Can Indian Media Be Global ?

Television, Print, Film & Radio

Entertainment & Media Industry
• Growth outperforms the economy
– One of the fastest growing sectors of the Indian economy

• Current Size : Rs 40,230 Crore • Estimated growth rate : 20 % over the next 4 years

Source : PwC analysis

The Growth Drivers
Rising proportion of young population Increase in income levels Changing spending patterns

Consumerisation of urban India

Increase in number of working urbans

Increase in spending power

Rising aspiration levels

Consumption of lifestyle items
Source : Lifestyle consumption by Edelweiss Securities Pvt Ltd

Technology is changing the face of media industry
E&M Sector  Films Television Radio Media Music Content  Commercial (Hindi & Regional) Cinema Art Movies Cartoon Movies Commissioned Programs News & Current Affairs Commissioned Programs News & Current Affairs Fiction/Non Fiction Articles Film Music Private Albums

Delivery 

Cinema Halls Home Videos (Video Cassettes, VCDs, DVDs,)

Mobile Phones

Cable Terrestrial DTH IPTV

Public Broadcaster FM Channels

Internet

Newspapers Magazines Books

Cassettes CDs

---------- Straight line denotes Traditional Delivery Mechanisms - - - - Dotted line denotes Converged Delivery Mechanisms
Source : PwC analysis

Television

An Explosion Of Channel Choices
350 300

No of channels

250 200 150 100 50 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source : TAM

New launches & delivery mechanisms lead to exponential growth in number of channels

Industry size & growth potential
45000 40000 35000 30000 INR Crore 25000 20000 15000 10000 5000 0 2004 2005 2006 E 2007 F 2008 F 2009 F 2010 F
12870 14800 20300 17000 25000 32700 42700

Industry projected to grow at an annual compounded rate of 26% per annum over the next 4 years
Source : PwC analysis

Industry structure
• Television dominates the entertainment & media industry
– 3 segments : Advertising, Subscription & Software

Growth Drivers - Subscription
• Projected CAGR of 29 % over the next 5 years
– Current average monthly collection : Rs 130. Projected : Rs 250 (by 2010) – Larger base of TV households from lower SECs – New regulatory changes & delivery mechanisms (like CAS & DTH) will result in improved declarations – New technologies will bring in increased revenues through value added services

Growth Drivers - Advertising
• Ad spend in India : 0.48 % of GDP ; global average 0.96 %
– Growth in disposable incomes: urbanization & consumerism – Increased reach of the medium due to expanding delivery platforms and technology advancements – Higher investment from sunrise sectors. Continued support from traditional categories (FMCG, durables ) – Separate viewership measurement for upmarket audience (Elite Panel)
• Will result in higher niche channel spends

Growth Drivers - Software
• Sustained growth in this sector
– Frequent & never ending launch of 24 hour channels leading to demand for content – Regional channel potential being tapped by national players. Increased demand for language programming – Better performance of dubbed foreign content (movies, cricket commentary , cartoons) will increase demand for such services

Key developments
• CAS
– An addressable system to provide subscribers with a selective choice of content via the “pay” mode – Implemented in Zone -1 areas of Bombay, Delhi and Kolkata from Jan 2007 – As per TAM’s latest report , 17 % penetration in the notified areas

• IPTV
– MTNL offering services in Delhi & Mumbai – Around 70 – 100 channels on offer – Service allows for time-shifted TV : viewers can watch programs upto a week old

Key developments
• DTH
– Allowed by Government in 2000 – Absence of middle men – consumer apathy with current Local Cable Operators – DTH is 'flexible‘, it is not connected to the ground infrastructure – DTH is a ‘National’ service :same STB can be used in any city – Current players DD Direct, Dish TV and Tata Sky ( Star + Tata venture) – In the pipeline : Reliance, Sun group – Subscriber nos : Dish TV – 20 L, Tata Sky – 4 L, DD – 50 L

Can Indian Television Industry Go Global ?
Some pointers

Homegrown channels vs foreign networks
• Indian channels dominate most of the markets / genres (Zee, Sun , ETV, Aaj Tak , NDTV)
– Zee’s improved performance vs Star Plus decline at national level – Regional channels dominate in TN, AP, Karnataka, Kerala, WB , Maharashtra – News, Hindi movie , music genres dominated by Indian channels – In sports, new entrant Neo Sports takes on ESPN, Star Sports, Ten Sports.

