Amid economic slowdown, movie business is rare exception; how ‘Lipstick effect’ is boosting growth

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Published: February 19, 2020 12:27:54 PM

While many sectors are reeling under an economic slowdown in India, the film industry is an outlier and has been witnessing a healthy growth with increased footfall.

On average, most multiplexes earn 60% of their revenue from ticket prices, 25-30% from F&B and the rest from advertising.Amid other reasons that have levered the growth of the film industry are better quality content availability and lower GST rates on ticket prices.

While many sectors are reeling under an economic slowdown in India, the film industry is an outlier and has been witnessing a healthy growth with increased footfall. Three reasons have fueled the performance of the industry including the ‘Lipstick effect’, a CARE Ratings report said on Tuesday. ‘Lipstick effect’ is a concept in economics where people tend to indulge in small luxuries even when there is a slowdown or recession. So, instead of buying big-ticket luxury items, women tend to buy costly lipsticks, according to the theory. “For this reason, film exhibition business tends to be resilient and benefits even during economic downturns,” the report said. 

The same phenomenon was also witnessed for premium items in the FMCG sector and Financial Express Online had earlier reported that while most of the fast-moving consumer goods companies were witnessing a slowdown, costly products for many companies including HUL, Marico and Parle were selling more. 

Also Read | Fast-moving costly goods? FMCG firms bank on expensive products amid slowdown

Amid other reasons that have levered the growth of the film industry are better quality content availability and lower GST rates on ticket prices. “Reduction in GST rates on cinema tickets in December 2018 came in as a breather for moviegoers, who were earlier subject to high entertainment taxes — as high as 50% in certain states,” the report said. The revised rates for tickets less than Rs 100 is 12% and more than Rs 100 is 18%. Filmed entertainment is one of the largest segments in India’s media and entertainment sector in terms of revenue.

In the last year, net box office collections grew to Rs 5,613 crore witnessing a 27% on-year growth. Average box office earnings also swelled by 15% on-year to Rs 23 crore. Among the top gainers in 2019 were — Avengers: Endgame, War, Kabir Singh and Uri. Avengers: Endgame alone made Rs 373 crore in India and in 2019, top 10 films accounted for a 42% share of the total share. 

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