Indian Entertainment Industry

According to the widely discussed Goldman Sachs report of October 2003, over the next 50 years, Brazil, Russia, India and China - the BRIC economies - could become a much larger force in the world economy. “India could emerge as the world’s third largest economy and of these four countries; India has the potential to show the fastest growth over the next 30 to 50 years”.

One of the fastest growing sectors in Indian economy is the Media & Entertainment (M&E) sector. M&E is a perfect blend of creativity and commerce and provides vast investment opportunities. According to a report by FICCI and PricewaterhouseCoopers; the industry is poised to become INR one trillion (INR 100,000 crore) industry by 2011 from the current INR 43,700 crore. CRISIL Research, in its recently published report on the Indian M&E industry, has projected a doubling of revenues on an aggregate basis from an estimated Rs 361 billion (INR 36,100 crore) in 2005 to Rs 744 billion (INR 74,400 crore) by 2010, translating into an annual growth rate of 15.6 per cent during this period. The sector is expected to cross turnover of INR 100,000 crore by 2011.

Over the years, spending power is steadily increasing in India. Between 1995 and 2002, nearly 100 million people became part of the consuming and rich classes. Over the next five years, 180 million people are expected to move into the consuming and very rich classes. On an average, 30-40 million people are joining the middle class every year, representing huge consumption spending in terms of the demand for mobile phones, televisions, music systems, cars, credit goods and the basket of a consumption pattern typically associated with rising income. The consumption spending is rising due to rising disposable incomes on account of sustained growth in income levels and reduction in personal income tax over the last decade.

The segments constituting the Indian Entertainment & Media industry are as follows:

• Filmed Entertainment
• Television
• Music
• Radio
• Print (Primarily Newspapers & Magazines)

Beyond traditional sectors, animation, gaming, Internet advertising, out-of-home advertising and live entertainment are also pulling the growth curve.

Key Drivers

• Economic growth of the country in general and rising disposable income levels in particular.
• Gradually liberalizing attitude of the government.
• Greater interface with international companies.
• Privatization and growth of the radio industry.
• Advancement in Technology.
• Favorable regulatory initiatives.
• Liberalized foreign investment regime.

The M&E industry is expected to significantly benefit from this fast economic growth, as this industry is a cyclically sensitive industry that grows faster when the economy is expanding. It also grows faster than the nominal gross domestic product growth (GDP) during all phases of economic activity due to income elasticity wherein when incomes rise; proportionately more resources get spent on leisure and entertainment and less on necessities. India is interestingly poised to enter this phase of bullish growth for the sector. It is riding on the economic growth and rising income levels that India has been experiencing over the past few years.

Trend

The rapid evolution of digital technology is having a significant affect on the media business. Wireless distribution, on-demand technologies, limitless storage and advanced consumer electronics devices are increasingly making media products ever present and always available. Consumers will soon be able to enjoy anything they want immediately, and for a reasonable fee, whether by subscription or other pricing models. Going forward, it will become increasingly necessary for the media, technology and telecommunications players to collaborate in developing sustainable business models that leverage the strengths and innovation of each industry. Conventional distribution mechanisms in the industry are expected to change. This, in turn, will influence the bargaining power of the different players in the value chain, as also the form taken by content. "In television, we expect the balance of power to shift in favour of broadcasters with the adoption of alternative distribution platforms such as DTH (Direct-to-Home), CAS (Conditional Access System), and IPTV (Internet protocol television).

Globally, technological advances and the proliferation of broadband Internet are re-defining conventional business models in the sector that are based on pushing content through various distribution media to passive audiences.

The Indian film industry is said to be one of the largest in the world with 934 films produced in 2004. It is currently worth about US$ 1256 million and is expected to grow at 18 per cent compounded rate annually for the next 5 years.

Growth Drivers of the film industry
Emergence of crossover films
Increasing importance of regional cinema
International cinema dubbed in Indian languages
Growth of multiplexes
Growth in Cinema Advertising
Merchandising/Promotional Material Revenues