media and entertainment

1

MEDIA & ENTERTAINMENT INDUSTRY

Group MembersPriya MeenaSaumya R SatpathySagar BehereRushabh Shah

Agenda

•INTRODUCTION – M & E INDUSTRY

• KEY PLAYERS IN INDUSTRY

•TRENDS IN M & E INDUSTRY

•DEMAND AND GROWTH IN M & E INDUSTRY

•OPPORTUNITIES ACROSS SEGMENTS

1

Entertainment

The sector is split into seven segments

Television

Others Print

Entertainment

Music Film

Radio AGV

2

Entertainment

TV has the highest share in the sector;AGV is one of the fastest growing

→ Total market size in 2011 was USD15.2 billion

→ The entertainment industry continues to be dominatedby television, print and films; together they have a

86.7 per cent market share

→ AGV has emerged as one of the fastest growingsegments with revenues growing by about 31 per centduring 2011

Segmental composition of entertainment (2011)

1.2%1.6% 6.3%

4.3%

12.8%45.2%

28.7%

Television Print Film AGV Radio Music Others

Source: : KPMG report 2012 ,Aranca ResearchNotes: AGV- Animation, Gaming and VFX, VFX- Visual Effects

3

Entertainment

The Indian entertainment industry isgrowing rapidly … (1/2)

→ The total market size grew from USD9.2 billion in 2006to USD15.1 billion in 2011, a CAGR of 10.6 per cent

16.0→ The industry recorded one of the highest growths in

the world in2010 (11.2 per cent); in2011 growth 14.0

picked up even further to touch 12.6 per cent12.0

Notes: CAGR - Compound Annual Growth Rate10.0 9.2

8.0

6.0

4.02006

Market size (USD billion)

CAGR 15.210.6 % 13.5

11.8 12.1

10.7

2007 2008 2009 2010 2011

Source: : KPMG report 2012,Aranca Research

4

Entertainment

The Indian entertainment industry isgrowing rapidly … (2/2)

→ During 2006-11, television revenues expanded at aCAGR of 11.4 per cent to USD6.9 billion

→ Advertising revenue growth has been behind theconsistent rapid growth of the television industry

→ Over the same period, revenues in the print segmentexpanded to USD4.4 billion, a CAGR of 10.0 per cent

→ The fastest growth during this period was however inthe AGV segment; it’s CAGR was 16.6 per cent

Television

Print

Film

AGV

0

Size of major industry segments (USD billion)

6.94.0

4.42.7

1.91.8

0.60.3

1 2 3 4 5 6 7 8

2011 2006

Source: : KPMG report 2012, Aranca ResearchNotes: AGV- Animation, Gaming and VFX;

VFX- Visual Effects

5

Entertainment

Key players in the entertainmentindustry-Television

Company Business description

Star India Pvt Ltd• Fully owned subsidiary of News Corporation

• Portfolio includes 35 channels in seven languages across various categories such as reality, news andfilms

• Also manages a portfolio of business ventures including DTH operator Tata Sky,cable system Hathway,channel distributor STAR Den, news channel operator MCCS, film production & distribution businessFox STAR Studios India and STAR CJ Home Shopping

Zee Entertainment Enterprises Ltd• Fully owned subsidiary of Essel Group and first listed media company in India

• One of the largest producers and aggregators of Hindi programming in the world• An estimated reach of more than 500 million viewers across 167 countries

• Pioneer of television entertainment industry in India; launched Zee TV-the country’s first Hindi satellitechannel

• Range of businesses across the value chain in the M&E industry

Multi Screen Media Pvt Ltd• Fully owned subsidiary of Sony Pictures Entertainment

• Comprises of Sony Entertainment Television (SET) and SAB, leading Hindi entertainment televisionchannels; MAX, a movies and special events channel; and PIX, a channel that airs Hollywood movies

• Its programming spans across various genres including drama, reality, comedy, horror, and liveevents

Source: Company Websites, Business Week, KPMG report 2012 Aranca ResearchNotes: M&E- Media and Entertainment

6

Entertainment

Key players in the entertainmentindustry-Print

Company Business description

Bennett, Coleman and Co Ltd• Largest media conglomerate in India

• Publishes world’s most widely circulated English broadsheet daily ‘The Times of India’ and second most widely circulated financial daily ‘Economic Times’

