Are Movie Theatres finally going to see some happy days?

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Are Movie Theatres finally going to see some happy days?

Are Movie Theatres finally going to see some happy days? | Finshots Daily Newsletter

In today's Finshots we talk about movie theatres and RILs ambition to go international.


Business

The Story

There’s been a bit of positivity surrounding cinemas and cinema stocks of late. Shares of PVR and Inox have been rallying after the Maharashtra government announced that they'd be opening theatres after October 22nd 2021. And truth be told, this couldn’t have come at a better time. PVR for instance made losses to the tune of 289 crores between January and March this year. The next three months were just as bad considering they lost another 219 crores during the period.

And this isn’t unique to multiplex chains like PVR. It’s a phenomenon that you see across all kinds of cinema theatres. Owners have been bleeding money for the past year or so and they’ve been desperately trying to get back up on their feet. Unfortunately, nobody expects things to change unless local governments begin to ease regulations. So you can see why Maharashtra’s decision to open theatres next month is breeding such optimism.

Having said that, however, it’s also safe to say that future prospects of these small business owners will ultimately hinge on big-budget flicks. If the content pipeline isn’t robust, patrons won’t frequent theatres. And this should be all the more apparent in 2021 since people are extremely reluctant to share a poorly ventilated space with a large number of people. If anything, movies that debut on  big screens these next few months have to be stellar. They have to compel people to throw all caution to the wind. Unfortunately, movie producers have to deal with their own set of financial insecurities.

Consider for instance the Telugu movie industry. Members from the exhibitor’s group have been requesting movie producers to delay the release of multiple films until theatres open fully. Now bear in mind, Andhra Pradesh has already allowed cinemas to function normally since July, but many owners have been trying to negotiate with the government and get them to offer some monetary support. In the meantime, they’ve been trying to hold off movie producers from launching their films on OTT platforms like Voot or Hotstar.

But here’s the producers' predicament. These people have already invested crores in creating the movie. Any potential delay involves an opportunity cost. It’s like tying up money in an asset that doesn’t yield anything. It’s a horrible place to be. So when OTT players come in and offer them a modest sum that would help them break even, they are inclined to take up that offer. Sure, cinema owners will argue that the money-making potential is substantially higher when producers opt for a theatrical release. But that’s an uncertain proposition. A guaranteed sum of 20 crores is better than 40 crores that you may or may not earn. So you can see why they’re increasingly turning to OTT platforms to ease their financial burden.

Which means the content pipeline is thin right now. So even if restrictions ease and movie theatres begin to open up, it could take a while before we start seeing people flock to movie theatres like they used to in the past.


Business

Reliance Industries says, “I’m going international”

Reliance Industries Ltd (RIL) is now Mr International. The oil-to-telecom conglomerate has decided that the whole world is its playground. So, it has set up a subsidiary in the UAE — Reliance International Ltd (RINL).

What will this subsidiary do?

Well, it’ll trade in crude oil, petrol, etc. You know, the usual things Reliance is known for. But outside of this, they haven’t divulged much.

But wait, is this the company’s first international subsidiary?

Of course not. It has subsidiaries in the Netherlands, the US, and Australia. RIL is already everywhere! But this new subsidiary is drawing a lot of attention because it seems the companies ties to the oil-rich Middle East region are growing stronger by the day.

In June, RIL shook hands with state-owned Abu Dhabi National Oil Company for its first-ever international greenfield project. Think of a greenfield project as a fresh start to things. It’s when they do everything from scratch. And considering RIL had never done something of this sort before, you can see why this was a significant development. Then they turned to Yasir Al-Rumayyan and appointed him as a director on their board. Yasir happens to be the chairman of the third-largest oil company in the world — Saudi Aramco.

And when RIL’s Jio Platforms was raising money in 2020, the Abu Dhabi Investment Authority jumped in and put in over Rs 5,000 crores. Cut to 2021, and we see that RIL has also inked a deal with the state-owned Abu Dhabi National Oil Company. And set up an international subsidiary too. RIL may also be selling a 20% stake in one of its companies to Saudi Aramco. And when you throw this new UAE subsidiary into the mix, you should probably begin to see why the growing influence of RIL across the middle east is turning heads.


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