Salman, Ajay Devgn, others expand multiplex footprint to small towns
New Delhi: A clutch of theatre chains are expanding their footprint into small town India including those launched by Bollywood stars Salman Khan and Ajay Devgn, who announced their entry into film exhibition recently. Devgn has already acquired six single screens in Uttar Pradesh in towns like Hapur, Raebareli, Ghaziabad, Agra, Phul Khiriya and Allahabad and plans to take over another 100 in the coming months across the country under his brand NY Cinemas. These will be converted into multiplexes.
Salman Khan also announced his plan to get into film exhibition during the promotion of his last release Race 3. At least two film industry experts confirmed that these theatre chains are being planned for smaller towns on the outskirts of Mumbai.
“Ajay expressed his desire to bring audiences closer to the film-making experience through this venture, especially in smaller towns which are often left out by mainstream cinema chains,” said Rajeev Sharma, chief executive officer, NY Cinemas, in a statement.
Chennai-based multiplex brand SPI Cinemas, owned by Kiran Reddy of the SPI Group has just started expanding northwards with a couple of theatres in Maharashtra, including places like Bhiwandi while a new company Opera Cinemas based out of Mumbai and owned privately by K.P Singh and Shivendra Pratap Singh, is looking at theatres across Madhya Pradesh.
Looking to build multiplexes, these companies want to improve India’s dismal screen count and capitalize on the potential in smaller towns that have an appetite for movies but not enough space to screen them. According to the Ficci-EY media and entertainment industry report 2018, India has 9,530 cinema screens compared to 40,000 in China and 40,393 in the United States. Multiplexes have grown at a rate of 10% over the last three years and contributed ~50% of overall domestic sales in 2017.
Despite producing the largest number of films in the world per year, India remains one of the most under-penetrated markets with eight screens per million people. This is primarily due to lack of penetration in tier-two, tier-three and tier-four markets, hence leaving a large section of the population with limited screen access.
“A great opportunity lies in the number of screens that the country is currently lacking,” said Shivendra Singh, managing director at Opera Cinemas that is looking at building 100 screens by the end of this fiscal year across all districts of Madhya Pradesh except large towns like Indore and Bhopal. There is a target of 500 by 2022 with a planned investment of ₹200 crore and the company will next move to Rajasthan if all goes well in MP. “We have the capacity for at least 20,000 more screens in India. Our biggest movies reach only about 30-35% of the population. So we are focusing more on the leftover 70% that has great potential.”
Although almost 70% of the overall business of a film goes to theatre owners, challenges in expanding to small towns are many.
“The major challenge is in convincing distributors and producers that these places can give you good returns in the long term,” Singh said. “If the movie doesn’t work, the print, advertising and marketing cost has already been incurred. So producers and distributors suffer losses and are therefore wary of taking films to these small centers,” he added. There is always the uncertainty of whether investment in small town will pay off and whether consumers have the necessary purchasing power.
“Obviously all of us are looking at properties that give us a payback on the investment we are making. In some cases it could be a gamble where we don’t know how the situation will turn out, but I guess all of us are looking at some calculated risk involved,” said Swaroop Reddy, president, SPI Cinemas that stood at 65 screens this March and hopes to reach 90 by next year with an investment of roughly ₹3.5-6 crore per screen.
Reddy said SPI’s newest screen in Bhiwandi is bringing in good returns and there is great untapped potential in these small markets. “In some ways, it’s a trial-and-error method. Having said that, we do our research before getting into any market,” Reddy said.
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