Q2 a 'write-off' for Indian cinemas
Strike could cost cinema operators over $60 milMUMBAI--Multiplexes in India will likely lose up to 3 billion rupees ($60.765 million) in the second quarter as an ongoing tussle with movie producers has led to almost no new releases at a time when the slowdown has cut admissions, analysts said.
Marketing and distribution of all new Bollywood films has been suspended and analysts estimate multiplex revenue losses of 2.5-3 billion rupees in the first quarter.
The average cost of running one multiplex is about 2-3 million rupees, of which the operators can only recover about a fifth of the cost, Vishal Kapur, chief operating officer of Fun Cinemas, which has 19 properties across India, said.
Producers in the world's most prolific movie industry are demanding a 50 percent share in boxoffice revenue while multiplex owners favor a performance-linked model based on a film's budget and star power, resulting in a deadlock that has seen almost no film releases since April 4.
Moreover, the average occupancy level has fallen to 10-15% since the deadlock, analysts and officials said, hitting revenue by 30-50% in April to June, according to a report by Angel Broking, which has a neutral rating on multiplex stocks.
Slowing consumer spend and poor content in 2009 badly hit domestic boxoffice revenues, which account for almost 70% of filmed revenues, prompting filmmakers to demand half of the revenues from multiplexes, analysts said.
Films like the Abhishek Bachchan starrer "Delhi 6," R. Madhavan's "13B" and UTV's "Dhoondte Reh Jaoge" fared poorly at the boxoffice, according to the Angel report.
And the situation isn't likely to improve soon, said analysts.
"Even if the spat is resolved, it would be six weeks before the movies can be released as they need time for marketing etc," an analyst with a local brokerage, who requested anonymity, said. "In April-June, they will post a good amount of loss."
The second quarter is a "write-off," said Kapur of Fun Cinemas.
Most multiplexes are cutting costs--operating fewer screens and lowering advertising spends--while producers have resorted to re-releasing old titles on single screens, but "unless producers and exhibitors find a solution to the revenue sharing issue, I don't see audiences going back to theatres any time soon," trade analyst Amod Mehra said.
The Indian Film Company has re-released last year's blockbuster Ghajini while UTV Motion Pictures, a unit of UTV Software has released some of its old titles "Rang De Basanti," "Jodha Akbar" and "A Wednesday" in single theatres across India.
"Our aim is not so much revenue, but to support single screens and also provide consumers with something to watch," said Siddharth Roy Kapur, CEO, UTV Motion Pictures.
In the stock market, multiplexes are following the broader bull market trend, with Adlabs adding 18 percent and Inox Leisure up over 12% since the April 4 deadlock, while PVR has fallen over 1%.
The broader 30-share BSE index has risen 17% in the period.