Sumant Bhargava entered single screen, traditional cinema exbihition business and rapidly changed over to multiple screens. He focused on tier II and III cities. Sumant's Stargaze Entertainment Pvt Ltd is making rapid inroads upcountry.Vikalp Dubey chatted up with Sumant to get a glimpse into this business. Excerpts:
When and how did you start up?
Stargaze Entertainment was incorporated in early 2008 and we started our first commercial cinema with a single screen cinema in Delhi in end June 2008. Thereafter we have gradually built 'Glitz Cinemas', our multiplex brand, into a 22 screen profitable company. Glitz Cinemas is a chain of multiplex cinema focused on emerging cities of India, conventionally called the tier-II & III cities across the country.
I entered the film exhibition industry almost 8 years ago with Satyam Cineplexes, at a time when the industry was just beginning to get a foothold in India and all operators were focused on the top 6 cities in India. The success of the multiplexes in these cities clearly established the need for quality exhibition infrastructures and a realization that better film exhibition infrastructure could lead to an exponential increase in box office revenues. And since films do form the soul of entertainment options across India and more particularly in the smaller cities, I realized the potential such cities offered with increase media awareness and disposable incomes.
This opportunity prompted me to set up my own cinema company in 2005 where I used the existing single screen infrastructure, converted it into a 2 screen cinema across 4 cities in Rajasthan. While the model was successful, I realized that it wouldn't be sustainable given the rapidly changing retail landscape in the country. Malls would soon dominate over standalone cinemas.
With a strong media conglomerate like Network 18 desirous of testing this domain, I was offered an opportunity to set up this business afresh in the new retail landscape with Capital 18 as investors. Glitz Cinemas now operates 22 screens across 8 locations with almost 5,500 seats per show and entertaining more than 3 million viewers.
What is cost of setting up a new multiplex?
While the cost of setting up a new multiplex may vary depending upon the scope of the works shared between the Mall Owners and the operators, our cost of building a new multiplex today stands between Rs 1-1.25 crores per screen.
What makes the entertainment business tick today?
In the markets that we operate in, films are a predominant form of entertainment for majority of the population. There is huge demand for Bollywood movies and big Hollywood movies dubbed in Hindi. Also, there is huge demand for regional content in these cities. However, patrons in all cities are very conscious of the quality and service standard offered and will only pay if there is a significant value offering. In addition, with the continuous improvement and innovation and cinema exhibition technology like Digital, 3D, Gold Class, etc. we have to continuously upgrade our offering to the customers.
How did you raise the money to start this venture?
Stargaze Entertainment is solely funded by Capital 18 Fincap Pvt. Ltd. the investment arm of the Network 18 group.
Why are you focused on tier II and III cities?
For many years, films have always been the predominant form of entertainment in such cities. However, in the last decade, the quality of cinema exhibition infrastructure has been gradually declining while the demand for filmed entertainment has been consistently rising. The multiplex operators have been focused on catering to the demand in the top 10 cities of India, leaving these markets underserved. Now that there is significant retail infrastructure development beyond these top 10 cities, we have had the opportunity to service this demand and have build this business focused on the opportunity created by the lack of quality cinema exhibition infrastructure in these cities.
Cities / towns with a population in excess of 1 million people (district population of ~2.5 million) and strong cinema viewing demographics serve as our core target markets.
What's a typical audience profile?
In the cities that we operate our screens, our audience comprises the entire spectrum of society since film viewing is the only source of family entertainment. However, our core group is SEC B, 18-35 years.
How expensive is the experience of watching a movie at Glitz, and how can you justify it?
The average ticket price across our screens is Rs. 140. With ticket prices ranging from Rs 60 for morning shows to Rs 400 for GLITZ Lounge, across class and days, we are able to cater to the entire spectrum of the audience and achieve an average ticket price in line with industry benchmarks, i.e. cinemas across the country including the top 10 cities in India.
At Glitz Cinemas, our endeavor is to provide exactly the same cinematic experience as any of the leading cinema brands in the top cities; in terms of quality of picture, sound, seating comfort, ambience and services. Even the ubiquitous Gold Class experience delivered in GLITZ Lounge is compare to the very best. This offering of comparable international quality cinema experience is the foundation for our higher than expected ticket prices in these cities.
Who are your key competitors and what gives you the edge over competition?
As a part of our business strategy, we attempt to be the first multiplex in a particular city at least in the new retail formats (malls). Hence, in such an environment, or closest competition is the other cinemas operating in the city. However, we believe that we need to garner a greater share of the family entertainment wallet in every city that we operate our cinemas.
Please tell us more about Glitz Lounge, Glitz Max and Glitz 3D.
Glitz Lounge, Glitz Max and Glitz 3D are the differentiated product offerings under our brand. Glitz Lounge offers the ubiquitous Gold class experience with flat-bed reclining seats and personalized service. Glitz 3D is the 3D compatible projection providing us a capability to screen 3D content and Glitz Max is our large-screen format keeping in view the larger than life cinematic experience.
How are you doing? The growth rate and base lines. When do you expect to break even?
The journey for Stargaze Entertainment has so far been quite fulfilling. We are a profitable company at EBDITA levels and have been growing into a position of strength with every new cinema. At a company level, we will deliver profits this year. While we have been operating for only three years and our business is growing more than 100% YoY. But more creditable is the fact that we have been able to grow cinema admissions YoY on a same cinema basis.
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What are your expansion plans?
We plan to add 28 new screens by end of March 2013. We will add 8 new cinemas over the next 16 months across locations as diverse as Muzaffarnagar, Jaipur, Bhiwadi, & Yamunanagar.
Is Stargaze planning to venture into fields other than cinema?
Not yet.
Any stumbling blocks?
On the screen expansion front, our new cinemas are governed by the availability of retail infrastructure, i.e. malls in the cities we wish to operate and more importantly the ability of the developers / builders to hand over the cinema locations to us in time. Hence, our expansion is very closely linked to the health of the real estate sector.
At an operating level, three key variable affect our performance and growth - (1) Quality of content (2) Taxation & (3) Talent As long as both Bollywood and Hollwood continue to provide innovative content that the customers are willing to pay for to watch in cinema screens, the business will continue to be healthy and grow. While, Hollywood is already up the curve on experimenting with 'experiential' content with increasing number of films being screened in 3D, Bollywood is still catching up.
We as an industry are subject to numerous taxes in addition to the innumerabale licenses which have lost their significant in this era of technology. Cinema admissions are subject to Entertainment Tax which in some state is as high as 60%, and F&B is subject to VAT. In addition, our payouts to the builders / developers are now subject to service tax and there is also talk about the film sharing with distributor and producers being subject to tax. In such a heavily taxed environment and lack of clarity on some of the newly introduced taxes, the industry will be dealt a double blow.
Skilled manpower is affecting the service quality specifically so for us because ii is in very limited supply in tier-II & III cities. There is a general lack of English speaking, presentable young people in these cities. Also, people in these cities do not perceive working in a cinema a dignified profession. On the contrary, the industry has immense potential and growth opportunities for the young and the same needs to be popularized in a way.
So, how have you dealt with these challenges?
As you realize almost all of these are extraneous factors and there isn't much we can do about it. But we have an internal development and training system, wherein we are continuously grooming talent for future growth. We are upgrading cinemas to 3D to ensure we offer the new 'experiential' films to all our audiences.
Author of this piece, Vikalp Dubey is an artist and a writer based out of New Delhi. He can be contacted at vikalpdubey@gmail.com
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