Micro Economics Final Presentation

A Complete Report on the ELECTRONIC MEDIA INDUSTRY in general and the STAR TV network in particular
Saira Ansari (03) Dhruvin Shah (20) Rajiv Siddhartha (21) Suyash Gupta (09) Vinit Shah (29)

What exactly is a Medium?? Channels of communication that serve many diverse functions, such as offering a variety of entertainment with either mass or specialized appeal, communicating news and information, or displaying advertising messages. Available types of media include print, electronic, out-of-home, and direct mail. Print usually refers to newspapers and magazines but also includes directories, school and church yearbooks and newsletters, and programs at sporting events and theater presentations. Out-of-home media are designed almost exclusively to serve only an advertising function, and include billboards, transit advertising, and posters in public places such as stadiums, airports, and train stations, as well as flying banners and skywriting. Directmail media are advertisements that are mailed directly to prospects. Any single form of communication is known as a medium.

How is electronic media different from other forms of media?? Electronic media utilize electronics or electromechanical energy for the end user) to access the content. This is in contrast to static media (mainly print media), which are most often created electronically, but don't require electronics to be accessed by the end user in the printed form. The primary electronic media sources familiar to the general public are better known as video recordings and audio recordings .One must note that electronic media may be in either analog or digital format. Although the term is usually associated with content recorded on a storage medium, recordings are not required for things like live broadcasting. Industry Outlook of the Electronic Media Industry The Indian entertainment and media (E&M) industry, standing at more than USD 8 billion, is one of the fastest growing sectors of the Indian economy. The industry is now at an inflection point, with the earlier phase of growth having run its course; the sector is now ready to enter a second stage of growth powered by the twin engines of technology and an enabling regulatory environment. According to a study by FICCI and PwC it has been estimated that the industry would grow at a CAGR of 19% to reach Rs. 83,740 crores by 2010 from the present levels of Rs.3,530 crore.

Source: ENIL, 2006.

Easy availability of jobs amongst the young Indians (20-24 yrs) have led to a higher disposable income, with a major chunk being spent on music, cell phones, books, food and branded clothes (KSA- Technopak).

So what drives the E&M industry? The buoyant economy has given a fillip to the consumer's income which in turn increases the disposable income that the consumer spends on E&M 2. This combined with technological advancement and policy initiatives undertaken by the Indian government has contributed to the growth of the E&M industry. Factors such as low media penetration across various socio-economic classes and lower ad spends have also helped drive the industry. The other key factor is the liberalized foreign regime, the recent being FDI permitted in the print and radio sectors, while films, TV and other segments are already open to foreign investments. In short it can be said that the Indian E&M has everything going for it, be it technology, digitalization, government support and industry developments.

Source: ENIL, 2006.

The industry needs a consistent and uniform media policy for increasing investments in all sectors that needs efforts not just by the industry bodies but also by the government. Investments in technology will call for access to more institutionalized funds, thus resulting in corporatization, transparent accounting policies, professionalism and corporate governance. According to a report by BSE, Annual Market Review 2003, the Indian media business is no different in terms of exponential potential as compared to its global counterparts. The difference lies in the structure of the business in India and that at the global levels. AOL- time, Walt Disney, Bertelsmann, Viacom,

News Corporation and Vivendi Universal are amongst the largest media companies in the world and their `family brands' consists of business in almost all areas of the media segment. Whilst in India, we have dominant leaders in individual segments of the business such as Broadcasting (Star, Sony and Zee), Content (Balaji, TV18), Music (Saregama, Tips, Universal etc.), Movies (Mukta Arts, Yash Raj Films) & Distribution (Siticable, Hathway).

Out of the above television and filmed entertainment form the bulk of the electronic media. As can be inferred from the above, they have tremendous potential as can be seen from their projected size.