Reaching out to Indian diaspora
• Leading TV channels have presence in foreign markets though distribution tie ups • Zee
– Presence in Asia Pacific, Africa, UK, US & Europe – Reach of more than 120 countries & 350 million viewers globally – Sun, NDTV, Aaj Tak, Eenadu , Asianet and other channels beaming to different parts of the world

• Channels also accessed through dish antenna in regions without C&S connection • Dedicated programming targetting overseas Indians
– Eg : UAE band on Asianet, Kairali TV

Zee coverage

Attracting strategic and financial investors
• Television segment open to FDI
– 49 % for cable & DTH; 26 % for news channel

• Indian channels / media groups attracting foreign investment
– Reuters, UK takes equity stake in Times Global Broadcasting – Blackstone invests $275 Mn in Eenadu – CNN IBN: partnership between Turner International and TV18 – Tata Sky : alliance between Tata & Star for DTH operations in the country

Joint ventures recognizing strength of Indian entities
• NDTV & Genpact alliance offers media outsourcing services to enterprises
– Editing, digitizing and subtitling

• Star Ananda Bengali news channel – alliance between ABP & Star • Balaji Telefilms & Star form new company to launch Telugu channel

WTO agreement
• Will finally open up media segments across countries to global competition

Barriers to growth
• Lack of uniform media policy for foreign investment
– Different caps in FDI in various segments – DTH 49 % ; cable 49 % (ownership can only be with Indian citizens) – News channel 26 % ; Entertainment 100 %

• Adhoc content regulation
– Content regulator vs self-regulation – Debate continues on the working mechanism of content regulation - enforcement, penalties etc – Recent issue : government ban on AXN channel for showing adult content – Sports broadcast ordinance : compulsory for content providers to share content with DD

Barriers to growth
• Price regulation
– TRAI recommendations stifle broadcaster’s attempt to fix prices based on market dynamics – Cross media ownership rules • Government yet to evolve clear rules in this regard • Potential investors unable to plan their long-term strategy for the market

• Lack of empowered regulators
– Many TRAI recommendations still not fully acted upon – Eg: Addressability in distribution, digitalisation of cable TV, privatisation of terrestrial broadcasting etc – Yet to enact broadcasts bill; Content code (BRAI)

Print

Growth in titles
60000 58000 56000 54000 52000 50000 48000 46000 44000 2001 Registered publications 2003-04 49145 58469

Source : RNI

Industry size & growth potential
25000
19500 17300 I NR Crore 15300 13500 9780 10900 12100

20000

15000

10000

5000

0 2004 2005 2006 E 2007 F 2008 F 2009 F 2010 F

Industry projected to grow at an annual compounded rate of 13% per annum over the next 4 years
Source : PwC analysis

Growth drivers
• Booming economy resulting in increased job creation • More number of household with high spending power - service sector boom • Rural / lower SECs provide vast opportunity for print players • IT advancements will lead provide easy access to rural areas

Growth drivers
• Opening up of the sector for FDI
– Upto 100 % permitted in publishing / printing scientific and technical magazines – Upto 26 % in news and current affairs (newspaper) category

• Increased ad spends
– In line with economic growth – Increased activity from sunrise sectors like Retail, Telco – Publications rapidly increasing number of colour pages and supplements – Launch of specialized magazines providing focused reach among niche segments

Key trends
• Tapping the reading population :
– The readership of print media currently stands at 27 % – Growth will be driven by increase in literacy levels – 7 dailies in India have readership over 1 Cr: Dainik Jagran, Dainik Bhaskar, Eenadu, Lokmat , Amar Ujala, Hindustan and Daily Thanti

• Building a pan-India presence
– Publications drive growth through geographic expansion – Eg: HT launch in Mumbai, Deccan Chronicle in Chennai, Midday in Bangalore, new editions from Dainik Jagran, Bhaskar, Business Line in Mumbai
Source : NRS

Key trends
• According to World Association of Newspapers (WAN)
– Indian newspaper sales increased 7 % in 2005 (vs 0.56 % worldwide) and 33 % during 2001-05 (vs 6 % worldwide) – India is the 2nd largest newspaper market with 7.8 Cr copies daily (China – 9.6 Cr) – Indian newspaper advertising revenue increased 23.2% over 2004 (vs 5.7 % globally)

Can Indian Print Media Go Global ?
Some pointers

Targeting the NRI population
• Online editions
– Almost all the lead dailies (English & language) have internet editions providing free access to the latest news – Internet editions used by advertisers to reach Indians living abroad – Many dailies provide “epaper” versions with search options
• Monetized by dailies like Hindu • Free access in the case of TOI, HT

