well in advance of print and

television production-cycle deadlines, and are usually by-invitation-only. When a studio

anticipates negative critical reviews, this step is frequently skipped; the studio instead relies

on advertising, in-theater previews, word-of-mouth, and established knowledge of the target

audience for the success of the film.

Private screenings are provided for investors, marketing and distribution representatives,

and VIP media figures.

Premier screenings are provided for well-wishers from the film industry including

actors, actress, film financer, and producer, distributor, invited VIP guests etc.

Film festival It is the presentation or showcasing of films in one or more movie theaters

or screening venues. The films are usually of a recent date and, depending upon the focus of

the individual festival, can include major international releases as well as those made outside

a country's established film industry. Sometimes there is a focus on a specific genre (e.g.

Thriller, suspense) or subject (e.g. gay and lesbian film festivals). Film Festivals are typically

annual events.

MULTIPLEX PHENOMENON

A multiplex is a multi screen entertainment complex showing different films under one roof

with other type of supporting business in the vicinity like Restaurant, Shopping arcade and

other entertainment avenues such as Game parlor, DJ party hall, Bowling, Cafeteria, Ice

skating etc. Emergence of multiplex has made movie going out an event. People can go at

just about anytime and find something to watch. It also enables exhibitor to show a variety of

movies appealing to several segments of moviegoers while serving patrons from common

support facilities such as Box Office, Concession areas, rest room, and lobby. The multiplex

model is based on the concept of Umbrella Entertainment built around a primary anchor

movie. Typically, the possible income generating channels in a multiplex can include:

The box office collection.

Rent from display.

Food & Beverages.

Products launch rentals.

Promotions of consumer goods.

Multiplexes earn lot more from other revenue sources as compared to box office collections.

However, due to the role of PULL creator that the movies play in this scenario, overall

returns are highly correlated to Box office contribution. Most multiplex projects breakeven at

an occupancy rate of 40-45%. This figure may vary as per the maintenance standards of

various theaters and the revenue streams running parallel to it. Real estate is the major cost

component and a strategic resource for the multiplex business. Typical built up area required

per seat is around 30 sq. ft. and average no. of seats per seats per screen is around 250-400 as

compared to single screen cinemas which have capacities in the range of 800-1,200 seats.

Although much smaller than traditional theaters in a screen to screen analysis, multiplex often

command higher collections and space efficiencies due to the following reasons:

The element of choice of movies available to the consumer.

Premium pricing possible due to the total entertainment platform.

Multiple revenue streams hedge the risks associated with movie performance.

A recent trend in multiplex operations has witnessed the proliferation of multiplexes in to

non-metro urban centers of the country. The driver for this phenomenon is a combination of

lack of quality entertainment option in non-metro cities together with a growing consumer

base and disposable income available for entertainment. The primary targets in this include

Pune, Baroda, Indore, Ahmadabad and Jaipur. Maharashtra, with its attractive tax sops for

multiplex development and operation is likely to get a lion’s share of these projects. India

currently has 13,000 existing screens, 95% are standalone, single screens. These single screen

cinemas are poorly maintained as the owners find it difficult to upgrade and renovate their

facilities, due to unavailability of organized finance. The deteriorating quality of these

cinemas dissuaded viewers and they started using alternative viewing options. Over the last

few years, multiplexes have emerged as a trend in urban India, with around 13,000 active

screens, India is under screened comparing with China 65,000 screens while the US has

36,000. India’s screen density stands low at 12 screens per million populations. This gives

multiplex operators enough room to grow as the traditional single-screen theatres do not have

the financial wherewithal nor do they enjoy tax incentives.

EMERGENCE OF MULTIPLEX IN INDIA

In 1979, world’s first multiplex ‘Eaton Center’ in Toronto, Canada was opened for the

general public. The Eaton Center has 18-screen movie theater complex. In 1997 PVR

established, first multiplex in India – PVR Anupam, New Delhi. The PVR Anupam changed

the Indian movie exhibition landscape. Movie exhibition till mid nineties was dominated by

Cinema halls – the traditionally single screen halls. Cinema halls witnessed a surge of

customers mostly during the festive season and on weekends. The emergence of multiplexes

changed the movie exhibition business in India. Today, all eyes in the entertainment industry

have turned towards multiplexes, as they generate a larger share of revenue though they

accommodate less number of seats per theater.

The emergence of new multiplexes has reduced the audience for traditional cinemas. The

multiplex business is not only prompting traditional cinema theater owners to convert their

property into multiplex but in recent times has also attracted many international players to

venture into the business. No wonder the multiplex business is so lucrative that foreign

entertainment giants like Time Warner, South Korean multiplex operator Megabox, and

Australia’s Hoyts are in talks with real estate developers such as the DLF group, the Raheja

Group and Sobha Developers to set up chains of multiplexes across the country. New players

are trying to enter this sector and the existing players are busy expanding their horizons. In

recent times the multiplex has gone beyond the metros to redefine entertainment in Tier 1 and

Tier 2 cities like Lucknow, Indore, Nasik, Aurangabad, Kanpur, Amritsar. The good news for

most of the movie exhibitors is that at present roughly 70 percent of the total box office

collections in the country come from non metros.

These multiplex has multiple screen movie theater complex which also offers lifestyle

shopping. It offers brand new experience of watching movies. Today multiplex are

considered not just a part of the entertainment, it is an opportunity for family outing which

include movies, shopping, dining out, gaming parlors, buying books, buying groceries, etc.

Most of the multiplexes malls in India have common structure, which believes structure of

the ideal multiplex. Ideal multiplex malls have a four to five floors with various leisure and

recreation options for customers. The top floor has multiplex and rest of the floors offer

facilities. The structure of the multiplex mall explores the consumer psychology, where

customers who come with the intention of watching a movie are made to pass all the floors in

the shopping mall. It increases the possibility of their making some impulsive purchases.

Moreover, the multiplexes do not allow outside food and beverages into the movie theaters

which offer them opportunities to sale of their own products at a premium. The decade old

Indian multiplex industry has definitely changed the movie exhibition industry in India. The

multiplex industry, in India, is still in an early growth stage, and is way behind the size and

scale reached in the developed countries.

IT’S RAINING MULTIPLEXES

The majority of “multiplex” films released in the past few months haven’t fared too well at

the box-office. Or the fact that the exhibitors are forced to relent to unheard of terms to

acquire prized films like Dostana, Singh is king, Jane tu… for their theatres. That hasn’t

deterred multiplex owners from diversifying their business, or single-screen owners from

making forays into the multiplex business.

Kanakia, the proprietor of Cineline theatres who is into the construction business, has three

more multiplexes lined up in Mumbai—Cinewaves in Kandivali, Cineprime in Mira Road

and Cinevision in Thane. Also coming up is Cinezone in Nashik. “We wanted to enter Thane,

Mira Road, Bhayander and Kandivali first as also Nasik. If you recall, we pioneered a

revolution in theatre maintenance with Cinemax,” Kanakia points out, adding that the

location of these multiplexes have already given him an edge over the competition. Kanakia

was backing single-screen theatre owners in their battle against multiplexes and the lack of

level-playing field. “That’s true but then I realized that multiplexes are the future of show

business thanks to their manageable capacities and the variety of films they offer at any point

of time. A 4-screen multiplex with a total capacity of 1,400 seats playing four different films

is definitely a better proposition than a 1,400-seater theatre running to 20 per cent

occupancy,” Kanakia reasons.

“The 800-1000 seater theatres are history. Gone are the days when producers of lavishly

mounted films released their films with great pomp at such theatres,” says Sanjay Dalia,

general manager, Programming, Cineline theatres.

Corporate giant and big multiplexes player, INOX will also make its entry into Mumbai

shortly with multiplexes at Nariman Point, Santa Cruz, Kandivali and Borivali. INOX is in

fact, looking to a national presence with multiplexes in Chennai, Hyderabad, Bangalore,

Lucknow and Allahabad, Rs 150 crores proposal. It has already registered its presence in

Pune, Vadodara and Kolkata.

The stiff competition that is likely to intensify with the coming up of so many multiplexes

does not seem to worry any of the players. “No doubt the industry is likely to witness a few

shake-outs with the indiscriminate mushrooming of multiplexes, but the ones with a

prominent chains and proper financial backing will hold their ground,” Baijal maintains.

According to him, “the coming up of so many multiplexes will not really cut into the business

of any of the competitor. A case in point is Pune where the launch of every new multiplex

has seen only marginal drops in the returns of the existing theatres,” he says.

Shravan Shroff believes the many mutliplexes that are coming up have only increased the

volume of business. He cites the example of Fame Adlabs and Fun Republic, two multiplexes

located within close proximity of each other. “Before Fun Republic came up, our average

weekly net collections before payment of distributors’ share was Rs 19 lakh a week. After

Fun Republic the collections dropped to Rs 17 lakh a week. On the flip side the approximate

business of Fun Republic, Rs 10-11 lakhs a week, has increased the net collections in

Versova area from Rs 17 lakhs to Rs 28 lakhs. It is an indication that the amount a consumer

is spending on entertainment has definitely gone up,” Shravan adds.

Kanakia agrees that multiplexes have increased the volume of business. “The multiple

options that they offer make them extremely viable business propositions,” he asserts. Adds

Dalmia, “The audience has viewed these multiplexes as get-together places where they can

shop, play video games and of course, watch films. Parents now can choose to watch an ‘A’

rated film after pushing their children into an auditorium showing a film approved for

universal viewing. People also have the advantage of flexi-timings and late night shows.”

Kanakia insists that there is a large market for both single-screen and multiplex operators.

According to Shravan Shroff, a certain category of films are even today ideal only for large

single screen theatres. He cites the example of Jaani Dushman, a film released by Shringar in

the past. “I honestly felt we should not have slotted the film for Fame Adlabs both as

distributors and exhibitors, since it simply wasn’t a multiplex film. On the other hand, a

Joggers Park would not have run anywhere but a multiplex,” he rationalizes.

With multiplexes came the multiplex style of management: plush seats, superior sound

quality, add-ons - all at a price, of course. Consumerism has always existed. Today

multiplexes are offering better facilities to a section of the audience that can afford it.

The Indian film industry is one of the largest in the world - producing 1041 films, annually. It

is currently worth about US$ 1.8 billion and is expected to grow at 16 per cent for the next 5

years to reach US$ 3.8 billion in 2011. Bollywood, the Hindi film industry, which commands

a 40 per cent share of the Indian film market, is gaining a global audience. A spurt in the

number of multiplexes in the country has changed the entire complexion of Indian films —

their budgets, the way they are made and the audiences they are made for. Multiplexes have

played a pivotal role in these developments, catering to a global taste, says Mr. Alok Tandon,

CEO of INOX.

“People with higher disposable income prefer the multiplex catering. 65% of operational cost

in a Multiplex is pertained to electricity cost the rest is staff salaries and ancillaries. The

Multiplex culture is not only in Mumbai but all over India which offer better choices of films

to the consumer outlet for small media products to be screened,” says Shravan Shroff,

Director Fame Adlabs.

Across the country, single-screens are being taken over and converted into multiplexes.

Here’s a stunning stat: the total number of screens in India actually declined by nearly 20%

from 2000, even as the number of multiplex screens surged by a whopping 1300% in the

same period.

According to a government ordinance, the multiplexes need not pay any Entertainment Tax

for three years and then only 25 per cent for the next five. Of course, the multiplexes had to

provide extra facilities such as video games, a theatre to stage plays, adequate parking, a

crèche, and gardens and so on.

The rationale for tax waiver was explained and a statement was appended to the government

notification. The statement reads as follows, “Public at large these days prefer to see movies

at home. Keeping in view this scenario, a concept of complete family entertainment centre

has emerged, popularly known as a multiplex. However, these multiplexes are highly capital

intensive, their gestation period is also longer and therefore, need government support and

incentive.”

