Ack_ment

It is indeed a great pleasure and proud privilege to present this project work.

I am indebted to Mrs. Mona Bhatia, the project guide and the BMS co-ordinator
of Nagindas Khandwala College of Commerce and Arts, Malad (west). Her
guidance and valuable thoughts and co-operation have enabled me to complete
this project.

I would like to thank and express my gratitude for the help and advice given to
me by my guide and teacher, Prof Mona Bhatia. Without her help, guidance and
encouragement, the project might not have been completed.

I would like to sincerely thank the principal of Nagindas Khandwala College,

Mrs.Ancy Jose for her support and guidance.

I would also like to thank the college library and its staff for patiently listening
and helping me, and finally my family and friends who supported me all the way.
Contents

1. Execuitive Summary
2. Introduction

3. Project Profile On Multiplex

4. The Multiplex Phenomenon:

5.Changing face of Cineplex's

6. The multiplex revolution

7. The new boom

8. Policy formulated on setting up of multiplex theaters.

9. The fine print... (Problems faced by multiplexes)

10. Points to be considered while setting up of a multiplex

Family entertainment center at Cochin

11. INOX Pune multiplex a major success.

12. Fame Adlabs

13.Single screen cinemas V s multiplexes

14. Conclusion

15. Bibliography.
Executive summary

About two decades ago, an outing to the local cinema hall was an attractive entertainment
option. But in the last decade, with the liberation of the Indian economy, people's tastes,
lifestyle, social behavior and culture have undergone fundamental transformation. The two
main catalysts for this change have been the development and growth of the electronic media
as a source of information and entertainment coupled with the increase in purchasing power
of the average person. This has a tremendous impact on the leisure and entertainment
industry in general and the film industry in particular, with far reaching consequences.

With the rising demand of entertainment and theaters the rising demand for multiplex
theaters is no more a suspense.

This project covers various aspects of multiplex theaters from its meaning to its growth in
India to the problems faced by multiplex theaters and also the success of various multiplex
theaters in India.

Meaning:

A Multiplex is a multi screen entertainment complex showing different films under one roof
with other type of supporting business in the vicinity like restaurants, shopping arcade and
other entertainment avenues.

The features of multiplexes:

It is equipped with four to five screens screening movies, one or two cafe, and an
international brand of restaurant, entertainment for children and a shopping

area.
The problems faced by the multiplexes:

_ Infrastructure _ Software related

Success of various multiplex theaters in India

Inox at Pune is a major success.

UFame adlabs" of shringar cinemas in Mumbai got its success by trying various new things
like online ticketing, display of seating pIan and various other technologies.

It also throws light on why there is a revolution of multiplexes in India and also shows the
benefits of revenue generation through multiplexes with the help of governments liberal
policy towards multiplexes. The project highlights various points regarding the boom of
multiplex theaters and the changing face of cineplexes.

It also gives details about the major players of multiplexes in India like Adlabs, PVR
complexes, Inox, Satyam and many more.

It also shows what are the points to be considered while setting up a multiplex with an
exclusive example of an estimated project for setting up a multiplex in Cochin.

There is also an article on single screen theatres strike against the government for its
favorable -policy towards multiplexes.

Lastly the project is concluded by showing the future of multiplex.

MUL TIPLEX THEA TRES

MULTI-PRONGED ENTERTAINMENT

What does the Chopra family, comprising Mr and Mrs Chopra and two teenagers, do on an
uneventful Sunday evening? The parents love Hindi movies, but the kids

don't like them, preferring to play video games and watch Hollywood films.

Do they spend the evening separately? No. They drive down to the nearest multiplex, which
has four small halls, two of which are playing the latest Hindi films, with the other two
featuring Hollywood films. There are gaming rooms too. The parents watch the latest
Bollywood blockbuster, while the kids take in a Hollywood flick and spend the rest of the
time playing video games. The evening is rounded off with a good meal at the restaurant
housed in the same complex.

There are a number of families like the Chopras, starved of attractive entertainment options
and with rising disposable incomes, who want to spend a greater proportion of their
expenditure on entertainment.

About two decades ago, an outing to the local cinema hall was an attractive entertainment
option. Bit in the past decade or so, average occupancy in Indian cinema halls has fallen
considerably due to high entertainment taxes and the onslaught of cable television. This has
led to a further decline in the quality and maintenance of cinema halls in the country, leading to an
even greater number of people preferring to watch television or films at home.

In the nineties, cinema halls started shutting down or converting to business premises and shopping
complexes. In 1997, the first multiplex, PVR Anupam, comprising four small cinema halls, gaming
rooms, restaurants and music rooms, opened in New Delhi. It soon went on to become extremely
popular, spawning several similar complexes in metros and mini-metros.

Initially, multiplex projects were started in the metros due to the availability of an
assured audience. More recently, multiplexes have begun proliferating in smaller towns and cities,
spurred by a growing consumer base and higher disposable incomes. The main cities in this list are
Pune, Baroda, Indore, Ahmedabad and Jaipur.
 MUL TIPLEX THEA TRES

PROJECT PROFILE ON MULTIPLEX

WHAT IS MULTIPLEX?

A Multiplex is a multi screen enlertainment complex showing different films under one roof with
other type of supporting business in the vicinity like restaurants, shopping arcade and other
entertainment avenues. Emergence of multiplexes has made movie going an event. People can go at
just about anytime and find something to watch. It also enables exhibitor to show a variety of
movies appealing to several segments of moviegoers while serving patrons from common
support facilities such as box office, concession areas, rest room and lobby.

In the last decade, with the liberation of the Indian economy, people's tastes, lifestyle, social
behavior and culture have undergone fundamental transformation. The two main catalysts for this
change have been the development and growth of the electronic media as a source of information
and entertainment coupled with the increase in purchasing power of the average person. 'I1lls has a
tremendous impact on the leisure and entertainment industry in general and the film industry in
particular, with far_reaching consequences.

PROJECT

The proposed project envisages to have State of the Art Multiplex on a 40,000 sq. ft area with 3
multi size theatres with a combined seating capacity of 1500 seats ranging from 200/ 450/ 850 seats.
200 seats screen is targeted to the premium segment. The proposed project is envisaged to have
latest projection system along with Digital Dolby Sound System.
THE MULTIPLEX PHENOMENON

The growing share of entertainment expenditure in the disposable income pie is driving a revolution
around India's favourite entertainment option today - Movies. The combination of cinema with other
services and facilities has led to the burgeoning growth of multiplexes around the country.

Globally, primarily major movie production houses and media conglomerates including the likes of
20th Century, Paramount, United Artists, ColumbiaTristar/Sony, and Warner Bros operate
multiplexes. The primary reason for the popularity of this business model has been the escalating
cost of movie distribution as well as a hedging opportunity to run multiple revenue streams around
self owned content

In India, the movie industry" is not quite as developed and organized as the industry in USA.
Multiplexes arrived in India in June 1997 when Priya Village Road show was the first to
pioneer the concept with its initial _stablishment PVR Anupam, a multiplex with 4 theatres
and a host of other entedainment options including restaurants, music centers, gaming
centers etc.

The multiplex model is based on the concept of umbrella entertainment built around a primary
anchor - movies. The revenue streams, however, do not necessarily centre on a single anchor.
Typically, the possible income generating channels in a multiplex can include:

. The box office collections

. Rent from display systems . Food & beverage

. Product launch rentals

. Promotions by companies seeking to promote consumer goods
More often than not, multiplexes earn lot more from other revenue sources as compared to box
office collections. However, due to the role of "pun" creator that the movies play in this scenario,
overall returns are highly correlated to box office contribution. Most multiplex projects break even at
an occupancy rate of 40-45%.

