Daybreak - PVR Inox's new sub model wants to push occupancy. But it will likely end up with a 'house-not-full'

Episode Date: November 15, 2023

PVR INOX posted a blockbuster quarter with triple the revenue from a year ago. Nearly 50 million Indians flocked PVR INOX theaters in the September quarter. A huge part of it is of course thanks to this year's big releases like Barbie, Oppenheimer, Gadar 2, and not to forget, the record-breaking performance of Shahrukh Khan’s Jawan. Just last Sunday, Salman Khan’s much-awaited Diwali release Tiger 3 also hit the big screen. However, even though PVR INOX successfully crossed pre-pandemic revenues in the September quarter, there was one very important metric that it failed turn around: occupancy levels. So to solve the issue, it came up with a first-of-its-kind subscription plan called Passport. It allows movie-goers to watch 10 movies a month for Rs 699 only.But it turned out too good to be true. "Terms and conditions apply."Tune in to find out more.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon, Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. You know the American actor and comedian June Rivers? She'd once said something quite unforgettable about the business of entertainment. It's either feast or famine in showbiz.

And as it turns out, she was on point. Take the multiplex Baymouth PVR-Inox, for example. For them, the feast does not seem to be ending. The joint entity posted a blockbuster quarter would triple the revenue from a year ago. Nearly 50 million Indians flocked to PVR Inox theatres in the September quarter. And of course, a huge part of this is. is thanks to this year's big releases, Barbie, Oppenheimer, Gader 2, and not to forget, the record-breaking performance of Shah Ruk Khan's Javan.

So, you can imagine how PVR Inox, which accounts for a huge 30% of box office collections in India, reap the most out of these money spinners. Even just this Sunday, Salman Khan's much-awaited Diwali release Tiger 3 hit the big screen. and with opening day numbers close to 100 crore rupees, PVR INox is most likely going to end this year on a smooth high. But you're listening to Daybreak and there's obviously a catch in this story. So even though PVR INOX successfully crossed pre-pandemic revenues in the September quarter, there was one very important metric that it could not turn around. Can you take a wild guess of what it could be?

It was occupancy levels of its theatres. As of March this year, the average occupancy was just 26%. Basically, it has not been able to go even close to the pre-pandemic occupancy highs of 2019. So obviously, it could not just sit back and watch things go from bad to worse. So last month, it came up with the first of its kind of a solution. PVR INOX launched a subscription service called Passport for its theatres. The plan was to allow members to watch up to 10 films in a month. And you won't even believe how much it priced this subscription planner.

$699 for 10 movies. That sounds like a total steal, right? Especially when prices for a single PVR. movie ticket can go up to $800 $800 on a weekend. Who would say no to this? But this passport subscription scheme is a bit like all the

things that are too good to be true. Terms and conditions apply. And the problem is that there are way too many of them. To the point that it almost seems like PVRI NOx is asking its customers to not sign up for this plan. Welcome to Daybreak, a business podcast from the

I'm your host, Nickda Sharma, and I don't chase the news cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Wednesday, the 15th of November. PR and INOX have actually come a long way from 2020 when the pandemic dealt the biggest blow to the business of multiplex chains. Back then, PBR and INOX, if you remember, were two separate entities. And as hard as it may be to picture this now, nobody knew if people

would ever walk back into a theater again. There were much bigger problems to lose sleep over then. Both PVR and Inox's businesses came crashing down. From a combined revenue of more than $3,000 in the year that ended in March 2020, it came down to just over $250,000. or rupees the next year. And when the pandemic restrictions began to lift, the entertainment scene in the country was almost unrecognizable for movie theatre chains. It had suddenly become all about OTT content and small screens. That is why, for India's number one and number two movie theatre chains, PVR and INOX, it was more about survival than keeping up with competition. So as the last resort, in February this year, they decided to join forces to become

one entity. Luckily for them, things have turned around quite a bit ever since. PVR Inox has become a force to reckon with, powered by their combined network of more than 1,600 screens and this year's many, many blockbuster releases which drew large crowds. In the quarter of that ended in September this year, the company reached a new revenue high of more than $2,000 crore rupees. This is three times what the company had made in the same period a year ago. The average price people paid for ticket has also reached its highest level. So did the per person spending on food and beverages. But like I mentioned earlier, the largest multiplex chain has still not been able to crack one thing so far this year.

Occupancy level of its theatres. And to solve this, it has now been betting on this first-of-a-kind subscription plan in the country in movie theaters. Stay tuned to find out more about it. The subscription plan is called Passport and like I told you earlier, it allows members to watch 10 movies a month at PVA-R-Rinox theaters for just 600. $99. My colleague, the Ken reporter Shivani Varma, got in touch with Gotham Datta, the company's co-CEO about this plan.

