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India continues to be in the throes of an entertainment revolution spawned by economic liberalization and the subsequent rollout of CAS and DTH. The players in the entertainment industry can be classified into a three-link chain. First are the studios (including the animation studios), which comprise the hardware part of the industry, the second are the content providers and the third link comprises the distribution trolleys, which include the cable and satellite channels, multiplex theatres, MSOs and the DTH players.
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There are around 125 m television households (52% of total homes), and 74 m pay TV households (60% of TV households) in India. In the next 5 years, the number of TV households is projected to increase to 170 m (70% of total homes), while the number of pay TV households is projected to increase to 155 m (70% of TV households). The sector is set to witness a transformation through digitisation. Digitisation means that cable penetration will decrease to 78% from the current level of 95%. This will benefit all the stakeholders. The broadcasters revenues will increase significantly increasing their ability to spend on content. Digitisation will also be beneficial to the viewers as it means a better visual quality at a lower cost.
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In India, the ratio of advertising expenditure to GDP is about 0.4%. This is substantially lower in comparison to the developed economies as well as developing economies. As the Indian economy continues to develop and the television reach increases, its advertising expenditure to GDP ratio is expected to increase over the next 5 years.
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| Supply |
Presently there are approximately 200 channels in the fight for viewer ship, which has led to a shortfall in quality programmes. In the near future around 82 more channels across different languages and genres will be launched.
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| Demand |
The highly fragmented viewership has led to an increasing preference for niche channels.
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| Barriers to entry |
High for broadcasting since it is very capital-intensive. It involves the cost of leasing the transponder, setting up up-linking facilities, setting up pre and post-production facilities. The barriers to entry are far lower for content providers. Besides, broadcasters themselves commission programmes and finance their production. Hence margins are lower. Broadcasters are tapping the international securities markets and the private equity investors for funds. The broadcasters are finding it increasingly difficult to retain their key personnel. Inspite of the high barriers to entry a slew of channels across languages and genres are slated to be launched in the near future.
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| Bargaining power of suppliers |
High for content providers, reflected by the fact that Balaji Telefilm’s relisations per hour are increasing. However, terrestrial broadcasters such as Doordarshan and regional broadcasters such as Sun TV actually commission time slots to content providers.
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| Bargaining power of customers |
Relatively high. There is a surfeit of channels and programmes to choose from for the viewer. In the near future around 82 more channels across different languages and genres will be launched. The rollout of CAS and DTH services will enable the consumer to choose the channels that he wishes to view increasing his bargaining power.
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| Competition |
High amongst broadcasters especially for general entertainment channels. The Hindi General Entertainment Space will become more competitive with the entry of the TV18 group, UTV, NDTV, and INX Media. |
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The Indian media and entertainment industry recorded a growth of around 17% over the previous year. With this, the industry in India reached an estimated size of Rs 513 bn, up from Rs 438 bn in 2006. Though different segments of the Industry like online advertising, television, radio, OOH and filmed entertainment registered variable growth rates, the television industry recorded a growth of 19% over the previous year. It reached an approximate size of Rs 226 billion in 2007.
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In FY08, the television media sector continued to witness launch of new channels catering to varied genres. Along with the growth in television and cable & satellite homes in the country, new players and channels have sprung up in niche segments like news, fashion, sports, lifestyle, tourism and children. Broadcasters such as UTV, Zee launched a youth oriented channel keeping in mind India’s vibrant young population.
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During CY07, advertisement revenues accounted for 38% of the total ad spend. In India, the broadcasters receive only 10% of the subscription revenues as opposed to 35% to 40% in the developed countries. One of the key reasons why this discrepancy exists in India is due to the under-declaration of connections by cable operators leading to lower subscription revenues. However, it must be noted that over the last 2 to 3 years, there has been a consistent improvement in realisations from the subscription segment for broadcasters, largely due to the rollout of CAS and DTH services.
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The future of the entertainment industry will be decided on the interplay of a number of reasons like consumerism, advertising spend, content, pricing, technology and regulation. According to the FICCI-PWC report on the entertainment and media industry, it is estimated that this industry is set to grow at a CAGR of 18% to reach an estimated size of Rs 1.1 trillion in 2011. The television industry revenues are expected to grow from the present size of Rs 226 bn to Rs 600 bn by 2012, implying a 22% compounded annual growth over the next five years. Subscription revenues are projected to be the key growth driver for the Indian television industry over the next five years.
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The demographic profile of India also favours higher spends on entertainment, with the consuming class forming a sizeable chunk of the country's total households. Thus, this could lead to the emergence of a huge consumer base for the various products and services (including entertainment).
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New distribution technologies like DTH, Conditional Access System (CAS) and IPTV, hold the future of the media industry as increasing digitalisation will radically alter the ways in which consumers receive channels. Also, these distribution platforms will give broadcasters direct access to consumers providing not just routine content but also customized value added services (like video on demand). As a result of this, the average revenue per user will increase significantly. Moreover, broadcasters are also expected to rake in larger advertisement revenues, as ad spend is likely to go up on the back of the robust economic growth.
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