This figure may vary as per the maintenance standards of various theaters and the revenue streams
running parallel to it. Real estate is the major cost component and a strategic resource for the
multiplex business. Typical built up area required per seat is around 30 sq. ft. and average no. Of
seats per screen are around 250 - 400.
Although much smaller ihan traditional iheatres in a screen to screen analysis, multiplexes often
command higher collections and space efficiencies due to the following reasons:

. The element of choice of movies available to the consumer

. Premium pricing possible due to ihe total entertainment platform

. Multiple revenue streams hedge the risks associated with movie performance

Most of the initial multiplex projects started in the major metros due to the availability of larger
catchment areas. However, a recent trend in multiplex operations has witnessed the proliferation of
multiplexes into non-metro urban centres of the country. The driver for this phenomenon is a
combination of lack of quality entertainment options in non-metro cities together with a growing
consumer base and disposable income available for entertainment The primary targets in this list
include Pune, Baroda, Indore, Ahmedabad and Jaipur. Maharashtra, with its attractive tax sops for
multiplex development and operation is likely to get a lion's share of these projects. Multiplexes in
Mumbai Metropolitan Region (MMR) will get a 100 percent exemp Uoll for four years while in the
rest of Maharashtra the exemption period will be five years.
These projects will be entitled to a number of facilities including stamp duty relief (if located outside
the municipal limits), power at the industrial rate for- five years etc.

Space planning in real estate £Or a multiplex will include decisions regarding parking space, theatre
seating space, retail storefronts, and promenade space. With increasing competition, peripheral
issues like approach road, property maintenance and upkeep and overall beautification of the
premises will create additional pressures on the cost equation. However, in order to maintain
their premium pricing multiplexes will need to investin a host of non-revenue generating activities
as well. Considering the complexity of real estate issues that operating a multiplex can involvet the
use of sophisticated models of space planning and facility mix becomes imperative to derive the
maximum returns per square foot of built up area. But as ticket prices face upward pressures with
modernization of existing theatres and the proliferation of multiplexes, the question is, "Are we onto
too much of a good thing?" With the rising number of cineplexes on the ground fast attaining a
critical mass, the key to success would definitely lie with the fustmovers of the trade.
CHANGING FACE OF CINEPLEXES

With the invasion of satellite channels, cinemas are attracting fewer crowds. Many are
therefore converting to multiplexes to woo audiences back.

THERE WAS a time when films were the only form of entertainment. Going to the cinema
in large numbers was a way of life. But, with the advent of satellite channels, all that
changed. Now, people prefer to watch films in the comfort of their living rooms.

This phenomenon meant many theatre-owners of the city had to think of ways and means to
bring audiences back to the halls, like converting their theatres into multiplexes. And some
of them seem to have succeeded.

The Sathyam complex was perhaps one of the first to convert into a multiplex. Quite a few
innovations were introduced by way of a sophisticated sound system, comfortable seats,
snack stalls, concept-based marketing strategies for new films and so on. A few others like
Abirami theatre too are in the process of upgrading their facilities.
With the revenue generated through the box-office at all all-time low, many cinemas found it
virtually impossible to run the show. Halls such as Alankar, Wellington, Paragon, Plaza, Eros and
Sun, once landmark buildings of the city, gave way to commercial complexes. As for the Anand
complex, while Little Anand where films such as "Aradhanau ran for two years, continues to screen
movies regularly, the main hall has been partially converted into a marriage hall.

What do theatre owners have to say about the changing face of cinemas?
For a film, sound and tight are of paramount importance. Nowadays, people prefer to sit and watch
movies in their homes. Moreover, classics are being screened on different channels everyday, which
means screening classics at a cinema is no more feasible. Also, most of todays films lack a good
script Upgrading of cinemas has become necessary to lure audiences back. Out of six films, which
are released, ortlyone rUI1S successfully. For people to come to the cinemas in large numbers, films
need to have a good story, narrated effectively. If a cinema has 1,000 seats, only3oo come in to
watch movies these days. If the capacity is SOO, then it becomes 60 per cent Under the
presentcircttmstances, it is better to have cinemas with about 300 to 400 seats. Abirami theatre is
going to be restructured as two halls, with a roof top theatre, a restaurant, a large car park, a
shopping mall, eat outs and other amenities. Also, nowadays, not many women_ once a large
percentage of the audience, come to the cinemas as they can watch serials and other programmes on
television.
VCR, cable 1V, a wide choice of channels - all these have dealt a blow to cinemas. Going to the
cinema is no more a pleasurable experience. Parking problems, traffic jams before and after shows,
consmnt ringing of cell phones... After a show is over, a minimum of 30 minutes is needed to clean
the place. Noon and matinee shows suffer, as more and more women prefer to sit in the confines of
their homes, watching serials. So what is the answer? Multiplexes, for one. Also, cinemas need
to improve infrastructure such as providing more parking space, with possibly separate driveways
for entry and exit cleaner toilets and better amenities which would ensure a 'comfort zonal for the
viewers. They have to ensure cinema watching is a pleasurable experience, not a painful one
THE MULTIPLEX REVOLUTION IN INDIA

I The Multiplex Revolution underway is changing the concept of cinema theatres in

: India. India represents the most active, robust, progressive market for theatre I
I equipment anywhere in the world.

I Multiplex projects well funded and ambitious on a scale comparable with the best
.
in the world, are not only on the drawing boards of existing multi-cinema hall
_ complexes, but also in the corporate boardrooms of the Indian entertainment industry. There are
major multiplexes incorporating concessions, luxury seatings, acoustics and computerized ticketing.
The entertainment industry is the fastest growing industry in India. There is a major leap in demand
in cinema sound equipment, thanks to the ongoing multiplex revolution, though late, but now in full
swing in India. Since 2000, more I than 600 multiplexes are being planned in India. The screen count
in the region is I rising primarily due to the addition of multiplexes. India ranks second in the
number of screens (theatres) in Asia Pacific. In 1996, the screen count was 13,100. And it is
projected that by 2005, the number of screens in India would grow to 21,000. The multiplex
revolution in India is compelling the cinema exhibition industry to upgrade their single screens into
multiplexes.
Identifying The Cash Cow

State governments have begun to realise the revenue-generating capacities of multiplexes, as

entertainment tax and sales tax are state taxes. Maharashtra, for instance, has offered
extremely attractive sops to would-be developers. Multiplexes constructed in the Mumbai
Metropolitan Region will get a 100-percent tax exemption for four years, while for the rest of
Maharashtra the exemption period is five years. These projects will also get facilities such as
stamp duty relief (if located outside municipal limits) and power at the industrial rate for five
years. Typically, the multiplex model is built around a primary anchor - movies. The revenue
flow, however, does not

centre on a single anchor. The income-generating channels in a multiplex may include box-
office collections, rent from display systems, restaurant rentals, food and beverage
collections, product launch rentals and promotions by companies.

In multiplexes, the other revenue streams are often larger than box-office collections, but
movies are the main pull of such complexes. Hence overall returns are correlated to box-
office contributions. The primary reason for the popularity of this business model has been
the escalating cost of movie distribution. Multiplexes act as a hedge, with multiple revenue
streams around self-owned content.

Allover the world, major movie production houses and media conglomerates, including 20th
Century Fox, Paramount, United Artists, Columbia-Tri star Sony and Warner Bros, operate
multiplexes
THE NEW BOOM

Multiplexes as consolidated entertainment centres.

That's the new boom sweeping urban India. But, scratch the surface and there's a bunch of
anxious marketers. Catalyst takes a look behind the scenes.

Its Showtime, folks. Take your pick from 'rocker technology' backed stadium seating, no
obstruction viewing, plasma wall-ta-wall screens, Xenon projection technology screening,
digital surround sound with Dolby and DTS technology, interlocking projection, fibre optic
lighting roofs, and more. If you're wonder_ng what we are referring to, it's about the 'finer
aspects of movie watching'.

Recent months have been witnessing a new kind of phenomenon sweeping urban India. And
it's to do with new age entertainment that couldn't get slicker. In other words, consolidated
entertainment centres in the form of movie theatres, restaurants and shopping arcades - all
under one roof. Industry estimates project that on average, 1,000 new screens are expected in the
next few years and that the cost of developing entertainment complexes of about 50,000 sq. ft. works
out to anywhere between Rs 15-20 crore.
 Inox Leisure, the diversification venture of the Inox group with interests in leasingI and finance,
and chemicals among others, is already in the thick of things in the I organized cinema
exhibition industry. Inox Leisure's mission: “To establish a corporate face in the cinema
exhibition industry.” Observes Shishir Baijal, CEO, Inox
.