Theatre owners are not allowed to change the nature of their business unless they retain 33

per cent of the original number of seats in their new enterprise. Further, the government has

not considered the fact that not everyone can afford to watch a film in a multiplex considering

the high rates of admission. This will only promote a backdoor boost to video piracy.

Over the past five years, 49 single screen cinemas in Mumbai and the suburbs have downed

shutters. Apsara at Grant Road and Metro at Marine Lines are among those that have been

converted into multiplexes. Mr. Manoj Desai, says “Earlier, a theatre owner in south Mumbai

paid Rs 50,000 as property tax, while he now shells out Rs 5 lakhs. Theatre owners also pay

other taxes: 12 per cent for Entertainment tax, 15 per cent for road tax, while one per cent of

weekly box office collections go to the government-owned Films Division.” Some prominent

theatres on the death list include Ganesh in Lalbaug, Satyam, Sachinam and Sundaram in

Worli, Milap in Kandivli, Milan in Santa Cruz and Sangeeta and New era in Malad. Five

more cinema halls are on their way out. Kohinoor at Dadar and Topiwala at Goregaon too

have fallen in this contest. One more single screen theatre in the city paved way for a swanky

multiplex. The Tata-owned Sterling cinema, a major south Mumbai landmark is for a

makeover. The theatre gave away and reopened as a three-screen multiplex.

FILM EXHIBITION BUSINESS IN INDIA - TREMENDOUS

SCOPE

Film exhibition forms the most important component of the Indian film industry. According

to a report domestic theatrical revenue contributes 57% of the total Rs59bn film industry

revenues and is expected to grow at 17%. Overall, the Indian film industry is expected to

grow at 16%, which is expected to reach Rs143bn in 2010. The main pockets for film

exhibition in India are Delhi, Mumbai and South India. Due to various regional language film

industries in the South, it has become an important film exhibition pocket. Hyderabad and

Bangalore are 2 southern cities where occupancies are exceptionally high at around 70%-

80%. UP, Bihar, MP are other states which are proving lucrative for exhibition industry

because of tremendous increase in demand for Bhojpuri films.

An average of merely 12.9 theaters per million people indicates the extreme paucity of

exhibition outlets in India as compared to the US which has 116.6 screens per million. A

UNESCO study estimates that while India currently has 12,900 cinemas, around 20,000 more

cinemas are required to meet the increasing demand for film entertainment.

(Source: CII – DSK Legal Media and Entertainment Industry Legal Report, 2003)

Number of screens per million of population:

Source: The Indian Entertainment Industry – FICCI- 2001

Last-mile consolidation in distribution and exhibition:

With around 12,900 active screens (down from 13,000 in 1990), out of which over 95 percent

are standalone, single screens, India's screen density is very low. In contrast, China, which

produces far less films than India, has 65,000 screens, while US has 36,000. With many more

avenues of entertainment available to the youth (an important target population), it is

imperative to create an enhanced theatre viewing experience.

Evolution of multiplexes:

Multiplexes generally offer international quality audio and video equipment apart from

quality seating and ambience, thus providing a patron with a high quality viewer ship

experience. The key factors for growth of multiplexes are as follows:

Organized Retail boom:

There has been a boom in the organized retail market in India. KSA Technopak, India

estimates organized retail in India to reach 12% to 13% of the total retail market by 2010

with sales of Rs 1700 – 1800bn, aided by improved retail real estate infrastructure and easier

access to capital. One of the key elements driving the success of a mall is its ability to drive

footfalls consistently. Hence each mall design looks at a mix of tenants – large and small.

Multiplexes are one of the anchor tenants to large format malls. This gives a mall assured

footfalls as movies have a higher frequency of consumption.

Quality Theater Complexes:

Films are a key destination for entertainment. The poor condition of most single screens has

turned away family audiences. Multiplexes offer the quality ambience and service levels.

Although multiplex tickets are usually priced at a premium to the ticket prices of single

screens, they continue to attract patrons (both individuals and families) on account of the

better quality of service and ambience that they provide.

Economic Logic of Multiplexes:

Multiplexes offer significant economic advantages over similar size single screen theaters.

The key economic advantages are as follows:

Better Occupancy:

Multiplexes have multiple screens, with different seating capacities. The multiplex operator

can choose to show a movie in a larger or a smaller theater, based on its expected potential.

This enables the Multiplex operator to maintain higher capacity utilization, as compared to a

single screen.

Greater number of shows:

Each film has a different screening duration. Since multiple films are available for screening,

the multiplex operator has the flexibility to decide on the screening schedule so as to

maximize the number of shows in the multiplex, thus enabling it to generate higher number

of patrons.

Better exploitation of a Film:

Typically, a Film has a large audience in the first week of release. A multiplex operator could

therefore commence screening by showing the film on multiple screens in the first week, and

then gradually reduce it to one screen and finally moving it to the smallest seating hall within

the complex. This enables better exploitation of the revenue potential of the film.

Better Cost Management:

A multiplex complex will benefit from a set of shared facilities, such as the Box Office, F&B

Facilities, Utilities and Common Manpower, resulting in better cost management.

India's edgy new cinemas, Filmmakers thank the multiplex for

increased freedom:

Lately, a third type of Hindi cinema has emerged apart from commercial and art cinema. It is

composed of smaller, offbeat films that are more realistic than Bollywood tales and more

cutting edge than art-house ones. The films have an urban, uniquely Indian sensibility. Many,

though not all, are in Hinglish, the hybrid of Hindi and English that is spoken in metropolitan

India.

These films have none of the overt glamour or sunny disposition of mainstream movies.

Emotions are messy, characters have pasts and endings aren't always happy. But neither are

the movies treatises on social issues far removed from the filmmakers' own experience, like

so much art-house cinema was. Working with low budgets - $450,000 to $1.15 million, as

opposed to more than $2.5 million for a Bollywood film - they are defying conventions and

labels.

As the director Homi Adajania, whose first film, "Being Cyrus," is being released, put it:

"After all, India is not just Bollywood and a Punjabi wedding." Adajania's India is most

certainly not. "Being Cyrus" is a dark, unsettling film about the members of a dysfunctional

Parsi family who let a stranger into their lives, with dire consequences. Adajania, whose

characters speak in English with a smattering of Gujarati, said he was interested in "the stark

underbelly of life." The film's only crowd-pleasing aspect is the lead, Saif Ali Khan, an A-list

Bollywood star who usually plays charming heroes.

"Five years ago, I couldn't find one producer," Bharadwaj said, "and now I have to choose

among 10 willing to finance anything I want to make. I am blessed to be working in these

changing times."

Grimness is no longer box office poison, however. The first hit of 2005 was "Page 3," the

director Madhur Bhandarkar's scathing look at high society in Mumbai. It featured

pedophilia, drug-fueled rave parties and unabashed nastiness. The film, made for $575,000,

grossed $2.3 million in India - a stellar performance, even though it didn't have what

Bollywood insiders call "face value" (like stars or hit songs). "Iqbal," another low-budget

film, also emerged a winner. The story of a deaf-mute village boy who yearns to be an

international cricket player, it opened to euphoric reviews and recouped its $685,000 budget

in five weeks.

Seven years ago, "Iqbal's" director, Nagesh Kukunoor, kick-started Hinglish cinema with

"Hyderabad Blues," this was released in one theater in Mumbai and went on to become a hit.

But the current crop of Indian independents can count on far wider release, thanks in large

part to the arrival of more multiplexes.

The first Indian multiplex, the PVR opened in New Delhi in June 1997. Until then most

filmgoers patronized cavernous theaters with 1,000 to 1,500 seats. Crippled by steep

entertainment taxes, enormous operating costs and dwindling audiences, many of these movie

houses were in an advanced state of ruin, even in the largest cities, like Mumbai and New

Delhi.

After the PVR Anupam opened, some state governments announced entertainment tax

exemptions and prompted a multiplex boom. There are 73 multiplexes in India, with 276

screens and about 89,470 seats. The numbers are expected to increase to 135 multiplexes with

more than 160,000 seats by the end of 2006.

THE BOOM SWEEPS INDIA

By Prashant Mahesh for Outlook Business on January 24, 2007

Top multiplex players like Adlabs Films (where Anil Ambani holds a 51% stake), Inox

Leisures, Shringar Cinemas (Fame multiplexes), Fun Multiplex (of Essel group) and

Cinemax India too have ventured to small towns across the country. "Metro or non metro, if

a town has a population of more than 10 lakh (1 million) people, we are interested," says

Alok Tandon, chief operating officer, Inox. "About 38 cities in India would qualify for that,"

he adds. The rising prominence of smaller towns can be gauged from the fact that movie stars

are now touching down at these places to promote their films. If Aamir Khan was in Thane, a

suburb of Mumbai, for the release of Rang de Basanti, more recently Amrita Rao was in

Nasik for the release of Vivaah. "After two years, non metros will clearly be the drivers for

film exhibition companies," says a foreign fund manager, who owns and tracks multiplex

stocks. "With box office collections from non metros, expected to move up one cannot ignore

the smaller towns." At present, as much as 65% of the total box office collections in the

country come from non metros, says Sampat of Cinemax. "We see this changing to 30:70

metro-non metro in three-to-five years," he adds.

Pricing It Right

As in metros, in smaller towns too it is the retail boom that's mostly driving the multiplex

story. Mall developers all over the country are wooing multiplexes to occupy their top floors

as anchor tenants who would ensure footfalls. "The arrival of the mall syndrome has

accelerated the growth of cineplexes as multiplexes are the anchor tenants in most of these

malls," says Shravan Shroff, managing director, Shringar Cinemas.

But the game is slightly different here from that in metros. For one, multiplexes are forced to

price their tickets lower as affordable levels are lower in smaller cities. "Customers in these

towns would not have the capacity to pay upwards of Rs 100 for a ticket, hence we have

entered these towns under a separate brand name of PVR Talkies," says Ashish Shukla, chief

executive officer, PVR Talkies. Cinemax, for example, has priced its tickets at less than Rs

100 in Nashik, while in its Mumbai property the average ticket price is Rs 150. Also,

revenues from food and beverages (F&B) and advertisements are lower in smaller towns.

According to Sampat of Cinemax, F&B revenue constitute 15-20% in non-metros compared

to 20-25% in metros. "While ad revenue in metros would be 10%, non metros would yield

5%," he adds. "Since my margins in food and beverages are as high as 65%, lower F&B

revenues from the segment, would delay my break even in B and C class cities," murmurs a

multiplex operator who doesn't want to be named.

Industry watchers feel this will change. "Over time, F&B and ad revenues from non metros

would match the metros," says Chintan Mewar, analyst at Almondz Securities. Also, the

consumer preferences are different. If hotdogs and popcorn are popular in the metros and

semi-metros, in smaller towns, people would rather go for the traditional samosas and vada

paavs. To make up for lower revenues, exhibitors are entering the B and C towns without

some of the frills they offer in metros. For example, while Cinemax offers reclining chairs in

Versova, Mumbai the chairs are simpler in Nashik. PVR has an air-cooled lobby in Latur,

while the lobbies in its metro properties are air-conditioned. But they won't call it cost

cutting. "The ambience is adjusted as per local environment," says PVR's Shukla.

Farewell, Single Screen

So what if multiplexes constitute just 1% of the total number of cinema halls, and 4-5% of the

12,900 screens, in India, the industry is talking about the end of single screens. Single

screens, with their low quality ambience, would find it tough to survive in the long run, it is

felt. "Over a period of time, theatres will die a natural death," says Sampat. This is because

there is a rising demand for quality cinema exhibition infrastructure. Also, before long,

digitization will be the industry standard and exhibitors will have to shift to it.

"Though the propensity to watch movies in India is high, there is a big gap in terms of

quality-viewing experience between the metros and the smaller cities," says Tushar Dhingra,

chief operating officer, Adlabs. In India, there are only 12 screens per million population

compared to 117 screens per million in the US and more than 40 screens per million for

European countries. Now, increasing property prices is a big concern, of course. But most

multiplex owners have tied up properties for at least the next couple of years. Also, being the

anchor tenants in a mall, they are always offered special rates by developers.

