Contents The Entertainment and Media industry p4/Television p10/Film p22/Print p28 /Wired and mobile internet access p35/Wired and mobile internet advertising p39/Gaming p43/Radio p47/Music p51/Out-of-home advertising p54/ Dealsp58/Technology p60/Tax and regulatory issues p62
India Entertainment and Media Outlook 2014
www.pwc.in 2 PwC Ad ls ea D
Foreword
Welcome to the 2014 edition of the India Entertainment and Media (E&M) Outlook, which analyses key trends and developments across nine major E&M industry segments in the country. This year also marks the 10th anniversary of the report. With Indian economy stabilising over the last few months, the E&M sector continued its upward growth journey. Internet access and internet advertising led this growth path beyond expectations to keep the sector buoyant and self-sustaining. The demographic shift in India has impacted the digital growth combined with better infrastructure. The key theme of our report this year is ‘monetisation strategies in media sector’. Widespread technological advances and the digital experience has brought a new mindset to make business – quicker, more targeted, experimental and collaborative. It has become imperative for emerging business models to move beyond digital innovation to customer engagement innovation to reap the benefits of digital transformation in India. CII and PwC thank our key industry stakeholders for sharing their valuable insights and supporting us in developing these industry insights. We appreciate your feedback and request you to continue informing us about what we can do to further improve the usefulness of this publication. We hope you will enjoy reading this edition!
Amita Sarkar Smita Jha Deputy Director General Leader, Entertainment & Media Confederation of Indian Industry PwC India
India Entertainment and Media Outlook 2014 3 The Entertainment and Media industry: 2013 -2018
In the next five years, global entertainment and revised due to change in the number of DTH media revenues will continue to grow, slightly subscribers, as per TRAI) to 420 billion INR behind global GDP, as it always has. Yet, in this in 2013, representing year-on-year growth seeming sameness dichotomies abound. of about 15%. This growth was led by an In 2018, non-digital media will continue increase in subscription revenue, driven by to account for the largest share of global the ongoing process of digitisation. Internet spending, TV will still be the biggest access and internet advertising have been the advertising medium, and the US will be fastest-growing segments with annual growth the world’s biggest entertainment and rates of 47% and 26%, respectively. media market. But, respectively, digital The increasing shift towards the digital revenues, internet advertising and China medium was perhaps most evident in the will all have dramatically narrowed the fact that internet access overtook print as the gap. This evolving environment will be second-largest segment. It contributed about characterised by six underlying shifts. 22% to the overall E&M sector in 2013, driven • Advertising revenue is outpacing by growth in adoption of mobile internet in consumer revenue in the migration to the country. digital. • By 2018, internet advertising will be poised to overtake TV as the largest advertising segment. • The biggest challenge is monetising the digital consumer. • Rising consumer revenue may be driven by 24/7 access. • Revenue growth is being driven by internet access rather than content spending. • Two-thirds of revenue growth from consumers and advertising will be digital.
Decoding the India story The Indian E&M industry generated 1,120 billion INR in revenue in 2013, an increase of 19% over the previous year. The largest segment, India’s television industry, continued its strong growth momentum with revenue increasing from 366 billion INR in 2012 (Revenue from subscription in 2012 has been
4 PwC Indian E&M industry revenue in billion INR, 2013
12 18 19 21 29
126
223
252 1120
420
Television Internet access Print Film Internet Gaming OOH Radio Music Total advertising
Source: PwC analysis Note: Excluding internet access revenue, the size of the Indian E&M sector is about 869 billion INR in 2013, representing a y-o-y increase of 12%
Based on our analysis, the industry is expected music sector, though minor, is expected to In 2018, television will continue to lead the to grow at a CAGR of 15% between 2013 grow at a healthy CAGR of 13%, reaching 22 industry in terms of revenue contribution and 2018, to reach 2,272 billion INR. The billion INR 2018 from 12 billion INR in 2013. with 37% share of revenue. Internet access television sector is expected to continue its With the rapidly increasing adoption is expected to emerge as the second-highest robust growth during this period, to reach 846 of smartphones and tablets, the gaming sector contributor with a share of 29%, up from 22% billion INR, at a CAGR of about 15%. Internet is fast emerging as a promising source of in 2013. With the increase in share of internet advertising and internet access are projected revenue for the Indian E&M industry. Efforts access, the relative sector contribution of large to be the fastest-growing segments, with by industry players as well as support from segments such as print and film is expected to CAGR of 28% and 21%, respectively. Driven the government are expected to provide a decline. The share of print is likely to decrease by Phase 3 auctions, the radio sector is also major boost to the gaming sector, which is from 20% in 2013 to 14% in 2018, while the projected to grow strongly at a CAGR of 17%. still in its infancy. Out-of-home advertising is share of film is expected to decrease from 11 Film contributed 126 billion INR to the gradually expected to slide to the last position to 10% during this period. industry, growing steadily at a y-o-y growth in terms of revenue contribution to the sector, rate of 13%, on the back of higher domestic with its share declining to 1% in 2018, the and overseas box-office collections as well same as music. as cable and satellite rights. The share of the
India Entertainment and Media Outlook 2014 5 Projected revenues of the Indian E&M industry in billion INR, 2013-2018
Segment 2013 2014 2015 2016 2017 2018 CAGR Television 420 486 568 648 756 846 15% Print 223 241 259 278 298 314 7% Internet access 252 352 446 552 613 662 21% Film 126 141 161 179 198 217 12% OOH 19 21 23 25 26 28 8% Radio 18 20 23 27 32 40 17% Music 12 13 14 16 19 22 13% Gaming 21 26 30 35 38 43 15% Internet advertising 29 38 52 68 87 100 28% Total 1,120 1,337 1,576 1,827 2,068 2,272 15%
Source: Industry discussions and PwC India analysis Note: Excluding internet access, the Indian E&M sector is expected to grow at about 13% cagr over 2013-2018 and reach revenues of about 1,610 billion INR in 2018
6 PwC Segment revenue contributions
2013 2018
2%2%1% 1%2%1% Television Television 3% 4% Film Film Print Print 22% 38% 37% Radio Radio 29% Internet access Internet access 2% Internet advertising Internet advertising OOH OOH 2% 20% Gaming Gaming 11% 14% 10% Music Music
Source: PwC analysis
The revenue from advertising is expected to Segment contributions to advertising revenue grow at a CAGR of 13% to reach 632 billion INR, from 350 billion INR in 2013. Overall, 2013 2018 the share of consumer spend is expected to increase. Consumers spend’s share is expected 5% to increase from about 69% in 2013 to 8% Television 4% Television about 72% in 2018. Television and print are 16% 5% Print Print expected to remain the largest contributors to 40% Radio 40% Radio the advertising pie in 2018 as well. Internet 6% advertising should emerge as the third-largest Internet Internet segment, with a share of about 16% in the Advertising Advertising total E&M advertising pie. While this marks OOH OOH a major shift, the Indian internet advertising 42% 34% segment is still way behind its US counterpart, which is expected to be nearly as large as TV advertising in 2018. Source: PwC analysis
So how does the future look? Yet, the Indian internet advertising market is Radio in India is expected to grow at a expected to remain minuscule as compared Gamechangers include projected growth heartening 17% over the next five years with the market in the US, which is expected for the film industry, driven by domestic with the Phase 3 auctions being the primary to reach revenues of about 66 billion box-office collections and increasing global driver. Digital radio is expected to gain USD in 2018. This might owe itself to the collaborations. Online players are expected further popularity, backed by increased device predominant position of traditional media to keep pace with the content consumption adoption. Alongside, India is expected to be such as print and radio in India. experience for varied devices and speeds. among the fastest-growing market in terms Mobile internet connections in India are Contrary to trends in developed countries, of television subscription revenue from 2013 expected to increase at over 20% CAGR to newspaper circulation will continue to grow to 2018. Pay TV penetration will improve. reach about 543 million in 2018. Clearly, and will be supported by a corresponding Television content, to quote a cliché, will digital is the future with the wired internet growth in advertising. Interestingly, out-of- continue to be king. advertising market expected to grow by 26% home advertising is expected to grow at a CAGR and the mobile internet advertising CAGR of about 8% to reach about 28 billion market to grow even more sharply to about INR by 2018. This will be triggered by the four times its current size. thrust on infrastructure.
India Entertainment and Media Outlook 2014 7 Digital imperatives in the E&M organisation is the single biggest change since The emergence of digital ignited a blaze industry the advent of digital media of innovation in technology, as companies What’s more, this decisive step has now scrambled to roll out digital platforms and processes. But with digital products and Digital success is not just about become mainstream: a pervasive part of the industry’s ‘new normal’. It’s a mindset that platforms now in place, the focus is shifting technology. It’s about applying a digital to innovating in data insights and analytics mindset to build the right behaviours. focuses unwaveringly on applying the core principles of digital – which are about getting to drive personalisation and deeper two-way Towards an embedded digital culture ever closer to the customer – across everything relationships. What does ‘digital’ really mean for today’s the organisation does, whether digital or Differentiating on digital technology was just entertainment and media companies? It’s analogue, from service development to cyber a transition phase: we’ve now reached the no longer just about technology. Instead, it’s security, and from talent management to stage of differentiating on relationships. shorthand for ‘the world has moved on – and entering new markets. business has moved with it’. This mindset underpins a concept that we call Putting the consumer at the centre of What’s more, the changes have much further the innovation decathlete – an organisation their own world to run. We’re in a world where internet that excels at innovation across multiple How can companies build these advertising spend will virtually catch up with disciplines. What sets these businesses apart relationships? global TV advertising within five years, where in the marketplace is that they can make consumers expect 24/7 access on demand to the audience of one a reality across every Many people talk about social, mobile, their favourite content, and where growth experience, whether digital or analogue. analytics and cloud—SMAC—as the route to relationships. But those technologies are in digital advertising revenue is rapidly So the most important impact of digital just the plumbing. The most momentous outpacing digital consumer spending. has not been to generate a step-change advances aren’t in delivery platforms, but in technology. Instead, it has created and Alongside these disruptive impacts, in consumers’ psychology—which has embedded a new mindset towards doing technology has also brought entertainment undergone a shift every bit as profound business: not just quicker, but more targeted, and media businesses the ability to deliver the as companies’ move to a digital mindset. experimental, experiential, inclusive and new experiences that consumers are seeking What’s changed for consumers is that they’ve collaborative. We believe this shift towards across myriad environments and contexts. But realised they can be at the centre of their a more personalised customer-centric the underlying shift it has triggered is even own world of entertainment and media, organisation is the single biggest change since more profound: an irreversible migration to constantly enjoying content experiences that the advent of digital media. a more complicated world, where businesses are shaped around them as people. Through move faster and it’s ever harder to sustain personalisation and recommendation the competitive advantage. A world where Not just digital strategy: but business engines, online services have shown businesses must have a strong digital IQ and strategy consumers they can switch from finding where digital must be an enterprise capability This in turn means businesses no longer need content experiences they have liked, to being woven throughout the business. a digital strategy. What they need is a business found by content experiences they will like— This change has impacted not just digital strategy fit for a digital age—a world where via every channel and device. media, but analogue too. It’s long been offline media and programmatic advertising accepted that online delivery is not the both have a place in the mix, but with a Relevance: now a target across all ultimate end game in every case. But now unique balance in every case. industries offline media must also follow the same rules. Sure, there’s a digital component. But it’s just Delivering such an experience demands ...that drives ever closer to the customer one part of an overall strategy that identifies much more than crunching data: it means what’s needed for success in a world that’s As a result, the most important impact of getting to know people as individuals—and very different from yesterday. digital has not been to generate a step change them knowing you back. in technology. ... focused on relationship innovation This requires not just the right technology, Instead, it’s been to create a new mindset The new mindset for this changed world also but also the right mindset and talent towards doing business: not just quicker, but encompasses a further step forward: from for relationship innovation. When these more targeted, experimental, experiential, digital innovation to relationship innovation. elements all mesh around the consumer, inclusive, collaborative. We believe this shift the result is relevancy—which brings the towards a more personalised customer-centric company that delivers it a disproportionate share of that individual’s lifetime value.
8 PwC Entertainment and media companies have …demanding operational innovation foundation by developing and exhibiting three been pursuing relevancy for years. And they’re In the long term, this intensifying battle for behaviours. escalating their efforts to achieve it, as they the consumer will see formerly separate value First, forging trust. This means more seek to tap into new opportunities such as the chains coalesce into a matrix around the than generating trust among customers by emerging middle classes in markets worldwide customer, triggering wide scale cross-industry delivering relevant product and services. witness too the rapid advances in mobile reshaping and collaboration. Increasingly, it also requires giving them full advertising, and the rising engagement with But more immediately, the widening control over their own personal privacy, and ‘super-fans’ as key influencers and arbiters of respecting society’s evolving expectations taste. Consumers’ individualised experiences struggle for relevancy brings operational and infrastructure implications for entertainment on issues like tax payments. It also means from media mean they increasingly expect embedding trust internally between everyone the same level of personalisation and and media companies, as the relationships between content creators, distributors and in the business—understanding why what recommendations from all their other they do is relevant, and how it’ll remain so. providers, from utilities to retailers to advertisers blur. carmakers. So the race for relevancy—and In an environment when consumer relevancy Internal and external trust feed into the indeed the migration to a digital mindset—is is imperative, companies need to rethink second behaviour: creating the confidence being joined by a vast array of participants how they engage the consumer. This means to move with speed and agility. As soon as a from beyond entertainment and media, all looking beyond innovation in products trusted business has an idea, it can execute on competing head-on for relationships with the and services to examine new operational it quickly and decisively. same individuals. and infrastructure models—including new The third behaviour is empowering and previously undreamt-of collaborative innovation. This means energising everyone It’s a mindset that focuses unwaveringly relationships. And at the heart of every in the business to recognise and celebrate its on applying the core principles of successful collaboration will be a shared successes in the past, while innovating in a digital—which are about getting ever digital mindset. way that’s unconstrained by that legacy— closer to the consumer. The bedrock of a building on it to stay valuable and relevant to strategy fit for a digital age is the digital Three behaviours to build a successful consumers going forward. mindset. This provides a solid plinth strategy The adjectives that describe the mindset for a successful strategy. Companies What does all this mean for entertainment of today’s leaders in entertainment and must build on this by developing and media—targeted, experimental, experiential, exhibiting three behaviours: forging and media companies’ strategies? In our view, the bedrock of a strategy fit for the digital inclusive, collaborative—are easy to trot out. trust; confidence to move with speed and The hard part is developing and embedding agility; and empowering innovation. age is the digital mindset, characterised by a remorseless focus on relationship innovation. the day-to-day behaviours and that turn these This provides the solid plinth for a successful words from corporate mantra into strategic strategy. Companies must then build on this reality. Those companies that achieve this will have a business strategy fit for a digital age.
India Entertainment and Media Outlook 2014 9 Television
The Indian television industry grew from Key trends 366 billion INR in 2012 to 420 billion INR in 2013, representing a growth of 15%. This • While digital cable has gained was driven largely by growth in subscription subscribers, ARPU has not yet risen revenue, which grew by 18% to reach 282 significantly billion INR, led by an increase in the number With digitisation, analogue cable subscribers of digital cable subscribers and rise of DTH have been migrating largely to digital average revenue per user (ARPU). The soft cable, which has gained about 10 million macroeconomic environment tempered the subscribers in 2013, while net DTH growth in advertising revenue, which grew subscribers increased by approximately 3 from 127 billion INR in 2012 to 138 billion million. The reason for this shift is that digital INR in 2013 at a y-o-y growh rate of 9%. cable provides customers a large number of Digitisation has proven to be a boon for the channels with better signal quality, without Indian television distribution industry. With any major increase in the price. This is being the process still ongoing, industry players reflected in the slow growth of digital cable have not yet realised the full gains of the ARPU, which rose to 180 INR in 2013 from exercise, but are on track to doing so. The full 170 INR in 2012, an increase of only about impact of digitisation in terms of growth in 6%. DTH ARPU, on the other hand, rose from subscription revenue, reduction in carriage 170 INR to 200 INR in 2013, witnessing a and better addressability is expected to be healthy increase of about 18%, on the back of realised in the next two to three years. price hikes and rising HD subscriber base.
Growth of the industry in billion INR, 2012-2013
420 366
138
127
282 239
2012 2013
Advertising Subscription Total
Source: PwC analysis Note: Revenue from subscription in 2012 has been revised due to change in the number of DTH subscribers, as per TRAI
10 PwC Going forward, implementation of channel packages, bundling of services like cable and broadband, and provision of value added services such as video on demand (VoD) will provide a boost to digital cable ARPU, which is expected to reach about 310 INR in 2018.
In 2013, Hathway, SiTi Cable and inCable launched innovative channel packages. Hathway’s packacage provides high- speed cable broadband services across 20 cities. It also provides high-speed broadband services with DOCSIS 3.o technology and is expanding its footprint in Mumbai and Pune. SiTi’s packages allow its subscribers to access internet on their television sets through internet- enabled set top boxes (STBs). DEN’s package includes a high-speed cable broadband service for its subscribers across geographies. Even in developed markets in the West, where cable markets are largely saturated, cable operators are successfully providing bundled services • Regulatory push helping MSOs gain A key success factor for MSOs will be the and triple-pay packages to boost ARPU. transparency in billing subscribers ability to actually realise higher revenue In particular, they provide VoD, which is The main deterrent limiting subscription share from LCOs. TRAI has recommended well-suited to cable owing to its two-way revenue were lack of visibility of a revenue share of 55:45 (MSO:LCO) for network, an advantage over satellite. In subscriber base, (as LCOs controlled the the basic free-to-air (FTA) tier and 65:35 the UK, Virgin media (the largest cable last mile) and low digital cable ARPU. (MSO:LCO) for a combination of FTA and TV provider in the country) provides In 2013, the collection and submission of pay channels. TiVo, an advanced STB, which provides customer application forms (CAFs) gained • Broadcasters are seeing lower than access to linear content, on-demand traction after TRAI’s final deadline for expected gains in subscription revenue programming and online-video services submission of CAFs for the 38 cities under (including Netflix), and has been adopted Phase 2 of digitisation, and all major With the first two phases of digitisation, by more than half of its TV subscribers, MSOs have nearly completed the process. broadcasters have witnessed a 10 to 15% who pay a premium for it. growth in revenue. While digitisation This will facilitate inclusion of customer brought a reduction in carriage fees, it was details in the MSO’s subscriber below the expectations of broadcasters. management systems and ensure Carriage fees reduced by about 10 to 20% smooth implementation of gross billing in the first phase, but no significant drop and provision of channel packages to was seen thereafter. It is expected that with consumers. MSOs will be able to get actual the implementation of all four phases of revenue based on their customer base digitisation, MSOs will be able to increase and the packages and other value added their subscription revenue and further services that customers opt for. Gross reduce carriage fees. billing, as mandated by TRAI, has also commenced in Delhi and Kolkata since December 2013.
