Karnataka's ₹200 movie ticket cap: Is it feasible?
What's the story
The Karnataka government's proposal to cap movie ticket prices at ₹200 (including taxes) across all formats, languages, and theater types is creating a stir. While the move, announced as part of the state's budget allocation, is being hailed as a pro-public initiative, it could disrupt the economics of multiplexes like PVR-Inox. The draft notification is currently open for public feedback and has already drawn strong reactions from the film industry.
Revenue implications
Karnataka contributes 10% of PVR-Inox's revenue
Karnataka accounts for over 12% of PVR-Inox's screens and around 10% of its box office earnings. The average ticket price in the state is around ₹260. According to the Economic Times, a flat cap at ₹200 would mean a direct 30% cut in ticket-level revenue for the multiplex chain. This could reduce PVR-Inox's overall average ticket price by 3.7%, decrease revenue by 2.2%, and lower EBITDA by 1.8% over FY26-28, according to Elara Securities.
Business impact
Price cap disrupts multiplexes' revenue model
Multiplexes operate on a delicate balance of ticket revenue, food sales, ad revenue, and rent. The proposed price cap would eliminate the flexibility to charge more during peak demand periods, jeopardizing this balance. This is especially true for premium formats like IMAX, 4DX, or recliner seats, which are expensive to build and operate. A blanket cap at ₹200 makes these formats unviable instantly.
Expansion concerns
Cap could deter investors from pursuing multiplex expansion
Karan Taurani of Elara Securities told the portal that the price cap could deter investors and franchises from pursuing multiplex expansion. "Lower returns will cool investor and franchise interest. Expansion plans, especially in second-tier cities or in premium screens, will slow down (or maybe stop)," he warned. This could lead to fewer screens, limiting options for producers and distributors, and negatively impacting local employment in theater operations.
Historical context
Similar attempt in 2017; current proposal could have wider impact
This isn't Karnataka's first attempt at imposing a price cap. In 2017, the state tried to impose a similar ₹200 cap, which eventually went to court. The High Court allowed theaters to charge more for premium formats, providing some relief. However, the current proposal could have wider implications if other states follow suit.