Following the acquisition of Cinemax India Limited, PVR Limited aims to invest Rs. 175 crore to Rs. 200 crore to setup 90 screens across Tier II regions in India, and build a billion dollar theatre business in the next five years
Ajay Bijli’s first brush with entrepreneurship began in 1988, when he helped his father manage the family trucking business. Soon after, in 1990, in a move to pursue his long-held passion for theatre and entertainment, he took charge of Priya Cinemas, a single screen theatre in New Delhi (bought over by his father in 1978). After overcoming a sizeable share of challenges for over two decades, today, PVR Ltd, as it is now called, is a leading player in India’s multiplex theatre segment, with a total income of Rs. 674 crore in FY13. It has three subsidiary businesses; the wholly owned subsidiaries, PVR Pictures Ltd. and Cine Hospitality Private Limited (CHPL) and, PVR Leisure Limited, a joint venture with Mauritius-based L Capital Eco Limited, in which PVR Ltd. holds a 53.68 per cent stake.
“If you look at the way the Indian theatre business is structured today, there are 12 screens per million, as against 125 per million in developed countries. Moreover, of the 9000 screens in the country, only 1800 are multiplex screens. This, combined with the shift in consumers’ go-to-movie format changing from single to multiplex presents a huge growth opportunity for us,” says Nitin Sood, chief financial officer, PVR Ltd.
To capitalise on this opportunity, the company plans to spend Rs. 175 crore to Rs. 200 crores in the coming months to build around 90 screens of approximately Rs. 2 crore each, particularly in Tier II regions. In the next three to five years, PVR aspires to be a billion dollar entity in India’s theatre segment.
PVR has marked out a clear target audience for its theatre business; a segment which can afford a ticket beyond the Rs. 75 price bracket. But, that doesn’t rule out single screen theatre audiences, who typically spend Rs. 25 to Rs. 50 on a movie ticket, from being potential customers. “We are also present in Tier II regions such as Ujjain, Nandi and Bilaspur, where we charge twice as much as a single screen theatre does, for a movie. However, we’ve noticed that whenever we’ve entered such markets, single screen theatres have shut down and consumers’ have upgraded to multiplexes,” points out Sood.
Alternatively, Pramod Arora, group president of PVR Ltd indicates that the company faces higher competition from businesses such as restaurants and gaming centers and, technologies such as mobiles and iPads, than from its close contenders. Essentially, what Arora means is that he believes that PVR is in the entertainment business rather than in the business of managing theatres.
Commenting about the industry, Arora also indicates that the Indian theatres face quite a few regulatory challenges today. “The Government has to become more progressive and come out of an era of licensing Raj, and develop single window clearance schemes. But, this has also proved advantageous until now because, if not for this, a lot of international companies would have set foot in India and made the industry more competitive,” he says.
Succeeding in the theatre business
According to Arora, two key elements drive higher occupancy rates in theatres; content and location. “On the content front, if you notice, in the last two years, unconventional movies such as Vicky Donor and Kahaani have started gaining higher acceptance among Indian audiences. In fact, Hollywood is also playing a pivotal role in helping us gain superior penetration.” He adds, “A decade back, I wouldn’t even have dreamed of releasing Hollywood movies in a place like Allahabad, but today, the patrons themselves ask for it.”
On the location front, he states that theatres should be located centrally, and made accessible to a good share of the population. His reason, quite arguably, is that infrastructure in India is not as good as in developed countries, so, Indians won’t drive 50 miles to watch a movie. Secondly, the company ensures that the ambience at every PVR theatre is designed according to the city and security is given utmost importance. “We never follow the American, black box cinema format. Each of our theatres is handcrafted keeping in mind our location,” he adds.
In fact, distributors also play an as important role in sustaining a theatre business. Agreeing with this, Arora says, “Each and every distributor in our line of business is a stakeholder. If they don’t supply the content, we are nothing.” To maintain a good distributor relationship, first of all, there has to be a mutual respect for each other. Second is to give importance to commercials. “Ours is a capital business and commercials play an important role in driving revenues. For instance, if a customer wants to watch a movie, we charge him/her three hours in advance. On the other hand, the distributors are paid much later. In such circumstances, it is important to give the distributors the assurance that their money is safe with us,” he explains.
In the coming months, we will be spending Rs. 175 to Rs. 200 crores in terms of capex to build around 90 screens, particularly in Tier II regions. In the next five years, we aspire to be a billion dollar entity.” – Nitin Sood, chief financial officer, PVR Ltd.
Thirdly, PVR actively involves itself with the distributors to formulate release strategies. For instance, if there are two movies being showcased at PVR and a closely located competitor’s theatre, PVR designs a release strategy in consonance with the consumer’s needs and ensures that the movie timings don’t collide. This way, the distributors make more money and also gain confidence in the theatre group.
Fourthly, given that all distributors look forward to marketing their event, PVR adopts a combination of above-the-line (ATL), below-the-line (BTL) and digital marketing tactics to communicate with its audiences. ATL activities typically include advertising through newspapers, radio and television and, on-site marketing tools such as standees, posters, trailers of upcoming movies between movie breaks and LCD screen displays. BTL activities include connecting with customers, through relevant data, on mailers and phone. On the other hand, digital marketing strategies are implemented based on segregating consumers based on predictive intelligence. This varies from helping consumers’ book tickets for movies they would like to watch, to interacting with them on social networking sites such as Facebook and Twitter.
Acquisition of Cinemax
In November 2012, PVR acquired a 69.27 per cent stake in Kanika Group’s Cinemax India Limited, through its wholly owned subsidiary, Cine Hospitality Pvt. Ltd. Currently, it holds a 93.19 per cent stake in the company and plans to complete its merger by February 2014. “Cinemax is a big player in Mumbai with a presence in a few locations down South and up North. This apart, they have a good location strategy and a profitable business. Hence, this acquisition made sense,” reasons Sood.
Post acquisition, PVR’s screen count increased to over 350, in 85 properties across 36 states, thus making it the largest multiplex business in India. In the quarter ended September 2013, PVR and Cinemax together generated a turnover of Rs. 91 lakh per screen, per quarter, thus recording a 28 per cent growth.
Going forward, Arora indicates that converting entertainment tax into GST and infrastructure development will pose as key growth drivers for the business. “Entertainment tax should be charged in the form of VAT or GST, which, I believe, will be happening next year. Moreover, once the government starts providing greater incentives for retail real estate developers, we’ll see more shopping centres and theatres coming up, which, if anything, will satisfy the social needs of the public,” explains Arora. On the third front, he indicates that there is also a need for better infrastructure in the form of better roads and parking lots, in and around malls.
“Ultimately, we are in the business of happiness. By showing a different movie every week, we bring a new lease of life and a new perspective to our audience. This makes us dynamic, rich and is the core design for PVR,” reinstates Arora, on an ending note.
Founder: Ajay Bijli
Theatres: Over 350, in 85 properties across 36 states
Turnover: Total income of Rs. 674 crore in FY13
Consolidate operations with Cinemax India Limited by February 2014
Invest Rs. 175 crore to Rs. 200 crore to setup 90 screens across India, particularly in Tier II regions
Continue to drive its marketing efforts with a mix of ATL, BTL and digital marketing activities