Cinema Here To Stay, OTT Long Way To Go

Cinema Here To Stay, OTT Long Way To Go

Why Indian people prefer to watch CINEMA in Big Screen rather than OTT platforms?

Cinema is likely to remain popular, given that Indians prefer large screen viewing experience, underscored by differentiated content & lifestyle changes and entry of OTT platforms such as Netflix (2014), Amazon Prime (2016), Hot Star (2015) & Zee5 (2017).

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Domestic Hindi box office collection grew at 15% CAGR over FY15-20 and this momentum is expected to sustain over FY20-22E. This trend has been observed in the US as well as China.

padman

US box office collection grew at ~3% CAGR over CY14-19, and this is despite  the entry of OTT platforms, such as Netflix (1997), Amazon Prime (2005), Hulu (2008) and HBO Now (2015).

China box office collection grew at 14% CAGR over CY14-19, and this is despite  the entry of OTT platforms, such as Netflix (1997), Amazon Prime (2005), Hulu (2008) and HBO Now (2015).

Huge headroom for growth in screen addition

Although India and China are similar in terms of population size (1.3bn vs 1.4bn), China has 2x screen per mn population (8 vs 16). If India were to even double the number of screens, box office collections would reach new highs.

PVR targets adding 80 screens in FY20, bringing total count to 838 screens. Inox Leisure targets adding 72 screens during the same period, bringing the total to 643 screens.

Manikarnika

Differentiated content, another lever for growth

During FY18-20, movies tailored after real-life and historical events had a considerable following: movies such as Padman, Uri, Manikarnika, Gold & Super 30, were instrumental in generating ~40% of box office collections, signaling an increasing preference toward movies with a social message.

New talent meeting success: During FY18-20, new actors released 41 movies vs 30 for yesteryear stars. resulting in a success ratio of 60% vs 29%. With promising content in the pipeline, we expect new talent to outperform the industry with record-breaking box office collections.

Super 30

OTT Long Way to Go

India’s OTT market size is at USD 303mn (Source: FICCI report of 2019) vs Bollywood’s USD 1.38bn. FICCI expects OTT in India to grow at ~23% CAGR over the next five years. Of USD 303mn market size, subscription-based video on demand (SVoD) comprises a mere 18%; this is expected to shoot up to 32%, as consumers increasingly pay for quality content online.

Digital release not yet money making

Around 75% of overall revenue comes from big screen cinema release while digital makes up 13% and the rest from TV & satellite broadcasting. We believe a larger number of movies will continue to be released on big screen to recover high cost of production.

Fragmentation overhang: India has 32 OTT, which include OTT from broadcasters, global tech giants and home-grown versions; however, given the myriad languages (more than 50% non-Hindi), OTT may fragment further with newer launches.

OTT Platforms

Value Picks

Inox Leisure (INOL IN, Buy, CMP: INR 354, TP: INR 490) – INOL has outperformed PVR in terms of average SSG 14.3% (vs 4.0% of PVR), leading to market share gains and expansion in premium screens, driving a revenue CAGR of 20.4% over FY19-22E.

PVR (PVRL IN, Accumulate, CMP: INR 1,771, TP: INR 2,050) – Sustained double-digit growth in spend per head and inorganic expansion in screen addition would drive a revenue CAGR of 15% over FY19-FY22E.

Karan Taurani @ Elara Capital

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