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 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 and March 2017 4 CBFC - Films certified between April 2016 and March 2017 5 Directorate of Advertising & Visual Publicity (DAVP) 6 Hollywood reporter - China Box-Office Growth 7 Motion Picture Association, India office-Theatrical-Market-Statistics-2016; Deloitte India analysis 8 Box-office mojo 9 http://variety.com/2017/film/asia/china-box-office-expands-by-2-billion-in-2017-1202650515/ 10 Deloitte India analysis 11 Deloitte India analysis 12 Ent-group; Motion Picture Association, India office-Theatrical-Market-Statistics-2016, http://variety.com/2017/film/asia/china-box-office-expands-by-2-billion- in-2017-1202650515/ 09 Screen Density | Key to Unlocking the Hidden Box Office Potential

With respect to the screen density, India Figure: Comparison of global screen density13 comes in at the last position as compared Screen density (number of screens per million of population) to US, Canada and China with 6 screens 125 per million of population. Comparatively, China has 30 screens per million of population while US has 125 screens. 82

India has witnessed a sluggish growth 61 57 in screens over the past few years due to rapid pace of decline in single 30 screen cinemas. India needs to focus on 26 initiatives for empowering the exhibition 6 sector to increase the number and share of quality screens across the country; USA Spain UK Germany China Japan India such initiatives will play a critical role in growing box office collections to revive an Source: PVR Investor presentation, Deloitte India analysis otherwise struggling industry.

The Average Ticket Price (ATP) in India Year wise total number of screens in India in 2016 was close to USD 1.4 (INR 88), comparatively, the ATPs in US and China, in 2016, were USD 8.6 and USD 12,000 10,346 5.5 respectively. When adjusted for 10,383 10,035 9,951 10,000 9,632 purchasing power parity between the US 8,134 8,225 8,471 Dollar, Indian Rupee, and Chinese Yuan, 8,000 the equivalent ATPs in US and China, INR 167 and INR 189 respectively, were 6,000 approximately two times the ATP in India. Lower ATP in India is primarily driven 4,000 Number of screens by the difference in ticket prices across 2,000 multiplexes and single screen theatres and structure of the exhibition sector. 0 The ticket prices in India across leading 2010 2011 2012 2013 2014 2015 2016 2017 multiplexes chains, PVR and INOX, were Year INR 196 and INR 178 respectively in 2016, which is comparable to the adjusted Source: Inox investor presentation, November 2017 ticket prices in US and China. However, the ticket prices in single screens were as low as INR 15 in some cases while the ATPs across all single screen theatres was approximately INR 60.14 This difference in ticket prices across multiplex and single screen theatres is further intensified by the mix of seating capacity. In 2016, the mix of seating capacity across single screen and multiplexes stood at 88%:12% in favour of single screens with only slight variation in occupancy levels.15

13 Source: PVR Investor Presentation, June 2017 Deloitte India analysis 14 Industry discussions conducted by Deloitte India 15 Deloitte India analysis 10 Screen Density | Key to Unlocking the Hidden Box Office Potential

History of Film Exhibition in India The 1918 Cinematograph Act instituted and soon into the tier 2 and 3 cities. The India is one of the largest and the most censorship and the licensing policy largest multiplex in India is Mayajaal in culturally diverse countries in the world for film theatres. This was followed Chennai, which has 16 screens21. and so is its cinema. In different regions by municipal and police rules in 1920 of India – , , ordering that films should be shown only Current State of Film Exhibition Sector , Punjab and other parts of in built up premises and emphasized the in India India, local theatre groups flourished due need for greater financial accountability The film exhibition industry in India to the growing demand for entertainment by the distributors. In 1923, the Bombay is mainly comprised of single screen, by the public. In Punjab, the Punjab Land Entertainment Duty Act came into effect, and multiplexes. Most single screen Alienation Act, 1900 was passed that levying high tax on utilising public places properties in India are more than 50 curtailed investments in agricultural such as exhibitions for cinema.19 The years old and run by the second or land, which led to large scale investment high taxation practices introduced in the third generation entrepreneurs. These in the entertainment business. These early 20th century continue even today properties were built in the pre-digital investments were in the form of with the latest GST implementation era when the analogue cinematography theatre buildings, first used for stage bringing the exhibition sector under equipment and the physical reels posed performances and later for films.16 the highest GST slab of 28% for tickets exorbitant costs, upwards of INR 50,000. priced above INR 100 - a situation in These together with the distribution In the early years, film exhibition sector some single screens and most of the costs necessitated a huge audience in constituted of travelling tent theatres multi screen cinema halls. For tickets order to be profitable per show. The using the Edison and after 1907, the priced below INR 100, and for temporary result was that, theatres (single screens) Pathé projection systems. From 1910, transfer of copyrights for exhibition or for were built with huge capacities – 500 to the cinema theatres began to be built broadcasting, the applicable GST rates 1,000 seats per screen.22 Such properties while famous theatre palaces in major are set at 18%. Though GST has benefited also required huge catchment area to cities got converted into ‘bioscope’ exhibitors in a few states, where under drive footfalls to such a huge capacity projection houses.17 the earlier indirect taxation structure theatre. However, with the advent of of service and entertainment tax, the digital cinema, the print costs reduced Madan theatres was one of the pioneers effective tax rates were as high as 45%, to almost one fifth making it profitable of the film distribution and theatrical it has also had an adverse impact on to have smaller theatres23. As a result, business in India. They converted their regional cinema and states with lower most of the theatres that have come up theatres into projection houses, and entertainment taxes. in the last decade are small (up to 250 acquired other theatres, until it had seats per screen) theatres. The reduced around 126 theatres throughout India and Till 1980s single screens ruled the distribution costs, growing supply of earned half of the box office revenues18. exhibition industry with audience content and appetite of the Indian They mostly catered to Anglicized elite thronging to watch movies. It was only consumer have also allowed them to have and imported movies from British before during mid-80s that the culture of more than one screen per property. the First World War. They also entertained multiplexes arrived in India and changed British troops during the war. the dynamics of the cinema industry In calendar year ending 2016, India had completely20. People slowly started approximately 2,500 screens across In the pre-independence era, movies shifting to swanky movie halls with multiplexes and 6,000 single screens. were primarily screened as touring amazing infrastructure and amenities; In terms of seating inventory, the 6,000 talkies, drive-ins in open grounds in these multiplexes simultaneously ran screens accounted for 88% share of towns/villages, panchayats and other movies across multiple screens and thus seating capacity while remaining 12% places of consumption which drew offered more choice for consumers. was contributed by screens across large crowds of Indians. There was The earliest multiplexes were individual multiplexes.24 apprehension of large gatherings and this properties. Multiplex chains like INOX led to an imposition of multiple Leisure, PVR Cinemas, Cinepolis India restrictions on the exhibition sector and gradually entered the through Sovereign Acts. market between 1990s to early 2000s

16 Indian Cinema – Origins to Independence 17 Indian Cinema – Origins to Independence 18 https://madantheatres.com/about/ 19 Indian Cinema – Origins to Independence 20 Indian Cinema – Origins to Independence 21 http://www.mayajaal.com/about-us 22 Industry discussions conducted by Deloitte India 23 Industry Discussions 24 Deloitte India Analysis 11 Screen Density | Key to Unlocking the Hidden Box Office Potential

Split of screens in India (Number of screens in May 2017) 12% Cinepolis

13% 33% Carnival Others

71% 29% Single Multiplex screens screens 19% INOX 23% PVR Total number of screens = ~ 8,500

Source: Company websites (as of May 2017)

Single screen segment in India is •• Limited capability of single screens to fragmented and controlled by multiple monetize ancillary revenue streams small players. The multiplex segment is such as F&B and advertising largely corporatized, 67% of the multiplex •• Pressure on margins resulting screens are controlled by PVR, INOX, from poor box office collections, and Cinepolis.25 minuscule share of ancillary revenues, unsustainable revenue share In spite of a 13% CAGR in number of agreements with distributors, high screens across multiplexes over the last taxes and fixed operating costs 5 years, the overall screen count in India declined by 3% due to closing down of For the multiplex industry, inability single screen theatres26. to organically grow screens at a fast pace due to lengthy regulatory process Since 2009, every year, approximately 5 to drove the players to add screens 10% single screens have shut down due inorganically. Hence, of the 1,665 screens to issues such as: 27 controlled by PVR, INOX, Carnival and •• Limited content availability from Cinepolis in 2016, close to 41% have distributors due to concerns regarding been acquired inorganically.29 Carnival transparency of box office collections, cinemas made the biggest acquisition technology employed for projection, (in terms of number of screens) of 290 piracy and geo location strategy for screens from Big Cinemas, Broadway specific content and Giltz over 2014 and 2015; 79% of screens owned by Carnival have been •• Inability of single screens to compete acquired inorganically. PVR acquired with multiplexes in terms of viewing 167 screens from Cinemax and DT and experience leading to decline in INOX 133 screens from Fame Cinemas occupancy and Satyam.30

25 Deloitte India Analysis 26 Industry discussions, analyst reports, company reports 27 Indywood – The Indian Film Industry, 2016 28 http://www.business-standard.com/article/companies/coming-soon-multiplex-boom-across-india-115021101507_1.html 29 Deloitte India analysis 30 http://www.business-standard.com/article/companies/coming-soon-multiplex-boom-across-india-115021101507_1.html 12 Screen Density | Key to Unlocking the Hidden Box Office Potential

Acquirer Target Year Number of Screens Acquired “Over the years, Indian

PVR DT 2016 32 audiences have become

Carnival Glitz 2015 30 increasingly appreciative

Carnival Broadway 2014 10 and acceptive of content

Inox Satyam (Delhi) 2014 38 across languages,

Cinepolis 2014 83 cultures and genres. We

Carnival Big Cinemas 2014 250 have witnessed with

PVR Cinemax 2012 135 our releases like Marvel

Inox Fame Cinemas 2011 95 Studios Black Panther,

Source: Business Standard28, Deloitte India Analysis Thor: Ragnarok, Avengers: Age of Ultron and Disney’s In 2016, all the multiplexes together the content supply. India has a growing The Jungle Book that added only approximately 250 new middle class spread across metros, tier screens across India31. Following the I and tier II cities with young population audiences across cities consolidation wave in the industry that is willing to spend on leisure and small towns have now only a few targets are available for activities. The supply of content is robust the large players. Going forward, the with regional industries thriving and equally enjoyed these multiplex screens are expected to grow Hollywood supplying content in dubbed global blockbusters. This organically at a similar pace adding languages. Digitization is enabling faster approximately 100 to 250 screens per distribution of films and also elevating means, there is a huge year.32 With a potential to consume the overall cinema watching experience. demand for such world- content across approximately 7,500 to While all constituents are in place, lack 10,000 multiplex screens nationally, of availability of quality infrastructure class stories in tier 2 and growth of 100 to 200 screens per year (screens) is likely to lead to a missed tier 3 cities. To add, the seems to be highly inadequate to exploit opportunity for India. the complete potential of this industry; screen density per capita at this pace, the industry will require Increasing disposable incomes and is low and there is huge more than 30 years to build consumption rising middle class: capacity that is required today. India has a significant portion of its potential and opportunity population within the working age group for growth. We are The missed opportunity - Cinema (15 to 59 years) and there is a growing consumption potential in India number of graduates waiting to join working with industry There is a huge market opportunity the Indian workforce. According to the players to find ways to both from the demand perspective and Brookings Institution, India is expected improve screen count India's share of global middle class consumption (PPP) and increased support for digital content in smaller 20% 17% markets, where Motion 15% Picture Association, India 9% 10% office titles don’t get to hit 5% some theatres today.” 5% Bikram Duggal, 0% 2015 2020 2030 Executive Director and Head, Studio Entertainment, Disney India Source: Brookings Institute

31 Industry Discussions 32 Industry discussions conducted by Deloitte India 13 Screen Density | Key to Unlocking the Hidden Box Office Potential

to contribute ~35-38% of the next global to be capitalised fast to increase the Availability of Hollywood and dubbed middle class, between 2015 and 2022.33 overall pie for the Indian film industry. content: India is becoming an area Growth in disposable income and rising of focus for Hollywood producers; to middle class is likely to drive discretionary Rise of Regional Content: Opportunity this end, Hollywood movies are being spending on leisure and entertainment for growth from tier 2 and tier 3 cities released in India either on the same day thereby offering a huge potential for is further amplified by availability of as their worldwide release or earlier. growth of Indian film Industry. regional content. About 50% of box ‘Jungle Book’ and ‘Inferno’ released in office collections today are contributed India a week and two weeks before their Focus on tier 2 and tier 3 cities: With by regional films35. Moreover, on an US releases respectively. Dubbing of the penetration of mobile and digital average, producing a regional movie Hollywood movies in regional languages media, the audiences in tier 2 and 3 cities costs 73% less than producing a Hindi has also improved the availability of are maturing in terms of their media movie, thus attracting investments from consumable content in tier 2 and tier 3 consumption habits and becoming large studios and producers.36 Large cities; the number of foreign films dubbed more familiar with what the content national producers such as Reliance in Indian languages has doubled over the film industry has to offer. However, the Entertainment, Eros, Disney, Viacom past 5 years38. Films are primarily being current penetration of multiplex screens 18, Fox Star Studios and independent dubbed in Hindi, Tamil and Telugu. In in tier 2 and tier 3 cities stands at only producers like Emmay Entertainment, 2016, ‘Jungle Book’ made 58% of its more 8 screens per city – 88% lower than the Akshay Kumar and Grazing Goat than INR 2,000 mn box office collection screen density in the tier 1 cities which Productions plan to spend 20% of their from dubbed versions.39 stands at 66 screens per city.34 There annual budget on regional cinema.37 exists a market opportunity which needs Digitization: UFO Moviez and Real Image have facilitated the digitization of movies Split of regional movies released during 2016 enabling wider distribution and reach; it has also helped in curbing the piracy of content and offering confidence to 3% 3% producers on monetization potential. 4% The lower printing costs as compared 22% to conventional printing has enabled 6% producers to scale up the number of screens for release by as much as 5 6% times in the same budget.40 Digitization has improved penetration of content in smaller cities and towns and has enabled 9% 18% simultaneous release of movies across theatres. Given that 60% of box office collections are realized in the first week 41 11% of release , simultaneous release across 18% theatres plays an important role in boosting box office collections. Reduction in cost of physical transportation Hindi Telugu Tamil Kannada Malyalam and printing, lower running costs and convenience have led to better Bengali Marathi Bhojpuri Gujarati Punjabi profitability economics for exhibition industry. Source: Moviebuff

33 Brookings Institute – The unprecedented expansion of global middle class 34 Deloitte India analysis 35 Indywood – The Indian Film Industry, 2016 36 Deloitte India analysis 37 Indywood – The Indian Film Industry, 2016 38 Indywood – The Indian Film Industry, 2016 39 Deloitte India analysis 40 Industry discussions conducted by Deloitte India 41 INdywood – The Indian Film Industry, 2016 14 Screen Density | Key to Unlocking the Hidden Box Office Potential

Indonesia – recognising its market potential Indonesia, with only 1,117 screens to serve a potential audience of more than 255 million people, is one of the least penetrated cinema markets in the world.42 The country has a growing middle class which is expected to account for nearly half the population by 2030, up from 19% in 2012.43 Since 2011, the Indonesian government has been moving towards a free-market policy around the film industry. In 2016, it removed film projection, production and distribution from its list of businesses with foreign investment caps. This has resulted in significant foreign investments into the country and also associated increase in performance of existing chains. For example,

•• CGV cinemas reported a massive 150% increase in its footfalls between 2012 and 2016.43

•• Singaporean sovereign wealth fund GIC entered into a strategic partnership with Nusantara Sejahtera Raya (NSR), Indonesian cinema operator for USD 260mn43 and

•• South Korean exhibition giant CJ-CGV increased its stake in CGV-Blitz from 14.75% to 40.25% for USD30 mn.44

The Indonesian film industry expects that favourable government environment is expected to allow the market to add 500-600 new screen additions every year for next 10 years and reach a base of 5000-6000 screens.45

