A file photo of BookMyShow's Mumbai office. Photo: Mint
A file photo of BookMyShow's Mumbai office. Photo: Mint

Quiet rise of India’s ticketing unicorn

  • Online ticketing platform BookMyShow is diversifying to tide over challenges to its first-mover monopoly
  • Now two decades old, BookMyShow is next in line to enter the coveted club of unicorns—firms valued at $1 billion or more—with a likely infusion of roughly $70 mn

On the eve of a stake sale which is likely to catapult online ticketing platform BookMyShow (BMS) into the elite club of unicorns—firms valued at $1 billion or more—company insiders are blasé about that sought-after tag. Founder and chief executive Ashish Hemrajani’s favoured analogy for the company is that of a dog, not a unicorn. “Unicorn is a mythical animal that exists only on paper," he told Mint in an interview in 2018. “I am a mongrel. I wake up every morning as an entrepreneur and fight on the street. I will get bitten or bite. If there is a pack of dogs, you run. If somebody pets you, be gracious. If somebody feeds you, be grateful. If someone tries to hit you, run—you will always have another day to fight."

Perhaps it is this degree of realism which has kept the company alive through its early days in 1999, when selling movie tickets online was technically illegal, and through the dotcom bust of the early 2000s, when its employee count bottomed out to a mere five or six. Today, the company sells upwards of 15 million tickets each month and has over 1,400 employees.

While a company spokesperson dismissed the reports of the stake sale as market speculation, Mint has independently confirmed the impending infusion of roughly $70 million into the firm.

This infusion of funds comes at a time of big change for BMS. Its first-mover monopoly had remained mostly unchallenged till the summer of 2016. In that tumultuous year, a few months before demonetization, digital payments firm Paytm, run by One97 Communications Ltd, moved in to acquire a majority stake in Insider.in, another ticketing firm. Almost at the same time, Alibaba, a major investor in Paytm, bought a stake in Orbgen Technologies Pvt. Ltd’s TicketNew, a Chennai-based platform that had painstakingly built partnerships with single-screen cinemas in south India. The familiar formula of 100% cashback and 1+1 offers followed.

With an upstart nipping at its heels, Bigtree Entertainment Pvt. Ltd, the company which owns BMS, shifted its strategy—from solving the niche concern of the crowded cinema ticket counter to making it easier for Indians to show up at anything from a sports event to a live concert. Talk of being a “360-degree entertainment destination" is being taken quite seriously, with plans to push down revenues from movie tickets to below 50% within a few years. According to a person aware of the stake sale discussions, the company will also expand into sponsorship, media, and advertising sales besides boosting the payment technology that powers its website.

As things stand, the emerging duopoly between BMS and Paytm will largely determine how India enjoys movies, stand-up comedy shows, and Indian Premier League (IPL) games. Despite the deep discounts which Paytm unleashed, analysts estimate that BMS still accounts for over two thirds of all tickets sold online.

“We have a stated ambition of delivering a significant share of our revenues from our live entertainment business over the next few years," explains Albert Almeida, chief operating officer, Live Entertainment,BMS. These events and music festivals, especially the ones with a foreign star attraction, are as much as 50% more expensive than regular movie tickets.

Then, there’s a third unlikely participant—the Reserve Bank of India (RBI). Beyond the discount itself, how much can online firms change as convenience fee and internet handling charges and should that fee be regulated? In response to a recent Right to Information query, the RBI said its circulars or transaction fee or payment gateway charges (which constitute a portion of the “internet handling charges") apply to online firms too. A petition is now pending before a consumer court in Hyderabad. The outcome of that legal battle may have an impact on a slew of India’s online service providers, including BMS.

The early days

Getting drunk can sometimes pay rich dividends. Ask Hemrajani and he will tell you that is how India’s go-to entertainment ticketing platform, BMS, came into being. It was in 1999 when the advertising maven was backpacking with his college friends in the vineyards of South Africa that he heard a radio programme selling tickets for rugby. The idea took root “when I was smashed out of my brains, lying under a tree", remembers Hemrajani, “particularly because of the way movie tickets were sold in India at that time: through pigeon hole counters that operated on fixed timings and no information on ticket availability with the result that black marketing of tickets was rampant." The friends returned to Mumbai and launched Bigtree Entertainment.

The ride to success was not easy. In 1999, Indian laws did not allow tickets to be sold online, nor could the box office be automated. Hemrajani had the daunting task of convincing the state government to amend the law. The next step was to install ticketing software and start selling tickets that were home-delivered, using the cash on delivery method. However, he had to deal with blocked inventory—which meant that he had to first buy a fixed number of tickets that he could then sell. This was an inefficient model because of the supply and demand issue.

As if things were not bad enough, 2002 saw the dotcom bubble go bust and with that Hemrajani’s dreams flew out the window. But he bided his time. In 2007, seeing the growth in multiplexes and credit and debit card penetration in the country, Hemrajani and his team relaunched BMS and the rest is history. “BookMyShow was an early mover and was certainly integral to building the ecosystem for online ticket sales for movies, especially with the advent of multiplexes," explains Ankur Pahwa, partner and national leader, e-commerce and consumer internet, EY.