"Since we have signed up properties for the next two-to-three years, and get preferred rates as

we are anchor tenant, we are not worried about the rise in property prices," says Tandon of

Inox. It's the same for other top players as well. "One of our key focus areas is also expansion

to smaller towns, with populations of up to five lakh (500,000). Property prices in these

places have been comparatively stable, which makes us bullish on our plans for these cities,"

says Bijli of PVR.

So, at least on the surface, there's nothing much to stop the multiplex boom. The coming of

age of direct-to-home services like movie-on-demand and live gaming are unlikely to make

the millions of fans across a country of fanatic fans (have you heard of the temple named

after South Indian actress Khushboo) resist the first day-first show temptation of Bollywood.

MULTIPLEX V/S SINGLE SCREENS IN INDIA

A lot of such cinema halls / theaters were set up over 30-50 years back, largely by local

entrepreneurs and businessmen. A combination of highly fragmented ownership, high

entertainment tax rates, large cost of setting up new theaters, and unavailability of organized

funding has resulted in many such theaters not being able to continuously upgrade or

renovate their facilities, thus resulting in a decline in the quality of such theaters.

However over the last 5-7 years, factors such as strong economic growth, falling interest

rates, increased interest in real estate development, increased consumption levels, etc. have

resulted in a large boom in the Organized Retail sector in India. A number of large organized

retail outlets have been trying to attract large footfalls by building in attractive Properties

such as branded food & apparel outlets as well as theater chains. In fact, movie theaters –

especially the new format multiplexes which provide high quality viewing experience – are

fast emerging as one of the key drivers of footfalls in a number of organized retail outlets,

resulting in a renewed interest in investment in and growth of the movie exhibition business

in India.

Demands of Single screen theatre Owners:

Entertainment Tax reduction.

Hike in service charge.

Exit policy (The business could not wind up).

Electricity at concessional rates.

Abolition of show tax imposed by municipal bodies.

De-linking of Property Tax from box-office collections.

Exemption on taxes for film hoardings in theatre premises.

With multiplex industry’s soaring business and ominous presence, can the single screen

cinema halls sustain its business, is the biggest buzz. Single screen theatres and talkies in

the city are a passé now. They are inconspicuously disappearing into oblivion in the wake

of rampant multiplex culture. Besides the government ordinance which ensures a

complete entertainment tax waiver and concessions to multiplexes, the populace audience

also has deserted the single screens. The nature of multiplex entertainment, which offers

video arcades, bowling alleys and pool parlors spiced up with their lavish and multi-

cuisine food courts, does ensure that the audience is lured towards its glitterati.

MULTIPLEXES AND MEGAPLEXES

North America's first two-screen theatre was created in 1957 when expanded the 20 year old

facility. Taylor is the inventor of the multiplex or Cineplex, and later, opening the 18-screen

Cineplex, the world's largest at the time. American Multi-Cinema (now AMC Theatres)

become pioneer of the multiplex in 1963 after realizing that it could operate several attached

auditoriums with the same staff needed for one through careful management of the start times

for each movie. Since that time multiple-screen theatres have become the norm, and many

existing venues have been retrofitted so that they have multiple auditoriums. A single lobby

is shared among them. In most markets, nearly all single-screen theatres have gone out of

business. Because of the late development of multiplexes, the term "cinema" or "theater" may

refer either the whole complex or a single auditorium, and sometimes "screen" is used to refer

to an auditorium.

A popular movie may be shown on multiple screens at the same multiplex, which reduces the

choice of movies but offers more choice of viewing times or a greater number of seats to

accommodate patrons. Two or three screens may be created by dividing up an existing

cinema, but newly built multiplexes usually have at least six to eight screens, and often as

many as twelve, fourteen or even sixteen. In these large modern theaters, an electronic

display in the ticket hall often shows a list of movies with starting time, auditorium number,

admission rating, and whether it is sold out. Sometimes the number of remaining available

seats is shown as well. At the entrance of each auditorium there may be a one-line electronic

display with the title of the movie. After the movie has started, it can display the title and

time of the next scheduled showing.

Although definitions vary, a large multiplex with 20 or more screens is usually called a

megaplex. The first megaplex is generally considered to be the Belgium, which opened in

1988 with 25 screens and a seating capacity of 7,500.

Adlabs Plans India's First Megaplex Chain

Adlabs Cinemas, An Anil Dhirubhai Ambani Group promoted Cinema Exhibition Company

plans to bring in the concept of megaplex in India & Plans to build 12 such megaplex in the

next five years. Megaplex would have 11-15 screens (Unlike 5-6 screens in a multiplex) and

a seating capacity for more than 4000. Apart from the movie auditoriums, the megaplex

would offer Gaming Zones, Kids Zones, Food Courts and other Value Added Services.

As per Adlabs Cinemas COO Tushar Dhingra, Adlabs has carefully chosen the locations

keeping in mind the high spends by consumers in these catchments areas. In addition, the

Adlabs is in the process of signing up seven more locations for building such megaplex. The

exhibition company is in the process of sourcing hi-end digital technology from overseas

partners.

GROWTH DRIVERS OF MULTIPLEX BUSINESS

At a time when single-screen theatres are dying due to lack of footfalls, people are queuing

up at multiplexes that sell tickets at almost 5 times the prices prevailing in single-screen

theatres. This fact provides ample testimony to the increasing prosperity as well as the Indian

consumers’ willingness to pay for superior-quality entertainment. Given the prevailing

demand-supply dynamics, it is believe that the sector offers high visibility for steady cash

flows.

Supply side - Improving dynamics:

On the supply side, it is looked at content suppliers, real estate suppliers and the prevailing

regulatory environment in order to judge the visibility of revenues from the sector.

Content supply set to boom:

Multiplexes are in existence because people want to watch movies in a quality ambience.

Hence, as a direct corollary, more footfalls will be generated with more movies being

released. In this sense, the multiplex operator can do nothing but depend on the suppliers of

content (movie producers and distributors) for a regular and high-quality supply of content to

generate higher number of footfalls. Content supply is set to boom in the coming years

mainly because of the following factors:

Increasing investment in film production:

Film production is presently going through a wonderful phase as far as supply of funds is

concerned. This space has been attracting a lot of attention because of its inherently strong

fundamentals. A number of players with deep pockets have entered this space, which should

keep the content pipeline robust over the coming years. In this year so far, an investment

pipeline of $1.7bn has been announced in this space (investible over the next 2-3 years).

Producers are now flush with cash and are no longer overly dependent on informal sources of

funding. This trend will continue in the medium-term and supply of content will not be a

problem for multiplexes. Moreover, ticket sale reporting is far more transparent in

multiplexes than in single-screen theatres. This results in higher film revenues for producers,

which can be ploughed back into movie production.

Reducing shelf life of movies making multiplex the ideal format for distributors:

The shelf life of a movie has dramatically reduced from a few months earlier to merely a 1-2

week window now. This has significantly reduced the time window within which producers /

distributors can monetize the movie and recover their costs. Multiplexes, with multiple

screens, have far more flexibility in scheduling of movies, which enables them to exhibit

multiple shows of a single movie simultaneously, thereby helping distributors recover a

majority of the anticipated revenues from the film during the first week itself. For instance,

31 shows of the movie 'Race' were shown on a single day by a multiplex operator in Mumbai.

Today, multiplexes are contributing 35-40% to the overall domestic box office collections

with less than 5% of the total screens under operation. The format is highly relevant for the

distributors and none of them can afford to bypass it and still make money on films.

Hollywood films gaining ground - more content supply:

Hollywood films are increasingly finding acceptance in India, making India the fifth-largest

market of Hollywood films in Asia and the 15th largest market for Hollywood globally. An

increasing number of Hollywood films are being released in India in multiple languages with

greater number of prints. For instance, Spiderman 3 was released with 600 prints in 4

languages. The film was a blockbuster on the Indian domestic circuit, clocking $4.5mn

during the opening weekend. The number of foreign films released in India is set to grow,

especially with large studios such as Reliance Big Entertainment and Yash Raj Films

foraying into foreign film distribution. It is expected trend to benefit the multiplex industry in

terms of ensuring a steady stream of content.

Real Estate Supply:

Multiplexes are often regarded as the footfall magnets for malls. The concept of shopping-

cum-dining- cum-entertainment outing is gaining popularity among the urban populace,

where multiplexes in malls become the most relevant destination choice. Almost all

upcoming malls have a multiplex operator as an anchor tenant. Hence, the supply of real

estate will not be an issue for the sector, even though the pace might be slow due to

development delays.

India is presently witnessing a retail revolution with many big players foraying into organized

retail and many mall development plans being announced in order to cater to their expansion

plans. The pace of mall development will surely ensure availability of quality real estate for

multiplex operators.

Encouraging regulatory environment:

All entities linked to the entertainment space are required to pay entertainment tax, which is a

state subject. Entertainment tax in the past was as high as 100% of the ticket revenues in

some states, which made exhibition projects unviable in many cases. However, many state

governments appreciate and understand the need to rationalize entertainment-tax levels and

have provided for either entertainment-tax exemptions for multiplex operators or reduction of

entertainment-tax to more affordable levels.

Demand Side - Strong pull:

Demand side environment has never been better for the whole media & entertainment

industry in general and multiplex sector in particular. A lot of demographic changes coupled

with sector fundamentals are expected to fuel demand side of the story for the sector.

Prosperity to drive discretionary spend:

India is a highly favorable country for consumer industries with all the key indicators

pointing towards higher consumer spends in the coming years. It has seen its per capita

income doubling in the last 6 years, it has more than 60% of its people under the age of 60,

urbanization and exposure to western lifestyle is rising, all leading towards increasing

consumerism in the coming decade. In the buoyant times; people tend to spend more on the

leisure based consumption. For the multiplex sector, the target group is in the age group of

15-60 years of age, which visits the theaters more often than others.

Where will you watch them?

India is an entertainment hungry nation, and the major sources of entertainment are cricket

and Bollywood. More than 3.3bn tickets are sold in India annually, this makes us the most

cinemas going population in the world. Even then, there are only 11,000 screens operational

in the country. Secondly, 95% of these are single screen theatres many of which have poor

quality ambience. Most of the single screen theatres are run by single proprietor, often

without proper operational management skills. Moreover, because of the poor quality of

prints supplied to the single screen theatres in the rural areas, footfalls have been coming

down. On top of it, these screens are not eligible for entertainment tax exemptions. These

factors have eroded the viability of these screens resulting in poor infrastructure spend which

further reduces footfalls.

People willing to pay for quality:

With the entry of multiplexes, which provide better quality movie watching experience at a

higher price compared to single screen theaters, more and more middle income group people

are coming back to the theatres thus unlocking a latent demand. This is a classic case of

leisure consumption winning over value proposition in India. As content supply booms, more

and more people will turn to multiplexes because of the rising willingness of people to pay

for such services.

Enough space for more multiplexes:

There is enough space for more multiplex projects given the quantum of demand and lack of

supply in the sector. Our preliminary analysis suggests that at national level and considering

only the urban population demand in the age group of 15-60 years, 662 multiplexes with 3

screens per property i.e. 2000 screens can operate at 35% capacity. All of the multiplex

players combined are operating only 500 screens at present, hence, even though there might

be a case for overbuild in some pockets, overall there is enough scope for further screen

supply.

KEY PLAYERS IN MULTIPLEX

1. PVR CINEMAS:-

PVR Cinemas setup India’s first multiplex in 1997 at Delhi. The company has been funded

by ICICI Venture and is in final stages of closing second round of equity funding for future

expansion. PVR Cinemas is focusing on developing multiplex properties in Northern,

Western and Southern India (Bangalore & Hyderabad).

Strong operational performance: PVR is one of the leading multiplex operators with

very strong performance on operational parameters. The company has been able to

establish itself as one of the premier entertainment destinations, which has resulted in the

highest occupancies, footfalls and spend per head as compared to all of the other

multiplex operators.

