After introducing the zero-ad policy in some of its premium screens, seven to be precise, multiplex chain PVR Inox has begun cutting down on advertising volumes in its non-luxury formats.
This means that there will be fewer ads to watch in theatres. But will it make a big difference to the audience? Analysts say, no.
The PVR Inox move aims at reducing the advertising time by 20 percent in mainstream cinemas which make up 85 percent of the company's total screen circuit.
"To offset any potential revenue loss, we are implementing a strategic price adjustment on our rate card," Gautam Dutta, CEO of revenue and operations at PVR Inox, said.
Analysts have a different view altogether. "Reducing ads is not a favourable strategy," said Karan Taurani, senior vice-president of Elara Capital. "This will work out in a negative way. The interval time and before a movie starts when ads are shown combined is about 17-odd minutes. Even if this number comes down about 20 percent, it will be about 4 minutes and it will not make a big difference to the consumers. To some customers this might be attractive but for the larger chunk (audience) this wouldn't make a significant impact."
Also read: No commercials, just films: PVR Inox adopts ad-free movies amid declining theatre footfalls
A 20 percent lower ad volumes and a 20 percent higher ad rates may affect the PVR Inox finances.
"Advertising revenue has not gone back to the pre-Covid levels. Also the inventories have been filled up but pricing has not gone back to pre-Covid times. Increasing ad rates and cutting down inventory happens more in high-impact properties like sports and cricket. But in cinema, it will give lesser time to the audience to become mobile and do things. And, the longer the time of breaks the more visibility a brand gets. So, reducing break time is not the correct strategy," argued Taurani.
He added that it costs between Rs 8,000 to Rs 15,000 per screen per week for a 20-second slot to advertise in cinemas. The ad rates are now in the lower end of the range due to a weak content flow.
"There are certain properties which have come to the pre-Covid levels but on a per-screen basis, it is not back to the pre-pandemic period. The gap remains by 20-25 percent. These (reducing ads) are ways to drive more footfalls because clearly there is pressure on footfall," the analyst said.
Also read: Why popcorn is expensive? PVR Inox answers as it pulls out all stops to draw in more crowd
In FY24, PVR-Inox is likely to report a lower ad-revenue compared to the pre-Covid base of Rs 554 crore, said Jinesh Joshi, research analyst for institutional equities at Prabhudas Lilladher, a broking firm.
Initially there would be a slight hiccup due to the increase in ad rates which PVR Inox would try to compensate through higher F&B and movie ticket prices and possible new shows, said Vivek Menon, Managing Partner, NV Capital.
"It remains to be seen if cutting down on ad-time and making way for more shows bears fruit when the content itself is not clicking albeit temporarily," said Joshi on PVR Inox's zero-ad policy in some of its premium screens.
"Even during good months, the footfalls are down 15-20 percent. Cinemas will fill out if the content is good. All of this boils down to content. In FY25 so far, it has been muted. In April, Eid was a washout because of weak performance of films. In May too, there isn't too much of content, and in June, there is one content exhibitors are looking forward to, which is Chandu Champion starring Kartik Aaryan. Because of elections, down south not many films are releasing, Hollywood content is limited because of the writers' strike. So, Q1 FY25 will be one of the worst quarters. But I think Q2 onwards there will be some pickup and Q3 will be strong," Taurani said.
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