FICCI-KPMG-Report-13-FRAMES

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70 The power of a billion: Realizing the Indian dream © 2013 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Licensing & Merchandising (L&M) and Gaming: L&M and Gaming are still very underpenetrated categories in India due to inhibitors like piracy and a diverse audience to be reached with different propositions and price points. Also, merchandising needs sustained brand recall, which Indian films have not been able to create as they are mostly do not produce sequels. Hollywood has, over the years created iconic figures such as Batman and Spiderman. India is yet to create iconic figures on a scale that will generate robust revenues for the producer. Disney’s Cars generated moderate theatrical revenues in India but was immensely popular in the merchandising segment. Disney also tied up with consumer brands such as Pepsodent and Britannia to popularize the Cars merchandise 35 . Gaming also remains unexplored owing to lack of knowledge, captivity and reach. With a plethora of sequels and organized retail emerging in India, the merchandising and gaming markets if not tapped into will be a missed opportunity. Licensed merchandise today is inhibited by the lack of an appropriate retailing infrastructure – this segment will only grow once modern retail formats grow. With the government approving multibrand retail in India in 2012, the industry is indeed hopeful that this revenue stream can finally fulfill its promise. Content syndication: Sharing of intellectual property rights has not yet materialized significantly in India. While a first of its kind deal has been signed between Dutch entertainment firm - Endemol and motion pictures maker Eros International to share and develop properties based on their intellectual property rights, the industry needs to actively explore this avenue to open a new stream of revenues. “ India lacks on content syndication in films as compared to international markets. Indian films are not being translated worldwide. The overseas revenue as of now comes from the theatrical releases alone. Merchandising has also not taken up in India. We need to push ourselves to find new sources of revenue. “ - Ashvini Yardi Co Founder, Grazing Goat Pictures Pay per view (PPV): With the net DTH subscriber base growing at 18.8 percent in 2012 36 , pay per view is expected to grow robustly over the years. The phase 2 of TV digitization is set to cover 38 cities by March 2013 (although with likely delays) and phase 3 aims to cover smaller towns and cities by November 2014 37 . There will be considerable monetization potential for regional pay per view services. PPV will also aid the airing of parallel cinema movies, which often struggle to find slots in the exhibition space. With the emergence of new talented directors producing movies with strong storyline and inclination of Indian audience towards good quality content, PPV will be a strong driver for indie cinema. 35. ‘Cars2 economics: Movie, Merchandise and Kids’, Bemoneyaware.com, July 2011 36. KPMG in India analysis 37. ‘Cable TV Digitization in India’, Techmagnifier.com, November 2012 38. ‘Cinepolis India bets on small cities; to double screens this year’, The Economic Times, February 2013 39. ‘Cinépolis eyes expansion in India’, Indiantelevision.com, November 2012 Key themes Penetration into tier II and tier III markets Digitization has changed the face of the movie industry in a number of ways, one being simultaneous release of Indian movies on several screens, including those in tier II and tier III cities. Amongst those trying to cash in on this opportunity are movie exhibitors who now see tier II and tier III cities as potential drivers of growth. Even though Delhi and Mumbai contribute between 55 -60 percent 36 of the revenues of a big budget film, multiplex expansion in these regions is rapidly drying out. In 2012, there were no new screen additions in Mumbai and Delhi. “ Screen additions of multiplexes are slowing down in metro cities while tier II and tier III cities are observing growth. Such cities are building what can be called as ‘valueplexes’ which are constructed at reasonable investment and provide a better experience. Scan the QR code to hear more from Sanjay Multiplexes like PVR Cinemas, Inox Movies and Reliance Big Cinema are rapidly expanding their footprint in towns such as Latur, Darjeeling, Raipur etc. Cinepolis plans to expand its footprint in the south by opening 11 screens in Kochi in 2013 38 . It plans to open 500 screens across the country by 2016 39 . Multiplex chain INOX is planning to launch around 50 screens by the end of 2013, entering new territories such as Madurai, Bhopal, Surat, Bhubaneshwar, Kharghar and Udaipur. PVR Talkies, PVR Cinemas’ no-frills cinemas for consumers in tier II cities, is looking to add 50 more screens for the Talkies model in the next three years 40 . SRS Cinemas is also looking to add screens to cities such as Bhiwadi, Shimla and Lucknow 41 . With lower real estate prices in smaller towns and the leeway to launch a no frills cinema, the exhibitors are able to considerably bring down the cost per screen. Keeping in mind demographics of these cities, the prices of tickets are lower than those charged by multiplexes in the metros. For instance, while a regular PVR ticket price ranges from INR 100-275 in Delhi/ NCR, it ranges from INR 40-90 in Ujjain and INR 50-150 in Bilaspur 42 . “ While the domestic consumption has maintained, experimental cinema has started being accepted in unexpected markets. We were surprised to see the success of Hollywood movies in tier 2 markets like Nanded, Bilaspur and Ujjain. 