Cinema Content vs OTT Impact on Entertainment Stocks – Research & Ranking

“Bahar se koyi andar na aa sake,

Andar se koi bahar na ja sake,

Socho kabhi aisa ho to kya ho,

Socho kabhi aisa ho to kya ho”

This song from the popular 70’s movie “Bobby” became a way of life for all of us during 2020. People had to give up most of the things that they loved – eating out, travelling, meeting other people, shopping, watching movies and many other things. The movie bit, though not a “necessity”, has been a cause of heartburn for many. India produces highest number of films annually, more than any other country in the world. According to newspaper Mathrubhumi, more than 2,200 movies were released in India in 2019 and more than 1bn tickets were sold. Hence, a complete closure of multiplexes and single screen theatres for most part of 2020 came as a big heartache for Indians who ended up singing, “Jag suna suna lage, Jag suna suna lage, Koi rahe na jab apna”, looking at locked theatres.

Why theatres went from “Housefull” to “No Entry”?

As the Government imposed a country-wide lockdown in 2020, multiplexes were the first ones to be asked to shut down. Reasons were obvious – people sit close to each other while watching movies, have to jostle in crowds at entry and exit points and most importantly; watching movies is a highly discretionary expense. Plus one can satiate his / her movie watching appetite by watching them on TV or OTT platforms, albeit with a delay. Hence, according to lawmakers, people do not lose out on much even if multiplexes remain shut all along. The result – multiplexes have seen three quarters of dismal revenues and losses. Even though they have managed to reduce costs to the best possible extent, certain fixed costs remain – rent, electricity costs, wages, common area maintenance, etc. Job losses have been mounting for the sector. According to the Multiplex Association of India (MAI), the movie exhibition sector has lost Rs. 9,000cr between April’20 and Sep’20.

 “Mein waapas aaonga, Mein waapas aaoonga”

With every phase of “Unlock”, new aspects of life started getting back to normal. Multiplexes did not feature in any of these for the first four “Unlocks”. Finally, in “Unlock 5.0”, multiplexes were allowed to open with restrictions on seating capacity, hours of operations and so on. However, it has not been smooth sailing for multiplexes at all despite unlocking being in place. For one, there has not been any fresh content coming. A lot of movies, slated for release in 2020, have either been postponed, moved to 2021 or released on OTT.

Big banner movies that were released on OTT platforms skipping theatrical release in 2020:

Source: India Today

Content first or footfalls first?

Reasons why entertainment stocks are going through a rough patch currently

Multiplexes are complaining that no good content is coming their way which is the reason for low occupancies. On an average, multiplexes see 30-40% occupancy on weekdays and 70-75% occupancy on weekends, subject to variation. However, current occupancies are miniscule, not worthy of mention. Only few movies have managed to attract footfalls to theatres. Patrons have deserted multiplexes, mainly due to unwillingness to walk-in and risk an infection. This is causing companies to bleed heavily.

PVR Revenue Performance over quarters (Rs. Mn.)

PVR PAT Performance over quarters (Rs. Mn.)

Source: ACE Equity

The above chart shows the heavy losses that PVR has incurred over past three quarters of FY21. Inox Leisure’s condition is no different. Both companies have readied themselves with cash to tide over the crisis. But the very foundation of this business has been shaken.

On their part, film producers are complaining that they won’t be able to bring in new content, given the pitiful footfalls. There have been shows when less than 5 people were present in the entire cinema hall! Film making is an expensive business and hence producers want to be sure of revenue visibility before they can go ahead and release a movie. Hence, some have shelved releases for later while some have released content to OTT platforms to monetize quickly.

So the debate continues to rage on. Both parties (multiplexes and film producers) continue to point fingers at each other for normalcy to resume. In all probability, this situation will remain till vaccination drive gets completed and everyone has the confidence to get back to crowded places. Until then, multiplex owners will have to sing, “Inteha Ho Gayi Intezaar Ki, Aayi Na Kuchh Khabar Mere Yaar Ki”.

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