Sharma says an agreement is already in place where producers won’t have to pay Virtual Print Fee after five years.
Sharma says an agreement is already in place where producers won’t have to pay Virtual Print Fee after five years.
Mumbai - 18 Apr 2019 16:00 IST
India makes the largest number of films in the world and so there is a demand for more cinemas. As per a report by credit rating agency ICRA, for a population of 1.20 billion there are just 2,200 multiplexes in the India. While the single screens are struggling, affordability notwithstanding, multiplexes are the future.
In the last five years, a young chain of multiplexes has been slowly expanding its roots across the country. Madan Paliwal, the founder of the Miraj Group, entered into film exhibition business in 2012, beginning their journey with a few multiplexes in Ajmer, Rajasthan. The company has grown steadily since and now has 110 multiplexes across 14 states.
Cinestaan.com caught up with Miraj Cinemas' managing director, Amit Sharma recently. Sharma opened up on the Miraj Cinemas' journey so far. He spoke about how they aspire to reach the remote hinterlands of India, shared thoughts on the contentious issue of the ticket and food pricing, slammed Ronnie Screwvala on the issue of Virtual Print Fee and more. Excerpts:
India makes the largest number of films, but only a handful of films do well commercially. We live in times where producers are worried over the future of the theatrical business. In such an environment how has Miraj managed to not just survive, but thrive too?
2012 was just a humble beginning. Technically we started in 2014. We just had two theatres [in Ajmer] till 2014. Of late, there is talk that do we really need so many numbers of screens? I am not comparing with China and the US, but right now 70% of India’s population is not exposed to a good cinema hall. Look at Bihar, how many multiplexes do you have there? One or two! You are talking about a state that has a population close to eight crore. Similarly, what is the total number of good cinemas in Uttar Pradesh? You’ll be surprised to know that in the entire eastern UP, Varanasi, there is no multiplex operator.
In cities like Mumbai, the existing operators are revamping the cinema and taking the experience to a new level, they are taking it to Imax screens, 4DX screens. However, the growth of cinema is coming from the Chandrapurs, the Bhagalpurs, Hisars, and the Sonepats of the world. These are the places where Miraj is expanding. We are going to these places which are now giving you the new money, which the cinema industry had never seen.
We have a clear strategy. I am not a premium multiplex operator, but we are a value-for-money multiplex chain. So, I am an affordable multiplex chain. We provide you with a similar watching experience at an affordable price.
Food price in multiplexes has been debated a lot in the last few years. Few exhibitors had once told me that it contributes some 30% of their revenue...
It’s never 30%. I think it is less than 25% for everybody. Look, a samosa is being priced high at a 5-star hotel too. We need to understand the business model.
But have you given any relaxation to Miraj customers?
We have given certain relaxation but at the same time, my point remains that we need to understand that every single person has a right to do business. Have we ever gone to a clothing guy and asked what is the price you are getting the clothes for and what you are selling at? Have you ever asked Apple why the hell are you selling your phone at Rs1,00,000? A Xiaomi sells its phone at Rs5,000. So, we have never questioned them. Cinema has become a soft target. It’s one of the lovable babies of the media.
I’m not speaking as a media person, but I’m a consumer too. I can’t afford a Rs100-120 samosa. Don’t you think this business model has perhaps affected community viewing? Today a family of four would perhaps end up spending close to Rs2,000 for a film?
I am with you on this, but you tell me which is the better medium of entertainment which is available for a family of five in Rs2,000? Indian Premier League? A ticket may not cost less than Rs1,000 each. Amusement parks, well there too one ticket may be priced at Rs800-900. What is the EBITDA [earnings before interest, tax, depreciation and amortization] margin of entertainment companies? 15-17%. So, if a business is not allowed to work on a 15-17% margin then are we talking right or wrong? If their EBITDA margin was 35-40% then perhaps you can say that these guys are cheating the patrons and using their money to make an unreasonable profit. Every single business has to earn 15-17%. That’s their basic right.