Leisure Ltd, "Inox will bring about more transparency and professionalism to the I Indian cinema
industry. II The group plans to invest Rs 200 crore in setting up a series of multiplexes across the
country. While two Inox multiplexes are already operational in Pune and Baroda, Mumbai, Kolkata,
Bangalore, Hyderabad, Chennai and Gurgaon will follow. In all, 12 properties of Inox multiplexes are in
various stages of completion, and are expected to be OPerational by 2004-end. The Inox multiplex in Pune
already claims an average occupancy of 65 Per cent.
WL.1j1A_ 1fIJIIM_

The Delhi-based Satyam Cineplexes is investing Rs 80-85 crore in its Cineplex venture in
Delhi alone, and by the time you read this story, Satyam would have lifted the wraps on its
first four-screen, 40,000 sq. ft. multiplex in the Capital claimedly the largest multiplex in
North India. Next year, Satyam proposes to venture into Mumbai and Chandigarh, and add
another two multiplexes in Delhi within 18 months' time.

The two-month-old 3Cs (Competent Cine Court), floated by the Rs 550-crore Competent
Group of Companies, includes a 325-seat auditorium, and a food court comprising six
specialty restaurants under one roof. Competent Group's Chairman and Managing Director,
Raj Chopra, claims that the 3Cs auditorium is already over_hooting an occupancy nite _f 6'0
percent. "Since research shows "that globally, 42-46 per cent entertainment seekers combine
food and cinema, our business model is on a sound track," he says. Investment in 3Cs: Rs 20
crore.
The Competent group is planning to replicate its 3Cs model with a siIDilar cineplexcum-food court
in Delhi, followed by Lucknow and Amritsar.

The De1hi-based Priya Village Road show (PVR)is planning a pan-India presence beginning with
Mumbai and Bangalore, and intends to increase the number of its movie screens from 12 now to- 50
by 2004. A budget of Rs 100 crore has been allocated for the expansion. On the immediate agenda is
a seven-screen multiplex currently under construction in Gurgaon.

Real estate giant DLF Ltd has formed <I new company, DT Cinemas, for its multiplex venture. An
invesbnent of Rs 150 crore will be pumped in over 12 months for this venture. The group has
announced that it will set up nine multiplexes beginning early next year. According to DLF Group
estimates, at least 3.5 million film enthusiasts are expected to visit-these DT Cinemas annually.

Then there's Pride Circuit Citi in Pune, positioned as the country's first InfoTech and electronics man
in Pune, spread over 30,000 sq ft. Pride Circuit-Citi is a venture of Pride Housing and Constructions
Pvt Ltd. Other big names in the news for similar reasons include Essel Group's E-City Entertainment
(I) Pvt Ltd, the Videocon Group and Aerens Developers & Engineers Ltd.
WHY THE BOOM

So, why the sudden interest in the burgeoning cinema exhibition market?
.
The boom is very developer-oriented because retail and entertainment go hand
in-hand the world over. India is just awakening to the fact. While population has increased
across States, the numbers of theatres haven't. Also, existing theatres haven't really upgraded
and there have been few corporate players here.

The concept of a multiplex together with a shopping mall and other entertainment facilities is
relatively new. Merging cinema with retail, coupled with focus on customer service, presents
great opportunity to provide the best 'out of homel entertainment.

The era of big cinema is out thanks to the satellite boom, rampant piracy in the CD industry
and rising infrastructure costs.
Industry analysts point out to tllatent demand for destination entertainment" in India. According to
industry data, per cap:ila visit to a theatre per annum in India is about 5.5, against two in Europe,
three in Canada and five in the US. And if it's larger-than-life experience that will draw crowds,
marketers are not leaving any gaps unplugged.

Take Satyam, which is now exploring options for tying up with internationaJ cinema retail system
manufacturers for state of art 'concession stands' to ensure no queuing and better food experience.
Efforts are being made to provide box-office tele-reservations can centres, onJine ticket purchase,
automatic ticket dispensing through A TMS and SMS ticket booking. And, each Inox property
employs international architect firms TK Architects of Kansas, USA and Walker Architects of New
Zealand, for design and construction.
POLICY FORMULATED ON MULTIPLEX THEATRES

The policy regarding the setting "up of the multiplex theatres and conversion of the existing cinema
halls into the multiplex theatres. The scheme, patterned on the multiplexes in the metros across the
country, will allow the multiplex theatres to have three or more separate theatres within the same
cinema with each theatre having a seating capacity not less than 100 seats. Besides, the cinema halls
will also have shopping arcades, restaurants, games and cyber cafes besides the public space, a
notification of the administration said here.

Under the scheme, "The setting up of the multiplex theatres and conversion of the existing cinemas
into multiplex theatres, scheme, 2000", the multiplex theatres could set up either by converting the
existing cinema theatres or by fresh construction with the prior approval from the Urban Planning
Department No concession in the entertainment tax shall be allowed to the multiplex theatres as
compared to the cinema theatres.

"The multiplex theatre shall be allowed the freedom to fix entry ticket prices of 80 per cent seat in
each theatre by linking the same to the marketcondilions. For the 20 per cent seats, the licensing
authority shall be competent to fix the entry ticket prices. Ticket prices once so fixed shall remain
unchanged for six months. The prices fixed by the licensee shall be notified to the licensing authority
as and when revised.

Once this starts, viewers will have -movies to choose from at one place itself. The show timings will
be staggered in such way that a movie begins every 30 minutes thus allowing flexibility to viewers,
who can adjust their visits according to the movie schedules. This will stagger the parking patterns
also as people will keep coming in and going out.
 Certain conditions for the setting up of the new multiplex cinemas.

Out of the total floor area ratio (FAR), excluding the basement, parking.. utilitiesJ service area at
least 20 per- cent shall be used for public space, including circulation area and toilets. The
co1l11ilercial area in the multiplex theatres shan not be more than the area under the cinema halls
and the projected rooms.

And for the conversion of the existing hallsr the total seating capacity of the multiplex theatres shall
not be more than that of the existing cinema halls and it shall not be less than 75 per cent of the
sanctioned seating capacity. An additional FAR up to 50 per cent of the existing FAR shall be
allowed subject to payment of the conversion charges.

The conversion charges for the area under commercial activity (shopping purposes) will be Rs 800
per- square feet and for the area under- entertainment activity, including restaurantsr games and
cyber cafes, Rs 500 per square feet And for the area under office usage it would be Rs 400 per
square feet while for public space Rs 100 per square feet.

Each case for converting an existing cinema into the multiplex shall be examined for the adequacy of
services and for conforming to the town planning norms. Additions and alterations shall conform to
the building rules, the Fire Safety Rules, the Punjab Cinemas Regulation Act and other rules and the
use of basement and other area designated, as parking shall not be changed.

A person seeking conversion shall make an application to the Chief Administrator_ Any aggrieved
person may within 30 days of the date of the communication to him of such order may prefer appeal
to the Adviser to the Administrator

In case of infringement of any condition of permission" the Chief Administrator}: may" after such
inquiry as deemed necessary" cancel the permission giving reasonable opportunity of being heard.
Government Policy

The Government has decided to give 100% entertainment tax exemption in the first year & 75%
exemption in the second year & 3rd year to multiplexes with the investment above Rs. 1.5 crore"
having a minimum of 3 screens. The total amount of exemption is limited to the cost of buildings
including interiors" for film exhibition purpose only" excluding cost of land.

Cost! Profit Analysis

The cost of 'Multiplex' as above is envisaged at Rs 625lakhs" as per detail below: -

Particulars Amount (Rs. in lakhs)

Land 200.00
Building 125.00
Plant & Machinery 150.00
Misc. Fixed Assets 85.00
Prepaid Expenses 25.00
Interest During Construction. Period 40.00
Total 625.00
Means Of finance

Equity 250.00

Loan 375.00

Total 625.00

Profitability Ratio

Break Even Point 35%

Internal Rate of Return 18%

Avg. DSCR 1.5

Payback Period 4yrs

The cost component for communications links may increase by a factor of 7 - 10% if the company’s
acting as a back office at the end for overseas client.
 THE FINE PRINT...
(PROBLEMS FACED BY MULTIPLEX THEATERS)

Scratch the surface, however, and there are problems galore. Multiplexes are a high-risk business. In
India, typicany a mnltiplex would break even at 40 per cent occupancy against developed markets
where the break-even happens even on 10 per cent occupancy. This is because of heavy
infrastructure costs, duties and so on.