India Entertainment and Media Outlook 2014 11 Status of cable digitisation in India Phase Rollout targets Announced completion date I Delhi, Mumbai, Kolkata, Chennai 30 Jun 2012 (revised to 31 October 2012) II 38 cities with population greater than 1 million 31 Mar 2013 III All urban areas 30 Sep 2014 (Revised to December 2015) IV Rest of India 31 Dec 2014 (Revised to December 2015)
Source: Telecom Regulatory Authority of India
• Phases 3 and 4 digitisation to be led by Various initiatives are also being taken by • Moderate growth witnessed in regional MSOs and LCOs the LCOs to maintain their position in the television advertising In Phases 3 and 4, considerable investment new digitised world. LCOs are trying to Owing to the economic slowdown and will be needed to set up the technology retain control of the consumers by forming rupee depreciation, television advertising infrastructure in smaller towns. Phases 1 cooperatives and investing in headends grew by 9% in 2013 to 138 billion INR, and 2 saw nearly 30 million STBs being and STBs. LCOs from various states across lower than the projected growth rate of seeded, while phase 3 and 4 will require the country have decided to form a pan- 12%. Growth in advertising was sustained about 70 million more boxes to be placed. India association. At present, six state by the fast moving consumer goods Larger MSOs such as DEN and Hathway cable TV associations from West Bengal, (FMCG) category, which continued to have started installing STBs in these Maharashtra, Andhra Pradesh, Karnataka, increase spend, especially in the second markets. However, digitisation in phases 3 Gujarat and Madhya Pradesh have come half of the year, marked by the festive and 4 will largely be led by smaller MSOs together to be a part of this pan-India season. and LCOs. These smaller players will face platform, with more state associations India was ranked 11th globally in terms of significant challenges in funding, logistics expected to join. LCOs are also trying to growth in television advertising revenue and do not have the experience of Phases upgrade their technical skills. The Telecom in 2013. However, most of the countries 1 and 2. Nonetheless, regional MSOs are Sector Skill Council of India (TSSCI) and ahead of India are showing high growth on seizing the current opportunity and have Mumbai-based Druv Tech Systems have a very small base of advertising revenue. started seeding STBs and plan to provide launched courses to provide LCOs with Argentina, Indonesia, Turkey and Russia broadband services as well. technological, sales and marketing and customer management skills. are the only countries that have grown As per reports, Punjab-headquartered faster than India, on a comparable base. Fastway Transmissions has seeded The direct-to-network (DTN) digital cable Advertising on television continued to 450,000 STBs in Amritsar, Chandigarh TV service, based on Headend-in-the- contribute significantly to the overall E&M and Ludhiana, and another one million in sky (HITS) technology is also gaining industry advertising pie, with a share of areas of Himachal Pradesh, Punjab and focus. HITS uses a virtual headend from about 40%. Haryana that are covered under Phases 3 one location and broadcasts its signal and 4. The company also plans to provide via transponders to multiple LCOs, Advertising revenue from digital broadband services. Other regional who then downlink the signal, add platforms is still in a very nascent stage MSOs such as Gujarat Telelink Private local customisation and send to their in India; however, genres such as English Limited (GTPL) in Gujarat and Kolkata, customers. Encryption, SMS, billing, entertainment are seeing growth in Asianet Satellite Communications Limited etc are handled centrally by the HITS revenue from digital advertising, and in (Asianet) in Kerala, Ortel Communications provider. Currently two groups have the coming years, other genres are also Limited (Ortel) in Odisha and Meghbela invested in HITS–Hinduja Venture’s entity expected to follow suit. cable and broadband Services in West Grant Investrade, also known as GHITS Bengal have also started setting up digital (which received government permission STBs in Phase 3 and 4 towns. to provide HITS services in March 2014), and Noida software technology park (NSTPL) promoted JAINHITS.
12 PwC • Indian delivery platforms have started ‘Sky GO Extra’ which lets users download In the US, ABC network employed Twitter on the multiscreen journey shows on up to four devices and view later Amplify for the 86th Academy Awards. The trend of viewing content on multiple without an internet connection. Facebook is also planning to add a feature screens, either simultaneously or at that will automatically recognise the TV • Leveraging the power of social media: different times is slowly catching up shows or music playing in the background, Increasing popularity of social TV in India. In 2013, Tata Sky launched allowing users to share that information multiscreen service ‘Everywhere TV’ in TV viewing on multiscreen platforms with friends. India, allowing users to watch live TV, has also given rise to the trend of social catch up TV and VoD on multiple android TV, which allows viewers to regularly devices, using the Tata sky mobile app. engage with the television content via Dish TV also provides a similar service social platforms such as Facebook and (Dishonline) via its mobile app. Twitter, making TV viewing a real-time group experience. All broadcasters have Indian consumers are increasingly enhanced their social media presence watching a second screen, like a tablet and are carefully monitoring viewer’s or a smartphone, in addition to the response. Social media platforms serve television screen, mainly using the second as effective marketing tools to increase screen to engage on social platforms viewer engagement, drive popularity and during ad breaks. Continuous increase in enhance viewership. They also provide smartphone subscribers, increasing tablet content owners with real-time feedback on usage, larger screen sizes of mobiles and the content, which can be used as an input drop in smartphone prices are factors to the storyline and characters. driving multi-platform viewing in India. Popular TV shows such as Star Plus’s In global markets, there was a concern Satyamev Jayate, Sony’s Bade Achhe that viewership of content on multiple Lagte Hain, Colors’s Bigg Boss, Star devices may cannibalise viewing on World’s MasterChef Australia and MTV’s traditional screens. However, the second Coke Studio have run successful Twitter screen has actually increased the appeal campaigns. Social media is also being of television by making it more interactive used innovatively by various broadcasters. and increasing viewer engagement with For example, Fox Traveller launched an the content. Though this trend is fairly innovative and highly engaging social new in India, it provides an opportunity media campaign for its horror drama to deliver an integrated multiscreen series The Walking Dead. As part of the campaign that captures viewers’ attention campaign, zombie pranks were carried as they shift between screens. out in a phone booth and the videos were In the US, Twitter has launched Twitter then shared with fans on social media Amplify, a service that allows advertisers platforms, along with contests held on to promote television ads on Twitter. It Facebook and Twitter. enables campaign managers to monitor NDTV has launched a personalised when an ad has aired on TV and send out gratification model ‘Graphity,’ which promoted tweets, with five- to 10-second enables sending a personalised tweet or video clips, that coordinate with them. All any other gratification. Graphity was major television networks in the US have used by the film Jai Ho to send a subscribed to this service. personalised poster autographed by In the UK, Sky provides its multiscreen Salman Khan to anyone tweeting @ service ‘Skymultiscreen’, which lets BeingSalmanKhan with #jaiho. consumers watch shows on different Star Sports has launched a new interactive screens in the house at the same time and experience on Twitter called ‘Tweeplay,’ which allows users to watch replays of sports events by sending a tweet.
India Entertainment and Media Outlook 2014 13 • Digital as a delivery channel: Lack of thousand (TVT) from the traditional TV original content for over the top (OTT) In developed markets, cord cutting is not rating points (TVRs) to reflect viewership viewing expected to have a significant impact, in absolute numbers. with overall pay-TV subscription growth Most large broadcasters in India have Establishment of the Broadcast Audience started providing OTT services. Examples forecast to continue over the next five years. However, there is the risk of Research Council (BARC) and its plan include ‘Ditto TV’ from Zee Entertainment, to set up a parallel TV ratings system is ‘Sony LIV’ from MSM India and ‘Star pay-TV customers downgrading their packages, retaining basic packages and a welcome step in addressing the long- Player’ from Star India. However, OTT standing issues with television ratings. is being used as an alternate delivery supplementing with OTT services. No such threat is envisaged currently in Concerns such as inadequate sample channel, with no original or differentiated size, inadequate representation, lack of content being made for this platform. India and online television viewing will continue to supplement and not threaten transparency and interference should These platforms are mostly ad-funded be addressed in this system. However, a as the Indian television consumer is very traditional TV viewing, at least in the next five years. smooth transition is essential and regular price sensitive and has access to content audits are necessary as a competing on cable and satellite (C&S) television ratings agency is not expected to become platforms at very low prices. Creation of • TV audience measurement on path to operational in the near future. content specifically for the OTT platform resolving long-standing issues will be determined by the availability With the growing popularity of In 2013, TAM included LC1 (less than and coverage of high-speed broadband, multiscreen viewing, it is also imperative Class I—towns with under 0.1 million evolution of subscription business models that the system effectively captures population) markets in its television and development of robust payment viewership on multiple platforms, ratings to expand its footprint to include mechanisms. Going forward, as television including social media. In the US, for local towns. However, broadcasters ARPUs on C&S platforms rise with example, Nielsen (a provider of US questioned the accuracy of the data as digitisation and 4G services are launched, TV ratings) started measuring online television viewership habits are very broadcasters are expected to create TV viewing on a range of screens and different in small towns, which face original content for online television devices in 2013 and combining it with its recurrent power cuts. TAM subsequently viewing and charge subscribers for it. traditional ratings. shifted to measuring TV viewership per In the US, online video service providers, such as Netflix and Amazon, are investing in content for online video to become exclusive providers of original content. Netflix outbid HBO to commission the political drama House of Cards, for 100 million USD in 2011. Amazon has also come out with a slate of original programming; pilots of two dramas and two comedies were released in February 2014. In the UK, Sky has launched ‘Now TV’, an internet-based TV service, to provide its sports content. Sky has been aggressively pricing these services to compete with Netflix.
14 PwC • Ad cap limits to favour long-term TV advertising revenue CAGR by region (%), 2013-2018 growth in advertising; may impact news and music channels in the short term 12% The implementation of the 12-minute ad cap rule is likely to benefit the television 8% industry in the long term as it will 7% ensure a better consumer experience, 5% 5% leading to higher viewership and reduced 4% fragmentation in the industry. However, 3% in the short term, broadcasters are wary of the ad limit as they have still not fully realised the benefits of digitisation and Asia Pacific Latin America North Cantral and Middle East Western Global continue to rely on advertising revenue. America Eastern Europe and Africa Europe Hindi general entertainment channels Source: PwC Global Entertainment and Media Outlook: 2014-2018, www.pwc.com/outlook (GECs) aired about 16 to 18 minutes of advertising per hour. They have compensated for the loss in ad time by • Online TV advertising will double its hiking ad rates in the order of 20 to 30%. share of total TV advertising revenue News broadcasters show as much as 30 in the next five years minutes of commercial time per hour Online TV advertising revenue from and cater to many local and regional traditional broadcasters will increase advertisers. Hence, it is more difficult from about 4 billion USD in 2013 to about for this genre to significantly increase ad 10 billion USD in 2018, and more than rates. Similarly, smaller music channels double its share of total TV advertising are likely to face challenges as advertisers from about 2% in 2013 to about 5% may now focus on channels with higher in 2018. Traditional broadcasters still ratings and reach. dominate and are adapting to the online Advertisers are not planning to increase video opportunity, so creating themselves their ad budgets owing to the limit. a significant new revenue stream, despite Instead, they may focus on getting higher competition from internet rivals. returns from their ad spend. If the ad cap gets implemented, advertising spend may US dominates online TV advertising from shift from television to other mediums, traditional broadcasters especially digital. Global online TV advertising from traditional broadcasters, top ten markets by revenue (million USD), 2018 Key global trends: Television 265 211 Canada advertising 454 442 USA 188 France • Despite the growth of digital media, 595 TV advertising remains the place to be Germany 213 Italy Global TV advertising revenue is 261 UK successfully responding to the rise of 311 newer forms of digital media. Global TV Russia Australia advertising revenue will grow at a CAGR 5847 of 5.5% over the next five years, Japan confirming TV as the ‘place to be’ for South Korea advertisers looking to reach big audiences. Source: PwC Global Entertainment and Media Outlook: 2014-2018, www.pwc.com/outlook
India Entertainment and Media Outlook 2014 15 • Terrestrial’s share of advertising will Terrestrial TV advertising to grow at a CAGR of 4% fall as multichannel and online grow
Terrestrial TV is the primary contributor Global TV advertising revenue CAGR by category (%), 2013-2018 22% to advertising revenues, but its share of the TV advertising market will fall from 73% in 2013 to 68% in 2018. Multichannel’s share, by contrast, will grow from 25% to 27%, while online TV advertising’s share will rise from about 2% in 2013 to 5% in 2018.
7%
4%
TV advertising (Terrestrial) TV advertising (Multi-channel) Online TV advertising
Source: PwC Global Entertainment and Media Outlook: 2014-2018, www.pwc.com/outlook
16 PwC • Failure to embrace new audience measurement metrics will see TV lose advertising revenue to other digital media players. Even in the most advanced TV markets, broadcasters and advertisers are still unclear how audiences consume their content. Digital media metrics will quickly gain ground in the next five years and despite the apparent resilience of the current TV model, existing players need to adopt new metrics if they are to compete for advertising revenue in the long term.
Global smartphone connections approach 3.5 billion in 2018
Global smartphone connections and tablet active devices (billion), 2013-2018 3.4 3.1 2.7 2.4 2.0 1.6 1.4 1.2 0.9 0.7 0.5 0.3
2013 2014 2015 2016 2017 2018
Global smartphone connections Tablet active devices
Source: PwC Global Entertainment and Media Outlook: 2014-2018, www.pwc.com/outlook
Key global trends: Television subscription
• Subscription TV will not be daunted by the rise of OTT, as it grows across global markets Global subscription TV revenues will grow at a CAGR of about 4% over the next five years to 236 billion USD in 2018. This growth demonstrates that subscription TV is in a healthy position, assisted by the initiatives it has implemented to counter the impact of OTT and other disruptive influences.
Pay TV growth continues as the industry innovates to ward off OTT disruption
Global expenditure (million USD)on TV subscriptions and licence fees, 2013-2018
268,776 276453 254,054 261,357 236,419 245,370
228,809 235,972 215,136 221,900 198,456 206,884
37,963 38,487 38,918 39,456 39,967 40,482
2013 2014 2015 2016 2017 2018
Total Subscription spend License fees
Source: PwC Global Entertainment and Media Outlook: 2014-2018, www.pwc.com/outlook
India Entertainment and Media Outlook 2014 17 • Cable TV will fight back in the next five years, boosted by the switch to digital Digital cable will grow at a CAGR of about 10% over the next five years to reach 455 million subscribers in 2018. The move towards a digital-focused industry means cable will return to growth in the longer term.
Cable TV’s share of the pay TV market will decline over the next five years
Global subscription TV household market Global subscription TV household market share (%) by technology, 2013 share (%) by technology, 2018
1% 2% 24% Cable TV 26% Cable TV IPTV IPTV Satellite TV Satellite TV 9% 59% 66% Pay DTT 13% Pay DTT
Source: PwC Global Entertainment and Media Outlook: 2014-2018, www.pwc.com/outlook
• IPTV enjoying sporadic success, but fails on a global scale IPTV subscriber numbers are growing quickly, but this success is limited to a few markets. China is one of the few countries making progress and its sheer scale makes it the clear market leader with 31% of all IPTV households globally in 2013.
IPTV fails to challenge cable and satellite on a worldwide basis
Global subscription TV household numbers (million) by technology, 2013-2018
913 936 861 888 796 830
546 552 555 525 534 541
227 235 242 193 206 217 94 104 114 124 71 82 9 12 7 8 11 14
2013 2014 2015 2016 2017 2018
Total Satellite TV Pay DTT Cable TV IPTV
Source: PwC Global Entertainment and Media Outlook: 2014-2018, www.pwc.com/outlook
18 PwC • BRIC investment in sophisticated subscription TV technologies creates big gains over the next five years All BRIC countries – but particularly India and China – have prioritised investment in subscription TV technology. They are reaping the benefits of this by moving up the global TV rankings.
China is approaching 20 billion USD subscription revenues in 2018
BRIC countries, TV subscription revenue ( billion USD ), 2013-2018 2013 20 2018
10 9 12
7 3 5 2
Brazil Russia India China
Source: PwC Global Entertainment and Media Outlook: 2014-2018, www.pwc.com/outlook
...but smaller emerging markets will see double-digit growth rates. In the next five years, TV markets in smaller emerging territories are set to show the most impressive revenue growth levels. Along with India, markets like Saudi Arabia, Kenya and Thailand are also showing high growth.
The fastest growing countries for TV revenue growth (CAGR%), 2013-2018
16% 16% 15% 14% 13% 13% 12% 11% 11% 11%
Saudi ArabiaIndia Kenya Thailand Rest of Indonesia Vietnam China Venezuela UAE MENA
Source: PwC Global Entertainment and Media Outlook: 2014-2018, www.pwc.com/outlook Note: Based on combined value of TV subscription revenue and TV license fees, where applicable
India Entertainment and Media Outlook 2014 19 Future outlook • Increase in pay-TV penetration will drive growth in the television industry • Steep growth expected in overall television market in the coming years The Indian television industry is expected to grow from 420 billion INR in 2013 to 846 TV penetration in India is around 60%, billion INR in 2018, at a CAGR of about 15%. much lower than that in developed countries where it is greater than 90%. Subscription revenue is expected to increase from 282 billion INR in 2013 to 593 Hence, there is considerable potential to billion INR in 2018 at a CAGR of 16%. This growth will be driven by an increase in TV increase the number of TV households penetration, pay-TV subscribers and growth in ARPUs. Looking at a global comparison, in India. Pay-TV penetration among TV India is among the fastest-growing markets in terms of forecasted growth in television owning households is also expected to subscription revenue from 2013 to 2018. increase steadily in the next few years, Advertising revenue is expected to grow at a CAGR of about 13% to reach 253 billion INR driving growth in the television industry. in 2018 from 138 billion INR in 2013. In the coming years, while the total Projected growth of the industry in billion INR, 2013-2018 number of cable subscribers is not expected to change considerably, a major 846 shift is expected in the structure of the 757 industry. Driven by digitisation, the number of digital cable subscribers is 648 253 expected to rise, resulting in a steep fall in 568 223 the analogue cable households. In the next 486 197 five years, digital cable subscribers are 420 174 expected to grow at a CAGR of about 25%, 154 138 to reach 90 million in 2018. 593 534 DTH subscribers are also expected to grow 451 394 robustly to reach about 64 million in 2018 282 332 (active subscribers, net of churn) in 2018, at a CAGR of 13%. 2013 2014 2015 2016 2017 2018
Subscription Advertising Total
Source: PwC analysis
20 PwC Projected growth of pay-TV subscribers in India, 2013-2018 • Niche content on premium channels will aid in revenue growth Pay-TV subscribers in India (million), 2013-2018 Cable TV digitisation will facilitate the launch of new channels, and broadcasters will need to innovate and serve niche content to differentiate them from 148 competition. As television audience 144 143 159 129 139 measurement evolves and viewership of niche channels is adequately captured, 90 78 85 broadcasters will be able to target specific 64 65 64 audiences, especially in the upper 55 50 56 45 39 44 30 35 35 SEC segments. This will help reduce 15 their reliance on advertising and earn 7 5 higher subscription revenue (from both traditional and digital platforms), as these 2013 2014 2015 2016 2017 2018 segments have a higher propensity to pay Analogue cable Digital cable DTH Total for niche content. Initial headway in this direction has already been made with the Source: PwC analysis launch of ad-free premium HD channels such as HBO Hits, HBO Defined and Star World Premiere HD.
• Pay-TV ARPUs set to increase with rise and are expected to grow further implementation of cable digitisation with the launch of premium channels and uptake of HD subscribers. Driven by these TV viewing experience for consumers will factors and higher realisation levels post be greatly enhanced post digitisation, with digitisation, the pay-TV ARPU is expected significant improvement in the quality of to reach about 311 INR by 2018, up from signals. Consumers will also have access about 182 INR in 2013. to more number of channels, channel packages and value-added services such as VoD. DTH ARPUs are already on the
Projected growth of pay-TV ARPU (INR/month) in India, 2013-2018
311 301 263 228 199 182
2013 2014 2015 2016 2017 2018 Source: PwC analysis
India Entertainment and Media Outlook 2014 21 Film
India’s film industry has overcome the at the box office. In early 2014, Queen, a challenges posed by the economic slowdown heroine-focussed, liberal-themed movie and has grown strongly. The industry grew did well, completely defying the accepted from 112 billion INR in 2012, to 126 billion convention of a male-led star cast. INR in 2013, representing a growth rate Large studios too are now focussing on of 13%. Domestic box-office collections promoting new talent, both on-screen as continued to contribute a lion’s share with well as behind, by means of such content- revenue of about 93 billion INR. This growth led films. was driven by the increase in the number of multiplex screens and average ticket price. Other components of the Indian film industry such as overseas box-office collections, cinema advertising and ancillary streams such as cable and satellite rights also grew robustly in 2013. However, the physical home video market continued to decline in 2013.