Hemrajani was quick to collaborate with all the leading cinemas—PVR, INOX and Cinepolis—by bringing them on to the BMS portal. In 2013, BMS signed a five-year deal with PVR Cinemas to be their online ticketing partner across India. The use of BMS’ extensive data and analytical capabilities helped these cinema partners to increase spends per head of movie-goers. However, while BMS built a strong community of online movie ticket buyers over the years, other multiplex chains also went online themselves which impacted the bookings on the aggregator platform. The initial euphoria around buying movie tickets online started fading away.

Diversification push

That is why it made sense to diversify into a high margin business since the average transaction value is rather low on a movie ticket. Sports and live events were opportune since they would offer high margins and also whet the appetite of Indian consumers looking for new and varied experiences. According to a December 2017 McKinsey report, millennials spend 60% more on live experiences than Gen Xers—all in search of not only genuine connection but also fresh social media content. Globally, online ticketing firms in China and India are clocking among the fastest growth rates.

In March 2010, BMS became the official ticketing partner for IPL and the next year, the company became the exclusive ticketing partner for India’s first Grand Prix -Formula 1. The shift gained further urgency with the entry of Paytm into movie ticketing business in 2016. “The advantage of non-movie entertainment segments (sports and live events) is that the average ticket prices are much higher— 200 for a movie ticket versus a minimum of 2,000 for a sports event. With movie tickets, since the average transaction values are low, the commission take rates are low, which in turn also impact the margins they make," explains Pahwa.

Besides the first-mover advantage, what ultimately worked in favour of the company was the changing ecosystem in India. Deep mobile internet penetration, access to data, smart devices and affordable broadband connectivity gave a fillip to the ticketing platform, enabling it to tap into new users as well as give them improved discoverability and access to such experiences.

The emerging opportunity is rather huge. According to an EY-FICCI report, the Indian media and entertainment segment is expected to account for consumer spends of over 2.35 trillion by 2021, growing at nearly 12% a year. According to the report, more and more consumers are opting for online ticketing platforms such as BMS, Paytm, etc., and cinemas’ own platforms as against buying tickets from the box office. In recent years, over 50% of ticket sales for the top four multiplex chains were routed online.

The challenges

But when consumers dive into online channels in droves, competition for a piece of the pie is a natural by-product. Industry experts say Paytm has eaten into 20% of BMS’ movie business over the past two years. “The integrated experience of booking and payments through the wallet, along with the familiarity with the platform, certainly helped a player like Paytm make it seamless and also allows it to do a lot more in terms of cashbacks and discounts," explains Pahwa, adding that in smaller-town India, where the wallet is used more than cards, Paytm will have an advantage.

In May 2018, Paytm acquired Alibaba-backed Orbgen Technologies, which operates TicketNew, for $30 million. On the other hand, in April this year, BMS invested an undisclosed amount in AtomX, a Pune-based payments technology startup. AtomX enables a contactless payments platform that can be used by customers and vendors across all major live events.

One big difference between BMS and Paytm is that the former is expanding into international geographies. According to BMS’s Almeida, this includes Dubai and UAE through its partnership with the Coca-Cola Arena, besides strengthening its presence in South-East Asia including Singapore, Indonesia, and Sri Lanka.

“While BookMyShow has the brand recall, Paytm has a huge installed base of 200m+ wallet users, which they are leveraging," says Prasanto K. Roy, an expert in tech policy. He adds that going forward, there’s a likely hit on the bottom line of online ticketing firms due to possible regulatory interventions on online commissions and convenience fee—which could possibly bring down the sky-high valuations.

The ticketing revenues of BMS and Paytm rely, in part, on masquerading payment processing charges into their convenience fee, says Srikanth Lakshmanan, founder of Cashless Consumer, a policy collective on digital payments. Essentially, when a debit card is used at a brick-and-mortar supermarket, the processing charges are borne by the merchant—since digital payments reduce the cost of storing and managing cash in the long run. Many online services have been passing on this fee to consumers. “This is a violation of the payments and settlements act. But the RBI has not enforced this in any way yet," Lakshmanan says.

While those like Pahwa say ticketing platforms are essentially charging a fee for “providing premium services" and that “customers can always decide to opt out and physically go to a multiplex to stand in a queue", the prevalent political mood of encouraging digital payments may leave some collateral side-effects on the economy of transaction fee itself. The recent Union budget also makes it clear that the government wants to bring down merchant discount rate and other such transaction charges, says Lakshmanan.

How will India’s newly emerging mass of online consumers react to such fees in future will certainly have some impact on BMS’ earnings, but the bigger picture remains rosy in an entertainment-hungry nation. For now, the unicorn-in-waiting plans to keep consumers busy with musical stage productions and marquee events like India’s first-ever NBA pre-season game, which is set to take place in October 2019. By then, the unicorn status should be confirmed.

Lata Jha in New Delhi and Sriram Mani in Mumbai contributed to this story.

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