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“The Demand for Films is Much Higher in Small Cities”

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Stargaze Entertainment runs a chain of multiplexes under the brand name of Glitz cinemas. It has a unique strategy of focussing only on small towns and avoiding the metros. Sumant Bhargava, Founder and MD of Stargaze Entertainment, talks to Images Retail about the potential the tier II and III cities offer for a multiplex chain and the challenges faced by the operators.

Please give us a background of Stargaze Entertainment.

We started Stargaze Entertainment in 2008. Network18, which is the single largest investor and shareholder in the company, has committed investments through their private equity arm called Capital18. We are present in cities such as Ajmer, Kurukshetra, Raipur, Ranchi, Dehradun, Bilaspur, and Jodhpur, and we are aggressively looking at other cities in similar geographies.

Why did you choose only tier II cities for opening your cinemas?

I felt there was a latent demand for the film exhibition industry in these locations. The cinema exhibition infrastructure exists there but is very dilapidated. The demand to watch films is actually much higher in smaller cities than the metros because that is the only mode of entertainment available to people. With this premise, we initially entered a few cities like Kurukshetra and Ajmer, and were surprised to see what people were willing to pay to watch movies.

It is a misconception that people in smaller cities are not willing to pay to watch films. They are ready to shell out the money to watch movies if you give them a good-quality cinema exhibition infrastructure.

What challenges did you face initially in small towns?

The first challenge was retail space. These cities have a less number of malls. For example, Kurukshetra, Ajmer, Ranchi, Dehradun, and Jodhpur have only one or two malls each. Secondly, talent is a very big issue that we are struggling with. Nobody from the metros is willing to work in small cities. The attrition rate is very high. Locally, there is no talent available and people who are good are already moving to the metros.
The third challenge is the whole taxation issue that bothers us.

How much time does it generally take to break-even for a multiplex in a mall?

The operating break-even and cash break-even can happen in two months. But break-even in terms of investment would take anywhere between two-and-a-half to seven years, depending upon the location.

When you enter smaller cities, what kind of retail space and demographies do you look at for opening your cinema?

A city with a population of about 7 to 8 lakh is good enough for us. We also carry out an assessment of the per capita income a city can offer. Also, a very important factor is how strong a movie culture does that particular city have.

Your fortunes as a cinema chain are tied to those of the malls. If a mall is not doing good, will it impact your business as well?

Before we are operational, we are completely dependent on the malls. But after the mall becomes open to the public, it works both ways because at the end of the day only two things can pull in footfalls in these small cities: cinema and Big Bazaar. If we do well, the mall also tends to do well. If the mall has a great mix of brands and retail, we tend to benefit from it. It is not that we are entirely dependent upon the malls, but yes, the property has to be maintained and built well.

What is your vision for the future?

I would ideally like to see Glitz Cinemas as the single largest multiplex brand outside of the top six cities in India. It is possible in our industry because cinemas are always a local brand, not a national one.

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