In today’s Finshots, we talk about PVR INOX’s experimental marketing strategy and see what’s in it for the cinema house.

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The Story

In 2022, 12 crore people watched at least one movie in the theatre in India. That’s almost 10% of the population.

Seems like a big number, no?

But it was still 16% lower than the pre-pandemic levels. People weren’t going back to the movie halls fast enough. And theatres are hustling hard to get these numbers up.

For instance, remember the recently viral social media post about exorbitant food and beverage (F&B) prices at theatres? The moviegoer complained that their popcorn and soft drink cost as much as a year’s Amazon Prime subscription. And PVR-Inox was quick to respond. It announced an unlimited refills on its popcorn and beverages deal during weekends. It also rolled out cheaper food combos starting at ₹99. Maybe they felt that if higher F&B prices were proving to be a deterrent, special deals on weekdays could be an attractive proposition.

And it didn’t stop there. A couple of days ago it announced something quite interesting — a  monthly movie subscription called PVR INOX Passport. Pay ₹699 and you can watch 10 movies a month, Monday to Thursday with some strings attached, of course.

Now on the face of it, these plans sound like a steal for customers — if you consider that in FY23 the Average Ticket Price (ATP) at PVR INOX stood at ₹240, signing up for the monthly subscription means that you could end up with 70% cheaper tickets overall! Who wouldn’t love that? Add cheaper F&B to the mix, and it gets better. And it sounds like a loss-making proposition for PVR Inox. They seem to be giving up all the potential revenue with these massive discounts. But it might just be the cinema chain that comes out on top with these deals.

For starters, consider the typical occupancy levels on weekdays. Analysts peg it to be a measly 17%. Which means that less than 2 seats out of 10 are filled for a movie. Now, for PVR Inox, the rest of the 8 seats signal lost potential. They don’t make anything out of it. Yet, there’s a fixed cost of screening the show. So they’d rather find some way to lure more people onto the chairs. There’s no extra cost. There’s just extra revenue where earlier there would’ve been none. And analysts estimate that occupancy levels could rise to 25% with this deal.

And remember, it’s not just the tickets that drive revenue for the company. F&B is a massive contributor too. PVR INOX’s annual report suggests that moviegoers spent 51% of the ATP on F&B. So more moviegoers means an increase in the spend per head (SPH). Just look at other big names in the theatre world ― AMC US the world’s largest multiplex chain, Cinemark US, Cineworld US and Cineplex Canada see moviegoers spending upwards of 60% of their ATP on F&B. So maybe these tricks from PVR will see their numbers inch upwards too.

Then let’s consider the cinema subscription models itself. While it might be the first of its kind in India, it’s tried and tested globally. For instance, there’s US-based AMC. In 2018 it dipped its toes into the movie subscription model and its CEO pointed out some interesting bits shortly after. You see, when customers buy a subscription, they try to squeeze it for all its worth in the first couple of weeks. But soon, the excitement dies down and there’s a drop in their theatre visits. So while the pass gave access to around 12 movies a month, the average pass holder only saw 3 movies a month in 2019.

Now, if you apply this trend to PVR INOX, that is, if subscribers end up watching 3 movies a month, they still end up paying almost the same price per movie as its current ATP. So, the multiplex isn’t really losing potential revenue.

And there’s one more thing. Something that AMC’s CEO called the ‘bring along metric’. When subscribers come to watch a movie, they don’t often come alone. They bring non-subscriber companions who pay the full ticket price. And for AMC, subscribers helped boost this revenue while also increasing F&B spends by a whopping 250% within just a year of its subscription launch.

So maybe it’s numbers like these that pushed PVR INOX to launch India’s first movie subscription model too. And not to forget that a subscription model typically ensures upfront cash and a steady stream of revenue. Businesses love that.

Anyway, it’s just a trial for now. There are only 20,000 passes that are being handed out. And we’ll just have to wait and see if the initial numbers are enough to convince the PVR INOX management if they’ve hit upon a goldmine of a money-making idea or not.

Until then…

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Correction: An earlier version of the story incorrectly stated that the bottomless refills was introduced on weekdays. We regret the error.

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