Kangana’s Got A Point
It rained cash this September quarter and the theatres rolled in money. It may have been a one-time extravaganza.
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Actress Kangana Ranaut has a problem. She spent the last three years asking her fans (and haters) to boycott Bollywood, an industry she characterised as a den of nepotism and mediocrity. But her call for boycott may have worked a little too well. Last week, she delivered her fifth flop in a row, a super-patriotic fighter pilot’s saga called Tejas. Now she’s asking fans (and haters) to come to theatres and watch her film ASAP.
Ranaut says the Hindi film industry hasn’t completely recovered post the pandemic. Distracted by their mobile phones and TVs, the audience isn’t even willing to give 99% films a chance, hurting small-budget films. In particular, she appeals to multiplex audiences to step out and watch Tejas.
Predictably, people are mocking Ranaut, whose recent films (including Tejas) have received poor reviews from critics and little attention from cinema-goers. There is a lot of snide talk about karma.
But what if she’s right?
Will the PVR-INOX party continue?
Hardly anyone is taking Ranaut’s complaints seriously. After all, the Indian cinema industry had its biggest weekend ever this August. It made over ₹390 crore (~$47 million) in the August 11-13 weekend and sold 21 million tickets, an all-time high. The PVR-INOX stock rallied and has risen over 10% in the last six months.
How can anyone say their film is flopping because people aren’t back in theatres?
But let’s keep any feelings for Kangana Ranaut aside for a second and consider PVR-INOX’s latest earnings report (pdf). This was a record-breaking quarter for PVR: it made its highest ever quarterly revenue and profit after tax on the back of high-ticket prices and per head spending on food.
PVR-INOX’s movie ticket sales for the quarter doubled year on year. It had 48.4 million admits, 64% higher than last year. PVR and INOX made losses this time last year (when considered together); this quarter, the merged entity swung to an 8.2% profit after tax.
But dig a little deeper into these numbers, and the ‘historic’ quarter starts to look like a one-time extravaganza. These figures mask the risks to the growth story of PVR-INOX and the wider cinema industry.
Are people coming?
Let’s look at occupancy figures and average ticket prices. This September quarter, PVR INOX tickets cost an average of ₹276 (~$3.3), up 25% from a year ago. One reason is that post-merger, PVR and INOX have been bringing prices of all their offerings at par. This means tickets at INOX, once relatively cheaper than PVR, have risen. Besides, many more IMAX tickets were sold this quarter as Jawan, Mission: Impossible–Dead Reckoning Part One (MI:7) and Oppenheimer all released one after another.
But although PVR-INOXs occupancy rates have gone up in the last year, they’re still not at pre-pandemic levels: in the September 2019 quarter, PVR’s occupancy rate was 37.8% (pdf).
Despite a blockbuster performance, occupancy in the September 2023 quarter was slightly less than PVR’s reported rates in the June 2022 quarter. So, are people simply not going to theatres as much as they used to?
One reason could be prices. In this edition of The Impression, I’d written that higher ticket prices were coinciding with lower or stagnant occupancy rates, meaning multiplexes were serving an increasingly smaller customer base. To reach a wider audience, they must slash ticket prices. To some extent, PVR-INOX has done that. It has been running offers such as tickets for ₹99 (~$1.19) on National Cinema Day and a special ‘Buy One Get One’ scheme for big hits like Jawan a few weeks after release. They’re also piloting a ‘PVR Passport’ scheme that lets a customer watch up to 10 movies a month for a three-month subscription priced at ₹699 (~$8.4) a month.
But on average, it’s still selling pricier tickets. PVR-INOX’s group chief financial officer Nitin Sood told investors in the October call that the company may cut prices in the next six months.
PVR’s other experiments to keep moviegoers coming also haven’t worked. For instance, the multiplex had launched an app, Vkaoo, in a joint venture with ticketing platform BookMyShow. Vkaao allowed viewers to get together and book a private screening at a PVR location. Company filings show Vkaao’s parent firm has shut down and the app is no longer available on Google’s Play Store.
