The Indian media and entertainment (M&E) industry is one of the fastest growing industries in the country. Thanks to a booming economy, growth-encouraging measures undertaken by the government and rising income levels, the M&E industry, which has various segments such as film, television, advertising, print media and music among others, is set to enter a golden era.

According to a report jointly published by the Federation of Indian Chambers of Commerce and Industry (FICCI) and audit firm PricewaterhouseCoopers, the Indian M&E industry is expected to grow at a compound annual growth rate (CAGR) of 18 per cent to reach US$ 23.81 billion by 2012.

• In 2007, the estimated size of the industry was US$ 12.45 billion, up from US$ 9.69 billion in 2006.
• The advertising industry recorded a growth of 22 per cent in 2007 over 2006 to reach US$ 4.75 billion in 2007, up from US$ 3.56 billion in 2006. The sector contributed 38 per cent of the industry’s revenues.
• For 2007, the report pegged the size of the TV industry at US$ 5.48 billion, print media at US$ 3.62 billion, film entertainment at US$ 2.33 billion and radio at US$ 150. 52 million.
• Foreign investments in the M&E industry reached a record high of US$ 211 million in 2007 against US$ 89.18 million in 2006.

Television

The television industry in India is currently at its prime, contributing the largest share in the total media and entertainment industry. While India is the third largest cable television market in the world, the penetration level of pay TV is still low, which promises a huge untapped potential for growth.

According to the PWC report, the television industry was worth US$ 5. 48 billion in 2007, recording a growth of 18 per cent over 2006. It is further likely to grow by 22 per cent over the next five years and be worth US$ 12. 34 billion by 2012. Digital distribution platforms such as direct -to-home (DTH) are transforming the industry. Direct-to-Home segment is gearing up for a new phase of TV viewing with digital video recorders (DVRs) or personal video recorders that will free consumers from having to watch television at broadcaster-ordained timetables. "The next level of TV viewing enhancement will have to be around the two-way interactivity that will allow TV viewers a lot more autonomy or freedom, and DVRs will be key enablers of this," says Mr Atul Bindal, President (Telemedia Services), Bharti Airtel. The study said the number of DTH subscribers would grow cumulatively by 44 per cent every year, over the next five years

Music

The Indian music industry, which until recently was overwhelmingly dominated by film music, is now being propelled by non-film music. However, piracy and advent of radio channels which constantly play hit music leading to loss of sales of music, has affected the industry. According to the PwC study, the music industry is likely to grow by 2 per cent over the next five years and will be a US$ 164.56 million industry by 2012.

Significantly, the share of digital music is likely to increase. A recent study by the digital music company, Soundbuzz that has been done with PwC and International Federation of Phonographic Industries has found out that by the year 2009, India will become the second country in the world, after South Korea, where digital music sales will surpass the sales of music in traditional formats such as cassettes and compact discs. Digital music sales are expected to account for 88 per cent of the total music industry revenue in India by 2009, according to the study.

Radio

The cheapest and oldest form of entertainment, reaching 99 per cent of the population, this segment is likely to see many dynamic changes. According to the PwC study, revenues from radio are likely to grow at a CAGR of 24 per cent over the next five years and the industry will grow from US$ 150. 52 million in 2007 to US$ 370. 22 million in 2012.

Private FM radio has emerged as the fastest growing segment in the media, notching up an average 30 per cent growth in advertising revenues, compared to the industry’s average of 18 per cent, according to ACNielsen’s Radio Audience Measurement (RAM) service. Moreover, it is expected to increase to US$ 218.49 million over the next two years from US$ 133. 52 million today.

Private FM radio broadcasting has expanded at a rapid pace with as many as 338 licences being issued in the second round of bidding in February 2006. Of these, 286 licences have been allotted across 90 cities. Nearly 100 radio stations are on air today and the government has collected US$ 243.52 million as entry fee from the bidding companies that were successful.

Cinema

The Indian film industry, with over 3 billion admissions per annum, (3.6 billion tickets were sold in 2006 as per an A T Kearney report) is the largest in the world, in terms of number of films produced per year. The industry, which was worth US$ 2.33 billion in 2007, is projected to increase to US$ 3. 61 billion by 2012, at a CAGR of 13 per cent, according to the PwC report. According to the report, the emergence of new revenue streams such as mobile phones, internet, home video, merchandise, re-make rights and branded entertainment as well as the advent of the studio model of production will result in de-risking the business.

The opening of the film industry to foreign investment coupled with the granting of industry status to this segment has had a favourable impact, leading to many global production units entering the country. For example, Walt Disney has partnered with Yash Raj Films to make animated movies, the Warner Group is funding the Sippys' film projects, Viacom has a joint venture with the TV 18 group to form Viacom-18, and Sony Pictures Entertainment has co-produced Saawariya with SLB Films (Sanjay Leela Bansali Films).