Another worry that multiplex owners have to grapple with is related to software. What if no good
movies are made next year? Software is one area we have no control over.

The industry is facing a shortage of software. If a film flops, everyone connected to the film suffers
huge losses. Governments need to playa bigger role to further the industry's cause by easing out
heavy taxes. More State Governments offering entertainment tax breaks and better quality of cinema
is what would pun in the numbers.

Over 1,000 multiplexes with between 150-400 seats are expected to be built in the
next few years. The impetus for the multiplex boom has been provided by
entertainment tax incentives introduced by state governments. The central government
has also announced that operators setting up multiplexes in non-metropolitan areas
will be eligible for a deduction of 50% of their taxable profits for five years.
 POINTS TO. BE CONSIDERED WHILE SETTING UP OF MULTIPLEX

Family entertainment center at Cochin

Project Background

The project for construction of a Complete Family Entertainment Centre (FEC) comprising
multiplex-cum-shopping complex in Cochin is targeted towards filling up an entertainment vacuum
in the commercial hub of Kera1a.

On an average, Indians visit cinema halls 6-7 times a year, compared to 3-4 visits a year by a person
in the US. With poor faci1ilies and inadequate amenities in over 12,900 cinema theatres across the
country, they are able to attract only 5000 million admissions a year, while the potential could be
much more. Better cinema faci1ilies rould directly result in attracting larger family audiences.

300

261

25Q

2OIl

150

100

50

0 2001 2QO2£ 2000£ 2OO4E 2iI1O5E

Ycsif
Indian entertainment industry revenue estimates

As per a study undertaken by FICO, the current size of the films segment in India is " estimated
at 18% of the Rs.130 Bn entertainment industry. This segment is estimated to grow at 25% per
annum to a size of about Rs.40 billion by FY2005.

The study further concludes that future growth of this segment will be driven by expansion in
exhibition infrastructure and development of multiplexes, amongst various other reasons. The
success of family dramas like "Humaapke hain kaun" in

Hindi and /I Alai payuthe" in Tamil has indicated the potential of family audiences in generating
mega revenues. The concept of films appealing to all segments of audience as a whole is fast picking
up. This is against the trends of last few years, when movies targeted select audience groups.
MUL TIPLEX THEA TRES

1Vith increasing pressures of work in Jarge cities, the idea of frequent weekend visits to leisure
facilities in and around the city with the family is becoming increasingly popular. The lifestyles in
Indian metros is reflecting the trends seen in western countries. An outing with entire family
essentially covers leisure & movies in addition to shopping. Itis here that multiplexes Appear,
combining other leisure avenues with cinema and shopping. Multiplexes hold potential with their
offering of #something for the entire family" instead of just movie theatres. As a direct consequence
of this, single leisure avenues are struggling for financial viability, as opposed to multi attractions
that offer variety to people with varying tastes.

)"Iultiplexes earn revenues from multiple streams and this acts as a hedging option over the box
office collections. However, the returns still are dependent on the movies, because it is the pun that
the movies create that draws people towards

multiplexes.

The current situatioI1 in Kerala film Industry where 60 to 70 films are being produced a year is in
stark contrast tb 19708 figure of about 125 films. The gap has been filled up by English, Hindi &
Tamil movies. There is also a treI1d of I1iche movies being made that does not get proper exhibition
opportunities in large theatres.

The rising distribution costs and higher risks involved are forcing theatre owners to screen safer
movies, which are big budget blockbusters with bankable stars. These films owing to higher
probability of their turning out box-office bits, edge out local movies in the race for best theatres.

ii'i,_;e:us offer a solution here too. With low seating capacity theatres :in their ;"'__ they provide
exhibition avenues to multiple movies simultaneously. This
MUL TlPLEX THEA TRES

includes local, art & niche movies. Globally_ major movie production houses and media
conglomerates have entered into multiplexes to further cut risks around self owned content. It
includes the likes of 20th Century Fox, Columbia-TristarjSony & Warner Bros.

Tourism and entertainment have been accorded the status of an Industry by the Central Government
This has paved way for institutional finance and tax concessions for multiplex projects across the
country. The idea of multiplexes has caught on nationally.

Various state governments like Maharashtra" Gujarat" Tamil Nadu and Delhi realizing the potential
of multiplexes, have taken lead in introducing incentives for boosting investments. Multiplexes have
thus received a spurt in these States in the

last couple of years.

Industry experts opine that 300-400 screens would come up across India in the next 2 years, owing
to this impetus provided by State Governments. Most of these screens would come up in metros with
sizeable urban populace. The screens would

be targeted at fue family audience and fue high-income segment urban audience.

Cochin, a metropolis in fue making, is also reflecting trends in lifestyles as in other major
metropolitan cities of India. Wifu growth in service sector, the city population is also becoming
increasingly cosmopolitan in character reflecting diversity of cultural tastes.
MUL TlPLEX THEA TRES

Kerala with its mature local fllm industry and Cochin with its urban, young outgoing crowd
having comfortable disposable income offers a great potential for developing such a complete
Family Entertainment Centre. Such entertainment centre would also emerge as major attractions
to tourists and citizens of other cities if unique facilities such as a Large Format Fibn Projection
theatres or Snow City were added to the same.
Location

m Cochin

Cochin, the commercial capital of Kerala, is the next metro in making. The city has an
International airport and one of the busiest ports in India. It is

connected to all parts of the country through road and rail links. The

excellent connectivity and commercial activities has day-migrants coming in from nearby
areas too. Being the hub for IT in the state, the inhabitants include :Toung software
professionals with

varying backgrounds & origins.

The city has a cosmopolitan mix of almost 0.65 million (within corporation limits - 2001
census) people as its citizens. Suburbs combined, the population for Greater Cochin
exceeds 2

MUL TIPLEX THEA TRES

million. The citizens with varying tastes and occupations ensure ready demand fur various
commercial initiatives like fast food chains & recreational places.
MUL T/PLEX THEA TRES

With the yearly tourist arrivals of over 1.3 million people (Dept of Tourism, 1997), the ci1y has
ample scope for additional tourist-cum-enterta1nment complexes. In addition, Cochinis the entry and
exit point for most tourists in Kerala and is hence

best suited to house such projects. The ci1y (with suburbs) presently has only about 20 cinema halls
with an estimated seating capacity of 18,000 catering to such a vast populace. Most of these cinema
theatres do not offer llthat" extra attraction for cine goers to come flocking for movies.
MUL TIP LEX THEA TRES

II Marine Drive

The entire stretch can be looked upon as a concentrated commercial corridor of the city. The
main Shanmugham Road has Luxury apartments, elegant hotels and Office buildings located
on either side. The stretch running from Taj Residency to The High Court has within it, bases
of almost all branded wears in the country, fast food restaurants in the city and some of the
biggest shopping malls. The stretch attracts the entire city crowd to itself in the evenings,
some for shopping reasons and others for just a stroll on the walkway overlooking the
backwaters. The entire expanse running parallel to M G Road -the lifeline of Cochin- has all
big brands of consumer products and food joints scrambling for space. Broadway runs
parallel to the east of Shanmugham Road and is the cityls oldest and busiest shopping streets,
for clothes and spices.

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MUL TIPLEX THEA TRES

The bridge under construction by GIDA (Goshree Islands Development Authority).. once ready,
would directly connect the Marine Drive area to the islands of Bolgatty, Vypin & Valarpadam.

The site is located in the extended stretch of Marine Drive. The plot is on the undeveloped reclaimed
area. Service roads have been constructed for- easy access by vehicles. The plot faces CMFRI &
BPCL plots across the road.

Total 10 acres of land is owned by Greater Cochin Development Authority" (GeDA) in the area. 3
acres of plot next to the bridge under-construction by GIDA, has been identified for the project
Multiplex
MUL TIPLEX THEA TRES

Plot Location And Characteristics

Overlooking the entire Cochin Harbour and located along the backwaters, the site is
most suited for setting up a Family Entertainment Centre. Located along the extended length
of Marine Drive, which already attracts tourists, shoppers and outgoing locals, the project is
sure to attract both tourists and local citizens seeking 'to spenci an enjoyable evening or
weekend. The distance of the plot from the nearest railway station (Cochin Central) is only 2
kIDs.