Growth of the industry in billion INR, 2012-2013
126 2 112 3 22 18 10 9
83 93
2012 2013 Domestic box office Ancillary streams Overseas box office Total Home video
Source: PwC analysis
Key trends • Acceptance of content-driven films as the norm, as against ‘star driven’ blockbusters Films released in 2013 such as The Lunchbox, Madras Cafe, Jolly LLB and ABCD – Any Body Can Dance, which were not led by ‘stars’ were successful
22 PwC Net domestic box-office collections of select content-driven films in 2013
Film Net domestic box-office Month of release Studio collections in billion INR
Kai Po Che! 0.50 February UTV Motion Pictures ABCD – Any Body Can Dance 0.46 February UTV Spotboy Madras Cafe 0.45 August Viacom18 Motion Pictures, J.A. Entertainment, Rising Sun Films Fukrey 0.37 June Excel Entertainment Jolly LLB 0.32 March Fox STAR Studios Lunchbox 0.22 September UTV Motion Pictures, National Film Development Corporation of India (NDFC), others
Source: Industry discussions and press articles
• Digital cinema enabling larger Net domestic box-office collections and number of screens of select films in 2013 and 2012 release of films and faster recovery of investment Film (released in No of Net domestic box- Film No of Net domestic box- 2013) screens office collections (released screens office collections A quiet transformation has already taken in billion INR in 2012) in billion INR place in the Indian exhibition business Dhoom:3 4,500 2.8 Ek Tha 3,500 2.0 with most theatres migrating to digital Tiger projection systems. It is estimated that over 90% of screens have already Krrish:3 4,000 2.4 Dabangg 2 3,000 1.6 been digitised. Interestingly, India is at Chennai Express 3,700 2.3 Rowdy 2,800 1.3 the forefront of this change occurring Rathore throughout the world. By 2013, about 75% Yeh Jawaani Hai 3,000 1.9 Agneepath 3,000 1.2 of the world’s screens were digitised with Deewani considerable variations across regions. Goliyon ki 2,000 1.1 Jab Tak 2,500 1.2 For instance, over 80 and 70% of screens Rasleela… Ramleela Hai Jaan in the US and Europe have been digitised respectively, whereas in Latin America, Source: Industry discussions and press articles only 45% of cinemas have been digitised.
The Indian film industry has already • Improving performance of Hollywood dubbing films into local languages such started reaping the fruits of digital film releases in India as Hindi, Tamil and Telugu. However, US exhibition. Releases are now much wider The market share of Hollywood movies studios are still some way from witnessing especially in terms of deeply penetrating in India is estimated to be around 10% a boom similar to the one seen in China, Tier-1 cities and reaching Tier-2 and of total box-office revenues. Although where marquee Hollywood movies can Tier-3 cities. As a result, films are individual US studio films often perform earn over 100 million USD through box- ramping up collections at a fast clip, impressively, they face fierce competition office collections. For instance, Iron Man allowing them to recoup most of their from Indian movies. 3 earned about 120 million USD in its investments in production and publicity theatrical release in China, whereas in in the first week. The total collections Nonetheless, US studios have continued to India, the movie earned about 12 million of successful films have reached a much make gains in India in recent years, due to USD (gross). higher level than earlier. multiplex expansion, better marketing and
India Entertainment and Media Outlook 2014 23 Gross box-office collections of select Hollywood films
Film (2013) Studio Total gross box-office collection in India (million USD) Iron Man 3 Disney 12.2 Fast & Furious 6 Universal 10.2 Man of Steel Warner Brothers 6.3 Gravity Warner Brothers 6.2 The Wolverine Fox 4.6 G.I. Joe: Retaliation Paramount 4.2 The Conjuring Warner Brothers 3.8 Thor: The Dark World Disney 3.6 World War Z Paramount 3.0 A Good Day to Die Hard Fox 2.3
Source: Industry discussions and press articles
• Film studios increasing focus on Number of certified films: Top 10 Indian regional films languages With films in multiple languages, the Language Number of certified regional film market in India is highly films (FY2013) diversified. While films in the southern markets of Tamil, Telugu, Malayalam Tamil 292 and Kannada dominate with the Telugu 280 maximum number of releases, those in Hindi 255 other regional markets such as Bengali, Malayalam 195 Marathi, Bhojpuri, Gujarati and Punjabi are also gaining significance. Tamil film Kannada 133 Vishwaroopam was the highest grossing Bengali 127 regional film in 2013 and made about Marathi 121 2 billion INR. Telugu film Attarintiki Daredi also did excellent business of Bhojpuri 99 about 2 billion INR. Gujarati 67 Punjabi 31 Total 1,600
Source: Film Federation of India
24 PwC All the large film studios in India are also • Indian films being distributed in wider • Leveraging the power of social media: focussing on regional films, and not just for overseas markets and beyond the An essential part of film promotion the southern markets. Punjabi, Bengali and Indian diaspora As advertising on television and print Marathi markets are also gaining attention. Overseas box office collections of Indian becomes increasingly expensive, social films continued to increase at a healthy media provides a cost-effective means to Select regional films produced by large studios (2013/H1-2014) rate, driven in part by wider releases in effectively promote films prior to their traditional geographies (US-Canada, UK, release. Social media is now an essential Major studios Select regional films released Australia-New Zealand, Middle East, etc) part of a film’s promotional strategy and in 2013/H1-2014 and through release in new territories. For platforms are being used in creative ways Eros Punjabi: example, Chennai Express was reportedly to create a buzz and keep the audience the first Hindi film to be released on interest piqued till the release. International • Saadi Love Story the same day in Peru as in India. It was • Rangeelay For example, Yash Raj ran a campaign also released in Morocco, Germany, across YouTube, Facebook, Twitter and Tamil: Switzerland, Austria, France and Israel. Pinterest for the promotion of Dhoom 3. • Aandava Perumal Bhaag Milkha Bhaag also received a wide YouTube was the primary platform and • Karuppampatti overseas release spanning countries such multiple teasers, trailers and the theme as the US, Australia, Britain, Fiji, Singapore, song was released on it. The theatrical Fox Star Tamil: Thailand, Malaysia, Hong Kong, East trailer was released both in the IMAX Studios • Vathikuchi Africa, South Africa, Indonesia, the UAE format and simultaneously launched on • Raja Rani and New Zealand. Additionally, it opened YouTube. The trailer garnered 12 million Reliance Bengali: in Japan with over 70 prints. The Lunchbox views in 20 days. achieved stunning success in the overseas Entertainment • Deewana Microblogging site Twitter was used to market. The total overseas box-office • Mahapurush O Kapurush host an inter-city competition for the revenue (gross) of The Lunchbox was about • Ganesh Talkies promotion of Bullett Raja. Fans were 700 million INR (70 crore INR), far higher asked to tweet why they would • Boss than its domestic box-office collections • Jaatishwar want the Bullett Raja trailer to be (gross) of about 280 million INR. released in their city first with the Telugu: hashtag #wewantBullettRaja. By the end • Sahasam of this contest, the number of Twitter Box-office collections of The Lunchbox in select • Attarintiki Daredi followers for Bullett Raja rose to 1227. overseas markets • Bhai The first trailer of Dedh Ishqiya was • Manam Country Box office collections launched exclusively on Facebook for (gross) in million INR • Thoofan 24 hours, before its full release. France 272.2 UTV Motion Tamil: • Digital as a delivery channel: Electronic Pictures • Settai US 155.8 (Disney) home video gaining ground in India • Theeya Velai Seiyyanum Germany 112.9 The electronic home video market is Kumaru Switzerland 43.6 growing strongly across the world, even Yash Raj Tamil: Italy 36.8 in India. Over-the-top (OTT) distribution Films • Aaha Kalyanam (dubbed UK and Ireland 32.0 has acquired strong roots in the Indian version also released in market with multiple producers, rights Telugu) Canada 22.9 owners and aggregators using the internet Viacom Marathi: Hong Kong 10.3 and mobile platforms to monetise their 18 Motion • Zapatlela 2 Netherlands 8.1 content libraries better. Significant OTT Pictures UAE 5.0 offerings include Eros Now (from Eros Source: Industry discussions and press articles International), Lukup, SPuul and Box TV Source: Industry discussions and press articles (from Times Internet). Google’s YouTube and Google Play Movies also have a number of Indian movies available ad- funded and on payment.
India Entertainment and Media Outlook 2014 25 The upside to getting the online and The physical home-video sales and rental • In the US alone, according to the MPAA, mobile content distribution strategy market is continuing its downward 42 million homes had internet-connected right is quite high. For instance, in North journey. The market has already declined media devices (smartphones, tablets, America, the electronic home video significantly over the past few years and smart TVs, etc) capable of streaming and market is seeing double-digit annual it is unlikely that this trend is going to downloading films in 2013. revenue growth. In fact, the overall home be broken anytime soon. Wider releases, • In the past few years, filmed entertainment video market in North America has started smaller release windows and piracy have revenues saw minor declines in some increasing after years of decline and the made the offering unattractive Western European markets. For example, electronic market revenue is expected to for consumers. In addition, the the Spanish box office revenue fell between exceed physical market revenue within the proliferation 2010 and 2013 as the country struggled to next two to three years. of electronic home video alternatives has cope with piracy, a new sales tax on tickets In India, electronic home video led to continuing decline in the physical and an ailing economy. However, European consumption is expected to receive a home video market. cinema will continue to benefit from state fillip with the increasing adoption of 3G This is consistent with global trends. aid in the form of ongoing tax breaks. The and eventually 4G mobile technologies. For instance, in late 2013, Blockbuster, global competition to attract international Nonetheless, it is important for industry a leading home movie and video game film production and thereby drive inward players to ensure that their business rental service provider, announced that investment and create jobs will intensify models are aligned with consumer interest it would close its last remaining stores further. and the propensity to pay. in the US. This highlights the problems • Developed markets continue to take steps facing physical home video distributors in to control piracy. In December 2012, the the face of fierce competition from digital US and Russia developed an IPR Action distributors. Across the world, outlets for Developed markets such as the US Plan that addressed the areas of greatest buying and renting VCDs, DVDs and Blu- are witnessing increasing moves by mutual concern in IPR protection and Ray are continuing to vanish. Nonetheless, digital distributors to develop their enforcement. Russia also enacted a law to the physical home video market is still own content in order to reduce their establish a specialised IPR court in 2013 significant and will remain so till 2018 dependence on acquired content. For and amended its criminal code to revise and beyond. example, in 2012, Netflix struck an criminal thresholds for copyright piracy. agreement with Disney for exclusive Meanwhile in China, the Supreme People’s access to new films from Disney, Pixar Key global trends Court is cracking down on internet piracy. and Marvel from 2016. It also plans to commission original feature films in • The global cinema business is resilient. • The US film sector will continue to the US. The boom in film production and cinema generate huge profits internationally but going in China (now the largest market for will face increasing competition from new Amazon and other players in the film after the US) Russia, India and Brazil production hubs in China and Russia. OTT space are also increasing their will ensure that this spike continues. investment in content production. • Digital distributors will continue to rely Digital distributors are also partnering • According to the Motion Picture primarily on acquired content. However, with major US studios. For instance, Association of America (MPAA) statistics, Netflix’s signature success with 2013 Sony is reportedly providing original the number of cinema screens increased drama House of Cards, which ‘premiered’ filmed content to Netflix. 5% worldwide in 2012 due to major on the streaming service, underlined the increases in Asia Pacific and the Middle appetite among digital distributors for East. investing in original first-run product. Led by Amazon and Netflix, providers of • There will be more and more ways to movie streaming services will increase watch films. Alongside the state-of-the- their investment in the production of art cinemas showing big-budget, first-run filmed content. movies in 3D or IMAX at premium ticket prices, the opportunities to download and watch filmed entertainment will continue to multiply.
26 PwC • Amazon already has well over 200 million Domestic box-office collections will continue to • Increasing globalisation of Indian film customers worldwide and Netflix is aiming dominate the market with revenues increasing industry robustly due to sustained increase in average to increase its subscriber base to 90 million The industry is witnessing increasing ticket prices as well as rise in the availability of in the US and even more overseas. In late global collaborations. India recently theatre-seats. 2013, Netflix had more than 44 million signed an audiovisual co-production subscribers globally with some 10 million The Indian market is highly under-penetrated treaty with Canada and is in discussion overseas. Of the 2 billion USD it invests on at present with only about eight screens per with China and Australia for a similar content annually, only a small proportion million people as compared with over 100 arrangement. In these treaties, resources (150 million USD) has gone on original screens per million in developed markets. and expertise from the two countries are programming, but that is expected to rise. The increase in screens will happen over time agreed to be shared for film production. • 3D is no longer the key driver for the and most of the new screens will be housed Member countries award benefits to each introduction of digital screens; digitisation in multiplexes that offer a superior viewing other’s industries in terms of providing is now driven by 2D installations. experience albeit at higher prices. Additionally, qualified manpower, access to shooting with sustained increase in purchasing power locations, financing programmes, etc. Future outlook and lack of entertainment alternatives and India has also recently announced a single- leisure activities, especially in Tier-2 and Tier-3 window clearance system to facilitate the • Indian film industry poised for strong cities, occupancy rates of multiplexes will also shooting of foreign films in the country. growth with bulk of the increase driven inch up. This will also contribute to an increase by domestic box-office collections in box-office collections. The revenue of the Indian film industry Accordingly, revenues from domestic box- is expected to increase strongly at about office are expected to increase at over 11% 12% CAGR from 126 billion INR in 2013 to CAGR from about 93 billion INR in 2013 to about 217 billion INR in 2018. almost 160 billion INR in 2018.
Projected growth of the industry in billion INR, 2013-2018
217 1 198 1 179 45 1 161 39 1 141 34 14 1 13 126 29 2 12 25 12 158 22 11 145 10 132 119 105 93
2013 2014 2015 2016 2017 2018
Domestic box office Overseas box office Ancillary streams
Home video Total
Source: PwC analysis
India Entertainment and Media Outlook 2014 27 Print
The Indian print industry grew from 209 Key trends billion INR in 2012 to 223 billion INR in 2013, representing a growth rate of 7%, driven • Continued growth in circulation of substantially by an increase in advertising newspapers driven primarily by Hindi revenue. Newspapers accounted for 207 and regional language dailies billion INR (93%), whereas consumer Contrary to global trends, the circulation magazines contributed about 16 billion INR of physical newspaper copies in India (7%) of the print sector revenue. has been on the upswing, with overall Newspaper advertising revenue grew by 7% newspaper circulation revenues increasing to reach 136 billion INR, whereas circulation at the rate of 8% from 2012 to 2013. This revenue grew from 66 billion INR in 2012 to makes India the third ranked country (in 71 billion INR in 2013, registering a growth terms of growth in circulation revenue of 8%. Growth in circulation was boosted by from 2012 to 2013) among global markets. the launch of new editions throughout the The top 10 markets in this list are primarily year, focussed especially on the large regional from Asia and Latin America, as other language segments in the country. developed markets in North America and The Indian magazine publishing industry Europe are witnessing a steady decline in grew marginally to around 16 billion INR in circulation. 2013, representing a growth of 2%, driven largely by growth in advertising revenue, which also grew by around 2%.
Growth of the industry in billion INR, 2012-2013
223 209 6 6 10 10 71 66
127 136
2012 2013
Newspaper advertising Newspaper circulation Magazine advertising
Magazine circulation Total
Source: PwC analysis Note: To avoid double counting, digital advertising revenues of print have been included in internet advertising
28 PwC Within India, circulation growth continues to be primarily driven by Hindi and regional language publications. Based on figures released by the Audit Bureau of Circulation, Hindi language dailies account for approximately 36% of total certified newspaper circulation in India; and English language newspapers account for 17% of the total. The other regional languages account for the remaining 47%, with Marathi, Malayalam, Tamil, Telugu and Bengali being the most popular.
Language-wise contribution (certified circulation for daily newspapers), Jul–Dec 2013
2% Hindi English 3% 4% Marathi 5% Malayalam 7% 36% Tamil Average qualifying sales of top 10 dailies (million copies), Jul-Dec 2013 8% Telugu
Bengali The Times of India 3.32 8% Kannada Dainik Jagran 3.11 10% 17% Punjabi Dainik Bhaskar 2.96 Others Hindustan 2.24
Source: Audit Bureau of Circulation Malayala Manorama 2.23
Amar Ujala 2.02
Five of the top 10 newspapers (by certified Eenadu 1.8 circulation) are Hindi language dailies, with only one English language daily, The Times Rajasthan Patrika 1.74 of India, featuring in that list. Dainik Jagran, Daily Thanthi 1.72 Dainik Bhaskar and Hindustan are the top three Hindi language newspapers, and Lokmat 1.48 Malayala Manorama is the highest ranked 0 0.5 1 1.5 2 2.5 3 3.5 non-Hindi regional language daily. Source: Audit Bureau of Circulation
India Entertainment and Media Outlook 2014 29 In 2013, growth in circulation was In 2013, the government announced a • Increased cost pressure on publishers driven by the launch of fresh editions 19% increase in the newspaper advertising due to rising cost of newsprint especially in regional language markets. rates it pays, disbursed by the Directorate Demand for newsprint in India continues In September 2013, Kasturi and Sons of Audio Visual Publicity (DAVP). This to grow at a steady rate of over 9% over launched the Tamil language edition was announced in mid-November 2013 the previous year, driven primarily by of daily The Hindu. This is the group’s with the price increase being implemented increased circulation of newspapers as first entry into the regional language retrospectively from 15 October 2013. This well as a rise in the number of pages in market, with the earlier focus being only rate hike is expected to have a positive some editions. India also continues to rely on English language publications. The impact on newspaper advertising revenues, heavily on imports, with more than 60% Tamil newspaper is priced at 3 INR on with the central government spending of the demand met through international weekdays and 4 INR on weekends, and approximately 4 billion INR on print newsprint. the initial print run was estimated to advertisements the previous year. After this be 5.25 lakh copies. The Hindu (Tamil) announcement, the state governments are This increased volume of demand in also includes a single business page also expected to increase their advertising India has coincided with a rise in prices that contains translated reports from rates which may have a much larger impact as well. While globally, the price of the Group’s financial English daily, The on the sector, as the print advertising spend newsprint declined last year, the landed Hindu Business Line. for state governments is estimated to be price in India was severely impacted by four to five times higher. The DAVP rate depreciation of the Indian rupee leading In January 2014, DB Corp launched its hike was also announced at an appropriate to an increase in price by over 5%. This foray into the Bihar market, with the time, prior to the Indian general elections impact was felt more by English language Patna edition of Dainik Bhaskar. The which saw heightened advertising activity, dailies as they use more imported 24-page edition is priced at 2.50 INR both from leading political parties as well as newsprint as compared to Hindi and and the initial print run was estimated to the government. vernacular language newspapers. be 1.65 to 1.70 lakh copies. Prior to the launch, DB Corp conducted a two-phase reader survey, reaching out to more than 3.38 lakh households in the city, to understand and study their preferences and then to take pre-launch bookings in the second phase.
• Strong growth in advertising revenue for newspapers Newspaper advertising revenue continues to exhibit robust growth in the Indian market. This growth was primarily driven by the continued focus of sectors such as FMCG and retail, and real estate on newspapers as a core medium for advertising. Elections in several states have also provided a boost to advertising revenues.