42 Opening Indonesia's Film Industry to Foreign Investment, 26 May 2016 - https://www.indonesia-investments.com/news/todays-headlines/opening-indonesia- s-film-industry-to-foreign-investment/item6859? 43 Indonesia's CT launches cinema blitz to boost retail chain, Nikkei Report, 19 January 2017 44 http://variety.com/2016/biz/asia/cj-cgv-increases-stake-in-indonesia-blitz-1201746944/ 45 http://variety.com/2016/film/global/indonesia-film-business-rebounds-1201725645/

15 Screen Density | Key to Unlocking the Hidden Box Office Potential

Exhibition Sector: Key Challenges

16 Screen Density | Key to Unlocking the Hidden Box Office Potential

“The top multiplex chains With a contribution of 72% to the direction, with the formation of Indian film industry, domestic box Intellectual Property Crime at most points in time office collections play a critical role in Unit (TIPCU) and Maharashtra's Digital have around 50 screens accelerating the growth of the Indian Crime Unit (DCU) to deal with on-line cinema.46 In spite of producing more piracy, more stringent measures and fitted out and staff hired, movies than any other market across the implementation practices need to be waiting for some approval globe, domestic box office collections in adopted India have seen a muted growth due to: to be granted; approvals Improving screen density by promoting •• Limited accessibility to screens: the growth of multiplexes is need of are held up at two levels Screen density varies widely across the hour for the industry to address India – with as many as 20 screens – approval for malls, challenges associated with poor per million of population in some of accessibility, lower than average ATPs and and then approval for a the states in south and as low as 1.5 sub optimal customer experience. multiplex within the mall ” screens per million in the northeastern states47 Current situation of Screen Density in Devang Sampat •• Structure of the exhibition sector: India Director, Strategic Initiatives, Cinepolis Traditionally, India’s exhibition sector Screen density is defined as the number has been largely driven by single screen of screens available in the country per theatres. However, with increased million of population. Screens (across spending power, consumers are theatres) provide a primary platform spoilt for choice and demand a better for producers, directors, actors and the experience, making it difficult for single entire film fraternity to exhibit their work screens to compete. There is a need for to audiences across the globe. Screen increasing screen density through the density plays a pivotal role in shaping growth of multiplexes that are able to the economics of the exhibition sector meet the demands of today’s consumer and film industry in general by defining collections from one of the biggest •• Lower Average Ticket Prices (ATP): revenue streams – box office. Some of the ATP across multiplexes, are comparable benefits of improving screen density are to the global ATP (USA and China cited below: for example) when adjusted for the purchasing power parity. However, the •• Higher accessibility: Easier accessibility higher mix of single screens, selling of theatres improves the convenience tickets at much lower prices, drives of enjoying a cinema experience thus the average ATP in India much below incentivizing people to watch movies on the global average. Addressing the big screens structural rift between single screens •• Establishments of screens help in and multiplexes will help the industry improving socio-economic status by address the issues of ATP. Comparable enabling local businesses to thrive occupancies (for a much smaller seat from increased footfalls in the area; inventory) at multiplexes for higher moreover, it also benefits the real ticket prices as compared to single estate sector by increasing the demand screens is a testimony of consumer willingness to pay for better experience. •• Increasing the penetration and density Capping on ticket prices, adopted by of screens helps in promoting cultural some states, is another deterrent and social messages amongst a wider inhibiting the growth of ATPs audience base. In pre-independence era, local cinema was used as a tool to •• Rampant Piracy: Availability of the promote the message of independence film content via illegal platforms is amongst the youth, making cinema a one of the key reasons for lower key target for widespread regulation by occupancy rates. While Government the English. has started taking steps in the right

46 Deloitte India Analysis 47 Census 2011, DAVP 17 Screen Density | Key to Unlocking the Hidden Box Office Potential

State-wise screen density across India (2016)

Screen density Screen density Categorization range (screens/mn population)

High >10

Moderate <10 and >6

Low >4 and <6

Very low <4

Source: Census 2011, DAVP website

Screen Density Tables

States Population (Mn) Screens/ million States Population (Mn) Screens/ million

Uttar Pradesh 207.3 2.6 Telangana 35.3 6.2

Maharashtra 112.4 9.2 33.4 14.6

Bihar 103.8 2.7 33.0 2.4

West Bengal 91.3 4.8 31.2 2.5

Madhya Pradesh 72.6 4.0 Punjab 27.7 8.7

Tamil Nadu 72.1 12.6 25.5 4.9

Rajasthan 68.6 3.6 25.4 5.5

Karnataka 61.1 13.3 Delhi 19.0 5.4

Gujarat 60.4 11.0 Jammu and Kashmir 12.5 2.3

Andhra Pradesh 49.4 28.1 10.1 7.2

Orissa 41.9 3.7

Source: 2011 Population Census, DVAP Website, Deloitte Analysis

18 Screen Density | Key to Unlocking the Hidden Box Office Potential

In spite of the many benefits associated Screen density varies widely across It is evident from the graph that there with a higher screen density, at six India – with as many as 20 screens per is a stark difference in screen density screens per million of population, India million of population in some of the within metro cities as well. has a has one of the lowest screen densities states in south and as low as 1.5 screens screen density of ~21 screens per million in the world. To add to this, India’s per million in the northeast states.49 whereas the screen density is screen count has reduced from 10,345 Exhibition industry has flourished in the is only 7.80 screens per million. in 2011 to approximately 8500 in 2016 south due to the support extended by aid-growth of 3% over a period of five the government for development of the Impact of Low Screen Density years. Reduction in screens can be mainly film industry. also enjoys one of Low penetration of screens prevent attributed to the shutting down of single the highest screen densities due to ease the producers and distributors from screen theaters across India; 5 to 10% of of setting up screens from a regulatory monetizing a movie to its full potential. the single screens have shut down every process perspective. The remaining With nearly 2,000 movies produced in year over the past five years, reducing states offer much scope for increasing India annually, there are more than 30 the count from 9,300 in 2010 to 6000 the number of theatres. movies releasing every weekend; these in 2016.48 While the single screens have movies are vying for 8,500 screens across closed down due to competitive forces The current screen density in India across the country leading to an average of and profitability related issues, number 25 prime cities, as of 2016, is shown in the only 250 screens available per movie.51 of screens across multiplexes have not chart below. However, since these movies are across grown to fill the void. different languages, the number of

Screen density across 25 prime cities50

35.0 30.2 29.9 30.0 27.7 26.4

25.0 21.0 20.6 19.2

18.8 20.0 18.4 17.9 17.1 15.9 15.5 13.1

Screen Density 15.0 12.3 12.5 12.0 10.8 10.8 10.5 10.0 7.8 6.3 6.2 5.2

4.3 5.0

0% Agra Surat Nasik Patna Jaipur Bhopal Kanpur Kolkata Chennai Mumbai Lucknow Ludhiana Vadodara New Delhi Bengaluru Ghaziabad Hyderabad Vijayawada Ahmedabad Visakhapatnam

Source: Industry Discussions

48 Deloitte India analysis 49 Deloitte India analysis 50 Industry Discussions 51 Deloitte India analysis 19 Screen Density | Key to Unlocking the Hidden Box Office Potential

screens available for movies varies. There movies such as Dangal, domestically vs •• The authorities approving the licensing is a further pressure on the screens when in foreign countries, the results throw up of theatres are: a District Magistrate; more than one popular movie sees a the glaring problem of lack of screens in or a Sub-divisional Magistrate; or a simultaneous release, limiting its ability the country. Commissioner of Police to realize full potential on the opening •• The Cinematograph Regulations of weekend. Smaller independent movies Factors limiting the growth of screen various states mandate three key and regional movies are most affected density in India regulatory requirements in setting up a as they lack the negotiating power for Complex regulatory framework, multiple theatre business in India: distribution and resources for marketing. taxation, decentralized and highly ––location clearance, ‘Bahubali-2’, one of the leading movies complex operating environment are ––construction clearance and of 2017, saw one of the widest releases some of the key challenges hampering ––business license - across 6,500 screens. ‘Sultan’ was the growth of screen density in India. released in 4,350 screens52. ‘Dangal’ – one of the leading movies of 2016 - was Regulatory Framework Governing the •• Each of these clearances require the released across 4,250 screens and is Exhibition applicant to make an application to the estimated to be viewed by less than 2.5% The exhibition industry in India is regulatory body. The application has to of the Indian population in theatres; regulated by The Cinematograph Act, be supported with various No Objection comparatively, yesteryear blockbusters 1952 at the national level. Center makes Certificates (NOC) and certificates such as Mughal-e-Azam (1960) and Sholay provision only for the cinemas which which the applicant has to procure by (1975) were viewed by 5%-6% of Indian are directly under its administration independently approaching various population, then, in theaters.53 This and directs the State Government to government departments. indicates the opportunity for increase have similar legislation for regulation in collections for blockbusters, provided of cinemas in the State. Thus, each Annexure-I and Annexure-II provides there are enough number of screens and of the states have introduced a Bill deeper insights from comparison of competitive running time. independently to introduce a licensing regulation and associated rules across system for the film theatres. Most of states in India. With international movies making these bills have been introduced in the in-roads in India and regional movies 1950’s and are more than six decades old. Almost all the workflows related to travelling beyond the linguistic The provisions of these bills across states approval are managed offline in most of boundaries, the competition for screens are almost similar. the states and require the applicants to is becoming fiercer and the running time visit the concerning department in person in theatres is becoming shorter. When Key points pertaining to licensing are as to submit the relevant documents in hard one compares the performance of Indian follows: copy to make the application.

Comparison of Dangal's performance between India and China

Dangal

Country of release India China

Year of release 2016 2017

Lifetime domestic box office collection (USD mn) 76 152

Number of screens across which the movie was screened 4,250 9,000

Running time in theatres (in weeks) 24 5

Opening weekend collection (USD mn) 30 15

ATP (USD) 2 4

Source: Deloitte analysis

52 http://www.livemint.com/Consumer/gAvNZlAeMzMtFERBT9RtaM/Salman-Khans-Sultan-soars-at-box-office-with-Rs3654-cror.html 53 Deloitte India Analysis 20 Screen Density | Key to Unlocking the Hidden Box Office Potential

Key regulatory processes involved in setting up a new theatre in India

Location clearance Construction clearance Business License

Key requirements for •• Detailed plan •• Location clearance •• Occupation certificate application •• Ownership documents •• Approved plans of •• NOC from: Electrical construction Inspector, Health Officer, •• NOC for detailed plans and parking layout Fire department, Traffic from: •• NOC from the Chief Fire Police, Public Works Municipal building and property department, officer department, telephone local corporation, Fire Department, Public exchange/ internet works department, Collector service provider

Approval process •• Invite objections from local citizens •• Review the application •• Submit proposal to the and papers submitted government for sanction •• Enquiries by the local police station •• Provide NOC •• Issue license after the •• Traffic department approval receipt of permission •• Government approval

Key regulatory Ownership; Proximity to public institutions such Possession of valid Architectural requirements for as schools, hospitals and government offices ownership documents and specifications for approval NOCs entrances, exits, seating, ventilation, lighting

Approximate time for 6months 2months 6months approval

Source: http://thanepolice.gov.in/faq.php

The regulatory requirements, multiplicity •• Long gestation period •• Absence of provisions for evolving of departments and lack of streamlining The regulatory clearances for opening trends leads to many complications for the a new cinema theatre on an average The cinema regulation acts enacted by exhibition players. The key concerns takes three to six months. However, the states are nearly six decades old faced by the exhibition players incude: there have been several instances and require a revisit in order for it to be where fully constructed and ready to made contemporary, in order to make •• Multiple regulatory authorities operate facilities have had to wait for the process of setting up new screens There is a dependency on at least six more than 2 years post construction in in tune with the current times and also different government departments order to get the business license54. make it an effective tool to counter to get the location NOC. Each of these It is essential to take cognizance of the modern challenges such as piracy. departments have to be approached in significant opportunity costs that are person to solicit the required approval. •• Inability to track the status of borne by a cinema entrepreneur as Similar is the case for the construction application they await a cinema business license clearance and the business license. The states which still conduct the to open doors to the public. Moreover, An exhibitor is required to contact process offline makes it difficult most of the cinema owners also appoint people across the 5 key departments for applicants to track the status of the required staff and take electrical and approving authorities many times their application. The absence of connection in anticipation of obtaining and secure over 15 to 20 approvals to transparency in application status the license. Thus, the long gestation obtain a business licenses. Process of stands as a demotivating factor and period also leads to massive losses as approaching multiple departments impacts investor sentiment. many theatres, fully constructed and and coordinating across multiple ready to function, await the business •• Regulations pertaining to single touchpoints makes the entire process license to start operations. screens very time consuming and inefficient, Regulations related to single screens thus discouraging new investments in are seen to be adversely impacting this industry.

54 http://www.thehindu.com/news/cities/chennai/pvr-cinemas-application-for-licence-pending-for-over-2-years/article7914236.ece 21 Screen Density | Key to Unlocking the Hidden Box Office Potential

the business for the owners. On one As a result, quite a few theatres have required to be paid on all other services, hand, in a bid to prevent the theatres been lying defunct. It is essential including temporary transfer of copyright from closing down, certain states such to review the regulations for single for exhibition of cinematographic films as Maharashtra have introduced exit screens and facilitate monetization of other than for exhibition in theatres. regulations restricting single screen these properties. The levy and collection of entertainment properties from redeveloping into tax was under the purview of the state commercial properties. To redevelop a Taxation governments as provided under Article cinema theatre a capacity of 1,000 seats, Prior to 1st July 2017, the film exhibition 246 of the Indian Constitution. For the it is mandatory for exhibitors to build a sector was levied with both Central as exhibition sector, this tax was applicable smaller cinema theatre of 330 seats at well as State levies. Levies from centre on the value of the gross ticket sale the same place prior to re-development. include service tax and customs duty and the tax rate varied from state while the state taxes include VAT and to state. The table below shows the On the other hand, the single screen entertainment tax on different sources entertainment tax rate across states in theatres fail to qualify the infrastructure of income. The base service tax was India. Combination of taxes increased the requirements for multiplexes such as fixed at 14% which had two types of effective tax liability of an exhibitor to parking space. Hence it is difficult to cess on top of it, the Swach Bharat Cess more than 100% in some states. convert most of these single screen (SBC) at 0.5% and Krishi Kalyan Cess theatres into multiplexes. Renewal of at 0.5%, bringing the effective service In addition to the limited exemption licenses for single screen theatres is tax rate to 15%.55 While service tax was under service tax as mentioned also challenging as they are expected exempt on exhibition of movies and above, the state governments, at their to comply with the requirements for temporary transfer of copyright by discretion could provide exemptions for modern theatre properties. distributor to exhibitor for exhibition of entertainment tax. This exemption varied cinematographic films in theatres, it was from state to state and was focused

Table. Entertainment tax in India (prior to July 1, 2017)

SN State Entertainment Tax

1 Andhra Pradesh 20% (15% for Telugu Films)

2 Assam, , Jammu & Kashmir, Punjab and Uttaranchal Nil

3 50%

4 Delhi 20%

5 Gujarat 20%

6 Haryana 30%

7 Jharkhand 110% (Nil for Jharkhand films)

8 Karnataka 30% (Nil for Kannada films)

9 Kerala 30%

10 20%

11 Maharashtra 45% (Nil for marathi films)

12 Orissa 25%

13 30% (Nil for Rajasthani films)

14 15% (Nil for Tamil films)

15 30% to 40%

16 30% (2% for Begali films)

Source: http://www.filmtvguildindia.org/

55 Industry discussions conducted by Deloitte India 22 Screen Density | Key to Unlocking the Hidden Box Office Potential

on promoting exhibition of regional With the GST implementation from July relevant to the sector are now liable to cinemas. For example: Tamil Nadu 1, 2017, the central and state taxes are GST at 18%. government provided a 100% exemption subsumed into one tax which is levied on entertainment tax for films which had in two tax slabs: 28% for tickets priced Illustrative comparison of pre-GST and Tamil names. above INR 100 and 18% for tickets post-GST liability for a Hindi language priced up to INR 100.56 Most of the other movie, which enjoys no exemption services and various goods that are across states is shown below:

Detail Units Maharashtra Tamil Nadu Assam

Pre-GST Post-GST Pre-GST Post-GST Pre-GST Post-GST

Ticket price INR 200 200 200 200 200 200

Entertainment tax rate % 45% - 15% - - -

GST % - 28% - 28% - 28%

LBT % - - - 20%* - -

Tax liability % 45% 28% 15% 48% - 28%

Total tax liability INR 90 56 30 96 56

Source: Deloitte India analysis *Considering a non-Tamil movie; for Tamil movies, LBT is 8%

The GST regime provides the exhibition housekeeping etc. was not fully available off would enable the industry to reduce industry with the benefit of obtaining for set off against output liability. their costs in the form of lesser tax input credit, previously not available. For Similarly, tax paid on purchase of goods liability. example, previously, tax paid on rent, was also not available to an exhibitor. common area maintenance, security, Compared to the earlier regime, this set

Country-wise Comparison57

Country Standard VAT/ GST VAT/GST on theatre admissions

Austria 20% 10%

Belgium 21% 6%

Finland 24% 10%

France 20% 10%

Germany 19% 7%

Netherlands 21% 6%

Sweden 25% 6%

India 5%, 12%,18%, 28% 18% or 28%

Source: Vatlive.com

56 http://www.business-standard.com/article/economy-policy/gst-impact-entertainment-tax-tweaking-by-states-results-in-disparity-117070401028_1.html 57 https://www.vatlive.com/vat-rates/international-vat-and-gst-rates/ 23 Screen Density | Key to Unlocking the Hidden Box Office Potential

While GST is expected to provide some players; since the implementation When compared to the global respite to exhibition centers in high taxed of GST, a system to incentivize new counterparts, the tax levels for cinema states such as Maharashtra, centers in theatres under construction is yet to are on the higher side. Given the growth states such as Assam which had zero be formulated.58 Many of the state phase of the industry and the price entertainment tax are expected to feel governments previously allowed tax sensitive audience, high taxes pose a the pinch. Also, regional cinemas are exemption for new properties; this serious challenge to the growth of the expected to be hit the worst. Prior to GST, practice is abolished under the new industry. regional cinemas were incentivized by tax regime. the states by having to pay either zero While GST was set to subsume taxes or subsidized taxes. For example, in Single screen properties, which are entertainment tax, states retained the Maharashtra which was one of the states already operating at wafer thin margins option to levy local body tax over and with high tax rate, Marathi movies were due to high operating costs and dwindling above GST in order to cover for the loss in made tax-free. The tax subsidy has played footfalls, are expected to be impacted revenue. For example, state of Tamil Nadu a key role in the growth of the Marathi significantly by the new tax regime in has empowered its local bodies to collect movie industry in the recent past. Thus, states. The multiplexes on the other hand 8% tax on movies in Tamil language, and the new tax regime is expected to hurt are expected to become costlier for most 20% tax for movies in other languages. the regional cinema. Also, in the pre-GST of the consumers (especially those in This tax is levied over and above the GST era, state governments would offer the states charging lower entertainment rates of 18% (For tickets up to INR 100) & entertainment tax concessions to cinema tax previously). This may affect the 28% (for tickets priced above INR 100)59. exhibitors for first few years of operation occupancy levels as the Indian audience is Such taxes recreate the challenges that in order to enable them to remain viable extremely price sensitive. industry faced in the pre-GST era. and competitive against established

58 CIT vs. Chaphalkar Brothers Pune (Supreme Court) 59 http://www.business-standard.com/article/economy-policy/tamil-nadu-govt-reduces-local-body-entertainment-tax-to-8- ahead-of-diwali-117101300829_1.html

24 Screen Density | Key to Unlocking the Hidden Box Office Potential

Piracy of newly-released movies found online. •• Ineffective counter technologies: Availability of film content illicitly while Superior and portable video recording Sophisticated technologies like the the movie is still in the theatres has been devices enable easy recording and clean watermarking of prints, which allow dampening the box-office collections digital copy of a movie with perfect producers or rights holders to monitor and has become a grave concern for audio that can be quickly distributed the usage and movement of each print the entire industry. Technological online. across the globe, have failed to provide advancements are allowing easy protection due to the clandestine •• Digitization: The film industry has dissemination of pirated content while recording of pirated versions which are increasingly adopted digitization of lack of government initiatives to curb mostly done in low-light setting of a film prints to cut the cost of recording, piracy has been leading to massive losses cinema theatre, or from the projector storing and copying of films for for the industry. The Indian film industry room. distribution. Digitization has increased is estimated to incur losses of around INR the risks involved in leaking and piracy •• Improving mobile and internet 180 bn ($2.7 billion) and over 60,000 jobs manifold. penetration: Increasing internet every year because of piracy.60 penetration, smartphone penetration •• Pre-release piracy leak: Distributors and cheaper data rates have improved Some of the key trends which have led to are opting for a simultaneous global the accessibility of pirated content. a growth of piracy are: screening, which requires the dispatch of prints some 10-12 days in advance, •• Increased proliferation of illicit leading to pre-release leakage of prints. cam-recording: Illicit camcording is the primary source of unauthorized copies

60 https://www.thequint.com/entertainment/2016/08/22/indian-films-are-losing-dollar27-billion-to-piracy-every-year

25 Screen Density | Key to Unlocking the Hidden Box Office Potential

Development of China’s film exhibition industry – a remarkable growth story

26 Screen Density | Key to Unlocking the Hidden Box Office Potential

“India has 8,500 screens Overview from USD 2.20 bn in 2010 to USD 6.60 As on December 2016, Chinese film bn in 2016. Today, China accounts for and China has 45,000. industry was ranked second in the approximately 17% of the global box- India will catch up on world in terms of box office collections; office market share61. In the same period, however, this was not the case six years the market leader in terms of box office the screen density and ago. Over the last six years, Chinese collections, US and Canada, have grown has a market place to film industry has seen a significant rise by 8%. in box-office collections, growing 200% accommodate growth for all players" Growth of chinese box-office collections

Kailash B Gupta Chief Financial Officer, INOX 8 6.70 6.60 5.10 6 2.90 3.70 4 2.20 2.40

2 Revenue (USD bn) 0 2010 2011 2012 2013 2014 2015 2016

Source: Ent-group; Motion Picture Association, India office

The Chinese film industry contributed more than 70065 domestic films, with nearly USD 9 bn to China’s Gross approximately 58%66 of these movies Domestic Product (GDP) in 2014 finding their way to theatrical screening. considering direct and indirect Collections from imported films are contribution in the form of purchases, mainly driven by Hollywood movies which wages and taxes in the industry62. At the are highly popular among the Chinese. current pace of box-office growth, China’s In spite of the Chinese government box office collections are predicted to policy limiting the number of foreign reach USD 15.07 bn by 2020; this growth film imports to 34 releases a year, a in the box office collections will benefit all staggering 41% of box office collections the players across the value chain while come from imported films. Preference for contributing more than USD 20 bn to the Hollywood movies is better understood GDP. 63 when we look at China’s contribution to top five grossing Hollywood movies of China’s exhibition sector screens a H1 2017. The revenue contribution from mix of domestic and imported films China for these movies stood at 17%, with approximately 55%64 of box office comparatively, US domestic markets collections being contributed by domestic contributed 35%67. films. On an average, China produces

61 Motion Picture Association, India office-Theatrical-Market-Statistics-2016 62 Oxford economics – The economic contribution of the film and television industries in China, 2015 63 Deloitte estimate 64 Ent-group 65 Ent-group 66 Ent-group 67 Media reports, news articles 27 Screen Density | Key to Unlocking the Hidden Box Office Potential

Growth in number of cinema screens Number of screens in China has increased the reach of domestic and imported films across China thus playing a significant role in growth of the 40,917 Chinese film industry. Back in 2010, China 31,882 had a screen density of 5 screens per 24,317 million which translated into box office 18,398 collections of USD 2.20 bn.68 Since 2010, 13,118 9,286 China added an average of 16 screens per 6,256 day to reach 40,917 screens in 2016; this 36.75% CAGR of screens increased the box office collections at a rate of 20.09% 2010 2011 2012 2013 2014 2015 2016 CAGR over the same period to reach USD Source: Ent-group; Hollywood reporter 6.60 bn in 2016.69

To put this into perspective, the highest the top grosser of 2016, ‘The Mermaid’, grossing Chinese film of 2009, ‘The earned USD 505.36 mn. Between 2010 Founding Of A Republic’, earned USD and 2016, the screen count rose by 64.32 mn in box-office collections while ~34,661 screens.70

Top 4 movies of 200971 Top 4 movies of 201672

Movie name Box office (USD Mn) Movie name Box office (USD Mn)

The Founding of a Republic 64.32 The Mermaid 505.36

Bodyguards and Assassins 41.96 The Monkey King 2 183.77

Red Cliff II 39.82 The man from Macau 3 168.45

A Simple Noodle Story 39.20 Skip trace 135.22

In terms of absolute screen count, China government and industry led initiatives industry. The decree also covered has surpassed US through its growth focussed on developing the film industry reduction of Business Tax rate for spurt over the last six years making it as a key economic driver. Some of the key culture focused companies the largest market in terms of number growth drivers have been detailed in this •• In 2010, the film industry was of screens; as on December 2016, US section. earmarked as a strategic industry had 40,17473 indoor and drive-in screens. encouraging financial institutions, However, given the size of China’s Government’s Focus on Improving the including banks and funds, to expand population (1.4 bn) with respect to that ‘Ease of Doing Business’ in Film and financing channels to players from of US (0.32 bn), screen density in China Entertainment sector75 the film fraternity; this improved stands at 30 screens per million people Government is seen to have played a affordable and more reliable financing as compared to 125 screens per million in key role by introducing policies focussed options available for the industry thus the US.74 on supporting the growth of screens in promoting growth and investments. exhibition sector. Key Growth Drivers •• In 2014, the government released •• Through a decree in 2009, the China’s growth story can be largely Decree No. 56 which aimed at government introduced Value Added seen as a function of favourable macro- establishing special funds to Tax (VAT) and Business Tax exemption economic trends along with a slew of support the production of films and for qualified enterprises in the film

68 Ent-group 69 Deloitte India analysis 70 Ent-group;Hollywood reporter 71 https://shaoyis.wordpress.com/2010/01/10/top-10-box-office-chinese-films-of-2009/ 72 http://www.Chinawhisper.com/top-10-chinese-films-of-2016/ 73 http://www.natoonline.org/data/us-movie-screens/ accessed on 22 June 2017Updated 74 Deloitte India analysis 75 https://chinaselaw.wordpress.com/2016/07/24/a-top-down-approach-tax-incentives-and-their-effect-on-the-chinese-movie-industry/ 28 Screen Density | Key to Unlocking the Hidden Box Office Potential

construction of movie theatres. The aim zones etc. are some of the outcomes attractiveness to set up and operate for construction of movie theatres was from urbanization that have attracted movie theatres in rural areas focused on bridging the gap between investments in exhibition sector. In •• Development of rural film screening China’s rural areas and big metropolitan comparison, India, China’s next in terms infrastructure85: China had released a areas. of population numbers, is projected draft ‘Film Industry Promotion’ law on to have 600 mn (approximately 40%) •• The Chinese government has arranged 6 November 2016. According to it, the urbanized by 2031.80 for fiscal benefits for the industry by government committed to increase the setting up a film development special •• Rise in disposable incomes: Rise support for the rural film screenings, fund tax. The National Film Industry in disposable incomes is another continuously improve the capacity of Development Special Fund Office by-product of urbanization. China’s film viewing in rural areas, and provide of the State Administration of Press personal disposable income has the people with exceptional, quick and Publications Radio Film and Television increased at a CAGR of 10.7% between easy film viewing services. The local applies a “Special Film Fund” tax of 5% 2010 and 2017 to reach USD 3,780 per governments were asked to establish on net box-office collection, which is head in 2017. Accordingly, spend on and improve service networks for such used to support the making of special- leisure and education has increased 2.5 screening services. In addition, local themed films and to support the times over the last seven years and is governments were required to include renovation of movie theatres. expected to reach USD 380 in 2017.81 the construction and reformation of movie theatres into the people’s •• Additionally, through a directive in Rapid pace of urbanization and rise economic and social development 2016, government announced that in disposable income have increased plans, culture industry development if a cinema hall makes at least two- the capacity of locals to spend on plans, overall land use plans and urban third of its revenue from exhibition of entertainment and leisure thus and rural overall construction plans. Chinese movies, the exhibitor would incentivising the industry to invest in be provided with a rebate of 50% on building new screens. In 2016, China sold Film Industry-led Initiatives its payment of the Film Development 1.37 bn tickets translating to nearly 1 There have been several industry Special Fund Tax.76 ticket sold per citizen.82 led initiatives focussed on improving affordability of tickets, offering insights Demographic and Macroeconomic Focus on Under-penetrated Rural for a more data driven distribution, Trends Regions and partnership based go to market •• Rapid Urbanization77: Over the past It is estimated that 30% of the population strategies focussed on improving box twenty seven years, China’s population living in Tier 1 and Tier 2 cities in China office collections. has seen rapid urbanization.78 The contribute towards 60% of box office •• Dynamic Pricing: China’s leading online urban population increased from 24% collection; China has over 30 cities ticketing companies such as Baidu, of the total population in 1990 to 57% categorized as tier 1 and tier 283. To bridge Weiying, Maoyan offer discounted of the population in 2017, an increase this gap, China has made and is planning movie tickets that are priced well of more than 500 million people.79 By to make appropriate provisions for below the cinema hall prices Example: 2030, China is projected to have 70% growth in rural regions. If a movie ticket is worth USD 4 in the of its citizens living in urban areas. •• Tax Exemptions84: In 2014, Chinese theatre, online ticketing companies Further, it is reported that the Chinese government passed a policy providing sell it as low as USD 2. Such offers, middle class population is predicted an exemption on VAT for distribution with heavy discounts have spurred to increase to more than 60% (in each and exhibition of films in rural areas ticket sales and corresponding revenue territory) by 2020. Development of until 2018; this move from government growth. In 2010, 3 in 10 tickets were infrastructure, real estate and malls, is perceived to have increased the sold online; as of Q1 2017, this number growth in demand for entertainment

76 http://variety.com/2016/film/asia/china-to-boost-local-films-with-tax-break-1201740838/ 77 World Bank – Urban China 78 Urban China : Toward Efficient, Inclusive, and Sustainable Urbanization 79 Deloitte India analysis 80 http://www.worldbank.org/en/country/india/overview#2 81 EIU, Deloitte India analysis 82 http://www.hollywoodreporter.com/news/China-box-office-growth-slows-37-percent-2016-official-data-shows-960217 accessed on 22 June 2017 83 JP Morgan – China Media; Head to the cinemas, skip the red-carpet https://ggiforum.com/consulting/financial-developments/760-a-top-down-approach-tax- incentives-and-their-effect-on-the-chinese-movie-industry-2.html 84 https://ggiforum.com/consulting/financial-developments/760-a-top-down-approach-tax-incentives-and-their-effect-on-the-chinese-movie-industry-2.html 85 https://ggiforum.com/consulting/financial-developments/760-a-top-down-approach-tax-incentives-and-their-effect-on-the-chinese-movie-industry-2.html 29 Screen Density | Key to Unlocking the Hidden Box Office Potential

stands at 8 out of 10 tickets being sold •• Film production and exhibition industry online.86 is part of the Cultural policy. Regional governments are made responsible for •• Data Analytics in Film Distribution: growth in number of movie screens and The advent of internet technology firms maintenance of existing screens. The such as Baidu, Alibaba and Tencent priority areas for growth of screens are has enabled the use of data analytics rural or under-penetrated areas. in planning movie distribution. In 2014, Break Buddies, prior to its official •• Rationalization of taxes: The financial release, used internet ticketing agency support provided to new theatres and Meituan to gather over RMB 100 million rural screens helps most players to in box office revenue through advance manage their finances and plan for ticketing. The film achieved a screening future growth through re-development rate of 36%, surpassing films released and ultimately contribute to during this period. Based on online the economy. ticket sales and forecast data, theatres •• Promotion of regional content: The are able to plan their schedules more incentives provided for screening more efficiently, improve the movie watching domestic movies enable players to plan experience and increase ticket sales.87 a mix of domestic vs imported movies in order to leverage the best of both Key takeaways from China’s case worlds. example From the above, it is reasonably evident While the exhibition sector and film that China has taken significant steps industry as a whole have seen significant in its ambition to attain global box- growth over the last seven years, office leadership position by extending China needs to take initiatives to keep significant support to the film and the tempo going. In order to sustain entertainment industry. Through policy performance going forward industry support in the form of ease of doing needs to look at producing high quality business, rationalization of taxation content and open the market to more and leveraging the inherent demand for foreign films for driving higher footfalls movies, China seems to have set itself up and delivering value for money. to become the largest box-office player globally by 2020. Some key initiatives that are note-worthy include:

86 http://Chinafilminsider.com/Chinas-online-ticketing-industry/ 87 Deloitte India analysis 30 Screen Density | Key to Unlocking the Hidden Box Office Potential

31 Screen Density | Key to Unlocking the Hidden Box Office Potential

Socio-economic impact of promoting growth in screen density in India

32 Screen Density | Key to Unlocking the Hidden Box Office Potential

“ The big screen experience With a 1.3 billion domestic audience across. This was amply evident in the and close to 2,000 films produced each Hollywood collections in 2015. Prior to cinemas offer, is perhaps the year, India has the potential to overtake 2015, Hollywood limited its releases to most powerful instrument of US and China in terms of the box office Digital Cinemas Initiative (DCI) compliant collections and emerge as the biggest screens due to concerns of quality and social change. As technology film industry. In order to replicate China’s security. Due to the high costs associated evolves, cinemas are further growth story, India will have to reach a with set-up and maintenance, there are screen count of approximately 33,000 limited DCI compliant screens in India. focusing on enhancing this by 2020 – a growth rate of 64% for the There were only 1,500 DCI compliant experience. The emotional, multiplex screens.88 screens in India in 2015. In 2015, when the release of two of the popular movies immersive and larger than life Initiatives focussed on incentivising new – Fast & Furious 7 and Jurassic World was theatrical experience has an investments in exhibition sector (e.g. tax extended to non-DCI compliant cinemas, breaks), refurbishing and downsizing of the individual screen counts of these impact on a community, that existing single screens and improving movies increased to more than 2,800 virtually is unmatchable by the ease of doing business in exhibition and 2,100 respectively. This substantially sector (e.g. reforms such as single benefitted these movies by helping any other medium. Due to low window clearance), are some of the them gross more than INR 1bn each - the screen density a large number measures which can fuel the growth of highest ever for Hollywood movies in screens in India. Social and economic India. This demonstrates the impact of of population is deprived of benefits arising from this growth have the increase in number of screens on the such an experience. Lack of the potential to enormously benefit collections per movie. all the stakeholders including the reliable and relevant data on government, film producers, distributors Bridging the demand-supply gap in the movie consumption patterns and exhibitors, creative artists, and the Indian exhibition industry is expected to general population. boost the box office collections by more and audience measurement than 3x. As the box office collections are a has prevented deserving Economic Benefits direct function of the number of screens, Gross Value Added (GVA) by the Indian an increase in the number of screens is focus on improving screen film industry has the potential to increase expected to enhance the collections. The density in India for too long. by almost 12x if India can replicate the 40% CAGR growth of screens to reach growth story of China over the next a screen density of 23 by FY2021 can A thrust on increasing access five years89. GVA is a measure of total improve the total number of footfalls to the unique big screen economic contribution of the Indian by 26% CAGR by FY2021. This takes into exhibition sector to the Indian economy. account a slight drop in occupancy level experience to audiences At the current rate of growth, net present per screen as the number of screens and the industry embracing value (NPV) of the GVA is expected to increase. Assuming a modest growth of be approximately USD 500 mn by FY21; ATP at inflation rates, this can lead to a the global best practices on the other hand, if India successfully more than 3x growth of the box office of a central mechanism to replicates the China growth story, the collections, a 53% CAGR growth vs the 4% NPV of GVA by the India exhibition sector CAGR growth at the current pace.90 measure movie consumption, is estimated to exceed 6 bn by 2021. box office trends are two Improvement in box office collections, Increase in number of screens is ancillary revenues and employment expected to have a multi-fold impact factors that could dramatically opportunities are some of the key drivers on the Indian entertainment industry transform the Indian market of the higher GVA. and economy. Apart from revenue contribution to the national GDP, the and leverage our soft power." Box Office Collections addition of cinema screens is also likely to Box office collections from movies is enable creation of jobs. An operator of a Rajkumar Akella seen to be directly proportional to the 3 to 4 screen multiplex, typically requires Managing Director, India, Theatrica, number of screens they get released approximately 60-80 employees to keep Rentrak Corporation (comScore)

88 Deloitte India analysis 89 Deloitte India analysis 90 Deloitte India analysis 33 Screen Density | Key to Unlocking the Hidden Box Office Potential

it operations, across functions,leading to is injected back into the economy through attractiveness of film production industry direct generation of employment like any purchases and tax payments. as a business, which in turn is expected business, a multiplex is likely to create a to improve availability of content to all ripple effect across the economy creating Access to a wider and more diverse mix other broadcasting industry segments jobs through suppliers and partnerships of viewers is likely to lead to improved – such as television, music, Video on and finally create an induced effect as the returns to producers and distributors. Demand platforms– due to the increased third layer where the new wealth created This is expected to improve the investments.

Table: Economic Benefits of Growth in Screen Density91

Detail Units Exhibition industry Exhibition industry grows growth at current pace at China’s pace

Screen density at FY21 Screens per million 6 24 population

Total number of screens Count ~8,800 ~32,800

Growth rate of screens % 1.02 40.25

% of multiplexes % 37 88

Box office collections for the year FY21 USD bn ~2.0 ~10.2

Indirect tax collected on film ticket sales from USD bn ~1.7 ~2.2* FY17 to FY21 (NPV)

Indirect tax collections from ancillary industries USD bn ~0.5 ~1.2 – F&B and advertising from FY18 to FY21 (NPV)

Spending on construction industry for the new USD bn ~0.1 ~3.8 screens built till FY21 (NPV)

Number of new jobs created Count ~6,000 ~4,80,000

GVA (FY18 to FY21) USD bn ~0.5 ~6

Source: Deloitte India analysis, *Assuming nil taxes are levied from FY18 to FY20 to incentivize growth. The assumption is made to understand the impact of taxes. This only reflects the taxes that would be collected in FY21

91 Deloitte India analysis 34 Screen Density | Key to Unlocking the Hidden Box Office Potential

Malaysia a case example

Growth of Malaysian Film Exhibition Industry 1,800 1,200

1,600 984 915 1,000 1,400 869 760 1,200 800 692 1,065 1,044 994 1,000 608 563 867 518 600 774 800 754 381 403 639 600 571 400 289 453 485 217 235 400 353 287 265 200 200

0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Number of Screens GBO Receipts (RM Mn)

Source: http://www.finas.gov.my/en

Until 1980s, Malaysian film industry received neither assistance nor incentives from the government. The physically small country with only about 32 million inhabitants92 and a multicultural society presented an enormous challenge for the government to promote the industry as part of a creative industry with economic potential. Nonetheless the government established National Film Development Corporation of Malaysia in 1981 to promote, nurture and facilitate development of the Malaysian film industry. Amongst the many incentives, one of the key incentives has been Entertainment Duty Incentive Scheme which allows production companies to claim the rebate of entertainment duties collected on sale of admission tickets. From 1989 to 2008 an estimated RM43.5 mn (USD 11mn) was channelled back to the industry.93 Additionally, the government allows import duty tax exemption for cinema equipment for setting up new screens.

The government’s commitment to encourage the sector through positive reforms has allowed the country to increase its screen density from 10 screens per million in 2005 to a massive 33 screens per million in 2017.94 The associated benefits have been translated into 4.5 times increase in annual box-office collections.94

Ancillary Revenues Similarly, a modest assumption of On an average, when a family of four Increase in the number of screens is spending per head (SPH) on F&B as visits a movie hall, the total spend also expected to fuel the growth of 25% of ATP (SPH for PVR has increased including spend on ancillary industries other industries allied to the exhibition from 28% to 41% of its ATP from FY12 is approximately INR 2000; please refer industry – such as advertising and food to FY17) for each of the added screens, to the table below for distribution of retail. An in-cinema advertising revenue is expected to boost the F&B industry costs across various spend areas for a of ~USD 50k per screen per year, growing revenues (linked to the exhibition family of four. Movie viewing in cinema at inflationary rates per year, is expected sector) by more than INR 200 bn in FY21. exhibition halls not only creates a direct to boost the advertising industry with a The improved ancillary revenues are inflow to the GDP, it also supports the contribution of almost USD 1.5 bn in FY21 expected to enhance the profitability of ancillary shops and establishments vs a mere USD 0.2 bn if the screens were the industry and attract more players. around the movie hall and creates an to grow at the current pace. indirect contribution to the GDP.

92 World Bank Databank, 2017 estimates 93 Film Censorship in the Asia-Pacific Region: Malaysia, Hong Kong and Australia Compared, 2013 edition 94 http://www.finas.gov.my/en, Deloitte India Analysis 35 Screen Density | Key to Unlocking the Hidden Box Office Potential

Spend category Approximate Spend (INR)

Transport charges 200

Ticket cost (ATP of 187) 748

Food & Beverage (SPH of INR 81) 324

Shopping in nearby outlets (Clothing, Household items etc.) 1,000

Source: Deloitte Estimates

In addition, growth of screens is expected earnings of more than USD 1.2 bn (NPV) due to setting up of food courts, retail to boost the construction industry. by FY21, almost USD 0.7 bn more than outlets, ATMs, shopping complexes, Assuming a construction cost of USD 600 the collections that India would have if it supermarkets. Thus, setting up theatres (INR 40,000) per seat for a new screen followed the traditional mode of growth. is expected to generate significant development, the 24,000 extra screens employment indirectly. Also, the locality are expected to enhance the revenues of Social benefits is expected to witness a spurt in rentals. the construction sector by approximately Employment growth USD 3bn to USD 4bn. Besides, the In FY17, when there were an estimated Cultural and social benefits power, maintenance and technology 8,471 screens in India, the exhibition Cinema viewing has been one of the most requirements are also expected to sector employed 170,000 resources popular outdoor activities in our country. accelerate the growth of the allied directly95 - which means approximately 20 Cinema is a unique leisure activity due to industries. people were employed per screen. Thus, the aspects of art and collective viewing. addition of close to 24,000 more screens Making it accessible and affordable is Tax Collection to achieve the target screen density is expected to enhance creativity and social Tax concession for the first four years expected to create at least 4.8 lakh more interaction. Cinema provides a platform and taxation at the current rates (18% for jobs, creating opportunities for the local to the local talent and acts as a window ATP less than INR 100 and 28% for ATP of population and boosting development. for the world to experience Indian culture. more than INR 100) at the end of 5 years The film industry has potential to uplift is expected to provide tax collections Local development revenue of other allied industries such as (from sale of film tickets) of more than Development of new theaters is tourism, hospitality and retail industry. USD 2.8 bn in FY21, which is more than expected to improve the footfalls in Improvement of returns to producers the cumulative tax earned across the five the respective localities. This is likely through increased box office collection years assuming taxation at the current to improve the commerce in the area is expected to improve the investment in tax scenario. Thus, the government from additional demand for transport, film production and thereby support the stands to gain at the end of the race by entertainment and retail. This is growth of allied industries. providing tax concessions at the start. supported by the fact that most of In addition, the government also stands the retail malls house a multiplex as to gain from the collections from taxes an anchor tenant to attract footfalls. on F&B and advertising which are Typically, the premises of theatres expected to amount to cumulative witness a rise in entrepreneur activity

95 Economic contribution of film and television industry in India, 2018 36 Screen Density | Key to Unlocking the Hidden Box Office Potential

37 Screen Density | Key to Unlocking the Hidden Box Office Potential

Recommendations

38 Screen Density | Key to Unlocking the Hidden Box Office Potential

“Opening screens in Significance of the Indian exhibition a. Consider revisiting the existing sector’s contribution to the film regulations in the light of current screen-dark areas will industry and the economy as a whole economic conditions is undisputed. However, the growth of give a boost to theatrical b. Creation of an online single window this industry is muted largely due to clearance platform revenues. Incentives such challenges with regards to regulations –– Centralized hosting of the and profitable operations. Growth can as the 5 year tax holiday platform: To accurately monitor the be promoted in this industry by focusing licensing process across states, the given to multiplexes in on suitably addressing the challenges central government can consider faced by the exhibition sector. There is the 2000’s which led to design and implement of a single urgent requirement for a forum to enable window clearance system that is a spurt in new screens, collaboration between government and hosted on a centrally managed industry bodies where such issues can be could be brought back internet based server discussed, deliberated and implemented ––Single point of information to encourage new within reasonable timelines. Listed below dissemination: To allow an are some of the key areas requiring investment." applicant for a cinema operating attention: license to view the complete list Siddharth Roy Kapur, of requirements (by state) and Improve the ease of doing business President, Producers Guild of India and subsequently submit and track through regulatory reforms Founder and MD, Roy Kapur Films applications The regulations and corresponding ––Automated monitoring of the requirements for obtaining a cinema application: This system could have license were enacted back in 1952 stage-wise timelines programmed and have not been suitably amended to enable tracking of status of the considering the changes in the operating application and identification of any environment; the irrelevance of bottlenecks. certain provisions under these cinema ––Assigning accountability for any regulations in today’s day and age delays that are not justified warrants a consideration for revising these laws. We are given to understand c. To address the two-tone issue of that at any point, around 15 to 20 screens standardization of requirements are pending licensing approval for over and improving the functioning of 6 months96. Additionally, some of the licensing processes leading multiplex chains (at most points –– To the extent possible, rationalize in time) have around 50-75 screens the licensing requirements across fitted out and staff hired, waiting for states to have a common approach some approval to be granted.97 Given including the validity of licenses the significance of the film industry to issued may be evaluated and the economy, improving the ease of suitably facilitated doing business, from a regulation and ––Remove duplication of licensing licensing point of view, is critical for the by creating provisions for scenarios sustainability and growth of the industry. where existing NOC’s for a shopping For detailed listing of the challenges center (including for the space set faced by the industry (as gathered aside specifically for cinema theatres through discussions with various relevant / multiplexes) can be re-used by stakeholders) refer to Annexure-I. a cinema theatre owner for the purpose of application for business Following are some of the key license, except for conditions that recommendations for improving the ease may warrant for special reviews to of doing business and bringing in the be performed necessary regulatory reforms:

96 Industry discussions 97 Industry discussions 39 Screen Density | Key to Unlocking the Hidden Box Office Potential

–– Create centralized accountability: Identify and notify a central Case Study: Single window clearance process for setting up mini theatres in department that would be Andhra Pradesh accountable for oversight and effectiveness of the licensing process Steps for single window clearance process: –– Highlight the steps to indicate 01. Submission of application through a designated web portal by an applicant licensing related activities that are 02. Subsequently, concerned line departments generate their clearances online required to be followed sequentially leading to issue of license by the Joint Collector for construction of mini theatres and which can be initiated in parallel 03. Similar process is followed by the authorities for further licensing required for to other steps commencement of films exhibition 04. Renewal of all license/permissions can be made co-terminus for a period of one Having a clearly defined process and year. policy will assist in providing transparency and clarity to both the applicants as well Highlights of the pre-requisites/rules concerning clearances: as the licensing authority. 01. Minimal infrastructure specifications: –– Maximum seating capacity of 199 seats over a floor space of at least 4,000 Enhancing fiscal incentives to maintain square feet sustainability –– Parking area shall be considered 20% of built up area. Since the height In the pre-GST era, before 1 July 2017, of the complex does not exceed 15 metres, the set background around the exhibition sector was levied with multiple complex shall be minimum 3 metres indirect taxes that included service –– Convenient and comfortable seating arrangement along any direction tax and entertainment tax; rates and with sufficient spacing between rows to be provided without mandating exemptions for these taxes differed from battened seating arrangements in any singular direction state to state and on type of the movie, 02. Minimal location restrictions: for example, certain states provided –– Mini theatres can be established in smaller spaces without requiring large exemption from entertainment tax constructions. They can also be established in commercial centers like for regional movies. While GST regime shopping malls, convention centers, bus stations, multi utility areas. has combined the different taxes, the –– Can be established in rural areas like Mandal headquarters, small towns state governments have been given depending upon feasibility to boost entrepreneurial activity. the authority to impose an additional –– Permission shall be relaxed if other exhibitor points exist with 2km radius as local body tax bringing in an element of they boost entrepreneurial activity. uncertainty for the exhibitors. 03. Safety specifications: –– Mandated to be equipped with permanent and inbuilt fire safety and It is important for the government to prevention provisions such as water tank, water sprinklers, fire alarm, etc. consider streamlining the taxation within the premises policies in the exhibition sector to assure –– Residential areas like gated residential communities shall be exempted investors and promote investments in considering safety aspects the sector. Additionally, in a post-GST 04. Flexibility of transformation: environment, it would be important for –– Permission shall be granted for converting single screen theatres into mini state governments to adopt a common digital theatres approach towards providing subsidies Source: Industry discussions to the exhibition sector. Few states, such as Maharashtra have already offered a period of tax holidays for new exhibitors. The government of Uttar Pradesh has three years from the date cinema hall to offer a small scale industry status to taken an initiative to revive approximately reopens. Such exemptions, if replicated exhibition sector; small scale industry 709 single screen theatres that have by other states, can benefit the state and status will allow exhibitors to obtain closed and the many theatres that stand central government in terms of increased electricity at industrial rates and ease the as abandoned buildings by offering a employment, improved tax collections process of obtaining loans and financing 50% subsidy on indirect taxes98 to the and enhanced contribution to the GDP. required for further development of single-screen owner for a period of Additionally, consideration could be given the industry.

