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!


he current challenging global economic environment has led to moderate expectations for the Indian media and entertainment industry for 2009, but the projections for the coming years are still strong. While the industry grew 15 per cent annually in the last five years to $11.68 billion (Rs 584 billion) in 2008, the growth rate is expected to remain subdued at 7.5 per cent in 2009 and 10 per cent in 2010, according to a latest report by the global consultancy firm KPMG and the Federation of Indian Chambers of Commerce and Industry (FICCI), India’s premier trade organisation representing more than 1500 companies and

The industry at a glance
1. India’s media and entertainment industry grew 15 per cent annually in the last five years 2. Projections for the next five years lowered, yet a 12.5 per cent CAGR predicted 3. Television to continue dominating the media and entertainment business 4. The film industry to suffer stagnation in 2009, but expected to pick up in the coming years
more than 500 chambers of commerce and business associations. Even the projection for 2009-13 has been reduced to 12.5 per cent compound annual growth rate (CAGR) from the earlier prediction of 18 per cent for the period of 2008-12. Yet, over the next five years, the industry is projected to cross the mark of $21 billion from $11.68 billion in 2008. Table I explains how the growth rate is expected to improve again in the years to come:

Present tense, future perfect
The KPMG-FICCI report has rightly mentioned that in many ways, 2008 was a testing time for the industry. “With the global economic slowdown affecting advertising spends, sectors like television, print, radio and outdoor that depend on advertising revenues were affected,” 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-examine their existing business models. Companies need to draw upon new capabilities to survive in this environment.” 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

Print media. 9. The growing acceptance of the digital TV distribution technology will help the broadcasters on both the fronts of reducing carriage fee and increasing subscription revenue.1 per cent for the film industry and 9 per cent for print media. The total annual subscription fee received by all the TV channels is estimated at $0.94 15.48 per cent CAGR for 2009-13: 12.18 billion in 2008. leading to restructuring of programming costs.2 per cent for the radio business.04 Per cent growth — 15. The media companies are also bound to feel the need of cost-rationalisation.81 billion in 2008 surviving the downtrend.99 per cent 13.1 per cent CAGR from $2.28 per cent 16.18 billion in 2008. compensations.53 per cent 10.5 per cent (Source: KPMG-FICCI Report) to innovate and revamp their strategies.72 8.38 billion in 2013 from $2. The Indian government has already given an indication that it is considering a policy intervention to prescribe a period of five years for the existing and new multiservice operators (MSOs) and local cable operators will have to digitalise their network. 12.45 billion in 2008. is expected to grow to $9. the second largest segment of the industry. will force the media and entertainment companies Table I India’s Media and Entertainment Industry Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 Size ($ billion) 7.5 billion—only about one sixth of the total subscription revenue of the television industry— suggesting that there is a huge scope for improvement on this front. Animation business.8 per cent annually in this period. however. Film business is projected to grow to $3. Although the year 2009 is predicted to be a no-growth year for this industry. The film industry of India.17 per cent 15.28 billion in 2008. the advertising revenue of the segment is projected to move up to $3.22 21. Domestic theatrical business will continue to be the largest chunk of the pie con- . which is worth only $130 million as of now. carriage fee. which is expected to come down this year. registering a CAGR of 9 per cent.Market Survey for the television industry.16 billion during this period.37 billion in 2013 at 9. The DTH subscriber base in India has already gone up to 10 million in 2008 from one million in 2005. in which a number of Indian companies have started making their inroads into the international markets.68 12. is predicted to touch $788 million in 2013 from $348 million in 2008.48 billion from $2. Television.9 10.81 billion in 2008.84 billion in 2013 from $1. is expected to grow to $9. Also. also seems to be following a similar storyline.5 per cent.32 billion in 2013 from $3. with the size of the industry moving up to $3. The pressure to reduce the cost will be there on the print media also. Television. registering a CAGR of 14.45 billion in 2013 from $4. the CAGR during 2009-13 is pegged at 9 per cent. the entry of new direct-tohome (DTH) service providers will not only heat-up the competition in this segment but also expand the overall market size. which is the largest producer of movies in the world. The highest growth of 33.4 per cent for the advertising industry. The KPMGFICCI report predicts the DTH subscriber base to reach at 28 million by 2013.56 13.3 billion. The current annual outgo as the carriage fee is pegged at $0. is expected to grow to $5. which forms the largest chunk of the Indian media and entertainment industry.85 per cent 12.32 billion in 2013 from $3.5 per cent. growing at 17.45 billion in 2008 with a CAGR of 9 per cent. which forms the largest chunk of the Indian media and entertainment industry.31 per cent 7. preparing for the future growth The current phase of challenging environment.4 11. the size of print media is expected to move up to $5. however. 14. television and print companies may increase their thrust on subscription revenue.49 per cent 15. While the subscription revenue of print media is expected to increase to $1. Yet. is projected for gaming.82 18. Considering the slowdown in advertising revenue. etc.45 billion in 2013 from $4.

