pwc.com/india Indian entertainment and media outlook Indian entertainment and media outlook 2009 2009 © 2009 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers”, a registered trademark, refers to PricewaterhouseCoopers Private Limited (a limited company in India) or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. About PricewaterhouseCoopers PricewaterhouseCoopers Pvt. Ltd. (www.pwc.com/india) provides industry - focused tax and advisory services to build public trust and enhance value for its clients and their stakeholders. PwC professionals work collaboratively using connected thinking to develop fresh perspectives and practical advice. Complementing our depth of industry expertise and breadth of skills is our sound knowledge of the local business environment in India. PricewaterhouseCoopers is committed to working with our clients to deliver the solutions that help them take on the challenges of the ever-changing business environment. PwC has offices in Ahmedabad, Bangalore, Bhubaneshwar, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune. Contents Introduction................................................................................................................................... 4 Executive Summary ..................................................................................................................... 5 Television ................................................................................................................................... 29 Print Media ................................................................................................................................. 49 Filmed Entertainment ................................................................................................................. 61 Radio .......................................................................................................................................... 71 Emerging Segments ................................................................................................................... 79 Music ...................................................................................................................................... 80 Internet Advertising ................................................................................................................ 84 Out-Of-Home Advertising ....................................................................................................... 93 Animation, Gaming and VFX Industry ..................................................................................... 97 Sports Entertainment ............................................................................................................ 103 Tax and Regulatory issues impacting the Indian E&M industry ............................................... 109 PricewaterhouseCoopers Entertainment & Media Practice-contacts and office addresses ................................................................................. 122 Glossary of terms and abbreviations ....................................................................................... 124 Glossary of tables and charts .................................................................................................. 125 3 July 29, 2009 Dear Friends, Welcome to the 2009 edition of PricewaterhouseCoopers’ Indian Entertainment and Media (E&M) Outlook, covering the forecast period of 2009–2013. Our forecasts and analysis for this edition focus on eight major E&M industry segments. To reflect the current slow-pace in the industry, we have included in the executive summary, a section on how E&M companies can cope with the slowdown and prepare for the upturn. We have also included a chapter on the tax and regulatory impact on the various E&M segments, incorporating the Union Budget 2009 recommendations Although the global economy was showing signs of weakness, the performance of many of the E&M sector companies in India during the first nine months of 2008 was buoyant. However, after October 2008, the negative impact of the economic downturn on the E&M industry became apparent. The prevailing slowdown is expected to reduce growth rates in the near future. Moreover, the pace of change is likely to increase with greater economic pressure, as consumers seek higher value from the content they consume and advertisers seek more accountability. Nevertheless, the India E&M growth story continues to provide excellent opportunities. Media segments that are currently experiencing declining revenues are not necessarily because of declining demand. In fact, demand for E&M offerings appears to be increasing. What has changed in some cases is the ability to monetise that demand. Industry must create new models to restore that ability which is why there will be “no place to hide” from new models and dynamics across the industry. Whatever the revenue model be it ad-funded, subscription-based or a combination of both the key to sustainable revenue streams lie in providing a ‘content experience’ that cannot be readily duplicated. Monetising the increasing demand for E&M content, capitalising on evolving consumption habits, and developing diverse new advertising revenue models are challenges that companies will need to address. The slowdown presents an ideal time to differentiate through innovation of and capitalization on new forms of collaboration across the entertainment, media and communications value chains. At PricewaterhouseCoopers, we continue to monitor trends and developments that may impact your business now and in the future, and we look forward to further sharing our thoughts with you. We appreciate your feedback and ask that you continue to tell us what we can do to make the Indian E&M Outlook more useful to you. If you wish additional clarification on any matters included in the Indian E&M Outlook, or you believe we can be of service to your business in any way, please contact one of the PricewaterhouseCoopers E&M professionals listed in the report. Finally, we thank you for your support and wish you an exciting and rewarding year ahead. Sincerely, Jairaj Purandare Timmy Kandhari Country Leader - Markets & Industries Leader - Entertainment and Media PricewaterhouseCoopers India PricewaterhouseCoopers India 4 PricewaterhouseCooopers I Indian entertainment and media outlook 2009 Executive Summary GDP and the Indian E&M Industry: Impact of the Global Economic Crisis Managing downturn and preparing for the upturn Performance of Indian E&M Industry in 2008 Key developments in the Indian E&M Industry in 2008 Key developments in the Global E&M Industry in 2008 Outlook for the Indian E&M Industry 2009-2013 We are pleased to present our annual edition of the optimistic growth forecast of 7%-7.5% by the Prime Indian Entertainment and Media (E&M) Outlook, 2009. Minister’s Economic Advisory Council to 4% by the Our forecasts and analyses for this edition focus on World Bank. The Reserve Bank of India, the country’s eight major E&M industry segments. central bank, has placed the growth rate at around 6%. IMF expects India’s growth rate to decelerate to As we prepare the Indian E&M Outlook, the full extent 4.5% in 2009 before recovering to 5.6% in 2010. of the impact of the international financial crisis on the economy, the credit crunch and cutbacks in India’s E&M industry has witnessed remarkable consumer spending are yet to be determined. It is not buoyancy in growth in recent years and has clear whether and to what extent the various stimulus consistently outpaced growth in domestic GDP. While packages and bailout plans will halt, slow, or reverse annual average growth in nominal GDP was 14.48% the slide. We do know that the Indian E&M industry over the period 2004-08, the E&M industry grew by is more interrelated than ever to the global economy 16.6 % over this period. and that developments globally can quickly affect the this industry. Historical precedent—the benchmark In the wake of the global economic crisis, the trend from which forecasts are developed—is now a less has been reversed in 2008 and is expected to reliable guide because the economic climate in most continue in 2009, with the growth of the Indian E&M countries, including India, is more volatile than at industry moderating to a larger extent relative to the any other time in recent past. While it is clear that overall economic activity. changes in the economic environment in 2009 could significantly affect the projections, we believe that After registering a growth of around 16.6% many of the underlying trends we identify in the compounded annually over the period 2004-08, Indian E&M Outlook, that are driving change in the growth in the E&M industry is set to decelerate to industry, will remain on course. 8.0% in 2009. The CAGR projection for the E&M industry over the period 2009-13 is just 10.5% from GDP and the Indian E&M Industry: Impact the earlier growth rates which have been close to of the Global Economic Crisis 20%. This has largely been influenced by a marked slowdown in the advertising outlays with growth India has experienced a significant loss in the growth expected to moderate to 9.2% in 2009 after posting a momentum due to the pervasive effects of the global CAGR of close to 17.3% during 2004-08. financial contagion. The rapid deterioration in the global economic environment has pushed India off its high growth trajectory of close to 9%