Aggressive expansion plans: PVR intends to open 100 screens in the coming two years.

This is assuming a 50% discount to these plans for our estimates, in order to rule out mall

delays. Among the new screens, 20-30 will be high end PVR Premiere screens with ticket

prices in the range of Rs150-Rs750. It has already opened 17 out of the total 30 screens

that expect for FY09E, thus providing more certainty to our estimates.

Foray into co-production: PVR has, through PVR Pictures, entered into film co-

production, after its first movie met with beginner’s luck. It has 4 movies lined up for

FY09E and intends to ramp it up to 8-10 movies in FY10E. We expect the movie

business to operate at 13% EBITDA margin and contribute 11% to the total revenues by

FY20E.

Leading Multiplex operator: PVR is one of the leading multiplex chains in India with

101 screens under operation in 14 cities at present. PVR has been successful in building a

lifestyle entertainment brand because of its focus on customer service and quality of

experience. Because of the strong brand and presence at prime locations, PVR has found

a very encouraging response from the customers. It attracted 18 million patrons with

occupancy ratio of 41% in FY08, both the highest numbers among all the multiplex

players. Today, it contributes 10% plus to the total domestic box office collections in the

country, showing a clear dominance.

PVR Premiere to increase ATPs: The Company has recently started a chain of luxury

cinemas branded as PVR Premiere which will be present only in the metros and other

affluent cities. These screens provide a very high quality digital cinema viewing

experience in luxurious setting. Average ticket price for these screens is in the range of

Rs150-Rs750, as compared to the normal ticket price of Rs70-Rs250. From 2 screens at

present, PVR Premiere will reach 30 screens by FY10E which will help increase the

overall ticket revenues.

JV with Major Cineplex to strengthen presence: PVR has formed a 51:49 JV with

Major Cineplex, the largest exhibition player in Thailand, to further strengthen its

presence in the lifestyle entertainment space. The entity, branded as PVR Blu-O

Entertainment, will open bowling alleys, karaoke centers, ice skating rinks and gaming

zones across the country. It is believe that this venture is a well thought out move and

complements well PVR's positioning as a leading out of home entertainment provider.

With a strong and experienced JV partner like Major Cineplex, execution will be fast

paced. However, due to a recent start, we are not factoring in any of the traction from this

initiative as of now.

Entertainment tax burden to decline: PVR started its operations from those territories

where entertainment tax exemption was not available, e.g. Delhi NCR region. At present,

it pays E-tax on 16 out of a total of 22 properties. E-tax as % of gross ticket revenues is

amount the highest for the company at 24% in FY07.We expect E-tax % to come down to

18% in FY09E and 17% in FY10E due to more screen additions in areas where E-tax

exemption is available like Punjab, West Bengal and Mumbai. Recently, Delhi

government has lowered the entertainment tax rate to 20% from the earlier 30% levels.

This will help PVR the most as it operates 46 screens in that region.

Existing Locations:

Name Location Screens Seats

PVR Bangalore Bangalore 11 NA

PVR Priya Delhi NA 944

PVR Saket Delhi 4 1,000

PVR Narania Delhi 4 830

PVR Gurgaon Gurgaon 7 1,300

PVR Plaza Delhi NA 300

Spice PVR Noida NA 1,821

PVR Hyderabad Hyderabad 5 812*

PVR Lucknow Lucknow 4 928

PVR Indore Indore 5 1,199

PVR Mumbai Mumbai 2 + 3 NA

Grand Total 57 Approx 12360 Approx

Upcoming:

Cinemas Screens Seats Expected

In

PVR CINEMAS Mumbai 6 Screens 1,750 Fiscal 2006

PVR CINEMAS New

Delhi 6 Screens 1,269 Fiscal 2007

PVR CINEMAS Mumbai 7 Screens 2,050 Fiscal 2007

PVR CINEMAS Mumbai 8 Screens 2,200 Fiscal 2007

PVR CINEMAS New

Delhi 6 Screens 1,500 Fiscal 2008

PVR CINEMAS Chennai 7 Screens 1,600 Fiscal 2007

PVR CINEMAS Mumbai 4 Screens 1,250 Fiscal 2007

PVR CINEMAS Ludhiana 4 Screens 1,000 Fiscal 2007

TOTAL

71

Screens 19,310 Seats

2. INOX LEISURE:-

Inox Leisure plans to target very specifically cities in South India Like Bangalore, Chennai,

Hyderabad, Vishakhapatnam.

Consistent performer: Inox has shown impressive operational performance,

delivering a 65% CAGR in top line in the past 5 years with the highest EBITDA margins

in the multiplex space. The company has shown remarkable pace of expansion in the last

3-4 years with commendable speed and quality of execution.

Expansion in tier I and tier II cities to be value accretive: Inox has more

than 50% of its screening the tier I and II cities, which has rewarded the company very

well in the past. It plans to add 100screens in the coming 2 years, 70% of which will

come up in select tier I and II cities. Believe that move will create value for the company

as these locations are comparable to metros at the EBITDA level.

Impressive capacity ramp-up over the last 4 yrs: Inox Leisure (Inox) was

set up as part of a diversification strategy by its parent company, Gujarat Flurochemicals.

The company opened its first multiplex in Pune in 2002. Since then, the company has

come a long way as one of the leading premier multiplex chain operators with a strong

brand recall. Starting from just 4 screens in 2002, Inox has ramped up its presence to 84

screens in 24 locations at present. While registering a strong capacity growth in the past 4

years, the company has also been very successful in building a strong entertainment brand

for its cinemas. Operating in an industry marked by execution delays, both the speed and

the quality of expansion are commendable considering that the promoters didn't have

prior exposure to the exhibition industry.

Top 25 cites - compelling growth stories: Crisil Research has identified 25

cities where consumption potential is high due to the strong economic growth and

increasing urbanization. Taking organized retail market size as a proxy for future growth

potential, they have identified 25 locations that have the potential to become high

consumption centers in the next 3-4 years. This combined with the past experience of the

company shows that there is a lot of room for leisure consumption at these centers and

hence the move into these cities will be value accretive.

E-Tax exemptions: Inox operates 24 properties but pays entertainment tax

only on 7 of them. 13 properties are fully entertainment tax exempt and 4 are availing

exemption partially. This has resulted in an E-tax payment of 10% as a proportion of

gross ticket revenues during FY07. It has risen to 14% in FY08 as it opened two non E-

Tax exempt properties and 2 of its properties became eligible to pay E-Tax.

Move to create value for the company: Believe that the expansion in these

locations is a well thought out move and will create value for the company. While it's true

that the average ticket prices in these locations are lower than those in the metros, it gets

compensated with far lower rentals and staff expenses on the cost side. Moreover, it gives

the company access to prime locations in these cities which provide assured footfall

growth has the company has seen in the past.

Existing Multiplexes:

City Location No of screens No of seats

Mumbai Nariman Point 5 1335

Bangalore Magrath Road 5 1103

Vadodara Race Course Circle 4 1318

Pune Bund Garden 4 1316

Goa Panaji 4 1271

Kolkatta Salt Lake 4 1144

Kolkatta Elgin Road 4 1016

Jaipur Vaibhav Nagar 2 787

Grand Total 38 11181

Upcoming Projects:

Location Screens Seats

Vishakhapatnam 4 1,300

Raipur 4 1,250

Lucknow 4 1,000

Kolkatta 5 1,042

Kharagpur 4 1,200

Hyderabad 6 1,470

Chennai 5 1,156

Bangalore 4 1,100

Bangalore 7 1,860

Bangalore 7 1,720

Grand Total 56 14,598

3. FAME INDIA:-

Fame India (Fame) is one of the smaller multiplex operators among the listed Indian

exhibitors, with a current slate of 16 properties and 61 screens under operation. Boasting of a

predominantly urban presence, especially in Western India, Fame has been disproportionately

focused on Tier-I cities. With 8 of its currently operational 16 properties located in Mumbai,

Fame is looking to aggressively add to its existing screen count and establish a pan-Indian

presence. Shringar Cinemas (Fame), managed by promoters who have been one of the largest

film distributors in Western India for Hindi films, Company is focusing on Western India i.e.

Mumbai, Pune, Nasik, Aurangabad as well as Eastern Indian i.e. Kolkata.

Heavy skew of properties towards Tier-I locations: 8 of the company's

currently operational16 properties are situated in Mumbai, with three more lined up

before Mar'09. This translates into Mumbai accounting for a whopping 42% of the

company's proposed seat count (by Mar'09). In fact, the two Western states of

Maharashtra and Gujarat are likely to account for 75% of the company’s seat count by

Mar'09. This skew towards Tier-I cities is likely to translate into marginally improving

ATPs in the near-term on a full-year basis from FY09 onwards. Fame currently

commands an ATP of Rs97, a discount of 21% and 24% to that of Inox and PVR

respectively.

Scale to bring in margin expansion triggers: Fame is among the smallest

exhibitors in the multiplex space currently. As of FY08, Fame commands fairly low

EBITDA margins essentially because of a low scale of operations. Given the high degree

of operating leverage (characteristic of the business), we believe that EBITDA margins

would improve once the company is able to expand its screen and seat count.

Existing Multiplexes:

Fame Adlabs 5 screens , 1342 seats

Fame Malad 6 screens, 1571 seats

Fame Nasik 3 Screens, 1407 Seats

Fame Kandivali 4 Screens, 1275 Seats

Fame Kolkata 4 Screens, 900 Seats

Fame Pune 3 Screens, 1009 Seats

Grand Total 25 Screens 7504 Seats

Upcoming Projects:

FAME Ghatkopar 4 screens and 1250 seats

FAME Aurangabad 3 screens and approximately 1000 seats.

FAME Hyderabad 3 screens and approximately 900 seats

FAME Surat - Raj Empire 6 Screen

FAME Thane 5 screens

PEST ANALYSIS

PEST analysis stands for "Political, Economic, Social, and Technological analysis" and

describes a framework of macro environmental factors used in the environmental scanning. It

must be rated on its potential impact on the company, and rated on its likeliness of

occurrence. Multiplying the potential impact parameter by the likeliness of occurrence

parameter gives us a good indication of its importance to the firm.

1. Political and legal environment:

At the federal level, India is the most populous democracy in the world. For most of the years

since independence, the federal government has been led by the Indian National Congress

(INC). Politics in the states have been dominated by several national parties including the

INC, the Bharatiya Janata Party (BJP), the Communist Party of India (Marxist) (CPI (M)) and

various regional parties.

How does Political and legal environment affects the business?

Political factors include areas such as tax policy, employment laws, environmental

regulations, trade restrictions and tariffs and political stability. This covers the impact of

political institutions on the business. There are 3 institutions which together constitute the

total environment.

1. Legislature: also called parliament at central level and Assembly at the state level is

law making body.

2. Execution: known as the government, is the law implementing body. The legislature

decides and the executive acts.

3. Judiciary: This has the role of a watchdog. The main function of the judiciary is to

ensure that both the legislature and the executive work with in the confines of the

constitution and in public interest.

2. Economic environment:

For most of its post-independence history, India adhered to a quasi-socialist approach with

strict government control over private sector participation, foreign trade and foreign direct

investment. However, since 1991, India has gradually opened up its markets through

economic reforms and reduced government controls on foreign trade and investment. Foreign

exchange reserves have risen from US$5.8 billion in March 1991 to US$308 billion on 4 July

2008. Privatization of publicly owned companies and the opening of certain sectors to private

and foreign participation have continued amid political debate. India's GDP in terms of USD

exchange-rate is US$1.089 trillion. When measured in terms of purchasing power parity

(PPP), India has the world's fourth largest GDP at US$4.726 trillion. India's per capita

income (nominal) is US$977, while its per capita (PPP) is US$2700.

With an average annual GDP growth rate of 5.7% for the past two decades, the economy is

among the fastest growing in the world. India has the world's second largest labour force,

with 516.3 million people, 60% of whom are employed in agriculture and related industries;

28% in services and related industries; and 12% in industry. The agricultural sector accounts

for 28% of GDP; the service and industrial sectors make up 54% and 18% respectively.

