Big competition for small US theatres

Jitendra Kothari fondly remembers the time in the early 1980s when he used to take his family to the Bombay Cinema theatre in Queens, New York, to watch popular Hindi movies on the single screen the theatre had. “It was the only social enjoyment we had because there was nowhere else we could see these movies,” says Kothari, who immigrated to the US from India in 1970. “It was like being back in India.” Prior to the theatres, Kothari remembers some of his friends renting out halls or auditoriums at universities in the 1970s and screening Hindi movies there.

There was a big leap from university auditoriums to actual movie theatres screening Hindi movies, but fast forward 30 years and not much has changed for the Indian movie theatre. Indian theatres remain independent, mom-and-pop shops that have gone through many ups and downs in their business cycle. It started in the 1980s, as the VCR became more affordable and theatre-goers switched to watching their favourite films at home. “Why spend the money for a movie ticket when we could watch them at home for practically nothing,” says Kothari. Soon after, the Bombay Cinema in Queens went out of business.

There seemed to be a revival of independent Indian movie theatres opening up again in the mid-1990s, perhaps with the new wave of South Asian immigrants coming to the US. But the business still has its share of problems. “A combination of increased competition, labour issues and pirated DVDs impacts the business,” says Siva Gunasegaram, whose father co-owns Jackson Heights Cinemas in Jackson Heights, Queens, and the Mayfair theatre in New Jersey.

Of late, some of the competition has come from an unlikely company from India landing on the US shores in early 2009, giving some independent Indian movie theatre owners a bigger run for their business: Reliance MediaWorks Ltd’s Big Cinemas, which now has a presence in several countries, including India, Malaysia, Nepal and the US.

The Mayfair theatre in New Jersey opened in 2008 with three screens playing a combination of Tamil, Telegu, and Hindi movies. “A few months after we opened, Big Cinemas opened a few blocks away,” says Gunasegaram.

Chief executive of Reliance MediaWorks, Anil Arjun, says the company wanted to take advantage of the estimated three-four million Indians in the US who speak an Indian language, including Hindi, Tamil and Telegu. “What we noticed is that there was a significant market for Indian films in the US,” says Arjun. “But what was lacking was an adequate distribution mechanism for getting products to customers and giving them a real consumer experience in terms of entertainment.”

Reliance MediaWorks took over several existing theatres in the US, 30% of which already played Indian movies. In addition to putting its brand name to them, the company refurbished the theatres and changed the acoustics system in the hope of giving the consumer a better “look and feel and experience”, Arjun says, compared with some of the mom-and-pop Indian movie theatres out there. “We brought in not just the superior experience and ambience of the theatre, but also reporting systems, electronic ticketing, better quality standards, and trained the staff,” he says.

With penetration of Indian movies in the US at only 8% of the worldwide gross, Arjun says this can be much higher. Reliance MediaWorks’ website claims Big Cinemas accounts for “20-35% of Hindi features box office collections and over 70% of Tamil and Telegu box office collections from the US”.

In some ways, Reliance’s strategy has worked. Rimple Shah, who goes to watch Hindi movies at Big Cinemas in Edison, New Jersey, says things have changed since the firm took over the theatre about a year ago. “Before (it was taken over by Big Cinemas), it was really grungy and a little smelly. Now they’ve made the lobby and the ticket booth area a lot nicer,” she says. Still, whether that changes consumers’ choice of a movie theatre remains to be seen, especially since there are so few theatres that show Indian films. “I go to Big Cinemas because it’s closest to my house,” says Kunal Mehta. “The next closest theatre is 10 miles (16km) away.”

With Indian theatres being an unorganized industry that’s fragmented across the US, Reliance MediaWorks sees an opportunity in creating an independent, branded movie chain.

For Bala Murali, who owns a single-screen theatre called Sathyam in Chicago, Big Cinemas’ five-screen theatre opening across town hasn’t had much impact on his business, which shows only Tamil, Telegu and Malayalam films. There’s enough distance between the two theatres—about a 40-minute drive between each—to serve the respective Indian communities in those areas. Murali has also upgraded his movie theatre with a top-of-the-line audio system and serves Indian snacks as Big Cinemas does. “But if they get settled here in the long term, it could become a problem for small theatres like us, because they’ll control the market,” he says. In addition, Murali is a distributor for south Indian movies in the US. Now, Reliance is getting into the distribution business. “They’re starting to step on my territory,” says Murali. From the perspective of his theatre, he says if the competition heats up, he can always start showing Hollywood movies, or just get rid of the theatre lease.

Bhavesh Patel, whose family partnered with Reliance to open up Big Cinemas in northern Chicago, says the firm brought a sense of professionalism to the industry. In its Chicago location, where it only play Indian movies, he says “our customers see South Asian faces. Some people might feel intimidated to go to see American movies in a salwar-kameez. But it’s not like that here”.

Partnering with someone local has benefited Big Cinemas. “We bring in the experience, systems, the operational expertise, the negotiation in terms of programming, concessions, product flow, consistency in marketing promotions and online marketing strategies. Our partners’ strength is that they know the neighbourhood very well. That helps us determine pricing and programming,” says Arjun.

Arjun says Reliance takes a look at the “history behind the original theatre, the audience and the neighbourhoods”, and then decides what the mix of movies will be.

In addition, the large concentration of Indians in the neighbourhood and the proximity to the theatre seems to help Molakapalli maintain his customers. “Even with Big Cinemas around, I’m able to compete with them because of my location,” he says.

Molakapalli also owns a theatre in Dallas, Texas, which doesn’t have any competition yet. It’s too soon to tell what might happen if Big Cinemas moves there, he says. Reliance is looking at it as a possible opportunity.

Big Cinemas’ mix of movies at theatres depending on the neighbourhood has helped the company overall. “Our dependence on product flow is limited,” says Arjun. “When there was a strike last year in Bollywood for all Hindi films, it impacted us in India quite strongly. But the impact was very limited in the US because we had a lot of Hollywood movies that we showed as well as Tamil and Telegu films.” In sharp contrast, Eagle Cinemas located in Jackson Heights, Queens, which showed only first-run Hindi movies, was forced to go out of business when the Bollywood film producers went on a seven-week strike last year.

As of now, independent theatre owners in the US have mixed feelings about Big Cinemas’ presence. Arjun says that what it has done is to improve the consumer experience of watching Indian movies. “I don’t think the market has even opened up large enough to say that we are cornering the market share,” he says. In fact, he adds, Big Cinemas’ presence in the US helps independent theatres. “We are showing that there are more Indian films being released in the US, which means every distributor is looking at wider releases, so there is product flow happening,” says Arjun.

And he is happy to partner with independent owners if the opportunity is right. As of now, Big Cinemas is located in 24 US cities in states including New York, New Jersey, California, Kansas City and Chicago, to name a few. About the company’s future goals, Arjun says it is looking to may be go deeper into California and opening in Florida. “The good part about the US is that the Indian market is concentrated and it’s not widely dispersed. So you can zero in on specific theatres and communities,” he adds.

Several independent Indian mom-and-pop theatres have switched hands many times because, as entrepreneurs, they believe they can develop the theatres into successful ventures. Many of them started the business because of a passion they have for films. As for Reliance MediaWorks, Arjun says, “to me personally, there’s a lot of pride that we have an Indian company, an Indian brand, which is there in the US”.