Rs250-300 ticket, Rs100 samosa, Rs200 popcorn, we have to move on from that. It’s a business decision. If you don’t sell at that price, then you will not be able to survive. One will have to pull money from our home.
Often it used to be the big banner films, with stars that are priced high but today, even a film like Romeo Akbar Walter (2019) costs the same. Post GST, it was thought that film ticket prices would be reduced, but that’s not been the case in Mumbai...
Movies are perishable commodities. We look at which films to be looked at. Earlier, a blockbuster used to just be a Salman, Shah Rukh film. But today, a Stree (2018) or a Uri (2019) is a blockbuster. We have started pricing, movies, cinemas accordingly. Earlier, a John Abraham film was priced at Rs150 and a Salman Khan film was priced at Rs300. But now that gap has narrowed down. Maybe at times, it is a similar rate for both films. The taste of people has changed. It has now become very difficult to predict which movie will do what [businesss].
The OTT platforms are growing. Certain producers opt to release their film on them and not theatrically. Karan Johar had expressed concerns that may be going forward only the big banner, franchise films will be screened in theatres, whereas digital could become a space for niche films.
We are very happy about doing that. If I talk purely from a commercial point of view, as an exhibitor we pay a fixed rental, salaries, electricity costs. There is a fixed cost to run a cinema. In one screen you would run five shows a day. Suppose to run a screen, my cost is Rs5,000 a day. So for every single show, I am spending Rs1,000. If I have only big films releasing, people will come to watch those films. But if I have certain films which don’t attract a number of audiences… So, it is just not the producer or distributor who loses money with that film. At the same time, the exhibitor also loses money. I am giving out my fixed cost shows for both films.
But what impact do you think it will have on theatrical business?
The way I look at OTT and cinema, it is actually increasing the video consumption. So let them increase the video consumption. The OTT will become like a QSR [Quick Service Restaurant] where you can have quick, small meals, but if you want to enjoy the experience of the food, then come to the cinema and watch it. What is OTT? Just another TV channel? We need to understand whether it has impacted the TV industry. The first impact will not be to theatrical, but to TV.
OTT platforms are largely making serials. The serials are being called series. Fortunately, you are not being censored. You are trying to sell every mediocre story with a lot of flesh, violence, strong language. If you remove all three, the day you are going to come in censorship, I doubt how many people you will be able to attract.
Producer Ronnie Screwvala has expressed concerns over the Virtual Print Fee charged by exhibitors, which he labels as unfair. What are your thoughts on this?
Somebody needs to question Mr Screwvala. What was the analogue time cost that he used to incur when he was running UTV for so many years? As an exhibitor, we’ve always bought machines. Throughout the 100-year history of cinema, the distributor and the producers are the ones who invested in the print. The print then used to cost Rs50,000-60,000. And a projector used to cost Rs7-8 lakh. In the past, the cost for the Annual Maintenance Contract to maintain a projector, we used to pay approximately Rs2,000 a month. The maximum number of shows a print could have got was not more than 8-10. There were other shuttling charges. Today that cost has dropped down to Rs20,000 for an ‘n’ number of shows in one multiplex. A megaplex with 10-12 screens, where you are having 60-80 shows a day, you are still paying Rs20,000. I don’t understand who is losing from a number perspective.
For an exhibitor, the cost of that projector has gone up to Rs30 lakh. Now we are talking about laser projectors which cost you Rs35-40 lakh minimum and it goes into crores of rupees. We are spending that kind of money to upgrade for whom, that’s the question.
The maintenance contract now it has gone to Rs20,000 a month from Rs2,000. Personally, I guess what Ronnie Screwvala is doing is washing dirty linen in public. All issues need to be sorted out amicably. Going to the media, trying to put across a half story, is not the correct way. There is already a discussion, one of the production houses has already signed an agreement [paused] where the exhibitor has decided to have the shutdown period after five years. Thereafter there won’t be any VPF.
You didn’t want to enter the big metro cities first, but when you enter in small, remote towns, you have to look into the purchasing power there. Can you tell me what’s the base price that you are charging in the small towns?
