Why Reliance Is Buying U.S. Cinemas

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Phoenix will manage Reliance's U.S. chain. On Apr. 4, Reliance acquired Burbank (Calif.)-based DTS Digital Images, popularly known as Lowry Digital Images, a film-imaging and restoration outfit that provides picture-quality improvement services for movies, television, and video, from entertainment group DTS for an estimated $18 million. Lowry, which counts Disney, Paramount, and MGM among its clients, will help Reliance restore digital prints for release both in India and overseas and also to cater to the growing 3D content market.

Seeking a Global Audience

Reliance already owns 120 theaters in India through its subsidiary Adlabs Films, a production, distribution, and exhibition house acquired in 2005. It also has a stake in Prime Focus, a post-production and visual-effects company in Mumbai.

Is Reliance spreading itself too thin as filmmaker, distributor, and cinema owner? B.R. Sharan, chief creative officer at SaReGaMa Films, the movie and music division of Kolkata-based conglomerate RPG Enterprises, doesn't think so. "It's a typical Reliance strategy," he says. "Own the hardware—cinemas—and you control the entire supply chain."

Reliance isn't the first company to leverage this opportunity. "Indian entertainment companies can no longer focus on India alone," says Panchapakesa Subramania Saminathan, a managing director at South India-based film production and distribution house Pyramid Saimira. Pyramid says it has more than 900 cinemas with a capacity of 550,000 seats in the U.S, India, Malaysia, Singapore, and China. In the next three years, with more than 2,000 cinemas, Saminathan expects Pyramid's global business to notch 75% of revenues, up from 20% currently. "Just the Indian audience is not a viable proposition. You have to appeal to other global ethnic communities."

Saminathan's competitor—Reliance—is replicating his model of buying cinemas across the world. "They are copycats," he says. Reliance, which has distributed 45 films so far, now wants to follow Indian expats in other countries. The company's plans include buying cinemas in Britain, Malaysia, Nepal, and Mauritius, screening Bollywood, Chinese, Korean, and English films.

Lakshman covers India business for BusinessWeek .