Digitization of theatr Digital DawnSmar Tablets tphones Online applications The metamorphosis kingSmar Mobile payments or tphones Digital monetizationbegins Smartphones Digital cable FICCI-KPMG es Indian MeNicdia anhed E nconttertainmentent Tablets Social netw Mobile advertisingTablets HighIndus tdefinitionry Report 2012 E-books Tablets Smartphones Expansion of tier 2 and 3 cities 3D exhibition Digital cable Portals Home Video Pay TV Portals Online applications Social networkingDigitization of theatres Vernacular content Mobile advertising Mobile payments Console gaming Viral Digitization of theatres Tablets Mobile gaming marketing Growing sequels Digital cable Social networking Niche content Digital Rights Management Digital cable Regionalisation Advergaming DTH Mobile gamingSmartphones High definition Advergaming Mobile payments 3D exhibition Digital cable Smartphones Tablets Home Video Expansion of tier 2 and 3 cities Vernacular content Portals Mobile advertising Social networking Mobile advertising Social networking Tablets Digital cable Online applicationsDTH Tablets Growing sequels Micropayment Pay TV Niche content Portals Mobile payments Digital cable Console gaming Digital monetization DigitizationDTH Mobile gaming Smartphones E-books Smartphones Expansion of tier 2 and 3 cities Mobile advertising Mobile gaming Pay TV Digitization of theatres Mobile gamingDTHConsole gaming E-books Mobile advertising RegionalisationTablets Online applications Digital cable E-books Regionalisation Home Video Console gaming Pay TVOnline applications Digitization of theatres 3D exhibition Tablets Tablets Growing sequels Digitization of theatres Smartphones Portals E-booksPortals High definition Niche content Mobile advertising theatres 3D exhibition Social networking Digitization Digitization DTH Search Mobile gaming DTH Home VideoPay TV Home Video Micropayments Digital cable Tablets Smartphones Pay TV E-books Digital cable E-books Portals MobileNic headv contertisingent Niche contentE-booksE-books DTH Mobile gaming Pay TV TabletsPortals SmarDTHtphones 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: Red Chillies Entertainment, Zee Network, 9X Media, Turner International, UTV Group, Videocon d2h, Sony Music, T-Series, Only Much Louder, Reliance Media Works, Eros International, Ibibo, Saregama, UFO Moviez. with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. entity. (“KPMG International”), a Swiss with KPMG International Cooperative © 2012 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 independent firms Partnership KPMG, an Indian Registered © 2012 Digital Dawn The metamorphosis begins with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. entity. (“KPMG International”), a Swiss with KPMG International Cooperative © 2012 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 independent firms Partnership KPMG, an Indian Registered © 2012 Foreword 2011 has been a dynamic year for the Indian Media & Entertainment (M&E) industry - A year in which the transformation of the industry began to take hold. It was also a year of mixed fortunes, with advertising growth being robust in the first half (January to June), and muted in the second (July to December). The long- promised digital ecosystem began to impact various segments. Film saw benefits from digital distribution with wide releases and early capture of revenue, cable digitization got underway, and the music industry grew on the back of consumption of digital music. Going forward as well, the outlook for the economy remains conservative, and the muted growth rates seen in the latter part of the year may continue into the first 6 months of 2012. The Indian M&E industry has evolved greatly over the last decade against the backdrop of shifting consumer preferences towards niche content and digital delivery platforms, evolving business models, hyper competition due to entry of local and global players, and changing regulations. The industry has seen a focus on managing costs, innovation and research since the recessionary pressures in 2009. This has enabled players to look at sustainable cost optimization in difficult times. The year saw important developments in terms of multiple films crossing the INR 100 Crore mark at the