Along with India’s fast economic growth comes its growing demand for energy. According to

the Energy Information Administration, India is the sixth largest consumer of oil and third

largest consumer of coal.

Although the Indian economy has grown steadily over the last two decades; its growth has

been uneven when comparing different social groups, economic groups, geographic regions,

and rural and urban areas. Despite significant economic progress, a quarter of the nation's

population earns less than the government-specified poverty threshold of $0.40 per day. In

2004–2005, 27.5% of the population was living below the poverty line.

More recently, India has capitalized on its large pool of educated, English-speaking people,

and trained professionals to become an important outsourcing destination for multinational

corporations. India has also become a major exporter of software as well as financial,

research, and technological services.

In 2007, exports stood at US$145 billion and imports were around US$217 billion. Textiles,

jewellery, engineering goods and software are major export commodities while crude oil,

machineries, fertilizers, and chemicals are major imports.

The current economic standing of India:

Exchange Rates :-

INR / 1 USD: 48.7100

INR / 1 Euro: 64.7000

INR / 100 Japan YEN: 54.4100

INR / 1 Pound Sterling: 72.8580

Lending / Deposit Rates :-

PLR: 12.75%-13.25%

Savings Bank Rate: 3.5%

Deposit Rate: 7.50%-9

Policy Rates : -

Bank Rate: 6.0%

Repo Rate: 6.50%

Reverse Repo Rate: 5.00%

Reserve Ratios :-

CRR:  5.50%

SLR:  24.0%

Capital market:

BSE Sensex:  9645.46 *

S&P CNX Nifty:  2920.15 * 

* As on 13 DEC., 2008

GOVT. securities market:    

8.24 GS 2018:7.3912% - 7.6510%

91 day T-bills:  5.6539%*

182 day T-bills:  5.6075%*

364 day T-bills:  6.2985%*

* Cut-off at the last auction

Money Market:

 Call Rates:  3.05%-6.00%

3. Social and Cultural environment:

Culture refers to the complex whole which includes knowledge, belief, art, morals, laws,

customs and other capabilities and habits acquired by an individual as a member of society.

How does culture influence the business?

Purchasing power is directed towards people’s tastes and preferences. With over 30 different

languages, over 200 mother tongues and around 2000 dialects, India is a complex nation of

cultures. Consumption behavior, dress codes, food habits, values, attitudes, aspiration of

people and traditional importance etc. plays a vital role. India's culture has managed to

preserve established traditions while absorbing new customs, traditions, and ideas from

invaders and immigrants and spreading its cultural influence to other parts of Asia. Many

Indian festivals are religious in origin, although several are celebrated irrespective of caste

and creed. Some popular festivals are Diwali, Ganesh Chaturthi, Ugadi, Thai Pongal, Holi,

Onam, Vijayadasami, Durga Puja, Eid ul-Fitr, Bakr-Id, and Christmas. India has three

national holidays. Traditional Indian family values are highly respected, although urban

families now prefer the nuclear family structure due to the socio-economic constraints

imposed by traditional joint family system. With an estimated population of 1.13 billion,

representing 17% of the world population, India is the world's second most populous country.

Almost 70% of Indians reside in rural areas, although in recent decades migration to larger

cities has led to a dramatic increase in the country's urban population. India's largest cities are

Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad and Ahmadabad. India is the most

culturally, linguistically and genetically diverse geographical entity. Hindi, with the largest

number of speakers, is the official language of the union. English, which is extensively used

in business and administration, has the status of a 'subsidiary official language;' it is also

important in education, especially as a medium of higher education. The constitution also

recognizes in particular 21 other languages that are either abundantly spoken or have classical

status. Over 800 million Indians (80.5%) are Hindu. Other religious groups include Muslims

(13.4%), Christians (2.3%), Sikhs (1.9%), Buddhists (0.8%), Jains (0.4%), and others. India's

literacy rate is 64.8% (53.7% for females and 75.3% for males). The state of Kerala has the

highest literacy rate (91%) Bihar has the lowest (47%). The national human sex ratio is 944

females per 1,000 males. India's median age is 24.9, and the population growth rate of 1.38%

per annum; there are 22.01 births per 1,000 people per year.

Ecology:

ecological concerns that affect the firms production processes

ecological concerns that affect customers' buying habits

ecological concerns that affect customers' perception of the company or product

Socio-Cultural:

Demographic factors such as population size and distribution, age distribution,

education levels, income levels, ethnic origins and religious affiliations.

Attitudes towards materialism, capitalism, free enterprise; individualism, role of family,

role of government, collectivism; role of church and religion; consumerism;

environmentalism; importance of work, pride of accomplishment.

Cultural structures including diet and nutrition, housing conditions.

4. Technological environment:

Technological factors include ecological and environmental aspects and can determine

barriers to entry, minimum efficient production level and influence outsourcing decisions.

Technological factors look at elements such as R&D activity, automation, technology

incentives and the rate of technological change. Science and technology enable man to

overcome distance, control birth rate, save lives, generate, preserve and distribute energy,

discover new material to substitute existing ones, and provide himself with a lot of leisure

and comfort in the process.

How does technology influence the business?

The technology has helped the business in projection of film, screening, distribution, seating

arrangements, creating ambience, computerisation in box office collections, new

manufacturing processes, new products and services of competitors, new products and

services of supply chain partners, any new technology that could impact the company and

cost and accessibility of electrical power.

SEGMENTATION, TARGETING AND POSITIONAING

1. Segmentation:

Geographic segmentation:

Region: South India includes Chennai, Bangalore, Tamilnadu, Karnataka etc. West

India includes Mumbai, Gujarat, Maharashtra, Goa, Rajasthan etc., North India

includes Punjab, Delhi, MP, UP, Bihar, Haryana etc., and East India includes Kolkata,

West Bengal.

City: class 1, class 2, metros.

Population: population over 20000. Over 50000, over 100000 etc.

Demographic segmentation:

Age:

Current Population: 1 billion+ (1,080,264,388) growing between1.4% to 1.8%

annually

Age structure: 0-14 years: 31.2%, 15-64 years: 63.9%, 65 years and over: 4.9%.

Median age: 24.66 years

A younger population tends to have higher aspirations, and will spend more as it enters the

earning phase.

(Source: CIA fact sheet July 2005 & CII – KPMG Report 2005 accredited NCAER)

Urban consumer’s shopping basket is changing

Within the overall private final consumption expenditure there are category shifts happening

in urban consumption pattern. A study by KSA Technopak, India shows that urban consumers

have increased their expenditure on leisure & entertainment. Spends on eating out, movies

and theater, and books and music has increased the most. At the same time urban consumers’

saving and investment has reduced from 14% to 5.2 %.

Urban consumers spend (%)

Source: KSA Technopak, India

Increasingly, a number of mall developers are

considering Movies/Theaters and Entertainment

outlets as the key elements attracting footfalls to

Categories 1999 2000

Savings & Investment 14 5.2

Consumption:

Shopping 22 24.3

Leisure& Entertainment 21 29.1

Grocery 43 41.4

Sub Total of Consumption 86 94.8

Total 100 100

the malls. This is being reflected in the attractive rental rates offered to such outlets, in

comparison to other categories of outlets in malls. As a result, Multiplexes are fast emerging

as one of the key anchor tenants for most organized retail outlets in India.

Increase in Disposal Income

Multiplexes generally cater to High and Middle income Groups, with an increase in the

number of households within this earning group, will result to higher consumption and

spending patterns. Similarly migration of households from lower income to middle income

levels will further drive the consumption patterns. Urban consumers have increased their

expenditure on leisure & entertainment. Simultaneously spends on eating out, movies and

theater, and books and music will increase.

Changing Demographic profile

India is witnessing a significant change in the age profile of its’ over 1bn population, which is

likely to lead to accelerated consumption over the next few years. India has a median age of

24 years for its population against 36 years for the USA and 30 years for China. A younger

population tends to have higher aspirations, and will spend more as it enters the earning

phase.

Source: KSA Technopak India

The owners mostly divide the films as per the category of films i.e. they mostly show

the movies which are more successful in screens like animation movies at morning

shows only.

After that they show all family type movies or adult movies at night.

2. TARGETING:

Companies now are mostly targeting teenagers i.e. college going students, which are

capturing hearts of all who like to watch movies in theatres.

They keep cheap price for tickets during the morning shows and the price is

increasing as time in a day passes. This usually attracts the youngsters and people

who work at night shift.

The different schemes are framed to increase the sales on Tuesday to Thursday where

the sales goes down. The rates of ticket high for new release and when there are any

hit movies running on Saturday and Sunday. 1 ticket free on 1 in Hutch sim cards.

3. POSITIONAING:

Cinemas have acquired a very good position in the viewers mind.

It usually attracts all the age groups as they provide good services.

Cinemas are located at many places but the public is more attracted towards Mall.

Within a short period of time they have attained goodwill in the market.

SERVICE MARKETING MIX

1. Product:

This takes the customer-benefit concept and translates them in order to determine the aim and

intention of the organization. It is based of idea that actual service offered could be divided in

to no. of levels which relates to customer’s need, satisfaction and benefit.

Core service benefit level: The Core Competency here is Screening of Movies. This

provides platform for the development of other peripheral levels.

Expected service level: The minimum set of expectations customer has about service

and which marketer must strive to provide are cinema hall, Box – office, Food &

Beverage counter, Proper lighting facility etc.

Augmented level: It includes fundamental service and benefits that distinguish from

competitors. The augmented services are enormous like the Shopping arcade and

other entertainment avenues such as Game parlor, DJ party hall, Bowling, Cafeteria,

Ice skating etc. Good options for food like the Cafeteria where you get food made in

hygienic conditions.

2. Price:

This is only element of the marketing mix which generates revenue.

It must correspond to the customer’s perception of value.

Uses differential or flexible pricing for segmented customer.

Factors affecting pricing classified as:

- Internal factor which are controllable: Organisation, other marketing mix

elements, positioning, Fixed and variable costs.

- External which are uncontrollable: Competition, Demand, Regulatory factors

and unregulated factors.

Characteristics of service such as Intangibility, perishability, variability affects.

The average between Rs. 70 & Rs.250 depending upon the box office performance of

the movies screened and the show time & day.

The rates of morning shows are quite cheap and affordable and as the day time pass

the rates are likely to be increased to target different patrons (customer).

3. Place:

The production place and distribution place is inseparable.

The distribution means provision of personal service and information to the customer

which adds value.

The 2 important aspects which must taken care are:

- Availability of service at right time and right place.

- Should be accessible with care and convenience by customers.

To select location the determining factors are target marketplace, sales, interaction,

customer needs and wants, infrastructure facility, competitors operation place,

flexibility to accommodate future needs etc.

The exhibition companies are targeting urban as well as rural parts of country.

Franchising can help to increase the sales.

The multiplex has its outlet in popular malls only.

For example: The proposed multi-entertainment centre would come up in two major cities of

MP i.e. Indore and Bhopal. Bhopal is the capital of the State of the MP, The city accounts for

the population of over 1.5 million; however it has less than 20 theaters in the City and clearly

does not have any multiplex or 3D supporting theaters. Further, the city does not have an

integrated entertainment centre offering a complete family package. This illustrates a huge

gap between demand and supply in the city for which could be filled by the proposed

multiplex in the city.

Indore is touted as the Business capital of the State. The city has a population of more than

1.6 million and has few multiplexes launched recently. However, the city presently does not

have an integrated entertainment centre. Further, Indore is in close proximity to some cities

such as Ujjain and proposed project could attract visitors from these places.

4. Promotion:

It helps in encouraging sales and creating awareness among segmented group.

Continuity in communication, tangibility to service, through internal employee

behavior the promotion can be done.

