Two Tickets, Please!

Good afternoon!

Welcome to The Impression, your weekly primer on the business of media, entertainment, and content.

If someone shared this newsletter with you or if you’ve found the online version, hit the button below to subscribe now—it’s free! You can unsubscribe anytime.

A quick note: we’re taking next Tuesday (August 15) off for Independence Day, so there won’t be an edition of The Impression next week. I’ll be back on August 23.

On to this week’s edition.

The pandemic was the peak of India’s direct-to-consumer (D2C) brand wave. Made-on-Instagram brands grew almost overnight, bombarding our feeds with thousands of ads. And just when it seemed like anyone could start an online consumer business, it all began to go bust.

The ad industry declared that performance marketing—clicks on an ad in a search result, banner, video, story, or post—was dead. Advertisers were spending so much money on these relatively cheap digital ads that they were, at best, luring the affluent to one-time discounts, not building a loyal customer base. Then, Google began killing third-party cookies (a piece of code that collects user data on the internet) and Apple cut off Facebook from its users’ data. Brands shifted marketing budgets to retail media networks such as Amazon Ads.

So, if it’s no longer possible to build a brand by repeatedly serving cheap performance ads, what is an online-first consumer company to do?

Ask Nykaa and its latest offering, Nykaaland.

Building a Big Bang brand ‘land’

Beauty retailer Nykaa is hosting a full-fledged carnival-like event in downtown Mumbai this November called Nykaaland. It’s promising stalls with beauty brands, good food, music, live entertainment, and Instagrammable spots for selfies. November to February is the peak season for outdoor flea markets, performances, and other events in Mumbai. The theme? “Alice In Wonderland meets Beautycore”. Nykaa is yet to release more details. From the name itself, though, it seems Nykaa is drawing inspiration from food-delivery app Zomato.

In 2018, Zomato launched Zomaland, an outdoor event with food stalls from partner restaurants, along with live entertainment. Zomato is a plain, simple restaurant directory and food-delivery company but it focused on building Zomaland like a carnival, with interactive games, DJs, comedians, and even neon signs reminiscent of American carnivals and circuses.

Until Zomaland, Indian retailers had never really hosted a carnival-like event. Live events were meant to be shopping festivals, not an expensive to-do with musicians and comedians. A good example is Big Bazaar’s Sabse Saste Din, which started out as a single-day shopping spree on Republic Day in the early 2000s. Eventually, it became a three-to-four-day shopping festival advertising up to 80% off at all of the supermarket’s outlets. Today, every major retailer has a marquee sale event, such as Amazon’s Prime Day, Flipkart’s Big Billion Day, and Nykaa’s Hot Pink Sale.

Discount-fuelled extravaganzas can get more customers and help clear inventory, but brand marketing is meant to achieve more than that. Zomaland helped Zomato cement its image as a young, fun brand that understands millennials’ wants and desires. It ties in well with their social media marketing, which is heavy on memes and the everyday lives of young working adults.

Nykaa’s social following is much bigger than Zomato’s, but most of it is focused on brand launches, tutorials, and sales announcements. It has been the lead sponsor of lifestyle magazine Femina’s annual Beauty Awards, but Nykaaland will be the company’s first major event (co-produced with BookMyShow).

Organising events is an expensive business. In the year that Zomato incorporated its subsidiary Zomato Entertainment, which houses Zomaland, its marketing expenses ballooned (pdf) by 15x to ₹1,213 crore (~$146 million). That was nearly half of its total (non-finance, non-wages) expenses for the year. In FY19, Zomato spent ₹71 lakh (~$86,000) on renting a venue and equipment for Zomaland; this rose to over ₹1 crore (~$120,000) the next year, Zomato Entertainment’s filings show. But most of its costs were for massive ‘events infrastructure and facilities’—worth ₹4.3 crore (~$520,000), which rose to ₹7 crore (~$850,000) the next year.

After the pandemic, Zomato brought back Zomaland late last year in partnership with Paytm Insider. But besides events, online retailers have tried several other brand marketing campaigns to acquire an audience directly. In 2019, Zomato launched video streaming on its app with 18 original, food-based shows called Zomato Originals. It shut the offering down soon after, but the company still runs a podcast with founder Deepinder Goyal called Breaking Bread. That same year, Flipkart also launched video streaming in-app; its last show aired sometime in 2021.

Then, there are virtual activities in the “metaverse”. In 2021-22, Gucci and Nike built real estate and sold virtual merch in the kids’ game Roblox.

But hosting a live, in-person event is a lot more labour-intensive and needs tons of cash, as Zomato’s example shows. Nykaa’s consolidated marketing expense has risen from ₹200 crore (~$24.14 million) in FY20 to ₹590 crore in FY23. Nykaa will attempt Nykaaland while dealing with an exodus: six senior executives have quit the company since April, including chief marketing officer Shalini Raghavan. Nykaa’s founder-CEO Falguni Nayar is taking over the marketing function.

Nykaa should invest in a real, direct connection with its core customer base. It is battling deep-pocketed competition in the online beauty business, from the K Raheja Corp’s Shoppers’ Stop to Reliance Industries’ Tira, Tata Cliq, Myntra, and now, Amazon’s beauty business. Everybody will be bombarding online users with search ads, Instagram Story ads, YouTube video ads, and all other forms of paid social media marketing.

There’s little to differentiate between retailers selling makeup and skincare. So, who will customers pick when they go shopping? Maybe the one that hosted a dreamy, Alice In Wonderland-style carnival on a sunny winter afternoon.

The movies are back. So are costs.

