Multiplexes' revenue growth to dip to 15% in FY25; OTTs crimping profit margins

Revenue growth for multiplexes will slow down to 10-15 per cent in FY25 from the 20-24 per cent expected in FY24, a domestic ratings agency said on Wednesday. The profit margins will widen marginally, but will continue to be lower than the pre-pandemic levels due to the competition faced by the industry from over-the-top service providers like Netflix and Amazon Prime, the report by Crisil Ratings said.

The topline will grow 10-15 per cent to Rs 7,300 crore in FY25, it estimated, adding that in FY24, the revenue growth was higher due to a slew of big-budget releases, especially from Hindi films like Gadar 2 and Jawan, it said. The operating profit will grow by 4 percentage points to 14 per cent in FY24 on the rising revenues, and will widen further to 15 per cent in FY25, the agency said. "But that number (margins) will still be lower than the pre-pandemic level of 18-20 per cent, given the competition from Over-The-Top (OTT) content," the report said.

The agency said OTT continues to benefit from high-quality and diverse content available on-tap and the competition from such platforms will keep occupancies below the pre-pandemic level going forward as well. Occupancy surged to 25 per cent in FY23 from 16 per cent in FY22, but remained below the pre-pandemic level of 30-32 per cent in FY20 amid increased penetration of OTT, it said, adding that Hindi films significantly underperformed regional ones. "With movie producers aligning better with audience preferences and a stronger regional film pipeline, occupancies should remain at 26-28 per cent next fiscal and over the medium term," the agency's Director Naveen Vaidyanathan said. Continued supply of high-quality movies focusing on the large-screen experience will be crucial to sustain and improve occupancy at multiplexes, the agency noted.

The agency's team leader, Shivaramakrishna Kolluri, however, said the slower revenue growth will take the topline to an all-time high, and attributed the same to factors such as the addition of screens, rising movie ticket prices amid cost inflation and focus on premium formats. Increasing spending on refreshments following more offerings and menu revisions will also help drive the revenues, Kolluri said.