#shootingforthestars FICCI-KPMG Indian Media and Entertainment Industry Report 2015 kpmg.com/in ficci-frames.com We would like to thank all those who have contributed and shared their valuable domain insights in helping us put this report together. Images Courtesy: 9X Media Pvt.Ltd. Phoebus Media Accel Animation Studios Prime Focus Ltd. Adlabs Imagica Redchillies VFX Anibrain Reliance Mediaworks Ltd. Baweja Movies Shemaroo Bhasinsoft Shobiz Experential Communications Pvt.Ltd. Disney India Showcraft Productions DQ Limited Star India Pvt. Ltd. Eros International Plc. Teamwork-Arts Fox Star Studios Technicolour India Graphiti Multimedia Pvt.Ltd. Turner International India Ltd. Greengold Animation Pvt.Ltd UTV Motion Pictures KidZania Viacom 18 Media Pvt.Ltd. Madmax Wonderla Holidays Maya Digital Studios Yash Raj Films Multiscreen Media Pvt.Ltd. Zee Entertainmnet Enterprises Ltd. National Film Development Corporation of India with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. entity. (“KPMG International”), a Swiss with KPMG International Cooperative © 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated and a member firm of the KPMG network of independent member firms affiliated Partnership KPMG, an Indian Registered © 2015 #shootingforthestars FICCI-KPMG Indian Media and Entertainment Industry Report 2015 with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. entity. (“KPMG International”), a Swiss with KPMG International Cooperative © 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated and a member firm of the KPMG network of independent member firms affiliated Partnership KPMG, an Indian Registered © 2015 #shootingforthestars: FICCI-KPMG Indian Media and Entertainment Industry Report 2015 Foreword Making India the global entertainment superpower 2014 has been a turning point for the media and entertainment industry in India in many ways. With the current government’s optimistic outlook, business sentiment has been positive and strengthened by a number of growth promoting policy initiatives taken in the recent months. A benign global economic environment and a stable central government likely prompted the Economic Survey to suggest that India has reached a sweet spot and could finally be launched on a double-digit medium-term growth trajectory. Top global institutes also seem to have an upbeat view on India. Rating agency S&P01 called India the Asia-Pacific region’s bright spot while the International Monetary Fund02 revised India’s growth forecast, expecting its growth rate to surpass China’s in 2016. In the media sector, digital media continued its rapid penetration, as indicated by the stupendous 44.5 per cent growth03 in digital advertising in 2014 over 2013. One of the major highlights in 2014 was the announcement of ‘Digital India: A programme to transform India into a digitally empowered society and knowledge economy’ by the government. India topped as the world’s fastest growing smartphone market04. By the end of 2014, India had around 116 million internet enabled smartphones and the number is expected to reach 435 million by the year 201903. This growth presents a good opportunity for digital content aggregators, advertisers, app developers and online streaming companies to engage users through relevant mobile-led strategies. The absolute number of internet connections was at a record high in 2014. With almost 9 per cent penetration of social media05, India’s potential for social networking on the internet seems to be on a rise. 41 per cent of India’s total mobile users are active on social media06. The digital music industry witnessed a good deal of buyouts, sell-outs and new entries jockeying for a position. The revenue from distribution of music through digital channels already accounts for over 50 per cent of the overall size of the music industry in India. In television, advertising saw strong growth, driven by the positive shift in the macroeconomic environment, the general election spends, and the emergence of e-commerce as a significant new advertising spender. At the same time, despite rollout of digital set top boxes (STBs) as a part of the ongoing DAS, the anticipated improvement in addressability, increase in subscription revenues and more equitable sharing of subscription revenues continues to evade the industry. A key challenge remains, i.e. lag in implementation. MSOs seem to be taking time to build internal processes to reflect the change in business models from B2B to B2C. This, coupled with continuing resistance from LCOs, has resulted in delays in implementation of gross billing and rollout of channel packages in Phase I and II cities. The Ministry of Information and Broadcasting (MIB) has now extended the deadlines for Phases III and IV of DAS implementation to 31 December 2015 and 31 December 2016, respectively. The print sector continues to remain a highly fragmented space, at the national and regional level. In 