• Other prominent publications include magazines eg. Zigwheels, Filmfare, Femina and TopGear and Hindi dailies such as Navbharat Times and Sandhya Times

• The group has also diversified into radio and television business

HT Media Ltd• Hindustan Times is the second most widely read English daily in India

• Other prominent publications include the business daily Mint and the Hindi daily Hindustan• The group has also forayed into many adjacent businesses such as print and digital services,

internet, radio, and events and marketing solutions• The company’s job portal www.shine.com has over 7 million registrations

Living Media India Ltd• India Today and Readers Digest are among India’s most circulated magazines

• Other prominent magazine publications include Business Today, Cosmopolitan, Time, Design Today, Money Today and The Chartered Accountant

• The group has interests in various other businesses such as radio, events, printing, music, television, education and publishing

Source: Company Websites, The Times of India, Aranca ResearchNotes: CAGR- Compound Annual Growth Rate, FY- Financial Year

7

Entertainment

Key players in the entertainmentindustry-Film

Company Business description

Yash Raj Films Studios• The only privately owned film studio in India

• Apart from film production, the company has also expanded into distribution of films and music,home entertainment, production of television software, ad films, documentaries and private label music production

• The company launched a youth films studio Y-Films in 2011 to connect with the large youngpopulation of the country

Eros International Media Ltd• Strong distribution network spanning across 50 countries & over 27 dubbed foreign l

l anguages• One of the largest content owners in the industry having a film library of over 2000 films, thus

ensuring stable, recurring cash flows• The company is diversifying into Marathi, Punjabi, Tamil and other regional language films to

leverage upon the growing demand for regional cinema

Red Chillies Entertainments Pvt Ltd• Founded in 2002 as a film production house, the company has branched into TV shows and

advertisement, visual effects and multi-media production equipment leasing• Its latest venture 'Ra.one‘ is Bollywood's most expensive movie and very first Sci-fi movie

• It also owns the Kolkata Knight Riders cricket franchise in the Indian Premier League

Source: Company Websites, Business Week, Aranca Research

8

Entertainment

Key players in the entertainmentindustry-Music

Company Business description

Music Bharti• A wholly owned subsidiary of Bharti Airtel

• The largest music company in terms of revenues• Provides mobile-based value-added music services (VAS) such as hello tunes, call back tunes,

music on demand, Mirchi mobile and Airtel radio

Saregama India Ltd• The company owns the largest music archives in India, one of the largest in the world

• It uses the music labels Saregama, RPG Music and HMV• The company is making efforts to digitise its catalogue to make inroads into the digital music

market and counter declining physical music sales

Super Cassettes Industries Ltd• The company owns the rights to over 2,000 video and 35,000 audio titles, comprising of nearly

24,000 hours of music• The company has diversified into film production, consumer electronics and mobile

phones manufacture

Tips Industries Ltd• The company owns 3,500 titles of which a minimum of 25 have been sold over a million copies,

with another 10 selling over 10 million copies• Since 1981, Tips has the highest number of gold and platinum discs to their credit in India

• Tips also holds soundtrack copyrights of over50 Hindi movies and has also ventured into filmproduction

Source: Company Websites, Business Week, Aranca ResearchNotes: VAS- Value Added Services

9

Entertainment

Notable trends in the entertainmentindustry … (1/2)

• The television industry has been aided by strong growth in advertising

• Television subscription accounts for around 65 percent of revenues in 2011

Television

Print

Film

whereas advertising accounted for the rest

• The share of subscription to the total revenue is expected to increase to 69 %by 2016

• Unbundling of products to increase profitability

• Increasing income levels and evolving lifestyles have led to robust growth in niche magazines segment

• Increasing literacy levels leading to a rise in the readership base

• Rising circulation of English, Hindi as well as regional language dailies

• Growth to be fuelled by multiplex chains, increasing footfalls of consumers andhigher quality content

• Increasing share of Hollywood content in the Indian box office

• 3D cinema is driving the growth of digital screens in the country

• The Indian film industry is largest producer of films globally with 400 productionhouses and corporate houses involved in film production

Source: KPMG report 2012, Economic Times, Aranca ResearchNotes: DTH- Direct to Home, 3D- Three Dimension

10

Entertainment

Notable trends in the entertainmentindustry … (2/2)