PVR-Inox has had a washout start to the financial year. In the June 2023 quarter, the company slipped into the red, with a ₹44 crore loss after tax (pdf). This should have been a good result for the company:

• Sales of movie tickets and food were up 15% and 22% from the previous quarter.

• The average price of a ticket was ₹7 higher, and people spent ₹11 more per head on food & drink (vs. the previous quarter)

• Yet, 3.4 million more people came to the movies in this period.

So, what went wrong? Inflation.

Almost all of PVR-Inox’s fixed costs went up significantly quarter-on-quarter. It paid 5% more rent and 9% more in common area maintenance charges, a component of lease agreements with malls and other cinema locations. This was an extremely hot summer in North India, so the company’s electricity and utilities charges were up by a massive 39%. And to top it off, salaries also increased.

July will likely be a good month for PVR-Inox, with four back-to-back hits: Mission Impossible: 7, Barbie, Oppenheimer, and now Rocky Aur Rani Ki Prem Kahani, which has reportedly crossed ₹100 crore in domestic box office collections.

But all this will only be worth it if PVR-Inox minds these ballooning costs.

The company’s already working on it. Its management told analysts on an earnings call (pdf) last week. It is paying for newly-opened cinemas by share of revenue earned and not by minimum guarantees, an upfront amount of money promised to the landlord. “In some of our existing properties, which are underperforming where the rental cost is high, we are currently in discussions with some of our landlords and hopeful of getting some success there as well,” chief financial officer Nitin Sood said.

PVR-Inox is opening more cinemas, and the management says some costs, such as wages, will continue to rise. What will it take to make sure the profits keep rolling in? More hit films all year round. A couple of big hits a year is just not going to cut it. There may be a big boom month, like this July, but high fixed costs will eat into margins the rest of the year. Filmmakers will have to keep coming up with better movies all year round. If that doesn’t happen, we’ll be paying to watch trailers and reruns: PVR-Inox re-released the 2003 hit Koi… Mil Gaya in select theatres last week.

Last Scroll Down📲

Whispers of discontent: A moment of pride is turning ugly. Bomman and Bellie, the Kattunayakan community mahouts featured in The Elephant Whisperers, have sent a legal notice to the filmmakers Kartiki Gonsalves and Guneet Monga for unpaid dues, demanding ₹2 crore (~$240,000). The couple alleged they were promised a car, house, and money to fund their granddaughter’s education. The two women won an Oscar for best documentary short film last year, the first Indian production to get the award.

Hard times, tough measures: Influencers had negotiated a contract with the SAG-AFTRA actors’ union two years ago, hoping to become union members one day. That protection is coming back to bite them. The guild has asked influencers to stay away from work or risk losing future membership and union benefits. But many creators aren’t sure if it’s worth losing money today. They also aren’t sure if their current work technically violates the terms of the strike. Meanwhile, striking actors are using apps like Cameo to deliver birthday greetings for some cash in lean times.

‘A Goenka always pays his debts’: Seems to be Subhash Chandra's new credo. The Essel group promoter is settling an outstanding debt with JC Flowers Asset Reconstruction Company to buy back pledged shares in group companies, such as Dish TV, and other assets, including a central Delhi bungalow, Mint reported. Chandra and his son Punit Goenka are still barred from running listed companies or their subsidiaries. The Sony-Zee merger is delayed and the government is examining fraud allegations against the family.

Going all-in: No one can resist those sweet betting dollars, not even Disney. Its sports cable network ESPN is tying up with gambling company Penn Entertainment in a $2 billion deal. Penn’s betting portals in the US will be renamed ESPN Bet. As part of the deal, Penn is also selling Barstool Sports back to founder David Portnoy (who’s been posting about “coming back”).

Trumpet 🎺

Going ‘local’ sells. Ice-cream makers are doing it, even in print. Meta is advising brands to use personalised, local language ad copy for campaigns in the upcoming festive season. Can publishers be far behind?

Vogue India, arguably India’s most important fashion magazine, is also testing the waters with local language copy. Its latest issue features actor Sara Ali Khan on the cover with her name in Devanagari script (isn’t ‘Khan’ missing a nastaliq?). Khan’s interview for the cover story talks about her middle-class upbringing, so it makes sense to design the issue to be more ‘relatable’ with the use of Hindi in an otherwise super-premium magazine meant for rich, urban readers.

But the experiment has a problem: what about those Vogue readers who don’t read or speak Hindi? You can make the argument that Vogue’s current Indian readership is likely concentrated in Delhi and Mumbai, the hubs of the luxury fashion industry. Hindi isn’t an official language in Mumbai, though it is widely spoken and the script for Marathi and Hindi are similar. But this example shows how hard it can be to go ‘local’ in India, where so many languages are spoken.

This isn’t Vogue India’s first experiment with Hindi/Devanagari. In its April issue, it had actor Alia Bhatt on the cover with ‘India’ written in the script. That was presumably also to celebrate Dior’s first fashion show in India since the 1980s. And before that was the February issue featuring supermodel Naomi Campbell; her name was written in both Devanagari and English.

A magazine like Vogue will want to reach more rich Indians, many of whom aren’t part of elite Mumbai-Delhi circles. They may be living in smaller cities and state capitals where Hindi isn’t common. Affixing Hindi on the cover is hardly going to woo them; in some fiercely anti-Hindi states, it may just put them off.

That’s all this week. If you enjoyed reading The Impression, please share it with your friends, family, and colleagues. And please write to me anytime at [email protected] with thoughts, feedback, criticism or anything you’d like to see discussed in this space. I'd love to hear from you.

Thanks for reading, and see you again two weeks from now!