The Indian movie exhibition industry was in the thick of action in 2014 with many acquisitions in the multiplex business. All the big players - PVR, Carnival, INOX and Cinepolis - are also betting big on small towns with malls. Ajay Bijli, chairman and managing director of PVR, speaks with Arunima Mishra about how PVR Cinemas, the largest chain of multiplexes in India with 462 screens, plans to maintain its leadership position. Excerpts:
Q. Besides having the first-mover advantage, what else would you attribute to PVR's leadership?
A. My father had a trucking company first and he struggled in the trucking business. My father used to be in arbitration. In one of the arbitrations, the settlements were such he couldn't find a way to settle it but told the multiple owners of Priya: "If you guys are fighting amongst each other, let me just buy it". I was interested in cinemas and I thought I could look at the single-screen cinema at Priya [in south Delhi]. I used to play Hollywood films there first as that catchment was attuned to that. Most cinemas at that time looked drab; the designs were not very exciting. I started asking whether the cinemas could look exciting as people watch movies and what could we do to make the space outside the cinema hall - toilets, concessionaire and gangways - exciting and vibrant, so that people should feel that they can't get the experience at home.
I did not know that the habit of watching movies will one day turn into a business. Because the family had a property, because I was unsettled a little bit in the trucking business and said "Can I do something to Priya rather than run the trucking business?" And the single screen did so well that it encouraged me to get into multiplexes. As Priya was doing so well, I did not want to break something that is doing really well.
And, quality must result in good revenue, EBIDTA margins, profitability - only then you are also respected among shareholders. Happy customers lead to happy shareholders - that's our philosophy.
Q. Now everyone wants to be in the race to be the big player, if not by building cinemas then by acquiring them. How's PVR reacting to it?
A. The number of screens is not the only parameter to measure leadership, which we already have the highest now [462 screens]. I'm driven by a qualitative approach because we have investors and shareholders. Rather than just saying leadership, scale is very important. Then only you get the economies that improve your margins. Whether it's negotiating with producers and distributors for the film, if one has the scale, one gets better deals. This will ultimately improve one's bottom line. And, of course, who doesn't like leadership. It does come with a responsibility. I'm not complaining about it... You just can never rest on your laurels; you can never take your position for granted.
We will be opening organically about 100 screens a year, there's a certain pace at which malls are developing, cinema screens are coming up. There are a lot of players who are fighting for it. There's INOX, Cinepolis, who are also trying to get those screens. But, currently, we are sure that most mall developers prefer PVR as an anchor tenant over anybody else. Hopefully, we will be in the leadership position.
Carnival is a new player. They are growing more inorganically than organically. They have taken the acquisition route. Again, we should not underestimate anyone.
Q. How profitable has the Cinemax story been? Any takeaways? What's next besides Sathyam?
A. It's about scale, focus, core competence and core business. Everybody has got a reason to be in the business; and a reason to get out of the business. The acquisition is co-incidental. I never imagined that so many acquisitions will happen in one go. Everybody who has exited, it appears that it was not their core business. Kanakias are the ones from whom we bought Cinemax; their core business was real estate and at some point of time they realised it was time to exit. Somebody gets good valuation, they exit. Or if someone has got more passion to follow something else, they exit.
We are open to acquire any of the other leaders if they are also open. We are completely growth driven; if it [a deal] is at the right price, a right fit, then why not?
The largest companies in the world are much larger than what we are. Regal Cinema, the largest in the world, is 7,000 screens; there's AMC in China with 5,000 screens. In a country like India, which is grossly under-screened and there is plenty of potential to open more screens, we will be open to acquisitions at the right price. We are, however, not open to acquiring single screens because I feel the world has moved on.
Q. How is PVR looking at building its brand recall in the markets it's entering? Also, does a movie-goer choose a cinema over another for the brand value or it's the pricing and content?
A. It's evident from the five to six films that release every week, people want to have variety under one roof. The debate about single screens and multiplexes is long over now. Single screens are 1,000 plus seats, which are difficult to fill up and they don't have the infrastructure of car parking. Few single screens have a similar experience like multiplexes. Consumers want to have a variety of things. They want to eat, relax etc.
To talk about smaller towns - in Bhopal we have opened just now, and in a mall in Jalandhar also. Even in smaller towns - Raipur, Bilaspur, Ranchi, Bokaro - malls are the shopping and entertainment destinations. We would rather be there than anywhere else. Our strategy is to be there in malls.
As far as a moviegoer is concerned, it's difficult to articulate. Beyond a point, the consumer is emotional about the brand... I'm not looking at attracting consumers on the basis of wider seats, better technology... That's a table's takeaway anyway. It has to be the overall package.