Inflation impacts cost of film production

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: As inflation inches closer to the 12% mark, impacting spends across all essential items, the entertainment sector, particularly the film industry, is in wait-and-watch mode. Most production houses, distributors and exhibitors that FE spoke to insist rising “inflation has not really made any difference as of now”. But almost everyone agrees that if this phase continues, then moviemaking, distribution and marketing costs will take a hit and impact margins in a substantial way.

Several entertainment companies have said that traditionally, an inflationary phase has shown that spends on entertainment go up. Says Reliance Entertainment chairman Amit Khanna: “Right from the days of the Depression era in America, it has been seen that if inflation is high, the expense on entertainment goes up. Even now, in India, we are noticing that costs may go up but returns do not drop.”

Ranjan Singh, general manager, PVR, says one cannot really “co-relate inflation and entertainment”. But having said that, it’s a fact that in terms of making movies, production budgets have been affected. And at least in some major urban centres, there has been a fall in multiplex attendance. Now, that may not be only due to inflation. Says Ram Patnaik, research analyst and associate VP, Religare Securities: “Besides inflation, the other challenges that the entertainment sector faces are quality content, difficulty in increasing ticket prices and contracting people’s costs.”

Another analyst points at the fact that Bollywood too has not delivered too many hits this year, barring Race and small-budget films like Jannat and Aamir, and the Aamir Khan-PVR production Jaane Tu… Ya Jaane Na, thus impacting box-office collections. With prices so high, multiplex spends have taken a hit and there has been a drop in ticket sales across multiplexes in India. Says Patnaik: “There definitely has been a reduction in the occupancy rate and the footfalls have gone down adding to the woes of distributors and exhibitors.”

According to PVR’s Singh, there have been a lot of other reasons for the drop in audiences in the last quarter like the Indian Premier League of cricket, the content and the absence of a hit film. “Therefore, to attribute the slack to inflation will be slightly incorrect,” he adds.