INDIAN MEDIAINDUSTRY INVESTORS REPORT

The Indian Entertainment and Media Industry
INVESTOR REPORT
(Youl Production (I) Pvt Ltd)
INTRODUCTION


The Indian Entertainment and Media (E&M) industry is poised to grow at 18% compound annual growth rate (CAGR) to reach Rs.1 trillion by 2011 from its present size of Rs.437 billion, according to the 2007 annual edition of the FICCI - PricewaterhouseCoopers report Indian Entertainment and Media Industry – A Growth Story Unfolds. Rising income levels and consumerism bred from the country’s strong economic growth are creating a growing demand for entertainment. This coupled with technological advancements, policy initiatives taken by the Indian Government that are encouraging the inflow of investment and initiative by private media companies, will prove to be the key drivers for the entertainment and media industry. The industry has been forecast to outperform the economic growth in each year, till 2011.
"The last year can be defined as a year of start of convergence for the media industry. With various different services available on the same consumer devices and different network platforms enabled to carry similar services, consumers have been promoted to the top of the value-creating hierarchy, allowing them to enjoy all new social media experience termed as Lifestyle Media", said Timmy Kandhari, Executive Director and Leader Entertainment & Media Practice, PricewaterhouseCoopers, India. "With this new empowerment of consumers, mass media is fast becoming a two way communication platform and the importance of accurate audience measurement will be greater than ever before. Media consumption models such as media marketplace will gain significant importance as it will be crucial to gain insights in to the exact demands of consumers", he added.
Key Findings
OverallCurrent size: Rs. 437 billionProjected size by 2011: Rs.1 trillionCAGR: 18%Growth achieved in 2006 over 2005: 20%
Forming of Media PowerhousesThis age of convergence is leading to a number of collaborations between value chain partners to drive new products and services to consumers. It is also encouraging the diversification of several media companies both within segments such as television news channels diversifying in to entertainment channels or film distribution companies entering in to film production, as well as across different segments of the media & entertainment industry, such as the entry of several print media and television companies in to the radio space. Companies such as Reliance’s Adlabs, Bennett and Coleman and Zee Group today have presence across several segments of the Entertainment & Media industry, signaling the dawn of a new genre of media company in India, billed as ‘Media conglomerate’, similar to the likes of global companies like AT&T, Walt Disney Company, Time Warner etc.
Foreign Investment
2006 saw the maximum flow of foreign investment in the Entertainment and MediaIndustry. As many as 13 proposals for FDI in media since were cleared by theMinistry of Information and Broadcasting in 2006 itself and the Ministry is further examining another 22 proposals for clearance. The news and current affairs segment dominated the field with 8 proposals. Over the last three years, the Entertainment and Media industry has secured foreign investment of over Rs. 4 billion.
BREAK UP

Filmed entertainmentCurrent size: Rs. 85 billion Projected size by 2011: Rs. 175 billionCAGR: 16%
Advancements in technology are helping the Indian film industry in all the spheres – film production, film exhibition and marketing. The industry is increasingly getting more corporatised, highlighted by public issues of several film production, distribution and exhibition companies, long term contracts between film production companies and directors/ actors and the fact that more than half the releases in 2006 were by corporate rather than individual.. More theatres across the country are getting upgraded to multiplexes and initiatives to set up more digital cinema halls in the country are already underway, The Home Video section of the industry is also poised for steady cumulative growth of 31%.

TelevisionCurrent size: Rs. 191 billionProjected size by 2011: Rs. 519 billion CAGR: 22%
In 2006, CAS was implemented in select areas in Delhi, Mumbai and Kolkata with varying results. 2006 also saw the entry of the second private DTH player – Tata Sky and the launch of the first IPTV services in Delhi and Mumbai, by MTNL. These new distribution platforms are expected to punch up subscriber base and subscription revenues. Hence, subscription revenues are projected to be the key growth driver for the Indian television industry over the next five years. Subscription revenues will increase both from the number of pay TV homes as well as increased subscription rates. The buoyancy of the Indian economy will drive the homes, both in rural and urban (second TV set homes) areas to buy televisions and subscribe for the pay services.
MusicCurrent size: Rs.7.2 billionProjected size by 2011: Rs. 8.7 billionCAGR: 4%
The industry has been plagued by piracy and had been showing very sluggish growth in the physical format over the last few years, both in India and globally. However, ‘mobile music’ and ‘licensed digital distribution’ services are projected to fuel the recovery of the music industry the world-over. The pace of growth in mobile music reflects the fact that consumers increasingly view their wireless device as an entertainment medium, using those devices to play games and listen to music, while carriers are actively promoting ancillary services such as ring tones and caller tunes to boost average revenue per user. Ring tones currently constitute the dominant component of the mobile music market. Licensed digital distribution services are also contributing significantly to growth in all regions. The boom in the radio industry is also expected to have a positive impact on the music industry

