ENTERTAINMENT November 2010 ENTERTAINMENT November 2010
Contents
Advantage India
Market overview
Industry Infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
2 ADVANTAGE INDIA Entertainment November 2010
Advantage India - capital Increasing investments by the private sector and foreign media and entertainment (M&E) majors have enhanced India‘s entertainment infrastructure such as new multiplexes and digitization of TV distribution and theatre infrastructure.
• Digitisation and technological advancements Improving across the value chain are improving the quality • Producing more than 1,000 films entertainment of content and reach, and also leading to new annually, India is the largest infrastructure business models. For example rural DTH producer of films in the world. penetration is three times higher than in urban Digital High • There are more than 500 TV areas, with digital TV penetration rate of 34% in revolution production channels in the country, requiring rural areas as compared to 12% in urban areas volumes 30 hours of fresh programming per week. • A liberalised foreign investment regime Advantage and other regulatory initiatives are resulting in a conducive business India environment for Indian M&E. Large and under • FDI upto 100 per cent is allowed in film Liberal penetrated • In 2008, there were as many as 3.3 billion and advertising, TV broadcasting (except government consumer theatre admissions in India. news) and 26 per cent in newspaper policies base • With the TV segment reaching as many as publishing. Favourable 134 million households in the country, • Migration from fixed to revenue sharing demographics India is one of the largest TV markets in license fee regime in radio segment and the world. roll out of digital cable will provide further impetus to industry‘s growth.
• India is among the world‘s youngest nations, as more than 52 per cent of its one billion-plus population is less than 25 years of age. • This age group, with increasing disposable income levels, has given impetus to the entertainment industry. Sources: ―Indian entertainment down South: from script to screen,‖ Ernst & Young, 2009; EY M&E NewsReel, Ernst & Young, 2009; ―India to have 100-mn cable homes this year,‖ Business Standard¸ 4 January 2010; ―Tune-in to India‘s entertainment economy: From emerging to surging,‖ Ernst & Young, 2008; ―Tune into emerging entertainment markets- spotlight on BRIC,‖ Ernst & Young, 2010; ―Rural India's swift digital TV embrace,‖ Business Standard, 4 December 2010. 3 ENTERTAINMENT November 2010
Contents
Advantage India
Market overview
Industry Infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
4 MARKET OVERVIEW Entertainment November 2010
Market overview … (1/2) The Indian entertainment market continues to grow at a healthy pace.
14 Growth in the entertainment industry 18% 16% 16% 12 14% 0.29 15% 0.25 0.30 0.24 14% 10 0.22 0.25 13%
12% 0.19 2.70 12% Y
0.20 - 0.20 o
0.14 2.45 - 8 0.12 0.18 % y growth 0.17 0.16 10% 0.07 0.15 2.20
US$ billion US$ 0.14 0.04 0.16 1.92 6 0.11 2.20 8% 0.16 1.97 1.69 6% 4 8.04 7.10 6.21 4% 5.06 5.44 2 3.90 4.53 2% 2% 0 0% 2006 2007 2008 2009 2010 2011E 2012E
Television Films Music Radio Online advertising Industry growth rate
• The entertainment industry in India is estimated at about US$ 9.4 billion (INR 431.4 billion) in revenues in CY2010, which is expected to grow at a rate of 14.1 per cent to reach revenues of US$ 10.7 billion (INR 492.4 billion) in 2011.
Sources: Ernst & Young analysis; ―Tune-in to India‘s entertainment economy: From emerging to surging,‖ Ernst & Young, 2008. 5 MARKET OVERVIEW Entertainment November 2010
Market overview … (2/2)
Entertainment
TV Radio Films Music New media
• India is home to a • The FM radio • India is the • Film-based music • Increasing very diverse TV segment is one of largest dominates music sales broadband market, characterised the fastest- producers of in India. penetration is by multiple genres growing films in the • As in most global expected to attract and languages and entertainment world, with more markets, digital sales more content online. more than 500 segments in India. than 1,000 films of music are • As the second- channels vying for • Revenues in this released annually. becoming the norm in largest mobile viewer attention. segment have • In 2008, close to India. telephony market in • The country is home almost doubled 3.3 billion movie • Music on internet and the world, India has to 134 million TV since 2006. tickets were sold through mobile provided a new households. A lot of • There are close — the highest phones is the platform for content foreign investments to 248 FM radio number for any emerging business delivery. are flowing into it. stations in India. country. model for music companies
Sources: Ernst & Young analysis; M&E NewsReel, Ernst & Young, 2009; ―India to have 100-mn cable homes this year,‖ Business Standard¸ 4 January 2010.