Indian media and entertainment companies offer attractive investment avenues to foreign investors.13 0.1 per cent Source: KPMG-FICCI Report Table III Advertising Segments ($ billion) Segment Print Television OOH Radio Internet 2008 2. including the factors that contribute to the high growth of the Indian economy. Domestic theatrical business is expected to increase to $2.0 13. It suggests that the compound annual growth rate in the next five-year period of 200913 will be 12. The advertising spend-to-GDP ratio is also very low compared with the developed countries. almost all the segments of the media and entertainment industry have a low penetration compared to the international average.16 1.3 per cent 27.2 28.81 3.32 billion in 2013 from $0.43 0. with the growth of Indian economy cooling down to about 7 per cent.21 Per cent CAGR 14. The overseas theatrical business.59 0.2 0.55 0. Yet.33 0.76 0. Earlier.18 0.32 0. the Indian advertising industry is placed in a much better situation than the US or Europe.37 0.16 Per cent YoY growth 5. Despite this slowdown.8 per cent 33. Apart from that.1 Source: KPMG-FICCI Report .  Courtesy: IndusView Publication Projections for advertising also lowered.0 per cent 9.16 0.58 0.4 per cent.4 billion in 2013 from $1. CAGR during the three years of 200608.45 5. compensations.12 0.5 per cent 9.18 0. in the previous year’s report prepared by PricewaterhouseCoopers (PWC)FICCI.8 per cent 12.7 14.5 12.32 0.3 1.9 9. Despite the high growth achieved during the recent years. which had registered a growth of 20 per cent in the Table II Media Segments Segment Television Print Film Animation OOH Gaming Internet Radio Music 2008 ($ billion) 4.12 2009P 2. etc. a slowdown in the media and entertainment industry is quite natural.2 per cent 8 per cent economic growth: the key driver As discussed earlier. the growing middle class.2 billion 2008. the growth projections for the period of next five years put this sector as one of the most lucrative investment opportunities. period of 2004-07.Market Survey tributing more than 70 per cent of the total business of film industry. Film Industry’s revenue from home video is also expected to move up to $0. as the Indian economy delivered more than 9 per cent growth in the gross domestic product (GDP) during these years.9 9. young population and increasing discretionary spending are the factors that not only help the overall economy to grow at a healthy pace but also create a conducive environment for the media and entertainment industry.38 billion in 2013 from $0. the media companies are also bound to feel the need of cost-rationalisation. Now. however.12 0. low average revenue per user (ARPU) in various segments of the industry is both a challenge as well as an opportunity from an investor’s point of view.45 2.6 billion in 2008. carriage fee. the cable and satellite penetration in the country is just about 50 per cent.1 per cent 17.42 Per cent CAGR (2009-13) 10.9 6. For example.9 per cent 14. the advertising industry was projected to grow at 18 per cent annually in the five-year period of 2008-12. but five-year outlook still decent The KPMG-FICCI study has lowered the projections for the advertising industry also. There are a number of reasons to be optimistic about India’s media and entertainment industry.16 0. Due to the growth prospects coupled with the low valuations. a number of factors that are expected to drive the growth of the Indian media and entertainment industry will actually drive the entire Indian economy.18 billion in 2008.5 2013P 3. Just for a comparison.48 3. to $0. There is a direct co-relation between the performance of the Indian economy and the media and entertainment industry.66 0.5 35. leading to restructuring of programming costs.79 0. The advertising industry grew by 17. the advertising rates in the UK have reached the bottom of last 20 years.35 0.32 3.36 0. On the other hand. leaving half the market untapped.14 2013 ($ billion) 9. is expected to almost double in this period.

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