2014, the print industry witnessed a rise in circulation revenues on the back of rising cover prices and subscriptions, aided by low media penetration, population growth and rising income and literacy levels. This growth largely came from tier II and tier III cities with regional language editions outperforming the national editions and English 01. S&P revised up India’s FY16 growth forecast to 7.9% from the previous estimate of 6.2% 02. IMF forecasts 7.5% growth rate in FY16 compared with 6.4% projected earlier 03. KPMG in India analysis, IDC and eMarketer estimates, 2014 04. eMarketer newsletter, 30 December 2014 05. We are social: Digital, Social and Mobile in 2015 report 06. blog.digitalinsights.in, 17 August 2014, 10 Important statistics about Digital and Social Media in India with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. entity. (“KPMG International”), a Swiss with KPMG International Cooperative © 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated and a member firm of the KPMG network of independent member firms affiliated Partnership KPMG, an Indian Registered © 2015 #shootingforthestars: FICCI-KPMG Indian Media and Entertainment Industry Report 2015 dailies. While the sector has not seen cannibalisation in revenues from digital media, on the lines of the global trend, it is clear that the time has come for players to embrace digital strategies that complement the existing physical product and support brand building and penetration efforts. The films sector was a mixed bag in 2014 with some films creating box office records, while several were unable to attract audiences to the theatre and profitability was impacted, overall. The exhibition sector saw several players expanding their footprint; both organically (especially in Tier II and Tier III cities) and through acquisitions. The cable and satellite market also saw correction. Regional films continued to see success, in particular the Tamil and Telugu markets. Going forward, with an increasing number of multiplex screens and better internet penetration and bandwidth Tier II and Tier III cities may soon hold the prime focus of the industry. The radio sector saw the much awaited movement in Phase III auctions, with the government giving the go ahead for partial auctions across 69 cities, where potentially 135 channels are up for grabs. Though there may be some key contentious issues of exorbitant reserve prices for the auctions, the 15 per cent limit on the total number of frequencies that an entity may hold, as well as dearth of new frequencies in the profitable A and A+ cities remain, the commencement on Phase III provided the required fillip to the industry which hopes to revive its fortune with these new developments. What would it take for India to take its place as a global superpower in the sector? India’s significant consumer market base and increasingly favourable macro-economic and regulatory environment have prompted several investors and global players to look to the Indian market for growth. For Indian players, tailored content strategies for audiences (be it global, national or local), and a focus on building the relevant digital and physical touchpoints to enable easier and more open and interactive access could be key success factors going forward. With this, India could be at the cusp of significant growth and earn its place in the global spotlight. The building blocks for future growth have been put in place in 2014 by offerings; such as new spectrum for mobile, ongoing digitisation in cable, consolidation in exhibition, and Phase III auctions for radio. India now needs to ensure flawless and timely execution of these policies. In addition, at a local level, interventions such as speeding up permissions for multiplexes, live events and film shoots, and so on, could go a long way in boosting confidence and growth. With an advertising boost due to the ICC cricket world cup, strong projections for economic growth and a sturdy base of these building blocks, 2015 seems to holds great promise for the industry. UDAY SHANKAR RAMESH SIPPY KARAN JOHAR JEHIL THAKKAR CHAIRMAN CO-CHAIRMAN CO-CHAIRMAN HEAD FICCI Media and FICCI Media and FICCI Frames Media and Entertainment Entertainment Committee Entertainment Committee KPMG in India with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. entity. (“KPMG International”), a Swiss with KPMG International Cooperative © 2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated and a member firm of the KPMG network of independent member firms affiliated Partnership KPMG, an Indian Registered © 2015 95 Digital Media #Arrived 01 143 Radio Introduction Transmitting growth 07 157 Animation, VFX and Television Promise of a post-production new season Create in India 41 Print 185 Regional making headlines Out of home Sighting success 191 Sports Let the game begin… 61 Films with KPMG International Cooperative (“KPMG International”), a Swiss entity.