6 MARKET OVERVIEW Entertainment November 2010
Domestic demand … (1/3)
• In 2010, the industry is estimated to generate revenues worth US$ 6.2 billion (INR 298 billion), of which around 65 per cent was contributed by subscription, while the rest came from advertising. • India is home to 134 million TV households, of which 90 million are served by cable and satellite TV and is expected to reach 100 million in 2010. • As of March 2010, as many as 503 TV channels were registered with the Ministry of Information and TV Broadcasting (MIB) and more channels are being added across genres. • The adoption of digital distribution platforms — direct-to-home (DTH) and digital cable — is helping TV distribution become more organised. From about two million digital TV households in 2006, the platform currently caters to about 15 to 17 million digital subscribers. • Regional TV is becoming prominent and several regional-language TV networks have emerged to leverage the potential of regional markets, across key genres.
• In 2010, the industry is estimated to generate revenues of US$ 2.2 billion (INR 105.5 billion). • The industry remains dependent on domestic theatrical collections, which generate 70 to 80 per cent of a film‘s revenue. • More than 1,000 films are produced annually in more than 20 languages. • Regional-language cinema is an integral part of the Indian film industry. The four South Indian Films languages of Telugu, Tamil, Kannada and Malayalam cumulatively account for 60 per cent of all movies produced in India. • There are presently around 850 multiplex screens in India, and this is estimated to grow to 1,600 screens by 2013. • Digital cinema is helping film producers reduce cost, release more prints and combat piracy. A digital print cost around one tenth of the physical print. Corporatisation and globalisation of Indian film companies is driving the growth.
Sources: Ernst & Young analysis, ―Tune-in to India‘s entertainment economy: From emerging to surging,‖ Ernst & Young, 2008; ―India to have 100-mn cable homes this year,‖ Business Standard¸ 4 January 2010; ―Tune into emerging entertainment markets- spotlight on BRIC,‖ Ernst & Young, 2010; TP report on Media and Entertainment, Ernst & Young, September 2010; 7 MARKET OVERVIEW Entertainment November 2010
Domestic demand … (2/3)
• In 2010, the industry has been estimated at US$ 0.20 billion (INR 9.4 billion), GoI-controlled All India Radio (AIR) and 37 private FM radio companies that operate close to 248 FM radio stations in India cater to this segment. • The yet-to-be-launched Phase-III FM radio licensing policy is likely to give further impetus to the FM Radio radio industry and open up licences for close to 700 stations and raise the FDI limit from current 20 per cent to 26 per cent. • There is a growing advertiser interest in radio amongst the country level and the local advertisers. • International radio players such as Radio Netherlands Worldwide (RNW) and BBC have made content-syndication deals with FM radio stations in India.
• The music industry is estimated to generate revenues of US$ 0.20 billion (INR 9.4 billion) in 2010. • Distribution via digital formats on the Internet and through mobile phones is the emerging business model for music companies. • Music sold via mobiles as ringtones, caller-back ringtones (CBRTs) and downloads of complete songs contribute 25 to 35 per cent of music companies‘ revenues. • Business models built around mobile music such as track downloads and on-demand streaming are Music expected to emerge in the near future and gain further impetus with the rollout of 3G services. • Music sales in physical formats are affected and music companies are repositioning their products to counter this decline by introducing low-cost, MP3-based compact discs (CDs) for low-end customers and premium packaged CDs for high-end customers. It is also being sold on memory cards and pen drives. • By December 2011, the industry is expected to generate revenues of US$ 0.26 billion (INR 12.1 billion), exhibiting growth of 26.8 per cent over 2010.
Sources: Ernst & Young analysis; ―Tune-in to India‘s entertainment economy: From emerging to surging,‖ Ernst & Young, 2008. ―FM-III 1st phase to auction 160 stations,‖ The Financial Express website, http://www.financialexpress.com/news/fmiii-1st-phase-to-auction-160- stations/674181/, accessed 11 November 2010; ―Tune into emerging entertainment markets- spotlight on BRIC,‖ Ernst & Young, 2010;
8 MARKET OVERVIEW Entertainment November 2010
Domestic demand … (3/3)
• In India, the trend to access videos through the Internet and mobile phones is fast gathering momentum. • Almost every major M&E player now has a strategy to host its content on new media platforms. Consumers can now access entertainment content online or on their mobile devices. • Online advertising is one of the fastest-growing advertising markets in India. This platform is witnessing increased interest from advertisers, since advertising through this medium can be targeted New media as well as measured. • The online advertising industry in India is estimated at US$ 0.19 billion (INR 9 billion) in 2010, in 2011 this segment is expected to generate revenues of US$ 0.25 billion (INR 11.3 billion), growing at 25.6 per cent over the previous year. • The impending rollout of 3G and Wimax services is expected to open up the market for content on mobile phones and improve accessibility for laptop user. • Media and entertainment companies can expect to monetise content through subscription in addition to advertisement revenues.
