By Vritti Gandhi

Edited by Anandita Malhotra, Senior Editor, The Indian Economist

It all started with Inox Leisure Ltd. acquiring Satyam Cineplexes Ltd. for Rs. 240 crore, moving on to Carnival Films Pvt. Ltd. acquiring Broadway Cinemas – multiplex business of Housing Development and Infrastructure Ltd., and then the Mexican Multiplex chain Cinepolis taking over Fun Cinemas owned by the Essel Group.

‘THE’ DEAL

Now, Carnival Films has procured Big Cinemas, a division of Reliance MediaWorks Ltd., reducing Reliance Capital’s debt by about Rs. 700 crore by way of this transaction. A company that started out its operations with just four screens in Kerala, it has huge aspirations of ‘making cinemas synonymous to Carnival’, says Shrikant Bhasi, chairman, Carnival Group.

IMPLICATIONS FOR THE SECTOR
Considered to be one of the largest deals that the country’s multiplex business has ever witnessed, and rightly so, this acquisition is definitely the beginning of a new era in the exhibition sector.

As Carnival moves up the list to the third largest multiplex operator in India (after PVR Cinemas and Inox Leisure Ltd. respectively), the increase in its number of screens is certain to increase the bargaining power that these multiplex operators hold with the film distributors, and would thus help them gain a larger share of the box office receipts.
No, that is not all. With the rise in the number of screens, smaller filmmakers too will be able to distribute their movies with ease.

All of this, because Reliance wants to achieve its stated objective of “focusing purely on its core financial services businesses, significantly reducing exposure to non-core investments in the media and entertainment sector, and reducing overall debt,” the parent firm said in a statement. This deal has consequentially resulted in three main advantages, among others. Firstly, Reliance gets to focus on its core activities. Secondly, its debt gets reduced. And lastly, the increase in the bargaining power of the multiplex operators leads to a boon in the exhibition sector. The acquired and the acquirer, both stand at an advantage.

IMPLICATIONS FOR THE CONSUMERS
Over the years, the consumer base that the multiplex business witnesses has been rapidly expanding. The obvious immediate result is the rocketing prices of tickets and of food and beverages. Moreover, as multiplex operators own a larger number of screens after acquisition, their power to influence the prices rises, leading to an even greater profitability for the procurers. This price rise, however, should be carefully undertaken. What with home theaters gradually replacing the cinemas, an unreasonably high price does increase the possibility of a shrink in the consumer base.

The huge Reliance-Carnival deal has furthered the exhibition sector consolidation, the need for which was felt by the multiplex operators for quite a while now. As Carnival aims to increase its number of screens to 1,000 by the year 2017 and continues to drive its competitors, this sector is certainly in for an upward trend in the years to come.

Posted by The Indian Economist | For the Curious Mind