18 Balaji Telefilms Limited Annual Report 2012-13 MANAGEMENT DISCUSSION & ANALYSIS INDUSTRY REVIEW INDIAN ECONOMY The global economy faced another challenging year in 2012 as it continued to recover slowly following the global financial crisis of 2008. Slow US economic recovery, European sovereign debt crisis, moderating growth in China and other emerging economies continued to hold back the global GDP growth rates. As per a World Bank report ‘Global Economic Prospects’ released in January 2013, global economic growth was subdued at 2.3% in 2012. It is expected to remain flat in 2013 followed by a gradual increase to 3.1% and 3.3% in 2014 and 2015, respectively. 19 In addition to the weak global also likely in the global economy digital production techniques. New scenario, the Indian economy faced in 2013, prospects for the Indian content distribution platforms such as several internal macro-economic economy look better and real GDP broadband and digital cinema, direct- challenges such as high fiscal growth is expected to be in the range to-home (DTH) and digital cable deficit, large current account deficit, of 6.1% to 6.7% in FY2013 - 14. broadcasting, sophisticated electronic significant rupee depreciation, high devices etc. have resulted in the inflation, high interest rates and INDIAN MEDIA & emergence of new business models consequent slowdown in core sectors and revenue streams in the industry. as well as corporate and infrastructure ENTERTAINMENT Further, an increasing penetration of investments. The Indian GDP thus INDUSTRY multiplexes and entry of domestic as grew at only 5% in FY2012-13, the The Indian M&E industry, one of the well as international corporate houses lowest in the last decade. The Indian fastest growing industries in the across the M&E value chain are driving Media & Entertainment (M&E) industry world, is currently at an inflection growth in the industry. too was affected by the economic point where “Content Digitisation” slowdown, resulting in reductions has become the industry norm. in advertising budgets across all the Every segment across the industry sectors. However, the recent policy — television, radio, advertisement, measures taken by the government films and print — is gradually are expected to pave the way for transitioning towards digitisation. A a gradual recovery for the Indian push for digitisation in India has led economy. With some improvement to the development of sophisticated 20 Balaji Telefilms Limited Annual Report 2012-13 SIZE OF INDIA’S MEDIA & ENTERTAINMENT INDUSTRY 2011 2012 YOY% 2013P 2014P 2015P 2016P 2017P CAGR 2012 VS. (2012- 2011 17) TV 329,000 370,100 12.50% 419,900 501,400 607,400 725,000 847,600 18.00% PRINT 208,800 224,100 7.30% 241,100 261,400 285,600 311,200 340,200 8.70% FILMS 92,900 112,400 21.00% 122,400 138,300 153,600 171,700 193,300 11.50% RADIO 11,500 12,700 10.40% 14,000 15,400 18,700 22,700 27,400 16.60% MUSIC 9,000 10,600 18.10% 11,600 13,100 15,300 18,300 22,500 16.20% OOH 17,800 18,200 2.40% 19,300 21,100 23,000 25,000 27,300 8.40% Animation 31,000 35,300 13.90% 40,500 46,800 54,300 63,100 73,400 15.80% AND VFX GAMING 13,000 15,300 17.70% 20,100 23,800 30,900 36,200 42,100 22.40% Digital 15,400 21,700 40.90% 28,300 37,100 48,900 65,100 87,200 32.10% ADVERTISING TOTAL 728,000 821,000 12.60% 917,000 1,059,000 1,238,000 1,438,000 1,661,000 15.20% Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2013; All Figures in Rs. Million The Indian M&E industry grew by players and networks were able to is further expected to reduce carriage 12.6% from ` 728 billion in 2011 to handle the tough conditions better fees, building a case for the launch ` 821 billion in 2012. With the benefits than small and niche players. Further, of niche channels and investment of digitisation, continued growth of the television industry also witnessed in content for existing channels. regional media, upcoming elections, consolidation and exits, paving the Developments and refinements in strength in the film sector and the way for a more sustainable, profitable viewership measurement systems fast-increasing new media businesses, future. Despite the current challenges, will affect the way advertising is the industry is estimated to achieve a the long-term outlook remains distributed among channels. growth rate of 11.8% in 2013 to touch positive as India continues to remain ` 917 billion. The sector is projected a key strategic market for leading The television industry in India is to grow at a healthy CAGR of 15.2% to international broadcasters. estimated at ` 370 billion in 2012, touch ` 1,661 billion by 2017. and is expected to grow at a CAGR The television industry saw a major of 18% during 2012-2017, to touch INDIAN TELEVISION regulation passed in 2012, requiring ` 848 billion by 2017. Aided by 100% digitisation of television content digitisation and the consequent INDUSTRY and broadcasting, which is expected increase in average