Sources: Ernst & Young analysis; ―Tune-in to India‘s entertainment economy: From emerging to surging,‖ Ernst & Young, 2008. ―Tune into emerging entertainment markets- spotlight on BRIC,‖ Ernst & Young, 2010; TP report on Media and Entertainment, Ernst & Young, September 2010;
9 MARKET OVERVIEW Entertainment November 2010
International demand
• Indian films are increasingly gaining popularity among international audiences. Indian producers are releasing more prints to reach wider international audiences. As a result, collection from the overseas market is improving. The recent Hindi blockbuster, 3 Idiots, was released with an unprecedented 344 prints.
• Many Indian TV channels are available overseas on major TV distribution platforms.
Sources: Ernst & Young analysis; ―3 Idiots makes b‘wood history, ―Business Standard, 5 January 2010.
10 MARKET OVERVIEW Entertainment November 2010
Growth drivers
• Favourable demographics Apart from being home to the second-largest population in the world, India is among the world‘s youngest nations, with more than 52 per cent of its population below 25 years of age.
• Increase in disposable income With consumers‘ disposable income rising, spending on leisure and entertainment has increased.
• Changing consumer landscape Driven by changing consumption patterns there is a growth in consumer spending on leisure and entertainment which is expected to accelerate growth in advertising expenditure.
• Urbanisation The proliferation of organised retail outlets and malls is facilitating the rapid expansion of multiplexes across the country.
• Supportive regulatory framework FDI is permitted in almost all segments of the industry, with 100 per cent FDI permitted in up-linking TV channels (except news) and the film and music segments.
11 MARKET OVERVIEW Entertainment November 2010
Growth drivers
• Digitisation Digitisation and technological advancements across the value chain are improving the quality of content and reach. Digital distribution of content is making it possible to distribute it across many platforms and also resulted in new revenue models.
• Globalisation of Indian companies Indian companies are expanding their international footprint by acquiring theatre chains and production studios in the US and Europe and partnering with international studios to produce Hollywood films.
• Corporatisation and easier access to capital The M&E industry in India has witnessed increased corporatisation in sectors such as filmed entertainment. The industry is now able to attract funds from various organised sources such as private equity, media funds and IPOs both in India and abroad.
Sources: ―Tune-in to India‘s entertainment economy: From emerging to surging,‖ Ernst & Young, 2008; ―India‘s digital revolution: impact on film and television sectors,‖ Ernst & Young, 2007; ―Tune into emerging entertainment markets- spotlight on BRIC,‖ Ernst & Young, 2010; TP report on Media and Entertainment, Ernst & Young, September 2010;
12 MARKET OVERVIEW Entertainment November 2010
Key trends
• Content is becoming independent of platforms. For instance, a film typically made for theatrical Decoupling of releases is now cashing in on revenues from multiple platforms such as satellite, home video, mobile and the Internet. content from • Digitisation enables decoupling. The digitisation of content makes it possible to distribute it across platforms many platforms, while the digitisation of platforms enables interactivity and the aggregation of many types of content.
• Large Indian media conglomerates are increasingly shifting from a one-platform business model to a Business model multi-platform one. redefinition • Companies are becoming integrated media players with interests across various M&E segments such as TV, film and new media.
• An increasing number of global players have made investments across segments, be it TV, radio, film or the Internet. Hollywood studios are entering into co- production deals with Indian Globalisation companies. • The Indian M&E industry is becoming increasingly popular among international audiences.
Relatively easier • Previously, the industry was dependent on only a handful of private financiers. However, it is now access to capital raising funds through private equity, media funds and IPOs both in India and abroad.
13 MARKET OVERVIEW Entertainment November 2010
Key trends
• Media companies are innovating content to suit changing consumption preferences of small town India as regionalisation is becoming a significant factors driving growth with growing increase in literacy, consumption and disposable incomes in tier 2 & 3 cities. Regionalisation • Demand for regional content is growing, advertisers are also increasing focus on rural markets. National broadcasters are adding regional channels to their portfolios, regional cinema is growing and international film studios are tapping regional markets in India.
