While the increasing number of multiplex screens, higher ticket prices, and (hopefully!) improved content are all key contributors to growing box-office collections, the impact of digital cinema remains underrated. Traditionally, the high cost of distributing movies shot on analogue prints limited the number of prints released. Given that audience reach is a key determinant of theatre collections, analogue prints thus limit a film’s box-office potential. Further, smaller centres saw delayed releases through re-circulation, subject to a film’s affordability and performance.
Changing dynamics
Technology now allows films to be shot in digital format, or converted and distributed as digital files. As digital prints cost much less, producers and distributors are able to release four times the number of prints than before at no extra cost. As a major chunk of a film’s collections is made in the first week of release, more prints now mean wider audience reach and, consequently, higher theatre collections. Smaller projects have benefitted the most, as a wider release has dramatically improved collections. Further, digital cinema has streamlined distribution and enabled small-town audiences to view most movies on the same day of release as those in bigger towns/ cities.
Pace of digitisation
Digital cinema initially faced resistance from exhibitors as they had sunk money into analogue projectors and were wary of the investment required for digital projection.
Major players such as UFO Moviez and Real Image provided the impetus for change through subsidised pricing, rental models and instalment models involving lower upfront payment; they currently manage almost 7,000 digital screens between them. With almost 80 per cent of active screens already digitised, the rest are expected to follow suit in the next two years. The share of digital prints in Bollywood, too, has increased from around 10 per cent for some of the larger movies in 2008 to almost 90 per cent in 2013.
What next?
As screen digitisation nears saturation point, digital operators and movie studios will need to look at alternative growth levers for their respective businesses.
Digital operators are looking to develop technology solutions such as ticketing and monitoring platforms, digital sound solutions and post-production software as potential revenue streams. Both UFO Moviez and Real Image are looking to roll out 3D cinema screening capabilities within their networks, given the growing volume of 3D content (especially in Hollywood). Overseas markets are potential growth areas too, and UFO Moviez is looking to expand its international footprint from around 800 screens to 2,000 over the next two years. In-cinema advertising is another target segment for digital operators, as it provides advertisers a captive audience and the opportunity to reach under-penetrated small towns.
Going forward, continued growth in theatre collections would be driven primarily by an increase in screen count (especially beyond major cities) and a rise in ticket prices. India is significantly under-screened with around 12 screens per million, as compared with 131 screens per million in the US and 31 screens per million in China. According to Unesco, there is demand for at least double the number of screens in India. Similarly, its ticket prices, at around $2, are among the lowest — average ticket price is $8 in the US, and $5 in China. Major multiplex operators such as PVR and Inox and international operators such as Cinepolis are looking to expand their screen count. While concerns such as real estate slowdown, high rentals, single-screen theatre closures, and comparatively lower spending power in smaller cities could impede this growth, there is nevertheless a large market waiting to be tapped.
The author is Director, Grant Thornton India LLP.