3D demand is also on a rise as quality of content is improving. We see increased uptake of 3D content even in non-metros. “ 40. ‘Small Is Big!’, Franchise Plus, June 2012 41. ‘SRS Cinemas to add 18 screens by FY13’, Indian Express, November 2012 42. PVR Cinemas website, accessed March 2013 “ - Sanjay Gaikwad Managing Director, UFO Moviez India Limited - Nitin Sood Chief Financial Officer, PVR Limited
The power of a billion: Realizing the Indian dream 71 Use of social media in pre-release marketing strategies With Social Media grabbing about 25 percent of the internet surfing time in India, this medium is rather hard to ignore. India has more than 70 million 43 social network surfers – a potentially large platform for digital marketing. These consumers are already being targeting by the film industry. For example, Yash Chopra’s Jab Tak Hai Jaan trailer received 30,000 likes in the first week of its release on YouTube, breaking records worldwide 44 . Movies such as Anurag Kashyap’s Gangs of Wasseypur utilized social media very effectively to create attention. The sequel was marketed through a pseudo election campaign between the sequel’s prime characters. The election was staged on Twitter. The current spend on digital marketing platforms such as Facebook and Youtube is approximately INR 1.8 million 45 and will rise significantly in the near future. Disney has demonstrated how to leverage social media on a large scale. It engages with millions of consumers through more than 1000 social media accounts. It has pages and accounts across Facebook, Twitter, Linkedin and Youtube for every movie it makes, for all its theme parks and for Disney merchandise. The company has more than 3.5 million followers online 46 - The goal is to recreate the Disney magic online. Consolidation in exhibition industry “ While the industry will see further consolidation, the industry needs at least 30,000 more screens. With screen density of only 8 per million as compared to Indonesia (141), US (117), China (31) and Brazil (10), India has a long way to go. “ PVR’s screen evolution – a mix of organic and inorganic growth Source: PVR Ltd., Investor presentation February 2013 “ The future of Indian film industry lies in consolidation and continuous simulated, synergetic and symbiotic growth. Consolidation has already begun in the exhibition space and Indian market is going to witness a maximum of three major player in this segment. The exhibitors (read large multiplex operators) will start getting into content creation and acquisitions. Indian studios/production houses have already started entering into multi-level tie-ups. We will see many GECs and movie channels enter into the movie production purely due to their contribution in this space and sheer need for content at a reasonable price. Overall I can say that, in 100th year Indian cinema is finally heading for a gradual, cumulative growth which is going to continue at least for the next two decades. “ - Kapil Agarwal Joint Managing Director, UFO Moviez India Ltd. The film exhibition business has evolved considerably in the last few years with the multiplexes growing steadily and capturing the attention of the Indian audience in a significant way. As the industry attempts to fix the severely underpenetrated exhibition market, competition between multiplex chains has led to aggressive expansion efforts. Growth has been both organic as well as inorganic. PVR’s acquisition of Cinemax in November 2012 upped PVR’s rank, establishing it as the number one company in the film exhibition business in terms of screen count. Post the acquisition, PVR possesses 351 screens across 85 properties. Cinepolis, the world’s 4th largest exhibition company is also looking to expand both organically as well as via acquisition. A concerted effort is underway by the industry to tap into the vast opportunity presented by India’s underpenetrated movie exhibition market 47 . 43. ‘Facebook has 71 million active users in India, 50 million duplicate accounts worldwide’, Gadgets. ndtv.com, February 2013 44. http://www.indiatimes.com/bollywood/jab-tak-hai-jaan-trailer-creates-history-44110.html 45. Industry discussions conducted by KPMG in India 46. http://www.businessinsider.com/the-30-biggest-social-media-advertisers-of-2012-2012-9?op=1 47. PVR Limited, Investor Presentation, Feb 2013 - Utpal Acharya Head of Distribution and Acquisition, Reliance Entertainment © 2013 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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FICCI 2013 143 “ The Amendments t
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Acknowledgement We acknowledge the
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FICCI-KPMG-Report-13-FRAMES

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