Indian Cinema box office revenues to reach $3.7 bn by 2020: Deloitte report

The Indian film industry is the largest in the world in terms of number of films produced with between 1,500 and 2,000 films produced every year in more than 20 languages. In terms of revenue, the industry has gross box office realisations of $2.1 billion, which is expected to grow at 11 per cent CAGR reaching $3.7 billion by 2020.

The key growth drivers for the industry are:

• Increasing per capita income and growing middle class
• Demand from Tier 2 and Tier 3 cities
• Diversifying into international markets
• Releasing the potential of digitization
• Upside from ancillary revenue streams
• Upcoming use of Visual Effects (VFX) in movies

Despite the large number of films produced in India, the industry gross realisation has been substantially lower than its global counterparts. For example, the box office realization in the US and Canada stand at $11 billion whereas these countries produce which produces significantly lower number of films (approximately 700 films).

This is mainly due to the challenges plaguing the film industry such as:

• Low infrastructure penetration
• Slow growth in average ticket price (ATP)
• Complicated tax regime
• Rising costs and lack of access to funding
• Piracy
• Multiple layers of bureaucracy
• Prevailing strict censorship norms

The domestic box office contributes majority of the revenue, representing 74 per cent of the total industry. Cable and satellite rights and online/ digital aggregation revenues are the fastest growing segments, and expected to grow at a CAGR of about 15 per cent over the period FY15 – FY20. Further, the Indian film industry is dominated by Bollywood, the Hindi film industry, contributing 43 per cent of the revenue while the regional films contribute the remaining 57 per cent. International films is currently a small, but growing segment, driven by rising numbers of English (and other foreign language) speakers, as well as increasing numbers of international movies witnessing dubbed releases across the country.

Other key recent trends in the industry include:

• International / foreign films gaining share in the Indian industry
• Entry of international studios through acquisitions and collaborations
• Rise of regional cinema
• Digital adoption across the value chain
• Organic and inorganic growth in multiplexes
• Emergence of alternative streams of revenue

Going forward, the industry needs to focus on the following factors to ensure growth and profitability:

• Film tourism
• Skill enhancement
• Shortening window of release through better planning
• Updating current technology
• Countering piracy
• Growth of multiplexes