Apart from Advertising in (radio, print media), sales promotions (Contest, games,

premium gifts, coupons), personal selling (Inbound call center, frontline employee),

public relations (Sponsorship of event, inter college festivals, events, press release,

social and community involvement), publicity, Word of mouth (reference through

celebrities), Website etc.

Marketers may support In-Theatre advertising and promotions with standees, Backlit

Display boards, Floor Graphics etc.

Popcorn Bag Sponsorship, Product Sampling and Coupon Distribution.

Provision of schemes to target non peak period in a day or week with various schemes

like Buy 1 Get 1 Free with VODAFONE (Hutch) TUSEDAY, AXIS BANK (UTI

BANK) variable rate of discount on other days (Monday, Wednesday, Thursday).

For example:

Booking of ticket vie phone, internet.

Celebration of birthday, anniversaries.

Corporate bookings, group bookings.

Discount of popcorn and cold drinks.

Membership card to provide better service to regular customer.

Competitions, quiz, game show.

Product launches

Product displays and on-the-floor contests

Tie ups with the Game Zone or F&B.

Menu branding at the café.

5. People:

The interpersonal relationship between multiplex (Website, box office person,

security & bag checker, Ticket checker, person at food & beverages counter, cleaners,

call center people, home delivery person, online person etc.) and customer plays very

important role in customer satisfaction. This people are known as internal customer.

The service quality is being judge by the customer on the behavior of the internal

customer such as Reliability, Responsiveness, assurance, empathy, tangibility.

The multiplex owners must empower the employee along with promoting teamwork,

training and development etc.

Behavior in a friendly manner and always ready to help. Well dress especially in their

uniform.

The best employee can create loyal customers; achieve sustainable growth, profit

increases.

6. Process:

Designing of process includes Location facility, design and layout for effectiveness in

workflow and to the customer convenience, procedure and job definition, degree of

customer contact, customer participation, equipment selection, adequate capacity and

quality measures.

Managing queues so that available space can be utilized.

The movie must be available to patrons (customer) at their according time.

The availability of service with a consistent quality should be the basic objective.

Try level best to provide interactive experience to patrons (customer).

If the issues are managed successfully which gives competitive edge.

7. Physical Evidence:

This is the tangible clues for the service which interacts with the customers.

This includes seating facility which inferences comfort, layout, availability; facility

inferences payphones, toilets, children amusement, atmosphere inference friendly,

cold, indifferent; accessibility inferences location of entrance, car parking; service

delivery inference efficient, prompt; overall appearance inference cleanliness, décor,

lighting, attractiveness.

Ambience includes temperature, lighting, noise, music, scent, colour. Space felt

comfortness, accessibility, visibility.

The directions are displayed regarding basic necessary things in specific places like

screen, toilet, food counter, box-office, drinking water etc.

They are providing to customer with different facilities like centralized air-condition,

comfortable seats etc. which create good ambience.

Furniture, layout, colour of interiors, tickets, luxury & comfortness.

Akshay Kumar, Anil Kapoor, Salman Khan or many other stars opinion about the

ambience which is attractive, distinctive and memorable and works as Public relation

activity.

SERVICE MARKETING TRIANGLE

The customer satisfaction should be the goal of the organization. The organizational values

and goals should be shared by all.

External Marketing [setting the purpose]:

The activities include develop of price and distribution or sale the service to customer.

Anything that is communicated to the customer before service delivery is known as external

marketing.

To make the firm understand a customer’s want and expectations.

Since it builds customer’s expectations and beliefs about service delivery.

It gives promise to the personal needs of target market.

It is necessary to understand the customer segmentation on the basis of demographics,

psychographics and geographic.

This can be achieving by marketing mix which tend to differ in respect of customer

group.

The company conveys promises through promotion campaign, corporate image and word

of mouth communication conveys through past experience which the customer has with

firm.

Care should be taken to maintain credibility while setting the promise because a very high

expectation may lead to a highly dissatisfied customer.

Internal Marketing [enabling the promise]:

The activities include to train and motivate the employee to work as a team in order to deliver

the service. It emphasis on critical role that enables the employees to keep the promises made

to the customer.

The employee must meet the customer expectations created in external marketing stage.

Service system and staff must support frontline employees because they interact with the

customer.

To make internal employee perform the organisation must employ market research,

market segmentation, and marketing mix to attract the customers.

Through internal marketing the organization can aggressively achieve competitive

advantage.

The communication helps for employee motivation and excellence.

An open management style helps for highest level of commitment and co-operation.

Human resource activities, continuous interaction, internal mass communication and

information support are the key components.

Interactive marketing [delivering the promise]:

This describes the employee’s skill in handling customer contact. It is real time marketing of

“Moment of Truth” where the employee directly interacts with the customer in order to fulfill

the promise.

Moment of Truth

The company dreams about the service product and communicates its promise externally to

the customers, and simultaneously also talk to its internal customers or the frontline

providers, convincing them, training them and enabling them, it is only the providers who

finally keep the promise. For the customers, the providers become the face of the company

and all their perception of quality and satisfaction is entirely dependent on the quality of

transaction or the result of meeting with the providers. The impression of the service is

entirely dependent on the quality of the frontline providers and how they conveyed to the

patron only by the behavior and efficiency of its personnel:

At Box Office counter

At Security Checking

At Food and Beverage counter

At Inside the screen hall

At disembarkation arena

This will help in achieving:

Flatter hierarchy

Faster reaction time

Free flow of ideas

Proactively eliminating barriers to communication

Turning people from administrator to facilitator and leader.

BASIC FUNCTIONAL AREAS

Design layout:

Traditionally a movie theater, like a stage theater, consists of a single auditorium with rows

of comfortable seats, as well as a lobby area containing a box office for buying tickets, a

counter and/or self-service facilities for buying snacks and drinks, and washrooms. These

Stage theaters are converted into movie theatres by placing a screen in front of the stage and

adding a projector. Many of these early theatres contain a balcony, an elevated platform

above the theater's rearmost seats. The rearward main floor "loge" seats were sometimes

larger, softer, and more widely spaced and sold for a higher price. Rows of seats are divided

by one or more aisles so that there are seldom more than 20 seats in a row. This allows easier

access to seating, as the space between rows is very narrow. Depending on the angle of rake

of the seats, the aisles have steps. In older theaters, aisle lights were often built into the end

seats of each row to help patrons find their way in the dark. Step in the aisles may be outlined

with small lights to prevent patrons from tripping in the darkened theater.

Pricing and admission:

In order to obtain admission to a movie theater, the prospective theatergoers must usually

purchase a ticket, which may be for an arbitrary seat ("open" or "free" seating, first-come,

first-served) or for a specific one. In the case of free seats, already seated customers may be

forced by staff to move one or more places for the benefit of an arriving couple or group

wanting to sit together.

The price of a ticket may be discounted during off-peak times e.g. for matinées, and higher at

busy times, typically evenings and/or weekends. It is traditional to offer the lower prices for

Tuesday for all showings (with Vodafone scheme), one of the slowest days of the week in the

movie theatre business, which has led to the nickname "cheap Tuesday." Almost all movie

theaters employ economic price discrimination: tickets for youth, students, and seniors are

typically cheaper.

Movie theater culture:

Movie theaters are associated with dating, popcorn and expensive treats. It is rather common

that people throw and leave their garbage on the floor in a movie theater, as opposed to the

cultural standard of cleaning up after oneself.

Lobby, food and drinks:

Movie theaters usually sell various snack foods and drinks on concession stands. The

facilities for buying snacks and drinks often represent the theater's primary source of profit

since most of the ticket revenue goes to the film distributor (and onward to the movie studio).

The noise of people eating, including the opening of wrappers, is frowned upon by some

moviegoers.

Sometimes movie going teenagers throw various foodstuffs most notably popcorn at each

other, though sometimes at other moviegoers. This is frowned upon by management.

Luxury Screens:

Cinemas in city centers are increasingly offering luxury seating with services like

complimentary refills of soft drinks and popcorn, reclining leather seats and service bells.

Seating:

Patron has a ticket for a specific seat. The seat can also be selected by the patron. The seating

arrangements are divided as per the facility provided by the exhibitor keeping all segmented

target audience. The price for plush back or couple seat is higher than other seats.

Presentation:

A modern theatre presents shorts commercial advertising, then movie trailers, and then the

feature film. Advertised start times are usually for the entire program or session, not the

feature itself. Thus people who want to avoid commercials might want to enter later, and

those who want to avoid the trailers, again later. Some movie theaters have some kind of

break during the presentation. There may also be a break between the introductory material

and the feature, usually limited to special circumstances involving extremely long movies.

During the closing credits many people leave, some stay till the end. Usually the lights are

switched on after the credits, sometimes already during them. Some films show additional

scenes while the credits are rolling. In multiplexes, theater chains often feature a continuous

PowerPoint-like presentation of slides between showings featuring a loop of movie trivia,

promotional material for the theater chains (such as encouraging patrons to purchase gift

certificates or buy concessions), or advertising for local and national businesses.

Digital cinema:

Digital cinema refers to the use of digital technology to distribute and project motion

pictures. The final movie can be distributed via hard drives, DVDs or satellite and projected

using a digital projector instead of a conventional film projector. Digital cinema is distinct

from high-definition television and in particular, is not dependent on using television or

HDTV standards, aspect ratios, or frame rates.

Age restrictions:

Admission to a movie may also be restricted by a motion picture rating system. According to

such systems, children or teenagers below a certain age may be forbidden access to theaters

showing certain movies, or only admitted when accompanied by a parent or other adult.

Furthermore, where movie theaters do not have this legal obligation, they may enforce

restrictions on their own. Accordingly, a movie theater may either not be allowed to program

an unrated film, or voluntarily refrain from that.

Ticket check; movie hopping:

The theaters are arranged in such a way that tickets are checked at the entrance into the entire

plaza, rather than before each theater. Younger patrons may also use this practice to enter

auditoriums showing age-restricted movies. At a theater with a sold-out show there is often

an additional ticket check, to make sure that everybody with a ticket for that show can find a

seat. The lobby is after the ticket check.

Anti-Piracy:

Piracy occurs when unauthorized copies are made of music, movies and similar works.

Initially, unauthorized recordings were made using hand-held video cameras to

surreptitiously record movies shown at movie theaters. Most found guilty face a fine of

varying degrees, although in some cases a jail sentence can be imposed. This is most likely to

occur only for people manufacturing large quantities of unauthorized CDs/DVDs.

Revenue or Accounting system:

The distributor drive hard bargains entitling cinemas to as much as 55% of the gross ticket

revenue during the first week and the balance changes in 10% increments per week from

there.

Intimacy:

Sometimes couples go to a movie theater for the additional reason that it provides the

possibility of some physical intimacy, where the dark provides some privacy (with additional

privacy in the back-row), i.e., the same amount of intimacy is a lesser form of public display

of affection. This applies in particular for young people who still live with their parents, and

these parents tend to monitor and/or forbid certain activities, and in the case of other social or

even legal problems with public displays of affection. Compared with being together in a

room without other people, it may also be reassuring for one or both of the couple (and for

parents) that the intimacy is necessarily limited. Arm rests pose a hindrance to intimacy for

some people. Some theaters have love seats: seats for two without an armrest in the middle.

The most modern theaters have movable armrests throughout the theater that when down can

hold a food container as well as act as an armrest or partition between the seats and when up

allows closer contact between the couple. Some theaters have sofas for greater comfort.

Risks and Concerns:

Slowdown in content supply:

As multiplexes are the consumers of content, they have no control over the supply quality and

quantity. Multiplexes thrive on rising footfalls which in turn depend on the better supply of

films from producers. Hence, any disruption on the supply side will definitely have a negative

impact on the multiplex players' growth.

Alternative entertainment avenues:

Movies compete for customer attention with other forms of entertainment viz. DVDs, TV,

cricket, festivals etc. An increased acceptability of these avenues will divert footfalls away

from multiplexes.

