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Multiplex fever sweeps India

Shobhana Subramanian | August 24, 2005

Planning to see a movie today? Walk into your neighbourhood multiplex on any working day and chances are you'll be able to buy a ticket without waiting in line and put your feet up inside the hall on the empty seat in front. And it'll cost you only Rs 50.

Over the weekends, however, lines are longer, halls are fuller, and tickets are invariably three to four times dearer. The average at Inox's Nariman Point, for instance, is Rs 166. Be prepared to pay a pretty penny for an interval popcorn and soft drink, too.

If that sounds like a winning script for multiplex owners, you're not far wrong. For, even though a bulk of the audience - up to 70 per cent, according Adlab Films director Pooja Shetty - makes only a cameo weekend appearance, there's good money to be made.

Higher disposable incomes and changing lifestyles are driving growth, especially over pricey weekends. According to Kumar Katra, COO, Shringar Cinemas, multiplexes average between 3,500 and 4,500 footfalls a day.

Apart from ticket sales, an important source of revenue for multiplexes is from F&B, which is estimated by Manoj Bhatia, CEO, Inox Leisure, at 15 per cent of the ticket price. That's only half the international norm. No surprise, then, that many multiplexes, including Inox, are adding food courts to coming attractions.

As far as expenses go, a quarter is the cost of the content, which is paid to the distributor on a sliding scale that starts at 40 per cent and drops each subsequent week of a film's screening. Another 25 per cent is paid in taxes. Rentals account for 9-10 per cent while overheads, including power, administration, marketing and advertising, as well as personnel, account for another 25 per cent.

Unlike other businesses, however, working capital needs tend to be low and, hence, interest outflows are low, too. That's because audiences pay for their tickets upfront while distributors are willing to wait for their share.

The biggest advantage that multiplexes have over a single-screen theatre, though, is the ability to use capacities optimally. Though the average capacity per screen today is 296 seats, most complexes juggle movies within halls of varying capacities depending on demand.

Moreover, by offering movies of different genres and languages, as well as adding late night and cheaper morning shows, footfalls can be increased significantly.

As Katra explains, "We try to increase the total number of shows in a day, even if the capacity utilisation per show is low, simply because a larger number of footfalls will boost the topline."

The bottomline:  a multiplex can break even with an occupancy rate as low as 30-35 per cent, though the industry average is in the region of 35-40 per cent. Even at these levels, operating margins are at around 18 per cent says Bhatia, while net profit margins are even higher.

"Once the break even has been achieved, every additional percent of occupancy goes straight to the bottom line," adds Katra.

Little wonder the number of multiplexes is billed to double to 150 nationwide in two years, with the number of seats slated to rise from 90,000 to 160,000. That might signal curtains for many of the country's 12,000 single-screen cinema halls.

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Number of User Comments: 1

Sub: The economics of multiplexes can go for a toss

We as a family just want to enjoy a good movie.Forget the economics anyway.Give us a break and let us enjoy. Next article,concentrate on the ...

Posted by Maneesh Gopujkar


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