30 PwC benefits to advertisers and publications Innovation in newspaper Innovation in magazine alike, with advertisers having a single- advertising: India advertising: Global window opportunity to reach out to a Continuing with the trend in 2012, Magazines in the Western markets large reader base. On the other hand, newspaper companies and advertisers are experimenting with innovative the publications have the opportunity have attempted to develop and deploy advertising models, such as augmented and scale to further tap into new and fresh ideas for advertising campaigns to reality, to boost reader engagement large advertisers in the Indian market. differentiate themselves and create high beyond what is possible with print-only However, seamless implementation visibility among readers. An example is or digital-only content.Net-a-Porter, a and collaboration between the different the advertisement launched by Johnson reputed brand in online luxury retail, entities will be critical for realising the & Johnson India, where the pages were entered into the print realm by launching true potential of the alliance. infused with the smell of their baby Porter magazine. With the custom • Issues in readership measurement powder, to draw the reader’s attention Net-a-Porter app, readers can scan the to their flagship range of products. This pages to reveal links and instantly buy The year 2013 yet again witnessed issues campaign was launched across eight items of their choice as they see them in in readership measurement when the metro cities, in leading dailies such as the magazine. The magazine provides Indian Readership Survey 2013 released The Times of India, The Hindu, Malayala convenient links back to Net-a-Porter’s in January 2014. A large number of Manorama and Mathrubhumi. online outlet to buy the items. publishers including Bennett, Coleman and Co. Ltd (BCCL) and Kasturi and Sons Another such example of innovation in A new magazine from Hubert Burda Ltd questioned the findings and pointed advertising last year was the campaign Media, Meet, a lifestyle publication aimed out anomalies in the report. As a result, for the relaunch of Skoda Octavia in the at male food enthusiasts, launched with The Readership Studies Council of India Hindustan Times and The Times of India. Layar’s interactive print. Readers can use (RSCI) and the Media Research Users In the Hindustan Times, the advertisement Layar to scan the pages of the magazine, Council (MRUC) decided to temporarily featured a gatefold innovation, with the filled not only with recipes for men, but suspend the findings of the latest IRS 2013 headlights image of the car along with also many lifestyle suggestions, in order report and keep the survey findings in the message ‘Unfold this page to find out to gain access to bonus digital content, abeyance. In the meantime, revalidation why legends come back better’. Unfolding including shopping lists and videos. It and audit of the field work is being the pages led to a full-size image of the remains to be seen whether such models conducted by a third party. new Skoda Octavia spread across four will gain further traction. pages. For the same campaign, in The • Supreme Court ruling on Majithia Wage Times of India, the front page had been Board recommendations expected to transformed into a classifieds page for • Formation of alliances among have adverse impact on cost structure selling cars with the message, ‘Reasons to major publications to collaborate in sell your car are just around the corner’. advertising sales The Supreme Court has upheld the This was followed by a full-page Skoda recommendations of the Majithia Wage The Telegraph, The Hindu, Hindustan Board and asked newspapers and news advertisement on page 3, with the front Times and their vernacular publications, news page moved to page 2. agencies to pay employees the revised pay The Hindu Tamil, Hindustan and Ananda scale with arrears from November 2011. Bazar Patrika came together in 2013 to Employees will also be paid revised wages form an alliance, OneIndia, with the aim from April 2014 onwards. It is believed of collaborating and connecting with that these recommendations, if fully select advertisers (by invitation) through implemented, may drive an 80 to 100% a single point of contact. The alliance growth in wages, resulting in increased claims that it offers the unique benefit pressure on profit margins, especially for of a single-platform reach comparable smaller newspapers. and incremental to television. Such an initiative has the potential to provide
India Entertainment and Media Outlook 2014 31 • Specialised magazines in India to be a was used as the chief medium to create key growth driver Next Issue, a digital content subscription engagement and excitement among service in the US, charges a flat monthly Specialised magazine companies have readers, especially around the various subscription fee, to cater to those who been successful, in India as well as in the events planned for the day. read magazines in high volume. The West. Conde Nast (Vogue, GQ) or Vikatan subscription fee of 10 to 15 USD/month, This phenomenon is not limited only (Aval Vikatan, TimePass) have found when compared with similar services in to English language dailies, with Hindi profitable niches in the lifestyle segment. other industries, such as Netflix, Hulu papers such as Dainik Bhaskar and Dainik As per industry estimates, the auto and Plus, Spotify Premium and Amazon Jagran having a sizeable following on kids genres in the magazines segment Prime, is high. Facebook. Overall, social media provides are among the fastest growing in India. an effective medium for newspapers to This is corroborated by the acquisition Netflix: 8 to 12 USD/month engage with readers throughout the day, by Delhi Press of motoring magazine BS Hulu Plus: 8 USD/month as well as to reach out to new audiences Motoring and the launch of Highlights Spotify Premium: 10 USD/month and create visibility for the brand. Champs and Highlights Genies, magazines for kids, in collaboration with US-based Amazon Prime: 8 USD/month • Social media being used by magazines Highlights Kids. (99 USD/yr) to drive community building It is yet to be seen if subscribers who According to research conducted by the English language and vernacular consume magazines in high volume Association of Indian Magazines, (AIM) magazines alike are embracing the will help make up for the low digital magazines are the preferred source for community building model. Chitralekha subscription revenue elsewhere in the information on auto, travel and beauty has used an immensely successful social market. and health. In addition, according to media strategy through Facebook, the same survey, 83% readers don’t see comprising nearly 350,000 fans coupled with 85,000 talking about it. magazine ads as interruptions. This • Social media used by newspapers to reinforces the belief that readership will create brand visibility An example of a co-creation project is the grow among niche magazines due to Leveraging the power of social media in ‘Made by You’ edition of Femina magazine preference for the medium for information India is now a critical focus area for all in April 2013, an edition containing on certain sectors. Advertising alongside leading brands in the country, as this only reader-produced articles. The will grow as ads are not perceived as enables them to reach out and connect endeavour was considered a success, as irksome. with a large consumer base in a cost- Femina doubled the price of the edition. • Digital as a delivery channel effective manner. In line with this trend, Circulation numbers are said to have newspaper publishers have also started increased. Digital newsstands such as Magzter sell to focus on social media platforms to digital versions of English and vernacular At the outset, the magazine tested drive visibility for their brands. As an magazines alike, as major vernacular the appetite of readers to be involved example, Mint extensively uses Twitter publications have gone online and are in co-creation through Twitter, and where it has more than 124,000 followers. gaining popularity. Champak and Sarita subsequently raised awareness by Reporters and editors tweet and retweet are examples of magazines that went engaging with the blogging community. their stories on the platform, thereby online in 2013. Digital magazine stores A Facebook app was built through which providing visibility across a wide reader such as Zinio sell only niche magazines, stories were received, and Google+ base. The Times of India is another example while sites such as Groupon have offered Hangouts were used to hold editorial of newspapers successfully using social discounts on digital magazines by the meetings with contributing members. The media, with a follower base of over 2.1 India Today Group. experience of co-creation highlighted to million users on Twitter and 6 million likes Femina new opportunities in advertising, For standalone magazines that do on their Facebook page. with the possibility of getting relevant not enjoy economies of scale, digital Newspapers are also using social media advertisers to sponsor the entire distribution is expected to bring down the to promote and create visibility for their magazine. Femina has also come across a costs of operation. Significantly however, public campaigns. One such example is potential new business which could see its digital circulation revenue is almost the ‘No TV day’ campaign by Hindustan readers more regularly writing fictional negligible, as the audience for digital Times, for residents in Mumbai. Facebook content, under the name of Femina is niche and focussed, and as a result, Fast Fiction. volumes are low.
32 PwC Key global trends of ongoing declines in print circulation • Growth – or the lack thereof – is the revenue and advertising revenue plus a Achilles heel of the consumer magazine • The global newspaper industry has digital advertising stream whose growth market. When compared with segments endured a difficult few years. Against the is yet to compensate for losses elsewhere, such as filmed entertainment, broadcast backdrop of ongoing digital disruption, these Western markets are seeing ongoing and cable TV, and even radio, consumer which has pulled readers to alternate decline. magazine publishing is an underperformer digital media sources, the worldwide • Emerging economies of Latin America in both subscriber revenue growth and economic crisis further impacted sector advertising revenue growth. fortunes. However, aggregate decline has and Asia Pacific, however, have booming improved to become just a crawl, for three markets for newspapers. Here, growing • Magazine publishers will have looked main reasons: the worst of some Western populations, increased literacy and, carefully at the newspaper industry’s markets’ decline is itself in the past; digital often, a political thirst for information, experiments with paywalls and have payments promise new consumer income; are fuelling a growing appetite for begun to experiment with paywalls of and emerging economies are fuelling fresh news products, some of which defy their own. Esquire, for instance, charged growth in print newspaper fortunes. All overbearing regulation and threats to 1.99 USD for access to an investigative this has contributed to keeping annual their staff to report the news. In fast- article which took months to produce. industry revenue decline globally, which growing economies like Vietnam and Sports Illustrated has tested a model Peru, advertisers are turning on to the which asks readers to watch an ad before was 10.2% in 2009, to just 0.7% in 2013. opportunity to showcase their services to giving them access to certain articles from • In North America and Western Europe, growing numbers of newspaper readers, the current issue. Growth generation the newspaper market remains one in whose rising spending power is making is challenging, especially given that recession. Publishers are trying to make them more and more interested in strategies to increase one revenue element up for circulation decline by raising advertisers’ goods. can reduce growth in another. consumer prices. Wringing more money • Digital will prove a major driver for the from their remaining readers sounds like global magazine publishing market, with a recipe for turning newspapers into an increasing fixed broadband penetration artisan product for an ever-dwindling in emerging markets enabling access to number of premium customers, not a mass digital magazines and increasing tablet commodity. Yet this is working to minimise penetration in developed markets enabling circulation revenue decline. However, access to magazine apps, which can be advertising revenue to publishers in these used to purchase subscriptions. established markets is declining faster than circulation revenue, as agencies start • Print magazines have fallen in popularity to migrate budgets towards consumers with the rise in internet access and, in online, where advertising can be better particular, tablet penetration. There is a targeted. wealth of free content available online and it can be updated far more frequently so, • Tablet and mobile devices are among the for topics like celebrity news, magazines biggest change drivers for the industry. As are inferior to websites. adoption of the devices, and subsequently of digital content on those devices, • Advertisers have been slow to abandon continues to grow, there is a clear threat to magazine advertising but the market traditional printed newspapers. However, will be sluggish in the future. Subscriber tablet and mobile users are noted to be information is an attraction for more inclined to pay for content than advertisers; when they purchase an ad website users. So many news publishers spot, they can be reasonably sure of the have tried charging for digital content demographics of the people who will see for the first time in a generation; first for it and the size of the audience without tablet editions and then for associated relying on historical trends to estimate websites. Revenue from these digital this. Subscriber information is highly projects is growing fast, but in 2013 detailed as consumers give a large amount comprised just 2% of total, cross-platform of information about themselves when circulation revenue. Against the backdrop purchasing a print subscription.
India Entertainment and Media Outlook 2014 33 • Publishers are looking at recently launched Projected growth of the industry in billion INR, 2013-2018 digital ‘all-you-can-read’ subscription services, 314 with Next Issue, Zinio and Readr already on 298 6 11 the market. These have only seen small take-up 6 278 11 so far but, as tablet ownership increases and 259 6 11 241 publishers refine their business models, they 10 6 97 223 are likely to seem more attractive to consumers. 10 6 92 6 It should be noted that the magazine with the 10 88 83 largest digital circulation in the US is Game 77 Informer, which is bundled with GameStop’s 71 reward card. Game Informer has a certified circulation of nearly 3 million. To put this in perspective, there were 10.2 million certified 200 subscribers to the entire digital magazine 189 160 173 market in the first half of 2013. This is 136 148 rather indicative of the entire online content ecosystem: where consumers can consume quality content for free, they will. • Piracy will hinder digital revenues since digital 2013 2014 2015 2016 2017 2018 content is significantly easier to reproduce. Magazine piracy has not yet been a problem for publishers but there is no doubt that magazine Newspaper advertising Newspaper circulation Magazine advertising piracy will grow as digital circulations grow, Magazine circulation Total particularly in countries where piracy is widespread. Source: PwC analysis
Future outlook
• Growth will be led by newspaper sector Contrary to trends in developed Digital as a delivery channel: Increasing The newspaper industry is expected to grow at countries in Europe and North America, popularity of digital news platforms a CAGR of 7% from 2013 to 2018, with overall the circulation of newspapers in India revenues reaching 297 billion INR in 2018. will continue to show robust growth. The rapidly growing penetration of the internet Newspaper circulation revenue is expected Looking at a global comparison, India in India, both through broadband and mobile to increase from 71 billion INR in 2013 to is ranked fourth in terms of forecasted networks is expected to further drive consumers 97 billion INR in 2018, at a CAGR of 6%. In growth in circulation revenue from to access news through digital platforms. Readers addition, advertising revenue is expected to 2013 to 2018, behind Peru, China are increasingly looking for real-time access to the grow at a faster rate of 8% between 2013 and and Vietnam. latest from across the world. This has also led to 2018, reaching 200 billion INR in 2018. The The robust growth in circulation is the launch of a few ‘digital-only’ news platforms Indian general elections 2014 saw a blitzkrieg supplemented by a corresponding and blogs in India like Firstpost.com, Scroll.in and of advertising from leading political parties. growth in advertising as well. In terms Newslaundry which provide quality editorials and This is expected to have a significant impact on of forecasted growth rates between commentary on relevant topics, and are already newspaper advertising revenues for the year. 2013 and 2018, India is ranked fourth popular in social media forums. Similar changes The advertising revenues for the sector are on the global scale. Newspapers are are expected to drive rapid growth in advertising projected to increase to 148 billion INR in 2014, expected to remain a popular platform spend on news in the digital domain over the next at an annual growth rate of 9%. for advertisers to reach out to a large five years. However, in the short term traditional newspaper advertising will continue to dominate The revenue of the Indian magazine industry consumer base in the country. in India. is expected to increase gradually at about 2% CAGR to increase from 16 billion INR in 2013 to about 17 billion INR in 2018.
34 PwC Wired and mobile internet access
Revenue from wired and mobile internet Growth will also be driven by continued access grew from 171 billion INR to about 252 rationalisation of prices for mobile internet billion INR in 2013, representing a growth access. In 2013, India’s mobile operators of 47%, driven by growth in mobile internet focussed on bringing 3G tariffs in line with access revenue. Mobile internet access those for 2G services in order to encourage revenue grew by 95% to 177 billion INR in adoption. Most operators made steep 2013. The ubiquitous presence of mobile tariff cuts to encourage the migration of phone connections (estimated at 886 million 2G data users to 3G. Bharti Airtel, the in December 2013), availability of cost- only operator currently offering 4G LTE effective smartphones and feature-phones, services in the country, went a step further technology upgrades by mobile operators and and brought entry-level LTE pricing in line the tech-savvy young generation have driven with 3G. However, the coverage of Bharti the growth in mobile internet access revenues. Airtel’s LTE service is limited to just four cities and heavy data users continue to be Key trends its core target segment.
• Mobile internet access to continue growing strongly Mobile internet access continues to benefit significantly from the higher penetration of compatible mobile phones, making it a more attractive option to access the internet for many consumers. In rural areas, wireless technologies are enabling consumers to affordably access the internet, previously difficult due to inadequate wireline penetration. It is expected that mobile internet users in India will increase by about 30% in 2014, albeit from a low base. Steadily declining smartphone prices, are driving the adoption of mobile internet services further among the majority of the population. For instance, smartphone shipments in India increased almost three times from about 16 million in 2012 to over 44 million in 2013.
India Entertainment and Media Outlook 2014 35 A number of other broadband wireless Household penetration of wired broadband • Cable digitisation could support growth access licensees, including Aircel, Tikona in select developed and developing in wired broadband subscriptions and Reliance Jio Infocomm (previously countries, 2013 Cable TV networks are well established known as Infotel), are expected to start in India, especially in urban areas. Till offering LTE services in 2014/2015. Country Household penetration of wired broadband (%) recently, most cable TV networks were Reliance Jio Infocomm has established analogue and precluded the carriage of network sharing deals with Reliance France 89% high-speed data. Therefore, the proportion Communications and Bharti Airtel to UK 79% of cable broadband connections among minimise its network investments. With total broadband connections was quite low. the planned launch of multiple LTE USA 79% networks in 2014/2015, competition Australia 74% The situation is changing dramatically now. The digitisation of analogue cable will increase and is likely to lead to Japan 72% more affordable LTE services. These TV services is in progress across India. Germany 70% developments are expected to continue Phases 3 and 4 of the digitisation project driving the growth of mobile internet Russia 52% are currently in progress and pan-India across the country. China 38% digitisation is scheduled to be completed by December 2015. Brazil 30% Penetration of mobile internet in select devel- Digitisation of cable TV networks will India 6% oped and developing countries, 2013 enable cable operators to offer broadband Source: TRAI, PwC Global Entertainment and Media services using existing infrastructure, Country Penetration of mobile Outlook 2014-2018, www.pwc.com/outlook and PwC helping push the adoption of fixed internet (%) India analysis broadband services. Japan 86% In comparison, the situation with mobile Australia 61% internet was better. As per the TRAI, there • Potentially transformational NOFN project progressing, albeit slowly UK 61% were about 220 million wireless internet subscribers in India in December 2013. The USA 60% The NTP 2012 sets out a number of number of mobile broadband connections broadband-related targets, including Germany 52% (typically using technology such as 3G) was 175 million connections by 2017. To help France 46% reported by the TRAI to be about 40 million achieve these targets, the government Russia 44% in December 2013; this is almost thrice the had planned to deploy a fibre network to number of wired broadband connections gram panchayats, local self-government China 38% in India. bodies, at village level, which would Brazil 31% be funded by operators via a Universal India 16% • Change in definition of broadband Service Obligation Fund (USOF) at a augurs well for consumers over the cost of about 200 billion INR (3.2 billion Source: TRAI, PwC analysis long-term USD). The intent was to provide non- discriminatory access to enable operators • While mobile internet access continues Towards the end of 2013, the TRAI to offer broadband services to the rural to grow rapidly, India trails in wired changed the definition of broadband to and remote areas at affordable prices. broadband internet penetration mean download speeds of at least 512 kbps. While this is not significant when The project was planned to be completed As per the Telecom Regulatory Authority compared with global benchmarks, it by October 2013, but the progress of the of India (TRAI), India had only about is consistent with the National Telecom National Optical Fibre Network (NOFN) 18.3 million wired internet connections, Policy (NTP) 2012, which has also project has been slow and the deadline including 14.5 million wired broadband specified that broadband speeds should has been pushed to September 2015. The connections, in December 2013. The wired increase to 2 Mbps by 2015. government also plans to use the NOFN broadband household penetration in India infrastructure to rollout wi-fi hotspots is just 6%, an abysmally low figure when to the gram panchayats by March 2016. compared with developed countries as well as select emerging countries.
