Operating profits of the mulitplex industry is likely to reduce by around Rs 100 crore, if half of the movie-goers in the state carry their own food and beverages, according to an analysis of rating agency CRISIL.
The rating agency estimates that multiplexes in Maharashtra will be required to increase ticket prices by Rs 70 to offset the impact on the food and beverages (F&B) division, while observing that such a sharp hike may not go well with movie-goers. The state accounts for roughly a quarter of the revenues of multiplex operators in the country and non-ticket segments comprising F&B and advertising are highly profitable and subsidise losses on ticket sales.
Earlier this month, the state government announced that there would be no difference in the MRP of food products sold outside and inside multiplexes in the state and viewers will be free to carry their own eatables inside the multiplex. It also said that strict action would be taken against overcharging multiplexes from August 1. A public interest litigation (PIL) on this is pending before the Bombay High Court.
Crisil said that non-ticket revenues are growing twice as fast as ticket sales, with a compound annual growth rate of 29 per cent in the past five fiscal years, compared with 15 per cent for ticket revenues. As a result, share of non-ticket revenues has increased to around 43 per cent in financial year 2018, compared with around 30 per cent in financial year 2013.
“The gross profit margin of multiplexes in the F&B segment is about 75 per cent, and in the advertising segment over 80 per cent. In fiscal 2018, leading multiplexes reported an operating profit (EBITDA) of Rs 58 lakh per screen. Of this, the gross profit generated by the F&B segment was Rs 61 lakh per screen, while advertisements reeled in Rs 33 lakh per screen. Put another way, these multiplexes would have bled if their only source of revenue was ticket sales,” said Sachin Gupta, Senior Director, CRISIL Ratings.
The rating agency said that if the new rule is imposed, the ability of multiplexes to augment their revenue streams by raising ticket prices and advertising tariffs will be the key monitorable.
“Today, multiplexes account for half of the box-office collections despite having only a fourth of the total movie screens in India. They are also the main attraction at shopping malls. Therefore, any disruption in multiplex operations will, apart from having a cascading impact on the film industry, affect footfalls at malls, too,” said Nitesh Jain, Director of CRISIL Ratings.