PVR-SPI Cinemas deal: A script that has taken the trade by surprise

While some players are wary of the likely monopoly that PVR Cinemas will command, others see a whole lot of positives

On Sunday, Chennaiites woke up to the news that Sathyam Cinemas, south India’s largest cinema chain, was being acquired by PVR Ltd for ₹850 crore.

The deal that was struck by PVR Cinemas to buy out SPI Cinemas, a popular cinema chain owner that is headquartered in Chennai and owns several properties across Karnataka, Andhra, Telangana, Puducherry, Maharashtra, and Kerala, has taken many in Tamil Nadu by surprise.

The development would see PVR and SPI Cinemas jointly control close to 57 screens just in and around Chennai city (in near future), one of the most important movie markets in Tamil Nadu. SPI Cinemas will add another 26 screens across five other States – Andhra, Telangana, Karnataka, Puducherry and Kerala – to PVR Cinemas in these markets where it already has a presence (except Puducherry). For the movie fans and patrons, SPI Cinemas is all about the movie watching experience along with great food. However, for producers, distributors and other competitors, they are a dominant player in the market who can alter the market dynamics with right resources.

Expressing cautious optimism, S.R. Prabhu, treasurer, Tamil Film Producers’ Council, underlined that consolidation of resources of two major theatre chains cannot be termed as entirely ‘positive or negative’ for the industry.

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“Monopoly is never good. We have to wait and see how it impacts the market. Such mergers will have both good and bad effects. We hope that regional movies continue to be given importance in South India,” said S. R. Prabhu, treasurer, Tamil Film Producers’ Council.

Stating that all such consolidations are common in mature markets, Archana Kalpathi, CEO, AGS Cinemas, who primarily concentrates on Tier II and Tier III cities, said, “We will see such consolidation in every industry that matures. However, I am not too sure if it is going to be substantial here, since there are some very strong regional players who have their own patrons.”

Ms. Kalpathi added that such developments are good for the industry.

 

“This shows the faith of major players in Tamil film market.” Several producers that The Hindu spoke to expressed concern about a possible ‘monopoly,’ in a market, which is already dominated by a few politically influential persons, especially in down South.

“Multiplexes already have an upper hand in dictating terms to producers and such a merger will strengthen their hands. The cost of going to the movies could further go up as they could hike prices of food and beverages across these screens,” said a producer, who didn’t want to be named.

However, such a ‘consolidation’ is not necessarily bad as it will eliminate ‘individual players’, said S. Sashikanth, producer, YNOT Studios. “The buyout need not necessarily be a bad thing. It just follows the trend seen around the globe. A market cannot have so many individual players and consolidation will solve that," he said.

Rejecting concerns about two movie chains jointly elbowing out smaller players in markets such as Madurai, Salem and other smaller towns, Tiruppur Subramaniam, a well-known distributor controlling substantial number of screens in the Western districts, said: “PVR Cinemas has always had a good presence in South India and this will enable them to grow more. We always knew that the future is going to see more such deals in cinema. It won’t affect us.”