36 PwC This is primarily due to the inadequacy • Countries with growing economies and on subscriber numbers, as customers will of existing wireline infrastructure in the increasingly large youth populations will largely be existing mobile internet users country. There were less than 30 million see particularly strong growth, due to migrating from 3G. fixed telephone lines active in India in the growing popularity of smartphones • But, while 4G broadband services might December 2013 with almost 80% of them and online services with this technology- be able to command a premium in in urban areas. This continues to restrict literate demographic. Facebook and local developed markets temporarily, pressure the growth of wired broadband in India. social-networking services are proving to to migrate customers will lead to intense be particularly strong drivers of mobile- As per the new timeline, the NOFN will price competition and limit ARPU growth. broadband adoption. cover 100,000 gram panchayats by March Many markets now host two or more 4G 2014, followed by a further 100,000 by • The growing availability of sub-200 USD, operators. March 2015 and an additional 50,000 by followed by sub-100 USD, smartphones • 4G is also becoming increasingly available September 2015. However, by October will also have a dramatic effect on mobile in emerging markets, but its effect on both 2013, only three pilot deployments had internet adoption by making it more subscribers and revenue will be minimal been completed, connecting 58 gram viable for operators to bundle devices because of the relatively high cost of panchayats, less than 1% of the target. and services for lower-income segments, handsets and tariffs. In the medium term, At the current rate, the NOFN project is particularly in emerging markets. many operators in emerging markets in expected to continue well beyond the • Innovative pricing and segmentation will Latin America and the Middle East will September 2015 deadline. also make mobile internet services more largely seek to use 4G to attract higher- affordable to the wider population. The end subscribers, though prices will fall Key global trends effect will be most dramatic in emerging as more providers enter the market and markets where many cannot afford smartphones become more affordable. • Internet access – and increasingly fixed traditional postpaid-broadband plans. broadband – is being seen as a utility • In a number of other emerging markets, rather than a luxury in both advanced • Operator strategies to bundle or cross- LTE is initially being used to provide fixed and emerging markets by consumers and sell fixed broadband and mobile internet broadband access services in selected governments, as more new and existing services with each other, and fixed- areas. It will only become a viable services commercial and public services go online. telephony and TV, will increasingly drive for smartphones and other mobile devices As a result, broadband has risen up the internet access adoption by broadening once coverage improves and handset political agenda around the world spurring the appeal and affordability of services. prices fall. government initiatives aimed at improving The bundling of third-party online content its availability, quality and affordability. and applications, such as Spotify’s music- streaming service and Netflix’s video-on- • Mobile internet services will drive the demand offer, will also make both mobile majority of growth, thanks to three internet and fixed broadband services factors: most mobile internet markets are more compelling. underpenetrated; infrastructure is cheaper and faster to rollout on a widespread basis; • 3G services will drive the majority of and the growing availability of mobile mobile internet growth, as the technology internet-enabled devices. Where there is becomes standard in developed markets investment in fixed-line infrastructure, it and a strategic priority for operators tends to be focused on upgrading existing in emerging markets, where 2G still broadband networks to support superfast dominates. speeds rather than new lines. • The availability of 4G mobile internet • Growth in mobile internet access will be services will spur some mobile internet particularly strong in emerging markets, adoption in the world’s more developed where fixed-line coverage, PC penetration markets, especially once more compatible and income levels are low and because of smartphones become available and the relatively higher costs of rolling out competition between one or more fixed broadband. operators leads to lower prices. But their effect will be greater on revenues and average revenue per user (ARPU) than
India Entertainment and Media Outlook 2014 37 • The impact of the global financial crisis Future outlook will vary. Growth in badly hit economies The number of mobile internet will suffer due to lower disposable income • Internet access market to be dominated connections is expected to increase at over and governments prioritising spending by the mobile platform 20% CAGR to reach about 543 million and policymaking on other issues rather The number of wired broadband in 2018. This will make India among the than making fixed broadband more connections is expected to increase by world leaders in mobile internet in terms available and affordable. about 10% CAGR to reach about 23 of total number of connections, a sharp • Broadband’s growing status as a utility in million in 2018. This number could be contrast to its abysmal performance in developed markets and an aspirational higher, provided the government of India wired broadband. service in emerging ones means ARPU is able to accelerate the implementation This will present both opportunities and growth is likely to be hit harder than of the NOFN project. Nonetheless, India challenges to online players, who will subscription adoption, due to operator will continue to lag behind developed and have to optimise the content consumption strategies to make services more leading emerging countries in terms of experience for a multitude of mobile affordable to consumers. household penetration of fixed broadband. devices and connection speeds. • Growth in fixed broadband household Mobile internet is expected to continue numbers, however, will be inhibited by growing robustly as more and more weaknesses in property markets. Fewer existing mobile subscribers start using newly-built homes and fewer people their mobile devices for accessing moving home, which historically have information and other services on the been strong drivers of adoption, will mean internet. The roll-out of affordable 3G and fewer new subscriptions. The US and UK 4G services and increasing availability housing markets have begun to show signs of smartphones for less than 5,000 INR of recovery and some major emerging will lead to most consumers accessing the economies remain strong, but others look internet through their mobile phones. likely to continue to suffer. • Coverage of fixed-line infrastructure will place a limit on fixed broadband’s Projected growth of the industry in billion INR, 2013-2018 potential, particularly in areas of developed and emerging markets that 662 have low population densities and income 613 levels, making it unprofitable to deploy 552 networks. 446 • Low levels of PC ownership will also 352 554 515 inhibit fixed broadband’s growth, 252 463 especially in emerging markets where 365 275 low incomes mean that many people’s 177 first—and perhaps the only—internet 89 98 108 service will be via a mobile broadband- 75 77 81 enabled handset. 2013 2014 2015 2016 2017 2018 • High penetration levels will be the ultimate limit of internet access growth, Fixed broadband internet access Mobile internet access Total even if other inhibitors are weak or absent. Source: PwC analysis
38 PwC Wired and mobile internet advertising
The internet advertising market in India was advertising is the dominant mode of estimated to be about 30 billion INR in 2013, advertising there. In many emerging which grew by about 26% from 23 billion INR countries, internet advertising accounts in 2012. The market was dominated by wired for a large share of total advertising internet advertising, which generated revenue revenues. For instance, in 2013, internet of about 26 billion INR in 2013. Mobile internet advertising contributed almost 40% of advertising revenue also grew rapidly, albeit overall advertising revenues in China. from a smaller base, and reached 3 billion INR in 2013. • Leveraging the power of social media: Social networking sites will continue to Driven by the rapidly increasing adoption be important for internet advertising and usage of internet across the country, the wired and mobile internet advertising The adoption and usage of online social market is currently on the cusp of sustained networks among the Indian internet rapid growth. It is expected to emerge as a user base continues to be high. As per significant component of advertisers’ media reports, over 85% of Indian wired internet mix over the next few years. users use online social networks such as Facebook. Even in terms of time spent on websites, social networks continue Key trends to dominate other types of websites and • Share of internet advertising is rising in portals with about 25% share of total the total advertising market online minutes. Wired and mobile internet advertising The popularity of social networks is also has started to emerge as a significant highlighted by reports indicating that component of the media mix for India has over 100 million active Facebook advertisers. In 2013, internet advertising users, making it the second-largest market accounted for about 8% of the total in the world in terms of number of users. advertising revenues, up from about 7% Facebook plans to ramp up this number in 2012. This trend is expected to continue significantly by tying up with mobile over the next few years and as consumers operators and device vendors to offer easy, start spending more time on the internet, cost-effective access to millions of mobile advertisers are likely to continue to phone users in the country. increase their spends on this medium. Thus, with a large and growing base of active The latent potential for growth in internet and engaged users, the importance of online advertising revenues is also high. For social networks will continually increase instance, internet advertising accounted from the internet advertising perspective. for nearly 25% of advertising revenues in This is also consistent with trends the US in 2013 and the share is expected observed in many countries across the to continue rising over the next few world. The amount of time people spend years. The corresponding value in the UK using the internet continues to rise, even is almost 45%, indicating that internet in developed markets. Social media sites,
India Entertainment and Media Outlook 2014 39 in particular, have proved enormously Developed countries have witnessed rapid Fixed broadband penetration is extremely popular and have increased the amount increases in mobile internet advertising low and, while it will grow, it will be far of time that users spend on the internet. over the past few years. For instance, from a mass-market phenomenon even by Some of this time is taken from other mobile internet advertising revenue in the the end of the forecast period, due to the media, such as print, but much of this US and the UK has witnessed CAGRs of cost of services and the difficulty of wiring is ‘new time’ to the world of media and over 100%, albeit from small bases, over a large country like India with a significant is often taken from non-media-related 2009-2013. rural population. activities. Yet there are issues, in all markets across The rise of mobile internet and the world, owing to the fact that mobile- smartphone usage can mitigate these • Video advertising gaining ground specific ad formats are still in their issues to some extent. For instance, many Video advertisements can either be infancy. Besides, the small screen that a device vendors have started offering inserted in a video feed (eg on sites such as smartphone offers allows fewer ads to software-based mobile interfaces in YouTube) or embedded in a webpage. Till be displayed. local languages (eg Hindi, Marathi, etc). recently, the low penetration of high-speed These work well with touchscreen-based broadband was a significant barrier to the • Barriers such as low literacy, smartphones, thereby overcoming the penetration of video advertising. inadequate local-language content and limitations of ordinary mobile handsets poor fixed broadband penetration need However, this has started to change. with rigid pre-printed buttons. to be overcome For instance, the Telecom Regulatory Mobile apps, especially free apps on widely Authority of India (TRAI) has changed the In spite of the high latent potential for distributed mobile operating systems definition of broadband services to mean Internet advertising in India, there are such as Android, can overcome the gap of connections offering download speeds of still major barriers in terms of low literacy inadequate local-language content. Lastly, more than 512kbps (earlier threshold was and inadequate local-language content. the staggering rise in mobile Internet 256kbps). Further, 3G mobile services A major problem for internet advertising usage in India can certainly overcome have already established a firm foothold in in India is that there simply isn’t enough the limitations of poor pan-India fixed India and high-speed mobile subscribers premium content produced in local broadband network penetration. are expected to increase rapidly over languages. Most local ad players are still the next few years. As internet speeds focussed on English-language content for continue to rise, there will be greater the English-speaking audience. opportunities for advertisers to use video advertisements to target relevant customers. The past few years have seen video advertising grow rapidly in developed countries. For instance, the video advertising market in the UK witnessed a whopping 74% CAGR over 2009-2013. The US also witnessed robust year-on-year growth of over 30% in the same time- frame, albeit from a much higher base.
• Mobile internet advertising growing strongly, but challenges remain Although mobile internet advertising revenue is currently not very large, it is witnessing rapid growth on the back of increased penetration of smartphones, which are likely to become more affordable for a much wider range of Internet users.
40 PwC Key global trends retail outlets. Google and other search Future outlook engines, such as Baidu, continue to • The global internet advertising market innovate on their products to make them • Both wired and mobile internet has, by and large, been able to weather more attractive to both consumers and advertising markets expected to grow global economic circumstances and grow advertisers. In some local media markets, strongly over the next five years even where other media have flattened such search-related spending is therefore Backed by strong growth in adoption and or contracted. It has achieved this for ‘leaving’ the local industry. usage of wired as well as wireless internet, several reasons. The sheer number of • Display, while not enjoying the meteoric the Indian internet advertising market is internet users continues to rise, in terms growth it did in the early days of internet expected to grow at a fast rate over the of both broadband penetration, and those advertising, also continues to expand. next five years. that have access to the medium in public The declining cost of display advertising, places like schools, libraries or Internet The wired internet advertising market is while not necessarily healthy for the cafes. In key markets like China and expected to grow by 26% CAGR from 2013 medium, has turned it into an extremely Russia, penetration remains below 55%; to reach 82 billion INR in 2018. The mobile cost-efficient way to build mass and reach in the likes of India and Indonesia, fixed internet market is expected to grow even quickly. New and more creative brand- broadband penetration is under 10%. Even more sharply, backed by rapid growth in oriented formats, new forms of targeting, in markets like the US, there is room to the number of users of smartphones and and new forms of buying and trading display grow: fixed broadband penetration in the high-speed mobile internet. The market advertising, will continue to drive the US is only 79%, and several million users size is expected to grow over five times to medium forward. remain on dial-up connections. about 18 billion INR in 2018, representing • Video advertising and mobile advertising will a CAGR of about 41%. This translates to an • Broadband prices are also either generally start to play a significant role in the online ad expected overall market size of 100 billion flat, in developed markets, or declining in market by the end of 2018, with an overall INR in 2018, at a CAGR of about 28%. developing markets. The latter is a result CAGR of 24% and 22%, respectively. Video of two factors: increased competition brings some of the branding advantages that in some areas, such as Latin America, TV has enjoyed to internet-enabled devices, and a need for operators to increase particularly as more and more premium their addressable market. Given this, content providers start to offer ad-funded we forecast increased take-up of fixed content online. Its share of the total market broadband in most markets, encouraging will increase from 4% in 2013 to 8% in 2018, further online interaction. with North America and developed Western • The range of devices through which users European markets driving the early adoption. can access the Web, including tablets and Mobile devices are starting to become, for mobiles, is also increasing the amount of many users (particularly in developing time people spend online and its relevance in markets), the primary rather than secondary people’s lives. Further, internet advertising, way to reach the internet.This opens up especially performance-based advertising, new opportunities for advertisers, especially also continues to be an attractive option for as smartphone penetration increases even the most spend-cautious of advertisers. throughout the forecast period. Mobile • Search remains, arguably, the most advertising revenues will exceed classified accountable of any medium, offline or revenues in 2014 and represent 19% of the otherwise, with advertisers able to see online market in 2018. exactly what value they get on every • Advertisers still need to understand and penny spent basis. Despite sites now quantify the return on their investment, and having plenty of other sources for effective measurement of video and other referrals—mobile apps, and social sites display advertising will be a key factor in like Facebook and Twitter in particular— persuading advertisers to migrate more of users still continue to make more and their budget to these new formats in future. more searches. E-commerce continues to However, if that can be achieved, it’s fair to grow in tandem with, in some developed say that online advertising is in good health. markets, a decline in shopping in physical
India Entertainment and Media Outlook 2014 41 Projected growth of the industry in billion INR, 2013-2018 Despite the expected strong growth, the Indian internet advertising market (with projected revenues of 1.8 billion USD in 2018) 100 is expected to remain minuscule in size as 87 18 compared to developed markets such as the US, which is expected to reach revenues of 68 15 about 66 billion USD in 2018. 52 11
38 8 82 29 5 72 57 3 44 33 26
2013 2014 2015 2016 2017 2018
Wired internet advertising Mobile internet advertising Total
Source: PwC analysis
42 PwC Gaming
The Indian gaming industry grew to around Rationalisation of revenue share between 21 billion INR in 2013, representing a robust telcos and game developers has also led to growth of about 20%. This growth was driven more games appearing through carriers, mainly by mobile gaming, which grew by further enhancing the growth of this 34% to reach 10 billion INR in 2013. Mobile segment. and console gaming now comprise almost The abundance of games on feature an equal share of the gaming market, with phones (as India is still a rich feature some cannibalisation seen in 2013, as console phone market), falling prices of smart games took a hit on account of low-cost phones—in some cases up to 5,000 INR— smartphones and tablets. The effort made and a spurt in the entry-to-mid segment by industry players and the government to tablets priced between 5,000 and 20,000 promote gaming, both for sport as well as for INR have also led to the high growth in business, has also helped grow the industry. mobile gaming. Mobile gaming has expanded the base Growth of the industry in billion INR, 2012-2013 of casual gamers in India, since several popular mobile games like Angry Bird - and Fruit Ninja are available for free download and popular titles like Fifa, Grand Theft Auto, Need for Speed and Max Payne are priced much lower than 21 their console versions. The ‘freemium’ model or the model of micro-transactions 18 has worked well in India, since Indian consumers prefer to try out products 2012 2013 before purchasing them. Monetisation Gaming currently remains a challenge for Source: PwC analysis Indian publishers, as a majority of game downloads are funded by ads. However, Key trends gaming companies, having invested in consumers to aid the ‘discovery’, are now • Mobile gaming is fuelling the growth in in a better position to obtain their returns. the overall gaming industry While console sales have taken a hit on account of smartphones and tablets, Mobile gaming grew to 10 billion INR in the opportunity for trial will eventually 2013, representing a 34% growth over the facilitate handholding to the next previous year, driven largely by consumer generation of consoles, if console makers spending. Retail VAS, in the form of rise to the occasion. gaming cards is also expected to become significant in the near future, given that Indian consumers are more comfortable transacting with cash.
India Entertainment and Media Outlook 2014 43 willing to spend the money to become In developed markets such as the US local and achieve user engagement. and UK, growing popularity of handheld Game developers are yet to make devices like Nvidia’s Shield is an example concerted efforts to promote gaming as an of console makers developing more engagement mechanism to advertisers and flexible mobile gaming devices. The Shield showcase the innovations and storytelling is a dedicated mobile game console built that is possible. As agencies begin to like a smartphone (running on Android promote game advertising as a part of OS and a Tegra CPU) which demonstrates the overall media strategy and not just an that even home consoles face the threat of allocation of the overall budget (currently disruption by mobile devices. sub-optimal), the potential of this segment will be further exploited.
• Console makers rise to the occasion and lower prices to expedite the evolution to Companies such as Sponsorpay in the next-generation consoles Germany and Tapjoy in the US allow While console makers such as Sony and for user-initiated interaction with ads Microsoft report that their sales have and allow for users to receive premium taken a hit since smartphones and tablets content in exchange for their engagement satiate the instant gaming urge, console with advertisements. This concept of companies are now reducing the prices sponsored wallets is yet to become of their games by 15-30% to lower the significant in India and can benefit consumers’ total cost of ownership. Sony the advertiser (through a targeted has started local manufacturing of PS3 and engaged audience), the developer games, bringing down price of popular (via ad sales monetisation) and the titles like God of War III and Infamous. consumer (through premium content and Even Microsoft has brought down prices sponsored wallets). of some Xbox games like Alan Wake and For example, Game4u, a retailer of PC Crackdown 2. Even in global markets, and videogames, gaming consoles and console makers are rising to the occasion • Digital as a delivery channel: The digital accessories, launched India’s first online and lowering the total cost of ownership. medium is helping gaming companies gaming store in 2009. The company In the US, the growth in mobile and move up the value chain and build their subsequently established a national online markets has led Sony, Microsoft distribution channels. presence by opening nine physical stores and Nintendo to offer various free-to-play and, in early 2014, launched its operations The digital medium, including app stores, titles, such as Blacklight: Retribution (PS4), in Singapore and Malaysia. DC Universe Online (PS4), WarFrame has given a great impetus to mobile and (PS4), Killer Instinct (Xbox) and Project tablet game development. Independent • Industry players and the government Spark (Xbox). Even established games developers are able to move up the value are promoting the industry, for sport as such as Forza, Gran Turismo and Crimson chain and publish a game by themselves, well as for business Dragon now offer micro-transactions. making the process of monetisation easier. Even in retail, e-commerce has Both the government as well as industry • Videogame advertising is gaining given gaming a boost by facilitating the players are making efforts to promote ground distribution of games to various cities. gaming as a sport. The Indian Olympic Association is recognising Indian ‘e-sports’ Videogame advertising, which refers This, in turn, is helping the brick-and- mortar format of game retail to flourish, professionals and sponsoring their trips to to advertising built into games, has international championships. India now has shown some traction in 2013. However, since there is now a ready base of customers who are exposed to gaming. its own gaming professional, Santanu Basu, industry players believe that there is much who represents the country at major events, untapped potential as brands are not yet such as the Asian Indoor and Martial Art Games (South Korea), HKE Sports (Hong Kong) and Games 13 (Dubai).
44 PwC Gaming tournaments are achieving massive • Though Nintendo dominated home and Future outlook size and publicity. The most recent edition portable gaming consoles with the Wii and of Bring Your Own Computer 2013 or BYOC DS, its Wii U console has fallen short of its • The Indian gaming industry is expected 2013, a computer gaming event organised management’s expectations. The next year to grow rapidly over the next five years annually in New Delhi by Xtreme Gaming, will be crucial for the company, the last The revenues of the Indian gaming witnessed around 5,000 attendees and of the original console players like Atari, industry are expected to grow rapidly at 60-hours of non-stop gaming. Sega and Coleco. 15% CAGR, from 21 billion INR in 2013 Many state governments are supporting • The market share of PC games is expected to about 43 billion INR in 2018. India is the gaming industry in India. In 2013, the to gradually decline over the forecast ranked fifth in terms of forecasted growth Andhra Pradesh government announced period despite impressive increases in rates. However, the size of the Indian plans to set up an animation and gaming digital games distribution. However, gaming industry is not even a tenth of the city in Hyderabad, which will have an innovative systems like Oculus Rift, Steam gaming industry in China, the second- incubation centre called Game Towers, a Machines and NVIDIA’s Shield point to a largest in the world. state-of-the-art ‘walk-to-work’ and ‘plug new, potentially more exciting long-term and play’ built-up office space, etc. for PC gaming. The growth of the Indian gaming industry is expected to be driven largely by mobile • China is driving online and mobile gaming gaming as investments in the value-conscious growth and is now the world’s second- Key global trends consumer (through the provision of free largest game market after the US. It games) eventually begin to yield returns, via • In 2013, both Sony and Microsoft surpassed Japan to be the largest gaming launched the ‘next generation’ of home market (by revenue) in the Asia-Pacific both subscriptions and advertising. consoles and sold over 8 million units region in 2013. globally by the end of January 2014 • The market for games is becoming ever between them. more polarised. Big-budget games like • Functions like cloud gaming, media Grand Theft Auto V and Call of Duty: management and better-value subscription Ghosts continue to perform well, with the services will serve the console gamer well as former seeing record sales. Meanwhile, volumes ramp up and hardware prices drop. independent developers are being courted • By January 2014, Sony had released the by players like Microsoft and Sony, with PS4 in 48 markets. The manufacturing Steam looking to Kickstarter to raise scale of using a more PC-like architecture funds. The medium-sized developer, with allowed a much quicker release than for middling IP, struggles to survive (see the previous generations of consoles. spectacular implosion of 38 Studios). Meanwhile, titles like the free-to-play • Microsoft launched the Xbox One in fewer League of Legends or tablet-based Puzzle markets but has still sold 3 million units and Dragons continue to pull in huge globally by January 2014. The launch revenues in micro transactions. of these consoles will drive growth in console games, particularly digital games, with their greater focus on providing digital entertainment, both gaming and otherwise.
