While theatres are back to pre-COVID levels in terms of ticket prices and food and beverage business, cinema advertising and footfalls are seeing a slow recovery.
Cinema advertising platform UFO Moviez, which reported a negative profit after tax (PAT) of Rs 92 million and revenue of Rs 1,078 million in Q2 FY23, saw no increase in government ad spending, which has become an area of concern for the company.
Government advertising revenue has been similar to Q1 FY23 in the second quarter, the company's management said. Out of the total in-cinema advertising revenue of Rs 131 million in Q2 FY23, corporate and local advertisers had ad spending worth Rs 103 million while government and PSU (public service undertakings) spending was at Rs 28 million.
Pre-COVID in Q2 FY20, total cinema advertising was at Rs 360 million out of which corporate spends were at 227 million and government spends were at Rs 133 million.
"The government is not spending the way it used to do pre-COVID on digital cinema media. The central government pre-COVID used to contribute 75-80 percent in some cases. There was also a trend when the state government and PSU share was slowly increasing from 15 percent in 2016 to 25 percent at one stage. But lion's share was from the central government," Ashish Malushte, Chief Financial Officer said during the Q2 earnings call.
However, this revenue stream has dried up, said Rajesh Mishra, Executive Director and Group CEO.
"We are observing that the government has reduced ad spends by 70-80 percent on all mediums. While we were proactively looking to push corporate more, government spending due to COVID completely dried up before corporate could take on," he said.
On the corporate side, the weak performance of films at the box office is pushing advertisers away from cinema advertising.
After a good three months in January, February and March this year, a series of movies not performing well back to back changed the positivity in the minds of advertisers, said Malushte.
"Advertisers had started reallocating some of their ad budgets to cinema ad medium. Unfortunately, with back-to-back weak content like Jersey, Heropanti 2, Samrat Prithviraj and Jug Jug Jeeyo, followed by Shamshera, Khuda Haafiz 2, Liger, and Ek Tha Villain 2 in Q2, corporates started taking a break (from advertising in theatres). They are saying that the audience should come back," he said.
The situation is slightly changing after the release of Ranbir Kapoor and Alia Bhatt-starrer Brahmastra. "The film was released during the festive period and that brought advertisers back," the CFO noted.
The company which entered the distribution business in 2020 is betting big on pushing southern content in Hindi-speaking markets which it expects will help them improve ad revenues.
Ad revenues have been a laggard for top multiplexes like PVR and INOX Leisure in Q2.
PVR had said that while it was bullish about ad revenue recovery in Q2, the weak performance of some of the bigger films took a hit on advertising and the multiplex chain expects recovery for cinema advertising, which was at 62 percent of the 2019 number in Q2, to remain the same in Q3. The company expects cinema advertising to pick up in Q4.
INOX also sees a delay of a month or two before it sees a recovery in ad revenue. Due to lower footfalls, advertisers have not extended their contracts, Alok Tandon, CEO, INOX Leisure Limited, said during the Q2 earnings call.
UFO Movies in its results presentation noted that the average ad revenue per screen in Q2 FY20 was Rs 99448 which has come down to Rs 37,501. The average of minutes sold per screen has come down to 1.75 in Q2 FY23 from 4.34 in Q2 FY20.
While theatres are back to pre-COVID levels in terms of ticket prices and food and beverage business, cinema advertising and footfalls are seeing a slow recovery.
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