Cinemas Reimagined in Post-OTT India: Lease, Franchise, or Own?A Strategic Framework for Developers

Abstract

The Indian cinema exhibition industry is in a state of significant structural shift, with a dramatic increase in the number of Over-The-Top (OTT) streaming platforms, changing consumer behaviours in a post-COVID-19 pandemic environment, and increased operating costs contributing to a decline in box office footfalls, which are yet to recover to pre-COVID-19 levels with OTT platforms like Netflix, Amazon Prime, and JioHotstar providing unprecedented convenience and variety to consumers at competitive prices. This has made traditional long-term lease agreements, which were a hallmark of developer-operator relationships, economically unsustainable for both parties in a post-OTT, post-COVID-19 pandemic environment, with major multiplex chains like PVR INOX opting for Franchise-Owned Company-Operated (FOCO) and Operations & Management (O&M) models, significantly changing the risk-reward dynamics for real estate developers. Some of the important findings include the experience-driven and content-driven nature of movie-going habits, which is no longer habitual, the permanent shift in the consumption pattern of low to mid-budget content to OTT, and the absence of one dominant business model. Stability with diminishing returns is offered by the leasing model, balanced risk and brand leverage by the FOCO model, and maximum control with upside potential by the direct ownership model, which requires O&M expertise. The project culminates with the development of a strategic framework to help developers choose the best model based on risk appetite and availability of capital.