After gobbling multiplex chain Cinemax Ltd, Ajay Bijli, the CMD of multiplex major PVR Ltd has become even more aggressive on increasing the cinema exhibition business in India.
He has also signed deal with the IMAX Corp and has launched 2 IMAX screens in India, while there are more in offing. PVR is also open for organic and inorganic growth in the space.
Bijli spoke with Urvi Malvania and Gaurav Laghate on his strategy in the future. Edited excerpts:
I think there are a lot of other forms of entertainment which are much more expensive. To build a good cinema in a good location, with safety and security, technology and comfort level taken care of, is not cheap. Real estate costs itself to be in a prime land is very expensive.
On top of that, if you want to build a great facility; you see we are competing with so many more platforms where people can watch a movie, so if we don’t create a magical space where technology is good with a no compromise service, people are not going to come.
We want people to be glad they took the decision to see a movie at PVR. So for that you have to build a great place. If you do that and operate it well, the toilets have to be clean, the staffs has to be trained, safety and security is taken care of, upkeep has to be there, not a single carpet can be dirty and so on. If all this needs to be there then there is a price that needs to be charged and only then you get a reasonable return on investment.
But the main attraction for multiplex is the content. How satisfied are you with the kind of content line-up?
We are very comfortable in the Indian market space because of the constant flow of content as India makes the largest number of movies. India is also a country where English speaking is rampant so there is no problem and even Hollywood films which are imported do very well.
On the other hand, there is amazing appetite for people to watch movies. It still continues to remain the number one form of entertainment. You have movies which cut across all age groups. So basically we are a conduit between the film-makers and film-goers.
But the conduit has to be of a certain standard and quality and that is what we are trying to do. We want to make sure that the experience is so enhanced that people want to watch a movie on the big screen.
After Cinemax, will you focus more on organic growth rather than going to buy other properties?
We were always very keen on organic as you can control everything including the location, what you want to build, and capital expenditure is also under control. So we always had a robust organic growth strategy anywhere.
However, we felt that if there is an inorganic that comes at the right price and is the right fit, then we will be open to it. This is because it is something we are very keen to achieve. So this opportunity (Cinemax) came along and it worked for us and we are also very happy. We got a very good asset available at a good price.
Everybody was after it but we were fortunate enough to get it. But that did not stop our organic growth; we still have around 90 screens opening up this year, another 50-60 next year. So we will do that anyway, however, if I yet again get another opportunity which is a right fit at the right price then definitely we will go for it.
PVR, with Cinemax, has become very strong entity and you are in a position to dictate the terms to producers. Don’t you feel CCI may want to look into it?
Individually we are way below any threshold or percentage that CCI has to take notice of us because that’s if you have over 60-70% of the market share. Our market share is around 25-30% when it comes to bigger movies as they get played across 2000-3000 screens. Even single screens play it so your average comes down.
So that’s nothing for CCI to get worried about as its only the case when your percentage goes high or when everybody is coming together, which is not the case here.
We are not touching the hornet’s nest. There are other areas where you can get economies of scale. Maybe some smaller films are there, or if some resetting needs to be done it could be looked at but nothing significant. Everybody is so co-dependent on each other.
India is still an underpenetrated market in terms of total screens. What is your view?
India has got around 9,000 screens, out of which 1900 are new multiplex screens which are either represented by major players or by local multiplex operators. If you compare that to the US, it’s around 39,000, in China its 19,000.
What we need is the avatar of these multiplexes to come and proliferate in every place. When they say that India is still under-screened, they mean that the new avatar of modern day multiplexes which have around eight screens under one roof, where the facility, sound and projection system is better; that part we still have not penetrated.
So you still have single screens which are good, but it’s difficult to fill them up to two weeks in a year and therefore ATP is also low. With new screens coming up, the average ticket price will marginally go up and it will revive every catchment.
But what about the places where spends on film viewing is not that high?
Today, places like Nanded, Bilaspur and Raipur are also doing very well. New market gets created, and what the revenue potential of those cities was earlier pre-multiplex, is completely different to what it is post-multiplex. The FICCI-KPMG report also states that newer multiplex proliferation has to happen.
But isn’t it a high investment business? Considering the cost and real estate business, how do you see the proliferation of multiplexes?
You have to be very careful. The cost of putting up screen will be different in a place like Mumbai to Latur, Bilaspur or Aurangabad. Mumbai is really expensive and everything basically has a cascading effect, your capex also has to be higher as you are targeting a very discerning audience.
