PVR vs Cinepolis: The Show (Down) Is On
Image: Amit Verma
eepak Marda still remembers that fateful day on campus. In early 2007, the 34-year-old IITian was studying at the Stanford Graduate School of Business when Alejanadro Ramirez, the CEO of Cinepolis, Mexico’s biggest movie exhibition company and world’s fourth largest, came to address the class. This was the opportunity that Marda and two of his batchmates, Milan Saini who like Marda was doing a mid-career management course after spending a decade working in the US; and Miguel Mier from Mexico, had been waiting for. The three of them had prepared a project report detailing why the Mexican company needed an entry strategy for the Indian market. It seemed a long shot, especially since Cinepolis hadn’t expanded beyond the Americas till then.
Yet, later that evening, when Marda and his friends got an opportunity to present the report to Ramirez over dinner, the response was immediate. “He instantly saw the opportunity,” recalls Marda. Ramirez had sighted India’s potential: The biggest market of moviegoers in the world, the largest pipeline of content, or movies; and most importantly, the lowest penetration of multi-screen exhibition complexes, or multiplexes, in the world. He simply wanted to know the next steps.
By the very next year, Cinepolis had made its debut in India. And four years later, Marda and Saini are in the midst of ramping up one of Cinepolis’ most ambitious market entries ever. Mier, a senior executive from Cinepolis who was on a sabbatical at Stanford, is now chief operating officer and is supervising the international roll-out from the HQ in Mexico. Now, Cinepolis India has 34 screens across five cities and is likely to clock Rs 100 crore in revenues by the end of 2012. And what’s more, if things go according to plan over the course of this year, the Mexican chain could well emerge from nowhere to become the biggest multiplex operator in the country.
As you read this, a team from Cinepolis is carrying out a due diligence of Anil Ambani’s Big Cinemas, the largest player in the domestic market by screen count. If the two players agree on the valuation, the transaction could lead to a merger of the two companies with the Mexican major taking operational control. Big Cinemas is a unit of the Bombay Stock Exchange-listed Reliance MediaWorks (RMW) and its 500 screens are divided almost equally between India and overseas markets.
There’s one person who has his eyes peeled on every move that Cinepolis makes in India. Ajay Bijli, the chairman and managing director of PVR Cinemas, started the multiplex culture at Saket, New Delhi, 15 years ago. Today, Bijli’s high quality product will be challenged by a global player with a formidable reputation of bringing in cutting-edge innovations.
It isn’t widely known that Cinepolis had approached Ambani after talks with Bijli broke down last year. Bijli even made a trip to Mexico on the invitation of the Cinepolis CEO. But when asked, he chooses to downplay the visit. “Cinepolis was kind enough to invite me to Mexico. The visit was more to gauge the competition,” he says. However, a top official at Cinepolis India confirmed that the two sides had discussed a potential investment by the South American company in PVR. “But every entrepreneur thinks his baby is priceless,” the official says. The two sides couldn’t eventually agree on a valuation.
Interestingly, Bijli had a multinational partner in Australia’s Village Road Show, which later exited in 2002. PVR, or Priya Village Roadshow, draws its name from that alliance.
It is not surprising that the two (Cinepolis and PVR) would be interested in each other. “I have respect for them,” says Bijli. “They are the giants from Mexico who have deep pockets and an ambitious BRIC strategy to expand,” he adds. More importantly, the Mexican company, through its half-a-century experience, has mastered the art of movie exhibition and treats each of its screens as a product and not a commodity, as is the norm.
Cinepolis is known to be fussy about every little detail: Leg space between seats, big screen size, a special coating on the 3D screen that makes it easier on the eye, better 3D glasses and sophisticated air conditioning. Cinepolis auditoriums typically have about 10 percent fewer seats compared to its peers so that there is enough space for food to be served at the seat. And they’ve been known to pull out of the mall if the developer doesn’t have enough space for parking. In many ways, that’s what helps them get repeat customers.
In India, Cinepolis has gone digital from its very first screen. This enables even a screen in smaller places like Amritsar to hold the screening of the latest movie at the same time as, say, Mumbai. This was not possible earlier as the prints had to be transported.
Bijli also talks exactly the same language. He has the highest margins in the business. PVR has also undertaken an initiative to go completely digital.
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