98 http://economictimes.indiatimes.com/news/politics-and-nation/in-lead-role-yogi-adityanath-moves-to-revive-cinema-halls-in-uttar-pradesh/ articleshow/58306691.cms 40 Screen Density | Key to Unlocking the Hidden Box Office Potential

Development focus for could decide on their respective screen Easing policies for single screens to underpenetrated areas development targets and include downsize and convert into a multiplex States (such as UP and Rajasthan) which them as a part of their infrastructure with two screens or more, without have high population but a very low development mandate. any compromise on safety, security, screen density could aim to improve environment and related matters, penetration and accessibility of screens Improving the operating model of could enable its owners to optimize the to a larger population base. Additionally, single screens economics of operating the property. satellite cities (e.g. Navi Mumbai, NCR, A major reason for single screen halls to Additionally, multiplexes would offer etc.) around metros and other tier I cities be constructed with large capacity was benefits to exhibitors in multiple ways also offer significant scope for improving the cost of the physical celluloid print such as: screen density. required to exhibit movies. In order to •• Programming flexibility recover this high cost, theaters were Recently established theater in Kopar setup with high capacities. However, •• Ability to attract higher ticket prices Khairane in Navi Mumbai is an example with digital print reducing cost of print to •• Lower distributor share of consumption capacity and growth one-tenth of the celluloid, exhibitors can potential offered by such areas; this consider down-sizing to a smaller theater With the addition of these factors, a theater has managed to achieve an format which have lower operating multiplex with even two screens could occupancy of 55% by tapping into a and maintenance expenses per sq feet receive nearly double the revenue per locality previously lacking affordable and of area.100 screen, than the earlier single screen. easily accessible quality entertainment Table below illustrates this concept. options.99 Each state government

Detail Units Single screen Multiplex with ability to Multiplex - With ATP at attract industry ATP below industry level

Average number of seats Number 500 250 250

ATP INR 60 183 100

Occupancy rate % 20% 27% 27%

Average number of shows Number 5 5 5

Revenue per day per screen '000 INR 29 62 34

Tax rate (GST) % 18% 28% 18%

NBOC per month INR mn 0.7 1.3 0.8

Distributor share (On NBOC) % 60% 44% 44%

Revenue after distribution per month INR mn 0.3 0.7 0.5

Source: Deloitte India analysis

Adoption of lean and innovative unprofitable. The industry needs to look of INR 80-100.101 Many of the existing business models at lean and innovative business models to players have started focussing on low High capex investment and dependency overcome this challenge. capex deployment models to make the on real estate and mall development is screen economics viable for long term one of the key impediments to the growth Gujarat, Maharashtra, and sustainability especially in tier 2 and tier 3 of theatres. Also, high capex investment Punjab have recently seen a growth of cities. Some such models adopted by the and operation costs necessitate high miniplexes, offering good facilities like industry include: ticket prices which negatively impact the comfortable seats, food counters and occupancies in theatres and render them air-conditioning at a nominal ticket price

99 Industry discussion 100 http://www.financialexpress.com/archive/digital-theatres-yet-to-evolve/159339/ 101 http://economictimes.indiatimes.com/news/politics-and-nation/in-lead-role-yogi-adityanath-moves-to-revive-cinema-halls-in-uttar-pradesh/ articleshow/58306691.cms 41 Screen Density | Key to Unlocking the Hidden Box Office Potential

•• Public Private Partnership models propensity to pay for recreational limited, UFO Movies, Y screens. Exhibitors are exploring opportunities content. However, the growth of •• Compact and affordable theatres – of partnering with state governments per-capita income and improvement Miniplexes and getting into joint ventures with in lifestyle has a strong linkage to Miniplexes are small movie theatres investors and real estate developers to the penetration of media in a region. with less seating capacity (limited build entertainment arenas consisting Hence, the industry and government to 125 seats and in some states 75 of theatres, retail outlets and food can consider creating an advertisement seats) per screen that would qualify courts. driven sustainable business model to for video license category. Despite incentivise players to provide services the small size, the facilities are For example, Carnival cinemas has been in such areas. UFO Moviez has started comparable to multiplex. Before the improving its reach in tier 2 and tier 3 an initiative to provide an open movie GST implementation, these properties towns through partnership with state viewing experience to India’s rural enjoyed entertainment benefit in governments: population situated in media dark some states. ––Partnership with Jharkhand areas. UFO employs vans which display

government to set up 75 theatres advertisements during the day and Miniplexes remove the dependency cum recreation zones in 18 districts. play movies by the evening; these of theatres on a mall infrastructure. The state government would be movies are screened in market place Due to the reduced infrastructure facilitating them with acquisition area and visitors are not charged for requirements, these theatres could of land - an acre to 1.5 acres per the movie. Given the limited capacity be set up at locations such as bus project.102 of the inhabitants from such areas to stations, market yards, government ––MOU with the Odisha government pay for entertainment, UFO relies on offices, residential complexes or any to build entertainment zones across advertising from companies targeting commercial space/building. CAPEX 30 districts. Under this MOU, the rural areas for revenues. Each van visits requirement for such theatres is also company will get 1-1.5 acres of land in seven villages a week in a closed circuit. lower – INR 7 to 7.5 mn. Additionally, each of the districts to build two-three Caravan Talkies remains operational during the low occupancy periods such screen multiplexes, food courts and for eight to nine months a year except as morning shows, the property can be some retail outlets.103 during monsoons. UFO plans to cover used for seminar/ conference services. ––Carnival plans to have two to three 300 routes across India (excluding Also, it could be a venue for private partners per state to develop these South India) in this manner.105 movie screening, product launches, entertainment zones. They would be •• Franchise model for rapid performances by local talent, birthday keeping the ticket prices low to attract infrastructure development parties, other ceremonies etc. more footfalls. Footfalls of 2,000 are Challenges in setting-up and expected per zone per day.104 operationalizing a theatre due to State transport bus stands and railway ––Carnival has also partnered with UP complexity of rules and regulations stations make an attractive location to government to revive the 700+ single and long gestation period deters entry set up miniplexes. They are located in screens which have shut down. of new players in the market. Few the heart of the city/town and always corporates in the exhibition industry have a floating population. In a view Similar industry-government have launched an asset light franchisee to generate additional revenues, partnerships are required to give the model to help budding entrepreneurs Telangana State Road Transport necessary thrust to the pace of screen set up new screens or revive old screens Commission has planned to build mini- growth in the country. on franchising basis. Entrepreneurs theatres at bus stands.106 They have •• Advertising based revenue models make the investment and take care already identified 60 such bus stands for media dark regions of the day-to-day operations whereas which would make viable locations for Media dark regions are symbolised by the corporates bring in their expertise theatres. Similarly, Andhra Pradesh low per-capita income and hence are required for setting up the theatre and government has also approved plans an unattractive business proposition sourcing content at competitive costs. for setting up as many as 100 mini- for most exhibitors due to their low Some such corporates include – KSS theatres at 52 bus stations across

102 http://www.indiaretailing.com/2016/08/22/retail/carnival-group-signs-mou-govt-jharkhand-open-75-theatres-cum-recreation-zones/ 103 http://economictimes.indiatimes.com/industry/media/entertainment/after-jharkhand-carnival-cinemas-joins-hands-with-odisha-govt-for-expansion/ articleshow/56209701.cms 104 http://economictimes.indiatimes.com/industry/media/entertainment/after-jharkhand-carnival-cinemas-joins-hands-with-odisha-govt-for-expansion/ articleshow/56209701.cms 105 http://www.ufomoviez.com/OurProfile.aspx, Industry discussions 106 http://www.siasat.com/news/mini-cinema-theaters-bus-stations-generate-income-971186/ 42 Screen Density | Key to Unlocking the Hidden Box Office Potential

Andhra Pradesh.107 Some of these is unable to introduce dynamic ticket Scale up anti-piracy initiatives initiatives in Andhra Pradesh and pricing, similar to the airline industry. It Piracy is a major factor affecting the Telangana are supported financially by is recommended that the industry be viability of the exhibition industry. the producer and distributor fraternity. encouraged to adopt digital ticketing While there are state-wise anti-piracy systems to enable transparency in cells which investigate piracy instances, Flexible ticket pricing model the ticket sales (from tax collections additional measures could be taken up Ticket sales are a perishable commodity perspective) and also dynamic pricing to discourage pirates from distributing for the exhibition industry. Once a of tickets based on demand and supply content online, a significant channel for show is run, all the unsold tickets are situation. This will enable both increasing distribution of pirated films. Steps can lost revenues for the exhibitor. Since the occupancy levels leading to improved range from IP tracking and blocking to the government regulations require revenues for the players and increased warnings to uploaders and downloaders. exhibitors to submit the pricing of tax collections for the government. the tickets in advance, the industry

Case study: United Kingdom’s Police Intellectual Property Crime Unit (PIPCU) The UK government has been successful in curbing digital piracy to a great extent with the institution of a specialized IP crime unit

About PIPCU:

•• The City of London Police formed the Police Intellectual Property Crime Unit (PIPCU) in 2013 to investigate, disrupt, and prevent cyber-enabled intellectual property crime, which causes significant harm to the UK economy and consumers, both in terms of physical counterfeit goods and digital piracy.

•• Funded by the UK Intellectual Property Office (UKIPO), PIPCU has a team of 19 staff consisting of detectives, analysts and researchers and is based within the Economic Crime Directorate of the City of London Police, the National Lead Force for Fraud.

Key Initiatives:

•• Early Intervention / restorative justice – utilising intelligence derived from various sources, provide opportunities for online perpetrators to stop committing crime or rectify the situation

•• Disruption of online facilitators and enablers (intermediaries) – work with third party providers such as advertisers, payment service providers, social networking sites, online markets and internet service providers to prevent unlawful trading, restrict access to revenue and undertake domain seizure

•• Influencing online behaviour by site owners, service providers and consumers through education, prevention and enforcement activity

•• Disruption of non-technical enablers including supply chains and manufacturing outlets

•• Investigation and prosecution – investigate and gather evidence against organised crime groups for arrest and prosecution.

•• Seizure of criminal assets – utilise all aspects of the Proceeds of Crime Act to either compensate victims or seize criminal assets derived from intellectual property crime.

Impact:

•• In 2016, 17 suspects were arrested for trade mark, copyright, and fraud offenses.

•• Suspended 17,000+ sites selling counterfeit goods

•• Restricted the advertising revenue of more than 1,200 of the worst infringing sites offering digital content (music, film, TV, ebooks, and software) in order to cut off their revenue stream.

•• 64% decrease in advertisements volume on IWL (infringing websites watch list) websites in 12 months

Sources: PIPCU website, PIPCU Denmark 2017 presentation

107 http://www.andhraheadlines.com/news/state/151812/what-an-idea-cm-naidu 43 Screen Density | Key to Unlocking the Hidden Box Office Potential

Adoption of boxoffice measurement the benefits of common measurement Conclusion systems system be reaped. The government Growth in the number of good quality India is one of the few countries where can work with such independent cinema screens is the need of the hour no single universally accepted boxoffice measurement agencies to drive a faster for the Indian film industry – to improve measurement system exists. A single adoption. its reach to audiences and realize true boxoffice measurement system is potential. In order to accelerate the required for the industry to ensure Investments in technology across the growth of screens, the industry needs transparency and accuracy in the value chain to look at innovative models to build reporting of the box office collections. Over the past few years, technology has infrastructure and government needs to Such a system can help the film radically altered the entire film industry consider revisiting the regulations and producers and distributors in better film and more importantly the exhibition their implementation to facilitate the release planning and also understanding industry. Technology is continuously ease of doing business. the audience preferences. For the reshaping the film viewing experience advertisers, such tools provide a good (sound and video) thereby mandating the All the stakeholders including the reference tool when evaluating the ad exhibition industry to make continuous government, film industry and local spend effectiveness and associated investments to deliver a superior population stand to gain manifold by the return on investment. Rentrak (now experience to the audiences. The role of growth of the exhibition industry. The ComScore) is one such player with technology extends right from discovery, government can expect increased tax international presence covering ticket booking, in-theatre experience revenue, growth in tourism, development ~95 percent of the global box office and post-theatre experience. While of local communities around the theatres, collections. The company has been able the industry is making investments in and increased GST from artists. The to not only collate data across 125,000 technology, it is not extendable to all the film industry would profit from the high screens in more than 25,000 theatres players due to economic considerations returns from the domestic market and across the globe but also add insights to and hence the government could potential foreign investments given the distribution and marketing strategy consider providing incentives for the lucrative nature of the sector. The of any film on theatrical side. In India, investments in technology upgradation local population on the other hand Rentrak has been doing work in-terms of and ensuring rapid adoption of digital would benefit from a good source of bringing exhibitors together. However, platforms. leisure and entertainment, employment it still has a long way to go to gain 100% opportunities, commercial development industry participation. Only once all the due to growth of allied industries and stakeholders have been on boarded can improvement in real estate value.

01 03

Discovery In-Theater Experience •• Movie Trailers 02 •• etickets/Mobile 04 •• Movie Schedule tickets •• Theater & Show •• F&B ordering selection Ticket Post-Theater Ticket Booking •• In-cinema ads Experience

•• Online booking •• Movie Reviews

•• Over the Counter •• Audience Behaviour •• F&B Ordering Analytics

44 Screen Density | Key to Unlocking the Hidden Box Office Potential

45 Screen Density | Key to Unlocking the Hidden Box Office Potential

Annexures

Annexure I: Listed below are some specific sections Recommendation: Improve the ease from the regulation and the process for of doing business through regulatory obtaining license offering opportunities reforms for improvement:

Area Challenges Opportunities for improvement Rationale

Licensing Process Manual and time consuming An online system can be set Enables transparency in process process for physical up to accept, track, review and through online tracking of submission of application approve/ reject applications. application status and time This would enable application taken by each department through a single window system. 5 departments and multiple Automated workflow would A joint commission of the five key touch points to obtain required trigger respective departments authorities – Fire, Electrical, PWD, approvals to initiate required activities and Police and Health to be convened provide approval. This improves on need basis to make decisions ease of application regarding approvals, rather than each department having to be reached independently.

