New Delhi: Multiplex chain operators in India are looking at places such as Jamnagar, Gorakhpur and Hathras as people in these small towns seek better entertainment avenues with rising purchasing power.

Operators plan to add as many as 7,000 screens over the next 10 years, many of them in smaller towns, to cover about 70% of the country, according to exhibition industry experts. India’s multiplex screen count is around 3,000, with an average of about five-six screens per theatre.

India’s screen count lags far behind countries such as the US and China, leaving enough room for multiplex operators to make deeper inroads into the country. India has less than 25% of the screens in China or the US, despite producing the most number of films in the world, said a Ficci-EY report on media and entertainment industry, released in March.

Last month, PVR Cinemas launched its first three-screen property in Madhya Pradesh’s Satna under the sub-brand PVR Utsav—an offering for tier-II and tier-III cities to address the growing aspiration for cinema across markets. Inox Leisure Ltd followed suit with new properties in Lucknow and Jalandhar, while Carnival Cinemas has announced the opening of 30 screens across Jammu and Kashmir and five more in the Ladakh region.

The 2001 Census defines tier-II towns as those with a population of 50,000-99,000, while tier-III and tier-IV towns are those with populations of 20,000-49,999 and 10,000 -19,999, respectively.

India is also behind in terms of screen density, with eight screens per million population, versus 16 in China and 125 in the US.

“The Indian market is a bit of a paradox. There are some locations that are oversaturated and have multiple multiplexes of various operators, while there are pockets that are virgin territories, where there is absolutely no entertainment infrastructure," said Kamal Gianchandani, chief executive officer (CEO), PVR Pictures. “We expect this to become a big growth piece for PVR. The top 20 cities are already saturated and the next level of expansion will have to come from the tier-II and III markets. We believe that in the next three-five years, this is where the bulk of growth for the multiplex sector will come from," he said.

PVR has a presence in 65-70 cities, including small towns such as Ranchi and Kota, whereas a film releases in 400-450 towns across India, Gianchandani said. This means there is scope to expand to about 300 towns. The Utsav properties in Satna and Jabalpur will be followed by those in Jamnagar, Faridabad, Hathras, Ratlam, Dahanu and Chhindwara, said Sanjeev Kumar Bijli, joint managing director of PVR Ltd.

“We have 16 properties in the pipeline over the next 12-18 months with a 5-6 crore investment per property. Cinema watching is a form of entertainment that is universal in our country, we’re trying to address that gap," Bijli said.

The idea is to select places where there is a strategic benefit to be derived from entry. First, the town should have a population of at least 300,000-400,000. Second, companies such as PVR use their distribution experience to gauge the potential for business in specific locations and the genre of films that works there. While the imposition of the goods and services tax has mostly ensured a level playing field as far as entertainment tax goes, some states still impose local and municipal taxes. Further, the idea is to find a central location within the city with good retail, food and beverage options so that it becomes an entertainment hub.

The other goal is to go to areas where people from nearby villages and small catchments can travel to easily, said Jagdeep Oberoi, CEO of Carnival Realty Pvt. Ltd. Carnival aims to come up with two-screen properties in about 100 sites over the next two years. This would include states such as Madhya Pradesh, Chhattisgarh, Kerala, Telangana, Tamil Nadu, Rajasthan and Gujarat. The company has allocated 300 crore for this.

Most companies aim to reduce prices of tickets for these small towns to at least half of what a metro commands. A ticket price range of 100-150 ensures value added-services at a suitable cost, compared to 250-plus tickets in big cities.

“When determining the prices, we take into consideration the location, cost structure of the project and, most importantly, the paying propensity of the catchment. This is a common formula for all our markets and geographies and, therefore, you may find variance in small towns as opposed to urban cities. We make sure that we do not outprice ourselves," said Alok Tandon, CEO, Inox Leisure. Next on the cards for Inox is Gorakhpur with an investment of 2.5-3 crore.

There has been a rise in discretionary expenditure in the top 20 cities in the last 10-15 years where people are comfortable with an average ticket price and a certain level of food spend at the cinemas, Gianchandani said.

“We believe this habit creation will also take place in the smaller towns over the next three-five years. As a result of stable government policies, we see more prosperity in smaller towns and when that lift in discretionary consumption starts to take place, we want to be well poised to grasp the opportunity," he said.

Film trade and exhibition expert Girish Johar said the fact that national multiplex chains are looking at mass audiences reiterates the age-old concept of India living in its villages, or, in this case, its small towns. “That is the way to go. This kind of mass consumption should help not just the film exhibition business, but also distribution and production," said Johar.

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