And he told us that the idea behind this plan was to get people to visit the big screen more often, five to six times a month ideally, compared to the current average of one or two times a month. Also, BVR Inox wants to amp up its occupancy on weekdays through this subscription plan. Now, if you look at how the company has priced this plan, you would think that cinema lovers won't even think twice before signing up for it, right? On paper, $699 for 10 movies or around $70 per movie ticket sounds like a damn good deal. But the long list of terms and conditions attached to this passport deal is most likely going to be quite the turn-off for these customers. For starters, subscribers have to enroll for a minimum of three months and they cannot use the service on Fridays, Saturdays and Sundays.

They also cannot redeem the benefits of passport on festivals, special days, gazetted holidays, or for any new movie that releases on a weekday. And dear listeners, that is not even the end of it. Passport users cannot enjoy recliner seats. They also cannot avail the subscription at the premium screens of PVR-Inox like IMAX, gold and insignia. And like that wasn't enough, the passport subscription does not apply for movie tickets which are priced above 350 rupees. And here is where it gets even stranger. South India, despite being known for its crazy love for movies, has been excluded from this plan. In fact, more than a third of PBR INOx screens are actually in this very region.

So we asked Gautam Datta to help us understand the logic behind this, and he told us that passport would not help the multiplex chain much in the south because movie ticket prices are more reasonable here, since it is already regulated by the respective state governments. But all of these caveats cite, the real question is, who has so much time? Forget about 10 movies. Will subscribers even want to watch five or six movies a month?

Especially when there's already so much quality content streaming on OTT platforms. Quite interestingly, PVR INox isn't too worried about this. The company has only rolled out 20,000 passport subscriptions on a pilot basis. And Data said that this was a very cool. conscious choice because the goal is to study consumer behavior, usage patterns and preferences. The market research firm Elara Capital also expects small increases in revenue and occupancy from passport and almost no change in the operating costs of PVR. And the added perk is that the theatre chain will see its food and beverage revenue increase if passport users come to

watch movies more often. But as much as BVR Inox would like to think of passport as a low-stakes, harmless game, the plan could still blow up in the company's face. After all, that is exactly what happened with Zomato when it first launched its subscription plan Zomato Gold. And BVR Inox could actually learn quite a few things from it. Stay tuned to find out more. When Zomato launched Gold in 2017, the idea of subscriptions were fairly new, especially in the dining segment. Initially, Zomato wanted to make eating out affordable for members. So, it offered one plus one offers on food and two plus two on drinks at any of Somato's partners' restaurants on any day or the week.

Restaurants came on board to get more visibility and footfall. And most importantly, for these eateries, people would come in and fill tables on weekdays as well. Kizang Shiring Bhutia, the former sales manager at Zumato, told Shivani that Zomato assumed gold would make people order more. But in some locations, and it was bound to happen if you think about it, members started ordering only the food and drinks that had offers on them. And why wouldn't they right? But this in turn upset the partner restaurants. They wanted to offer discounts only during weekdays because that is when they need. needed these customers. They also did not want to have discounts on the entire menu.

So, Zomato had to come up with four iterations of gold until it finally cracked the balance between customers, restores and its own interests. But Zomato's initial version of gold was actually the most customer-friendly. In the case of Passport though, it is quite clear that the plan is heavily skewed in PVR Inox's favour. And Zomato is just one example from the dining segment. Globally, movie theatre chains and companies have had a tough time getting their subscription plans right. Take Movie Pass, for example.

It was a similar movie subscription model launched in the US in 2017. The creators of Movie Pass did not own any theatres, but they offered unlimited movies in partner theatres for about. $10 a month. But the per ticket price was actually as high as $12 or more at the time. And ultimately, Movie Pass ended up burning cash. It also went bankrupt in 2020, partly because the business was not straightforward enough. So this year, it came back with a bunch of subscription plans to choose from. And this in turn made customers feel more in control of what they wanted to pay for. In the price-conscious Indian market, even streaming giant Netflix had to do things differently,

like launching a mobile plan for $199 a month and bundling with telecom plans. So the point is that subscription models are tricky and they involve a lot of active course correction. PVR Inox did say that it studied the plans offered by cinema chains worldwide, but eventually the company decided to stick to the current version of Passport. So despite the multiple examples to learn from, it looks like PVR INox wants to learn only from its own mistakes. Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature store. stories, newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.