But it isn’t just about cutting ticket (or food) prices. There’s so much to watch online and on TV that customers may be simply walking into cinemas only when there’s a massive masala entertainer to watch.
Are the movies coming?
But the stars (literally) won’t come together every time like they did this September quarter. Starting July, it rained blockbusters in Indian theatres. There was MI:7 and the Barbie-Oppenheimer mega weekend, followed by Rajinikanth’s Jailer, OMG2, and Gadar 2, which all released over the same August weekend. Jawan wrapped up the blockbuster release spree in early September.
No such ‘mega weekends’ are coming, at least not in the December 2023 quarter. The Ranbir Kapoor-starrer Animal and Vicky Kaushal’s biopic Sam Bahadur are releasing on December 1, while Shahrukh Khan-Raju Hirani’s widely-anticipated Dunki, along with Prabhas-starrer Salaar: Part 1, are hitting theatres on December 22.. December may have to do the heavy lifting; in October, Thalapathy Vijay’s Leo did big business but Ganapath: A Hero is Born (Hindi), Ghost (Kannada), and Tiger Nageswara Rao (Telugu) didn’t. Meanwhile, Kangana Ranaut is gathering support from members of India’s ruling party to rescue her sinking film Tejas.
“October and November have been slightly slower in terms of movie releases, but December is looking quite packed. There are almost two big films releasing every month. So both Q3 and Q4 are looking quite strong and they should be decent quarters, but it will be tough to replicate what we managed to get in Q2 where all the films fired in one quarter: Hindi, regional and English.”
- Nitin Sood, group CFO, PVR-INOX
Then there is IMAX and its pricey tickets that boost profits. More IMAX films are hitting theatres in India than before, including domestic releases (I’ve covered this in depth in this edition of The Impression). But in a rare occurrence, three major movies—MI:7, Oppenheimer, and Jawan—were released in the format back-to-back. Later, The Nun II and A Haunting In Venice also arrived in IMAX. Such a barrage of films may not hit India’s IMAX theatres anytime soon; already, Denis Villeneuve’s IMAX sequel Dune: Part Two has been delayed to next year.
PVR-INOX’s management is already tempering investors’ expectations. But a lack of bumper quarters isn’t PVR-INOX’s only problem.
Is the money coming?
There are threats to its profitability as well.
One, PVR-INOX’s costs are rising. Fixed costs such as rent remained steady during pandemic restrictions, when mall-owners and landlords worked out deals with cinema operators to freeze rent payments. Those concessions went away post-pandemic and soon after, inflation kicked in. Fixed costs have jumped 33% in the December 2022 quarter and then again by 33% this past quarter. The culprits: rising rent, utilities, and wages.
PVR-INOX is paying rent as a share of revenue for many of its newer screens, so weeks with higher occupancy also led to more rent payout, the company’s management told investors in the October call. Besides, malls may hike rents again this financial year.
Two, PVR-INOX needs to keep an eye on advertising revenue. I wrote in this edition of The Impression why ad revenues are a better indicator of the cinema industry’s recovery. The company’s income from in-cinema ads was up 41% this past quarter as the hit films kept audiences coming. But it still isn’t back to pre-pandemic levels and won’t be anytime soon.
“Advertising technically works on big blockbuster films doing well,” Gautam Dutta, PVR-INOX’s co-CEO North & South told investors in October. “...it is just that we need certain momentum to be able to get the money, which advertisers earlier used to plough back into cinemas which had gone into other media sources.” Dutta added that the company will hit its FY20 levels in ad money only by next year.
Finally, there is the south India problem. Traditional single screen theatres have a bigger stronghold in southern states such as Tamil Nadu, Andhra Pradesh, and Telangana, where the government caps ticket prices. This means for every Tamil or Telugu film that hits a box office record, PVR-INOX gets a smaller slice of the pie than it would like to. Consider this: last quarter, it accounted for over 38% of Jawan’s total box office collections. But for Jailer, the company’s contribution was just 17%, as it was for Telugu films Kushi and BRO.