So India is a very disparate market as per the demographic profile. Somewhere they are more sensitive to quality than price and vice-versa. But as a company you still have to give a minimum level of quality. What we have done with our PVR Cinemas and Talkies model, which is a PVR Premiere model where basically capex per screen is lesser but we are still not compromising on the quality of sound, projection system.
But overall it’s a no frills cinema. So in some cases the finishing cost is lesser and in any case the real estate cost is cheaper as well because we are in a smaller town.
In small places, our overall cost works out to Rs 1 crore per screen, as opposed to Rs 2.5 to 3 crore cost in a city like Mumbai.
Being one of the first multiplex, what was your vision then and what is the strategy now?
We started with a single screen in 1990. Then we opened a multiplex in 1997. We knew that you have to have a critical mass to get into the business. So always the goal was that it should be a national chain and not be Delhi based as the movie going capacity changes from city to city.
There was Mumbai, Bangalore and Chennai which were untapped. One should also be very cautious in the initial stages to make a very big decision. We were fortunate that everything we opened did well, so we could keep growing.
Our vision was that it should be a larger company, a chain and as we moved along we realised that the PVR brand had more potential, the management kept becoming very strong, Sanjeev (Bijli, brother and joint MD) and I including the investors had a larger appetite. But most importantly, India had more appetite for a brand like ours.
When you see everything coming together, and there were people who were ready to back us, you just keep working towards making a larger company.
So what is the vision now?
The vision continues to remain that can we be the best player in the exhibition space in the country and one of the most significant ones globally. Now we have become a significant one in Asia at least.
Is there a desire of going overseas?
We have our domain in India now; I don’t want to jump into another country until I really understand the dynamics of the market. Just now itself, India has got a lot of work that needs to be done. We are expanding and it is challenging.
You should be careful how you grow managerially, financially, from a brand perspective and from a consumer experience perspective. It’s a home grown brand where you need to keep changing systems and processes.
It will be wonderful being an Indian brand and then having a global impact. That dream is there but how to, is what I still have not thought of.
But there are challenges of entertainment tax...
I find India unique despite all its challenges of entertainment tax being high, Cinematograph Act changing from state to state, cinema building by laws changing and more. The only thing going for people in this business is the amazing appetite people have to watch films and the constant flow of movies.
These two factors play a very important role because imagine if the demand and supply is not there. These parameters or boxes get ticked in any market.
He has also signed deal with the IMAX Corp and has launched 2 IMAX screens in India, while there are more in offing. PVR is also open for organic and inorganic growth in the space.
Bijli spoke with Urvi Malvania and Gaurav Laghate on his strategy in the future. Edited excerpts:
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Why are the average ticket prices at your multiplexes on the rise?
I think there are a lot of other forms of entertainment which are much more expensive. To build a good cinema in a good location, with safety and security, technology and comfort level taken care of, is not cheap. Real estate costs itself to be in a prime land is very expensive.
On top of that, if you want to build a great facility; you see we are competing with so many more platforms where people can watch a movie, so if we don’t create a magical space where technology is good with a no compromise service, people are not going to come.
We want people to be glad they took the decision to see a movie at PVR. So for that you have to build a great place. If you do that and operate it well, the toilets have to be clean, the staffs has to be trained, safety and security is taken care of, upkeep has to be there, not a single carpet can be dirty and so on. If all this needs to be there then there is a price that needs to be charged and only then you get a reasonable return on investment.
But the main attraction for multiplex is the content. How satisfied are you with the kind of content line-up?
We are very comfortable in the Indian market space because of the constant flow of content as India makes the largest number of movies. India is also a country where English speaking is rampant so there is no problem and even Hollywood films which are imported do very well.
On the other hand, there is amazing appetite for people to watch movies. It still continues to remain the number one form of entertainment. You have movies which cut across all age groups. So basically we are a conduit between the film-makers and film-goers.
But the conduit has to be of a certain standard and quality and that is what we are trying to do. We want to make sure that the experience is so enhanced that people want to watch a movie on the big screen.
After Cinemax, will you focus more on organic growth rather than going to buy other properties?
We were always very keen on organic as you can control everything including the location, what you want to build, and capital expenditure is also under control. So we always had a robust organic growth strategy anywhere.
However, we felt that if there is an inorganic that comes at the right price and is the right fit, then we will be open to it. This is because it is something we are very keen to achieve. So this opportunity (Cinemax) came along and it worked for us and we are also very happy. We got a very good asset available at a good price.