Changing • Consumer preferences are shifting towards international programming formats. There is an opportunity for global production houses to localise their content for the Indian audiences. consumer • There is a demand for youth oriented content and niche and regional content. Reality shows are preferences also gaining popularity among the viewers.
Sources: ―Tune-in to India‘s entertainment economy: From emerging to surging,‖ Ernst & Young, 2008; ―What‘s next? for Indian media and entertainment,‖ Ernst & Young, 2009; ―Tune into emerging entertainment markets- spotlight on BRIC,‖ Ernst & Young, 2010; TP report on Media and Entertainment, Ernst & Young, September 2010;
14 MARKET OVERVIEW Entertainment November 2010
Key players — TV … (1/2)
Company Parent Channels Colors: Hindi GEC* A 50/50 joint MTV — youth channel venture between Nick — kids channel Viacom 18 Viacom Inc and the Studio18- Motion picture brand that produces, acquires and distributes Hindi Network18 Group films VH1— international music and lifestyle channel Star Plus — Hindi GEC Star World — English entertainment channel Star One — Hindi entertainment channel Star News Corporation Channel V — Music channel Star News — Hindi news channel Star also has other channels in the entertainment, sports and regional genres. Zee TV— Hindi GEC Zee Cinema — Hindi movie channel Zee News — Hindi news channel Zee Entertainment Essel Group Zee Café — English channel Enterprise Ltd (ZEEL) ETC — music channel Ten Sports – Sports channel It also has channels in the entertainment, sports and regional genres.
*GEC: General entertainment channel
15 MARKET OVERVIEW Entertainment November 2010
Key players — TV … (2/2)
Company Parent Channels Multi Screen Media Sony Entertainment Television: Hindi GEC Sony Pictures Private Ltd ( a MAX — movies and special events channel Television subsidiary of Sony SAB — Hindi entertainment channel International (SPTI) pictures PIX — Hollywood movie channel entertainment)
NDTV Imagine — Hindi GEC Time Warner has NDTV 24x7 — English news channel acquired a 92 per cent New Delhi Television NDTV India — Hindi news channel stake in NDTV Imagine Limited (NDTV) NDTV Good Times — lifestyle channel through its subsidiary, NDTV Lumiere — world movies Turner International. NDTV Profit – Business channel
UTV World Movies — international movie channel United Television Disney has a strategic UTV Movies — Hindi movie channel (UTV) Software stake in UTV Software UTV Bindass — youth channel Communications Ltd Communications Ltd UTV Action — genre-specific movie channel
*GEC: General entertainment channel **GRP: Gross rating points
Sources: Viacom18 website, www.viacom18.com, accessed 11 November 2010; ―Channels,‖ Star website, www.startv.in/channels_collection.asp, accessed 11 November 2010; ―Brands,‖ ZEE Entertainment website, www.zeetelevision.com/html/AboutZee.asp?Content=3, accessed 11 November 2010.
Sources: ―About Sony Entertainment Television,‖ Sony Entertainment Television website, www.setindia.com/about_set.php, accessed 11 November 2010; ―About us,‖ UTV website, www.utvnet.com/about-us/, accessed 11 November 2010,; ―The company,‖ NDTV website, www.ndtv.com, accessed 11 November 2010. 16 MARKET OVERVIEW Entertainment November 2010
Key players — films … (1/2)
Company Parent Portfolio Yash Raj Films is involved in the production of Hindi movies and home entertainment — including marketing and distributing DVDs and VCDs — Yash Raj Films — music, film distribution and the creation of ad films, music videos, music albums, TV software and documentaries. It has it‘s own past production facilities. The company‘s film services include motion picture processing and digital Reliance Anil intermediate (DI), digital mastering, film restoration and studio and Reliance MediaWorks Ltd Dhirubhai Ambani equipment rentals. It also operates as a media business process outsourcing Group (BPO) entity. The company is engaged in the production of Hindi movies, regional movies, UTV Software animation films, international productions and co-productions. UTV Motion Pictures Communications It has an exclusive distribution arrangement with The Walt Disney Company Ltd for India, which holds a strategic stake in UTV. It is also engaged in broadcasting, games content, interactive and TV content.
