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Screen Density – Key to Unlocking the Hidden Box Office Potential December 2018

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Screen Density – Key to Unlocking the Hidden Box Office Potential December 2018 Screen Density – Key to Unlocking the Hidden Box Office Potential December 2018 Screen Density | Key to Unlocking the Hidden Box Office Potential Contents Foreword Producers Guild of India 4 Foreword Deloitte 5 Executive Summary 6 The Indian Film Industry Paradox 8 Exhibition Sector: Key Challenges 16 Development of China’s film exhibition industry – a remarkable growth story 26 Socio-economic impact of promoting growth in screen density in India 32 Recommendations 38 Annexures 46 Acknowledgments 66 03 Screen Density | Key to Unlocking the Hidden Box Office Potential Foreword Producers Guild of India India is one of the fastest growing Our endeavor is to help the film industry economies in the world with a young and create an ecosystem of growth and highly aspirational population. As Indians inclusion. The film production houses move up the economic development should be able to justify the investments curve, the time spent on leisure activities in content development through is expected to further increase. While increased outreach of their films, the there are various forms of recreational exhibitors should be able to provide activities, in India, cinema is considered quality infrastructure and the audiences to be one of the most favoured forms of should have access to a world class film such activity. viewing experience. Despite producing the largest number We hope that this initiative will get the of films across languages and having ball rolling towards reforms which will an unrestricted access to international enable the industry to reach its full content, Indian film industry’s net potential. economic contribution remains dismal. Much of the opportunity is lost due to Kulmeet Makkar our inability to provide the audiences Chief Executive Officer access to good quality entertainment Producers Guild of India infrastructure. 04 Screen Density | Key to Unlocking the Hidden Box Office Potential Foreword At the outset we would like to thank the significance in current context. The industry bodies, Producers Guild of India industry needs to change gears and move and CreativeFirst for taking up the issue fast to meet the audience’s demand of of screen density in India and bringing to better film viewing experience. light an important aspect of film industry which has thus far been ignored. This report highlights the key challenges faced by the industry and suggests We live in a dynamic world where, thanks possible solutions which can help the to technology improvements, our way of industry get back on track. life is getting fast disrupted. Technology has become an integral part of a society’s Jehil Thakker existence. In such vibrant times, the Partner film exhibition industry is still subjected Deloitte India to archaic rules which have little or no 05 Screen Density | Key to Unlocking the Hidden Box Office Potential Executive Summary 06 Screen Density | Key to Unlocking the Hidden Box Office Potential It is a known fact that India is a film Box office collections are an important This report highlights the need for consuming nation and Indians are source of revenue for the film producers • Improving the ease of doing business fanatical about films to the extent that as it contributes ~74% of the overall through regulatory reforms some even worship their favourite revenue and hence the profitability of actors as demi-gods. One of India’s best a film depends on the performance of • Enhancing fiscal incentives to maintain known global brands is Bollywood (Hindi the films at the box office2. The current sustainability Film industry) which enables India to infrastructure is unable to accommodate • Development focus for exercise significant soft power in the a theatrical release for all films produced underpenetrated areas global arena. However despite producing in a year. Additionally, most films which the largest number of films year after do get a limited theatrical release struggle • Adoption of lean and innovative year the country is nowhere near the to recover their cost. It is estimated that business models highest grossing territories in the world. in 2016 more than 60% of the films could – Encouraging Public Private In fact, US is six times that of India, not recover their cost of production. Partnership models despite producing 62% fewer films and a – Advertising based revenue models for population which is one third the size of media dark regions India. China too is three times larger than The industry needs a model which – Promotion of franchise-based models India in terms of box office collections. offers a better viewing experience to the for rapid infrastructure development audience while allowing the