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MUL TIPLEX THEA TRES

Project Components - Proposed Development

The first of its kind multiplex in Cochin could primarily be divided into 2 zones, namely direct
revenue generating zone and the Non/ Low revenue generating zone. The complete project is
expected to be taken up in a single phase and Completed wiihin 15 months.

Details of the zones could be:

Zone I: Revenue generating zone
The primary revenue generating area in the multiplex could have the following facilities.

Four screens for movie exhibition. In line with current trends, the theatres could be planned with
seating capacities ranging from 150 to 400. Every theatre could be planned with different capacities
as per a detailed plan. The total seating capacity could be kept around 1300 seats.

One of the theatres could be planned as a Large Format Film Projection (LFFP) theatre. This theatre
could be planned with seating capacity of 400-500. Setting up an LFFP theatre would involve
additional expenses but is expected to attract tourists and curious patrons apart from regular cine-
goers.

International/ Branded fast food joints and Cafes within the complex Space for Bowling alleys &
Gaming zones having virtual reality games Music & Gift Shops An arcade of Retail/ Departmental
stores Tourist Information Centres, travel agencies and other facilities serving tourists
MUL TlPLEX THEA TRES

The revenue generating area should at least be a multiple of 65-70 sq. ft/ cinema seat for
giving the entire complex a spacious look and feel. Depending on the layout plan, the total
built-up area could vary from 90,000 to 1,50,000 sq.ft across various floors. In many cases
within India, about 50% of the running expenses are recovered

from commercial space in the complex. This also reduces the required nrinimum
\

occupancy rates in the cinema halls for such projects to be viable. Ltis observed that
most multiplex projects break even at an occupancy rate of 40-45% in cinema
theatres.

The second zone in the multiplex would be: Zone II_ Non/Low revenue generaUngzone
This is an area which is not expected to generate sizeable revenues for the multiplex but is essential
for efficient operations in the complex and locality. A parking facility with capacity designed for one
4 wheeler per 4 cinema seats and one 2 wheeler per 2 cinema seats could be planned. Additional
space could be kept based on the estimate of non-movie goers thronging the multiplex. The numbers
could

vary" but have been recommended based upon the experience of other multiplexes across
the country. Provision for future expansion and demand is also considered while arriving at
these figures.

Some mechanism has to be kept for avoiding parking by non-visitors to the multiplex. The approach
roads, upkeep and beautification of the premises would add to operational cost. However, to attract
crowds and charge premium pricin_ the multiplex would need to spend on these non-revenue
generating activities as well.
MlJk. TlPlEX THEA fRES

Demand Analysis

The demand analysis identifies the probable catchment segments and their contribution to the
overall revenue generation. Keeping in mind the experience else wheret conservative
estimates have been used for assessing the project feasibility. A low occupancy figure of
around 50% has been used for theatres on an average round the year. This translates into
around 21500 viewings in a day. This could be considered realistic in light of the prime
location of the proposed multiplex in the city.

Multiplexes world over have attracted tourists already in the city and generated additional spending.
With Kerala already a tourist destination, multiplexes could generate additional stay and revenues
from these tourists. The presence of LFFP is

expected to attract a large number of the 1.3 million tourists who visit Cochin annually.

Ernakulam district with a total population of 3 million has an estimated population of about 1.4
million persons in the age group of 15 to 40. With Cochin being promoted as a major hub for
Information Technology Enabled Servicest persons with high disposable income in this age category
is expected to increase. Also, Cochin is emerging as a major centre for other services - health,
education and

tourism. Young professionals are a target segment for the project.

Cochinand its suburbs with 20 cinema theatres having seating capacity of about 18,000
suggest need for additional space for cinema exhibitors.
MUL TlPLEX THEA TRES

The cosmopolitan young crowd offers market fur English, Malayalam, Tamil and Hindi
movies. This offers varieq choice for screening and ensuring a minimum occupancy.

Shanmugham Street is estimated to have more than 35 eating joints. Food joints in the multiplex can
therefore be expected to do brisk business.
MUL TIPLEX THEA TRES

Revenue streams

The possible income streams for the multiplex would be;

The box office collections of movies exhibited

This would by far be the main revenue-generating avenue. The conections from movies are
expected to rake in more than 60% of the total revenues.

PromotionaJf Display systems

An average of about 2500 cine goers are expected to come over to the multiplex in a day.
With such a high number of footfalls in the theatre, a sizeable amount of revenue can be
expected. Various mediums like product displays, Neon display I hoardings in the complex,
on screen promotions, sponsorship of launches events

etc. can be leveraged for revenues. Newer concepts like printing of sponsors name on the tkkets
eouId be further used to enhance revenues

Rent from the shop owners fbank ATMs etc.

I
I Out of a total 200,000 sq. £t of built up area, more than 62,000 sq. £tis planned to be
I constructed and leaBed out as commercial space. The rent rates in Marine Drive are

amongst the highest in the city. With premium branding of the complex, a sizeable chunk of
revenues are expected to be generated by rent from shop owners.

Auxiliary services
Additional revenue is expected to come from auxiliary services like Parking facility, SID
/pca facility in the complex. A parking fee of Rs. 10 per four wheeler and Rs. 3 per two-
wheeler is generally charged in cinema theatres. The same Figures can be used for
calculating revenues expected.
Fmancial Structure

MULTIPLEX THEA TRES

Out of a total built up space of 200,000 sq. it, the division in 2 zones is

Revenue generating area 130,000 sq. ft includes cinema theatres, food courts, shops, free ways etc.

Low! Non revenue generating are(J 70,000 sq. ft includes parking lot For a spacious look and fee}, a
space of 30 sq. It ! cinema seat has been used for calculation of cinema theatres' area. 35 % of the
built up area in the complex .is kept for walkway,

open galleries, common spaces, etc. A parking space for 260 four wheelers and 650 two wheelers
has been considered in the plan. It will ensure a hassle free movements and would take care of future
requirements.

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Cinema Hal 4 39,000

Food Court 1 10,000
BaNtingi Ga 3 21,000
zones
Shops 25 30,000

Gahriss 1 Walkways 30.000

Parking ipSOi 10,000

Totat 2005000

As per the Industry standards a built up cost of Rs. 1400! sq ft has been

considered for the revenuegenerating zone (including walkways and galleries). A

construction cost of Rs.

650! sq ft .is considered for the other areas like Parking etc. The total construction cost.is estimated
at Rs. 228 million. 70,000 Parking space
39,000 4 Cinema Hall 200,000 Total 30,000 Galleries! Walkways 30,000 25 Shops 21,000 3
Bowling! Gaming zones 10,000 1 Food Court.

Additional investments would be needed in construction of the LFFP structure and furniture! fixture
amongst others. The LFFP screen and equipment is expected to
MUL TIPLEX THEA TRES

cost Rs. 130 million apart from construction of the dome of about Rs. 10 million. Total land
earmarked for the project is 1.5 acres. The total cost of land is estimated to be around Rs. 90 million
at the cost of Rs. 60 million/ acre. A debt: equity ratio of 1.5:1 has been considered for the project.
The cost of land is also considered as part of the debt portion of the capital. Land can be obtained
from GCDA on deferred payment basis (for one year) and then repaid over a period of two years.
Interest rate has been considered @ 14% for the land componentr while debt rose from the market@
13 % for construction has been assumed to be repaid over 7 years.
MUl. TlPl.£)( THEA TRES

Cash Flow Analysis

Though LFFP screen has a long term potential for generating revenues.. the cash flow analysis is
computed for a lO-year period. Financial analysis for the project has been considered under two
scenarios:

Scenario 1: Three screens are regular theatre screen, while one is LFFP (Capital cost = Rs. 468
million}

Scenario 2: All four screens are regular the_tre screens (Capital cost = Rs. 331 million)

Under both scenarios.. the total built-up area is considered to be constant The capital cost includes
cost of land, building and equipment for the cinema theatres. An initial marketing budget of Rs. 2
million for promotion of the multiplex has also been considered. Other operating expenses
considered are:

Maintenance cost of Rs 3/ sq ft for the entire complex is assumed, with a 5% increase per annum
fuereafter.