• Growing focus on the ‘kids genre’ and rise in dedicated channels for them

• Increase in animation movies in theatres and use of animation and VFX in TVAnimation, Gaming

and VFX (AGV)

Radio

Music

advertising

• Growing outsourcing of VFX and gaming to India

• Content localisation by Indiagames (by launching T20fever.com) & by Zapak(by launching ICC World Cup 2011 games)

• Increasing FM enabled radio phones and car music systems

• During 2010, there were a total of 245 channels operating across India

• Favourable government guidelines for expansion of the third phase of FMradio broadcasting services

• Earlier only educational institutions were permitted to set up a community radio; in 2008 liberalisation of policy on community radio took place andcurrently 71 community radio stations are operational in the country

• The Indian music industry is a consortium of 142 music companies

• Players are looking at new ways and mediums to monetise music, such asutilising social media to promote music

• Mobile phones, iPods and mp3 players - devices that enable music on-the-go -are becoming the primary means to access music

• Digital music on mobile continues to drive music industry revenue

Source: PwC India Entertainment and Media Outlook 2011, KPMG report 2012 Economic Times, Aranca ResearchNotes: AGV- Animation, Gaming and VFX, 3D- Three Dimension; VFX- Visual Effects, FM-Frequency Modulation11

Entertainment

Strong demand and policy supportdriving investments

Growing demand

Higher realincomes and

changing lifestyles

Inviting

Falling prices,increasingpenetration

Growing,young

consumer base

Policy support

support

Policy sops,favourable FDI

climateResulting

in

Measures toimprove

profitabilityacross segments

Increasingliberalisation,

tariff relaxation

Increasing investments

Higher FDI inflows

Increasing M&Aactivity

Increasing dealsizes

Source: ICRA, PwC, Business Standard, Business Today, Aranca ResearchNotes: M&A- Merger and Acquisition, FDI- Foreign Direct Investment

12

Entertainment

Multiple factors will drive growth indemand … (1/2)

→

→

→

India's per capita income (nominal) is $ 1219

Nominal per-capita income is estimated (IMF) to have recorded a CAGR of 11.5 per cent over 2001-11

It is estimated that India's Per Capita Income will register an average growth rate of 13% during 2011-20 so as to reach $ 4,000 by 2020

As the proportion of ‘working age population’ in totalpopulation increases, per-capita income and GDP areexpected to grow higher

2500

2000

1500

1000

500

0

Rising per-capita income in India

30%

25%

20%

15%

10%

5%

0%

-5%2001 2003 2005 2007 2009 2011E2013F 2015F 2017F

Per capita income, USD, LHS Annual growth rate, RHS

Source: IMF, Aranca Research

13

→

Entertainment

Multiple factors will drive growth indemand … (2/2)

→ Apart from the impact of rising incomes, widening of Changing income dynamics over the yearsthe consumer base will also be aided by expansion of

the middle class, increasing urbanisation, andchanging lifestyles

→ The entertainment industry will also benefit fromcontinued rise in the propensity to spend amongindividuals; empirical evidence points to the fact thatdecreasing dependency ratio leads to higherdiscretionary spending on entertainment

70 Million households

60 Aspirers : annual income

50 INR90,000 -200,000

40

30

20 Deprived: annual income< INR90,000

10

0

Seekers: annual incomeINR200,000 - 500,000

Strivers: annual incomeINR500,000 -1000,000

Globals: annual income> INR1000,000

2005 2010 2015 2020 2025

Deprived Globals Aspirers Strivers Seekers

Source: McKinsey Quarterly Report, Aranca Research

14

Entertainment

Policy support aiding sector growth … (1/2)

• Digitisation of the cable distribution sector to attract greater institutionalfunding, improve profitability and help players improve their value chain

• FDI limit increased from 49 per cent to 74 per cent for broadcast carriageTelevision

Film

Radio

service providers who upgrade to digital and addressable environments

• No restriction on foreign investment for uplinking and downlinking of TVchannels other than news and current affairs

• Co-production treaties with various countries such as Italy, Brazil, UK andGermany to increase the export potential of the film industry

• Granted ‘industry’ status in 2001 for easy access to institutional finance

• FDI upto 100 per cent through the automatic route has been granted bygovernment

• Entertainment tax to be subsumed in the GST; this would create a uniform tax rate regime across all states and will also reduce the tax burden

• FDI limit in radio increased to 26 per cent from 20 per cent

• Private operators allowed to own multiple channels in a city, subject toa limit of 40 per cent of total channels in the city.