RadioCurrent size: Rs.5 billionProjected size by 2011: Rs. 17 billionCAGR: 28%
The cheapest and oldest form of entertainment in the country, which was hitherto dominated by the AIR, is witnessing a sea-change. In 2005, the Government announced three key policy initiatives - migration to a revenue share regime, allowing foreign investment up to 20% in to the segment and opening of 338 licenses in 91 cities to private players. The effects of these policy changes were evident in 2006 with 245 licenses sold to private players and several new radio channels such as Reliance’s BIG 92.7 FM being launched. In 2006, the community radio was finally implanted by the government. Satellite radio continued to grow while the new concept of ‘visual radio’ was also launched on Nokia mobile phones.
Live entertainment Current size: Rs. 9 billionProjected size by 2010: Rs. 19 billionCAGR: 16%
This segment of the entertainment industry, also known as event management, is growing at a fast and steady rate. While this industry is still evolving, Indian event managers have clearly demonstrated their capabilities in successfully managing several mega national and international events over the past few years. In fact, event managers are also developing properties around events. The growing number of corporate awards, television and sports events is helping this sector. With rising incomes, people are also spending more on wedding, parties and other personal functions. However, issues like high entertainment taxes in certain states, lack of world-class infrastructure and the unorganised nature of most event management companies continue to hinder growth of this industry.
Advertising Spends
Indian advertising spends showed exponential growth in 2006 growing over 23 percent over last year’s spends to Rs.163 billion as compared to a growth of 14 percent. Advertising revenues are vital for the growth of this industry. "While today the low ad spends may seem like a challenge before the E&M industry, it also throws open immense potential for growth," points out the report. This potential can be estimated by the fact that "even if India was to reach the global average, the advertising revenues would at least double from the current level of around Rs.163 billion," as per the report.


Out-of-home advertisingCurrent size: Rs. 10 billionProjected size by 2010: Rs. 21.5 billionCAGR: 17%
Outdoor media sites in India are predominantly owned or operated by small, local players and are typically, directly marketed by them to advertisers and advertising agencies. This makes the industry a fragmented and disorganized one. This situation is improving slightly with some big players like Star Network and Bennet & Coleman & Co. entering the OOH advertising industry. This sector has witnessed several technological innovations such as light-emitting diode (LED) video billboards. This is a segment that is being buoyed by interesting technological innovations across the world and is likely to grow in India too in the short-term.
Internet advertisingCurrent size: Rs.1.6 billionProjected size by 2010: Rs. 9.5 billionCAGR: 43%
An estimated 32 million Indians have been exposed to the internet till 2006, with 21 regular users. A total of 59 million Indians are PC literate and thus potential targets for internet advertising. The number of regular internet users is expected to increase to 35 million+ by 2008 and this will drive growth of internet advertising, which today stands at approximately Rs 1600 million. The increase in number of broadband connections gives users improved internet speeds at cheaper rates encouraging further use of the medium. A study of the demographics of internet users reveals that a large number of users fall in categories suitable for being targeted by internet advertising. The internet is being used for a variety of reasons, besides work, such as chatting, leisure, doing transactions, writing blogs etc. This offers a huge opportunity to marketers to sell their products.

Print mediaCurrent size: Rs.128 billionProjected size by 2011: Rs.232 billionCAGR: 13%
A booming Indian economy, growing need for content and government initiatives that have opened up the sector to foreign investment are driving growth in the print media. With the literate population on the rise, more people in rural and urban areas are reading newspapers and magazines today. Currents estimates reveal that the reach of print media in India has increased to 222 million people. Print media is also the favorite segment for global investors with maximum foreign investment in this segment. The print media industry has potential to grow still larger as 369 million literate people in India are still not tapped by any publication.
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