No defined timeline within A timeline can be defined within Enables cinema owners to plan which an approval/ rejection which, an applicant should their construction, hiring and notice should be provided to receive an approval/ rejection procurement activities and the applicant notice from the approving saving on maintenance and authority operation costs incurred due to delay in receipt of license

Approving authority The powers for granting A dedicated licensing board •• The files related to cinema cinema license lies with the can be formed for matters NOCs receive low priority over Police Commissioners of the related to set-up, operations matters related to law and city. and closing of theatres. This can order and hence the police comprise of a mix of civil officials commissioner would not be and individuals with relevant ideal experience in the industry •• The regulatory board, comprising of individuals with industry and civil experience, would be aware of the main parameters considered for grant of cinema license. This is expected to reduce the time taken for approvals.

46 Screen Density | Key to Unlocking the Hidden Box Office Potential

Area Challenges Opportunities for improvement Rationale

Regulatory requirements Obtaining clearance from the Revalidate the requirement to The awareness of various Building and Construction have this clearance buildings existing or proposed (B&C) department around the proposed site for a cinema lies with the Municipal Corporations and Councils being the competent authorities for implementation of the development plans. Therefore, the requirement for an additional clearance can be re-validated.

Invitation for objections from Review if this can be simplified or The present cinema theatres people living within a distance relaxed being sound proof are less from the proposed location likely to create nuisance for surrounding areas

Certificate of telephone facility Review if this can be simplified or In today’s connected world, relaxed telephone certificate appears redundant

Cinemas are required to obtain Review if this can be simplified or A Building under development a parking clearance from the relaxed is obliged to provide parking traffic police facilities, the scrutiny of which, comes under the purview of Municipal Commissioner/ CEO of Municipal council whose approval is already sought separately

A theatre cannot be situated Review if this can be simplified or Cinema theatres, being sound within 63 meters from relaxed proof are less likely to create temples, schools and hospitals. nuisance for the neighbours. Moreover, buildings with similar use such as drama halls, mangal karyalays are not restricted by such conditions.

Single screen regulation In Maharashtra, to redevelop Review if this can be simplified or It is essential to review the single a cinema with a capacity of relaxed screens through a different lens 1000 seats, it is mandatory for considering the time they were exhibitors to build a smaller constructed in and their history cinema of 330 seats at the same place

Renewal of licenses for single The laws for renewal of license for Ease of business for this screen theatres is difficult single screen theatres should be segment will encourage existing as they fail to qualify the revised considering the historical owners to continue investment infrastructure requirements origins of the segment in this sector meant for multiplexes

Source: Industry discussions conducted by Deloitte

47 Screen Density | Key to Unlocking the Hidden Box Office Potential

Duplicate approvals required for for obtaining a “No Objection Certificate •• In case of Karnataka, Licensing cinema theatres in shopping malls (NOC)” for a permanent cinema/multiplex Authority is required to forward the The individual state policies also do not between Maharashtra and Karnataka No Objection Certificate to all the specifically cite the requirements in case that could be standardized through a concerned departments and the a multiplex is to be established within common national regulatory framework respective departments are required to shopping mall. As part of the shopping by adopting best practices from each give their opinion or clearances within mall’s construction plans, the promoters state.108,109 a period of 30 days (from receipt of No would need to obtain certain approval Objection Certificate from Licensing •• Plan for construction of a new such as Fire, Electrical etc. In today’s Authority). Moreover, the Licensing permanent cinema is required to economy, a shopping mall's promoter is Authority is obligated to respond to the include details of all buildings within already aware which units within the mall application of No Objection Certificate a distance of 61 meters in case of would be for a cinema theatre and usually within a period of 45 days from the Maharashtra, however, state of initiates the fit-outs accordingly. However, date of application. In contrast, in Karnataka requires details of all the the cinema theatre owner who occupies Maharashtra, there is no specific building within 500 meters to be the said units is required to obtain these mention of the Licensing Authority included in the plan. In case of drive in approvals again where it may have been requiring to coordinate no objections cinemas, state of Maharashtra specifies possible to rely on the existing approvals from respective departments. a distance of 400 meters whereas obtained by the shopping mall’s promoter. Additionally, in case of Maharashtra, Karnataka mentions the same to be there is only a mention of period 1,000 meters Significant potential for standardization of 60 days (post the completion of of cinema theatre licensing rules across •• Karnataka state grants a maximum period for receiving public objections, states of 15 days for any objections to be which is 30 days) for the licensing Apart from revising outdated rules, there raised by public on construction of authority to submit a report to the is significant potential for policies to be a permanent cinema on proposed state government. There is no timeline standardized across states through a locations, however, state of defined for the state government to common national framework for granting Maharashtra allows a maximum of 30 provide its sanction and accordingly licenses. For an industry that is standard days to receive objections. license authority to provide a NOC from in the operating model at any location, date of application. •• In case of Karnataka, the notification having rules that differ amongst states to public is raised as soon as applicant •• The table below highlights the may not be warranted, with the exception submits a request for NOC. However, licensing timelines discussed above, for rules that are required due to national in case of Maharashtra, the concerned green indicates best practice, while security or public safety and are related to authority is granted a period of 30 days red indicates an opportunity for peculiar characteristics of the area under (one month) to provide their remarks improvement. consideration. Below is a case in point before issuing a publication to invite comparing the cinema licensing rules objections.

Maharashtra Karnataka

Activity Timeline Activity Timeline

Application to concerned "Municipal 0 days Application to "Licensing Authority" 0 days Authority"

Concerned "Municipal Authority" to provide 30 days Application directly submitted to "Licensing 0 days remarks to "Licensing Authority" Authority"; step not required

"Licensing Authority", on receiving remarks No timeline "Licensing Authority", on receiving No timeline from "Municipal Authority", to notify public mentioned application for NOC, to notify public of mentioned of intention to open a cinema with a purpose intention to open a cinema with a purpose of of inviting objections inviting objections

108 http://www.bareactslive.com/MAH/mh645.htm#0 109 https://www.ksei.gov.in/pdf/Acts%20&%20Rules/HD%2012%20CNA%202010.pdf 48 Screen Density | Key to Unlocking the Hidden Box Office Potential

Maharashtra Karnataka

Activity Timeline Activity Timeline

Time period to receive public objections 30 days Time period to receive public objections 15 days for construction cinema on the proposed for construction cinema on the proposed location location

"Licensing Authority" to submit a report to 60 days In parallel to public objections process, 30 days state Government with recommendation, "Licensing Authority" to obtain opinion or on the expiry of the period for the receipt clearances from Town Planning Officer in City of objections, on whether a "No Objection Corporation /Urban Development Authority/ Certificate" should be granted or not Planning Authority/Assistant Director, Town and Country Planning of the district as the case may be, District Health and Family Welfare Officer, Executive Engineer, Public Works Department of the district and the Superintendent of Police of the district/ Commissioner of Police of the city/ District Fire Officer of Fire and Emergency Services of the Electrical Inspector of the District or area

State Government to accord sanction based No timeline Licensing Authority to grant or refuse NOC No timeline on the report from "Licensing Authority" mentioned directly (within their powers) mentioned

Licensing authority to grant or refuse No timeline Licensing Authority to grant or refuse NOC No timeline NOC based on the sanction from state mentioned directly (within their powers) mentioned Government

Maximum allowed time for "Licensing No timeline Maximum allowed time for "Licensing 45 days Authority" to grant or refuse NOC from date mentioned Authority" to grant or refuse NOC from date of application of application

•• Additionally, Karnataka mentions which an application has been made”. •• Parking Space Requirement: Basic a rule under which an applicant is Maharashtra, does not mention of any parking space requirements are not required to obtain a NOC for such exceptions. non-standard across Maharashtra “converting or altering the existing and Karnataka; while both link it to cinema theatre within the licensed Deep diving into regulations also shows the population of the town, they are premises by making smaller theatres a significant difference in terms of rules not standardized to the population without increasing the total number required for specific departmental size across the two states. Moreover, of seats for which an application has clearances indicating an opportunity Karnataka has more complex been made” or for “constructing within for standardization. Below table shows specifications with separate rules the licensed premises one or more a comparison of certain rules between for permanent cinema theaters and additional cinemas adjacent to or on the Karnataka and Maharashtra as a case in multiplexes, while Maharashtra does ground floor or on the first floor of the point. not specify separate set of rules. existing cinema or proposed cinema for

49 Screen Density | Key to Unlocking the Hidden Box Office Potential

Maharashtra Karnataka

Population Car Parking Spaces Population Car Parking Spaces Required (as % Minimum Car Space Based Slabs Required (as % of seats) Based Slabs of seats) Requirement (# of cars)

Permanent Multiplexes Cinema Theatres

Greater Bombay 4% >10,00,000 4% 4% 20

>5,00,000 2% 1,00,000 - 2% 4% 15 10,00,000

1,00,000 - 1% 50,000 - 2% 4% 10 5,00,000 1,00,000

<1,00,000 0.5% <50,000 2% 4% 5

50 Screen Density | Key to Unlocking the Hidden Box Office Potential

•• Seating Requirements: Maharashtra between successive rows differs (back •• Rewinding Rooms: While Karnataka requires that no part of the auditorium of one seat and front of the other) clearly mentions that requirement shall provide accommodation, exclusive between Maharashtra and Karnataka of rewinding rooms are not of passages, at a higher scale than as well. Maharashtra specifies this mandatory for permanent cinema 20 persons per 9 square meters i.e. distance to be 30 cms whereas theaters and multiplexes adopting 0.45 sq. m per person. Comparatively, Karnataka specifies this distance to be advanced technology such as digital Karnataka requires that the auditorium at least 50 cms. projectors and digital sound systems, provides a seating area of 0.6 sq. m per Maharashtra, does not make any person. The minimum gap specification such exceptions.

51 Screen Density | Key to Unlocking the Hidden Box Office Potential

Annexure II:

Maharashtra Uttar Pradesh Karnataka Madhya Gujarat Kerala Rajasthan Assam Punjab Orissa Pradesh

Location Key •• Detailed plan *Location clearance •• NOC for detailed plans with extract of •• NOC for •• NOC for detailed •• NOC for detailed •• Detailed plan *Location clearance *Location clearance *Location clearance clearance requirements requirement not town map, site plan, challan showing location plans with extract of plans with extract requirement not requirement not requirement not •• Ownership explicitly mentioned payment of fees town map, site plan, of town map, site •• Ownership explicitly mentioned explicitly mentioned explicitly mentioned documents in the regulations, challan showing plan, challan showing documents in the regulations, in the regulations, in the regulations, however there •• NOC required from town planning payment of fees payment of fees however there however there however there •• NOC for detailed officer, district health and family welfare •• NOC for detailed plans and parking are adjacent rules plans and parking are adjacent rules are adjacent rules are adjacent rules that specify the officer, executive engineer, PWD, that specify the that specify the that specify the layout from: superintendent of police (Within 30 days NOC required from NOC required from layout from: Municipal building requirements for the requirements for the requirements for the requirements for the location else deemed approved) town planning officer, town planning officer, location location location and property district health and district health officer, department, local Municipal building family welfare officer, fire officer and property corporation, Fire executive engineer, department, Public department, local PWD, Superintendent corporation, fire works department, of police Collector department

Approval •• Invite objections *Location clearance •• Invite objections from local citizens •• Invite •• Invite objections *Location clearance •• Review NOC and *Location clearance *Location clearance *Location clearance process from local citizens requirement not objections from from local citizens requirement not provide approval requirement not requirement not requirement not explicitly mentioned •• Enquiries by the local police station local citizens explicitly mentioned explicitly mentioned explicitly mentioned explicitly mentioned •• Enquiries by the •• Report to in the regulations, •• Traffic department approval in the regulations, in the regulations, in the regulations, in the regulations, local police station however there •• Report to government however there however there however there however there •• Traffic department are adjacent rules •• Government approval government are adjacent rules are adjacent rules are adjacent rules are adjacent rules approval that specify the that specify the that specify the that specify the that specify the requirements for the Issue location requirements for the requirements for the requirements for the requirements for the •• Government location Issue location clearance location location location location approval clearance

Construction Key •• Location clearance •• Approval of the •• Approval of the site location, site plans •• Location •• Location clearance •• NOC for detailed •• Building related •• NOC for detailed •• Not explicitly •• License application clearance requirements site location, site (detailed construction plan as well clearance plans with extract requirements plans with extract mentioned however, invited twice a year •• Approved plans of plans (detailed as neighbourhood architecture) and certificate •• Approved plans of of town map, site of town map, site a release indicates construction construction specification by the licensing authority construction from plan, challan showing Approval from plan construction •• NOC from board plan as well as •• Subdivision engineer" payment of fees license authority clearance is consisting of •• NOC from the Chief clearance on NOC required from Superintendent of Fire officer neighbourhood required architecture) and building plans" NOC required from executive engineer, police, Executive specification by the town planning officer, town committee, engineer, Roads and licensing authority district health officer, gram panchayat, buildings, Public fire officer development health department, authority" Executive engineer, chairman Improvement trust. Licensing authority will be the chairman of the board

•• Challan showing payment

•• Board to submit decision within 4 months on which applicant to grant license to

Approval •• Review the •• Review the •• Approval by licensing authority based on •• Review the •• Review the •• Notice to chief •• Review the •• Review the Not explicitly •• Review the process application and application and inputs from town planning officer, PWD, application application and electoral officer and application and application and mentioned but application and papers submitted papers submitted and electrical inspector and papers papers submitted executive engineer papers submitted papers submitted indicates construction papers submitted submitted 15 days prior to clearance required •• Provide NOC •• Provide NOC •• Provide NOC construction (After •• Provide NOC •• Provide NOC •• Provide NOC •• Provide NOC obtaining various NOC)

•• On completion, inspection and certification for structural soundness, electrical, health and divisional officer - fire

52 Screen Density | Key to Unlocking the Hidden Box Office Potential

Maharashtra Uttar Pradesh Karnataka Madhya Gujarat Kerala Rajasthan Assam Punjab Orissa Pradesh

Location Key •• Detailed plan *Location clearance •• NOC for detailed plans with extract of •• NOC for •• NOC for detailed •• NOC for detailed •• Detailed plan *Location clearance *Location clearance *Location clearance clearance requirements requirement not town map, site plan, challan showing location plans with extract of plans with extract requirement not requirement not requirement not •• Ownership explicitly mentioned payment of fees town map, site plan, of town map, site •• Ownership explicitly mentioned explicitly mentioned explicitly mentioned documents in the regulations, challan showing plan, challan showing documents in the regulations, in the regulations, in the regulations, however there •• NOC required from town planning payment of fees payment of fees however there however there however there •• NOC for detailed officer, district health and family welfare •• NOC for detailed plans and parking are adjacent rules plans and parking are adjacent rules are adjacent rules are adjacent rules that specify the officer, executive engineer, PWD, that specify the that specify the that specify the layout from: superintendent of police (Within 30 days NOC required from NOC required from layout from: Municipal building requirements for the requirements for the requirements for the requirements for the location else deemed approved) town planning officer, town planning officer, location location location and property district health and district health officer, department, local Municipal building family welfare officer, fire officer and property corporation, Fire executive engineer, department, Public department, local PWD, Superintendent corporation, fire works department, of police Collector department

Approval •• Invite objections *Location clearance •• Invite objections from local citizens •• Invite •• Invite objections *Location clearance •• Review NOC and *Location clearance *Location clearance *Location clearance process from local citizens requirement not objections from from local citizens requirement not provide approval requirement not requirement not requirement not explicitly mentioned •• Enquiries by the local police station local citizens explicitly mentioned explicitly mentioned explicitly mentioned explicitly mentioned •• Enquiries by the •• Report to in the regulations, •• Traffic department approval in the regulations, in the regulations, in the regulations, in the regulations, local police station however there •• Report to government however there however there however there however there •• Traffic department are adjacent rules •• Government approval government are adjacent rules are adjacent rules are adjacent rules are adjacent rules approval that specify the that specify the that specify the that specify the that specify the requirements for the Issue location requirements for the requirements for the requirements for the requirements for the •• Government location Issue location clearance location location location location approval clearance

