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Demand of new releases expected to go up post COVID-19


Bollywood and Hollywood were the box office drivers of 2019, making the coveted one billion club the new normal. With the coronavirus epidemic hitting the entertainment sector hard, the demand of new films is expected to grow so that the industry can return on the same path after the lockdown phase.

According to a study by Kotak Institutional Equities Research, CY2019 was the second consecutive year of good box office performance. Bollywood churned out 17 over Rs1 billion grossers, nearly doubling the count over CY2017-19.

The box office success report highlights some trends -- impressive progress of movies into Rs 1 billion and Rs 2 billion clubs. The number of films crossing Rs1 billion/Rs2 billion Net Box Office Collection (NBOC) has doubled to 17/7 over CY 2017-19.

The growth can be attributed to -- proliferation of multiplexes, rise of young stars and associated increase in supply of good content, broad-based demand across weekends, a gradual move away from quarterly seasonality and high dependence on long weekends.

Another highlight was the relatively muted growth of the top five movies. Over the past few years, the top five movies (5-yr CAGR at 4%) have dragged Bollywood NBOC growth. This trend is due to fading BO performance of the big stars (the three Khans -- Shah Rukh, Salman and Aamir); the new crop of stars are yet to deliver blockbuster hits, inability of multiplexes to expand footfall base given a weak macro and modest growth in per capita income/purchasing power and limited crossover films such as "Baahubali" that cut across regions.

It is important to mention that the steady improvement in performance of the new crop of stars (Ranveer Singh, Ranbir Kapoor, Shahid Kapoor, Tiger Shroff, Ayushmann Khurrana, Kartik Aaryan, Rajkummar Rao and Alia Bhatt) and Akshay Kumar have more than compensated for the falling contribution of the three Khans' NBOC.

The market of streaming services must be growing in India, but it doesn't affect the box office business. Several movies that score low on visual effects/production value have garnered Rs1 billion + NBOC. Ideally, OTT should have impacted BO collection of such movies if one assumes that consumers prefer to watch movies with good visual effects in cinemas and low-to-mid budget films on small screens.

The "Avengers" film broke records. Hollywood's contribution to PVR's ticket sales increased to 19% in CY2019 from 16-17% earlier. It is worth noting that "Avengers: Endgame" surpassed the #1 Hindi movie of CY2019 in terms of India NBOC. It was the only movie to have round-the-clock shows on the release weekend.

In fact, "Avengers: Endgame" (CY2019) grew 67% over "Avengers: Infinity War" (CY2018) in India versus 37% growth worldwide. The report shows a growing market for Marvel superhero movies in India, backed by the popularity of a few Hollywood sequels in India and untapped opportunities.

When it comes to regional box office, CY2019 was one of the weakest years for regional BO, especially South. PVR's SPI cinemas' occupancy dropped to 51% in CY2019 from about 57% in CY2018. A pick-up in regional box office led by multiplex penetration is a trend that should play out in the future.

With the world experiencing a complete/partial lockdown of cinemas in view of Covid-19 outbreak, PVR is expected to incur cash loss of about Rs550-600 million per month. According to the study, the company has adequate liquidity to navigate a complete lockdown of about five months and would be able to borrow more, if need be.

Post Covid-19, things seem to get better with "a strong bounce back" expected. The demand is expected to be led by pent-up demand, and a packed line-up of movies.

"We believe that PVR's performance is largely linked to content quality and likely weakness in macro aftermath Covid-19 would have modest impact on PVR's operating performance," read the report.


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