India Entertainment and Media Outlook 2014 45 Mobile gaming will help transition casual Projected growth of the industry in billion INR, 2013-2018 gamers to serious gamers, who are likely to adopt next-generation consoles. In addition, mobile gaming will facilitate the evolution of highly interactive and engaging videogame advertising. Hence, both subscription and advertising are expected to be significant growth drivers 43 for the gaming industry over the next 38 five years. 35 30 26 The potential of games with an Indian 21 context is not fully explored. A few games around cricket and Bollywood have been successful, but there is much innovation 2013 2014 2015 2016 2017 2018 that can be brought to the table, as most Indians are not familiar with international Source: PwC analysis content. Women-centric games, perhaps based on popular TV soaps, could be targeted at urban homemakers, which is a segment with untapped potential.
46 PwC Radio
The year 2013 was good for the radio industry, better engagement with listeners and which grew by 18 % from 15 billion INR in high interactivity through programmes 2012 to 18 billion INR in 2013. Growth in the on sports, festival celebrations and new industry was driven mainly by the increased developments in the city. popularity of the medium in smaller towns and cities, the state assembly elections held • Phase 3 auctions on the anvil in 2014 and radio being recognised as an With new government in action, the effective medium for advertising to target auctions of Phase 3 FM licensing are India’s large and incredibly diverse audience. expected to begin soon. It is expected to extend FM radio services to about 227 Growth of the industry in billion INR, 2012-2013 new cities, in addition to the existing 86 cities (with a total of 839 new FM radio channels across 294 cities). One of the key aims of the licensing process is to extend the reach of FM radio to some of the more remote rural areas of India. The successful 18 completion of Phase 3 is expected to result in a much-improved FM radio coverage, 15 which is expected to drive up listenership and, in turn, increase the radio industry’s 2012 2013 share of advertising revenues. Radio advertising revenue Source: PwC analysis
Key trends
• Innovation in content Over 90% of India’s population has access to radio and with multiple radio stations playing similar content, the need for innovation in content is imminent. Many radio stations experimented with content to break-away from all-time film music airtime. Ramayana, a radio drama aired on Fever FM, gained popularity and was made available as an app on the Apple store for listeners worldwide. Storytelling show Yaadon ka idiot box on BIG FM has also been successful. The non-music content is believed to drive
India Entertainment and Media Outlook 2014 47 TRAI has also given its recommendations The community radio, which usually runs properties are acting as a supplement and for license period and migration fee for within a range of 10-20 km in an area, has providing an alternate means to access radio channels migrating from Phase 2 to emerged as an effective tool to disseminate new audiences. They also help to deliver Phase 3. Like digitisation for the television information and empower the local integrated media campaigns to brands sector, Phase 3 is likely to be a turning community. across radio and digital platforms. point for the radio industry. During the floods at Uttarakhand, the PlanetRadiocity—the online platform of three community radio stations in the Radio City—has 11 web radio stations of • Advertising growth continues to area—Kumaon Vani (Mukteshwar), different genres and plans to include a be driven by retail and real estate Henvalvani (Chamba Valley) and regional web station. Radio Mirchi and segments Mandakini Ki Awaz (Rudraprayag)—were Big FM also have online stations and The share of radio in the overall vital in broadcasting live programmes mobile apps. Apart from standalone advertisement pie has been around 5% of that informed and sensitised the affected stations, there are websites such as India. the total media mix. The FMCG, retail and communities. fm and Onlineradios.in, which provide real estate sectors have continued to spend access to a range of online radio stations. In Chanderi (Madhya Pradesh), the on radio advertisements. These sectors community radio station has been initiated In the US, online radio and music recognise the fact that radio ads can be by the weavers’ cooperative. It is being streaming services such as Spotify and customised to the target city and help run by a local community youth team and Pandora have shown strong growth and build a brand identity in smaller towns focuses on women and child nutrition are putting pressure on traditional radio and cities by linking them with on-ground issues. While in Bhudikote (Karnataka), broadcasters, by cannibalising media brand activation programs. the community radio station Namma consumption hours and advertising spend. The state assembly elections and the Dhwani, a partnership between MYRADA general elections also provided a major In India, the popularity of digital music (an NGO), Voices (a media group) boost to advertising on radio in 2013. apps like Gaana, Hungama and Saavn is and UNESCO, is owned, managed and rising. However, at this stage, they do not operated with the active participation seem to be a threat to traditional radio Releasemyad.fm, an online portal of women’s self-help groups focussing as both options can co-exist to meet the launched in 2013, helps brands book on livelihood security amongst the rural growing demand from Indian consumers. advertisements on 24 radio channels households. across 86 cities in the country. It offers a The number of operational community • Radio playing a role in creating social mix of media-planning, buying, creative radio stations has been steadily awareness services and reporting for different increasing. As of July 2014, there were 170 Apart from meeting the nation’s music business categories, providing a viable community radio stations across India, up consumption demands and catering to option to local businessmen (who would from 152 stations in August 2013. target audiences for advertisers, radio is otherwise have very limited access to playing a crucial role in creating social radio advertising) to effectively use radio • Digital as a delivery channel: Online awareness through various themed as a medium for reaching targeted local radio acting as a supplement to programmes and advertisements. Some audiences. traditional radio examples include sensitising people about To leverage the increasing penetration women’s safety in Delhi (post the Dec • Community radio serving as a tool of of wired and mobile internet, terrestrial 2013 rape case) and awareness about rural empowerment radio operators are launching web “importance of the most important right channels and mobile apps for their – right to vote” around general elections. Community radio serves a specific stations. The increasing adoption of These campaigns were run across all radio community in a well-defined geographic smartphones and tablets is the key driver channels in most of the cities in different area. These radio stations broadcast for growth in digital consumption of radio languages. Prasar Bharti, the national content that is relevant to the local content. Most of the leading radio stations broadcaster, ran a campaign on Dowry audience and address the information have an online presence, and online radio Prohibition Act around the Anti-Dowry needs of the community. Educational Day in November 2013 to create awareness and other not-for-profit organisations about the Act. are granted permission to operate these stations, without the need to pay any fees or share revenue with the government.
48 PwC help make radio a more compelling In 2013, the Ministry of Information and proposition for advertisers. This will Broadcasting (MIB) launched internet ensure that radio continues to be and online-based services for its national competitive in the face of even more channel All India Radio (AIR) and accountable and measurable pure digital other state-run radio channels. The AIR platforms such as the Web and mobile. YouTube channel and mobile applications for AIR News for Android-based mobile • Maturation of Asian markets will spur devices were also rolled out. These long-term revenue growth initiatives are expected to make AIR The growing consumer spending power accessible to the Indian diaspora abroad in key developing Asian economies will and foster direct interaction with listeners catalyse greater radio advertising spending through social media. by big brands and local advertisers alike. AIR also has an account on the audio distribution platform SoundCloud, which • Growth in smartphone and data allows listeners to download and hear plan adoption will transform radio the latest AIR news and news-based landscape programmes. The platform has started The prolonged boom in smartphone with six playlists and plans to add more. and tablet adoption will continue to AIR is also using social media sites such transform the way in which consumers as Facebook and Twitter to promote its interact with radio, creating more SoundCloud account. listening opportunities and enabling innovation in product evolution.
Key global trends • Increased car usage will increase audience listening time Though highly diverse across different regions, the global radio market will be In-car listening has long been a key shaped by a number of key trends over the component of the radio market, next five years. especially in the US and Canada. As consumer expenditure rises in • A bullish market will underpin global emerging economies, car ownership growth will rise accordingly. More cars will The US accounted for 45% of the global result in more in-car radio listening and radio revenue in 2013 and will still more congestion which in turn will add account for 44% by 2018. Growth in the to in-car listening time. US, driven by the return of advertiser • Digital radio technology confidence following the global recession fragmentation will hinder growth and the growing popularity of digital platforms, will be a major thrust of the The digital radio landscape is fragmented global uplift. and disjointed. With only a handful of markets having established digital radio • Audience measurement innovation will sectors, broadcasters in most other improve advertiser support countries will have to rely more heavily The shift of more listening time on on PCs and smartphones, which will to digital platforms coupled with a mean more direct competition from other steady transition to digital audience forms of digital content. measurement methodologies will
India Entertainment and Media Outlook 2014 49 • Subscription radio will face intensified greater amount of digital entertainment. The growing spending power of consumers competition from apps The safety risk of digital entertainment, and continued spends by local and large Streaming music services like SoundCloud which requires significant user advertisers will catalyse greater spending on and Spotify will account for an ever engagement and attention, presents a radio advertising. Digital radio is also expected to larger amount of consumers’ listening core opportunity for radio broadcasters. continue to gain momentum owing to increased time in more mature markets. Traditional However, the increased programming smartphone and tablet adoption. broadcasters will find themselves and curation efforts of on-demand music competing head on with these new streaming services mean that competition disruptive entrants. will intensify markedly in the car.
• Digital services will compete for Future outlook advertising revenue: • Phase 3 auctions to boost growth in Over the next couple of years, free tiers radio sector of streaming music services will compete The radio segment in India is expected aggressively for the advertisers’ money. to grow from INR 18 billion in 2013 to In the long term, the maturation of INR 40 billion in 2018, at a CAGR of interactive radio services like Pandora will 17%. Implementation of Phase 3 will see radio getting a bigger share of digital be the primary growth driver for radio advertising revenue. advertising. With multiple frequencies being allowed to a broadcaster in the • In-car technology innovation will create same city, we expect the ad inventory to new opportunities for radio: increase, which will enable radio channels Interactive dashboards will give drivers a to offer quality content.
Projected growth of the industry in billion INR, 2013-2018
40 32 27 23 18 20
2013 2014 2015 2016 2017 2018
Source: PwC analysis
50 PwC Music
The music industry shrunk from 13 billion INR in 2012 to 12 billion INR in 2013, primarily due to reduction in digital sales. Various affordable internet plans now allow live streaming, downloads and easy access. However, monetisation has been low. The brick-and-mortar music retailers have been on a constant decline in physical music sales in India since 2009.
Growth of the industry in billion INR, 2012-2013
13 12 1 2 1 2
9 7
2 2
2012 2013
Physical sales Digital sales Radio Public performance/Concerts Total
Source: PwC Analysis
Key trends are sold as limited editions to lure consumers. This is seen as an extra edge • Innovative ways to popularise digital for a music loyalist who would have ready music access to music from day one of product The laptop, tablet and other hand-held purchase. Additionally, this feature helps device manufacturers have started in curbing piracy. tying up with music companies and app providers like Universal Music and Hungama to launch products with pre- embedded apps or music libraries that
India Entertainment and Media Outlook 2014 51 • Evolving business models for better • Illegal downloads continue to erode the Key global trends monetisation revenues • Digital recorded music revenue will Since piracy is rampant in music industry Flipkart’s online music store ‘Flyte’ had surpass physical recorded revenue in in India, and music companies have now to shut down in little more than a year of 2014. Global total digital recorded music developed new monetising strategies its launch due to music piracy and lack of revenue will exceed physical recorded through bundled services in partnership easy micro payments. Another streaming music revenue for the first time in 2014, with leading telecom companies across website Dhingana had to shutdown after at 10.18 billion USD against 10.17 billion the world. Hungama provides Indian a long battle for survival due to similar USD, respectively. Growth in digital has film content to 47 countries through reasons. Music Store, a chain of 100 given consumers greater choice and partnerships with companies like Roshan stores in India, was also shut this year allowed many different formats to flourish. Telecom in Afghanistan, Singtel in due to effects of piracy. A healthy music • Mobile music will see major gains in Singapore, Rogers in Canada and Verizon ecosystem without piracy is required for emerging markets. The introduction of in the US. The main revenue driver here these initiatives to sustain and scale up. low-cost smartphones in many emerging is the caller ringback tones (CRBT). The In fact, the growth in broadband markets will present new opportunities to only limiting factor in this segment is the connectivity has led to an increase in access affordable music. limited service availability across the globe illegal downloads. The absence of a as not all telecom territories across the water-tight copyright law for digital music • The music industry is starting to use ‘big world offer this service. and lack of strict execution of anti-piracy data’ to better engage with consumers. regulations have made the problem even Record companies are increasingly New markets in Africa and South Asia are worse over the past couple of years, as turning to digital data analysis as a being explored by music companies since consumers consumers have easy access means of developing targeted marketing they have an increasing base of smartphone through the web on mobile devices. campaigns. They are also beginning to users and are supported by growing local see ways in which fan data can be used telecom companies. However, each of them to drive tailored promotions to better has its own regional issues, which make engage consumers. significant contribution to mobile VAS international revenues difficult. • Live music festivals boost growth of non-film music In India, music predominantly consists of film and specifically Bollywood music, which is popular in Hindi-speaking states. With live music festivals like Sunburn and NH7 Weekender gaining popularity in India, there has been rising interest from the younger generation in electronic dance music (EDM) and other forms like jazz, rock, pop and metal. The number of bands playing non-film music has risen from 10-15 in 2007-08 to more than 60 today. Even venues like Hard Rock Café and Blue Frog across metros have supported the growth of non-film music and encouraged new talent in music. Apart from these, Indian folk and sufi music is also gaining popularity with many private music albums and live performances.
52 PwC Getting this analysis right will have a Future outlook If through government support, piracy is positive impact on recorded music revenue. controlled and music licensing costs are reduced, Going forward, we expect major music labels this segment has potential to grow with new • Live music is extending its geographical and brands to engage with Indian consumers emerging international markets and business reach. While the global revenue from live in the digital space and live events, given the models. The overall music sector is expected to music will rise by a 2.7% CAGR, countries demographic shifts being witnessed in Asian earn 22 billion INR in total revenues by 2018 such as Brazil and Indonesia will see rises of countries. With the growing consumer interest from 12 billion INR in 2013 at a CAGR of 13%. 6.3% and 8.0%, respectively, as emerging in non-film music, the live concerts and festivals markets increasingly establish themselves as segment can witness compounded growth as key locations for festivals and tours. high as 20% over the next five years. Digital sales are also expected to revive.
Projected growth of the industry in billion INR, 2013-2018
25 22
19 20 3 16 2 3 14 15 2 3 13 2 12 3 1 2 1 2 10 2
5 7 8 9 11 12 15
2 2 0 1 1 1 1 2013 2014 2015 2016 2017 2018
Physical sales Digital sales
Radio Public performance /Concerts
Total
Source: PwC analysis
India Entertainment and Media Outlook 2014 53 Out-of-home advertising
The Indian out-of-home (OOH) advertising emerged as the fastest growing segment industry increased from 17 billion INR in of OOH advertising, and is believed to 2012, to 19 billion INR in 2013, representing be outpacing the growth of traditional Ad a growth of 12%. This growth was driven by formats. As consumers are spending an the fact that consumers are spending more increasing amount of time on travel, time out of their home and the chances of brands are trying to capture the attention seeing billboards and other mediums of OOH of their localised target audience during advertising are much more. OOH advertising this period. contributes about 5% of the overall E&M The development of metros and industry advertising pie. modernisation of airports have also provided an impetus to this segment. Ad Growth of the industry in billion INR, 2012-2013 spots at locations such as the Mumbai and Delhi metros are being sought after by brands. Airport advertising in particular is being preferred by advertisers as it gets 19 regulated by airport authorities, ensuring visibility and also because it caters to the preferred target segment. For instance, 17 Flipkart launched a campaign for its new mobile app specifically across major Indian 2012 2013 airports in Mumbai, Delhi, Bangalore, OOH Chennai, Hyderabad, Pune, Kolkata, Source: PwC analysis Chandigarh, Ahmedabad and Nagpur. The campaign used different types of media Key trends at the airports such as baggage conveyor belts and displays at the security check-in. • Transit media driving growth for OOH In the US market as well, while billboards advertising market are the leading format, transit locations OOH advertising consists of spends on such as buses, rail, mobile billboards, taxis media such as billboards, street furniture account for more than 15% of revenue. (bus shelters, kiosks, etc.), transit displays Other alternate channels such as sporting (e.g. buses, trains, taxis, airports and arenas, petrol stations, beaches, ski areas metros), and captive advertisement are being increasingly explored and are networks (in venues such as malls, coffee driving growth for the industry. shops, office lobbies, etc). • Traditional sectors reduce spend on OOH formats such as billboards and street OOH; new categories drive growth furniture have been used traditionally for advertising and continue to dominate in While spend from sectors that traditionally terms of number of sites and audience used to spend on OOH, such as telecom reach. However, transit media has and automobiles saw a decrease, sectors such as two-wheelers, real estate and
54 PwC jewellery increased their spend, driving Developed nations are far more advanced growth. Auto companies till recently used in the measurement of the OOH medium’s In the UK, the Manchester City Council to rely heavily on OOH to promote new effectiveness and are engaged in regular has set up an interactive network of 20 product launches. However digital media enhancements. In the US, the Traffic Audit digital touchscreens, via an initiative now occupies a place of prominence in Bureau’s ratings system is now able to called CityLive. Each screen has their launch campaigns, and is cutting into not only detect whether a person looks multipoint touch functionality, near the share of OOH. at an advertisement but also provide filed communication (NFC), wi-fi, high- demographic data, an improvement definition (HD) cameras and a facial For example, the launch campaign of over the ‘Daily Effective Circulation’ detection system. The screens screen ads Honda Amaze was conducted across print, used earlier, which only estimated from Google, Vodafone and O2 and in digital and OOH and included a detailed the number of people who passed an addition to advertising display local news campaign on Twitter. Telecom companies OOH advertisement daily. Similar and weather, and interactive wayfinding. reduced OOH spend significantly in enhancements have been made to Postar’s the year and shifted focus to non-urban The New York Metropolitan audience measurement software, Route. areas. Companies such as Vodafone and Transportation Authority is using digital signage as a revenue stream to Tata Docomo reduced their OOH spend. • Digital OOH failing to live up to its supplement ticket sales. The digital However, jewellery brands such as Kalyan potential jewellers and Malabar utilised OOH for boards are able to dispense product their multi-city store launches. The two- While there was a lot of interest in digital samples to enable consumers to try wheeler segment emerged as a big spender OOH when it came to India, it has failed to products. owing to multiple new launches, with make its mark. Issues around maintenance players such as Hero Motocorp, Bajaj and of assets, availability of power and Digital OOH as a means to entertain Honda using OOH extensively to launch technology and regulatory hindrances and engage consumers their new vehicles. have dampened the widespread usage of At New York’s Times Square, racers digital media. Tremendous potential to controlled Hyundai’s Veloster hatchback • Lack of a universal measurement personalise, customise and run targeted on a giant billboard by an app which system continues to challenge the campaigns still exists if properly tapped. converted their iPhone into a remote industry Digital OOH can also be combined control. with other forms of media to deliver A key factor hampering the growth an interactive and robust marketing In the UK, British Airways ran a digital of this industry has been the inability campaign. OOH campaign in which passersby could to accurately measure the return on tap and swipe responses about their ideal investment (ROI) on spends. While With advances in technology and the holiday on a screen, which would then different agencies have developed resolution of regulatory issues, interactive show them images from the airline’s individual tools to measure visibility and digital OOH campaigns are expected to destinations as per the holiday profile ROI, and OOH players also sometimes steadily increase. In the West, digital created by them. use global currencies such as Route and OOH is already mainstream and has lead Geomex, a universal currency to measure to many innovations in the usage of Digital billboards drive commerce reach and ROI, which is widely accepted digital OOH. In the US, Tesco has launched a virtual by all players, is a critical need. Digital OOH being used by government store at train stations in Philadelphia. The extreme fragmentation in the industry to generate revenue Commuters can scan or tap the product with more than 2000 players, coupled bar codes on billboards and goods are with low entry barriers, makes acceptance delivered to their homes at a convenient of a universal metric furthermore time of delivery. difficult. Lately, the tools and platforms provided by Proof of Performance (POP), an independent agency providing OOH monitoring and audit services, are being used by a few advertisers, including the Bharatiya Janata Party (BJP), which used it to audit the performance of its OOH election campaign.
