12 Show Business                                                w w w. f i n a n c i a l e x p re s s . c o m             ...
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Indian Media and Entertainment Industry Landscape


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An indepth article to the media and entertainment industry in India, as published in The Financial Express, March 15, 2012.

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Indian Media and Entertainment Industry Landscape

  1. 1. 12 Show Business w w w. f i n a n c i a l e x p re s s . c o m THURSDAY l MARCH 15 l 2012 ing content with mass connect, star power and digitisation—facilitated countrywidereleases,allcontributed their part in this turnaround. In the year gone by not only did A-list star , cast films do well, but niche/focused content from independent film mak- ers also gained widespread accep- tance. Ragini MMS, Murder 2 and Tanu weds Manu performed well at the box office in 2011. Entertaining stories were appreciated across gen- res. Themes that were women orient- ed, such as No One Killed Jessica and The Dirty Picture, horror-based Haunted, urbane life-based Zindagi Na Milegi Dobara, Delhi Belly and ro- mance-based Ladies v/s Ricky Bahl wereallboxofficehits. Cable and satellite revenues con- tinue to account for a sizeable pre-re- lease recovery of high budget Hindi films. C&S rates for Ra.One and Don 2 wentpasttherecordsetbyThreeIdiots in 2009. Continuing the trend, Ag- neepath and under production TaalashgarneredoverR40croreeach in C&S revenue by end of 2011. Albeit on a much lower base, C&S revenues forregionalcinemaalsostrengthened during the year. Aggressive market- ing and promotion tactics became commonplacein2011. While Ra.One had the longest and most elaborate marketing cam- paigns in the history of Indian cine- IMAGING: SADHANA SAXENA ma, even medium budget films spent Entering the increasingly higher amounts to get strong pre-launch visibility Some of . Sudipta Datta the other key themes of 2011 were in- creasing digitisation of theatres, F OR THE media and en- widening acceptance of 3D exhibi- tertainment industry , tion, increasing multiplex footprint, 2011 was a bit of a mixed rising trend of cinema advertising, bag. On the one hand, it imposition of service tax on film ex- will be considered as the hibition and a growing presence of DIGITAL AGE year in which digital transformation Hollywood. Although film budgets of theindustrybegantotakehold,on have increased sharply over the theother,theeconomicdownturndid years, the commercial success ratio impact revenues, with advertising of films has remained roughly the growth somewhat muted in the sec- same at 15-17%. Spending more did ondhalf of theyear.ButastheFICCI- not necessarily increase the likeli- KPMG Report on Media and Enter- hoodof commercialsuccess.Patiala tainment Industry 2012, released in House, Mausam and Game did not do MumbaiduringFICCIFRAMES2012 as well as anticipated despite having on Wednesday revealed, the media , star casts, supporting budgets and and entertainment industry which , grew 12% in 2011 to R72,800 crore, is The FICCI-KPMG report on the media and entertainment industry says the sector is now wide marketing. now better prepared for a financial meltdown, having seen a focus on better prepared for a financial meltdown, having seen a focus on managing costs, New media: On the fast track managing costs, innovation and re- search since the recessionary pres- innovation and research since the recessionary pressures of late 2008 and 2009 New media continued its growth tra- jectory in 2011, with estimated sures of late 2008 and 2009. growth in advertising revenues in ex- While television continues to be in expected to increase significantly . availability of broadband and other advertisementspends.Theprintplay- On the other hand, the tier-II and cess of 40% over last year. Coming in thedriver’sseat,representingaround The TV industry is expected to grow value-added-services, and enhanced ers continued to adopt a cautious and tier-III markets continue to be at- at approximately R1,540 crore rev- 45% of the entire M&E sector, grow- at a CAGR of 17% over 2011-16, to user experience through better pragmaticapproach,withprimaryfo- tractive due to increased affluence enue in 2011, digital adspend reached ingtoR32,900crorein2011fromR29,700 reach R73,500 crore in 2016. The total viewing quality and consumer ser- cus on consolidating their position in and a consumerist outlook. The in- approximately 5% of total media and crore in 2010, the year saw important numberof TVchannelsinIndiawent vice. While the transition towards core markets. The growth in adver- dustry is beginning to treat the ur- entertainment industry advertising developments in terms of multiple upto623in2011,andmanymorechan- digitisation is not expected to be en- tisementrevenueshasbeenataCAGR ban consumer on a par with the revenue. This share is expected to films crossing the R100 crore-mark at nels are awaiting approval for broad- tirelysmooth,andthereareboundto of 8.7%, whereas circulation rev- global citizen and developing con- continue to grow over the coming the box office. The year 2011 also saw cast. There has been a significant in- be implementation challenges, the enues have displayed a CAGR of 3.7% tent and delivery platforms which years, driven by significantly higher growing commitment from the cable crease in demand for satellite overall indicators appear positive, between 2007 and 2011. The