17 MARKET OVERVIEW Entertainment November 2010
Key players — films … (2/2)
Company Parent Portfolio PVR Ltd is a cinema exhibition company and has 33 cinemas with 142 screens. PVR Pictures, a subsidiary of the company, is engaged in film production and PVR Ltd — distribution. 40 per cent stake is held by JP Morgan Mauritius Holding Ltd and ICICI Venture in equal proportion. Reliance MediaWorks Ltd has 516 screens across India, the US and Malaysia. It Reliance MediaWorks BIG Cinemas has launched 3D as well as 6D technologies and is expected to also introduce Ltd megaplexes in the country. INOX operates 37 multiplexes and 140 screens across 25 cities. Part of INOX Group It is expanding in various cities, including Kanpur, Visakhapatnam, and subsidiary of INOX Leisure Ltd Bhubaneshwar, Jodhpur and Ahmedabad. Gujarat INOX merged with Calcutta Cine Pvt Ltd (CCPL), which resulted in additional Flurochemicals Ltd access to 9 multiplexes located in Assam and West Bengal.
Sources: ―Motion pictures,‖ UTV website, www.utvnet.com/motion-pictures/, accessed 16 November 2010; ―About us,‖ INOX website, http://www.inoxmovies.com/corporate_about_us.aspx , accessed 16 November 2010; ―About us,‖ BIG Cinemas website, www.bigcinemas.com/in/aboutus.asp, accessed 16 November 2010; :About us,‖ ―Yash Raj Films website, www.yashrajfilms.com/AboutUs/CompanyInfo.aspx?SectionCode=PRO001, accessed 16 November 2010; ―About us,‖ PVR website, www.pvrcinemas.com/page?page=about, accessed 16 November 2010; ―About us,‖ RelianceMediaworks website, www.reliancemediaworks.com/bigmediaworks/aboutus.html, accessed 16 November 2010. Note: This is an indicative list of companies.
18 MARKET OVERVIEW Entertainment November 2010
Key players — radio
Company Parent company Major brands Bennett, Coleman & Company Radio Mirchi has a presence in 32 cities across India, including Entertainment Network Ltd (BCCL) and Times Mumbai, Delhi, Kolkata, Chennai, Pune, Indore, Ahmedabad, (India) Limited (ENIL) Infotainment Media Ltd Bengaluru, Hyderabad, Jaipur, Patna and Jalandhar. BIG FM has a 45-station network covering 45 cities, 1,000 towns and Big FM Reliance Media World Ltd 50,000 villages. South Asia FM Ltd Suryan FM has a presence in seven cities in Tamil Nadu, while Red Sun TV Network (SAFL) FM has a presence across 37 cities in the country.
Sources: ―About us,‖ ENIL website, www.enil.co.in/profile.html, accessed 16 November 2010; ―FM Radio,‖ SUN TV Network website, www.sunnetwork.org/FM/default.htm, accessed 16 November 2010; ―About us,‖ BIG 92.7 FM website, www.big927fm.com/Content.php?Id=3, accessed 16 November 2010.
19 MARKET OVERVIEW Entertainment November 2010
Key players — music
Company Portfolio
The company has rights to more than 2,000 video and 35,000 audio titles, comprising nearly 24,000 hours of music T-Series software.
Venus holds audio rights for various regional language movies, including Hindi, Marathi, Bhojpuri and Bengali. It also holds video, satellite and cable rights. Venus The company is also involved in acquiring and creating re-recording rights, film presentations, sound recording and film production. This company owns a library of about 48,000 albums and 300,000 songs in 14 languages. Saregama The company is also involved in home videos, films, TV software, digital distribution of video and audio content, event management, artist management and theatrical film distribution.
The company holds 3,500 titles and the soundtrack copyright of about 50 Hindi movies and has the highest number Tips of platinum and gold discs.
Sources: ―About us,‖ T-series website, www.tseries.com/Aboutus.aspx, accessed 16 November 2010; ―About us,‖ Tips Industries website, www.tips.in/aboutus/index.htm, accessed 16 November 2010; ―About us,‖ Venus Records website, www.venusgroup.org/newaudio/about_us.html, accessed 16 November 2010; ―Entertainment,‖ RPG website, www.rpggroup.com/saregama.html, accessed 16 November 2010.
20 ENTERTAINMENT November 2010
Contents
Advantage India
Market overview
Industry Infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
21 INDUSTRY INFRASTRUCTURE Entertainment November 2010
Industry infrastructure
Investments from the private sector and foreign M&E majors primarily fund India‘s entertainment infrastructure. Government-owned enterprises, too, have developed extensive infrastructure to provide entertainment services to the majority of India‘s population.
