Why multiplex operators luxury gamble may not pay off

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Updated: January 13, 2020 7:24 AM

Even movie theatre firms are investing in luxury halls, scalability remains a challenge

On average, most multiplexes earn 60% of their revenue from ticket prices, 25-30% from F&B and the rest from advertising.On average, most multiplexes earn 60% of their revenue from ticket prices, 25-30% from F&B and the rest from advertising.

Even as OTT platforms wage a war on traditional media consumption, multiplexes have largely remained unaffected, according to reports. In the September quarter of FY 2020, two of India’s top multiplexes, PVR Cinemas and INOX Leisure, reported footfalls of 2.93 crore and 1.90 crore, respectively — a 40% year-on-year growth in footfalls — according to a report by Emkay Research.

To leverage the growing footfalls, multiplexes are adding luxury and premium offerings to garner additional revenue. Ajay Shah, partner, EY, says while the regular screen formats bring in volumes for these players, luxury formats give them higher margins. “In a regular theatre, the average spend per head on food and beverage (F&B) is around `100; but in a luxury or premium setting, it is above `500.”

On average, most multiplexes earn 60% of their revenue from ticket prices, 25-30% from F&B and the rest from advertising. In luxury formats though, the share of F&B is higher. PVR, for instance, gets 35% of its revenue from these properties, out of F&B. The average ticket price across these formats is also higher — in the range of `800-2,000.

Offering an experience
Multiplex players have launched luxury formats to tap a varied set of audiences. PVR Cinemas, for instance, currently has four screens under Director’s Cut, and 37 screens under PVR Gold, which also includes six screens under PVR Luxe launched in May last year. The company also has a members-only club PVR Home in Delhi.

“With the introduction of Luxe, we are reaching out to a wider segment of audiences who would love to watch cinema in a luxury setting. Director’s Cut is more of a uber-luxury cinema that offers a vast menu, hospitality, access to private dining, lounge, etc,” says Renuad Palliere, director, PVR Lanka.

INOX Leisure has a total of 52 luxury screens. Besides Insignia, it has opened a Megaplex in Mumbai, which houses luxury formats such as Kiddles, MX4D, ScreenX, IMAX and Samsung ONYX LED screen. Cinepolis has 11 luxury screens under Cinepolis VIP and has also introduced IMAX, 4DX, and Dolby ATMOS screens.
Aside from the top-notch technology and opulent setting, the other key attraction here is the food, with menus curated by celebrity chefs, butlers on call and
live kitchens.

“We have a menu crafted by masterchef Vicky Ratnani; we offer about 10-12 different cuisines with about 250 items on the menu,” says Alok Tandon, CEO, INOX Leisure.

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PVR Cinemas’ menu is crafted by chefs Mayank Tiwari and Yutaka Saito; the menu is changed every quarter according to the feedback from its guests. The average order per person at these screens is around `600-800. These properties are often rented out for parties, viewing football matches, engagement ceremonies, etc. Devang Sampat, deputy CEO, Cinepolis India, says, in a month, the company hosts four to five such private parties at these theatres. For PVR, such events bring in 8-9% of the revenue.

The right mix
While these screens do help multiplexes earn higher margins, they bring down the number of seats, and hence the monetising opportunity, considerably. “The auditorium, which can otherwise house 300 seats, has only 50 seats in these formats. So you have to balance it out with the right pricing of tickets and F&B offerings,” says Shah of EY.

It’s a tightrope walk. If the tickets are very expensive, it could lead to a fall in footfalls and affect revenue.

The right content is a big factor when it comes to luxury formats. “Multiplexes need to ensure the programming mix appeals to this particular audience; because the content that might work in other screens of these venues, may not work for audiences of these luxury screens,” says Jehil Thakkar, partner, Deloitte India.
Most of these screens have been launched only in the metros and tier II cities yet. Experts say that the scalability of these screens is uncertain as they are high-priced and cater to a niche audience.

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