The evolution of multiplexes in India has been a fascinating journey, marked by significant milestones and transformative changes. The concept of multiplexes, which began in the late 1990s, revolutionized the movie-going experience by offering state-of-the-art facilities, diverse food and beverage options, and a wider selection of films under one roof. This shift from single-screen theaters to multiplexes catered to the changing preferences of urban audiences who sought more than just a movie – they desired a comprehensive entertainment experience. So let’s delve deeper into the journey of multiplexes with Partho Dasgupta, former CEO of BARC India and currently Managing Partner at Thoth Advisors.
Multiplexes Today
Today, multiplexes have become a staple in India’s urban landscape, significantly influencing the country’s cinema culture. According to the latest Ficci-EY media and entertainment industry report, the number of cinema screens in Hindi-speaking markets rose by 6% in 2023, while those in the east increased by 4%. In contrast, the southern markets saw a modest 2% rise in screens. However, this slight percentage increase in the south is still substantial given that south India holds 47% of all screens in the country. Specifically, Andhra Pradesh, Karnataka, Tamil Nadu, and Kerala collectively boasted 4,573 cinema screens as of 2023, compared to 5,169 screens in the rest of India.
Significantly, 2023 marked a milestone for the cinema industry as the number of screens finally surpassed the levels seen in 2018, despite the devastating impact of the COVID-19 pandemic. During the pandemic, an estimated 1,500-2,000 theaters, predominantly single screens, shuttered across the country. This resurgence signals a recovery and renewed interest in cinema-going post-pandemic.
The multiplex industry in India is experiencing a period of dynamic transformation, marked by significant developments that promise to reshape its landscape. Central to this evolution is the merger of two industry giants, PVR, and Inox Leisure, which has created a formidable entity poised to drive growth and innovation within the sector. This merger, finalized in February 2023, has positioned the combined company as the fifth-largest listed multiplex chain globally by screen count, an impressive achievement that underscores the scale of its influence.
The consolidation of PVR and Inox Leisure represents a strategic move designed to capitalize on synergies and enhance operational efficiencies. By merging their resources, expertise, and market reach, PVR-Inox now controls a substantial 18% share of total cinema screens in India, and a dominant 43% share of multiplex screens. Furthermore, the entity commands a 30% share of the overall box office revenue, with over 50% of the multiplex box office share, according to a report by Kotak Institutional Equities. Partho Dasgupta says, “These figures highlight the significant market power and competitive advantage that the merger has conferred and the implications of this merger extend beyond market share and financial metrics.”
The combined entity is poised to play a pivotal role in advancing the multiplex industry’s growth trajectory. With plans to open 180-200 new screens annually across various formats over the next two years, PVR-Inox is committed to expanding its footprint and enhancing the movie-going experience for audiences nationwide. This expansion strategy not only addresses the saturation in tier 1 cities but also taps into the burgeoning demand in tier 2 and 3 cities, fostering inclusivity and accessibility in entertainment.
“The merger is expected to drive innovation within the industry. PVR-Inox can invest in cutting-edge technologies, superior amenities, and diversified content offerings, setting new benchmarks for quality and customer satisfaction.” States Partho Dasgupta. Also the focus should be on Premiumization, he adds. Multiplexes can implement dynamic pricing to offer varied ticket prices based on the type of experience, such as premium seats with recliners, gourmet food, and advanced AV technologies, which can command higher prices.
By introducing premium experiences like Gold Class or Royal Seats, they can maximize revenue from high-demand customers. Offering luxury amenities also diversifies revenue through higher-priced food and beverage sales, offsetting potential ticket sale losses. “Targeted marketing attracts high-value customers willing to pay for premium experiences, boosting average revenue per user (ARPU)” says Dasgupta. Investments in premium amenities and technologies enhance operational efficiency, providing better services and justifying higher prices.
Saturation in Tier 1 Cities and Potential in Tier 2 and 3 Cities
While multiplexes have thrived in tier 1 cities, leading to market saturation, the future growth potential lies in tier 2 and 3 cities. Urban centers like Mumbai, Delhi, and Bengaluru have witnessed extensive development of multiplexes, leaving little room for new additions. However, smaller cities and towns present untapped markets with growing disposable incomes and a burgeoning appetite for entertainment. This trend is supported by the data, which shows an increase in the number of screens in various regions, indicating a shift towards expanding in these less saturated areas.
Delhi, for example, saw the number of theaters rise from 129 in 2008 to 137 in 2022, peaking at 142 in 2017. The average number of cinema shows per day rose from 450 in 2010 to 623 in 2022, yet the average number of cinema-goers per day has declined over the last 13 years, as per the Delhi Statistical Handbook-2023. This underscores the need for multiplex operators to explore and invest in tier 2 and 3 cities where the potential for audience growth is higher.
The slow but steady growth of multiplexes in India reflects a broader trend towards modernization and enhanced viewer experiences in the cinema industry. Despite the challenges posed by the pandemic, the industry has shown resilience, with screen numbers rebounding and surpassing pre-pandemic levels. As tier 1 cities reach saturation, the expansion into tier 2 and 3 cities presents a promising avenue for growth. This strategic shift not only democratizes access to high-quality cinema experiences across the country but also drives economic growth in smaller towns and cities. The journey of multiplexes in India, as highlighted by Partho Dasgupta, is a testament to the industry’s adaptability and enduring appeal in the face of evolving market dynamics.