You look at the top three multiplexes of the country, their average ticket price is in the range of Rs200-225 plus. Miraj is in the range of 150 bucks. I try to look into the Rs150-170 bracket.
Is this with Goods and Services Tax?
Yes, this a with GST. What happens with this is that you are basically catering to that large section of the middle-class people. When it comes to purchasing power in the non-metro cities, you’ll be surprised to know that non-metros cities at times have better purchasing power compared to your metros. There is a misconception about the non-metros. People who haven’t travelled to the hinterlands will not understand what lies in the smaller cities of the country.
I believe you entered the Mumbai market later. Was it with the acquisition of the Kandivali Thakur cinema?
We started with the Kandivali Thakur [Miraj] Cinema in 2014. Then there is Anupam (in Goregaon), then we have cinemas in Nalasopara, Vasai, Ambarnath, Ulhasnagar. In Mumbai metropolitan region we have around eight cinemas, 22-23 screens. We are coming up with more.
What’s the numbers of the screens you have per cinema and the seating capacity?
Currently, we are close to three screens per cinema. The average seating capacity should be 230-245 per screen.
In a city like Mumbai, ticket prices for a big Bollywood or Hollywood film today would cost in upwards of Rs300 per ticket in the first week. Do Miraj Cinemas offer different pricing in Mumbai as opposed to the competitors?
The pricing of any product is completely based on the micro market of that area. Now we are sitting in Malad. If you look to buy a property in this area, you wouldn’t get it less than Rs25-30,000 per sq feet. So, you should be prepared to pay Rs500 rupees for a movie ticket on the weekend. At the same time, that rate won’t be there in Nalasopara, Ulhasnagar and Ambarnath. The price in these places may be in the range of Rs200-250. Your cost of running the show, your rental payouts, all works accordingly. Also, what kind of people you are catering to. A 3-star hotel would be priced differently than a 5-star hotel.
Mumbai is the entertainment hub. Would you be able to share the kind of business you’ve made from the Mumbai Metropolitan region?
We have opened 22 screens in the last five years. We must have put in close to Rs35 crore in total investment. From a profitability perspective, I think the entire Mumbai region would be close to Rs10 crore EBITDA.
And what about the pan-India growth?
Last year, we started with 82 screens from 1 Apri1  and we close this year with 110. This (financial) year 2019-2020, we will be opening close to 60-75 screens, and we hope close at 170-200 screens. In terms of Capex which we have done so far is already more than Rs175 crore. My EBITDA projection for next year is more than Rs50 crore.
Is it still the big ticket films that are driving the cinema in this country?
Not really. Big films, small, regional or non-regional films. The dynamics are now changing. We release around 700-800 films in theatres every year. Hindi films are the driving force only in the northern part of the country. For Miraj, Hindi is 60% of the total kitty. The other 40% comes from Hollywood and regional films.
Two-three years down the line probably reliability on Hindi films will go down to 50%. because we are expanding big in the south. The overall collection of southern films will increase and there is a clear trend of Hollywood films too catching up. 15% of our business come through Hollywood films. This could go up to 20-25% in a few years. Punjabi, Gujarati films are doing fantastic. A few Marathi films have done well this year.
Miraj Cinema has a keen focus down south. What’s the kind of penetration that you have been able to have in these years?
We have one four-screen property in Chennai, one four-screen in Hyderabad, one two-screen in Vijayawada, one three-screen in Gulbarga, Karnataka. However, we have approximately 100 more screens in the pipeline in the 4-5 southern states only. We are looking to open 25-40 screens down south in the next few years. Out of the 3,000-odd multiplex screens we have in the country, I guess approximately there are 600-700 screens from down south, rest is all up north. There is a lot of penetration which is yet to be done down south.
Finally, you have spoken of expansion, but will you be open to merging with a big player?
We will be getting married, and we will be evaluating, but at the same time we will be looking at a financial investor for expansion. But we are looking at funding from a financial institution.