Excerpts from an interview with Anil Arjun, CEO, Reliance Mediaworks
Is differential pricing in terms of the genre of movies possible? Do you think it will work?
The way I see it is that you have to have some base level of pricing for every movie. You can have a higher price during the festive season or if it is a blockbuster movie. Going for a movie is a social occasion, and therefore, is a leisure spend. A person does not go to watch a movie because it is cheaper than another movie that is also playing. In India, a combination of social and economic diversity is at play, which decides whether a movie will work or not.
Rather than differentiating ticket prices in different genres, it should be done for the various shows at different times of the day, since the people who come to watch these shows belong to different segments. Therefore, once you understand the segment, you can then work around the price. So we typically have 12–15 different price points, based on the day and time of the show, and these points move like an index, depending on the time of release and star power of the movie. However, while star power and the season during which a movie is released can raise ticket prices, the opposite does not happen.
The satellite rights for many movies are now being sold, even before it releases. Is this affecting theatrical revenues?
Not really. Theatrical revenues, which used to be about 70%–75% of the total revenues for the film industry, have now declined to around 65%. Therefore, while it has declined in percentage terms, it has increased in absolute terms. Moreover, the budgets of movies are also increasing due to the presence of so many distribution platforms. Consequently, if a movie had been grossing INR200 million earlier, it is now collecting INR300 million. Therefore, this is just an additional revenue stream for producers and does not eat into any other revenues.
What are the other avenues that can boost the top line for film exhibitors?
Broadly, there are three revenue streams for film exhibitors — the box office, which is the main driver; expenditure at concession stalls and cinema advertising. Cinema advertising and food and beverages have a far greater potential than that being exploited so far.
In box office ticket prices, segmentation by ticket price is one way of boosting revenue, and we are currently doing that. For example, we have initiated “Bargain Mornings,” where customers are offered special pricing for tickets and food and beverages for pre-noon shows. As a film special, we have even been able to draw full-house audiences for a 6.45 a.m. movie show of a movie like Ready!
Similarly, we are customizing our food and beverage offerings to cater to the neighborhood and customer segment. The food habits of segments including young people, families, women, etc., differ significantly, and hence, to realize their full potential, our food and beverage offerings need to be created and pushed to appeal to these segments.
Cinema advertising is the only way by which you can touch and feel a product. Moreover, you also have a captive target audience while they are in the theater. Hence, rather than only selling bland advertising slots, you can take a profile of your customers to advertisers and ask them to create campaigns that will “connect” with the different audience groups.
How do you build loyalty among theater goers?
In India, we go to watch a movie because it is a leisure outing. “Stickiness” to a particular theater is created from at the beginning. It is only in case a particular movie is not playing at that a theater or the show times are not convenient that its loyal clientele go to another theater. Therefore, now the question arises as to what you can do to maintain the stickiness; how you can build on it. We are now creating further segmentation. We have our I-Matter card, which is a loyalty card that can be used to receive discounts, paid previews, etc. on Hollywood movies. Technically speaking, we do not need to create this card and deplete our revenue by offering discounts, but the rationale for offering such a card is to attract a large number of people to come to the theater on an ongoing basis. Therefore, there is now an incentive for customers to go back to the theater and make movie-going a habit.
What we can learn from other developed markets?
One of the main things we can learn from developed markets is that you need to build large and expansive theaters. Most theaters abroad have large screens. Since the primary reason for going to a theater to see a movie is for the experience, you have to make sure that this is rich and not compromise on it.
The second thing that we should learn is in terms of the entire ecosystem. You have large production houses that invest heavily in making films and big theater chains that also make significant investments in screening movies. These create an ecosystem that generates enhanced box office revenues, which increase the production budget of movies. This is a cycle. If you do not have an adequate number of screens, you cannot generate the requisite revenue from theaters. Therefore, it is imperative for the industry to grow. Moreover, a large number of screens give a new lease of life to other films as well. This is somewhat similar to a food court model — people prefer going to a food court because there is so much variety available there.
What are the regulatory hurdles the film exhibition segment faces?
Entertainment tax is a strong deterrent. You do not have to pay tax for internet gaming or any other form of entertainment, then why do you pay tax for watching a movie? Moreover, what is the concept of tax-free movies? Is it that you should only watch such movies and not others? This is not logical.
The process of obtaining permission is another huge issue we are facing. Theaters that are being set up need to comply with rules and acts that are governed by the states. They are also covered under specific municipal laws, fire laws, etc. Therefore, a theater needs to take the permission of around 16–17 authorities, which is more than what you would need to set up a mall. To make matters worse, the laws are archaic and vary from state to state. For example, we cannot have real time ticket pricing because we need to get the Collector’s permission several days in advance for any change in the price of tickets. We also need to take permission to change the seating pattern in a theater. Therefore, there are many micro elements that are deterrents in the entire process.
Is 3D here to stay or is it just a passing fad?
There is good 3D and bad 3D. Good 3D is something you enjoy. The applicability of 3D to a particular film is of paramount importance. Moreover, infrastructure including projectors, the spectacles used, etc., should be of a high quality; otherwise the 3D experience is bad. We are still in the learning process as far as 3D is concerned, but need to scale up fast because the whole world is moving to it.
However, it is mostly young people who are “hooked” to 3D. Furthermore, since most of the movies that did well last year had VFX, the key lies in amplifying VFX in 3D.
What works against 3D is customer acceptability. If you have too much of 3D as well as bad 3D, there will be a consumer backlash. Currently, only action films are being made in 3D, whereas real life is actually in 3D. Therefore, consumers’ acceptance of the applicability of 3D to movies that are not action-oriented will also determine its future.
What is your vision for BIG Cinemas?
I think it is a very exciting time because consumers are now increasingly spending on the entertainment segment. Demographics are also working in our favor, since the bulk of the Indian population is under the age of 25. This has created a huge movie-consuming class. Moreover, consumer preferences are changing, which has led to the growth of niche films. We are a part of this consumer growth and enhanced spend.