Indian Cinema… Only for the Rich?

"It is shocking to see the government is classifying watching movies as luxury and subjecting us to the similar tax structure as of five-star hotels and casinos," said Nitin Sood, CFO of PVR yesterday when the government announced the GST rates on various products and services to be applicable from 1^st July this year. This made me wonder. My initial thought resonated that of Mr Sood as to how can anyone classify watching movies as a luxury? But then I took a step back and did a bit of number crunching. So, ladies and gentlemen, tighten your seat belts as what you are going to experience is shock albeit quite opposite to the shock experienced by Mr Sood.

In India, any movie which grosses Rs 100 cr (USD 15 Mn) is considered a super hit.

This makes sense considering the average revenue per film is an abysmal Rs 5-10 Cr (USD 1-1.5 Mn). Most of this is collected in the first week itself since unlike the days of yore when the success of the movies was defined by their run at the box office, 25 weeks for a Silver Jubilee and 50 weeks for a Golden Jubilee, these days it is the moolah it brings in. The prints have been upgraded to digital which enables the film to get released simultaneously across thousands of screens unlike in the past when physical film rolls had to be shipped to a cinema hall that limited the screens on which it got released. These physical prints would be handed-down to smaller cities over time and by the time it reached the category C towns, the prints were all scratchy and blurry. Now let’s come back to the numbers. The multiplex goers know that on the release date the ticket prices can be anywhere between Rs 300-500 (USD 5-7) and depending upon the opening weekend response the prices stay at the same level or go down. The single screen ticket pricing is around 60-150 (USD 1-2). Let us for simplicity sake, and to consider the best-case scenario after even excluding the taxes, take the average ticket pricing to be Rs 100 (USD 1.5) during the lifetime of the film. So, for a superhit film which grosses Rs 100 cr (USD 15 Mn), the number of patrons who watch the movie in any cinema hall comes to a paltry 1 cr (10 Mn). That’s just 0.8% of India’s population!!! Compare this with the Top 1% of India’s population that earns more than Rs 1.5 lacs p.m. (USD 2307 p.m.). Did I forget to mention the cost of popcorn sold at cinema hall? Does anyone seriously believe that an average middle class Indian with income levels between Rs 10-25000 (USD 150-400) can afford to spend a cumulative Rs 2000 (USD 30) for a movie outing of a family of 4? If cinema watching is not for the rich then I wonder what is?

Let’s compare these numbers with those of Hollywood. There a film is called a hit if it crosses domestic sales of USD 500 Mn (Rs 3250 cr). The average ticket price in USA is approx. USD 8 (Rs 500) which translates into the total patrons for a hit movie as 62.5 Mn people (6.25 Cr). This works out to 20% of the total population.

Now since it is proven beyond doubt that Cinema in India is for the rich and indeed a luxury, it is time for Mr Sood to open his eyes and accept this as a fact and start working with his business development team to work out a plan that can take cinema penetration from the current 0.8% to 20%. India has 13,900 single screens and 2050 multiplex screens (2016 stats). Assuming seating capacity of 500, with a 50% occupancy rate and 4 shows in a day, a total of 1.5 cr (15 Mn) people can watch a movie every day or a total of 550 cr (5.5 Bn) views in a year. If on an average a movie-goer watches 1 film in a month this would mean about 45 cr (450 Mn) of Indians can be accessed. The point here is there are enough screens already and the heads need to come together to find the right pricing to fill these seats. Just like the physical print in the earlier days would keep penetrating the market from Metros & large cities to smaller cities to towns to tehsils, maybe a similar solution can be worked out using trickle-down pricing mechanism. There are more people in our country who would want to watch Bahubali in week 5 than Half Girlfriend in week 1 and if the pricing is correct, one can still achieve houseful of Bahubali in week 5 easily.

It wasn’t like this in the pre-multiplex era when the movie going was possibly the only source of entertainment for the masses and tickets prices were affordable to all. Today it has indeed become a rich man’s entertainment and has also spurned a huge piracy industry. Piracy occurs because it is the only option left (but that’s another topic I will write about soon). Music piracy has come down since the free streaming services started which found other ways of making money rather than trying to sell a Rs 500 audio CD to someone who clearly could not afford it and instead downloaded it from a pirate. Similar or other solutions need to be thought of for cinema to take it to masses yet again.

Wish you the very best, Mr Sood.