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Market Survey

Media & Entertainment:


Next Five Years Are Promising
Behind every adversity lies an opportunity. The current phase of challenging environment will
only force the media companies to innovate and revamp their strategies. Considering the
slowdown in advertising revenue, they may thrust on subscription revenue!

T
he current challenging
global economic envi- The industry at a glance
ronment has led to mod- 1. India’s media and entertainment industry grew 15 per cent annually in the last five years
erate expectations for 2. Projections for the next five years lowered, yet a 12.5 per cent CAGR predicted
the Indian media and 3. Television to continue dominating the media and entertainment business
entertainment industry for 2009, 4. The film industry to suffer stagnation in 2009, but expected to pick up in the coming years
but the projections for the coming
years are still strong. While the in-
dustry grew 15 per cent annually in more than 500 chambers of com- expected to improve again in the
the last five years to $11.68 billion merce and business associations. years to come:
(Rs 584 billion) in 2008, the growth Even the projection for 2009-13
rate is expected to remain subdued has been reduced to 12.5 per cent Present tense,
at 7.5 per cent in 2009 and 10 per compound annual growth rate
cent in 2010, according to a latest (CAGR) from the earlier predic-
future perfect
report by the global consultancy tion of 18 per cent for the period The KPMG-FICCI report has
firm KPMG and the Federation of 2008-12. Yet, over the next five rightly mentioned that in many
of Indian Chambers of Commerce years, the industry is projected ways, 2008 was a testing time for
and Industry (FICCI), India’s pre- to cross the mark of $21 billion the industry. “With the global eco-
mier trade organisation represent- from $11.68 billion in 2008. Table nomic slowdown affecting advertis-
ing more than 1500 companies and I explains how the growth rate is ing spends, sectors like television,
print, radio and outdoor that depend
on advertising revenues were af-
fected,” says the study. Despite this
situation, the report looks forward
for better days, saying that “Behind
every adversity lies an opportunity.
Media companies are under pressure
to change, innovate and re-exam-
ine their existing business models.
Companies need to draw upon new
capabilities to survive in this envi-
ronment.”
Even after lowering the growth
projections compared to the earlier
figures for 2008-12, the growth rate
during 2009-13 is pegged at 27.9 per
cent for the Internet, 14.5 per cent
Market Survey
for the television industry, 14.2 per
cent for the radio business, 12.4 per
cent for the advertising industry, 9.1
per cent for the film industry and 9
per cent for print media. The highest
growth of 33.5 per cent, however, is
projected for gaming, which is worth
only $130 million as of now.
Television, which forms the larg-
est chunk of the Indian media and
entertainment industry, is expected
to grow to $9.45 billion in 2013 from
$4.81 billion in 2008, registering a
CAGR of 14.5 per cent. Print media,
the second largest segment of the in-
dustry, is expected to grow to $5.32
billion in 2013 from $3.45 billion in
2008 with a CAGR of 9 per cent. Film
business is projected to grow to $3.37
billion in 2013 at 9.1 per cent CAGR Television, which forms the largest chunk of the Indian media and entertainment industry,
from $2.18 billion in 2008. Anima- is expected to grow to $9.45 billion in 2013 from $4.81 billion in 2008
tion business, in which a number of
Indian companies have started mak- to innovate and revamp their strat- not only heat-up the competition in
ing their inroads into the interna- egies. Considering the slowdown in this segment but also expand the
tional markets, is predicted to touch advertising revenue, television and overall market size. The DTH sub-
$788 million in 2013 from $348 mil- print companies may increase their scriber base in India has already
lion in 2008, growing at 17.8 per cent thrust on subscription revenue. The gone up to 10 million in 2008 from
annually in this period. total annual subscription fee re- one million in 2005. The KPMG-
ceived by all the TV channels is es- FICCI report predicts the DTH sub-
Surviving the downtrend, timated at $0.5 billion—only about scriber base to reach at 28 million by
one sixth of the total subscription 2013.
preparing for the revenue of the television industry— The pressure to reduce the cost
future growth suggesting that there is a huge scope will be there on the print media
The current phase of challenging for improvement on this front. also. Yet, the size of print media is
environment, however, will force the The media companies are also expected to move up to $5.32 billion
media and entertainment companies bound to feel the need of cost-ra- in 2013 from $3.45 billion in 2008,
tionalisation, leading to restructur- registering a CAGR of 9 per cent.
Table I ing of programming costs, carriage While the subscription revenue of
India’s Media and fee, compensations, etc. The current print media is expected to increase
Entertainment Industry annual outgo as the carriage fee is to $1.84 billion in 2013 from $1.28
Year Size Per cent pegged at $0.3 billion, which is ex- billion in 2008, the advertising rev-
($ billion) growth pected to come down this year. The enue of the segment is projected to