advertise- are in tune with the changing times. growth rates in online advertising industry to pursue digitisation as per bandwidth, with the introduction of and the industry believes that digiti- ment revenues continued to be the On the other hand, the industry will spendcomparedtotraditionalmedia. the government’s mandate, regional HD channels, DTH expansion and sationof cablenetworksacrossIndia main source of revenue for the print have to connect with the consumer This is good news for the industry marketsdefiedrecessionarytrendsin new channel launches. islikelytobelarge- industry contribut- , in emerging consumption centres as it comes to terms with the impact terms of growth of television and While there has been a significant ly successful. In ing 67% to the in- by establishing strong relation- of the Internet on its traditional print, the government’s increased increaseinadvertisementinventory , fact,theremaybea THE OVERALL M&E dustry’srevenues. ships through local language con- businessmodelsandbeginstoevolve commitment towards phase 3 for ra- advertisement rates generally re- delay of six to 12 MARKET IN INDIA IS The Indian print tent, quality service, innovative them for monetising its content in dioandthegrowthof newmedia. mained flat or declined in 2011, with months for com- industry has to be business models and bringing com- the digital world. The digital media ExcerptsfromtheFICCI-KPMGre- advertiserscuttingadbudgetsdueto plete digitisation EXPECTED TO GROW AT looked at from two fort of familiarity. The rate of ad- ecosystem in India is evolving rapid- port on the top three sectors—TV , the economic slowdown. However, across metros. As A COMPOUNDED perspectives—the spend growth in smaller cities has ly.ContinuedgrowthinInternetpen- printandfilms—andthefastgrowing with a large number of untapped ad- Ronnie Screw- ANNUAL GROWTH RATE urban centres and accelerated and overtaken the tradi- etration and mobile device access is newmediasector: vertisers who are currently using vala,MD,WaltDis- OF 15 % PER ANNUM the emerging cen- tional markets. expected to drive consumption. This only the print platform, there is po- ney India puts it: OVER THE NEXT FIVE tres of consump- will further drive adoption by adver- Television: Digital tential for further growth for TV . “There is likely to tion. Thus far the Films: Scripting a tisers and developments in the pay- route to growth The cable television industry in be delay in digiti- YEARS, TO REACH metros and tier-I turnaround ment ecosystem to facilitate better Television is the largest medium for India is poised for one of its most sig- sation due to prac- R1,40,000 CRORE IN 2016 cities were the hub The Indian film industry has recov- monetisation. media delivery in India in terms of nificant developments in the last tical difficulties… of economic ac- ered from a two-year slowdown in The overall M&E market in India revenue, representing around 45% of decade—atransformationtotheDig- but the two big tion; however, the 2011, and was estimated to be of a size is expected to grow at a compounded the total media industry The TV in- . ital Addressable System (DAS) for themes for 2012 and 2013 are digitisa- focus is now shifting to the next 40 of R9,300 crore in 2011, indicating a annual growth rate of 15 % per an- dustry continues to have headroom television distribution. Cable opera- tion of cable and broadband.” cities which are experiencing rapid growth of 11.5% over 2010. With the numoverthenextfiveyears,toreach for further growth as television pene- torsinaDASregimewouldbelegally urbanisation and greater economic cricket World Cup and IPL taking R1,40,000 crore in 2016. The potential tration in India is still at approxi- bound to transmit only digital sig- Print: Consolidation; growth. Powered by strong con- away four months in the first half of for increase in media penetration, mately60%of totalhouseholds.India nals. Subscribed channels can be re- new frontiers sumerism, these centres have been 2011, there were only about 40 avail- growing importance of regional continues to be the third largest TV ceivedatthecustomer’spremiseson- In the calendar year 2011, the R20,900 insulated to a large extent from the ableweekendsforfilmreleases.Body- markets, increasing consumption in market after the US and China, with ly through a set-top box equipped crore print industry grew by 8.4% impactof globalslowdown.Theplay- guard, Singham, Ready, Ra.One and tier-IIandIIIcities,impactof regula- 146milliontelevisionhouseholds.Ca- with a conditional access card, and a fromR19,300crorein2010,slightlylow- ing field in both these markets is Don2breachedtheR100-croremarkin tory changes, more focused con- ble and satellite (C&S) penetration of subscriber management system erthanexpectations.Eventhoughthe quite different. domestic theatrical collections. The sumer research, innovation in con- television households is close to 80%, (SMS). In a nutshell, each user in the longtermgrowthstoryof Indianprint The urban centres observe high industry took just one year to more tent, marketing and delivery withDTHdrivingasignificantpartof network would be uniquely identifi- industry remains promising, the sec- levels of media penetration, faster than double the count of films in this platforms to serve different niches, thegrowthinthepast12months.With able to the service provider. Digital tor was impacted due to the overall adoption of technology deeper pene- , elite club of high revenue generating increasing device penetration like