Targeting the NRI population
• Overseas editions for many dailies
– Sandesh – weekly – Chicago – ABP – fortnightly – US – Malayala Manorama – daily – Bahrain, Dubai – Madhyamam – daily – Bahrain, Dubai – Gujarat Samachar – weekly – New York – Divya Bhaskar – fortnightly – New York

Foreign tie-ups
• Tie-ups with foreign publications
– Publications are opting for foreign tie ups to launch new titles/ improve current offerings – HT Media’s business paper “mint” launched last week with a 20 % content sharing agreement with Wall Street Journal – Financial Times has taken an equity stake in Business Standard – Living Media group brings Time, Fortune & HBR to India; Outlook launches Newsweek & Marie Claire – Deccan Chronicle brings out International Herald Tribune – TOI group forms alliance with BBC Worldwide to launch its magazines in India including Top Gear

Local vs foreign titles
• Indian magazines hold on against foreign magazines
– Better understanding of the market and the target audience – Femina still the No 1 Womens magazine with a readership of 3.47 Lakhs vs Cosmopolitan’s 0.19 L (among SEC A1+) – Local news magazines like India Today and Outlook way ahead of Time, Newsweek etc

Source : NRS

Barriers to growth
• Low literacy levels • Most of the big media houses are family run
– Wary of external / foreign investment – Follow conservative growth strategies

• Lack of uniform media policy for foreign investment
– Content : News (26%) and non-news (100%)

• Growing younger population and their increasing internet affinity poses new challenges • Mushrooming 24 hour news channels undermine the agenda setting function played by newspapers

Films

Industry size & growth potential
18000 16000 14000 12000
INR Crore

15300 13200 11300 9700 7900 6800 5650

10000 8000 6000 4000 2000 0 2004 2005 2006 E

2007 F

2008 F

2009 F

2010 F

Industry projected to grow at an annual compounded rate of 18% per annum over the next 4 years
Source : PwC analysis

Growth drivers
• Advancements in technology helping the industry in film production, exhibition and marketing • Corporatisation of the film industry
– Many exhibition companies (PVR, Shringar, Inox) have gone public – Entry of the largest industrial house in the E & M industry – Reliance acquired majority stake in Adlabs – Corporates also forayed into film distribution eg. UTV software

• Increased marketing spends
– Corporatisation also resulted in innovative marketing activities : microsites, blogs, contests, mobile downloads etc – Centralised marketing and promotion activities

Growth drivers
• Derisking through portfolio approach (multiple releases with multiple revenue streams)
– Companies getting associated through in film brand placements, endorsements etc – Mobile companies :selling ringtones and wallpapers at premium rates – Merchandising catching on in a big way

• Growing number of multiplexes
– Incentive for low-budget, niche films and experimental cinema – Higher admission rates : account for 60 % of Box Office revenues

Can Indian Film Industry Go Global ?
Some pointers

Tapping overseas markets
• Growing collection from overseas markets
– Indian films are becoming increasingly popular even with the non Indian community – More number of prints being released abroad – Overseas revenues estimated to account for 10 % of total earnings by 2010 – In 2006, films like Kabhie Alvidha Na Kehna, Fanaa, Rang De Basanti emerged blockbusters in UK and North America. – Forbes magazine estimates : Dhoom-2 ($18.4 million) Fanaa ($17.7 million) and KANK ($17.5 million) – Regional language movies (Telugu, Tamil) also popular abroad

• Digitalization of Cinema

Digital Cinema – removing the distance barrier

– India is on the verge of becoming the largest digital theatre country in the world – Malayalam movie "Moonnamathoraal" reportedly became the first film to be digitally released: Sept’06 – Advantages : curbs piracy, reduces production cost, gives better clarity and allows simultaneous release across centres reducing revenue loss – FICCI estimates 25-30 % growth through digitalization and savings worth 2000 Cr (incurred due to piracy & film stock import)

International co-productions
• Increased corporatisation has resulted in Indian companies doing more co-productions
– UTV tie up with Fox , Will Smith’s Overbrook , Porchlight (animation) – Viacom plans co-production with local film makers – Percept Picture Company joined hands with Further Films and Sahara One to produce “Tree of Life”

Cinema – the future
• Could we imagine these 15-20 years back ?
– – – – Mobile phones becoming an integral part of our life Cameras without film Access to around 300 TV channels Reading newspapers on the net

• In the next 2 – 3 years
– Physical movie prints will become obsolete – Movie producers will be able to digitally release movies across all theatres in India (12000+) and abroad – Reduced time lag in releasing home videos - higher revenues, reduced piracy – Drop in VCD costs: Moser Baer already releasing regional movies in the Rs 28 – 34 price range