Simultaneously, advancements in technology along with a rise in consumer income and change in consumption patterns has led a massive shift in all spheres of the film industry -- production, exhibition, distribution and marketing. Shah Rukh Khan's Red Chillies Entertainment is going to invest US$ 20. 56 million to reel out three more movies this year. This includes a US$ 12.34 million movie with computer-generated special effects starring himself and two medium-budget films, each with a budget of US$ 4.11-5.14 million. Apart from this, Fox Star Studios, a joint venture between Twentieth Century Fox and Star, has entered into a multiple-film deal with producer Vipul Amrutlal Shah, marking its foray into the Indian film industry. The deal includes the development and production of an action movie and also a romantic comedy.

R-ADAG-owned Adlabs Films is betting on its integrated film service business and movie exhibitions to drive its growth. The company is spending US$ 41. 13 million to expand the two businesses. It also has a significant presence in film production, distribution and television content production. One perceptible change has been the rapid growth of multiplexes, which meets consumer demand for quality entertainment and has also helped boost production of niche films targeted at niche audiences.

Multiplexes

The nation's multiplex industry is all set for an unprecedented boom buoyed by positive regulatory changes and booming consumerism. According to an estimate, the number of multiplex screens in India is expected to touch 5,000 by 2012, constituting around 40 per cent of the total cinema screens. As of December 2007, there were 1,350 screens. In fact, currently the Indian market is highly underserved when compared to the West -- India has less than 13 screens per million of the population, against 117 in the US, 52 in Italy and 30 in the UK. Multiplexes /megaplexes have been instrumental in contributing 28 per cent of the total theatrical sales for the film industry according to a report by Systematix Institutional Research.

• DLF, a leading real estate player in the country, plans to invest US$ 257.08 million in expanding its multiplex business by adding around 500 screens in the next four to five years.
• Entertainment conglomerate Adlabs Cinemas has drawn up a plan to build 12 megaplexes in cities like Mohali, Lucknow, Hyderabad and Delhi.
• Multiplex chain PVR Cinemas, is also planning to add over 250 screens across India, staggered over a period of three years from 2008-2010, with a total investment outlay of around US$ 82. 27 million.
• Cinemax India, the multiplex chain which currently has 55 screens over 17 properties across the country is planning to scale up its presence to 299 screens across about 100 properties by fiscal 2010.
• Inox, which has 26 multiplexes and 90 screens in 18 cities across India, will open nine multiplexes in Bangalore, Mangalore, Hubli and Belgaum by the end of 2010.
• Leading global multiplex player, Cinepolis, has earmarked US$ 350 million for its Indian operations. The company plans to have 500 screens across 40 cities in the next 5 to 7 years.
  

Others

Segments like print media, animation and gaming are also likely to see interesting growth rates. The country's growing literacy and new technologies have resulted in India emerging as the second largest newspaper market in the world, according to latest research by the World Association of Newspapers (WAN). Indian newspaper sales increased 11.2 per cent in 2007 and 35.51 per cent in the five year period. Newspaper advertising revenues in India were up 64.8 per cent over the previous 5 years.

According to the PwC study, print media is projected to grow at a CAGR of 14 per cent from US$ 3. 06 billion to US$ 5.77 billion by 2012. At the same time, the Indian gaming market is likely to grow 25 per cent from US$ 267. 35 million to US$ 822. 69 million. The Indian animation industry, currently estimated at US$ 460 million, is expected to grow at a CAGR of 27 per cent to touch US$ 1,163 million by 2012 according to a report titled ‘Indian Animation and Gaming 2008’, jointly prepared by NASSCOM and Ernst & young.

Government Initiatives

The Government has initiated major reform measures, which have had a cascading effect on the growth of the industry.

• Permitting 100 per cent foreign direct investment (FDI) through the automatic route for film industry and advertising.
• Allowing 49 per cent foreign holding in cable TV and DTH.
• Allowing 100 per cent FDI in non-news publications and 26 per cent FDI in news publications.
• The FM radio sector was opened for FDI with a 20 per cent cap.
• Permitting setting up of uplinking hubs for satellite uplinking by private TV broadcasters from the Indian soil.
  Giving industry status to the films segment.
• Opening FM Radio operations to the private sector.
• The government has allotted US$ 50.13 million in the current Five-Year-Plan for various development projects of the film industry. The funds will be utilised to set up a centre for excellence in animation, gaming and visual effects among others.

Going Global

With the growing popularity of Indian content in the world market in general and South Asians in particular, Indian entertainment industry players are venturing abroad to tap this booming segment. For example, in the films segment, in 2007, of the top 20 foreign films in UK, 14 were Indian. These were part of a total 69 Indian films that constituted 13.7 per cent of all releases. In fact, according to a report by CII-AT Kearney, the share of international markets in total box office collections is estimated to increase from 8 per cent in 2006 to 15 per cent in 2010.

Consequently, many domestic players like Yash Raj Films, Reliance-Adlabs and UTV among others have set up distribution arms overseas. Not only films, other entertainment content areas like music and television also have a huge potential international market. One recent estimate puts the total value of Indian content sold overseas at over US$ 200 million. Further, this number is expected to grow over 20 per cent every year.