Karnataka's ₹200 movie ticket cap troubles multiplexes: Here's why
What's the story
The Karnataka state government's recent announcement to impose a price cap of ₹200 on movie tickets has sent shockwaves across the cinema industry.
The decision, impacting multiplexes and single-screen theaters alike, is viewed as a potential threat to the profitability of such establishments.
Miraj Cinemas's MD Amit Sharma said government intervention in pricing could have long-term negative effects on the industry.
Market impact
Karnataka's movie market crucial for PVR Inox
Notably, Karnataka, especially Bengaluru, is an important market for PVR Inox considering its urban population and entertainment demand.
Abhishek Jain, Head of Research at Arihant Capital Markets Ltd, pointed out that 12% of PVR Inox's revenue comes from Karnataka.
PVR Inox operates 215 screens in the state, 13% of its 1,728 screens.
Jain added that the ₹200 cap will be impactful as Bengaluru contributes majorly to multiplexes' revenue.
Industry concerns
Concerns over pricing cap's impact on film industry
Meanwhile, Girish Johar, a prominent producer and film trade expert, expressed concerns that the pricing cap could harm exhibitors' economics.
"The rentals, the regular upgradation - all these are high-cost elements so whether they will be matched with this pricing has to be seen. There are exceptions for big films in other states."
"Whether this will be replicated in Karnataka is to be seen," Moneycontrol quoted him as saying.
Regional impact
Other southern states have imposed similar price restrictions
Other southern states such as Tamil Nadu and Kerala have also imposed price restrictions to make cinema affordable for all.
While these caps have made movies accessible to a wider audience, they have also affected multiplex profitability, especially for IMAX and 3D.
The Tamil Nadu Film Exhibitor's Association had earlier urged the state government to reconsider ticket pricing due to operational challenges posed by such price caps.
Bollywood impact
Karnataka's pricing cap may affect Bollywood's performance
The pricing cap comes at a time when several recent Bollywood movies continue to underperform at the box office.
Vivek Menon, Managing Partner at NV Capital, said major metro cinema markets such as Mumbai, Delhi, and Bengaluru have average ticket prices exceeding ₹200.
He added the Karnataka government appears to be adjusting ticket prices to match those in other southern states despite Karnataka's smaller movie market size.
Industry adaptation
Ticket price cap could benefit medium and small-budget films
Johar hinted that the government means well with the price cap and wants cinema to become affordable for a larger section of the audience.
He thinks this could benefit medium and small-budget films by bringing in more audiences.
Last year, filmmaker Karan Johar also asked exhibitors to make movie tickets more affordable, saying high ticket and food prices are cinema exhibitors' responsibility.