About 35 employees would be required for running the operations of complex. The wage bill is
expected to be Rs. 3.6 million in the first year of operation. Office expenses are expected to take up
another Rs. 0.6 million wifu 5% escalation in costs per annum.

Electricity xequirements are expected to cost Rs. 4.8 million at the rate ofRs 6/ unit. This is expected
to remain unchanged for the first 5 years of operation.
MUL TlPLEX THEA TRES

lMAX royalty is estimated at 7% of the revenues from the theatre. Moreover distributors share in the
screening of other movies is taken at 35% of the gross

revenues.

The annual marketing cost is likely to be Rs. 1 Million. A 5% increase in costs is expected
thereafter.

Income tax exemptions that could be available have not been considered, while a five-year tax
holiday has been considered :for entertainm:enttax.

The revenue streams over ten years are expected as under. A standard rate of 5% increase
per annum is assumed in the sponsorships, on screen promotions and other non-screen
revenues.

A standard ticket rate of Rs. 120 for the LFFPtheatre could be charged. The high fee for LFFP as
compared to regular theatres is acceptable around the world owing to the unique experience thatit
offers. Such fee could also be charged as LFFP attracts touris1s and curious locals. Six shows a day
in LFFP theatre could be organized with most of these movies being of low time duration -less than
two hours. An average low occupancy rate of 45% is considered :for cash flow analysis, as this
would be higher on weekends and lower on weekdays. Average ticket rate for three other

regular theatres is taken at Rs. 75. The figure has been estimated after taking into, consideration the
ticket rates in multiplexes elsewhere in- the country and in city theatres. A nonna14 shows in a day
is projected for these theatres, with an average occupancy of 55%.

Shops and commercial zones in the multiplex are expected to fetch Rs. 20/ sq_ it as per the going
rates in the vicinity. The premium image of multiplex also justifies this rate. With an assured inflow
of a sizeable crowd, an enthusiastic response for

occupation of these commercial spaces is expected.

MUL TlPLEX THEA TRES

The on-screen promotions are expected to fetch in Rs_ 500 per commercial per show. In
addition, the slides are expected to fetch Rs. 50 per slide per show. Multiplex screen would
attract premium over other screens. Combined together, it is

estimated to fetch more than Rs. 16 million annually. Product displays and other incomplex
promotions/ sponsorships are expectedto fetch in another Rs. 2.4 million. The parking charges are
expected to bring in more than Rs. 0.6 million per year.
MUL TlPLEX THEA TRES

Government Regulations
The construction is next to backwaters and would attract GRZ II restrictions. CRZ II

is defined as - The areas that have already been developed upto or dose to the shoreline. For this
purpose, 1/ developed area" is referred to as that area within the municipal limits or in other legally
designated urban areas which is already substantially built up and which has been provided with
drainage and approach roads and other infrastructural facilities, such as water supply and sewerage
mams.

The restrictions imposed by the Central Ministry of Environment & Forests are:
(i) Buildings shall be permitted only on the landward side of the existing road (or roads approved in
the Coastal Zone Management Plan of the area) or on the landward side of existing authorized
structures. Buildings permitted on the landward side of the existing and proposed roadsl existing
authorized structures shall be subject to the existing local Town and Country Planning Regulations
including the existing norms of Floor Space lndex (PSI) IFloor Area Ratio (FAR):
Provided that no permission for construction of buildings shall be given on landward side of any new
roads (except roads approved in the Coastal Zone Management Plan), which are constructed on the
seaward side of an existing road.

(ii) Reconstruction of the authorized buildings to be permitted subject to the existing FSI/F AR
norms and without change in the existing use.

(ili)The design and construction of buildings shall be consistent with the surrounding landscape and
local architectural style. No major restrictions are expected for multiplex development at the
location, given the development in the surroundings. The location has in its vicinity construction of
commercial & residential complexes up to 8-9 floors. GCDA would consider FAR requirement for
the specified plot up to 4.5. GCDA would approve ihe building plans for the proposed project.
MUL TIPLEX THEA TRES

Incentives

GovemmentofKerala would soon evolve a policy framework on this sector; clearly specifying all
available incentives and State Government support Specifically, for this project, the State
Government would also consider speedy approvals of all the necessary clearances and investments
in linkage infrastructure such as road, water

and electric power. Incentives provided by other States such as Maharashtra, Gujarat, Haryana, Uttar
Pradesh and New Delhi for exemptions in entertainment tax, waiver on building tax etc. would also
be considered by Government of Kerala. For the purposes of providing tax incentives, 'multiplexes'
would be defined as entertainment centres that include:

};>- A minimum of four screens"

» The screens put together should have a seating capacity of at least 1,000 » Entertainment
centres like video parlors, bowling alleys etc.
);>- Food court offering multiple cuisines and
» Shopping avenues.

In addition the complex

Should at least have 50% of the revenue generating area for services other than cinema.

Additional attractions like Large Format Film Projection (LFFP) theatres, a Snow city or other such
facilities may be included.

The probable incentives to be considered would include:

100% Entertainment Tax exemption in the first five years and 75% exemption £or the sixth &
seventh year. Waiver on the one time building tax. No change in the rate of electricity charged for
the first 5 years of operations of multiplex.
MUL TIP LEX THEA TRES

INOX'S Pune multiplex a major success

The Inox multiplex Bund Garden Road, Pune

The first Inox complex was launched in Pune at Bund Garden Road on MaylO, 2002.

Inox Leisure has made its foray into the organized cinema exhibition industry by developing,
constructing and managing multiplexes across India.

The prime reason for choosing this opportunity is the latent demand for destination
entertainment in India.

Inox Leisure will operate on two models. In some locations, INOX will invest and develop
both the multiplex and the synergistic retail areas around it, while in some other metros,
INOX Leisure will be destination anchor in select mall developments, thereby integrating,
entertainment and retail needs.
MUL TlPLEX THEA TRES

Inox Leisure Ltd has pumped in Rs 37 crore in the Pune property. Funded by the company through a
debt equity ratio of 1.5_1, the project is also backed by ICICI. Inox Pune is situated in the heart of
the city
MUL TlPLEX THEA TRES

In Pune, Inox follows the developer model and has aJso tied up with lifestyle brands - Barista,
McDonald's and Pantaloon to offer a mix of movies, food and shopping. Inox is also introducing it
own food counter under the Refuel brand. The multiplex opened with the premier of Pantaloons
maiden presentation 'Na Hum Jaane Na Turn.

The company's game- plan is to launch 100 screens in India by end of 2004. Capital cost
estimates for a project would vary form Rs25 to Rs50 crore per property. Shisbir Baijal,
CEO, Inox Leisure Ltd, hopes to make the Inox multiplexes 'the best out of home
entertainment destination".

Inox is a fundamental shift in the way consumers watch movies. Here a movie will start every 30
minutes and ten titles can be showcased in a day. The key to success will be location and Inox will
be positioning itself in prime locations and offering a more-than-justwatching-dnema experience.

This marks the beginning of the diversification journey of the Rs400 crore Inox group into
the entertainment business. Inox Leisure Ltd. is the subsidiary ofGujarat Flurochemicals and
will develop, construct and manage multiplexes across India.

Inox Leisure Ltd will initially focus on the western region in western region in the firstphase, which
will call for mvestments of Rs175 crore.

Phase two will see Inox going to Bangalore, Hyderabad, Calcutta and Nashik with an investment of
Rsl00 crore. The company would either opt for the developer format where it invests in the entire
project or an anchor tenants format where

property is leased out and managed by Inox. The payback period for these investments will
be four to five years.
MUL TlPLEX THEA TRES

_Jea.'fme ADLABS
Shringar Cinemas: Maximizing Customer Convenience

Shringar Cinemas opened Fame Adlabs, a 5-screen multiplex in Mumb_ with a total seating
capacity of 1,430, in APril 2002. Its goal was to achieve a sustained growth in occupancy
rates at its 5 cinema halls, and establish a loyal customer base. Shrlngar Cinemas developed
an Internet based business: customer e
commerce site, FameCinemas.com, based on Microsoft .NET technology.. A unique service
is, customers can gain direct access to an rolei'active seating plan, to reserve tickets of their
choice online, up to an hour before a show. At present, the site has 6,000 registered users.
Online tidcetsales as a proportion of total sales are expected to increase to 20 per cent.
Overall improvement in productivity is estimated at around 40 per cent. Other gains have
been increased occupancy rates, customer convenience, and improved service efficiency.