India Entertainment and Media Outlook 2014 55 • Media campaigns need to integrate • The ownership rate of passenger cars OOH with mobile and digital platforms The BJP effectively used the OOH across the world, according to the World medium in its election campaign, by Bank, was 117 cars per 1,000 people in Advertisers need to utilise technology employing a localised national strategy. It 2003 and this had risen to 134 cars per and carry out innovative cross-platform mapped constituencies they won and lost 1,000 people in 2009. Rising numbers of promotions to enhance consumer in the last elections and planned the OOH passenger cars increases the attractiveness engagement and facilitate audience sites specifically for each constituency of roadside billboards. measurement. Brands are using new based on its importance and their past • According to World Bank data, the technologies such as RFID tags and QR performance. Other factors such as number of air transport carrier departures codes and we expect this trend to increase demographics, socio-economic profiles, worldwide (domestic take-offs and take- in the future. For example, the Mahindra etc were also considered while designing offs abroad of a nation’s air carriers) Reva campaign integrated digital OOH the customised campaign. The campaign increased from 22 million in 2000 to 30 with social media. A list of questions was ran with the hugely popular slogan Abki million in 2012. This growing audience displayed at regular intervals at Mumbai’s baar Modi sarkaar and employed various for airport advertising is of particular Mahim Causeway. OOH formats such as billboards, foot interest to advertisers not only because of With every question being asked, the bridges, transit media, bus shelters, etc. the scale of the audience, but also for the mnemonic of a hand went up in the air, The BJP appointed a host of Indian and consumer buying power of this typically signifying the ‘Ask’ movement, on the some American agencies to work on the more affluent customer. digital billboard as well as on social media, campaign and employed independent press and TV. Such integrated campaigns agency POP, to monitor competitor are increasingly also being used in the hoardings and audit the performance of west. For example, In the US, a food its campaign. manufacturer’s digital billboards were linked to its Twitter feed and passersby would get food samples depending on the sentiment of the feed. A sports brand gives Key global trends its Facebook fans a chance to see their • The OOH advertising market today is image projected next to football star Lionel benefitting from a number of global trends Messi in Madison Square Garden. including urbanisation; rise in automobile ownership levels, air travel and public • General elections drive growth in OOH transport usage; and consumers in 2014 switching from basic mobile handsets to The OOH industry got a major boost smartphones. from the general elections in 2014. Since • According to the World Bank, 2010 was posters were banned in most cities, OOH the first time that more than 50% of the became a natural choice for political world’s population lived in urban areas parties owing to its cost-effectiveness and and this figure is forecast to grow to widespread reach. All leading national 57% of the world’s population by 2017. parties, Congress, BJP and NCP launched This increases the potential audience for aggressive OOH campaigns. OOH advertising and will drive growth, especially in emerging markets, enabling OOH advertising to build its share of global advertising revenue.
56 PwC • The OOH advertising market is evolving Future outlook from one dominated by traditional posters, The Indian OOH industry is expected to show beside roads or inside shopping malls, robust growth in the next few years. to one where the posters are replaced by digital panels. Advertisements carried It is expected to grow at a CAGR of about 8% by digital panels have more in common to reach about 28 billion INR by 2018. The key with television adverts than with the drivers for this growth will be the following: static posters of the past. In addition, • Rise in infrastructure development media owners have enabled these panels projects such as airports, metros and to support QR codes or Near Field highways providing more inventory Communications (NFC). Coupled with the • Increasing interest from advertisers in rise in adoption of smartphones and tablet leveraging OOH properties in Tier-2 and devices, advertisers are able to create Tier-3 cities interactive campaigns in close proximity to the point of purchase. • Increase in adoption of digital OOH • The ad cap, on television, if implemented may divert funds to other advertising medium such as OOH
Projected growth of the industry in billion INR, 2013-2018
19 21 23 25 26 28
2013 2014 2015 2016 2017 2018
OOH Source: PwC analysis
India Entertainment and Media Outlook 2014 57 Deals
The dampened macroeconomic environment led to reduced deal activity in 2013. However, the ongoing digitisation of television, raising of the FDI limit to 74% and growing interest from international players boosted the deal activity, with the television and digital media sectors witnessing maximum action. ls Increasing investor confidence has led MSOs a and broadcasters to raise funds from foreign e private equity firms. While MSOs are using the funds for expansion and funding their D investment in the technology infrastructure for digitisation, broadcasters are focussing on consolidation in regional markets that began in 2013.
Key deals in the industry in 2013
Television
Month and Type of Acquirer Target Description year of transaction announcement
May 2013 Private Goldman DEN Networks DEN Networks secured an equity Sachs Capital equity investment of 110 Partners million USD (approximately 600 crore INR) from Goldman Sachs. The investment will be used for funding DEN’s growth plans. October 2013 M&A Zee Media Maurya TV Zee Media acquired Maurya Corporation TV, a regional infotainment channel launched in 2010 catering to the Bihar- Jharkhand belt.
58 PwC October 2013 M&A GS Home HomeShop18 HomeShop18, closed a Leading global advertising agencies such as Shopping, 14 million USD follow-on Publicis and Dentsu made acquisitions in Network18 funding round with GS Home India to strengthen their digital marketing Media Shopping (GS). Funds were operations. managed by OCP Asia Ltd and Publicis also acquired Mumbai-based Network18. integrated communications solution provider March 2013 Private Providence Star CJ Providence Equity Partners Beehive Communications in October 2013. equity Equity Partners Network India L.L.C, acquired 50% stake in This marked the Publicis Groupe’s seventh Star CJ Network India Private acquisition in the country since 2012. It had Limited, the India-based joint also acquired two different agencies in India venture of CJ Home Shopping in December 2012: iStrat, an integrated and Star TV, for an undisclosed consideration. digital agency, as well as MarketGate, a Mumbai-based strategic business and August 2013 Private Morpheus TVC Skyshop Morpheus invested 420 million marketing consulting firm. In August 2012, it equity Capital INR in the direct-to-consumer had acquired a performance marketing firm Advisors retailing platform TVC Skyshop Resultrix, after acquiring Indigo Consulting, for an 8% stake. Proceeds a Mumbai-based digital marketing and web from the deal, which values the company at about 5 billion development agency in April 2012. INR, will be used by TVC The print industry witnessed a couple of Skyshop to fund expansion. divestments in the magazine sector. The ABP Group sold its Businessworld magazine to a group of private investors and Business Digital Standard announced the sale of its magazine BS Motoring to Delhi Press. Month and year Type of Acquirer Target Description of announcement transaction Going forward, deal activity is expected to remain robust in the coming years. A stable government and favourable demographics should drive further deal activity. As the March 2013 M&A Publicis Convonix Publicis acquired Convonix, a digitisation of television sector progresses, Groupe Systems full-service digital marketing and increased transparency and addressability consuling agency, based in Mumbai. should inspire investor confidence. To May 2013 M&A Dentsu Webchutney Dentsu acquired an 80% stake in reap the benefits of digitisation, national Media Studio Webchutney, a digital marketing broadcasters are also expected to cement company. their positions in regional markets with the launch or acquisition of new channels. Digital October 2013 Private Peepul Komli Media Komli Media raised 30 million USD advertising is still at a nascent stage in India, Equity Capital from new investor Peepul Capital. but growing rapidly. As the share of digital The funds will be invested in its key advertising in the total ad pie increases, technology platforms to strengthen interest from international players will its presence across the Asia-Pacific continue to rise. region April 2013 M&A Publicis Neev Publicis acquired Neev, a technology Groupe services provider specialising in eCommerce, SaaS (Software as a Service) and cloud applications across web, social and mobile channels. The acquisition triggered the launch of the Razorfish brand in India.
India Entertainment and Media Outlook 2014 59 Technology
Industry players are leveraging technology • In today’s connected world, media across the value chain to address the needs of companies are striving to provide content today’s connected consumer, who demands anywhere, anytime and on any device. content anytime and anywhere. Emerging In this scenario, cloud computing holds technologies are fast becoming indispensable immense potential for the E&M industry. tools for media companies. While cloud Cloud provides scalable and secured computing has opened new avenues for infrastructure, which is compliant technology infrastructure and content with various industry regulations and sharing, the mass adoption of social media has available in an on-demand model. This enabled companies to gain relevant insights leads to significant cost savings as against on their consumers’ behaviour. Moreover, maintaining traditional on-site data the divide between technology and media centres. The pay-per-use model of cloud companies is blurring and competition is eliminates the need for capital investment steadily increasing. and converts it into an operational investment. Key industry trends Print companies can use cloud computing for low-cost archival of their content • Television broadcasters are leveraging and enable sharing of editorial content technology to cater to consumer demands. across multiple devices. Broadcasters and Viewers are increasingly using a second video content owners can leverage the screen, such as a smartphone or a tablet, inherent rapid-build-out-and-tear-down along with watching content on the feature of cloud-based virtual machines television screen. Broadcasters have to implement complex and intensive recognised this trend and are making their digital media processing jobs like video content available on multiple screens by transcoding or encoding in significantly means of online streaming and mobile lesser time, without having to invest in apps. Select premium channels, such as costly hardware. They can also leverage Star World Premiere HD, are also offering the global content delivery network content to Indian audiences within 24 infrastructure provided by major cloud hours of its US telecast, aiming to address providers today for faster streaming of the issue of piracy. content and ensuring highly available • Television audience measurement is distributed access across its customer base. also benefitting from improvements in Additionally, public cloud storage provides technology. It is expected that the new media owners with the option to rent system, being set up by the Broadcast unlimited storage capacity at low cost with Audience Research Council (BARC), will improved accessibility across multiple deploy a fully digital audience measurement devices. Leading print and television system, which will use audio watermarking broadcasters have already started coding technology for content identification. leveraging the benefits of cloud computing This will provide broadcasters with a detailed and the use of cloud is expected to analysis of their viewership in terms of the increase tremendously in the future. number of households and the time being According to PwC’s 6th Digital IQ Survey spent on each piece of content.
60 PwC conducted earlier this year, private cloud and • Mobile recharge and payment platforms content free of charge. public cloud-based applications are amongst are providing advertisers with an While technology is acting as a key enabler the top 10 strategic initiatives for future alternative mode of targeted digital and opening new avenues for industry investment of E&M companies globally. advertising and promotions. For example, players, it will also pose challenges. Consumer • Technology companies are expanding Freecharge provides its users option to expectations will continue to evolve and their boundaries and becoming recharge mobile phones or make other competition from non-traditional E&M mainstream media companies. Most utility payments including payments to companies will only increase. In such a television broadcasters in India have their DTH operators. On selecting the recharge scenario, it will be imperative for companies channels on YouTube. Film studios are also type, users are offered free or paid to continually upgrade their technology monetising their film archives on YouTube, coupons of their choice near the recharge expertise. MSOs will need to continually besides using it as a key marketing tool. value. The advertising platform is able upgrade their subscriber management systems In fact, the share of marketing budget to capture the purchase behaviour of to ensure transparency and addressability on social media marketing is continually consumers via their choice of coupons. in the system and reap the benefits of the increasing for films (currently in the range Other companies such as Paytm and digitisation process. With the onset of 4G of five to 25% of the marketing budget). JustRechargeIt provide similar services and increasing consumption of content on and have expanded their offerings to In the US too, Google is expected to alternate platforms such as OTT, broadcasters provide additional facilities such as bus make significant investment in OTT and will need to expand their content offerings bookings. launched Chromecast, a new low-cost and leverage these platforms effectively. media-streaming device, in July 2013. • With the availability of digital platforms, Industry players will also need to evaluate Amazon is already a formidable OTT companies are realising the potential of their IT ecosystem and leverage the benefits player and is making investment in their archives. In the West, newspaper of cloud computing. providing original content that it can offer companies are selling archived content. exclusively. Players such as Apple and Most large newspapers provide digital Sony are also expected to expand their archives and offer different payment presence in the TV space. models for monetisation. The Guardian relaunched its digital archive in late 2012. Additionally, to augment revenues of the In 2013, Twitter announced Twitter declining print sector, some newspapers Amplify a new program for brands to sync provide paywalls that allow consumers to up television ads and promoted tweets read some content for free and require a through the use of a cutting-edge ‘video paid subscription for the rest. In India too, fingerprinting’ technology. An advertiser newspapers have begun to digitise their or media buyer is provided a special archives. However, they are yet to monetise dashboard that Twitter has created for the the archived content. For example, The service, which lets a brand monitor when Times of India provides free access to an ad has aired on TV. Digital marketers archives, from 2001, on its website free of can see in real time when their spots cost. While newspapers like The Wall Street air and the resulting tweet that activity Journal have implemented their paywalls in occurs about either the brand or TV show. India, Indian newspapers offer their online The campaign manager can then send out corresponding promoted tweets that more intelligently target Twitter users who tweeted about the commercial or show. Twitter Amplify was also launched in India by partnering with Star Sports.
India Entertainment and Media Outlook 2014 61 Tax and regulatory issues
Television • Bandwidth charges for transmission of signals through transponder in a • Payment for acquisition of content/ satellite telecasting rights The Finance Act 2012 retrospectively Foreign broadcasters have been at amended the royalty provisions under loggerheads with the Indian tax the domestic tax law overriding the Delhi authorities on the taxability of telecasting HC decision, which held that transponder rights in the television content acquired payments do not tantamount to royalty for the global market, which includes India since the control and possession of the as well. Generally, television content is satellite remains with the operator and is acquired either on licence basis or as an never granted outright purchase. Recently, the Bombay to the customers. High Court (HC) had dealt with a similar issue in the context of the India-Singapore However, it was expected that tax treaty. It held that since the transaction such retrospective amendment on was between two non-residents for transponder payments ought not to overseas broadcasting operations, it was impact tax treaty provisions, with judicial devoid of any economic link with India precedents consistently supporting such and therefore was not taxable in India. interpretation. However, recently, the While this decision pertains to a specific Madras HC, followed by the Mumbai issue, it is expected to provide some clarity Tribunal, ruled that such retrospective in this case. However, it is important to amendments to royalty provisions keep in perspective facts of each case and expressly covering satellite transmission relevant tax treaty terms before arriving at payments should also apply to royalty any conclusion. provisions under the India-US tax treaty, leading to uncertainty on treaty protection • Payments for acquiring broadcasting for such payments. rights of live events • Taxability of revenue streams of foreign A classic issue in the case of broadcasting telecasting companies (FTCs) live events is whether payments to foreign companies for acquiring rights to Taxability of advertisement revenues for telecast live feeds of an event is taxable FTCs has attracted protracted litigation in India, especially as royalty. Recently, with the Indian tax authorities alleging in the context of domestic tax law, the that FTCs’ Indian agents carrying out Delhi Tribunal held that providing live marketing and collection activities feed cannot be considered as a transfer constitute permanent establishment of copyright and thus is not taxable as (PE) for FTCs in India, owing to their royalty. One will have to consider the typical India business model. While the reasoning behind this decision vis-à-vis Bombay and Delhi HCs, after a series other precedents to take an informed view. of litigation, have held that payment of arm’s length remuneration by the FTCs to
62 PwC such Indian agents extinguishes the tax • Other key withholding-tax issues liability of FTCs from such a PE in India, on expected lines, the tax authorities The television sector has been facing have challenged the ruling in the litigation from the tax authorities on Supreme Court. Considering this, FTCs an array of withholding-tax issues. would need to develop strong defence Therefore, it is important to consider an and documentation on taxability and informed, consistent and practical view attribution of revenues in India. to minimise tax and litigation costs. Some key issues are as follows: Taxability of subscription revenue of the FTCs as royalty or business income from –– Payments by television channels cable operators, multi-system operators to acquire television programmes (MSO) or direct-to-home (DTH) providers from producers has also seen protracted litigation from –– Discounts given to advertising Indian tax authorities. The issue of agencies and sale of recharge whether the distribution rights qualifies coupons as royalty (‘grant of copyright’ taxable • Key indirect tax issues irrespective of whether FTCs have a PE in On the service tax front, the issue of India) or business income (taxable only whether the cash incentive received if FTCs have a PE in India) is currently by the advertising agency from pending adjudication at various broadcasters can be deemed as a appellate levels. service and subject to service tax • Deductibility of expenditure incurred requires deliberation. for acquiring telecasting rights in films With respect to sale of advertisement and programmes content along with advertisement space In a set-up where telecasting companies in cases where ad agencies provide acquire the rights on an outright basis advertising space along with content, or for limited airings that may span over there could be possibility of revenue different financial years, a potential authorities demanding that service tax issue arises as to whether such cost can be paid on the entire consideration, be claimed as a deduction in the year of since the Negative List only excludes acquisition, or over the licence period. newspaper advertisement. Further for Since significant value of television sale of content, there may be a dispute programmes is derived at the time of its on whether such content is subject to first airing, it could be argued that the service tax or VAT. entire cost should be deductible in the year of its first airing. If film rights are acquired for limited airings, one could argue that such costs should be claimable over the number of airings. However, the tax authorities have been arguing that such costs should be treated as incurred on the acquisition of intangible capital assets, eligible for depreciation at a specified rate. Reports suggest that the Comptroller and Auditor-General of India (CAG) have also recommended such a view. In light of this, an informed, consistent view backed by supporting documents could hold key to defend challenges.
India Entertainment and Media Outlook 2014 63 Film Such collaborations have also faced • Constitutional validity of service tax on service tax litigation. The revenue-sharing copyright • Film production and expenses for the arrangement between film distributors Recently, the Madras HC examined the acquisition of distribution rights and exhibitors was sought to be brought legality of the central government’s under the service tax ambit by the Central The Indian Income-tax Rules specify the power to levy service tax on the Board of Excise and Customs (CBEC). quantum of deduction for expenditure transaction involving ‘temporary transfer However, various media companies incurred on production of a film or or permitting the use or enjoyment of filed writ petitions before the Madras acquisition of distribution rights, copyright’ and upheld the same. The HC, HC challenging the CBEC circular as depending on the time when the film inter alia, relying on the Supreme Court unconstitutional. Treating the joint gets released or when the distribution judgment in the case of BSNL, held that collaboration or partnership arrangement rights to the films are exploited. There in the case of sales tax, there would be a to be a new entity, the Madras HC upheld is a debate as to whether these rules on transfer of right to use the goods, whereas, the constitutional validity of the circular deduction of expenditure would mean that under the service tax law what has been and has also held that such revenue other provisions allowing deductibility brought to tax is the temporary transfer or sharing arrangements are neither covered of business expenditure without any enjoyment of the goods. Thus, the levy of under the Negative List nor the mega corresponding condition would not apply tax under both the enactments is totally exemption notification. to producers or distributors. The judicial different. precedents are divided and therefore an • Tax deduction of expense informed view on such interpretation can have a direct and significant impact on the The film sector had its own share taxability of the revenues of film producers of protracted litigation on the tax and distributors. deductibility of the operating expense streams, such as the following cases: • Joint production of films between –– Cost incurred on dubbing of Hollywood Indian producers OR collaboration movies to various regional languages between Indian and foreign producers –– Production cost of abandoned film With increasing collaborations between projects producers in India and abroad, taxability • Payments to foreign line production of revenues from such films has gained service provider significant importance. In some cases, the tax authorities treated such a Shooting of films in overseas locations collaboration as an association of persons results in significant expenses toward line (AOP), a deemed separate taxable entity production services at such locations. under the Indian domestic tax law, The tax authorities have raised issues thereby taxing the total revenue from such regarding withholding tax on such collaboration in the hands of such deemed payments made by producers to overseas entity instead of taxing the producers on line producers (for arrangement of their share of revenue. This has led to transport, getting permissions for multiple complexities for the producers, shooting, hotel accommodations, etc) including issues on the deductibility of which has resulted in litigation on tax inter se payments between producers, deductibility of such expenses. There availability of withholding tax credits and have been favorable judicial precedents, eligibility to claim the tax treaty benefits including the Mumbai Tribunal and the once treated as an AOP in India. Therefore, recent ruling by the Authority for Advance it becomes pertinent to effectively capture Ruling (AAR) holding that withholding tax the substance of the arrangement terms provisions does not apply to such payment. in the collaboration or joint production While the decisions are fact-specific, they agreement, with a view to defend any such should hopefully provide persuasive value AOP exposures. on this issue.
