- Special Market Commentary -

May 27, 2010 (FinancialWire) (Cross Border: U.S. India News Wrap) (Go to http://www.financialwire.net/?s=cmmtry for all recent commentaries.) — Moviegoers in the US will need to shell out a steep $20 per ticket to watch DreamWorks’ “Shrek Forever After” at selected IMAX (NASDAQ: IMAX) megaplexes in New York City. Several theater operators have recently sharply hiked prices, some as steep as 25% in the past two months for 3-D animated features such as “How to Train Your Dragon”.

IMAX, which recorded revenues of over $117 million in 2009, boasts of the most extensive large format theatre network in the world. It has 430 theatre systems (309 commercial plus 121 institutional) spread across 48 countries. Its USP lies in being a key distribution platform for studios in Hollywood and strong relation with commercial exhibition companies. The ‘IMAX experience’ is essentially screen experience with enhanced audio and viewing capabilities.

IMAX & Others — Expanding Markets

Multiplexes are fast replacing conventional movie theatre systems across the world. Besides, there is increased consolidation among theatre distribution systems. In the past quarter IMAX alone has signed contracts for 41 theatre systems. Additionally in the last two months since, it has added another 13 theatre systems, including deals in China and Russia. India’s Reliance Group (NSE: RELIANCE) owned BIG Cinemas partners with IMAX and currently uses the large format 3-D/6-D technology at its flagship theatre in Mumbai. BIG Cinemas which is part of Reliance’s Media / Entertainment arm itself owns 70 screens in the US and a total of 253 globally.

India, which has the world’s largest population of potential moviegoers and the second largest film production industry after Hollywood, is a hot target for international players. Cinepolis, another large format global operator, which has had a presence in India since 2007 plans to open 500 screens in the country by 2016. It plans to invest $ 350 million largely through inorganic growth across 40 cities. It will also soon open India's first megaplex (a multiplex with more than 10 screens) and follow this with several such megaplexes in Tier 1 and 2 Indian cities. According to industry estimates, the present number of screens in India is drastically low at 0.6 screen per million of the population, as compared to 120 screens per million. Global players however need to bear in mind innovative models for penetrating into Tier 2/3 cities in this capital intensive industry.

Indian Film Industry Growing Anew Following Deceleration in 2008

KPMG estimates the film industry in India to grow at a CAGR of 9% and reach the size of Rs 137 billion ($2.9 billion) by 2014. The year 2008-09 has not been entirely favorable to the presently Rs 89 billion ($1.9 billion) industry. The industry experienced a slowdown that was more attributable to factors like paucity of content, fewer blockbusters (just 4 in 2009 as against 8 in 2008) liquidity crunch amongst theatre owners (causing them to cut back aggressive expansion plans) rather than the broader global economic slowdown.

The slowdown’s effects are expected to wear off in 2010 and an increased number of expected ‘blockbusters’  including “Shrek 4”, “Prince of Persia”, the Harry Potter and Narnia sequels are expected to draw crowds. On the Bollywood front as well this year is expected to produce more block-busters. Besides, regional cinema is looking up and although it may not impact multiplexes to a large extent, local growth will favor the overall film industry in the country.

There are roughly over 800 multiplexes in India and IMAX currently holds a somewhat elitist position, with ticket prices at a higher end of $7-10  per ticket whereas average movie ticket costs in Indian multiplexes is an ‘affordable’ $4-5 per ticket. The multi – million dollar Indian multiplex industry is dominated by local players PVR, BIG Cinemas, Inox, Fame and Fun Cinemas, but perhaps not for long.

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