SC ruling on F&B may offer respite to ailing cinema biz

A recent Supreme Court ruling allowing cinemas to set terms for sale of food and beverages inside their premises, is likely to provide respite to theatre owners as F&B contributes 30-32% of overall revenues annually.

Trade experts said this is the only revenue cinemas do not have to share with producers or distributor partners, unlike ticket sales, and gains significance at a time movies aren’t bringing in the best returns.

It is also important considering the massive expenses on rent and maintenance for theatre owners. But, this step may not be enough to tide over the challenges for theatre owners given the fact that films are no longer luring in audiences as much as they did earlier and many find ticket prices unreasonably high and content not compelling. Under such circumstances, F&B sales also becomes impossible.

Four years ago, multiple petitions were filed by activists across states asking for outside food to be allowed inside theatres. The cases were clubbed and the matter was presented before the Supreme Court.

“People come to theatres for an outing and not just to watch a film. The F&B options add to their film-viewing experience. We have always ensured that F&B pricing is affordable so that it doesn’t burden the audience. The contribution of food sales to revenues has gone up for sure,” said Ashish Kanakia, chief executive officer, MovieMax Cinemas.

According to the company’s earning’s release, PVR Cinemas had clocked in F&B revenue of ₹554.2 crore in the first half of FY23, up 3% from the same period in FY20. It was around 32% of overall income. INOX clocked in revenue of ₹274 crore from F&B sales in the first half of FY23, accounting for 28% of total earnings. PVR, INOX and Cinepolis did not respond to Mint’s queries on the implications of the apex court order.

Film distributor and exhibitor Sunny Khanna said there is no doubt that profit margins of multiplex chains on F&B are huge but one must take into account expenses incurred on a regular basis. “Mall rentals for up-market property can be ₹50-60 lakh per month. Plus, they must maintain infrastructure, such as sound and ambience,as well as staff salaries.”

Most multiplex chains invest regularly in upgrading their properties, including technology, seats and other equipment. Many are also eyeing luxury formats with smaller and more plush auditoriums, larger, high-tech screens and customized menus, to lure audiences.

Further, F&B remains the only source of revenue theatres don’t have to share with other entities. While the distributor-exhibitor share keeps changing depending on the individual film, in the first week of a movie’s run, the exhibitor takes a 52.5% share, which changes to 50% in the second week, and 47.5% in the third and so on.

However, F&B sale is directly linked to people agreeing to watch films in theatres. Trade experts emphasize that while many recent films, especially in Hindi haven’t managed to generate enough excitement, high ticket rates are killing chances of small and mid-scale films. The move does not augur well at a time when films are available on streaming platforms within weeks of theatrical release.

“The ruling is a blessing in disguise for theatre chains who spend exorbitant rates on rent and upkeep of their properties. But audiences are slowly maturing and it is their call to decide what they can afford. If ticket rates are unreasonably high, people will not come at all. It is the content that has to lure audiences,” film producer, trade and exhibition expert Girish Johar said.