64 PwC • Revenue-sharing arrangement between for MSOs to evaluate the agreement and tax. The Finance Act 2012 amended the film producers and actors arrangements with LCOs for determining royalty provisions within the domestic In the case of co-production of the films whether an AOP exposure is triggered tax law retrospectively to bring such lease by the actors, withholding tax and service out of the inter se arrangement. Also, it payment within the purview of the royalty tax liability on the variable portion is important to consider withholding-tax provisions. The tax authorities have representing share in profits has been a obligations on such inter se payments been arguing in certain cases that such matter of dispute. On the service tax front, to address any possible tax deductibility payments would be taxable even under while it can be argued that since it is in the exposure. the tax treaties, applying the retrospective nature of a revenue-sharing arrangement, amendments in the domestic tax law to • Equipment at customer’s premises there may not be any service tax liability, royalty provisions under the tax treaty. one will have to also evaluate the AOP While service tax is levied on subscription It is important to take an informed and exposure arising out of such arguments, to services provided by the cable operator, practical view on such issues, considering take a balanced view. the set-top boxes (STBs) are supplied recent judicial precedents applying free of cost and accordingly no VAT is retrospective amendments in royalty • Barter of services paid by the operators. The issue under even to the tax treaty, albeit in a different In the barter arrangement, while there consideration is whether a portion of the context. is absence of a monetary consideration, subscription charges should go towards service element is present and accordingly, sale of STBs, resulting in VAT liability. service tax is leviable. However, the basis of valuation of services rendered Wired and mobile internet access is debatable. Further, withholding tax and advertising implications also requires considerations on such services. • Taxability of website transactions The Indian tax authorities have sought to DTH /Digital Analog System (DAS) levy tax on advertisement charges paid to foreign companies who own the website, • AOP exposure and withholding-tax contending that the business is carried out obligations on inter se payments in India resulting in a taxable presence The TRAI regulations and directions in of the website company. The judicial relation to the implementation of DAS precedents have been divided, though across India could change the operating there are recent rulings holding that business models of MSOs and result websites cannot be construed as PE or a in significant direct and indirect tax taxable presence of the foreign enterprise implications, which require consideration and that income of such foreign companies to avoid protracted litigation. from services rendered for uploading and display of ads on its portal is business The revenue arrangement between income and not royalty, and thus is not an MSO and its linked local cable taxable in the absence of a PE in India. operators (LCOs), under the revised However, these rulings are now pending operating model, could potentially before the HCs, and it would be interesting raise AOP exposure, if the purpose, to see how the appeals unfold. intent, rights and obligations are not adequately documented to bring out the • Payment for the lease of integrated real intentions and substance of such private lease circuits arrangements. An AOP is a deemed There was protracted litigation before entity under the India domestic tax law the Finance Act 2012, relating to whether and is required to carry out individual the payments for bandwidth capacity compliances like filing of tax returns, should be treated as royalty and whether withholding-tax obligations and such payments are subject to withholding compliances. Accordingly, it is important
India Entertainment and Media Outlook 2014 65 Gaming countries, taxation of the income recipients within India and the Indian Gaming and animation development activity withholding-tax obligations of payers has two major segments, viz. intellectual necessitates a detailed examination. Such property (IP) rights and content development. receipts or payments may be characterised as royalty or fees for technical services or • IP licensing business income, based on the facts of the Payments made by an Indian developer case and the substance of the agreement. for acquisition of existing IP from foreign Also, one will also need to analyse whether companies would require withholding-tax the payee has a ‘taxable presence’ in India consideration since the tax authorities due to virtual presence, as the proposition could possibly argue that such payments that the tax liability in India cannot be qualify as royalty in the hands of the non- triggered in the absence of physical or resident IP owner requiring withholding other modes of presence of the payee tax. Similarly, where an Indian IP (such as in India, may not be free from litigation Krish, Chhota Bheem and IPL) is licensed unless factually substantiated. to a developer within or outside India, one will have to take an informed view • Taxability of sports or sports on withholding-tax obligations since the entertainment events in India tax authorities could allege that such Revenue generated from sports or sports payments qualify as royalty, requiring entertainment events (such as IPL, ISL, tax withholding. Tax treaty terms (in ITL and the likes) could face various tax non-resident payments) would also issues which can impact the overall Indian require considerations. In cases where a income tax obligations, especially the non-resident licenses its IPs to another following cases: non-resident for developing games and animation programmes outside India and –– Taxability of revenue generated subsequently, such games and animation from advertising, sponsorship and programmes are sold in India, considering subscription revenues that the IPs are exploited in Indian markets –– Taxability of the payments to as well, there is a possibility of the tax sportsperson and sport associations in authorities alleging that such payments India for their performances in India qualify as royalty under the second-source –– Taxability of any appearance and rule of the domestic tax law. Accordingly, participation fees and prize money it would be important to evaluate and take received by non-resident foreign an informed view as regards taxability of person in India such transactions as well. There could be withholding-tax • Content development service providers obligations in India, in relation to the Content development services may above events. Therefore, the sports possibly qualify as fees for technical company as well as sportspersons in services under the domestic tax law. India may be required to obtain related However, one would need to analyse tax registrations and ensure certain respective tax treaties, especially treaties mandatory compliance requirements in with ‘make available’ provisions, to arrive India. However, one needs to evaluate the at an informed view. arrangement and agreements with the Indian promoter in light of relevant tax • VAS payments treaties to arrive at the nature and rate Since the stakeholders in the VAS value of taxability and related withholding-tax chain may be tax residents of various obligation in India.
66 PwC • Service tax discharged by the agent • Deductibility of expenditure for on behalf of sportspersons acquisition of music rights Under the tripartite agreement between the The issue of the cost of acquisition of sportspersons modelling for advertisements license or copyright in music is whether of products of corporate houses, their such payment is entitled to depreciation agents and the corporate houses deduct or is in the nature of revenue expenditure, expenses along with the commission and deductible in the first year or amortised over remit the balance amount to the sports the period of licence. The tax authorities personalities (typically, the agents on receipt have adopted different approaches leading of consideration for such advertisements to considerable uncertainty and litigation in discharge service tax on the entire the matter. consideration). The revenue authorities contended that the discharge of service- Transfer pricing tax liability by agents is not sufficient and the demanded tax be paid again by the More than a decade has passed since the sportspersons. However, the Tribunal introduction of transfer pricing (TP) regulations has settled the issue by holding that the in India. Since then, TP has become the top tax discharge of service tax liability by the agents issue facing multinational corporations in the is proper in law relying on the definition of country. ‘assesse’, which includes agents. Key developments
Radio and music • APA An APA is an agreement between a taxpayer • Deduction of licence fees or migration and the tax authority covering future fees transactions to determine the arm’s-length The FM radio broadcasters are required to price in a cooperative manner and avoid any pay licence fees, one-time entry fee (OETF) TP disputes. APA provisions were introduced and recurring annual fees to the government in India with effect from 1 July 2012 by the as per the terms of licence. The issue is on the Finance Act 2012. The CBDT, by notification characterisation of such expense as capital in the official gazette, has introduced expenditure or revenue expenditure. This detailed rules providing the procedures has been a matter of litigation with divided and necessary forms for application and views. Further, with the Phase 3 of the FM administration of the APAs. policy on its way, the broadcasters would APAs can be applied for existing as well have to pay migration fees, where similar proposed transactions. They can be issues will need to be considered. unilateral, bilateral or multi-lateral, and can be sought for a maximum period of five • Taxability of royalty income years. In March 2014, the CBDT signed the Another issue that players in this sector first five unilateral APAs within one year of encounter is whether royalty from licence the applications being made. of music rights would be taxable in the year of receipt or over the period of licence. • Specified domestic transactions While available judicial precedents have The scope of TP provisions has been pronounced the taxability of such royalty extended by the Finance Act 2012 to cover over the licence period, in certain cases, the specified domestic transactions (SDT). tax authorities at lower level have adopted The provisions would apply to financial a contrary view. year 2012–13 and subsequent years, if the aggregate value of the transactions exceeds
India Entertainment and Media Outlook 2014 67 50 million INR in the relevant year. The Budget 2014: Key updates pricing of such transactions will now need to be determined applying arm’s length • AAR forum extended to resident principles. In a separate development, the applicants Companies Act 2013 has also increased Presently, the tax legislation provides the focus on arm’s-length transfer pricing that a taxpayer can approach the AAR under Section 188 of the Act, from an overall only to determine the tax liability of a non- corporate governance perspective. The scope resident. The Finance Act 2014 permits of the said section is significantly wider than resident taxpayers to approach that for SDT under the domestic tax law in the AAR subject to fulfillment of terms of relationships sought to be covered. prescribed threshold limits.
• Marketing intangibles • Key changes in withholding tax The issue of marketing intangibles is one of provisions the most highly debated topics in Indian TP As regards payment made to non- and would also apply to entertainment and residents, on similar lines as payment media companies in India, insofar as the to residents, deduction of such payment advertising, marketing and promotion (AMP) will now be allowed in the relevant expenses are concerned and the brand is financial year itself, provided that the legally owned by the foreign parent. TDS deducted is deposited into the Indian government treasury by the due date of The issue of marketing intangible was dealt filing the tax return. As for payments to by a special bench of the Delhi Tribunal. residents disallowance of expenditure will During the TP audit proceedings, the be restricted to 30%, as against the entire transfer pricing officer (TPO) alleged that expenditure at present, in case of non- the taxpayer has incurred excessive AMP deduction or non-deposit of TDS. expenses in comparison to comparable companies. The difference was considered by ‘Assesse-in-default’ proceedings in case the TPO to be AMP incurred by the taxpayer of default in withholding-tax compliance on brand promotion for the associated for resident payments can be initiated enterprise (the legal owner of the brand), within seven years from the end of the which should have been compensated by financial year in which the payment is the AE to the taxpayer. The TPO thus made made or credited. However, the provisions maintain status an adjustment for the difference. While quo with the FM announcing that a high- adjudicating the appeal, the Tribunal • Computation mechanism of dividend level committee would be constituted to concluded that, based on the facts of the distribution tax (DDT) evaluate applicability of retrospective case, the TP adjustment in relation to the With effect from 1 October 2014, DDT amendment on indirect transfer provisions AMP expenses incurred by the taxpayer is required to be calculated on the on all fresh cases before initiation of any for creating or improving the marketing gross amount of dividends declared by action by the tax officer. intangible for and on behalf of the AE is the company. Notably, the amount of permissible. The Tribunal also held that dividend payout shall drop by 2.48 INR • General Anti Avoidance Rule (GAAR) earning a mark-up from the AE in respect on every 100 INR of dividend distributed. Contrary to expectations, no further of AMP expenses incurred on behalf of the Accordingly, dividend as a mode for deferral of the implementation of AE is also allowable. repatriation shall become costlier. GAAR applicable from 1 April 2015 was announced. The FM also proposed to • Indirect transfers review the DTC in its current form and to Clarifications were expected in relation take a view on the matter. to the ambiguous indirect transfer provisions introduced retrospectively.
68 PwC • Other key provisions • Union Budget: July 2014 In case of appeals filed before the The Finance Minister made Commissioner (Appeals) or the Tribunal, announcements during the Union Budget pre-deposit of 7.5% of duty for first stage speech recommending the development appeal and 10% of duty for second stage of community radio stations (CRS); appeals (with no provision for claiming upgradation of sports infrastructure, interest on such pre-deposit) has been training facilities and setting-up a sports made mandatory, resulting in cash outflow university; launch of TV channels to in case of litigation. Further, effective 1 promote cultural and linguistic identity September 2014, CENVAT credit on inputs of the North East; and another channel and input services is to be availed within a dedicated to farmers. period of six months from the date of issue of invoice. Television
• Roll-back of APA • Issues relating to media ownership The Finance Act 2014 has introduced roll With a view of ensuring diversity and back mechanism i.e. an APA can be applied plurality of views, TRAI issued its to four years prior to the APA period. E.g. recommendations, which include the APAs applicable from FY 2013-14 onwards, following: may now extend to FY 2009-10 onwards. –– Control defined to flow from • Deemed international transactions ownership, board seats, decision The Finance Act 2014 provides that with making and contractual arrangements effect from assessment year 2015-16, a –– Cross media ownership rules to be transaction entered into by a taxpayer with promulgated keeping in mind factors a resident unrelated third party would be such as news and current affairs genre deemed to be an international transaction, as a product market, television and if the transaction is pursuant to a prior print to be considered as relevant agreement between the third party and segments in the product market, the AE of the taxpayer; or the terms of the manner of computing market and transaction are determined in substance market share –– Political bodies, government by the AE. • Levy of service tax on online media departments or ministries to be barred advertisement • Range concept from entry into broadcasting and TV channel distribution sectors The Finance Act 2014 introduced service The Finance Act 2014 has introduced the tax on advertisements in internet websites, range concept alongside the arithmetic • Distribution of TV channels through out-of-home media, film screening in mean and the use of multiple year data while various platform operators theatres, commercial publications and carrying out comparability analysis, but TRAI has demarcated the roles and aerial advertising. However, constitutional detailed rules in this regard are still awaited. responsibilities that can be assigned validity of such charge of service tax by the broadcasters to their authorised may be challenged given that only state distribution agencies for the distribution governments have the power to levy General regulatory developments of TV channels to various platform taxes on advertisements other than • Proposal to liberalise FDI caps operators, wherein such authorised advertisements in newspapers and distribution agents cannot change the advertisements broadcast by radio The proposal notifying increase in FDI composition of the bouquet formed by or television. caps in carriage services to 100% (from the existing 74%) and uplinking news the broadcaster and bundle bouquet or channel and FM Radio to 49% (from channels of the broadcaster with those of existing 26%) is still pending approval of other broadcasters. However, broadcasting the government. companies belonging to the same group can bundle their channels.
India Entertainment and Media Outlook 2014 69 • Monopoly or market dominance in broadcaster shall carry in its programme instalment of 15% shall be effective from 1 cable TV services advertisements exceeding 12 minutes April 2014 and the second instalment for the TRAI has issued a recommendation paper in a clock hour. Petitions were filed by remaining inflation shall be made effective on means to control the monopoly or stakeholders against this TRAI regulation. from 1 January 2015. market dominance in cable TV services. Based on Supreme Court ruling suggesting Some of the recommendations include the that TDSAT has no jurisdiction to hear • Directions to MSOs with respect following: cases challenging the regulation framed to billing by TRAI, TDSAT had dismissed these –– The state to be considered as the To protect the interests of consumers, petitions in December 2013. However, in relevant market TRAI has issued directions to MSOs to March 2014, the Delhi HC has provided –– Market dominance to be determined offer cable TV services to subscribers interim relief to the stakeholders by on the basis of market share in terms of on both prepaid and post-paid payment issuing an interim stay on TRAI’s ad-cap the number of active subscribers options. Also, it is mandated to provide regulations. –– Any M&A among MSOs or between itemised bill indicating price of channels or bouquet of channels along with the MSO and LCO in a relevant market to • Plea by the Supreme Court to regulate require prior approval of regulator name of channels in the bouquet, charges content on TV channels for STBs, charges for value-added service, • DTH tariff regulations The Supreme Court has issued notice details of taxes, etc. TRAI has issued a tariff order mandating to the government and Press Council of the DTH operator to provide a standard India (PCI) for setting up an independent • Issues related to new DTH licences and tariff package for customer premises mechanism to regulate content of migration of existing licences equipment. The DTH operator shall give television channels. The court has sought TRAI has released the following customers an option to acquire customer response from MIB and law ministry recommendations: alleging that misleading and superstitious premises equipment either through an –– Period of the licence to be increased contents were being broadcast by the outright purchase, a hire purchase or from 10 to 20 years, renewable by 10 channels and there is no regulatory body on rental basis. Also, with effect from years at a time to oversee it. 1 January 2014, multi-system and DTH –– The existing licence fee to be reduced operators will have to ensure that a-la- • Revision in tariff ceilings for cable TV from 10% of the gross revenue (GR) to carte rate of a pay channel should not be 8% of adjusted gross revenue (AGR) TRAI has revised the charges payable by a more than twice the price at which it is –– Uniformity in the policy on cross- subscriber to the LCO or MSO in Non-CAS offered wholesale. TRAI has also said that holding or ‘control’ between areas to an overall 27.5% inflation linked a-la-carte rate of pay channels shall also broadcasters and distribution platform hike. TRAI has clarified that this hike not exceed three times the ascribed value operators (DPOs) of the pay channel in the bouquet. should be implemented in two phases. First
• The Cinematograph Bill 2013 The Ministry of Information and Broadcasting (MIB) has introduced The Cinematograph Bill 2013, to provide for the certification of cinematograph films and for matters incidental thereto. Essentially, the bill restricts any person from exhibiting or causing the exhibition of any film or any part thereof which has not been certified by the Board or which is deemed to be an uncertified film under the provisions of this Act.
• Regulating advertisements on cable and satellite TV channels In March 2013, TRAI had issued regulations which provided that no
70 PwC –– Broadcasters and DPOs to be separate Radio Print legal entities –– Rationalised and regulated vertical • Migration of FM radio broadcasters • FDI in news media integration to be permitted between from Phase 2 to Phase 3 As per news reports, the government has broadcasters and DPOs, subject to TRAI has recommended, among others, initiated an internal deliberation to consider certain conditions that minimum spacing between channels increasing FDI in print media (news • Regulatory framework for platform should be 400KHz to increase the number segment) from the existing 26% limit. services of channels in each city, with a 15-year the period of permission from the date • The Press and Registration of Books and Cable TV (MSOs in areas covered by DAS of migration. Further, it suggested that Publications Bill, 2013 and MSOs and LCOs elsewhere), DTH, IPTV migration fees be calculated on certain The Press and Registration of Books and and HITS operators operate certain kind specified parameters. Publications Bill, 2013, on being notified, of programming services, which are not would repeal the existing Press and registered with MIB. In light of this, TRAI • Issues related to community radio Registration of Books Act, 1867. Some of has issued a consultation paper inviting stations (CRS) the amendments proposed include the comments on aspects such as definition of TRAI has issued a consultation paper following: such platform services, inviting comments from the stakeholders which services can or cannot be transmitted, –– Definitions of newspapers and on extension or renewal of ‘Grant of should there be any minimum net-worth publications have been revised to include Permission Agreement’ (GOPA) for CRS. requirement for offering such services, reproduction in electronic form. Some of the key issues for consideration whether these services should also be –– The facsimile edition is defined to mean, include the following: subjected to the same criteria as applicable the exact replica (in full or part) of for private satellite TV channels. –– The period of permission and whether original edition of foreign publication so there should be any additional terms far as content is concerned and may not • Tariff issues related to broadcasting and conditions of extension or renewal include title. and cable TV services for commercial of the permission –– Only an entity incorporated and subscribers –– Whether CRS permission holders be registered in India or a citizen of India, TRAI has issued a tariff order relating permitted to carry the news bulletins of may bring out a publication. to broadcasting and cable TV services All India Radio –– Publications may lose registration if they by commercial subscribers wherein –– In view of the availability of alternative carry any paid news. commercial establishments, who do not revenue or funding options, whether specifically charge their clients or guests there is any reason to increase the –– A specific appellate authority would for such services, should be treated like duration of advertisement beyond the be constituted for entertaining appeals ordinary subscribers and charged on five minutes per hour limitation against the Press Registrar General. per television basis. However, where commercial establishments specifically charge their clients or guests, the tariff can be as mutually agreed between the broadcaster and the commercial subscriber.
• Digitisation of cable TV services Based on news reports, the government has decided to delay the digitisation deadline by a full year. Earlier, Phase 3 covering all urban areas (municipal corporations/municipalities) were scheduled to be digitised by 30 September, 2014 and Phase – IV covering the rest of India by 31 December 2015.
India Entertainment and Media Outlook 2014 71 References
• PwC Global Entertainment and Media Outlook: 2014-2018, www.pwc.com/outlook • Ministry of Information and Broadcasting, India • Telecom Regulatory Authority of India • Department of Telecommunications, Government of India • Census of India 2001 and 2011 • Industry articles and reports; industry discussions • Company annual reports
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