Box office trends: New stars rising
Overall, 2018 box office(BO) performance was good and trends are encouraging. The key highlights are (1)Bollywood BO growth was broad-based led by a new crop of stars, (2) impact of reviews was amplified by social media, (3) Hollywood and regional BO grew steadily and offer promise, (4) no visible impact of OTT on the BO collections so far, and (5) favourable risk-reward for movie producers thanks to the burgeoning digital revenue stream

The key highlight of 2018 for Bollywood BO was the hefty contribution of the new crop of stars (Ranveer Singh, Ranbir Kapoor, Tiger Shroff, Ayushman Khurana, Rajkummar Rao and Alia Bhatt) that more than compensated for weak BO performance of the three Khans. Unlike in the past few years, growth in the net domestic box office collection (NBOC) of Bollywood (Hindi) films was led by the ‘belly’—top 25 movies grew 15 per cent in CY2018, driven by movies #6-25 that grew 37 per cent YoY, partly offset by an 8 per cent decline reported by the top 5 movies. We do not have data to assess performance of the ‘tail’ (balance 200 Bollywood films). We estimate mid-to-high single digit footfall growth for the top 25 movies assuming a 5-6  per cent increase in ticket prices. Overall, an impressive performance that could be a turning point.

Impact of social media:Even as word of mouth has always influenced a film’s BO performance, social media has amplified its impact. Adverse reviews accelerate the fall in daily BO collections as witnessed in case of Thugs of Hindostan. On the other hand, good reviews boost BO performance of movies as visible in case of Simmba and several other movies this year. Besides reviews, BO collections for a movie depend on a number of other variables including release date, competition, popularity of trailer/songs, etc. Given this, it is difficult to accurately calculate the net impact of social media. As per our assessment, the net impact was balanced in CY2018 with adverse reviews impacting Thugs of Hindostan, Race 3 and Zero and good reviews aiding Simmba, Baaghi 2, Badhai Ho, Raazi, Stree, Andhadhun and Sonu Ke Titu ki Sweety (SKTKS)’.

Hollywood and regional BO remain bright spots: The contribution of English and regional movies to PVR’s ticket sales (like-for-like excl. SPI cinemas) increased to 42 per cent in CY2018E from 40 per cent in CY2017. These genres are growing at a healthy pace for multiplexes. A dearth of regional and English BO data makes it difficult for us to analyse key trends. That said, a pick-up in regional BO led by multiplex penetration and a continued rise in the consumption of Hollywood movies are the two key trends that we expect to continue in the foreseeable future.

Impact of OTT on BO not yet discernible: A key concern among investors globally is the potential impact of OTT on BO collections, eventually. The OTT effect (if any) would be seen in the BO collections of movies that are low on visual effects/production value. The underlying assumption is that consumers would prefer to watch movies that have good visual effects on cinema screens. By that logic, we should have seen weakness in box office performance of the ‘belly’ especially as Amazon Prime/Netflix were aggressively buying movies and marketing the same. Contrary to these expectations, we saw impressive BO performance of several low-budget/low-production value films this year (e.g. Badhai Ho, Raazi, Stree and SKTKS—all made it to Bollywood’s Rs1b club). It is too early to rule out risk to cinema hall footfalls from OTT, but the trend so far is encouraging and supports the view that well-made films with good scripts can continue to draw audience to theaters. Lack of outdoor entertainment options in India also work in favor of theaters.

—Kotak Securities