Fuelled by rising income levels and consumerism bred by the country’s robust economic growth, the Indian Entertainment and Media (E&M) industry is poised to grow at 18% compound annual growth rate (CAGR) to reach $23 billion (Rs.1000 billion) by 2011 from its present size of $10 billion (Rs.437 billion), according to the 2007 annual edition of the FICCI-PricewaterhouseCoopers (PWC) report ‘Indian Entertainment and Media Industry — A Growth Story Unfolds’, a report jointly compiled by Federation of Indian Chambers of Commerce & Industry (FICCI), a national organisation that represents and aggregates multiple Chambers of Commerce and PricewaterhouseCoopers, an international accounting and consulting firm.

The report points out that the growing demand coupled with technological advancements, policy initiatives taken by the Indian Government to encourage the inflow of investment and initiative by private media companies, will be the key drivers for the E&M industry. During 2006, the E&M industry has recorded a growth of 20%. The report highlights convergence and two-way communication as the emerging trends that gained momentum during last year. Also, many media companies have started diversifying their product portfolio both within segments as well as across segments. While some television news channels are now diversifying into entertainment channels and film distribution companies are entering into film production, several print media and television companies are entering into the radio space. With the growing focus on convergence and presence across segments, a new genre of media conglomerates is emerging.

Advertising Spends

Indian advertising spends showed exponential growth in 2006 growing more than 23% over last year’s spends to $3.75 billion (Rs.163 billion) as compared to a growth of 14% in the previous year, according to the FICCI-PWC report. 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..

Foreign Investment

Year 2006 registered the maximum flow of foreign investment in the Entertainment and Media Industry. The Ministry of Information and Broadcasting cleared 13 proposals for FDI in media in 2006, 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 more than $92 million (Rs.4 billion).

Key Findings of the Report

While the overall size of E&M industry is estimated to grow to $23 billion (Rs.1000 billion) in 2011 showing a CAGR of 18% from $10 billion (Rs.437 billion) in 2006, the internet advertising is set to post the highest CAGR of 43%, rising to $218.4 million (Rs.9.5 billion) in 2011 from its current size of $36.8 million (Rs.1.6 billion), says the report. Television media, the largest segment of the pie, is also estimated to grow at a healthy CAGR of 22% to reach $11.9 billion (Rs.519 billion) by 2011 from the current size of $4.4 billion (Rs.191 billion).

Television Media

The report says that the new distribution platforms such as conditional access system (CAS), direct-to-home (DTH) and Internet protocol television (IPTV) are expected to punch up subscriber base and subscription revenues. CAS was implemented in select areas in select metro cities such as Delhi, Mumbai and Kolkata with varying results during 2006. Also, Tata Sky, the DTH venture of India’s largest private sector conglomerate, Tata Group, made its entry as the second private sector DTH player, and the government-owned telecom company Mahanagar Telephone Nigam Ltd. (MTNL) started the first IPTV services in Delhi and Mumbai. With these new platforms coming into place, 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.

Filmed Entertainment

Advancements in technology are helping the Indian film industry in all the spheres of film production, film exhibition and marketing. The industry is increasingly getting more corporatised, highlighted by public issues of several film productions, 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 corporates rather than individuals. 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%.

Print Media

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. Current 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.

Radio

The cheapest and oldest form of entertainment in the country, which was hitherto dominated by the state run All India Radio, 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 BIG 92.7 FM, the radio channel of India’s second largest diversified conglomerate, Reliance ADA Group, being started.

Music

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.

Live Entertainment

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 in 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.

Out-of-home Advertising

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 large national media houses 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 Advertising

An estimated 32 million Indians have been exposed to the internet till 2006, with 21 million 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 more than 35 million by 2008 and this will drive growth of internet advertising, which today stands at approximately Rs.1.6 billion ($35.56 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.