Interesting things about the Electronic Media Industry

The stupendous growth which is occurring in the electronic media industry is without much government support and represents the tremendous entrepreneurial efforts present in our nation. An interesting fact is that an urban cable home in the 4 metros currently receives approximately 100 TV channels. The most popular bouquet is Star, followed by Zee, Sony and Doordarshan. 60 of these are FTA channels and the balance 40 are pay channels which are bundled into bouquets and are available at a negotiated price. The competition structure in the Electronic Media Industry is one of Oligopoly, where there are a few networks who have a large market share namely Star, Zee, Sony and there are others who are just on the edge. It’s essential to note that these key networks strategically select what programmes to air given their assessment of other networks. We can see the serials that air on prime time repeatedly compete with each other for higher TRP ratings. Scenario in the different forms of electronic media Television India has the largest television market in the world today, acquiring the largest share in the entertainment industry accounting to 42%. The television industry grew at 15% overall, while the print media had received the much-needed impetus for growth with approval for FDI in July 2005. Television homes are growing at a staggering rate of 4% pa in India, thus it can be said that the number of television homes far exceeds the number of telephone-connected homes. India has 119 million television households that comprise around 60% of the total households in the country. Of these 119 million TV households, about 50 million receive cable television services, leading to a penetration of about 42% cable TV households to total TV households and 25% cable TV households to total households in India. As can be seen, from these low penetration percentages, there exists a huge untapped potential growth in this industry

Music The current size of the Indian music industry is USD 155 million and is expected to grow to USD 165 million by 2010 with a CAGR of merely 1%. Analysts state that the music sector is estimated to be about USD 149 million in legitimate sales of music cassettes and CDs and is pegged to grow at 3% over the next 5 years. However, this industry has been plagued by piracy and has been showing very sluggish growth in the physical format over the last few years, both in India and globally. The industry is seeing a revival of sorts with the growth of `mobile music' and `licensed digital distribution' services. Earlier, the music market was completely dominated by film music, as music is an integral part of Indian films and music rights contributed as much as 15% of an individual film's earnings. However, in the recent years remix, video-albums, depicting live song-cum-dance shows, are creating ripples in music industry. Radio This Rs.300 crore industry is poised for big growth estimated to reach a size of Rs.1200 crore (32% growth) by 2010. The PwC report states that there will be a boom in the radio industry with 22% growth and rationalization of the license framework will treble its size to about USD 145.9 billion by 2009. The Indian radio today reaches out to 99% of the population and is currently the most cost-effective mass communication media in the country (According to a report by Global Consultancy PwC). The overall ad spends in India is about 3% as compared to the worldwide average of 8.7%. The radio industry has become the hottest sector for investment in the E&M space due to the availability of as many as 338 FM radio licenses for bidding for the private players. These cover 91 cities, most of which till now were being serviced only by the State Broadcaster. The private FM radio sector is expected to get foreign investments of USD 111 million in the next 12 to 18 months. Film Industry The Indian film industry is the largest in the world churning out around 1000 movies a year, thus playing a major role in the growth of the E&M sector in India. The industry stands at an estimated USD 1.5 billion and is expected to grow around 20% annually to reach USD 3.4 billion by 2010. The sources of revenue being consumer box office spending for theatrical motion pictures plus spending

on renting and purchasing home video products in both DVD and VHS formats. It also includes online film rental subscription services, such as those whereby DVDs are delivered via overnight mail, and streaming services, whereby films are downloaded via a broadband Internet connection. This segment is set to grow at 5% a year for the next 5 years, with areas like overseas markets, domestic box office revenues, ticket prices and home entertainment consumption seeing growth. The Indian film industry has more than 3.1 billion admissions. The box office collections of this industry are 85% of its revenues as compared to the US film industry where the collections are only 27% of the revenues.

Industry Leader
India’s no. 1 network for the sixth year in a row, Star TV Network has been chosen by us as the representative firm in the electronic media, as we feel that it is the leading enterprise in this field and has a large market share. Launched in India in 1991 with just 5 channels STAR pioneered satellite television in India as well as in Asia and in the process catalyzed explosive growth in the media industry across the entire region. Today STAR provides over 60 services in nine languages and offers a range from sports to documentaries, movies to news. It has redesigned the way we look at electronic media. Reaching over 300 million viewers in 53 countries across Asia, it is watched by approximately 100 million viewer’s everyday!!

