The Economics of Bangalore’s Dead Nightlife

The newspapers are full of stories about Bangalore’s dying nightlife due to the recently imposed dancing restrictions and curfew. But what exactly is it that’s killing our nightlife? Let’s take a look at the economics behind the scenes.

Nightlife is a business. A business thrives when there is a safe and conducive environment in which the business can function profitably, thereby making it a worthwhile endeavor for those who manage and own it. The mathematics are simple; if a business is not profitable, it goes bankrupt and closes down.

The nightlife business model is fairly simple.

Expenses

* Liquor License: A Liquor License costs between Rs.50 Lakh to Rs.85 Lakhs. The government of Karnataka is not issuing any new liquor licenses, making the cost is exorbitantly high since they have to be procured on the black market.
* Rent and Deposit: Whether you rent, own, or lease, it’s costly to get a good location and the overhead is huge.
* Conceptualizing the establishment: Money needs to be invested in the architecture, construction, and decor costs.
* Overhead: Includes the salaries for the staff needed to run the establishment and the monthly upkeep bills (electricity, water, etc.)
* Marketing, PR, and Entertainment: The brand of the establishment needs to be developed . Also money must constantly be spent on entertainment and promotion to keep the business alive and to entice new customers.
* Equipment: Sound and light equipment , F&B equipment etc.
* Bribes: An unfortunate reality in any business in the F&B industry. To ensure the law-keeping agencies do not obstruct business operations (even when everything is being done legally).

Revenues

* Sales: Food and beverage sales are the main source of revenue to the establishment. The cost of liquor is usually 30% , and the food can be anywhere between 30%-50% .
* Entry Money: Entry fees or ticket sales are other sources of revenue.
* Sponsorship Deals : Liquor companies provide sponsorship budgets for events for use in marketing and public relations. In return their brands must be pushed at the venue, which will be reflected in sales. Tobacco companies provide a secondary source of such sponsorship revenues.

Constraints to the Business

* Cinderella’s Deadline: The 11.30pm deadline means that most businesses have 2.5 hours per day to offer their services. In our city, patrons to such establishments visit them after 9 pm and leave when the clock strikes 11.30pm.
* 3 days a week of business: Patrons usually visit nightlife establishments on Wednesdays, Fridays and Saturdays except of course if special events are planned on other days. Sales figures are typically negligible on the other days of the week.
* The Footloose No Dancing Law: When people in a nightclub cannot dance, they are discouraged from going out in the first place. Why not save money and have a few friends over at home instead? Dancing is a major element in creating nightclub atmosphere. Establishments have to wait for months to get dancing licenses and the overhead to run their business while they wait for these licenses usually ensures their demise.

Threats To The Business

* Dealing with the law enforcement agencies and agencies which give various licenses to the business.
* Keeping shady characters out of the establishment who are sometimes well-connected and violent and rowdysheeters.
* Extortionist under the guise of social organizations whose modus operandi involves threatening protests to defame the businesses, bogus claims of links to drugs and prostitution, questioning the legality of the business and claiming it’s against the Indian culture. Extortionists accept cash in return for keeping quiet, but their demands grow and their promises aren’t always honored. They sometimes have the support of reporters as well as law enforcement agencies and great lawyers to back their protests.

What does all this mean? The nightlife business entails huge expenses and investments coupled with low revenues and constraints and threats to the business. The current situation of the nightlife industry in Bangalore is a perfect recipe ensuring its demise. Those who would survive are:

* 5 Star Hotels which have to have a bar but do not rely solely on the revenues from the bars.
* Nightlife businesses with a higher focus on food than liquor; food creates a nearly constant customer flow and hours of operation are longer and more consistent.
* Those who are familiar with all the constraints on the nightlife industry but are innovative enough to work around them. Unsurprisingly, these entrepreneurs have proven to be few and far between.

Working Towards A Better Nightlife

So what can we do to improve the nightlife situation in Bangalore, not only for patrons of the nightclubs, but also for nightclub owners who are floundering in the constraints of the industry?

* The 11:30 deadline needs to be extended; This would increase the number of hours of operation, allowing for larger customer flow.
* A transparent and uncomplicated discotheque license procedure
* Police Protection: The police should give protection to owners of establishments from shady characters , and from organizations and individuals demanding extortion. The police should protect the people, working hand in hand with the venues to ensure that illegal activity is not taking place in nightclubs.

Every civilized city needs a great nightlife so its citizens can mingle, enjoy and socialize with their friends and loved ones after a hard day’s work .

Let’s hope those making the laws listen to the people as well as the entrepreneurs in the industry, and make policies and laws which ensure that the nightlife thrives in a safe and beneficial way for all involved.

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