Friday, February 23, 2007

Entertainment & Media - India

The Indian Entertainment and Media (E&M) industry is poised to grow at 19% compound annual growth rate (CAGR) to reach $18.6 billion by 2010 from its present size of $7.8 billion, according to 2005 annual edition of the FICCI - PricewaterhouseCoopers report Indian Entertainment and Media Industry-Unravelling the potential. Economic growth, rising income levels, consumerism, coupled with technological advancements and policy initiatives taken by the Indian government that are encouraging the inflow of investment, 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 2010. “Two factors that will contribute to the growth of the industry are low media penetration in lower socio-economic classes and low ad spends” said Deepak Kapoor, Executive Director and Leader for PricewaterhouseCoopers’ Entertainment & Media Practice in India. “Today media penetration is poor in lower socio-economic classes, but efforts to increase it even slightly are likely to deliver much higher results, simply due to the absolute numbers being large,” he added. Strong economic growth, rising consumer spending and regulatory corrections are drawing foreign investments in most segments of the E&M industry, especially the print media. “The sector needs a consistent and uniform media policy for increase in investments. Also, the on-going threat of piracy, which continues to hinder investments in all sectors, needs efforts not just by the industry bodies, but by government, with empowered officers enforcing anti-piracy laws,” said Dr. Amit Mitra-Secretary General, FICCI. Commenting on the future of the industry, Deepak Kapoor said, “Convergence will play a crucial role in the development of the Indian entertainment and media industry where consumers will increasingly be calling the shots in a converged media world. Broadband access and Internet Protocol (IP) will be the technology enablers that will evolve this new breed of consumers, as opportunities for them to access and manipulate content and services will be overflowing, while their time and attention will be limited. Established approaches of pushing exclusive content through non-linear-channels or networks to mass or segmented audiences will no longer guarantee competitive advantage.”

Indian advertising spends as percentage of GDP, at 0.34%, is abysmally low, as opposed to other developed and developing countries, where the average is around 0.98%. 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 $2.9 billion,” as per the report. The year 2005 was marked by the entry of new players across all segments of the industry. The most prominent entry was that of the Reliance Group in both the filmed entertainment and radio segment. In the radio segment, companies have bid for FM licenses in 338 small towns and cities spread across the country in the second phase of liberalisation, and an overwhelming majority of these companies did not even have a presence in the entertainment and media space, let alone the radio sector, earlier.

Current size of Television industry is $3.3 billion, and projected size by 2010 is $9.5 billion (CAGR: 24%). 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. New distribution platforms like DTH and IPTV will only increase the subscriber base and push up the subscription revenues.

Current size of Filmed entertainment industry is $1.5 billion, and projected size by 2010 is $3.4 billion (CAGR: 18%). 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 corporatized. Several film production, distribution and exhibition companies are coming out with public issues. 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. This will not only improve the quality of prints and thereby make film viewing a more pleasurable experience, but also reduce piracy of prints.

Current size of Print media is $2.4 billion, and projected size by 2010 is $4.3 billion (CAGR: 12%). 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. Also, there is more interest in India amongst the global investor community. This leads to demand for more content from India. Foreign media too is evincing interest in investing in Indian publications. And the Internet today offers a new avenue to generate more advertising revenue.

Current size of Radio is $67 million, and projected size by 2010 is $267 million
(CAGR: 32%). The cheapest and oldest form of entertainment in the country, which was hitherto dominated by the AIR, is going to witness a sea-change very shortly. In 2005, the government announced three key policy initiatives which will drive growth in this sector - migration to a revenue share regime, allowing foreign investment into the segment and opening of licenses to private players. As many as 338 licenses are being given out by the Indian government for FM radio channels in 91 big and small towns and cities. This deluge of radio stations will result in rising need for content and professionals. New concepts like satellite, Internet and community radio have also begun to hit the market. Increasingly, radio is making a comeback in the lifestyles of Indians.

Current size of Music industry is $156 million, and projected size by 2010 is $164 million (CAGR: 1%). 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 ringtones to boost average revenue per user. Ringtones currently constitute the dominant component of the mobile music market. Licensed digital distribution services are also contributing significantly to growth in all regions.

Current size of Live entertainment industry is $178 million, and projected size by 2010 is $400 million (CAGR: 18%). 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.

Current size of Out-of-home advertising is $200 million, projected size by 2010 is $389 million (CAGR: 14%). 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. However, this segment too is witnessing a sea-change with technological innovations. Growing billboard advertising is fuelled by technologies such as light-emitting diode (LED) video billboard. This is a segment that is seeing interesting technological innovations across the world and is likely to evolve in India too in the short-term.

Current size of Internet advertising is $22 million, and projected size by 2010 is $167 million (CAGR: 50%). An estimated 28 million Indians are currently hooked on to the Internet. And this rising number is leading to the growth of 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. And with broadband becoming increasingly popular, this segment is expected to grow by leaps and bounds.
Thanks FICCI-PWC Study on Indian Entertainment and Media Industry, March 2006

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