• Private players allowed to carry news bulletins of All India Radio

• Further boost may be given to the radio sector by charging licence fees onthe basis of ‘net income’ so as to provide relief to loss making radio players

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Entertainment

Policy support aiding sector growth … (2/2)

• FDI/NRI investment upto 26 per cent in an Indian firm dealing with publicationof newspaper and periodicals

• FDI/NRI investment upto 26 per cent in publications of Indian editions of foreignPrint magazines

• FDI/NRI investment upto 26 per cent in publications of scientific and technicalmagazines/ specialty journals/ periodicals

• Parliamentary approval on the Copyright Act (Amendment) Bill, 2012, whichstrengthens the royalty claims of musicians, lyricists and others in the field

• Policies are adopted against digital piracy and file-sharing; steps have beenMusic taken to block illegal music websites

• Adoption of revenue sharing model by Copyright Board requiring FM radiocompanies to share 2 per cent of their net advertising revenues with music

companies

Animation, Gaming •100 per cent FDI allowed in the sector through automatic route provided it is inand VFX (AGV) compliance with Reserve Bank of India guidelines

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Entertainment

Increasing investments in the sector-key deals and FDI inflows … (1/2)

→ Consolidation will be the major route to grow

inorganically for entertainment companies in order to

Mergers and Acquisitions (M&A) deals during 2011-2012

Deal valueexpand their portfolios and enter into new regions Acquirer Target Deal date(USD million)

→ A few big deals have come about, the most notable TV18 Eenadu Group Jan 2012 395ones being Walt Disney-UT V and T V18-ET V (together

amounting to around USD700 million) Walt Disney UTV Feb-2012 300

Educational Trustee Metronation

Company Chennai TelevisionMar-2012 3.2

BlackstoneJagran Media

NetworkJul-11 46.9

Source: Company ‘s news, KPMG report 2011, Aranca Research

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Entertainment

Increasing investments in the sector-key deals and FDI inflows … (2/2)

→

→

→

FDI inflows into the entertainment sector betweenApril 2000 and February 2012 stood at USD2.9 billion

By February 2012, the share of FDI in ‘Information andBroadcasting’ was 1.8 per cent of total FDI inflows into

the country

Demand growth, supply advantages, and policysupport have been the key drivers in attracting FDI

Cumulative FDI inflows into Information and Broadcastingfrom April 2000

3.5

3.0 2.9

2.5 2.2

2.0 1.8

1.5 1.3

1.00.6

0.5

0.0FY08 FY09 FY10 FY11 FY12*

Source: DIPP, Aranca ResearchNotes: DIPP- Department of Industrial Policy and Promotion,

*For FY12, the figures are till February 2012 whereas for others itis till the end of the financial year (i.e. March)

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Entertainment

UTV - One of the largest mediaconglomerates

Interactive

Broadcasting

Games content

Motion pictures

Television content

Ventured intointernet content

creation andaggregation

Started as acontent providerfor Doordarshan

Deal with Disneyto dub its content

into Indianlanguages

Disney becomes amajority shareholder with astake of 32.1%

Launched IPO as Became world’s firstUTV Software company to record

communications over 100 millionLtd downloads on

Nokia store

AcquiresIndiagames Ltd,enters gaming

software andcontent

Launched HungamaTV

1990 1996 2000 2004 2005 2007 2008 2012Source: Company annual report, Company website, Aranca Research

Notes: IPO- Initial Public Offering

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Entertainment

SUN TV : The South-Indian behemoth

Magazine

Newspaper

Launches a slew ofother channels in

Acquires Dinakarannewspaper, Tamil

Nadu’s leadingdaily

Enters FilmProduction and

Distribution through‘SUN Pictures’

Launches three paychannels and four

ad-free actionmovie channels

Launches SUNDirect to provide

Radio

Motion pictures

Direct to Home

Broadcasting

various South Indianlanguages

Founded asSumangali

Publications

‘SUN TV’ islaunched with

daily three hoursof programming

Direct -to -Home(DTH) services

Starts its first FMChannel

‘Sumangali FM’

1985 1993 2000 2003 2005 2007 2008 2012Source: Company website, Aranca Research

Notes: FM-Frequency Modulation

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Entertainment

The entertainment industry is slated forrapid growth … (1/2)