Company Overview

Feature film distributor.. Shringar Films.. diversified into the film exhibition business, establishing
Shringar Cinemas in 2002. The company aims to establish a chain of contempmaTy multiplex
cin.ema theaters in Mumbai. The first of these, Fame AdJabs, was IaW1ched in April 2002, in
Andheri, Mumbai Fame AdJabs is a multiplex of 5 cinema screens, with a total capacity of around
1,430 seats. Shringar Cinemas has an employee size of around 100.
MUL TlPLEX THEA TRES

Situation

During the past few years, there have been fundamental changes in the film exhibition industry. The
key feature of these changes is the higher degree of control and flexibility the customer has on what
feature films to view, and where and how

to view these. "Audiences now have the choice to view entertainment products from the
convenience of their homes, with the availability of delivery technologies such as cable
television, DVD players, and the Internet There are a number of

feature films of different genres being released today, targeted at well-defined audiences. Also,
consumers are becoming more specific in their preference of films,n

observes Shravan Shroff, CEO, Shringar Cinemas.

In response to these changes, Shringar Cinemas wanted to provide its customers maximum
convenience in the process of going to view a feature film. It aimed to address a fundamental
problem that audiences have - uncertainty about availability of seats. Shringar Cinemas' goal was to
achieve a sustained growth in occupancy rates at its 5 cinema halls. It also wanted to establish a
loyal customer base, which it believed was the key to increased sales revenue.

Solution

Previously, Shringar Cinemas offered its customers the option of booking tickets over telephone, in
addition to the traditional box office counter. However, itcould not scale up its call center operations
rapidly, to respond to sudden, rapid increases

in demand for tickets. Shringar Cinemas wanted a technology solution that co:uld easily handle
unpredictable peak demand situations.
MUL T/PLEX THEA TRES

It decided to provide customers a unique ability to reserve seats of their choice online, using an
interactive seating plan. Also, customers would be able to access the 24-hour online option to book
tickets, up to 1 hour before the show time.

Solution architecture

The company worked with Idealake Information Technologies Pvt Ltd., its technology partner, to
develop and implement the solution. The solution involved the integration of a ticket reservation
engine implemented on FameCinemas_com,

with various core systems at the ba_k fmd, which include its existing industry standard ticket
booking system, Viafq; an elep:ronic payment gateway; and a ticket delivery system. To widen its
base of potential customers, the reservation system on FameCinemas.com has been integrated with a
leading portal in India. The users of this leading portal can access the online film catalog, and the
ticket reservation

system at FameCinemas.com.
 MUL TlPLEX THEA TRES

Description of the solution

The main features ofth_ solution are:

. Online ticket booking:: The key elements of the online booking process are an

interactive seating layout, a 24/7 count down ticker, and a secure online credit card payment system.
The interactive seating layout displays all the seats reserved for online booking; from which the user
can select- seats. This data is submitted to the database along with the user's personal and payment
data. The user can collect the tickets any time after the booking from Fame Adlabs. The ticker
displays real time status of ticket availability live, for each of the films mnning at Fame Adlabs.

. Site administration: This is used to update cinema schedules for a particular

week, and inmate and close online ticket booking for a particular movie. Also,
the information layout of the web site can be altered dynamically, according to

priOrity .

. Movie schedule: Users can view a movie schedule for an entire week, and also the 'next change' films
of Fame Adlabs, for which online ticket booking is available. Weekly schedules of films are
delivered to registered users via e-mail.

. Customer profiles: The web site has a facility to capture data on users I personal preferences related

to films. Based on this information, selective information on films can be sent to users, who have
registered at the web site via e-mail.

Development with .NET technology

Jdealake Information Technologies decided: to build the solution based on Microsoft .NET
technology as, in its view, the attributes of .NET matched the requirements of the application. The
attributes include ease of development; ease of use and
MUL TIPLEX THEA TRES

convenience; ability to leverage existing sys_ to provide high functionality to customers; and a lower
development time.

Idealake Information Technologies selected .NET over technologies such as J2EE1 as it expected the
cost of developing applications to be much lower with .NET due to its support for standard business
languages. Another reason was that device

independent presentation tier logic had to be writtenl as the application would be accessed by users
coming from channels other than PCs.

Customer access

lit
Ticket booking and reservation

lit
Electronic payment

lit
Delivery

Externals
\ndependen\
1+ agencies' banking
portals. gateway

... Fame reservation .. Fame banking .. Fame's delivery

Fame website
"'" engine .... gateway "'" mechanism

,
Corporate Vista booking
..
 intranets engine

Alliance partners
(in film exhibition
..
business)
MUL TIPLEX THEA TRES

Support for innovation

The solution has enabled Shringar Cinemas to innovate and modify traditional practices in the film
exhibition industry. For instance, the company has done away with the practice of pre-printing
tickets, which complements its shorter cycle of film show scheduling. At present, the company
schedules films every week. Technically, itis possible to do :film show schedutingonce every 2-day
period
Shringar Cinemas also introduced a variable pricing model for specific show timings for certain
films, an funovation targeted at making film viewing more affordable to specific audience segments.
Its use of Internet as a marketing medium is an attempt to expand its geographic catchment area. If
the-uncertainty related to ticket availability is eliminated, then customers will not mind travelling a
greater distance.

Increased business agility

The company is able to take proactive measures to increase occupancy rate, due to
availability of real time status of ticket reservation information. It uses the Internet to
promote awareness about films among customers, by communicating interesting

information about the fi1ms.

It is also able to alter program schedule at shorter cycles, in terms of what:films to exhibit, and
changes to show timings. Trend information on ticket sales is made available to film distributors and
the Shringar Cinemas' program managers, to enable them to take faster decisions on scheduling of
films. This helps us minimize

missed revenue opportunites.

MUL TlPLEX THEA TRES

Rapid time to market

Shringar Cinemas was able to develop and implement the solution in 45 days, mainly due to the
strength of Microsoft's .NET technology in leveraging existing

systems. Microsoft's support of open standards and technologies ensures operability across
heterogeneous platforms, systems, and technical environments. It

is also in a position to implement new service concepts, in compressed time frames, due to the open
and modular architecture of the solution.

Technology benefits

The system is scalable, and hence can effectively support Shringar Cinemas' high growth plans for
its business. FameCinemas.com would be able to service the requirements of three new multiplex
cinema theaters, which Shringar plans to add in Mumbai The technology infrastructure has the
necessary capacity to meet situations of peak demand increases for tickets, whenever a blockbuster
film is released. The system has the capacity to handle the network load that the rapid

surges in demand can generate. The system has been very stable, in terms of ensuring a high level of
availability for our customers.