Segment Infrastructure Theatre infrastructure in the form of multiplexes has been witnessing rapid developments over the past Films decade. Currently, there are more than 10,000 operational theatre screens in India, of which about 850 are multiplexes. The industry has also added state-of-the-art studios and post-production facilities. There are 503 registered TV channels beaming into India, supported by the robust infrastructure of modern TV broadcasting studios and other support infrastructure. In addition, the public broadcaster, Doordarshan (DD), has a countrywide infrastructure of 66 studios and 1,135 transmitters for terrestrial broadcasting. In addition to its terrestrial network, DD operates a free-to-air DTH service — DD Direct Plus. Private players have built a vast TV distribution network spread across the country. There are around 60,000 TV distribution local cable operators, 6,000 multi-system operators, six private subscription-based DTH operators, and two head-end-in-the-sky (HITS) licence holders. Primarily, state-owned telecom companies MTNL and BSNL have laid out broadband infrastructure in the New media form of optic-fibre cables across cities and villages. Private-sector players such as Reliance Communications, and Bharti Airtel, too, have built robust broadband infrastructure across major Indian cities and towns.
Sources: ―Doordarshan Networks across India,‖ Doordarshan website, www.ddindia.gov.in, accessed 11 November 2010; ―TRAI gets five months to fix non-CAS cable tariffs,‖ Financial Express (India), 19 January 2010.
22 ENTERTAINMENT November 2010
Contents
Advantage India
Market overview
Industry Infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
23 INVESTMENTS Entertainment November 2010
Investments … (1/3)
• The largest deal in the sector was Inox Leisure‘s acquisition of Fame India for US$14.5 million.
• Another important deal was the acquisition of India Book House Pvt Ltd by ACK Media for US$ 4.7 million.
M&A scenario — details Period : January 1, 2010–31 October 2010 Deal type No of deals Inbound 12 Outbound 8 Domestic 17
Sources: Thomson One Banker, accessed 16 November 2010
24 INVESTMENTS Entertainment November 2010
Investments (Major acquisitions) … (2/3)
Announced Deal Target Acquirer Deal Announce date deal value Target name Acquirer type country country (US$ million) Mid-Day Multimedia Domestic ACQ October 15, 2010 40.01 India Jagran Prakashan Ltd India Ltd-Print Zee Entertainment Domestic ACQ September 22, 2010 NA INX Media Pvt Ltd India India Enterprises Asianet Satellite SIDOFI Inbound ACQ September 7, 2010 NA India Mauritius Commun Ltd Communications Getit Infoservices Pvt Astro All Asia Inbound ACQ August 8, 2010 21.76 India Malaysia Ltd Networks PLC Real Global Alva Brothers Domestic ACQ July 30, 2010 NA India India Broadcasting Entertainment Alva Brothers Domestic ACQ July 30, 2010 NA Miditech Pvt Ltd India India Entertainment Turmeric Vision Pvt Astro All Asia Inbound ACQ July 26, 2010 NA India Malaysia Ltd Networks PLC
Domestic ACQ June 16, 2010 NA Bloomberg UTV India Reliance Capital Ltd India Amar Chitra Katha United Inbound ACQ June 16, 2010 4.71 India Investor Group Media Kingdom Komli Media India Pvt Outbound ACQ June 10, 2010 NA PostClick Australia India Ltd United Outbound ACQ May 7, 2010 NA IM Global LLC Reliance Big Ent Pvt Ltd India States Source: Thomson One Banker, accessed 16 November 2010; Note: ACQ:Acquisition; PE: Private equity 25 INVESTMENTS Entertainment November 2010
Investments (Major acquisitions) … (3/3)
Announced Deal Target Acquirer Deal Announce date deal value Target name Acquirer type country country (US$ million) Codemasters United Outbound ACQ April 6, 2010 NA Reliance Big Ent Pvt Ltd India Software Co Ltd Kingdom India Book House Domestic ACQ March 24, 2010 NA India Amar Chitra Katha Media India Pvt Ltd Domestic ACQ February 5, 2010 2.75 Fame India Ltd India Inox Leisure Ltd India Domestic ACQ February 3, 2010 14.46 Fame India Ltd India Inox Leisure Ltd India Maya Entertainment Domestic ACQ January 28, 2010 16.43 India Aptech Ltd India Ltd Next Gen Publishing Shapoorji Pallonji & Co Domestic ACQ January 20, 2010 NA India India Ltd Ltd Taj Television Ltd Utd Arab Zee Entertainment Outbound ACQ January 18, 2010 44.15 India Mauritius Em Enterprises United Outbound ACQ January 7, 2010 NA i lab(UK)Ltd Reliance MediaWorks Ltd India Kingdom
Source: Thomson One Banker, accessed 16 November 2010; Note: ACQ:Acquisition; PE: Private equity
26 ENTERTAINMENT November 2010
Contents
Advantage India
Market overview
Industry Infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
27 POLICY AND REGULATORY FRAMEWORK Entertainment November 2010
Policy and regulatory framework TV • In 2004, the Telecom Regulatory Authority of India (TRAI) was appointed as a regulator for the TV industry.
