How OTT is gaining market with PVR & INOX merger

The merger might persuade more makers of low-budget movies to look to streaming services rather than multiplexes for screen time

Multiplex chain PVR announced a merger with another multiplex operator INOX Leisure, in late March. The merger will lead to the creation of the largest multiplex chain in India. The new cinema entity will have the name as PVR INOX Ltd. However, the two big names in the cinema sector, PVR and INOX, will continue the branding. The new multiplexes would bear the name PVR INOX post-merger.

New age of multiplex

The companies aimed the merger at building a profitable theatre business but the catch here is that it will also help the market of streaming services to widen. According to the analysts, this will help streaming platforms (OTT) access local movie content.

To gain a huge market share in India, video-streaming companies opt for unique content as part of their market strategy. Movies are the major attraction of their market strategy.

This market strategy would boost good clients as small to average budget film producers coming to their platforms. This deal would make producers better negotiate regarding PVR INOX.

Benefits to both industries

Aasim Bharde, vice president at DAM Capital Advisors said that streaming giants such as Netflix Inc. and Walt Disney Co.’s Disney+ Hotstar may also see more small- and mid-budget film producers head straight to their platforms, where they will have “better negotiating powers vis-à-vis PVR-INOX,”

Ajay Bijli, PVR Chairman and Managing Director, said in a filing to the Indian exchange that during the COVID-19 pandemic cinema industry was the worst hit. He said this merger would help benefit the industry to survive long and also fight against the capture of digital OTT platforms.

Changed marketing schemes

Talking about OTT players’ preference regarding content timings, Vivek Menon, founding partner at Indian media and entertainment fund NV Capital said that OTT platforms prefer blockbuster movies that should release in theatres first before releasing on OTT. Releasing in theatres would save their marketing funds. However, pandemic-led OTT boom when movies directly streamed online, some movies garnered relatively higher views within initial days of release.

If not for OTT boom, these platforms would have been spending millions on their marketing. Menon opined, “A few years ago, the annual marketing budgets for Netflix and Amazon were close to 3 billion Indian rupees. Due to the competition among the top OTT platforms to obtain engaging content, the budgets will have increased.”

For such reasons, many digital streaming players’ content marketing happens in different ways. For instance, for the fifth season of the Spanish criminal thriller Money Heist, there was a multi-starrer digital video including fans as well as a partnership with Pepsi and Bollywood star Tiger Shroff.

After PVR & INOX raised their average ticket prices (ATPs), their quarterly ATPs jumped to 48% and 36%, which is to 226 rupees and 239 rupees, respectively. This resulted from their fiscal third quarter that ended on December 2021.

The combination might persuade more makers of low-budget movies to look to streaming services rather than multiplexes for screen time. According to Menon, many filmmakers would prefer to sell to a streaming service where they could receive a higher price for their work.

Because of its size, the soon-to-be combined INOX-PVR cineplex will have superior negotiating power with content producers for revenue share agreements, show schedules, and even the window between theatre and OTT release, according to Jinesh Joshi, a research analyst at Prabhudas Lilladher. This will create the largest entertainment company in the country.

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