Future Plans

Shringar Cinemas plans to introduce more mobile device options for customers to access the online
ticket reservation system, such as laptop computers, mobile phones and PDAs. It is also working on
increasing ticket dispensing points for customers, such as petrol pumps.
MUL TIPLEX THEA TRES

FameCmemas.com will be integrated with more horizontal portals and large corporate intranets, to
widen the base of potential customers. An alliance with

outstation cinema theaters is also bemg planned, to provide tickets as part of a roamingl service to
their registered cinema-goers visiting Mumbai.
MUL TlPLEX THEA TRES

SINGLE SCREEN CINEMAS VS MULTIPLEXES

Maharashtra cinemas threaten indermite strike

Cinema halls in Maharashtra have threatened to close indefinitely from October 16 after talks
between theatre owners and the state government over tax breaks and
other facilities failed. Banded together under the Cinematographers and Exhibitors Association of
India, more than 1,200 single-screen cinemas in the state are pressing for a number of concessions in
order to survive tough competition. Nestor D'Souza,

president of the association, said talks with state Revenue Minister Shivajirao Nilangekar failed as
the government's response to their demands were not satisfactory. The association's earlier threat to
strike in May last was put on hold after Chief Minister Sushilkumar Shinde promised to look into
their demands. Theatre owners said they withdrew their agitation for 90 days to enable talks with the
government. They said they were promised that entertainment tax in Maharashtra would be slashed
by five percent while service charges on airconditioned halls would be hiked by only one percent
Other demands included electricity at concessional rates and abolition of show tax imposed by
municipal bodies. They also want that property tax paid by them be delinked from box office
conections as wen as exemption on taxes fof film hoardings in theatre premises. According to the
owners, hefty taxes have resulted in the number of theatres in Maharashtra falling from 1,181 in
1997-98 to 988 in 2O02-O3.Besides, the

government1s policy to encourage multiplexes has also affected their earnings. Multiplexes don't
pay entertainment taxes for the first three years and are eligible for a 75 percent exemption for the
following two years. Under the policy, each multiplex complex in Mumbai should have a minimum
of four theatres with a total seating capacity of 1,250. In smaller towns, however, multiplexes may
have three theatres seating a total of 1,000 viewers. Though the law does not permit multiplexes
from pricing tickets lower than the single-screen halls, the economics of
MUL TlPLEX THEA TRES

the film industry are heavily loaded in favour of the new exhibitorsr the theatre owners' lobby said.
Most of the new films don!t attract enough viewers while multiplexesr with smaller theatresr often
sport a full house. At present Mumbai alone has nearly 30 multiplex complexes with more slated to
open in the next few months. Several of these have cOme up in theatre premises converted to
shopping cum entertainment complexes. More than 40 cinema halls have dosed down in Mumbai
due to high operating costs.
MUL TIPLEX THEA TRES

SINGLE THEATRE MODERNlSATlON

How are we to manage everything else? The second factor is, once the single theatre is not abl_ to
continue, what are we going to do with our property? The present situation is that a cinema property
cannot be converted into a commercial or a residential property.

CS: I think you should fight to change this rule. These archaic rules of the municipality have
to go.
Chinoy: That is what we have been asking from the government for a long time. It has been
going on and now we are going to step up on that Because it is a only a matter of three years.
that the single theatre owner will be there, considering the new multiplexes comiIJg up. After
3 to 4 years the single theatre owner just may not be able to survive. That will be the
scenario.

CS: Are there any dishibution problems. Are the theatres suffering becau_ ot
t'-' ",----.

the distribution set up?

Chinoy: Good pictures will always attract the audience. H the product is not good, even in
multiplexes itwill notwork.

CS: In Indian cinema, is there something wrong with the system of dishibution of Hindi
fi1ms whereby you feel that because of the wrong system certain majority of theatres are
suffering because of lack of equal opportunity in getting the proper movies. Is there a nexus
developing or is something wrong with the dishibution system?
Chinoy: Presently this kind of discrepancy amongst the distribution sector is not there.
Maybe there are some cases where, maybe a distributor does not get along with a particular
cinema owner, but those are stray cases. But generally distributors
MUL TlPLEX THEA TRES

will go to cinema theatres if they feel that the business outlook in that cinema theatre is good. There
is nothing to do with the distribution sector.

CS: Now what else do you want to say about this new policy of the Maharashtra
government. Do you think it is progressive? I think it is very progressive. I feel it was
required. I think the Maharashtra government has come out with this policy two years, too
late.
Chinoy: All that is fine. What we are asking is that, the old cinema theatre owners

must also be given some benefits. Firstly they should reduce the entertainment tax and secondly they
should be allowed to convert their theatre property into any commercial or residential complex or
into any kind of a situation.

CS: I don't agree. I think it should be restricted to a multiplex. It should only be allowed to
become a multiplex with other entertainment options like they have abroad. You can have
games and other things and it should be made into a tall building, if necessary with IUde bit
of shopping and may be 5 or 6 screens with 200 seats and 150 seats and 100 seats, but not as
you have just said Mr. Chinoy.. The days where you could have 1200 people watching a
Hindi movie together are

gone.
Chinoy: You are wrong in that point because the multiplex policy very clearly states that there
should be a minimum of 3 screens per multiplex and Bombay should have 4 screens per multiplex.
Total capacity of 1250 seats in Bombay, 1000 seats elsewhere. They should have foyer for artwork
etc. etc.

I am trying to tell you that the single theatre owners do not have enough space to make three screens
of three hundred seats. You are only talking about one metro, but metro is only in Bombay. What
about the rest of Maharashtra? In Singapore and Hong Kong they have FSI of 5 and 6. We can't go
up towards the sky because the
MUL TIPLEX THEA TRES

FSI Index in India does not allow that Victory has only 15000 sq. it What can you do with only that
much?

Most existing theatres other than Bombay are less than 800. In Pune, only 2 or 3 theatres have more
than 1000 seats, rest are all 800 and less.

CS: Okay even if you take 800 seaters" it's a large property, and you can always build it upwards.
Chinoy: No, no, no. It is not possible. The FSI Index is not available. Well actually the whole long
standing rules have to be changed because the cities are just mushrooming in a big way and to give
additional FSI to smaller properties would cause a lot of environmental problems. That matter the
environmentalists will not allow, and thatis a matter that I cannot discuss upon.

CS: May I ask you, if you have any idea about the total collection of entertainment tax in
Maharashtra. Actually we are more concerned with the whole country.
Chinoy: The entertainment tax is strictly got to do with the state government. I am not fully
Aware of it. You can get the figures from the CEAI or the TOA i.e. the Cinema Exhibitors
Association or the Theater Gwners Association.

CS: Are you saying that on Rs 17" 45% is what the exhibitor gets to amortize the cost of air-
conditioning, projection, lamps ere?
Chinoy: That is right That is what an exhibitor gets to support his whole running cost. Now the new
multiplex policy is aimed at promoting the new multiplexes. The existing theatre owners, who have
been paying taxes and supporting the government for the revenue from the inception are now being
sidetracked and not
MUL TIPLEX THEA TRES

given any benefit. If the old theatre owners have to exist, they have asked for a relief by way of
reduction in entertainment tax, if not a total exemption, which should be at par with the multiplexes.
MUL TIPLEX THEATRES

Conclusion

In the early years, the single screen enjoyed strong acceptance in the market since they
provided the consumer with films as a source of entertainment outside their homes.
Cineplex and other major exhibitors expanded aggressively throughout India. These single
screen locations did suffer from limitations such as small screens; flat floors that hindered
the view of the screen, cramped seating and often less than ideal cleanliness and
consumer reaction slowly changed.

With the subsequent development of home entertainment centres and the early release of
films by Hollywood distributors into the home video market, theatre attendance started to
decline sharply throughout India. In order to attract the consumer out of their homes on a
consistent basis, it became apparent that movie theatres must do more than just show a
film; they must provide a truly unique experience. The consumer was demanding a more
complete entertainment experience with more palatial surroundings where the building itself
became an integral part of the experience.

The entertainment industry is being redefined for the next century. Cineplex will invest to
create the ultimate in state of the art Multiplex entertainment centers across India. The
greater visitor appeal of these new multiplex facilities is expected to result in increased
attendance and ultimately increased profitability
for the movie exhibitor. The multiplex concept was what the audience was looking for.
People come to eat, play games in new virtual reality entertainment areas, and visit with
friends and ultimately see a film or films although the film is now only a part of the
entertainment experience. The Multiplex has become a happening or a gathering place,
operating virtually 24 hour a day. Theatre visitors now choose the theatre first and the film
second. Guests now are very educated and they demand
an overall quality experience.
MUL TIPLEX THEA TRES

From the standpoint of the exhibitor, the success of the Multiplex will lead to increased
profitability. In order to increase theatre attendance, the exhibitor must influence the patron
to visit the theatre multiple times throughout the year. With the concept that if you give the
visitor more to do, he is more likely to come to the theatre and to stay longer, these new
Multiplexes are expected to increase repeat visitation in India. This increased attendance
equates to increased box office revenues and many other incomes too.

Thus we conclude that inspite of the problems faced by multiplex theater there is a vast
scope for it in India.
BffiUOGRAPHY

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