Box Office Revival Post Lockdown: How Are the Numbers Looking?
On October 16th 2020, after a gap of almost eight months, movie theatres and multiplexes (or “exhibitors’’) reopened in several states in India. Exhibitors were among the first places to be shut when the pandemic struck, impacting the entire industry which was otherwise on a nice run.
As the process of “Unlock” proceeds, so does the expectation of a better year in business after the single-biggest yearly debacle in revenue, footfall, projects, production and employment in the sector.
The Gilded Age of Indian Cinema
The early years of the millennium brought a touch of commercial extravagance and prosperity to the Indian Box Office.
Gross receipts crossed the ₹10,000cr ($1.36bn) mark for the first time in 2019 representing a sharp 11.6% YoY upswing following a robust run in years before. Total footfall grew handsomely by 8.9% to 103 crore in the year. With a paltry ₹2 increase in average ticket price for the same year, it was quite evident that bulk of the industry growth was being driven by an uptick in footfall — a strong endorsement to underlying fundamentals.
This trend underlines an interesting contrast to the better developed North American markets. North American exhibitors have been seeing a structural decline in footfall and have increasingly relied on price increases to lift box office revenues. 2019 saw a 4.8% decline in box office revenues despite price increases and a positive outlier in the form of stellar performance from Avengers: Endgame (all-time second highest grossing title behind Star Wars: Episode VII — The Force Awakens).
For perspective, for the five year period ending FY20, PVR reported 12% CAGR while Inox reported a 10% CAGR growth in footfall. On the flip side, North America showed a 0.5% decline over the same period of time marking a clear contrast in behavioral trends.
It is quite clear that Indian exhibitors were in a much sweeter spot of theatrical distribution with secular tailwinds as opposed to more nuanced headwinds in the Western world. And then came the lockdown, directly pressuring footfall with the potential of pronounced behavioural changes in India as well.
Pandemic-Sized Mildew on the Gild
As reported by Multiplex Association of India (MAI), the Indian movie exhibition sector has lost an estimated ₹9,000cr ($1.22bn) owing to the pandemic.
MAI members like PVR, Inox and Cinepolis have cited closure of around 10,000 cinema screens for the last six months. PVR and Inox’s shares plummeted by more than 40% each during the lockdown from all-time high figures in February 2020.
In states like Maharashtra, Tamil Nadu, Kerala and Chhattisgarh, theatres will remain shut. In addition, the standard operating procedures (SOPs) are vehement with mandatory masks, maximum 50% capacity, one-seat distance, proper ventilation and AC temperature setting at above 23 deg. Celsius.
In these circumstances, one hardly expects audiences to throng back to the halls. Recovery will take months, some even say years! No wonder the industry’s growth projections look dismal for the coming financial years.
Halls, Interrupted?
The cinema industry is an all-encompassing one, meaning it employs people from dozens of other industries (photography, make-up art, design, editing, production, costume etc).
Seeing as it is so labour-intensive, the wage-earning personnel on movie sets are the worst hit, followed by the ones who work in allied industries like theatres, multiplexes, film journalism, writing, singing, dancing etc.
Secondly, the movie exhibition business is fraught with declining market presence and a setback in their capital expenditure plans. To top it off, debts incurred to meet working capital needs (like maintenance, electricity etc.) added more nails to their coffers.
Although some of these nails were attempted to be removed through issue of securities (as done by PVR via a ₹300cr ($40.8m) rights issue and a ₹250cr ($34m) fundraising effort in the pipelines for Inox Leisure), it will take more to preserve liquidity given the state of business.
Good news, though! Multiplex stocks bounced back immediately after news of their unlocking. It is vexing, though, since additional investments to comply with sanitisation protocols will be burdened with revenue shortfalls from running at only 50% capacity, possibly jacking up ticket prices significantly more than what the industry has seen in the last decade.
Fighting on Multiple Fronts
The post-pandemic recovery coupled with audience-exodus to OTT platforms is a double concern for the movie exhbitionists, the guardians of the box office.
BARC and Nielsen estimated a 96% increase in the user base of video-on-demand devices for entertainment during this lockdown. Publicis Groupe report says, in the period between March 1st and 21st, entertainment and OTT-viewership registered a 34% increase!
These figures are particularly interesting because they include a significant number of audience from the 40-plus generation that is evidently trading their classic love of the silver screen for classics streaming online, with practically no theatrical window. (Read about the rise of OTT platform in India here]
Some of Bollywood’s big-ticket films are also making it straight to OTTs (Gulabo Sitabo, Shakuntala Devi, Laxmmi Bomb, Bhuj etc.) preempting the idea whether this is the new and “preferred” normal from hereon.
Trade Analyst Taran Adarsh is probably right when he says, “If 2019 was a dream, 2020 is a nightmare”, for the Box Office. Revenue rationale aside, content has emerged as the winner.
Balancing capital, guaranteeing audience-safety and fending off streaming-concerns after theatres reopen will determine the fate of the Box Office in future. And looking at the Western world for signs of encouragement is bound to yield largely discouraging trends.
(Originally published October 19th 2020 in transfin.in)
