The document discusses three key industries - animation, gaming, and broadcasting in India. 1) The animation and gaming industry in India is growing rapidly at a CAGR of 32% and 13% respectively, but still small at USD 739 million total in 2009. There is potential for much higher growth given India's capabilities in outsourcing and the low share of the global animation and gaming outsourcing markets currently captured by India. 2) The television broadcasting industry is large at USD 7.8 billion in 2009 but facing challenges from increasing digitization and competition from other media. Future growth depends on developing niche content and adapting to technological changes. 3) The radio broadcasting industry remains constrained by regulations but

1. Animation. Broadcasting. Gaming.
On the Cusp of Growth
www.deloitte.com/in

2. Contents
Message 3
About ASSOCHAM 5
Animation and Gaming 6
Introduction 6
Global Animation and Gaming Industry 6
Indian Animation and Gaming Industry 8
Animation 9
Introduction 9
Animation Entertainment 9
Entertainment VFX 16
Custom Content Development 17
Gaming 20
Global Gaming Industry 20
Indian Gaming Industry 20
Indian Animation & Gaming Industry: Future Outlook 23
Television 24
Introduction 24
Television – Revenue Streams 24
Television Channels in India 27
Television Genres in India – From Generic to Niche 27
Policy Framework 30
Future Outlook 31
Radio 32
Introduction 32
Key Growth Drivers & Constraints 33
Future Outlook 34
2

3. Message
The three focus segments of this paper: Animation, this growing phenomenon. It will be really interesting
Gaming and Broadcasting all have the potential to see to see if the industry witnesses any consolidation in
near future as inflection points in their growth. the coming 12-18 months. Another key thing that I am
really awaiting is the reaction of the content providers in
Animation and Gaming reminds me of the the industry to the oncoming 3G Wave.
transformation the IT-ITES Industry brought to the Indian
economy and populace some years back. The Indian The future of radio in this country is primarily dependent
animation industry is well-geared to start grabbing a upon change in the regulations and the mode of the
larger share of the increasing outsourcing pie. As the much-awaited Phase 3 Licensing. The real potential of
economy moves out of tough times, there is hope that the medium which lies in its local reach and interactivity
animation houses in India would take the initiative to can never be realized unless radio broadcasting players P N Sudarshan
develop the in-pipeline high budget high quality movies find it commercially feasible to operate in small towns Senior Director,
and animation content and showcase their capabilities. and cities, with the freedom to broadcast multiple Deloitte in India
Players are also expected to leverage the incoming 3G genres.
technology and develop end-to-end mobile games (IPs).
Promoting gaming / animation as a career in India and Our media spends are abysmally low (USD 4 per capita)
working with the Government for higher dissemination compared to our neighbours, China (USD 27 per capita).
of related professional education hold the key. There is enough demand in the Indian economy and
populace to propel the media industry to show a > 15%
As of now, Television, as evident from Indian and growth per annum and slowly bridge this yawning gap.
global experiences, does not have a real substitute for
either the audience or the advertiser. However, with I acknowledge the contribution of Sandip Biswas,
the unprecedented growth of channels in India, only Director, Deloitte Touche Tohmatsu India Private Limited
the players who invest in understanding the consumer to this report.
and target pre-determined segments with innovative
content and programming are slated to emerge winners,
leaving the others behind. Digitization will be the most
rapidly growing trend in this industry – Players need to P N Sudarshan
understand the implications and adapt themselves to Senior Director, Deloitte in India
Animation. Broadcasting. Gaming. On the Cusp of Growth | 3

4. Message
The Indian Media and Entertainment (M&E) industry This White Paper, jointly prepared by ASSOCHAM and
stood at USD 12.9 billion in 2009 registering a 1.4 per Deloitte Touche Tohmatsu India Private Limited, mainly
cent growth over last year. Over the next five years, the deals with Animation, Broadcasting and Gaming and
industry is projected to grow at a compound annual also the future roadmap for the Industry.
growth rate (CAGR) of 13 per cent to reach the size of
USD 24.04 billion by 2014. Additionally, the gaming I sincerely hope that FOCUS 2010 will be beneficial to
segment is expected to be the fastest growing sector the stakeholders in further promoting this Industry.
in the M&E industry. The sector showed a 22 per cent
growth in 2009 and is expected to grow at a CAGR of
32 per cent to reach USD 705.2 million by 2014, while
the animation segment is expected to record a CAGR of (D S Rawat)
D S Rawat
18.7 per cent in the next five years. Secretary General, ASSOCHAM
Secretary General,
ASSOCHAM
We are pleased to organise the fourth edition of Global
Summit on Entertainment& Media: FOCUS 2010 with
the Official Support from the Ministry of Information
& Broadcasting, the major Film Trade Associations and
active participation from the Industry.
4