→

→

Over 2011-16, the total market size is expected to riseat a CAGR of 14.9 per cent to USD30.4 billion

The next five years will see digital technologiesincrease their influence across the industry leading toa sea change in consumer behaviour across allsegments

Market size (USD billion)

3530.4

30CAGR

25.025 14.9 %

22.219.7

20 17.3

15.215

10

5

02011 2012E 2013E 2014E 2015E 2016E

Source: KPMG report 2012 ,PwC India Entertainment andMedia Outlook 2011, Aranca Research

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Entertainment

The entertainment industry is slated forrapid growth … (2/2)

→

→

Television will continue to be the lead contributor tooverall industry growth; the segment is estimated togrow in size to USD15.3 billion by 2016 (CAGR of 17.3per cent since 2011)

Animation, Gaming and VFX (AGV) is likely to witnessthe fastest growth - a CAGR of 27.2 per cent (2011-16); its size is set to touch USD2.0 billion in 2016

Notes: AGV- Animation, Gaming and VFX; VFX- Visual Effects

Television

Print

Film

AGV

Size of major industry segments (USD billion)

15.36.9

6.54.4

3.11.9

2.00.6

0 5 10 15 20

2016 2011

Source: KPMG report 2012 ,PwC India Entertainment and MediaOutlook 2011, Aranca Research

22

Entertainment

Opportunities across segments in theentertainment industry … (1/2)

Television

AGV

Print

• Television distribution is projected to garner a share of 62 per cent in the television pie by2015

• Television advertisement is also expected to witness robust growth; its share in the advertisingindustry is expected to touch 42.5 per cent by 2015 from 41 per cent in 2010

• The Indian animation industry was worth USD511 million in 2010 and is expected to grow atCAGR of 23 per cent to USD961 million by 2013

• Growth in international animation films, especially 3D productions, and the subsequent work for Indian production houses will help growth in this segment

• Newspapers and niche magazines are likely to drive industry growth

• Accelerated growth is forecasted in regional print and local news segments

Source: KPMG Report 2012 ,PwC India Entertainment and Media Outlook 2011, Aranca ResearchNotes: 3D- Three Dimension, AGV- Animation, Gaming and VFX; VFX- Visual Effects

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Entertainment

Opportunities across segments in theentertainment industry … (2/2)

• Size of the Indian film industry is expected to touch USD3.1 billion by 2016, up from USD1.9 billion in 2011

Film• Increasing digital screens and 3D films are expected to help industry growth

• Big ticket releases lined up for the next couple of years are also expected to boost revenues

• Phase III of e-auctions for FM radio licences will provide an impetus to the segmentRadio

• Radio advertising is another area likely to experience accelerated growth

• Mobile VAS and arrival of 3G are likely to lead to a surge in paid digital downloadsMusic

• Phase III radio licensing will also help in increasing music revenues from radio

Source: KPMG report 2012 ,PwC India Entertainment and Media Outlook 2011, Aranca ResearchNotes: 3D - Three Dimension

For updated information, please visit www.ibef.org OPPORTUNITIES24

Entertainment

Advantage India

2016EGrowing demand

• Rising incomes and evolvinglifestyles have led to higher

demand for aspirational productsand services

• Higher penetration and a rapidlyincreasing young population willprovide further boost to demand

Higher investments• Higher FDI inflows

• Increasing M&A activity

Opportunities

• Industry is set to grow at aCAGR of 15 per cent over 2011-2016, one of the highest ratesglobally

• Television and AGV segmentsexpected to lead industry

growth; opportunities in digitaltechnologies as well

AdvantageIndia

Policy support

• Policy sops, increasing FDI limits

• Measures such as digitisation of cabledistribution to improve profitability

Market Size:

USD30.4billion

•

2011

Market Size:

USD15.2

billion

More big-ticket deals such as WaltDisney- UTV, Sony-ETV and Zee-Star

and ease of institutional finance

• Increasing liberalisation and tariffrelaxation

Source: KPMG report 2012, Aranca ResearchNotes: AGV- Animation, Gaming and VFX, VFX- Visual Effects, M&A- Merger and Acquisition, CAGR-

Compound Annual Growth Rate, FDI- Foreign Direct Investment, E- Estimate

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