This problem could get worse. PVR-INOX (and other multiplexes) are urging Tamil and Telugu film producers to release their films online only eight weeks after releasing them in theatres. But they’re at an impasse: multiplexes say they need the window to protect box office collections, while producers say their largely single-screen audience doesn’t overlap with streaming viewers. Multiplexes didn’t release the Hindi dubs of Jailer and Leo in protest.
Now, don’t go rushing to a show of Tejas in solidarity with Kangana Ranaut. By all accounts, she’s a victim of bad filmmaking rather than of these complex factors shaping cinema. But the bottomline is, there is no permanent party. Cinemas need more than one near-perfect quarter to say they’re back on track post-pandemic. In the two years they were out of action, they may have lost some viewers permanently to online entertainment. Perhaps now only big spectacles can bring the audience back to the (pricey) big screen. How many spectacles can an industry churn out in 52 weekends?
Last Scroll Down📲
Scan the big media headlines from the week gone by
Finishing moves: India’s media and entertainment industry is currently a chess game. Zee’s merger with Sony is always one step forward, two steps back. Zee’s CEO Punit Goenka is finally free to hold top positions in listed firms, paving the way for him to take over as CEO of the merged Zee-Sony business. But market regulator SEBI may appeal the decision.
Meanwhile, Disney may have closed in on a buyer for its India assets: Mukesh Ambani’s Reliance, which already owns Viacom18 and entertainment assets under Jio. There’s some difference between both parties on valuation. But given Star India’s anaemic financials for FY23, that’s not likely to be a roadblock.
Sweetening the Apple: For the first time this week, Apple TV has released an original in theatres first before taking it online: Martin Scorcese’s Killers Of The Flower Moon. Apart from taking prestige films to the big screen, Apple is also planning to launch ads in streaming. But, as Variety argues, Apple TV is lagging behind in the streaming race because it still has a miniscule content library compared to Netflix and Amazon Prime Video.
Win some, lose some: For Big Tech, advertising is back. Both Meta and Google parent Alphabet posted better than expected earnings as businesses began spending on digital ads again. However, tech firms themselves are spending less on ads, hurting growth forecasts of the big ad agency networks. Meanwhile, Indian FMCG firms, among the biggest traditional advertisers, are increasing their marketing budgets.
Downward spiral: In the year since Elon Musk took charge, Twitter (now X) has lost nearly 13% of its daily active users. The company says it is now worth $19 billion, less than half the valuation Musk acquired it at. One bright spot: Twitter’s India unit made a surprise ₹30 crore (~$3.6 million) net profit in FY23.
Dissecting this week’s viral ‘thing’
Should comedians be fact-checked? The New Yorker did so last month, in this piece profiling American comedian Hasan Minhaj. Journalist Clare Malone interviewed subjects of Minhaj’s personal stories from his stand-up shows, along with his former staffers from The Daily Show and Patriot Act. Malone alleged Minhaj had largely invented incidents of racism to grab his audience’s attention and sympathy. In fact, she quoted Minhaj as saying that “emotional truths” were more important to him than the facts.
Last week, Minhaj fact-checked the fact-check. It’s a long, detailed video with recordings of his interview with Malone and copies of emails and texts between him and people who feature in his stand-up stories. It all adds up to compelling evidence that he never lied about the racism he’s faced growing up in the US. In fact, it looks like The New Yorker had a story idea already in mind, and simply picked and discarded bits from Minhaj’s interview to fit the narrative.
Now, comedy isn’t journalism, so one can reasonably expect the personal stories comedians tell will have some fiction in them. Why would someone even commission a piece only to find out if one comedian tells the truth on stage or not? As Minhaj points out, a more interesting question would have been where a comedian should draw the line when blurring fact and fiction. Instead, all we got was a ‘hit piece’ while Minhaj probably got material for a brand-new stand-up special.
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