However, it is believed that there is enough room for all to exist and grow simultaneously. A

case in point is US, where almost all forms of entertainment are present and have been well

received by the consumers. Even then, footfall growth hasn't halted over there. Moreover,

there might be possible synergies among these formats which might benefit multiplexes, e.g.

showing of IPL matches on cinema screens.

Mall development delays

Supply of quality real estate has been a problem in the past for multiplex players. Mall delays

due to various reasons will hurt expansion plans of the companies. We are building in a 50%

delay in mall handovers to the multiplexes in our analysis. Any delay more than this will hurt

future growth of multiplexes.

Uncertainty over entertainment tax:

Entertainment tax in India is among the highest in the world leading to a much higher

occupancy levels required for break even of multiplexes. Even though state governments

have announced tax free windows for these players, uncertainty looms over the viability of

multiplexes after the window expires. We believe that the levels entertainment tax will come

down in the future, otherwise any increase will be passed on to the consumer to a large extent

like it is done at present.

Worsening economic environment:

The whole footfall growth story depends on rising prosperity in the country leading to higher

discretionary consumer spends. If the economic environment starts worsening for a prolonged

period, it will affect patronage levels negatively pulling down top line growths. This are

assuming very low CAGRs at the top line levels for all of the players and are quite optimistic

that multiplexes will grow as expected.

Great success of IPL:

Bollywood regularly competes with cricket as an entertainment category. One such property,

the Indian Premier League (IPL) was floated by the BCCI during Q1FY09 and held between

Apr'08 and Jun'08. This has been a double whammy for multiplex operators. On the one

hand, movie producers were reluctant to release their movies during the quarter; on the other

hand, popularity of IPL reduced cinema visits. Since no fresh content was forthcoming,

multiplex operators had to churn the old movies a little longer and hence, could not generate

footfall growth.

Our interaction with the management at various multiplex chains indicates that all operators

experienced low occupancy rates during the quarter. Given the fact that the DLF IPL is here

to stay as a property, at least in the foreseeable future, we believe that low occupancy levels

would characterize the first quarter performance. However, we also believe that going

forward, once the novelty factor wears off, and multiplex operators would be able to

progressively improve their occupancy levels.

Proposed Facilities:

The proposed Multi-entertainment centre would have following facilities that would

essentially cater to all the age groups:

Multiplex- The Movie Factory:

5- movie screens

Snacks & beverages outlets

Ticket counter/s

Movie promotion corner showcasing the upcoming movies through banners, small screen etc.

Imax:

3D theatre with a capacity of 200-300 seats

Snacks & beverages outlets

Recreation Zone:

Games Zone including bowling alley, simulators, kiddie rides, battle tanks,

carnival games etc.

Multi-cuisine or specialty restaurants

Outlets of national/ international food chains

Shopping arcade having various outlets of different brands

Handicraft mela exhibiting the art and crafts of different states of the country

Other Facilities:

ATM centres of different bank

Parking space

Administrative room

Promotional / Display systems:

Average of 100000 cinegoers expected to come to the multiplex in a day. With such a high

number of footfalls in the theater, a sizeable amount of revenue can be expected. Various

mediums like product displays, Neon display / hoardings in the complex, on screen

promotions, sponsorship of launches events etc. can be leveraged for revenues. Newer

concepts like printing of sponsors name on the tickets could be further used to enhance

revenues.

Rent from the shop owners / Bank ATMs:

Out of a total 200000 sq.ft of built up area, more than 62000 sq.ft. planned to be constructed

and leased out as commercial space. The rent rates in Marine Drive are amongst the highest

in the city. With premium branding of complex, a sizeable chunk of revenues are expected to

be generated by rent from shop owners.

Auxiliary Services:

A parking fee of Rs. 10 per four wheeler and Rs. 5 per two wheeler is generally

charged in cinema theaters. The same Figures can be used for calculating revenues.

Condition to Establish New Multiplex:

Out of the total Floor Area Ration (FAR), excluding the basement, parking, utility service

area atleast 20% shall be used for public space, including circulation area and toilets. The

commercial area in the multiplex shall not be more than the area the cinema halls and the

projected rooms.

And for the conversion of the existing halls are the total seating capacity of the multiplex

shall not be more than that of the existing cinema halls and it shall not be less than 75% of the

sanctioned seating capacity. An additional FAR up to 50% of the existing FAR shall be

allowed subject to payment of the conversion charges.

The conversion charges for the area under commercial activity (Shopping purpose) will be

Rs. 800 per sq. ft. and for the area under – entertainment activity, including Restaurant,

Games and cyber cafes Rs. 500 per sq. ft. And for the area under office usage it would be Rs.

400 per sq. ft. while for public space Rs. 100 per sq. ft.

Each case for converting an existing cinema into the multiplex shall be examined for the

adequacy of service and for conforming to the town planning norms. Addition and alteration

shall conform to the building rules, the Fire Safety Rule, the Punjab cinemas Regulation Act

and other rules and use of basement and other area designated, as parking shall not be

changed.

A person seeking conversion shall make an application to the Chief Administrator. Any

aggrieved person within 30 days of the date of the communication to him of such order may

prefer appeal to the Adviser to the Administrator.

In case of infringement of any condition of permission the Chief Administrator may

after such inquiry as deemed necessary cancel the permission giving reasonable

opportunity of being heard.

Policy Formulated on Multiplex:

The policy regarding setting “Up of the multiplex theater and conversion of the existing

cinema halls in to the multiplex theaters: The scheme, patterned on the multiplexes in the

metros across the country, will allow the multiplex to have 3 or more separate theaters within

the same cinema with each theater having a seating capacity not less than 100 seats. Besides,

the cinema halls will also have shopping arcades, Restaurants, games and cyber cafes besides

the public space, a notification of the administration.

Under the scheme, “The setting up of the multiplex and conversion of the existing

cinemas into multiplex, scheme, 2000,” the multiplex could set up either by

converting the existing cinema or by fresh construction with the prior approval from

the Urban Planning Department. No concession in the entertainment tax shall be

allowed to the multiplex as compared to the cinema.

The multiplex shall be allowed the freedom to fix entry ticket price of 80% seat in

each theater by linking the same to the market conditions. For the 20% seats, the

licensing authority shall be competent to fix the entry ticket price. Ticket price once

so fixed shall remain unchanged for 6 months. The prices fixed by the licensee shall

be notified to the licensing authority as and when revised.

Once this starts, viewers will have movies to choose from at one place itself. The

show timings will be staggered in such way that a movie begins every 30 minutes,

thus allowing flexibility to viewers, who can adjust their visits according to the movie

schedules. This will stagger the paring patterns also as people will keep coming in

and going out.

Existing policy:

What had mainly annoyed the exhibitors was a letter from the Urban Development

Department (UDD) stating that it could not go ahead with the existing policy.

Theater owners are not allowed to change the nature of their business activities

unless their new enterprises retain 33% of the number of seats in the original

theater. The policy is meant to give exhibitors the permission to opt out of business

and utilize the space to start a new business if the previous one is running in to

losses. “No other state or country has this regressive rule where a person is

compelled to continue running his business even if it is a loss-making proposition,”

said Vidhani, president of TOA.

Government Regulations:

An Income Tax Concession under Sec. 80 –1B of The Income Tax Act was

introduced, with effect from 1st April 2002, allowing Multiplexes commissioning

before 31st March 2005, an income tax rebate to the extent of 50% on book profits. It

is requested that this concession be reintroduced so as to enable growth of

exhibition sector in the country.

The Indian film exhibition sector is highly regulated and changes in regulations may have

an adverse effect on business.

Regulations by both the central and the state governments.

Policies extend to aspects of building and safety requirements, licensing requirements, tax

and entertainment tax registrations and grant of exemptions from the payment of

entertainment tax.

Provisions of laws include:

- Requiring a minimum distance between the screen and the front row seats, which

distances were set based on large screens used in single screen cinemas and not the

smaller screens used at most Multiplex Cinemas.

- The permissible pressure at which the electrical current may be supplied to a

projector, which provision does not reflect the technological advances in respect of

Multiplex Cinemas.

- The reservation of playing times for a scientific film, educational film, news reel or

documentary.

- Restrictions on ticket prices in certain states.

Income tax and allied laws:

The government has introduced partial tax holidays for income of multiplex theatres. A

deduction of 50 percent from profits is allowed for a period of five years from the year of

commencement of operations in respect of the business of building, owning and operating a

multiplex theatre of prescribed norms. Some of the norms prescribed under the rules are:

The multiplex theatre should be constructed during the period from 1 April 2002 to 31

March 2005.

The multiplex theatre should comprise of at least three cinema theatres and at least

three commercial shops.

The total seating capacity of all the cinema theatres comprised in the multiplex should

be at least 900 seats and no cinema theatre should consist of less than 100 seats.

The multiplex theatre cinema should be centrally air-conditioned.

The ticketing system employed by the cinema theatres should be fully computerized.

The multiplex in order to be eligible for tax holiday should be located in a place other

than New Delhi, Chennai, Kolkata and Mumbai.

There are no specific/ separate provisions in respect of the taxation of film artists,

technicians, etc. They are entitled to a deduction of the income derived from foreign sources,

subject to the satisfaction of certain prescribed conditions. In the case of overseas

performance, taxation in the host country needs to be examined in the context of the

applicable Double Tax Avoidance Agreement (DTAA) and availability of foreign tax credits

against Indian tax on such income.

Entertainment tax benefits

City Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Minimum

Seating

Minimum no.

of screen

Mumbai 100% 100% 100% 75% 75% 1250 4

Rest of Maharashtra 100% 100% 100% 75% 75% 1000 3

Punjab 100% 100% 100% 100% 100% 1000 3

Kolkatta 100% 100% 100% 100% NA 1000 3

Rajasthan 100% 100% 90% 80% 70% NA NA

UP 100% 100% 100% 100% 100% NA 3

Bhopal/Indore/

Jabalpur/Gwalior 100% 100% 100% 75% 50% 1000 3

States Entertainment Tax

Delhi, West Bengal 30%

Gujrat 100%

Maharashtra 45%

Mumbai 45%

Kalyan, Thane, Dombivali, Navi Mumbai, Nasik,

Aurangabad, Nagpur, Karnataka40%

Vasai, Virar, Nallasopara 34%

UP 60%

Tamil Nadu 15%

In order to encourage investment many state governments have announced policies

offering entertainment tax benefits. This has encouraged the growth of Multiplex

Cinemas and also encouraged single screen theaters to convert into Multiplexes.

Quantum of entertainment tax benefit would be dependant on compliance with

certain conditions specified by the relevant state.

Procedure to setting up a Multiplex:

The procedure of setting up a multiplex is divided into 3 phases after the multiplex operator

has decided the location of the multiplex and entered into the agreement with the mall

developer.

Development of property:

In this stage the mall developer develops the property according to the specifications agreed

upon by the multiplex operator and the mall developer. The mall developer has to get certain

approvals from various authorities. After the mall developer completes development and gets

approvals, the property is handed over to the multiplex operator.

Fit outs:

After the property has been handed over to the multiplex operator, the interiors are done up

by him. This includes civil and architectural work, designing, seating, carpeting, putting up

the screens etc. This stage normally takes between 2-6 months depending on the size and

scale of the project.

Approvals:

After fit outs are completed, the multiplex operator has to get various approvals before he can

commence operations. On an average this stage takes around 1-3 months depending on the

state as he has to get approvals from the fire department, electrical department, health

department and various other licenses.

The Multiplex Model:

Source: The Indian Entertainment Industry: Emerging Trends & Opportunities – FICCI –

E&Y Report, 2004

Ticket income, Concession [Food & Beverage (F&B) income] and Sponsorship (Advertising)

income are the three streams of revenues for a multiplex. Ticket income is the largest

contributor to the of multiplex income pie. Over the last few years, there has been a lot of

importance given to concession income by theater owners. This is because the margins are

generally high. Advertising revenue is another source of income for the theater owners.

