Reasons I dislike the theatre business model
Crappy film but tickets at a 50% discount. You going?
Now, don't get me wrong—I absolutely love going to watch a film in a theatre. I think there is something rather magical about it. Also, who can resist the temptation of buying overpriced popcorn?
But if we peel back the curtain and take a closer look, I'm not particularly fond of a few aspects of the theatre business model.
1.No control on demand:
Picture this—you're a cinema owner, and you've done everything in your power to create a fantastic movie-watching experience. The seats are the most comfortable seats in the world and the popcorn is the most delicious popcorn in the world.
You even cut the ticket prices significantly. But here's the catch: you have no control over the quality of the films themselves.
If the producers make a dud, people just won't show up. Not enough occupancy translates to lower-than-expected revenue and in turn profit. (if at all)
2. The rise of OTT:
Now, I'm not saying that OTT will completely obliterate traditional theaters, but they have undeniably raised the barriers to going for a film.
You become more selective about the type of film you want to go out on. It needs to be a "theatre experience". You want to go for a Nolan film or the IMAX experience. You may even skip a wonderful romcom if you know it’s not a “theatre film”.
Also, OTT makes more economic sense. Even if you are paying for Hotstar, Netflix, Amazon Prime, HBO Max, Zee, Sony Live, Jio Cinema, Hulu & more. (The average ticket price for PVR Inox is close to Rs200 and that’s 1 film.)
3. The enigma of seasonal content:
Let's face it—predicting what will resonate with audiences is like trying to throw darts with your non-dominant hand.
As a theatre owner, you are meticulously assessing various factors such as budget, actors, music, and historical success rate when deciding which films to screen. You carefully crunch the numbers, analyze past trends, and consider market indicators, leaving no stone unturned in your pursuit of making informed choices. However, despite your thorough calculations and strategic planning, there's always the possibility that things may not unfold as planned. It could just be the film or the audience reception or the timing or a global pandemic or some other external factor.
Just look at the change in the language mix for films in India, in the past 3 years. Who was predicting this back in 2019? Bollywood certainly wasn’t.
4. Not exactly asset-light:
Owning or renting prime real estate for theater locations can be a substantial financial commitment. Cinemas require spacious facilities, comfortable seating, high-quality projection equipment, and state-of-the-art sound systems, all of which come with significant costs.
For a company like PVR Inox, adding a new screen could cost 2.5 Crore if not more. Assuming you add 5 screens at a new multiplex that’s 12.5 Crore.
5. Battling online shoppers:
Shopping malls and cinemas used to go hand in hand, right? You could spend the day shopping and then catch a movie to unwind.
But with the rise of online shopping, people now have the luxury of staying in and having everything delivered to their doorstep.
Again, not saying the mall industry is not growing. Of course, it is. But it’s just another aspect to consider!
To be clear—I'm not here to dish out investment advice. In fact, I firmly believe that every business can make sense at the right price. Furthermore multiplex are bound to grow in the country.
However, if we're talking business models, I personally feel like there are better fish to fry.
If you made it this far, consider voting, on which film you think will be more successful. Thank you for reading!