Construction Key •• Location clearance •• Approval of the •• Approval of the site location, site plans •• Location •• Location clearance •• NOC for detailed •• Building related •• NOC for detailed •• Not explicitly •• License application clearance requirements site location, site (detailed construction plan as well clearance plans with extract requirements plans with extract mentioned however, invited twice a year •• Approved plans of plans (detailed as neighbourhood architecture) and certificate •• Approved plans of of town map, site of town map, site a release indicates construction construction specification by the licensing authority construction from plan, challan showing Approval from plan construction •• NOC from board plan as well as •• Subdivision engineer" payment of fees license authority clearance is consisting of •• NOC from the Chief clearance on NOC required from Superintendent of Fire officer neighbourhood required architecture) and building plans" NOC required from executive engineer, police, Executive specification by the town planning officer, town committee, engineer, Roads and licensing authority district health officer, gram panchayat, buildings, Public fire officer development health department, authority" Executive engineer, chairman Improvement trust. Licensing authority will be the chairman of the board

•• Challan showing payment

•• Board to submit decision within 4 months on which applicant to grant license to

Approval •• Review the •• Review the •• Approval by licensing authority based on •• Review the •• Review the •• Notice to chief •• Review the •• Review the Not explicitly •• Review the process application and application and inputs from town planning officer, PWD, application application and electoral officer and application and application and mentioned but application and papers submitted papers submitted and electrical inspector and papers papers submitted executive engineer papers submitted papers submitted indicates construction papers submitted submitted 15 days prior to clearance required •• Provide NOC •• Provide NOC •• Provide NOC construction (After •• Provide NOC •• Provide NOC •• Provide NOC •• Provide NOC obtaining various NOC)

•• On completion, inspection and certification for structural soundness, electrical, health and divisional officer - fire

53 Screen Density | Key to Unlocking the Hidden Box Office Potential

Maharashtra Uttar Pradesh Karnataka Madhya Gujarat Kerala Rajasthan Assam Punjab Orissa Pradesh

Business Key •• Occupation An application to the •• Occupation certificate •• NOC from: •• Occupation •• Licenses obtained as •• Inspection by •• Ownership •• NOC for detailed •• NOC from Licence requirements certificate Licensing Authority Electrical certificate part of construction Electric inspector, documents plans with extract of inspecting containing: •• NOC from: Electrical Inspector, Health Inspector, clearance executive engineer, town map, site plan, authorities (not •• NOC from: Officer, Fire department, Traffic police, Health •• NOC from: Medical officer, •• Certificate challan showing elaborated) Electrical Inspector, •• Ownership details Public works department Officer, Fire Electrical Inspector, regional fire officer from executive payment of fees Health Officer, of the premises and department, Health officer, engineer, electricity •• Approval from Fire department, documents such architect and Fire department, department, •• NOC required from roads and buildings Traffic police, Public as - approval of site sub-division Traffic police, Public District officer, executive engineer, engineer" works department, plans; engineer, works department, films exhibition electric inspector" telephone exchange/ telephone telephone certificate, receipt internet service •• Plan of the building exchange/ internet for payment of fees and premises company and provider electricity service provider and tax clearance •• Plan of seating supply from super arrangements company intendent of the for each class, area" separately

•• NOC from the Electrical Inspector, Medical Officer of Health, Regional Fire Officer

Approval •• Submit proposal to •• Not mentioned •• Obtain NOCs as required and submit •• Submit •• Submit proposal to •• Obtain NOCs •• Submit proposal •• Submit proposal •• Submit proposal •• Submit proposal process the government for application accompanied by certificates proposal to the the government for as required and to the licensing to the licensing to the licensing to the licensing sanction from authorities government for sanction submit application authority authority authority authority sanction accompanied by •• Issue license after •• Issue of license after the receipt of •• Issue license after certificates from •• Issue license after •• Issue license after •• Issue license after •• Issue license after the receipt of permission" •• Issue license the receipt of authorities the receipt of the receipt of the receipt of the receipt of permission after the receipt permission permission permission permission permission of permission •• Issue of license (3 years) (3 years) after the receipt of permission"

Seating •• Interval between •• The distance •• The rows of the seats shall be arranged •• Interval •• 2 metres space •• There shall be a •• There shall be a •• The distance •• Interval between •• There shall be an two consecutive between the front in the form of concentric areas of circles. between two between screen and minimum distance minimum distance between the screen two consecutive interval of at-least seats is required to row of the seats and consecutive first row of 4 metres from the of 25 feet from the and the front row seats must be at- one foot between be 30 inches. the screen shall not •• The seats shall not be too near the seats must be screen to first row of screen to the first of seats shall not be least 12 inches110 two consecutive be less than 19 feet. screen. For this purpose a line drawn at-least one •• Interval between seats row of seating less than the width seats •• The distance in the longitudinal section of the foot. two consecutive of the screen itself •• The minimum between the screens •• The rows of auditorium from the eye of an observer seats must be at- •• Interval between two distance between and the front row seats shall be so in the front row to the top edge of the •• The distance least 35 cms. consecutive seats •• There shall be a the cinematograph of seats shall not be arranged as to screen shall not form an angle of more between the must be at-least minimum distance screen and the front less than the width leave a clear space than 35 degrees with the horizontal. A screen and the 35 cms. of 1 foot from the row of seats shall be; of the screen itself. of not less than 15 line drawn in the plan from the eye of the front row of screen to the first inches between observer in the extreme end of the front seats shall not •• The width of seats row of seating •• (i) equal to the •• The seats in the consecutive seats. row to the remote end of the screen shall be less than the should be between width of the auditorium shall not form an angle of less than 25 degree width of the 45 and 56 cm screen subject to a be arranged in the with the screen. screen itself minimum of 25 feet manner of an arc. in case of cinemas •• In any cinema theatre or multiplex, not •• The seats in equipped with more than fifteen seats of one row shall the auditorium screens up to 30 have access from a side aisle and not shall be feet wide; and more than five from a middle aisle. arranged in the manner of an •• (ii) equal to ¾ th •• Interval between two consecutive seats arc. of the width of the must be at-least 0.5 meters. screens subject to a minimum of 30 feet in case of cinemas fitted with screens exceeding 30 feet in width.

54 Screen Density | Key to Unlocking the Hidden Box Office Potential

Maharashtra Uttar Pradesh Karnataka Madhya Gujarat Kerala Rajasthan Assam Punjab Orissa Pradesh

Business Key •• Occupation An application to the •• Occupation certificate •• NOC from: •• Occupation •• Licenses obtained as •• Inspection by •• Ownership •• NOC for detailed •• NOC from Licence requirements certificate Licensing Authority Electrical certificate part of construction Electric inspector, documents plans with extract of inspecting containing: •• NOC from: Electrical Inspector, Health Inspector, clearance executive engineer, town map, site plan, authorities (not •• NOC from: Officer, Fire department, Traffic police, Health •• NOC from: Medical officer, •• Certificate challan showing elaborated) Electrical Inspector, •• Ownership details Public works department Officer, Fire Electrical Inspector, regional fire officer from executive payment of fees Health Officer, of the premises and department, Health officer, engineer, electricity •• Approval from Fire department, documents such architect and Fire department, department, •• NOC required from roads and buildings Traffic police, Public as - approval of site sub-division Traffic police, Public District officer, executive engineer, engineer" works department, plans; engineer, works department, films exhibition electric inspector" telephone exchange/ telephone telephone certificate, receipt internet service •• Plan of the building exchange/ internet for payment of fees and premises company and provider electricity service provider and tax clearance •• Plan of seating supply from super arrangements company intendent of the for each class, area" separately

•• NOC from the Electrical Inspector, Medical Officer of Health, Regional Fire Officer

Approval •• Submit proposal to •• Not mentioned •• Obtain NOCs as required and submit •• Submit •• Submit proposal to •• Obtain NOCs •• Submit proposal •• Submit proposal •• Submit proposal •• Submit proposal process the government for application accompanied by certificates proposal to the the government for as required and to the licensing to the licensing to the licensing to the licensing sanction from authorities government for sanction submit application authority authority authority authority sanction accompanied by •• Issue license after •• Issue of license after the receipt of •• Issue license after certificates from •• Issue license after •• Issue license after •• Issue license after •• Issue license after the receipt of permission" •• Issue license the receipt of authorities the receipt of the receipt of the receipt of the receipt of permission after the receipt permission permission permission permission permission of permission •• Issue of license (3 years) (3 years) after the receipt of permission"

Seating •• Interval between •• The distance •• The rows of the seats shall be arranged •• Interval •• 2 metres space •• There shall be a •• There shall be a •• The distance •• Interval between •• There shall be an two consecutive between the front in the form of concentric areas of circles. between two between screen and minimum distance minimum distance between the screen two consecutive interval of at-least seats is required to row of the seats and consecutive first row of 4 metres from the of 25 feet from the and the front row seats must be at- one foot between be 30 inches. the screen shall not •• The seats shall not be too near the seats must be screen to first row of screen to the first of seats shall not be least 12 inches110 two consecutive be less than 19 feet. screen. For this purpose a line drawn at-least one •• Interval between seats row of seating less than the width seats •• The distance in the longitudinal section of the foot. two consecutive of the screen itself •• The minimum between the screens •• The rows of auditorium from the eye of an observer seats must be at- •• Interval between two distance between and the front row seats shall be so in the front row to the top edge of the •• The distance least 35 cms. consecutive seats •• There shall be a the cinematograph of seats shall not be arranged as to screen shall not form an angle of more between the must be at-least minimum distance screen and the front less than the width leave a clear space than 35 degrees with the horizontal. A screen and the 35 cms. of 1 foot from the row of seats shall be; of the screen itself. of not less than 15 line drawn in the plan from the eye of the front row of screen to the first inches between observer in the extreme end of the front seats shall not •• The width of seats row of seating •• (i) equal to the •• The seats in the consecutive seats. row to the remote end of the screen shall be less than the should be between width of the auditorium shall not form an angle of less than 25 degree width of the 45 and 56 cm screen subject to a be arranged in the with the screen. screen itself minimum of 25 feet manner of an arc. in case of cinemas •• In any cinema theatre or multiplex, not •• The seats in equipped with more than fifteen seats of one row shall the auditorium screens up to 30 have access from a side aisle and not shall be feet wide; and more than five from a middle aisle. arranged in the manner of an •• (ii) equal to ¾ th •• Interval between two consecutive seats arc. of the width of the must be at-least 0.5 meters. screens subject to a minimum of 30 feet in case of cinemas fitted with screens exceeding 30 feet in width.

110 http://www.bareactslive.com/HRY/HL085.HTM 55 Screen Density | Key to Unlocking the Hidden Box Office Potential

Maharashtra Uttar Pradesh Karnataka Madhya Gujarat Kerala Rajasthan Assam Punjab Orissa Pradesh

Screen The minimum width •• Not mentioned •• Not mentioned The minimum No minimum screen •• Not mentioned •• Not mentioned •• Not mentioned The size of the •• Not mentioned of the cinema screen width of the size specified screen used for shall be 3.05 m. cinema screen video exhibition shall shall be 10 feet not be less than 52 centimetres

Lightning Lightning conductors The building shall Lightning conductors shall be provided Lighting •• Not mentioned •• Not mentioned •• Not mentioned •• Not mentioned The building shall The building shall conductors shall be provided in be provided with an in every cinema or multiplex building conductors shall be provided with an be provided with an each cinema building efficient lightning conforming to relevant I.S. Standards be provided in efficient lightning efficient lightning conductor each cinema conductor conductor building

Car parking The percentage of •• Not mentioned •• One car parking space for every twenty •• Not mentioned •• Not mentioned The building shall be •• Not mentioned •• Not mentioned Such arrangements Such arrangements car parking space five seats for cinema theatres and one provided with open shall be made for the shall be made for the in a cinema shall car parking space for every twenty spaces on all sides as parking of motor cars parking of motor cars be according to the five seats for multiplexes subject to a provided in rule 34 and other vehicles and other vehicles population of the minimum of space for twenty cars in of the Kerala Building in the vicinity of in the vicinity of town or city where the places having a population of ten lakhs Rules, 1984 and parking the buildings as the the buildings as the cinema is situated as and above; space for one car licensing authority licensing authority given below :- for every 33 seats of may require. may require. •• At one car parking space for every fifty accommodation (a) in Greater Bombay seats for cinema theatres and one car 4 per cent, of the total parking space for every twenty five seats number of seats; for multiplexes subject to a minimum of space for fifteen cars in places having a (b) in cities having population one and ten lakhs; and population of and above 5 lakhs, 2 •• At one car parking space for every fifty percent, of the total seats for cinema theatres and one car number of seats; parking space for every twenty five seats for multiplexes subject to a minimum (c) in cities having of space for ten cars in places having a population between 1 population between fifty thousand and to 5 lakhs, 1 percent, one lakh; of the total number of seats; and •• At one car parking space for every fifty seats for cinema theatres and one car (d) in towns and parking space for every twenty five seats places, having for multiplexes subject to a minimum population below 1 of space for five cars in places having a lakh, 0.5 percent, of population of less than fifty thousand. the total number of seats The car parking space for each motor vehicle shall be 5.5 meters x 2.5 meters"

56 Screen Density | Key to Unlocking the Hidden Box Office Potential

Maharashtra Uttar Pradesh Karnataka Madhya Gujarat Kerala Rajasthan Assam Punjab Orissa Pradesh

Screen The minimum width •• Not mentioned •• Not mentioned The minimum No minimum screen •• Not mentioned •• Not mentioned •• Not mentioned The size of the •• Not mentioned of the cinema screen width of the size specified screen used for shall be 3.05 m. cinema screen video exhibition shall shall be 10 feet not be less than 52 centimetres

Lightning Lightning conductors The building shall Lightning conductors shall be provided Lighting •• Not mentioned •• Not mentioned •• Not mentioned •• Not mentioned The building shall The building shall conductors shall be provided in be provided with an in every cinema or multiplex building conductors shall be provided with an be provided with an each cinema building efficient lightning conforming to relevant I.S. Standards be provided in efficient lightning efficient lightning conductor each cinema conductor conductor building

Car parking The percentage of •• Not mentioned •• One car parking space for every twenty •• Not mentioned •• Not mentioned The building shall be •• Not mentioned •• Not mentioned Such arrangements Such arrangements car parking space five seats for cinema theatres and one provided with open shall be made for the shall be made for the in a cinema shall car parking space for every twenty spaces on all sides as parking of motor cars parking of motor cars be according to the five seats for multiplexes subject to a provided in rule 34 and other vehicles and other vehicles population of the minimum of space for twenty cars in of the Kerala Building in the vicinity of in the vicinity of town or city where the places having a population of ten lakhs Rules, 1984 and parking the buildings as the the buildings as the cinema is situated as and above; space for one car licensing authority licensing authority given below :- for every 33 seats of may require. may require. •• At one car parking space for every fifty accommodation (a) in Greater Bombay seats for cinema theatres and one car 4 per cent, of the total parking space for every twenty five seats number of seats; for multiplexes subject to a minimum of space for fifteen cars in places having a (b) in cities having population one and ten lakhs; and population of and above 5 lakhs, 2 •• At one car parking space for every fifty percent, of the total seats for cinema theatres and one car number of seats; parking space for every twenty five seats for multiplexes subject to a minimum (c) in cities having of space for ten cars in places having a population between 1 population between fifty thousand and to 5 lakhs, 1 percent, one lakh; of the total number of seats; and •• At one car parking space for every fifty seats for cinema theatres and one car (d) in towns and parking space for every twenty five seats places, having for multiplexes subject to a minimum population below 1 of space for five cars in places having a lakh, 0.5 percent, of population of less than fifty thousand. the total number of seats The car parking space for each motor vehicle shall be 5.5 meters x 2.5 meters"

57 Screen Density | Key to Unlocking the Hidden Box Office Potential

Maharashtra Uttar Pradesh Karnataka Madhya Gujarat Kerala Rajasthan Assam Punjab Orissa Pradesh