Barriers to growth
• Low capital / investment levels
– Producers unable to invest in a large number of prints and marketing initiatives
• Digitalization will change the scenario

• Piracy
– Most of the credible efforts to combat piracy initiated by industry bodies – Current copyright act dated in terms of technology improvements

FM Radio
• Sector opened up after years of government dominance
– 338 licenses given away for 91 cities in the 2nd phase of radio privatisation

• 20 % FDI allowed by government
– Eg: Virgin Radio tie up with HT Media, Mid day & BBC for Radio One

• Revenue share agreement in contrast to the earlier fixed license fee regime
– Only 20 stations were set up after auctioning of 108 frequencies during round 1 of privatisation

FM opportunities
• Investments
– Need for financial investments as well as technical and operating experience to run the stations

• Content boost
– Average requirement expected to be 5000 content hours per annum per radio channel

• Potential to reach local markets
– Only 22 of the 338 channels are in the four metro cities – Huge potential to target the smaller cities

Industry size & growth potential
1400 1200 1000
INR Crore 1000 800 1200

800 600 400
240 300 370 550

200 0 2004 2005 2006 E 2007 F 2008 F 2009 F 2010 F

Industry projected to grow at an annual compounded rate of 35% per annum over the next 4 years
Source : PwC analysis

Radio going global
• Indian channels on international satellite radio services like World Space
– RM Radio, Jhankaar, Gandharv, NDTV etc

• Numerous Indian stations reaching out to people of Indian origin in foreign countries
– – – – RBC Radio (US), Asianet Radio (Gulf countries) 24 hour Tamil station in Singapore ( Oli 96.8 FM) Numerous Indian stations in Trinidad, Fuji, Mauritius Strong advertising support from local / MNC clients

Can Indian media companies go global ?
• Acquiring / taking a stake in local companies
– NDTV and SE Asian news broadcasting company Astro Broadcast have tied up to do business in Malaysia and Indonesia – UTV , Astro JV to launch channels in Hindi, Regional, Indonesia and Malaysia Bahasa – Astro and Sun TV have formed a joint venture to generate and distribute TV programs/channels for global audience

• More acquisitions likely as companies go public and have access to funds

Can Indian Media Be Global ?

Yes the foundation has been laid
• Large Indian companies will take over foreign entities
– Zee’s acquisition of Ten Sports an indicator of things to come – Synergies, access to funds, regulatory mechanism will set the pace

• TV, Films & Radio have already gone global
– Potential for further growth through technology advancements & relaxed trade agreements – Huge talent pool – creative & technical – will drive this growth

Print will catch on………soon
• Print
– Internet and epaper versions already available – More international editions once the base population crosses threshold figure – Increased interest in India will create huge demand for Indian content
• More syndication arrangements in the offing

Thank you

Appendix

Cable TV penetration
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Phillippines India US Australia Singapore Germany S. Korea Canada Taiwan Japan China

Source : Worldscreen, Morgan Stanley Research

Advertising spend split by medium
OOH 8% Radio 3% Internet 1%

TV 41%

Print 47%

Cinema 0%
Source : groupM estimates Year : 2005 Total : 12,275 Cr

Statewise C&S penetration
States Andhra Pradesh Assam Bihar Chattisgarh Delhi Gujarat Jharkhand Punjab/HP/Chandigarh Haryana Karnataka Kerala Madhya Pradesh Maharashtra/Goa Meghalaya Orissa Rajasthan Tamil Nadu/Pondicherry Tripura Uttar Pradesh Uttaranchal West Bengal ALL Base pop TV owning HHs C&S TV HHs % TV penetration % C&S 19142 12620 11562 66% 92% 5718 1931 541 34% 28% 16393 3640 788 22% 22% 4578 1763 773 39% 44% 3339 3023 2608 91% 86% 11429 6346 3901 56% 61% 5444 1572 707 29% 45% 6603 5286 2556 80% 48% 4554 3354 1998 74% 60% 11956 7947 6602 66% 83% 7520 5166 3591 69% 70% 12622 5020 2361 40% 47% 22900 14457 8322 63% 58% 504 304 199 60% 65% 9077 3442 1609 38% 47% 10675 4941 1778 46% 36% 16522 11121 10257 67% 92% 757 338 199 45% 59% 29473 10502 2828 36% 27% 1811 1036 360 57% 35% 18227 7851 4849 43% 62% 219244 111660 68389 51% 61%
Source : NRS’06 HH figs in 000 % C&S on the base of TV HHs

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