29 June 23

Operators, looking at reducing spaces for theatres as revenues drop; Multiplexes holding back on expansion due to ‘box office volatility’

➤ New Delhi: Mall operators are concerned over faltering revenue from cinemas with some even considering reducing space given to theatres in their upcoming projects.

➤ PVR Inox has recently said in the fourth-quarter investor call that it has delayed the handover of about 200 screens due to the ‘volatility at the box office’. After ‘Pathaan’ in January, box office collections have been tepid although the release of “The Kerala Story’ this month managed to revive revenues of malls to an extent.

➤ Malls have a revenue-sharing agreement where it gets a guaranteed minimum rental and also a share of the revenue. In the case of cinemas, it is only getting the minimum guarantee as revenue is not even breaching that threshold. “Currently, we are in the advanced stage of fitting out about 175 screens, which we plan to open this year. We have a very robust pipeline of a similar number of screens, which are coming up for handover this year. But in view of the huge amount of volatility at the box office, we want that to stabilize before we take the next leg of screens for handover and start fitting them out,” PVR Inox said. “And keeping that in mind, we delayed all new handovers that are coming up,” it said.

➤ PVR-Inox combined reported 168 million footfalls in FY20. That fell to 140 million in FY23.

➤ Mall operators expect movie line-up from July onwards to revive the industry.

➤ “Cinemas reported 27% occupancy in the last three months but in May the occupancy increased to 40%. At 40%, we hit the revenue share and though the last three months have been tough, we hope cinemas bounce back,” said Harsh V Bansal, co-founder of the Unity group that operates half a dozen malls in Delhi and Punjab.

➤ Rajendra Kalkar, president-west at Phoenix Mills, which operates more than half-dozen malls in Mumbai, Pune, Bengaluru, and in any tier-2 cities, also said that revenue from cinemas has dipped but May has shown some improvement.

➤ “There is a clear trend of occupancy of cinemas going down and PVR also announced shutting of about 50 screens. Future malls may plan to reconsider the size and number of screens and add more alternate entertainment options on higher floors,” said Shriram PM Monga, who cofounded retail consultancy firm SRED.

➤ PVR Inox said that May is looking better than what it had anticipated.

➤ “April, of course, has been slow, but then July picks up again with a lot of big movies coming. We are expecting much better content, starting May-June onwards. Q2 and Q3 are looking quite good on paper based on the content flow we have,” the company said. The operating costs for theatres also increased in FY23 as most of the rebates offered during the pandemic ended.

➤ “Cinema as a category will continue to give an advantage to malls as Indians like going out for movies. There will be phases when movies won’t do good, impacting the revenue and that is likely to be covered by releases that will be blockbusters,” said Muhammad Ali, CEO of Forum Malls of Prestige group.

➤ PVR-Inox added 79 screens during the fourth quarter of FY23, taking the total tally of the new screen additions to 168 screens for the full fiscal. In FY24, the company intends to open another 150 to 175 screens.

➤ Of these, nine screens have opened to date, 15 are awaiting licenses for commercial openings and 152 are currently under various stages of fit-outs.

➤ The company has also decided to shut down about 50 screens over the next six months across the country.

Source – Economic times

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