Sanitation Every cinema shall There shall at-least If the District Health & Family Welfare Every cinema Every cinema shall Licensees of Dependant on the Every cinema shall Separate latrines Separate and be provided with one latrine seat for Officer of the district is satisfied about shall be be provided with permanent theatres inspection of the be provided with and urinals shall be sufficient number of sufficient and separate every 100 person or the provisions made for maintenance of provided with sufficient and shall provide water medical officer sufficient and provided for each latrines and urinals urinal accommodation less and at-least one sanitary facilities, public health, hygiene sufficient and separate urinal closets at the rate separate urinal sex. The latrines shall be provided for for the use of males place for urinating for and cleanliness of the premises; he shall separate urinal accommodation for of one for every 250 accommodation for shall be cleaned or men and women, i.e., and females. every 50 persons or issue a certificate in form ‘E-3’ to that accommodation the use of the males persons and urinals the use of the males flushed immediately at least one latrine less of total seating effect, within fifteen days after receipt of for the use of and females at the rate of one for and females before and after for 100 persons In the case of cinemas accommodation: the application, which shall be valid for a the males and every 50 persons. each performance and one urinal for within the limits of a period of five years: females Licensees of temporary and shall be washed fifty. The latrines municipality, suitable The premises shall theatres shall provide with phenyl or other shall be cleared or urinals as approved by be kept clean and the In the case as many water closets sanitary fluid at least flushed immediately the municipality at the auditorium shall be of cinemas and urinals as may twice a day. before and after rate of not less than 2 swept and cleaned within limits of be specified by the each performance percent, and latrines before each exhibition municipality, licensing authority and shall be washed at the rate of not less suitable urinals Separate latrines for with phenyl or other than 1 percent, of the as approved by sanitary fluid at least number of individuals men and women at the municipality different places, and twice a day. The to be accommodated at the rate of latrine and urinals in such premises shall of a suitable type not less than and design shall be shall also be properly be provided in suitable 2 percent and lighted. places. Separate provided. latrines at the accommodation The latrine shall be rate of not less shall be provided for cleaned and flushed than 1 percent males and females. immediately before of the number of They shall be so and after each individuals to be constructed as to exhibition and shall accommodated cause no nuisance. be properly washed in such premises with a disinfectant at shall be provided least twice a day in suitable places. Separate accommodation shall be provided for males and females. They shall be so constructed as to cause no nuisance

58 Screen Density | Key to Unlocking the Hidden Box Office Potential

Maharashtra Uttar Pradesh Karnataka Madhya Gujarat Kerala Rajasthan Assam Punjab Orissa Pradesh

Sanitation Every cinema shall There shall at-least If the District Health & Family Welfare Every cinema Every cinema shall Licensees of Dependant on the Every cinema shall Separate latrines Separate and be provided with one latrine seat for Officer of the district is satisfied about shall be be provided with permanent theatres inspection of the be provided with and urinals shall be sufficient number of sufficient and separate every 100 person or the provisions made for maintenance of provided with sufficient and shall provide water medical officer sufficient and provided for each latrines and urinals urinal accommodation less and at-least one sanitary facilities, public health, hygiene sufficient and separate urinal closets at the rate separate urinal sex. The latrines shall be provided for for the use of males place for urinating for and cleanliness of the premises; he shall separate urinal accommodation for of one for every 250 accommodation for shall be cleaned or men and women, i.e., and females. every 50 persons or issue a certificate in form ‘E-3’ to that accommodation the use of the males persons and urinals the use of the males flushed immediately at least one latrine less of total seating effect, within fifteen days after receipt of for the use of and females at the rate of one for and females before and after for 100 persons In the case of cinemas accommodation: the application, which shall be valid for a the males and every 50 persons. each performance and one urinal for within the limits of a period of five years: females Licensees of temporary and shall be washed fifty. The latrines municipality, suitable The premises shall theatres shall provide with phenyl or other shall be cleared or urinals as approved by be kept clean and the In the case as many water closets sanitary fluid at least flushed immediately the municipality at the auditorium shall be of cinemas and urinals as may twice a day. before and after rate of not less than 2 swept and cleaned within limits of be specified by the each performance percent, and latrines before each exhibition municipality, licensing authority and shall be washed at the rate of not less suitable urinals Separate latrines for with phenyl or other than 1 percent, of the as approved by sanitary fluid at least number of individuals men and women at the municipality different places, and twice a day. The to be accommodated at the rate of latrine and urinals in such premises shall of a suitable type not less than and design shall be shall also be properly be provided in suitable 2 percent and lighted. places. Separate provided. latrines at the accommodation The latrine shall be rate of not less shall be provided for cleaned and flushed than 1 percent males and females. immediately before of the number of They shall be so and after each individuals to be constructed as to exhibition and shall accommodated cause no nuisance. be properly washed in such premises with a disinfectant at shall be provided least twice a day in suitable places. Separate accommodation shall be provided for males and females. They shall be so constructed as to cause no nuisance

59 Screen Density | Key to Unlocking the Hidden Box Office Potential

Maharashtra Uttar Pradesh Karnataka Madhya Gujarat Kerala Rajasthan Assam Punjab Orissa Pradesh

Conditions The application shall No building, except An extract of a town map drawn correctly The application No specific mentions No specific mentions No specific mentions No specific mentions Shall not be within a The building shall for granting be accompanied by a one already licensed to scale in six copies with one original shall be radius of - not be within a and renewing plan of the proposed for cinematography plan printed on tracing film and also in accompanied radius of 100 metres a license site drawn to scale and exhibition before digital format, and six prints or copies of by a plan of the (i) 75 metres from a of educational shall clearly indicate August 1, 1974, shall the same map shall be provided clearly proposed site place of worship, a institutions, hostels the surroundings, be so licensed- indicating the surrounding roads and drawn to scale cremation ground, attached to such roads and buildings, buildings which exist up to a distance of and shall clearly a graveyard, a institutions and Schools, hospitals, (a) if it is situated 500 meters and 1000 meters in case of indicate the cemetery, or hospitals including temples of other within a radius of 200 drive- in cinemas from the proposed site, surrounding hospitals under meter from the Raj (i) 200 metres like places within a the distance of all educational institutions, roads and from a recognised private management. distance of 61 meters Bhawan, the State hospitals, places of worship or other places buildings which If after grant of Secretariat, the High educational (400 meters for drive of public importance from the said site are exist upto a institution such as licence educational in cinemas) of the Court, the State Public also be shown distance of 200 institutions, hostels Service Commission a college, a high perimeter metres of the school or girls school and hospitals come up or the Board of proposed site. within the restricted Revenue; or or any residential Schools, hospital, institution attached areas, it shall not (b) if it is situated temples or to such educational stand in the way of within a radius of 75 other like place institution; or renewal or licence meter from- should be clearly already granted to the indicated in the (iii) 75 meters from a licensee. (i) any recognised plan public hospital with a educational large patient ward; or institution (other than primary school) or any (iv) 75 metres from an residential institution orphanage containing attached thereto; or one hundred or more inmates; or (ii) a public hospital with 25 or more (v) 75 metres from indoor patients; or a thickly populated residential area (iii) any building which is either housing an office exclusively residential of a head of the or reserved or department of the used generally Central or the State for residential Government or the as distinguished district civil of criminal from the business courts: or purposes. (iv) any other institution which the Government may consider necessary in public interest to declare an institution to which this clause applies; or (c) if for any other sufficient reason to be recorded, the licensing authority is satisfied that the location of a cinema at the site of that building is not public interest

Source http://www.bare- http://upati.gov.in/ https://www.ksei.gov.in/pdf/Acts%20&%20 http://www. https://cet.gujarat. https://archive.india. http:// https://gad.assam. "http://www.bareact- http://www.bareact- actslive.com/MAH/ MediaGallery/UP%20 Rules/HD%2012%20CNA%202010.pdf code.mp.gov. gov.in/Gallery/Media_ gov.in/allimpfrms/ 164.100.222.222/ gov.in/sites/default/ slive.com/HRY/HL085. slive.com/Ori/OR101. mh645.htm#0 Cinematograph%20 in/WriteRe- Gallery/Image1848. allrules/2367.pdf content/dam/ files/swf_utility_fold- HTM HTM#0 Rules-1951.pdf adData/Pdf/ pdf homeportal/ er/departments/ Rule_1972_0066_ homede- partment/ gad_uneecop- https://tcpharyana. Pdf_F183_English. pdf/RulesGroup6/ scloud_com_oid_3/ gov.in/Notifica- pdf Cinema%20Act.pdf how_do_i/level_1/ tion/16.06.2016_UNI- The%20Assam%20 FORM%20BUILD- Cinemas%20%28Reg- ING%20CODE.pdf " ulation%29%20 Rules%2C%201960. pdf

60 Screen Density | Key to Unlocking the Hidden Box Office Potential

Maharashtra Uttar Pradesh Karnataka Madhya Gujarat Kerala Rajasthan Assam Punjab Orissa Pradesh

Conditions The application shall No building, except An extract of a town map drawn correctly The application No specific mentions No specific mentions No specific mentions No specific mentions Shall not be within a The building shall for granting be accompanied by a one already licensed to scale in six copies with one original shall be radius of - not be within a and renewing plan of the proposed for cinematography plan printed on tracing film and also in accompanied radius of 100 metres a license site drawn to scale and exhibition before digital format, and six prints or copies of by a plan of the (i) 75 metres from a of educational shall clearly indicate August 1, 1974, shall the same map shall be provided clearly proposed site place of worship, a institutions, hostels the surroundings, be so licensed- indicating the surrounding roads and drawn to scale cremation ground, attached to such roads and buildings, buildings which exist up to a distance of and shall clearly a graveyard, a institutions and Schools, hospitals, (a) if it is situated 500 meters and 1000 meters in case of indicate the cemetery, or hospitals including temples of other within a radius of 200 drive- in cinemas from the proposed site, surrounding hospitals under meter from the Raj (i) 200 metres like places within a the distance of all educational institutions, roads and from a recognised private management. distance of 61 meters Bhawan, the State hospitals, places of worship or other places buildings which If after grant of Secretariat, the High educational (400 meters for drive of public importance from the said site are exist upto a institution such as licence educational in cinemas) of the Court, the State Public also be shown distance of 200 institutions, hostels Service Commission a college, a high perimeter metres of the school or girls school and hospitals come up or the Board of proposed site. within the restricted Revenue; or or any residential Schools, hospital, institution attached areas, it shall not (b) if it is situated temples or to such educational stand in the way of within a radius of 75 other like place institution; or renewal or licence meter from- should be clearly already granted to the indicated in the (iii) 75 meters from a licensee. (i) any recognised plan public hospital with a educational large patient ward; or institution (other than primary school) or any (iv) 75 metres from an residential institution orphanage containing attached thereto; or one hundred or more inmates; or (ii) a public hospital with 25 or more (v) 75 metres from indoor patients; or a thickly populated residential area (iii) any building which is either housing an office exclusively residential of a head of the or reserved or department of the used generally Central or the State for residential Government or the as distinguished district civil of criminal from the business courts: or purposes. (iv) any other institution which the Government may consider necessary in public interest to declare an institution to which this clause applies; or (c) if for any other sufficient reason to be recorded, the licensing authority is satisfied that the location of a cinema at the site of that building is not public interest

Source http://www.bare- http://upati.gov.in/ https://www.ksei.gov.in/pdf/Acts%20&%20 http://www. https://cet.gujarat. https://archive.india. http:// https://gad.assam. "http://www.bareact- http://www.bareact- actslive.com/MAH/ MediaGallery/UP%20 Rules/HD%2012%20CNA%202010.pdf code.mp.gov. gov.in/Gallery/Media_ gov.in/allimpfrms/ 164.100.222.222/ gov.in/sites/default/ slive.com/HRY/HL085. slive.com/Ori/OR101. mh645.htm#0 Cinematograph%20 in/WriteRe- Gallery/Image1848. allrules/2367.pdf content/dam/ files/swf_utility_fold- HTM HTM#0 Rules-1951.pdf adData/Pdf/ pdf homeportal/ er/departments/ Rule_1972_0066_ homede- partment/ gad_uneecop- https://tcpharyana. Pdf_F183_English. pdf/RulesGroup6/ scloud_com_oid_3/ gov.in/Notifica- pdf Cinema%20Act.pdf how_do_i/level_1/ tion/16.06.2016_UNI- The%20Assam%20 FORM%20BUILD- Cinemas%20%28Reg- ING%20CODE.pdf " ulation%29%20 Rules%2C%201960. pdf

61 Screen Density | Key to Unlocking the Hidden Box Office Potential

Annexure III:

S. No. States Screens Population (Mn) Screens / million

1 Uttar Pradesh 532 207.28 2.57

2 Maharashtra 1033 112.37 9.19

3 Bihar 276 103.80 2.66

4 West Bengal 434 91.35 4.75

5 Madhya Pradesh 287 72.60 3.95

6 Tamil Nadu 906 72.14 12.56

7 Rajasthan 244 68.62 3.56

8 Karnataka 812 61.13 13.28

9 Gujarat 665 60.38 11.01

10 Andhra Pradesh 1388 49.39 28.10

11 Orissa 155 41.95 3.70

12 Telangana 219 35.29 6.21

13 Kerala 487 33.39 14.59

14 Jharkhand 78 32.97 2.37

15 Assam 77 31.17 2.47

16 Punjab 242 27.70 8.74

17 Chhattisgarh 124 25.54 4.86

62 Screen Density | Key to Unlocking the Hidden Box Office Potential

S. No. States Screens Population (Mn) Screens / million

18 Haryana 140 25.35 5.52

19 Delhi 103 18.98 5.43

20 Jammu and Kashmir 29 12.55 2.31

21 Uttarakhand 73 10.12 7.22

22 Himachal Pradesh 30 6.86 4.37

23 Tripura 5 3.67 1.36

24 Meghalaya 11 2.96 3.71

25 Manipur 4 2.72 1.47

26 Nagaland 7 1.98 3.53

27 Goa 28 1.46 19.21

28 Arunachal Pradesh 3 1.38 2.17

29 Puducherry 7 1.24 5.62

30 Chandigarh 9 1.06 8.53

31 Sikkim 4 0.61 6.58

32 Andaman and Nicobar 2 0.38 5.26

33 Dadra and Nagar Haveli 4 0.34 11.67

34 Daman and Diu 5 0.24 20.58

63 Screen Density | Key to Unlocking the Hidden Box Office Potential

64 Screen Density | Key to Unlocking the Hidden Box Office Potential

65 Screen Density | Key to Unlocking the Hidden Box Office Potential

Contributors

Vijay Singh Rajesh Mishra Nitin Datar CEO, Fox Star Studios CEO, UFO Moviez COEAI

Kumar Sundaresan Devang Sampat Kailash Gupta Distribution Head, Fox Star Studios Director, Strategic Initiatives Chief Financial Officer, INOX Movies Cinepolis

Siddharth Roy Kapur Rohan Malhotra Jitender Chawla President Vice President, Distribution UFO Moviez Producers Guild of India Yash Raj Films

Ashish Malushte Suhas Tuljapurkar CFO, UFO Moviez Legal Advisor, Legasis

Special Thanks

Jasmine Roy Anahita Bhathena UFO Moviez Fox Star Studios

Seeta Iyer Nazneen Nakra UFO Moviez Lagesis Partners

Acknowledgments

Prashanth Rao Vidyasagar Prabakar

Shilpa Taneja Pratima Parab

Harshit Chehal Neha Kanukolanu

Rohan Padha Madappa Apparanda

Saranathan Singam

66 Key Contacts

Deloitte Touche Tohmatsu India Pvt. Ltd. Producers Guild of India Indiabulls Finance Centre, Tower 3, 28th Floor 1003-04, 10th Floor, Sri Krishna, Senapati Bapat Marg, Elphinstone Road (West) Fun Republic Lane, New Link Road, Mumbai - 400 013, Maharashtra, India Andheri (West), Mumbai 400 053. Tel: +91 22 6185 4000 Tel: +91 22 2673 3065 / 68 Website: www.deloitte.com/in Website: www.producersguildindia.com

Jehil Thakkar Kulmeet Makkar Partner, Deloitte India Chief Executive Officer [email protected] [email protected]

Prashanth Rao Partner, Deloitte India [email protected]

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