Inflation impacts cost of film production

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: of quality content. There have been just three hits out of the 33 films released compared to last year, when the number of films released in the first half was 21 and the number of hits was six.”

But, points out Tandon, if the current inflationary trend continues then “as we all know, households respond to a price increase by first cutting back on discretionary spending like visits to movies, eating out and the purchase of branded products.”

At Inox multiplexes around the country, footfalls for Q1FY 09 are 29,38,755, “not as high as we expected them to be”. The Rs 900-crore plus-Pyramid Saimira group, which is betting big on its food and beverage business at multiplexes, has already had to make some adjustments. Says PS Saminathan, CMD, Pyramid Samaira Theatres Ltd: “For companies like ours, we have to target little lower capacity utilisation and we should not assume that the average revenue per user could go up significantly. We in Pyramid Saimira are focused on cost control, consolidation and also keeping the growth intact but reducing the margins.”

Saminathan says Pyramid Samaira Theatres anticipated a capacity utilisation of above 40% in the first quarter of 2008-09. “We achieved 32% in this quarter. There has been a 20% reduction in occupancy, due to inflation as well as IPL. There has been a reduction in average spends on food and beverage in theatres.”

Pyramid cannot even raise prices heavily in the F&B sector. “Only some amount of price rise can be done.” Some like PVR have not hiked ticket prices, while others like Cinemax have increased prices.

Says Devang Sampat, Sr VP, Cinemax India: “Every year, we expect a 7% increment, so we hike the ticket rates accordingly.”

Inflationary pressures have pushed up fixed costs too. Although movie costs are the same, variable costs on the upkeep and food have gone up by roughly 10% of the costs incurred earlier. For instance, electricity prices in Gujarat and Maharashtra have been hiked “by almost 100% in the last six months”, says Vishal Kapur, COO, Fun Multiplex Pvt Ltd, pointing out that since “electricity costs are almost 20% of our total costs and cannot be compromised with, it has a direct impact on profits”.