Everybody was after it but we were fortunate enough to get it. But that did not stop our organic growth; we still have around 90 screens opening up this year, another 50-60 next year. So we will do that anyway, however, if I yet again get another opportunity which is a right fit at the right price then definitely we will go for it.
PVR, with Cinemax, has become very strong entity and you are in a position to dictate the terms to producers. Don’t you feel CCI may want to look into it?
Individually we are way below any threshold or percentage that CCI has to take notice of us because that’s if you have over 60-70% of the market share. Our market share is around 25-30% when it comes to bigger movies as they get played across 2000-3000 screens. Even single screens play it so your average comes down.
So that’s nothing for CCI to get worried about as its only the case when your percentage goes high or when everybody is coming together, which is not the case here.
We are not touching the hornet’s nest. There are other areas where you can get economies of scale. Maybe some smaller films are there, or if some resetting needs to be done it could be looked at but nothing significant. Everybody is so co-dependent on each other.
India is still an underpenetrated market in terms of total screens. What is your view?
India has got around 9,000 screens, out of which 1900 are new multiplex screens which are either represented by major players or by local multiplex operators. If you compare that to the US, it’s around 39,000, in China its 19,000.
What we need is the avatar of these multiplexes to come and proliferate in every place. When they say that India is still under-screened, they mean that the new avatar of modern day multiplexes which have around eight screens under one roof, where the facility, sound and projection system is better; that part we still have not penetrated.
So you still have single screens which are good, but it’s difficult to fill them up to two weeks in a year and therefore ATP is also low. With new screens coming up, the average ticket price will marginally go up and it will revive every catchment.
But what about the places where spends on film viewing is not that high?
Today, places like Nanded, Bilaspur and Raipur are also doing very well. New market gets created, and what the revenue potential of those cities was earlier pre-multiplex, is completely different to what it is post-multiplex. The FICCI-KPMG report also states that newer multiplex proliferation has to happen.
But isn’t it a high investment business? Considering the cost and real estate business, how do you see the proliferation of multiplexes?
You have to be very careful. The cost of putting up screen will be different in a place like Mumbai to Latur, Bilaspur or Aurangabad. Mumbai is really expensive and everything basically has a cascading effect, your capex also has to be higher as you are targeting a very discerning audience.
So India is a very disparate market as per the demographic profile. Somewhere they are more sensitive to quality than price and vice-versa. But as a company you still have to give a minimum level of quality. What we have done with our PVR Cinemas and Talkies model, which is a PVR Premiere model where basically capex per screen is lesser but we are still not compromising on the quality of sound, projection system.
But overall it’s a no frills cinema. So in some cases the finishing cost is lesser and in any case the real estate cost is cheaper as well because we are in a smaller town.
In small places, our overall cost works out to Rs 1 crore per screen, as opposed to Rs 2.5 to 3 crore cost in a city like Mumbai.
Being one of the first multiplex, what was your vision then and what is the strategy now?
We started with a single screen in 1990. Then we opened a multiplex in 1997. We knew that you have to have a critical mass to get into the business. So always the goal was that it should be a national chain and not be Delhi based as the movie going capacity changes from city to city.
There was Mumbai, Bangalore and Chennai which were untapped. One should also be very cautious in the initial stages to make a very big decision. We were fortunate that everything we opened did well, so we could keep growing.
Our vision was that it should be a larger company, a chain and as we moved along we realised that the PVR brand had more potential, the management kept becoming very strong, Sanjeev (Bijli, brother and joint MD) and I including the investors had a larger appetite. But most importantly, India had more appetite for a brand like ours.
When you see everything coming together, and there were people who were ready to back us, you just keep working towards making a larger company.
So what is the vision now?
The vision continues to remain that can we be the best player in the exhibition space in the country and one of the most significant ones globally. Now we have become a significant one in Asia at least.
Is there a desire of going overseas?
We have our domain in India now; I don’t want to jump into another country until I really understand the dynamics of the market. Just now itself, India has got a lot of work that needs to be done. We are expanding and it is challenging.
You should be careful how you grow managerially, financially, from a brand perspective and from a consumer experience perspective. It’s a home grown brand where you need to keep changing systems and processes.
It will be wonderful being an Indian brand and then having a global impact. That dream is there but how to, is what I still have not thought of.
But there are challenges of entertainment tax...
I find India unique despite all its challenges of entertainment tax being high, Cinematograph Act changing from state to state, cinema building by laws changing and more. The only thing going for people in this business is the amazing appetite people have to watch films and the constant flow of movies.
These two factors play a very important role because imagine if the demand and supply is not there. These parameters or boxes get ticked in any market.