How multiplexes dabble with alternative content to counter rising taxes

At the fag end of 2018, the government brought down the GST rates on cinema tickets costing up to Rs  100 to 12 per cent from the earlier 18 per cent, while tickets above 100 would attract 18 per cent GST against 28 per cent earlier. This bought some relief to the industry which had been reeling under a high tax burden including various local body taxes. That in turn meant higher ticket prices and lower footfalls, which led some players to scout for new ways to generate incremental revenue.

Multiplex market leaders PVR Ltd and Inox Leisure Ltd have both been experimenting with a whole range of alternative content over the past few years, witnessing a healthy growth in what is still a relatively small segment within the overall leisure business. Their approaches towards the add-on offerings presents an interesting contrast and a lesson for the wannabes.

The broader category of non-studio content includes music, documentary screenings, film festivals and of course, sports. The discerning consumer is drawn to the theatres for both — a big screen experience and to be part of a congregation of like-minded people. Market leader PVR (screen count 781) is working towards making it a sustainable revenue stream, while Inox (583) is looking at such events as “largely and purely consumer delight and brand building initiatives”.

When Dharmesh Datta, vice-president, marketing, PVR Group, recounts the company’s journey with alternative content, he does so from a certain vantage point. He was hired in 2014, the year PVR started dabbling with alternative content, and he was given the mandate to promote the genre. “Since the concept was popular in Europe and the US, we initially tried to experiment with what worked there. We tried ballets, musicals, the Royal Shakespeare theatre and Broadway type stuff but a select few showed up.”

What found traction among consumers was contemporary events rather than classics. From a select few in the initial days, the admissions went up to 50,000 last year with contemporary concert shows with the likes of One Direction, Justin Bieber and BTS mostly during weekends. “A surprise was in the form of art/museum exhibition films that appealed to the parent-child audience,” says Datta.

Talking about the programmes that have worked for INOX, Alok Tandon, chief executive officer, says, “Sony BBC Earth conducted the theatrical launch of their ambitious documentary Dynasties at INOX multiplexes across the country. Events like film festivals are also allowing us to engage with our audiences with some high quality feature films. We see a lot of potential in hosting meetings, training sessions, workshops and seminars. We have also played host to book and product launches, yoga sessions and musical events.”

That said, the number of screens is constant and one has to play the mainstays — films — on them. How then are these events managed? Datta breaks it down with an example that also helps to understand the revenue opportunity that such experiments create: “Say six shows of a film is playing in a cinema hall with 100 people turning up for each show. So 600 people are watching that film in a day. Now if we reduce that number to five shows, still 600 people will come with each show catering to an increased count of 120 people. But for the sixth show, which I have replaced with a comedy show, even a hundred turn up, they are all incremental admissions.”

Jehil Thakkar, head of media and entertainment, Deloitte India, looks at the other side of the coin: “You can scale the alternative content only up to a point. And that is not a steady source of revenue. Despite the encouraging reception, it is only a few percentage points on the top line at the maximum.” Back of the envelope calculations indicate, these events would add about 8-10 per cent to the total revenues for exhibitors who are trying really hard.

But that doesn't bother someone like Tandon. “We are aiming to build a stronger connect with the audiences through these unique offerings," says Tandon. "Ticketing, as we always believe, is a function of content. Content is the new 'hero' and as long as the content is performing well, ticketing revenues will flow in on its own.”

So the tangible benefits for the host? "The 100 new people will also bring extra revenues in food and beverages and also improve the ad sales potential". “And this is where the resource optimisation of the theatre business, which mainly comprises screen and seats, will happen,” Datta says.

And how does one allocate resources? Screen allocation depends purely on the nature of the content or the event. For example, a book reading session would require only a single screen, a film festival might occupy a couple of screens in a single multiplex and the screening of, say, the Cricket World Cup will happen on 25 screens across the country.

Some trends have been more encouraging than the others even throwing up surprises. PVR's Datta mentions a Korean pop or KPop show which sold out in smaller centres such as Raipur and Guwahati; and the Champions League final screening where two shows went house full despite starting post-midnight and not offering alcohol which any pub would have thrown in to lure football fanatics. People flock theaters even for something which is available on OTT platforms. On the other hand, the response to a special screening of a film on the late singer Jagjit Singh, which PVR thought would do well in North India where Singh had a cult following, did not meet with expectations.

As things stand, alternative content is a niche and one big challenge for multiplexes is coming up with a common theme that can satisfy a diverse audience. Scaling up, therefore, is a major headache.

It can never be mainstream because the historical value of live events is low, says media expert Vanita Kohli-Khandekar. "The whole economics of entertainment across the world, irrespective of the format you look at, is sustained by repeat value. For example, Disney creates repeat value by creating characters, theme parks, licensed merchandising around a kernel of content. Similarly, PVR, which is at the retail end of the business, can only achieve scale by playing more shows and getting people in more frequently.