revenue per user, The Indian television industry to significantly change the entire the share of subscription revenue to witnessed the effects of an economic dynamics of the television business. the total industry revenue is expected slowdown with companies holding Digitisation of cable is expected to to increase from 66% in 2012 to 72% back capital and cutting advertisement bring in transparency and increase in 2017. budgets in the backdrop of subdued subscription revenues for Multi System economic environment. Leading Operators (MSOs) and broadcasters. It MANAGEMENT DISCUSSION & ANALYSIS 21 REVENUE BREAK-UP OF INDIA’S TV INDUSTRY 900 848 800 725 700 240 607 600 207 501 500 180 420 400 370 157 Billion 329 ` 297 139 300 241 257 125 607 In 211 103 116 518 200 88 427 82 345 100 194 214 245 281 140 158 169 - 2007 2008 2009 2010 2011 2012E 2013P 2014P 2015P 2016P 2017P SUBSCRIPTION REVENUE ADVERTISEMENT REVENUE Source : KPMG in India Analysis, Industry discussions conducted by KPMG in India 22 Balaji Telefilms Limited Annual Report 2012-13 INDIAN FILM INDUSTRY: BREAK-UP OF REVENUES FROM MOVIES The film making business has undergone several changes over 120.0 In ` Billion recent times. Production houses are 6.2 increasingly opting for co-production 12.6 as the preferred business model going 100.0 5.4 1.7 5.4 forward. They have been collaborating 10.5 with local regional players as well as 80.0 2.0 Ancillary Revenue international studios in order to make 6.9 Cable & Satellite Rights inroads into newer markets. In addition 60.0 85.1 to this, digital distribution has resulted Home Video in a gradual shift from releasing films 40.0 Overseas Theatre with physical prints to the digital 68.8 Domestic Theatre format. The share of digital format has 20.0 increased from around 50% in 2010 to around 80-90% in 2012, enabling films 0.0 to broaden their reach and reduce the 2011 2012 distribution timeframe. Source : KPMG in India Analysis Cinema theatres have continued to is made possible by leveraging the been reduced by cooperation from remain the dominant medium of film digital technology which facilitates the government and internet service exhibition. However, the landscape the movie watching experience at providers by blocking websites is now undergoing drastic changes. an affordable cost and in a secure providing pirated content. However, While there has been a significant manner. a complete ban on piracy will come increase in the number of multiplexes only from a change in mindset of the in India, the number of single screen Piracy continues to remain a concern consumers. theatres continues to dwindle with for the Indian film industry. As per around 97 single screens shutting the Motion Pictures Distributors The Indian film industry displayed down in 2012 alone. Further, the Association (MPDA), India is among strong performance in 2012. Domestic industry has overall achieved 77% the top nations in the world in terms theatres will continue to be the digitisation of screens in 2012 and of video piracy. It witnessed a with major growth driver for the industry expects to achieve 100% digitisation US$ 1.1 billion loss due to piracy in while ancillary revenue streams will by 2013. While the domestic theatre 2012, an increase of 15.8% from that also grow rapidly albeit off a smaller segment continued to dominate, in 2008. The decrease in theatre- base. The industry would continue to digital distribution played a significant to-television timeframe from more excite India’s large population base of role in increasing the reach of the than six months to less than three more than one billion viewers and is industry penetrating further into Tier months at present helped restrict the expected to be worth ` 193.3 billion II and Tier III markets entertaining physical medium of piracy to some by 2017. the under-served population. All this extent. Further, online piracy has also Source: FICCI-KPMG Indian Media and Entertainment Industry Report 2013 MANAGEMENT DISCUSSION & ANALYSIS 23 C OMPANY REVIEW OUR TELEVISION BUSINESS TELEVISION ENTERTAINMENT HAS BEEN OUR FOUNDATION STONE. WE HAVE ESTABLISHED CAPABILITIES TO CREATE NEW AND DIVERSE STORY LINES AND PROVEN OUR ABILITIES IN GAUGING THE PULSE OF THE MASSES. MOST OF OUR PROGRAMMES ARE AIRED AT PRIME-TIME AND ARE WELL ACCEPTED BY OUR VIEWERS, REFLECTED BY RISING TRPs. REGION-WISE BREAK-UP OF OUR TV SHOWS SERIAL CHANNEL TIME SLOT DAYS COMMISSIONED SHOWS Hindi Bade Achhe Lagte Hain Sony TV 22.30-23.00 Monday to Thursday Kya Huaa Tera Vaada* Sony TV 22.00-22.30 Monday to Thursday Parichay* Colors 22.30-23.00 Monday to Friday Pavitra Rishta Zee TV 21.00-21.30 Monday to Friday Ek Thi Naayika* Life OK 23.00-24.00 Saturday & Sunday Savdhaan India Life OK 22.30-23.30 Friday Gumraah Season 2* Channel [V] 17.30-18.00 Monday to Thursday The Serial* Channel [V] 17.30-18.00 Monday to Thursday Marathi Arundhati* Zee Marathi 19.30-20.00 Monday to Saturday Mission Dosti.