Multiplex stocks have taken it on their chin ever since the lockdown started. Both PVR and INOX have corrected 60% since the lockdown and are now at their 52-week lows. What is driving this fall?
Lockdown is hurting
In the last 2 months, all the multiplexes have been shut down due to COVID-19. There is also no clear visibility on when these multiplexes will reopen. It is also feared that even after they open, the footfalls may be thin due to worries over social mixing. The problem for the likes of INOX and PVR is that each day their theater idles; they lose crores in the form of zero flows. At the same time, fixed costs like salaries, maintenance, license fees and rentals have been adding on. That has put multiplex stocks under tremendous strain.
But, there is an OTT angle too
Over the top (OTT) refers to the highly popular platforms like Amazon Prime, Netflix and others that bring high quality content right into your drawing rooms. While they have been popular for some time, their threat to the likes of PVR and INOX has become obvious in the last couple of months. Now there are seven films that are being released directly on Amazon Prime. If more producers adopt this model, then multiplexes may lose out on the lucrative first week sales, which is normally the profit driver for the multiplex companies.
Why PVR and INOX are upset
Clearly, the four big names in the movie exhibition business; PVR, INOX, Carnival and Cinemax are visibly upset. They fear that if more producers queue up to release their moves directly on the OTT platforms, multiplexes will lose out on the lucrative first week goldmine. Not all segments are so pessimistic. Some of the more successful producers like Karan Johar and Rohit Shetty have refused to bite the OTT bait. They would rather prefer to wait for the lockdown to end before releasing their films. Insiders at PVR also believe that OTT can never recreate the multiplex experience. Hence, it may at best be an adjunct but not a replacement.
Let OTT evolve
OTT players like Amazon and Netflix have deep pockets and that could be the real challenge for multiplexes. Also, they have been building subscribers at a rapid pace. But that is how evolution takes place. When multiplexes took over 20 years back, they sounded the death knell for single-screen theaters. Most of the theaters survived the assault of video display but could not survive the assault of multiplexes. How the likes of PVR and INOX handle OTT challenge will determine how they emerge post the lockdown. It has never made sense to resist innovation. It would be better for multiplexes to rethink their business models in the post-OTT scenario!