‘The real as­pi­ra­tion for movies & growth of screens lie in tier-2 and -3 In­dia’

In 2005, when Hol­ly­wood was still de­bat­ing stan­dards, a hand­ful of In­dian com­pa­nies started rolling out dig­i­tal cin­ema. They seeded theatres with dig­i­tal equip­ment in re­turn for rev­enue share, a unique so­lu­tion that made In­dia one of the first in the worl

Business Standard - - COMPANIES - SAN­JAY GAIK­WAD Next: The low-cost screen war­riors

UFO was one of the ear­li­est dig­i­tal cin­ema roll-out sin 2005. What has digit is at ion done to the In­dian film in­dus­try?

Digi­ti­sa­tion has helped sig­nif­i­cantly. The big re­leases have moved from 500-600 to 5,0006,000 screens. The top five films used to get ~200-250 crore in box-of­fice col­lec­tions, now it is closer to ~1,000-1,500 crore. So, digi­ti­sa­tion has helped be­cause it brought a real value propo­si­tion. From ~70,000-80,000 for a print, now the av­er­age cost is ~12,000-15,000. Ear­lier, be­cause only few prints were be­ing re­leased, movies would reach smaller towns later. Now same show re­leases hap­pen across In­dia. The vi­cious cy­cle of piracy caused by stag­gered re­leases across the coun­try has been bro­ken. One of the big­gest chal­lenges was the de-growth of screen sup­ply. In 1993, there were 13,000-odd screens, which fell to half be­fore ris­ing again (be­cause of mul­ti­plexes and dig­i­tal screens). In­vest­ment in con­tent (films) has in­creased. From 800-900 films, we are now mak­ing 1,800-1,900 films. Re­gional movies get more space.

The big chal­lenges?

In­dia has 8,500-9,000 screens, of which 6,500-7000 are sin­gle screens and 2000-2,500 are mul­ti­plex screens. So we are roughly at one screen per 150,000 peo­ple. The US is one per 7,000 peo­ple, China one per 35,000 peo­ple. Even to reach one per 50,000 peo­ple, we will need 20,000 more screens. Also, the screen con­cen­tra­tion is skewed to­wards the main met­ros. There are more mul­ti­plexes in the top 70-80 cities. Though the fig­ure of 3 bil­lion tick­ets is thrown about, the real num­ber of tick­ets sold in In­dia is closer to 1.8-2 bil­lion. Of th­ese PVR, the big­gest chain, sells 60-70 mil­lion. If we ex­trap­o­late that, 250-300 mil­lion tick­ets are sold across big cities. That means about 1.7 bil­lion tick­ets are sold in tier-2 & tier-3 towns (2 bil­lion mi­nus 300 mil­lion). That is where the real as­pi­ra­tion for movies lies. The sup­ply of screens for th­ese 1.7-bil­lion tick­ets is at ~40-45 a ticket. Aspi­ra­tionally, they could pay ~80-100. But there are no av­enues. In the last few years, sup­ply-side in­vest­ment has started.

What is UFO do­ing to in­crease the sup­ply of screens?

We get our pri­mary growth from ad­ver­tis­ing (UFO gets 28 per cent of its rev­enues from sell­ing ad­ver­tis­ing on its net­work of screens. This is the fastest grow­ing part of its busi­ness). So the short­age (of screens) hits us, too. In four-five years, UFO’s growth will come from ad­ver­tis­ing and for this we need to cre­ate me­dia.

Af­ter a lot of re­search, we have launched Nova Cine­maz. It is an as­set-light fran­chisee model. It tries to de­velop screens through ren­o­va­tion, brown­field or green­field routes. Un­der Nova, screen ren­o­va­tion for con­ver­sion of sin­gle screens to two-screen mul­ti­plex will in­cur ap­prox­i­mately ~1-1.5 crore per prop­erty, de­pend­ing on the con­di­tion of each sin­gle screen. This would help them in­crease ticket prices from ~50 to ~100 and oc­cu­pancy from 15 to 25 per cent or more, lead­ing to a rev­enue in­crease of twothree times. We plan to ren­o­vate 400-500 screens across In­dia over three-five years. (UFO will make its money from a rev­enue share).

The Nova brown­field pro­ject iden­ti­fies shop­ping ar­eas across tier-2 and -3 towns, where two-screen mul­ti­plexes could be put up by fran­chisees based on our de­sign and equip­ment. We will also be of­fer­ing to in­vest 20-25 per cent of the cap­i­tal. In the last three months, we have signed up eight fran­chisees in Pun­jab and Ra­jasthan.

Un­der green­field, we are work­ing with a real estate and reg­u­la­tion part­ner to work on a de­sign that can be stan­dard­ised across the coun­try. This is for a pre-en­gi­neered build­ing that can be put up in three-four months, a bit like the US strip malls. The big­gest is­sue with scal­ing up screens is get­ting ap­provals. So we are do­ing a pi­lot in Shah­pur in Ma­ha­rash­tra and Do­raha in Pun­jab. It is a 400-seater, two-screen mul­ti­plex on 4,000 sq ft. It will house re­tail and food courts, too. We are work­ing with the gov­ern­ment for a one-win­dow clear­ance, which is eas­ier for a green­field pro­ject.

The first ap­proval will take time. But be­cause it is a stan­dard­ised de­sign and roll-out, the sec­ond time on­wards, it will be one-win­dow sys­tem. Nova should help cre­ate 1,000 screens a year, three-four years down the line. That 20,000-screen growth can only hap­pen through frag­mented growth from all sides, not be­cause one or two com­pa­nies are do­ing it.

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