• Up to100 per cent FDI is permitted in TV channels.
• The foreign investment limit in the direct-to-home (DTH) business is 49 per cent, of which the FDI component limit is 20 per cent. The cable networks business has a 49 per cent foreign investment limit.
• TRAI has proposed to raise the FDI limit from 49 per cent to 74 per cent for DTH and national and state level MSOs. The regulatory body also recommended an FDI cap of 74 per cent on IPTV and mobile TV. There is no foreign investment policy on mobile TV at present.
• The rollout of DTH TV licenses and GoI-mandated digital conditional access systems (CAS) initiated the digitisation process. The recently announced Headend-in-the-Sky (HITS) policy which has 74 per cent FDI limit and a concessional customs duty of 5 per cent on importing digital headend equipment is expected to give further impetus to the digitisation process.
• To promote digitisation, the GoI is considering a conditional hike in foreign investment limits for those TV distributors who digitise their networks.
• TRAI has proposed four phase digitisation of cable TV networks by December 2013 and lifting the cap on the number of satellite-based TV channels intended for down-linking or up-linking from India. Sources: ―Tune-in to India‘s entertainment economy: From emerging to surging,‖ Ernst & Young, 2008; ―The Telecommunication (broadcasting and cable) services tariff order 2004 [1 of 2004]‖, TRAI, 15 January 2004; ―Cabinet approves policy to digitise cable TV operations,‖ Mint, 13 November 2009. ―Tune into emerging entertainment markets- spotlight on BRIC,‖ Ernst & Young, 2010; EY M&E Newsreel, August 2010, EY M&E Newsreel, September 2010. 28 POLICY AND REGULATORY FRAMEWORK Entertainment November 2010
Policy and regulatory framework Films • In 2000, the GoI granted industry status to the Indian film industry and permitted FDI of up to 100 per cent in film-related activities.
• Various state governments have also provided entertainment tax exemptions to multiplexes.
• In the Union Budget 2010–11, the GoI announced a rationalisation in the customs duty structure for the import of cinematographic films by charging customs duty only on the actual cost of the film and not on the value of the content.
Radio • Following the opening of FM radio broadcasting to private players in March 2000, the rollout of the second phase of the FM radio licencing policy in 2005 provided a thrust to the sector.
• In radio companies, FDI is limited to 20 per cent of the company‘s paid-up equity capital. With the FM phase 3 policy this limit will be raised to 26 per cent. An increase in foreign investment limits is expected to attract additional growth capital for the industry.
• Political advertisements are now allowed on FM radio stations in India.
• In April 2010, The Cabinet Committee on Infrastructure approved the MIB‘s proposal on the All India Radio (AIR) and Doordarshan‘s digitisation of transmitters and studios, setting aside US$ 191.7 million and US$ 129.2 million, respectively, for the purpose. Sources: ―Tune-in to India‘s entertainment economy: From emerging to surging,‖ Ernst & Young, 2008; ―The Telecommunication (broadcasting and cable) services tariff order 2004 [1 of 2004]‖, TRAI, 15 January 2004; ―Cabinet approves policy to digitise cable TV operations,‖ Mint, 13 November 2009; ―FM-III 1st phase to auction 160 stations,‖ The Financial Express website, http://www.financialexpress.com/news/fmiii-1st-phase-to-auction- 160-stations/674181/, accessed 11 November 2010; ―Tune into emerging entertainment markets- spotlight on BRIC,‖ Ernst & Young, 2010. 29 ENTERTAINMENT November 2010
Contents
Advantage India
Market overview
Industry Infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
30 OPPORTUNITIES Entertainment November 2010
Opportunities … (1/3)
• Rising affluence levels have directly led to increasing levels of consumption across semi-urban and rural towns. According to a study by Ernst & Young, non-metro and semi-urban towns constituted more than 70 per cent of the total consumption market of 100 cities mapped. In addition, the Investment in growth rate of consumer expenditure in these regional markets was higher than the metros. regional markets • As the demand for regional content is growing, entertainment companies, both Indian and international are expected to focus on penetrating these regional markets, which hold the possibility of high returns.