Channel Bouquet Offered by Star Network

Some information about the popular channels offered by the Star TV Network
STAR PLUS- India's number 1 cable channel for six years, STAR PLUS regularly

features the top 40 programmes on cable in India every week. Prime time programmes on STAR PLUS consistently outperform other cable and satellite channels with the most popular programmes recording more than 50% of the viewership shares in Hindi speaking general entertainment markets.

CHANNEL [V] is Asia's trend-setting music channel that features the latest chart-topping music videos, music stars and popular VJs. Locally produced programming, packaging and presenters ensure [V] reflects the tastes and attitudes of its huge youth audience.
CHANNEL V-

STAR MOVIES- STAR MOVIES brings audiences the biggest blockbusters from

Hollywood powered by all the leading Hollywood studios including 20th Century Fox, DreamWorks etc.

ESPN & STAR SPORTS- Viewers in Asia the most exciting sports action from

around the world. The channels mix of regional and international programming ensures fans enjoy the most comprehensive sports coverage.

NATIONAL GEOGRAPHIC - National Geographic Channel showcases the

expeditions of dynamic and committed explorers, filmmakers, and researchers on assignment around the world.

Challenges facing STAR TV network in particular and the Electronic Media as a whole
The problem of piracy has impacted all segments especially films, music and television. The lack of appropriate measure taken up by the government to enforce anti-piracy laws is encouraging the menace of piracy. Most sectors of the Indian E&M industry have traditionally operated under various agencies of the Indian Government, which were later opened to the private players in various stages. Thus the major benefactors in terms of broadcasting rights have been the incumbents like AIR and Doordarshan, at the cost of other networks such as STAR. For instance, limited frequencies have been opened for the private players with a license fee, which is not currently applicable to AIR. The broadcast media pricing has been frozen for over a year now, as per the notification issued by the TRAI. Since the market has been so efficiently regulated through competition, price regulation would limit the broadcaster's ability to shape their business models based on the market demand and the competitive environment. STAR is thus bound with this regulation. India has the challenge of building a broadband digital network to reach every city, every village, every home and every office. In addition, building a broadband digital network calls for huge server fans and new devices, this requires good support of technology. Thus the challenge of having proper human resources comes into existence. Since the entertainment industry is highly fragmented and disorganized, there is an urgent need for the government to facilitate digital entertainment to involve as an industry. There are also concerns with the rival channels such as ZEE and Sony steadily eating up the market share of STAR. As is evident with the declining share of STAR from 65% in 2005 to 58% in 2006, with its competitors rising steadily. ZEE has increased its market share from 17% in 2005 to 27% in 2006, while Sony’s market share is about 15%. Thus there will be a need to consistently upgrade technology and constantly upgrade the quality of the content shown, to counter the rising popularity of ZEE and Sony.

OPPORTUNITIES

As is evident in the recent years, the channel bouquet of STAR has expanded to include several regional channels that are a prime source of growth, as much of the untapped potential is in the rural markets. STAR Utsav, STAR Vijay to name a few have been instrumental in catering to local tastes and encouraging local participation. This provides much needed fodder for the steadily declining market share of STAR. Consumer needs are expanding beyond the mass media and segmented media to ‘Lifestyle Media’, a new approach that will help consumers maximizes their limited time and attention to create a rich, personalized and social media environment. This approach presents many opportunities for STAR TV to create new avenues to generate revenue. The STAR TV network along with Television industry as a whole will continue enjoying a lions share in the E&M industry and is expected to continue growing rapidly and reach INR 371 billion by 2010.

Regression Model
Multiple Regression model is used in our demand forecasting model. Y= a +b1X1+ b2X2, here the dependent variable Y is the total income of the STAR TV network, while the independent variables X1 and X2 are the advertising revenue of the company and the no. of channels respectively. We can therefore forecast the demand using the above tools.

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