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Multiplexes to reopen, but big action is on small screen

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ET Intelligence Group: Cinema exhibitors PVR and Inox Leisure handsomely outpaced the 3.5% gains of the benchmark Bombay Stock Exchange Sensex rallying 11-23% in comparison in the past five trading sessions. Though this was attributed to the renewed prospects of cinemas being opened for the public after a long lockdown, there are few concrete signs pointing to earnings improvement for the exhibition industry.

For one, the line-up of films that can pull audiences to theatres is already drying up. According to various estimates, more than 40 films are committed to streaming platforms.

“Films which are 90% completed are committed to streaming platforms. Even films that are 70-80% completed have been committed to streaming platforms. This wipes out at least five months of exhibitors’ film schedule,” said film trade expert Komal Nahta. “One does not know the fate of films which have started shooting and a considerable portion of these films remain to be shot. By March-April period next year, there will be shortfall in films which can be released in theatres.” These theatres may have to depend on Hollywood and regional languages films, said Nahata.

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The second aspect is the issue of occupancy in the post Covid lockdown period. The Maharashtra government has permitted 50% occupancy for exhibitors post opening. But, is this financially viable for exhibitors who did not have business in the lockdown period? Data from rating agency Crisil showed occupancy levels in multiplexes were 32% in FY20. A weak line-up of films would prevent exhibitors from selling tickets at high prices, practically ensuring weak collections. Given the fixed costs, multiplexes are unlikely to notch up enough revenues to cover these costs.

Thirdly, a combination of a surfeit of availability of content on streaming platforms and the behavioural tendency of people wary of picking up the infection would impact footfalls in theatres. After being cooped up for a prolonged period, people are likely to prefer an outing in an open space than watching films in a closed space. Given these factors, any further movement in the share price of multiplex stocks in the next few quarters would depend entirely on how successfully these companies achieve occupancy rates nearer to their pre-lockdown levels.

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