• Entertainment companies are expected to form partnerships or alliances across content creation, distribution or sales to de-risk their businesses and optimise resources. The number of content- sharing alliances with domestic as well as foreign players has been increasing. Alliances and partnerships • Global studios have entered the Indian film industry to co-produce Indian and international films. Indian companies are also partnering with global studios for doing visual effect and post production work.
• Consumer preferences are shifting towards international programming formats. There is an opportunity for global production houses to localise their content for the Indian audiences.
Development of • Entertainment companies will have to generate content that appeals to specific target audiences. content for a More content is expected to be generated for youth and emerging niche audiences. Reality shows specific target are making a headway and there is an opportunity as the new formats have helped TV companies audience earn revenue from mobile VAS services such as audience votes.
• Companies will have to understand consumer preferences to develop content and subscription models that can help them acquire and retain the right consumers.
31 OPPORTUNITIES Entertainment November 2010
Opportunities … (2/3)
• India has witnessed significant growth in mobile penetration. In 2010 the number of mobile subscribers have crossed the 500-million mark and internet and broadband penetration is increasing.
• New formats for entertainment such as computers, mobiles and other handheld devices are likely to be the most significant channels, as digital media has the highest visible return on investment. The launch of 3G and WiMax is expected to throw open myriad opportunities in value added Investment in new services segment. media
• New media investments are becoming critical for certain sectors such as music and publishing. Entertainment companies will have to develop a focused new media strategy to monetise their content better. Traditional entertainment companies could also consider diversifying their risk by entering the new media segment. For instance, broadcasters could venture into mobile and Internet services. Traditional film production houses could increase revenues from their content libraries by going online.
• With the emergence of new media, Indian media conglomerates are moving from being a one- platform business to being a multi-platform one and are becoming integrated media players with interests across various M&E segments such as TV, film and new media. New business and revenue models • Opportunities exist to tap consumers horizontally across the different strata of the society and vertically, diversifying into various businesses. Companies are also moving toward different revenue models. For instance, gaming companies, which till the 1990s focused on video gaming alone, are moving to online versions.
32 OPPORTUNITIES Entertainment November 2010
Opportunities … (3/3)
• Entertainment companies will try to protect and monetise their intellectual property (IP). For instance, content producers and broadcasters can jointly own content and explore ways to tap IP protection and revenues from different streams. monetisation • Alternatively, broadcasters whose content reaches vast audiences in various countries would ensure effective monetisation of these rights.
• The industry is adopting digital technologies to overcome distribution inefficiencies, reduce the cost of distribution and curb piracy.
• There are around 35 million digital TV households currently, growing from around 17 million households in 2009. With local cable operators (LCOs) and multi-system operators (MSOs) going digital and the advent of DTH and Internet Protocol Television (IPTV), companies are likely to be Digitisation witness vast opportunities in the long run through value-added services provided on these digital media. Companies will have to digitise their content and become digitally enabled to fully leverage such opportunities.
• With the introduction of HITS it will lead to enormous cost savings and elimination of digital head- end across locations.
• Indian M&E market mirrors the global M&E market, with more than 70 per cent of the share contributed by television and print media. However, the share of other segments such as radio (2 Media wise spend per cent), internet, music(1 per cent) and out-of-home media is significantly less than their share in global M&E market. This indicates an attractive growth opportunity for players in the market to tap the emerging segments as the consumer spending on media increases.
Sources: EY analysis; ―Tune-in to India‘s entertainment economy: From emerging to surging,‖ Ernst & Young, 2008; ―What‘s next? for Indian media and entertainment,‖ Ernst & Young, 2008. ―Tune into emerging entertainment markets- spotlight on BRIC,‖ Ernst & Young, 2010; TP report on Media and Entertainment, Ernst & Young, September 2010; 33 ENTERTAINMENT November 2010
Contents
Advantage India
Market overview
Industry Infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
34 INDUSTRY ASSOCIATIONS Entertainment November 2010
Industry associations
Indian Motion Picture Producers' Association ‗IMPPA HOUSE‘ Dr Ambedkar Road, Bandra (West), Mumbai – 400 050, INDIA Phone: 91 22 2648 6344/45/1760 Fax: 91 22 2648 0757
The Film & Television Producers Guild Of India Ltd G-1, Morya House, Veera Indl. Estate, Off Oshiwara Link Road, Andheri (W), Mumbai – 400 053, INDIA Tel: 91 22 56910662, 91-22 26733065 Fax: 91 22 5691 0661
35 NOTE Entertainment November 2010
Note
Wherever applicable, numbers in the report have been rounded off to the nearest whole number. Conversion rate used: US$ 1= INR 48
36 ENTERTAINMENT November 2010
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