Multiplexes may see 30-50% revenue drop in Q1 FY2010

MUMBAI: National multiplex chains are likely to see a drop of 30-50 per cent in revenues during Q1 FY2010 due to the on-going no show of Hindi movies according to an analysis by brokerage firm Angel Broking. The strike called by producers and distributors is over revenue sharing terms for movie, which has subsequently led to delay in movie release dates.

Moreover, multiplexes are planning to operate fewer screens per property, reduce advertising and marketing expenses and put fresh recruitment on hold.

Q1 FY2010 is also likely to be a forgettable quarter for multiplexes due to the second season of IPL. Owing to huge popularity of IPL across India and particularly since the matches are telecast at prime time, most producers have shied away from releasing big films during the period. Moreover, the release dates of movies slated for April and May are not yet decided due to the standoff. "Hence, we expect 1QFY2010 to be yet another poor quarter in terms of the movie pipeline," said the report.

The report also adds that the multiplex industry is set for troubled times ahead owing to multiple headwinds, high dependence on content, leading to a stagnation in footfalls and average ticket prices.

FY2009 witnessed a substantial 25-30 per cent drop in occupancy levels for most multiplex operators. While the first season of IPL hit them hard during Q1 FY2009, terror attacks and security issues during Q3 FY2009 kept occupancies low. Weakening consumer spends due to economic slowdown, exam season and a weak movie pipeline only aggravated their woes and ensured another poor quarter in Q4 FY2009 with occupancies reaching as low as 20 per cent. The report adds that, as a result of this, most multiplex companies (except Cinemax), registered a significant drop in their occupancy levels.

However, over the last one month, multiplex stocks have witnessed sharp rally in the range of 35-50 per cent despite looming concerns including lower occupancies and possible delays in handover of properties.

The report added, "Going ahead, we believe a weak Q1 FY2010 (owing to the ongoing tiff and second IPL season) coupled with weakening consumer spends are unlikely to improve occupancy levels. However, we expect H2 FY2010 to be better, though quality of content will remain the key driver for footfalls."

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