growing acceptance of the digital TV move up to $3.48 billion from $2.16
2005 7.72 — distribution technology will help the billion during this period.
2006 8.9 15.28 per cent broadcasters on both the fronts of The film industry of India, which
2007 10.4 16.85 per cent reducing carriage fee and increas- is the largest producer of movies in
2008 11.68 12.31 per cent ing subscription revenue. The In- the world, also seems to be follow-
2009 12.56 7.53 per cent dian government has already given ing a similar storyline. Although
an indication that it is considering a the year 2009 is predicted to be a
2010 13.94 10.99 per cent
policy intervention to prescribe a pe- no-growth year for this industry, the
2011 15.82 13.49 per cent riod of five years for the existing and CAGR during 2009-13 is pegged at 9
2012 18.22 15.17 per cent new multiservice operators (MSOs) per cent, with the size of the indus-
2013 21.04 15.48 per cent and local cable operators will have to try moving up to $3.38 billion in 2013
digitalise their network. from $2.18 billion in 2008. Domestic
CAGR for 2009-13: 12.5 per cent
(Source: KPMG-FICCI Report) Also, the entry of new direct-to- theatrical business will continue to
home (DTH) service providers will be the largest chunk of the pie con-
Market Survey
tributing more than 70 per cent of
the total business of film industry. The media companies are also bound to feel the need
Domestic theatrical business is
expected to increase to $2.4 billion in of cost-rationalisation, leading to restructuring of
2013 from $1.6 billion in 2008. The
overseas theatrical business, how-
programming costs, carriage fee, compensations, etc.
ever, is expected to almost double in
this period, to $0.38 billion in 2013 period of 2004-07. It suggests that CAGR during the three years of 2006-
from $0.2 billion 2008. Film Indus- the compound annual growth rate 08, as the Indian economy delivered
try’s revenue from home video is also in the next five-year period of 2009- more than 9 per cent growth in the
expected to move up to $0.32 billion 13 will be 12.4 per cent. Earlier, in gross domestic product (GDP) during
in 2013 from $0.18 billion in 2008. the previous year’s report prepared these years. Now, with the growth
by PricewaterhouseCoopers (PWC)- of Indian economy cooling down to
Projections for FICCI, the advertising industry was about 7 per cent, a slowdown in the
advertising also lowered, projected to grow at 18 per cent media and entertainment industry is
annually in the five-year period of quite natural. Yet, the growth projec-
but five-year outlook 2008-12. Despite this slowdown, the tions for the period of next five years
still decent Indian advertising industry is placed put this sector as one of the most lu-
The KPMG-FICCI study has low- in a much better situation than the crative investment opportunities.
ered the projections for the advertis- US or Europe. Just for a comparison, There are a number of reasons
ing industry also, which had regis- the advertising rates in the UK have to be optimistic about India’s media
tered a growth of 20 per cent in the reached the bottom of last 20 years. and entertainment industry, includ-
ing the factors that contribute to the
Table II Economic growth: high growth of the Indian economy.
Despite the high growth achieved
Media Segments the key driver during the recent years, almost all
Segment 2008 2013 Per cent As discussed earlier, the segments of the media and en-
($ billion) ($ billion) CAGR a number of factors that tertainment industry have a low
Television 4.81 9.45 14.5 per cent are expected to drive the penetration compared to the inter-
growth of the Indian me- national average. For example, the
Print 3.45 5.32 9.0 per cent
dia and entertainment cable and satellite penetration in
Film 2.18 3.37 9.1 per cent industry will actually the country is just about 50 per cent,
Animation 0.35 0.79 17.8 per cent drive the entire Indian leaving half the market untapped.
OOH 0.32 0.59 12.8 per cent economy. There is a di- The advertising spend-to-GDP ratio
Gaming 0.13 0.55 33.3 per cent rect co-relation between is also very low compared with the
Internet 0.12 0.43 27.9 per cent the performance of the developed countries. On the other
Indian economy and the hand, the growing middle class,
Radio 0.16 0.33 14.2 per cent
media and entertainment young population and increasing
Music 0.14 0.21 8 per cent industry. discretionary spending are the fac-
Source: KPMG-FICCI Report The advertising indus- tors that not only help the overall
try grew by 17.1 per cent economy to grow at a healthy pace
but also create a conducive environ-
Table III ment for the media and entertain-
ment industry.
Advertising Segments
Apart from that, low average
($ billion)
revenue per user (ARPU) in various
Segment 2008 2009P Per cent YoY 2013P Per cent CAGR segments of the industry is both a
growth (2009-13) challenge as well as an opportunity
Print 2.16 2.3 5.9 3.48 10.0 from an investor’s point of view.
Television 1.66 1.76 6.9 3.12 13.5 Due to the growth prospects coupled
with the low valuations, Indian me-
OOH 0.2 0.36 9.9 0.58 12.7
dia and entertainment companies of-
Radio 0.16 0.18 9.5 0.32 14.2 fer attractive investment avenues to
Internet 0.12 0.16 35.5 0.42 28.1 foreign investors. 
Source: KPMG-FICCI Report
Courtesy: IndusView Publication

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