exhibitor to – Development of compact and While there is no dearth of demand for charge a higher ticket price and achieve a affordable theatres (Miniplexes) in tier films in India, the inherent challenges better inventory utilization. Such a model II/III cities being faced by the industry are stifling its then needs to be replicated fast across • Scaling up anti-piracy initiatives growth and restricting it from reaching its the existing and new screens to address true potential. With 6 screens per million the major issue of below-par box office • Enabling industry with flexible ticket population, India is by far one of the most performance of the Indian film industry. pricing models under screened nations in the world. • Adoption of box office measurement Of the approximate 8,500 screens in This report is a joint initiative, among systems India, more than 70% are single screens Producers Guild of India, CreativeFirst showing films at an average ticket price and Deloitte, to unearth the root causes • Investments in technology across the of ~USD1. Poor theatre infrastructure of the weak performance of Indian Film value chain and lack of latest technology restricts Industry, assess the market potential these players’ ability to charge higher and identify possible implementable ticket prices and hence the multiplexes solutions. The industry and government which hold less than 30% of screen will have to work together towards the inventory contribute more than 50% to larger cause of achieving Indian film the industry’s revenues.1 industry’s true market potential. 1 Source: PVR Investor Presentation, June 2017, Deloitte India analysis 2 Indywood – The Indian Film Industry, 2016 07 Screen Density | Key to Unlocking the Hidden Box Office Potential The Indian Film Industry Paradox 08 Screen Density | Key to Unlocking the Hidden Box Office Potential “We need to target at Overview CAGR between 2017 and 2020 reaching Indian film industry is the largest in USD 1.9bn to USD 2.0 bn (INR 125 - INR least 50,000 high-yield the world in terms of films produced; 130 bn).10 On the other hand, China’s screens in India to unlock it produces close to 2,000 films every box office collections are expected year in over 40 languages.3 In 2017, to grow at 20.6% CAGR to reach USD the full potential of the India produced 1,9864 movies drawing 15.07 billion by 2020, exceeding the box Indian market. Currently, more than a billion footfalls across close office collections from US and Canada to 8,500 screens5. In the same period, by 21.5%. Considering historic growth an Indian distributor can Chinese exhibition sector attracted 1.37 trends over the past five years, growth in access ~5,000 screens billion footfalls across 41,179 screens, US and Canada’s box office collections is putting India in the second position with predicted to remain almost flat, reaching for a mainstream Hindi respect to number of footfalls.6 USD 12.4 billion by 2020.11 movie implying that each In spite of having second highest footfalls Our next-door neighbour, China, has screen caters to 260,000 and highest number of movies produced, demonstrated the potential of the film citizens. In comparison, Indian movie industry makes only a industry through its accelerated growth fraction of revenues compared to US & over the last eight years. From 2010 to a Chinese distributor Canada and Chinese markets. In 2017, 2017, China’s box office collection grew can access ~45,000 Indian film industry’s gross box office at 21.5% CAGR reaching USD 8.6 billion in realization stood at USD 1.76 billion while 2017.12 screens for a mainstream US and Canada recorded a gross box Mandarin release office realization of USD 11.4 billion, six Box office collections are a function of the times that of India, despite producing 62% number of movies produced for theatrical implying each screen fewer movies (718 films)7. Comparatively, screening, number of screens in the caters to 30,000 citizens. China released 391 movies in 2016 which country, occupancy rate and ticket prices. grossed USD 6.6 billion at box office.8 In Considering India’s leadership position in We need the government 2017, China recorded a growth of 30.3% terms of films produced and distributed to come forward with in its box office collections closing at USD annually, India’s ability to replicate 8.6 billion.9 China’s growth story will depend upon rebates, exemptions its ability to improve screen penetration and easier licensing In terms of future growth, India's box and enhance the quality of screens to office revenue is predicted to grow at 6% command a premium pricing. norms so improve the pace of building cinema Global comparison of ATP in INR, adjusted at PPP infrastructure.” 189 167 Rohan Malhotra Vice President - Distribution, Yash Raj Films 88 USA China India Source: Deloitte India analysis 3 CBFC - Films certified between April 2016
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