The coronavirus pandemic is forcing businesses to change and adapt fast to the new lockdown reality. In a conversation with CNBC-TV18, PVR chairman, Ajay Bijli made an interesting point about safety protocols once cinema halls again hit first gear. He said that the movie halls might have to put a distance between rows for safety purposes. The distancing of rows will mean that like airplanes, multiplex capacity too will go down temporarily.

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Going forward, two things will dramatically change the economics of multiplexes. As Bijli himself pointed out, entertainment will be the last on the government’s list of priorities as the lockdown is lifted in a phased manner. Also, will people throng to movie halls, given that social distancing is likely to be the norm in the foreseeable future? People stuck at homes are binging on OTT platforms like Netflix, Amazon Prime, Hotstar, Zee5, etc. It may result in a change in taste or choice of going to the theatre and watching a movie.

For the industry to survive, it will need support from other stakeholders (malls, employees) and also from the government in the form of tax concessions. A GST waiver will help bring down ticket prices going head.

History suggests that post the Spanish flu and World War II, cinemas bounced back fast. Analysts point out that while some people will be eager to step out after a prolonged lockdown but there will be a section that will remain more cautions and push such plans till more certainty emerges and/or a vaccine is found.

Bijli also said that PVR is working on a concept called "cinema re-imagined" for the period between the end of lockdown and discovery of a vaccine.

Companies across the board are trying shifting focus on their liquidity positions over their growth plans. Priya Village Roadshow or PVR Cinema is also trying to cope up with the unexpected halt by reducing its fixed costs by almost two-third.

What are the fixed costs?

A large chunk of the fixed cost for cinema halls is the rent paid to mall owners. In the case of PVR, rent and CAM (common area maintenance charges) stand at about Rs 62-65 crore and electricity payouts is another Rs 17 crore. Overall on average, on a monthly basis, there is a fixed cost of Rs 140 – 145 crore a month. To put this in perspective, the company incurred a fixed cost of around Rs 430 crore in the third quarter of the fiscal gone by. Manpower, like all industries, is also a big addition and PVR averages approximately Rs 35 crore a month here.

Steps taken to reduce fixed costs

Employee cost: PVR has announced a pay cut across the board. The senior management has decided to take a 50 percent salary cut until the lockdown lasts. The rest of the organization been asked to take a 25 percent cut. PVR projects that this alone will help reduce fixed costs by about 35 percent.

Electricity, repair, and maintenance: Electricity bills as expected have fallen sharply by 80 percent as cinemas are shut. Repair, maintenance, and other overheads are also expected to go down by roughly about 60-70 percent from the existing levels.

Rental: On the rental front, the force majeure clause will allow temporary suspension. The company has requested its landlords and says that it has received largely positive responses.

First Published:Apr 9, 2020 2:52 PM IST