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| Multiplexes may down curtains |
| Ashish Sinha / New Delhi Apr 29, 2009, 00:40 IST |
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The 250-odd multiplexes, which account for 80 per cent of Bollywood’s box-office revenues, are getting ready to down shutters after talks between their owners and film producers to change revenue-sharing arrangements proved inconclusive.
“Over 250 multiplexes in the country will close rather than accept what certain Bollywood producers are proposing,” said Atul Goel, CEO, E-City, the Essel group company that operates Fun Cinemas, a 19-multiplex chain, and founder of the Multiplex Association of India, which represents the country’s leading multiplex chains.
The stand-off has already seen occupancy rates in multiplexes drop to 20 per cent since April 4. This was after Bollywood producers decided not to release new films until their demand for a flat 50 per cent revenue share was met.
Multiplexes currently get 52-55 per cent revenue in the first week. This rises to 55 to 60 per cent in the second week and up to 70 per cent in the third and fourth weeks or beyond.
A meeting may take place between producers and multiplex owners in the next two to three days, after which multiplexes plan to close if no solution is found.
Industry sources said the closure could lead to a Rs 200 crore loss for multiplex owners in just a month. Last weekend, occupancy levels fell to an all-time low of about 15 per cent.
Top executives of most multiplex chains like PVR Cinemas, Big Cinema and Inox Leisure declined comment.
However, Siddharth Roy Kapoor, CEO, UTV Motion Pictures, and spokesperson for the Bollywood film producers, told Business Standard: “We have proposed a flat 50:50 revenue sharing formula. They haven’t got back to us so far. We are open to what they have to say to our proposal but there is no going back on our stand.”
UTV Motion Pictures is a member of the United Producers Forum, which represents leading Bollywood producers and distributors.
However, the United Producers Forum, an association of leading Bollywood producers and production houses like Yash Raj Films, UTV and Dharma Productions, among others, have termed the demands from multiplex owners as “unfair”.
A senior executive of a leading film production company said the revenue-sharing with multiplexes was under a “complex” formula that was dictated by the multiplex lobby based on geographical location of multiplexes and on the cast and crew of the film.
“From the first week onwards, multiplexes get a majority share in the revenue from ticket sales. The formula is similar even for medium- and small-budget films (a budget of less than Rs 15 crore) that are released in far fewer prints, as opposed to a big-budget blockbuster like Ghajini. Therefore, the issue of performance-linked revenue-sharing arises much after the film is released,” said a top executive of a big banner film production firm requesting anonymity.
“We have a certain fixed cost that cannot be met from a flat 50:50 revenue-sharing agreement,” said Goel of the Multiplex Association of India. A typical multiplex has 160 to 200 seats. Occupancy level for a successful Bollywood film is 75 to 95 per cent. Analysts say the monthly fixed costs of operating a multiplex vary from Rs 40 lakh to Rs 50 lakh depending on size and location. “A multiplex has to generate monthly gross collections of Rs 1 crore to Rs 1.25 crore to cover fixed costs. The additional revenue comes from sale of food and beverage,” said a senior executive of a leading chain.
Signs of trouble for the film exhibition business are already evident since box office collections from Bollywood films in March stood at about Rs 60 crore, the lowest in the last three years, said trade analysts. April collections are expected to be at least 20 per cent lower than March.
For March, and now April, average monthly collections across some leading individual multiplexes have fallen to Rs 20 lakh to Rs 25 lakh as against Rs 80 lakh to Rs 1 crore-plus earlier.
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