Negative working capital:

In the theater business, the entire collections from Customers are collected in cash. The

Multiplex gets credit from its various suppliers, including most of the Film Distributors and

Vendors. Hence, usually multiplexes operate with negative working Capital.

Shorter Pay back Period:

Cost of four screen multiplex is estimated at Rs 6-8 crores (Excluding cost of Land &

Building). Revenue from Ticket sales assuming 300 seats per screen, 40% occupancy, and

average ticket price of Rs 75 is estimated at Rs 6 crores. In India, Multiplex is earnings about

25% operating margin, which comes to Rs 1.5 crores and thus pay back period is between 4

to 5.5 years. Here only ticket sale is considered. If we add Earnings from Food & Beverage

and Advertising Income, Pay back period is reduced to 3 years to 4 years. And with negative

working capital, the entire project is capable of generating free cash flow in very short time.

Valuations:

There is no pure exhibitor company listed on Indian Bourses listed. Adlabs Films Ltd (Of

Adlabs Multiplex) and Inox Multiplex (Of Gujarat Flourochemicals) derive their part of the

revenues from Exhibition business.

REVENUE BREAKUPS

The revenue breakup is divided into three distinct parts namely:

- Ticket which generates 69% of the revenue.

- Food and Beverages is leased out to agencies which generate 19% of the revenue.

These include various stalls like cold drinks, juices, chocolates and various other

snacks.

- Advertisements as a whole generate 12% of the revenue.

Conduction fees a key part of the revenue breakup generates revenue with activities related to

the conduction of a particular show.

Companies today are putting in immense effort to try and expand their operations in prime

cities like Mumbai. Companies are also focusing on increasing food and beverage spend by

introducing new items and offering attractive packages like food combo's and providing

additional facilities like a gaming zone which attracts huge number of kids thereby generating

more revenue for the companies.

As in the chart Sing Is Kinng a mind boggling comedy which has done exceptionally well all

across the globe has broken all records to gain the title of the best comedy movie of the year.

This movie as the figure shows has generated Rs. 46,90,03,356 gross revenue followed by

Jaane Tu Ya jaane na and Kismat Connection as far as gross revenue is concerned.

COST BREAKUP

The costs are divided into 4 distinct parts, namely:

1. Direct Cost which is further divided into various sub parts:

- Distributors share-This refers to a stipulated amount which needs to be paid to the

distributor for distribution a particular movie to the multiplex.

- Entertainment Tax which is a mandate tax which needs to be paid and is charged

to the viewer within the cost of the actual ticket purchased by him.

- Food and beverages cost refers to the cost incurred by the in house brands to

producing or making a particular product or item available for the end consumer.

2. Personnel Cost refers to the cost incurred right from the sweeper and the security guard

right up to the manager of the multiplex.

3. Depreciation refers to the ware and tare of particular machinery over a period of time

which cans this case refers to the projector and various other assets bought to commence

the how.

4. Interest refers to the amount which needs to be paid on the borrowed capital by the

company.

A 1250 seater Multiplex in a metropolitan city would cost anywhere between Rs80-90mn.

This does not include the cost of land because the land may be leased.

YIELD MANAGEMANT

The goal of Yield Management is to produce the best possible financial return from a limited

available capacity. It is the process of allocating the right type of capacity to the right kind of

customer at the right price so as to maximize revenue or Yield.

It attempts to manage demand to meet the capacity to offer at what price to what market

segments in order to maximize revenue over a particular period. The challenge or risks in

yield management are:

Loss of competitive focus

Customer awareness

Employee moral problem

Promptness of employee

For example: In a multiplex 4 screen x 300 seats = 1200 seats can be sold for Rs. 100 per

show than the maximum revenue can be earn is Rs. 1,20,000 per show.

If the demand falls due to any reason and occupancy level is just 50% than the total revenue

can be earn is Rs. 60,000.

CURRENT AFFAIRS

Pirated DVDs drive audiences out of cinemas:

Mumbai’s movie watchers would rather not be movie-goers right now. On one hand is the

movie theatre, where a trip for a family of four can set them back by between Rs 500 and Rs

1,000, on the other is the promise of a pirated DVD, which costs less than Rs 100 and may

have four films copied on to it. In times like this when job and salary cuts are a clear and

present danger, the choice is obvious. Moreover, the recent terror attacks on the city have left

Mumbaikars scared and apprehensive about going out, especially in the evening.

CA Samir Panda has stopped going to cinema halls completely. He has his reasons: “I cannot

waste three hours watching a film that is not good; only about 5% of them are worth

watching. I prefer buying DVDs and watching them at home at my convenience. Besides,

why should I spend about Rs 200 for one movie ticket when I get to see four films for half

that price? I really don’t care if I am accused of encouraging piracy.’’ Trade analyst Amod

Mehra feels “at least 30%’’ of regular theatre-goers have shifted to the pirated DVD market.

Pirated DVDs used to be camera prints but now copies are made from the master prints, so

film watchers have no complaint about the quality. Andheri resident Archana Naydu buys

DVDs of new films from Lokhandwala. “The price of a ticket is one of the biggest factors

discouraging us from going to cinema halls,’’ she said. Former anti-piracy cell TSeries head

M M Sathish said, “You can carry a three-hour film on your pen-drive or a CD and download

it from anywhere in the world. No one will check your pen-drive or laptop at the airport for

pirated movies.’’ Most of the pirated DVDs of low-budget films hit the market on the day of

the release; sometimes they are there a day before the film releases in theatres. “But, in case

of big films with big actors, DVDs generally hit the market over the weekend, by when the

films have collected enough money.’’

Movie halls unaffected by recession:

"The recession has not as much affected the exhibition sector as has been the release of some

bad films that have failed miserably. Audiences are not coming in as earlier. Yuvvraaj has

failed, Dostana has rocked the boat of the Yash Raj

Banner that has under-performed in the year and the over-hyped Karzzzz has put its

exhibitors to a loss of 15 crores, this because films are sold at an exorbitant price, while the

income by way of theatre collection has dwindled. The star prices that had gone astronomical

will come down sooner or later," says Padam Sacheti, owner, 24- Karat Multiplex adding,

"according to me, the year 2009 would be a correction year which would be in the shape of

reduction in star prices, there will be good content in films and a correction in entertainment

taxes (45%) that is highest in the country while in Tamil Nadu it is 0 per cent and Rajasthan it

is 20 %. Plus there is VAT too. All this has a killing effect on exhibitors. Since my theatre is

a privately funded enterprise, it doesn't affect me much but I pity those who have their

property raised on public funds."

Shravan Shroff, MD, Fame Cinemas has his own views, Says "Visits to the theatres have

been traditionally 'recession proof'. People are known to go to the movies in good times as

well as in bad. This has been borne out by the fact that our multiplexes have enjoyed houseful

shows and robust occupancies on opening weekends of movies like Dostana, Golmaal

Returns, Quantum of Solace and Fashion. To add to this, we have been growing our average

ticket prices and spend per head on F and B on a year on year basis."

"On the other hand Kapil Bhopatkar, Secretary, Cine Exhibitors Association is of the view

that the much-talked about recession which "we are expecting to arrive here in India possibly

in the next three to six months. Yes, but tremors have been felt, like for instance Pyramid

Saimira has pulled down its shutters. Plus there is a talk that Salman Khan's two films

London Dreams and Veer have been kept on hold. London Dreams was supposed to be a

mega-budget film with a bill of over Rs 50 crores but the dream has been shattered now as

the money has dried up with banks refusing to loosen their purses to Bollywood." He goes on

to add," if and when the effects of recession hits our shores, the production sector will be

affected the most as there is a lot of money that has already been pumped into several films.

Going by what has happened as yet this year, several big-budget films including Karzzzz and

Yuvvraaj have all failed to make an impact on the box-office. In case of the recession taking

over people will be selective to walk into cinema halls; they will weigh a particular film

heavily before venturing to see a film. Films being the cheapest way of entertainment, it is

assumption that, films will be made at cheaper rates, with star prices falling heavily, cost of

production coming down. Here too filmmakers are negotiating with stars on their prices and

it has been seen that if the negotiations fail, some filmmakers are even holding back their

projects. In the case of exhibitors, we will have to pull up our socks and tread carefully."

Movie producers go on an indefinite strike

Movie producers went on an indefinite strike, starting from 3rd April as they could not solve

their differences between multiplex owners over revenue sharing. The move has come after

multiplex owners did not agree to their terms of 50:50 equality in revenue sharing for every

film to distributor and multiplex owners.

"We realised that we are talking to a wall and to the people who were insensitive to our

demands," said filmmaker Mahesh Bhatt. "Multiplexes have adopted the policy of tossing a

coin, and that is not done."

The rift between multiplex owners and producers has been going on for a while. But this is

the first time that top producers of the film industry like Yash Chopra, UTV and Indian films

came together and said that there will be no bullying tactics of multiplexes against them from

April 3 until and unless they agree on equal revenue sharing.

At present, the deal between producers and multiplex owners varies according to the status of

the film and the stars acting in it. If an actor like Shah Rukh Khan's film is released, then the

multiplex will budge for their revenue sharing with producers. But if a lesser known actor's

film is being released, the multiplex producers will dictate terms.

According to the producers, multiplex owners have formed a cartel and have armed-twisted

them individually, and they refused to take it anymore.

"In UK and UAE, the distributors and multiplex owners have a 50:50 ratio of revenue

sharing. In USA and Canada , 60 percent of the first week's collections goes to the distributor

and 40 percent goes to the multiplex owners. Unfortunately, this trend is not followed in

India and they dictate terms to us," said Ramesh Sippy.

"The multiplex owners earn 25 percent of revenue from the canteen, 15 percent from the car

park and 8 percent from the advertising and we don't even ask anything from that," added

Mukesh Bhatt.

At present, there are 240 multiplexes with 849 screens in India, with a capacity of 2, 27,084

seats per show. They are essential to the profits of the film because the tickets cost more vis a

vis single screen theatres, resulting in a big profit margin for the producers and distributors.

When we contacted Shravan Shroff, owner of Fame chain of multiplex theatres, he said he

could not answer any question at the moment. "We will invite the press in a day or two to

answer all the queries," he said.

This strike was resolved on June 3rd .

RECOMMENDATION FOR COMPETITIVE ADVANTAGE:

Solar energy:

A movie theater in the U.S. to install its very own solar array in a bid to defray electricity

costs. The 42-panel solar photovoltaic (PV) system at the Fairfax 5 Theaters multiplex is

expected to save over $627,000 in electricity costs and offset over 2 million pounds of carbon

dioxide during the 30-year life of the system, according to the theater's owner, Cinema West.

Funded in part by a state rebate and federal tax credit, the company expects the system to pay

for itself in 5 years. "Solar energy will not only help us offset our electricity costs, but will

also reduce greenhouse emissions and propagate the environmental ideals of this progressive

community," Corkill says.

Dealing more in eco-friendly product or service and creating awareness of the benefit

of eco-friendly products.

Participation in the social concerns activities.

The usage of transparent acrylic sheet or glass will reduce the power consumption and

cost drastically.

Reduction in price of ticket to fight against Piracy and attract more patrons because

people are price sensitive.

Improvement in the attitude like “hota hai, chalta hai, dekha jayega” etc.

Aggressive marketing strategy.

Introduction of scientific Management in interior design, customer behavior etc.

For example: A customer when enters the premises his / her eyes look only in 450 angle. The

colour used in ambience affects a lot it should not be more than 2 colours, the combination of

Red-white, Black-Red, Cream-Golden Brown etc.

BIBLIOGRAPHY AND WEBLIOGRAPHY

Marketing Research

Marketing management

Service Sector Management

FICCI

CII

www.Google.com

www. pvr cinemas.com

www. fame cinemas.com

www. cinemax .co.in

www. funcinemas .com

www. wikipedia .org

www. imax .com

www. cii online.org

www. filmtvguild .in

www. inox movies.com

www. ficci .com

www. unesco .org

www. technopak .com

business.outlookindia.com

www. bigcinemas .com

www. rbi .org.in