Box office, growing commitment from the cable industry to pursue digitization as per the government’s mandate, regional markets defying recessionary trends in terms of growth of television and print, the government’s commitment towards phase 3 for radio and the growth of new media. We are looking forward to 2012 being a relatively more buoyant year in terms of growth for the industry. We wait to see the action in the television distribution space, and in radio, as both industries undergo regulatory changes. It will also be interesting to see print players adapt to the growing challenge being posed due to new media and changing news consumption habits. Lastly, new media such as Animation / VFX, digital advertising, and gaming are expected to continue their growth momentum. The overall M&E market in India is expected to grow at a compounded annual growth rate of 15 percent per annum over the next five years, to reach INR 1.4 trillion in 2016. The potential for increase in media penetration, growing importance of regional markets, increasing consumption in tier 2 and 3 cities, impact of regulatory changes, more focused consumer research, innovation in content, marketing and delivery platforms to serve different niches, increasing device penetration like mobiles, tablets, PCs etc., all point towards a very positive future for the industry. The analysis presented in this report has been put together after extensive discussions with senior stakeholders of the Indian M&E industry. KPMG in India and FICCI are grateful to them and all others who have helped us put this report together. Yash Chopra Karan Johar Jehil Thakkar Chairman, Co-Chairman, Partner and Head FICCI Entertainment Committee FICCI Entertainment Committee Media & Entertainment Sector KPMG in India with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. entity. (“KPMG International”), a Swiss with KPMG International Cooperative © 2012 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 independent firms Partnership KPMG, an Indian Registered © 2012 © 2012 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 01 01 02 07 03 35 04 57 MEDIA & ENTERTAINMENT TELEVISION PRINT FILMS INDUSTRY IN 2011 IN THE BOX-SEAT EXPLORING NEW(S) FRONTIERS SPOT-LIGHT ON GROWTH AN INTRODUCTION 05 77 06 103 07 115 NEW MEDIA RADIO MUSIC Table of RIDING THE DIGITAL WAVE ABOUT TO BREAK FREE PLAYING THE DIGITAL TUNES Contents 08 131 09 143 10 151 11 169 ANIMATION, VFX AND OUT OF HOME THE EMERGING PICTURE DEAL ACTIVITY POST PRODUCTION VALUE AND ACCOUNTABILITY TECHNOLOGIES IMPACTING THE SMALL STEPS BUT WHERE DREAMS COME TRUE M&E INDUSTRY POTENTIAL FOR BIG LEAPS 12 175 13 181 POST MERGER INTEGRATION IN THE MEDIA INDUSTRY TAX AND REGULATORY MEASURING DEAL SUCCESS SURVIVING THE TAX CHALLENGES with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. entity. (“KPMG International”), a Swiss with KPMG International Cooperative © 2012 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 independent firms Partnership KPMG, an Indian Registered © 2012 01 01 02 07 03 35 04 57 MEDIA & ENTERTAINMENT TELEVISION PRINT FILMS INDUSTRY IN 2011 IN THE BOX-SEAT EXPLORING NEW(S) FRONTIERS SPOT-LIGHT ON GROWTH AN INTRODUCTION 05 77 06 103 07 115 NEW MEDIA RADIO MUSIC Table of RIDING THE DIGITAL WAVE ABOUT TO BREAK FREE PLAYING THE DIGITAL TUNES Contents 08 131 09 143 10 151 11 169 ANIMATION, VFX AND OUT OF HOME THE EMERGING PICTURE DEAL ACTIVITY POST PRODUCTION VALUE AND ACCOUNTABILITY TECHNOLOGIES IMPACTING THE SMALL STEPS BUT WHERE DREAMS COME TRUE M&E INDUSTRY POTENTIAL FOR BIG LEAPS 12 175 13 181 POST MERGER INTEGRATION IN THE MEDIA INDUSTRY TAX AND REGULATORY MEASURING DEAL SUCCESS SURVIVING THE TAX CHALLENGES with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. entity. (“KPMG International”), a Swiss with KPMG International Cooperative © 2012 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 independent firms Partnership KPMG, an Indian Registered © 2012 01 Indian M&E Industry in 2011 An introduction with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. entity. (“KPMG International”), a Swiss with KPMG International Cooperative © 2012 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 independent firms Partnership KPMG, an Indian Registered ©