The Karnataka government's decision to levy a 2% cess on movie tickets and over-the-top (OTT) subscriptions will lead to an additional burden on cinema chains and OTT platforms, who will pass on the price increase to consumers.

Industry experts, though, say that the price increase will be marginal and the revenue generation for the state government will be miniscule. As per industry estimates, the state government can expect Rs. 60 crore in incremental revenue from the levying of the 2% cess.

While the stated objective of the state government behind levying the cess is the welfare of film artists and cultural activists, experts note that effective implementation will be key to achieving this objective.

According to Elara Capital SVP Karan Taurani, Karnataka would be contributing an estimated 15% to the national box office collections of Rs. 10-12,000 crore annually. In terms of OTT subscriptions, the state's estimated share of the Rs. 10,000 crore subscription OTT market would be 10%.

"The 2% cess will lead to a positive impact of Rs. 60 crore for the Karnataka government. It's a mild negative for both the box office and OTT subscription businesses," he stated.

He noted that OTT platforms, which are already raking in heavy losses, will have a small negative impact on their plans to scale up. Similarly, cinema chains will be compelled to hike ticket prices even as footfalls are 20-30% lower compared to pre-covid levels.

Chandrasekar Mantha, Partner, Media and Entertainment Sector Leader, Deloitte India, said the proposed 2% cess on movie tickets and OTT platforms will likely be passed on to consumers.

"The movie industry in Karnataka currently pays an entertainment tax of 30%, and the additional cess may slightly increase ticket prices. Similarly, OTT platforms will need to comply with the 2% cess based on their subscription numbers for the state," he stated.