the impending digitisation of all ana- television is expected to provide the macro environment being depressed. tration of Internet and mobile and a Hindicinema.Asteadyincreaseinav- mobiles, tablets, PCs, etc, all point to- log cable subscribers imminent, pen- consumer access to a higher number Themacroeconomicenvironmentre- rapidchangeinconsumerbehaviour erage ticket price on account of the wards a very positive future for the etration level of digital households is of TV channels, customised tariffs, mained challenging and dampened and media consumption patterns. growing multiplex culture, increas- industry the report said. ,Budget: A wish list from media & entertainment sectorT HE MEDIA & entertainment ahead of the Budget this year: tax on transfer/ licensing of copyright cluded from the service tax levy . shoot in India. content and hence, is not in the nature (M&E) industry stands on the on non-theatrical streams. To prevent Multiplexes have helped in bringing Presently, amount paid to non-resi- of royalty However, divergent views . brink of a revolution, as new Rationalise taxes for multiple taxation on the same item, audiences back to theatres. Availabili- dent Indians for participation in any taken by tax authorities in characteris-technologies and platforms are trans- the government is requested to ex- ty of multiplexes in tier-II and tier-III sport in India is liable to tax at conces- ing these receipts as ‘royalty’ or ‘busi- film industryforming the way we experience and en- empt ‘copyright in theatrical distribu- cities is significantly lower vis-à-vis sional rate of 10% on gross basis. It is ness income’ has led to protracted liti-joycontent.Itisbecomingincreasingly High entertainment tax is a major tion of cinematograph films’ from ser- population. Further, tax incentives recommended that a similar provision gation. A clarification that theseimportant to ensure that tax laws not threat to the sector’s survival. Such ad- vice tax levy. The government should shouldbeofferedfordigitisationof cin- be introduced to tax foreign artistes, payments do not qualify as ‘royalty’ isonly recognise this, but also provide for ditional economic burden on an indus- include ‘copyright emastoexpeditegrowth performers and entertainers. sought to settle the dust.platform neutrality to ensure that con- try that showcases Indian art and cul- in theatrical distribu- prospects in these cities The government should take a cue The government should considersumptionof contentoverdifferentplat- turetotheworldisunjustified.Hence,it tion’ in the list of and curb piracy . from steps taken by federal/ state gov- granting relief from levy and collec-forms and screens have consistency in is imperative that entertainment tax negative services. The law requires for- ernments across the world such as Sin- tion of service tax on subscriptionterms of tax treatment. structure across the country is ratio- Under the negative eign performers, enter- gapore, the UK, Germany South Africa , charges received by cable operators In recent years, the ability of the nalised by bringing down rates of en- list- based service tax tainers, etc, to obtain in- and the US and should work towards in- and DTH operators, since theseM&E industry to grow at the desired tertainment taxes in states like Maha- legislation, govern- come-tax clearance centivising the film industry through a charges are already subject to enter-pace has been marred by myriad taxes rashtra, Delhi, UP, West Bengal, ment has proposed to certificate (‘TCC’) well defined plan for content creation tainment tax. The weighted deductionin various forms and multifarious Gujarat, Haryana, etc. High entertain- levy service tax on the before departure. The and infrastructure. of 200% of the actual expenditure in-statutorycompliances.Whilewerecog- ment tax also acts as an impediment to ‘right to enter any procedure of obtaining curred on in-house research and devel-nisetheindustryaspartof ourcultural live entertainment industry, which is premises’. Entry into RAKESH TCC is time consuming Foreign cos: Clarify status opment of the Act is currently avail-heritage, the average indirect tax bur- on a growth path. premises such as films, JARIWALA and onerous. It is suggest- Foreigntelecastingcompaniesgeneral- able to only certain segments of M&Eden of 40-45% on films is on a par with Film producers generate revenues theatres, amusement ed that an alternate ly grant distribution rights for their sector. It is suggested that this benefitproducts such as alcohol and tobacco from theatrical and non-theatrical parks could be liable to mechanism for clearance channels to an Indian company, which shouldbemadeavailabletoproductsasand goods with negative externalities rights, both of which are liable to ser- service tax. Since these activities are or a monetary threshold for triggering in turn transfers these distribution wellasproductionservicescompanies.(such as polluting products). vice tax. Separately, various state gov- already liable to high entertainment TCC provisions is provided, as the rights to the cable operators etc. The Provided below are the key issues ernments classify ‘copyright’ as taxes by states, it is suggested that en- current set up and administrative bur- payment for grant of distribution Rakesh Jariwala is partner and taxaffecting the sector and a wish list goods, thereby levying value added try into such premises should be ex- den discourages foreign talent to rights is not for the ‘copyright’ in the expert, Ernst & Young