5. About ASSOCHAM
The Associated Chambers of Commerce and Industry These encompass areas such as: Domestic &
of India (ASSOCHAM), India's premier apex chamber International Trade, Commerce, Industry, Services,
covers a membership of over 300,000 companies and Agriculture, Education, Food Processing, IT & BPO,
professionals across the country. It was established Economic Affairs, TQM, Energy, Environment,
in 1920 by promoter chambers (Bombay Chamber of Capital Market, Banking & Finance, Direct & Indirect
Commerce & Industry, Cochin Chamber of commerce Taxation, WTO & IPR, Infrastructure, Pharma, Health,
& Industry, India Merchants Chamber, Mumbai, The Biotechnology & Nanotechnology , Tourism and
Madras Chamber of Commerce & Industry, PHD Telecom.
Chamber of Commerce & Industry) representing all
regions of India. Leading Corporates like Aditya Birla Management
Corporation Ltd., Boeing, DLF, IBM, Reliance
As an apex industry body, ASSOCHAM represents Communications, Reliance Industries, TATA, Northrop
the interests of industry and trade, interfaces with Grumman, Cable & Wireless, Warburg Pincus, SREI
Government on policy issues and interacts with Infocom, Ernst & Young, Huawei Telecommunications,
counterpart international organizations to promote ZTE Telecom, Qualcomm, Centurion Bank of Punjab
bilateral economic issues. ASSOCHAM is represented Limited, Diageo India Pvt. Ltd., DSP Merrill Lynch,
on all national and local bodies and is, thus, able Geojit Financial Services Ltd., GMR Infrastructure Ltd,
to pro-actively convey industry viewpoints, as also ITC Limited, Jet Airways (India) Private Limited, Kotak
communicate and debate issues relating to public- Mahindra Asset Management Co. Ltd, Microsoft, Spice
private partnerships for economic development. Communications Pvt. Ltd., Videocon Ltd., Vodafone are
some of the Esteemed Members of ASSOCHAM.
ASSOCHAM members represent the following sectors:
• Trade (National and International) About ASSOCHAM please log on www.assocham.org
• Industry (Domestic and International)
• Professionals (e.g. CAs, lawyers, consultants)
• Trade and Industry Associations and other Chambers
of Commerce
ASSOCHAM operates through 90 Expert Committees
that provide an interactive platform to Members for
interaction and aid formulating Policy recommendations
so as to facilitate Economic, Industrial and Social
Growth.
Animation. Broadcasting. Gaming. On the Cusp of Growth | 5

6. Animation and Gaming
Introduction Global Animation and Gaming Industry
Animation, briefly described, is a rapid display of time The Global Animation and Gaming industry, growing at
sequenced frames to create an illusion of continuous 12% p.a. (2005-2009) is a USD 115 Billion industry
movement. The sub-segments within Animation and (CY 2009). The industry is estimated to continue its
Gaming may be defined as follows: growth rate at 10% p.a. to reach USD 170 Billion by
CY2013.
Animation Figure 2: Global Animation and Gaming Market
• Animation Entertainment: Custom animation devel- Revenues (USD Bn)
opment for television, movies, or DVD
170
• Visual Effects (VFX): Special effects development
%
used mainly in movies and ad productions 10
• Custom Content Development: Development of 140
custom content catering to multiple segments,
including Corporate, Higher Education etc. 115
%
Gaming
12
• PC Games: Games played on the personal computer;
can be single-player or multi-player 74
• Mobile Games: Games played exclusively on the
mobile handset. Currently consists of mostly single-
player short games
• Console Games: Games played on dedicated gaming
consoles. These boast of better graphics, and
controllers than other types of games
• Online Games: Games played over the internet. The
2005 2009E* 2011P** 2013P
platform can be PC, Mobile, Console * Estimated
Source: Nasscom Industry Report 2006, 2009 ** Projected
Figure 1: Animation & Gaming Industry Segments
Animation and
Gaming Industry
Animation Gaming
Cust om
Animation Visual Effe cts
Content PC Mobile Console Online
Entertainment (VFX)
Development
6

7. Worldwide, US is the largest market for animation. US contributor to the revenues of leading game publishers/
has the largest number of animation movie releases developers in the world viz. Nintendo, Electronic Arts
(29 in 2008) and houses the 2 largest animation (Refer Figure 3). However, China is the fastest growing
movie studios in the world, namely Disney Pixar and market for gaming. Most of the animation and gaming
Dreamworks. Major markets for gaming are US, Europe intellectual properties originate from these countries.
and Japan, US being the leader. US is the highest
Figure 3: Region-wise revenue contribution for leading game publishers
North America
Nintendo 45%
EA 55%
Activision Blizzard 61%
Europe Asia
Nintendo 34% Nintendo 17%
EA 39% EA 6%
Activision Blizzard 36% Activision Blizzard 3%
Source : Analyst Reports
Note : Activision Blizzard figures are for 2008; Rest for 2010
Animation. Broadcasting. Gaming. On the Cusp of Growth | 7

8. The Indian animation and gaming industry derives
its revenues majorly from outsourcing. International
Indian outsourcing share of the production houses outsource work to Indian studios
while international game publishers outsource work to
global market for animation
Indian game development companies. For animation,
India caters primarily to US and UK. The domestic share
of the Indian animation revenues was only 30% as of
and gaming industry is very 2009.
low as compared to the Macro indicators suggest an exponential scope for
growth, both on the domestic and the outsourcing
corresponding share in the IT
front:
Domestic: Indian domestic animation and gaming is a
and BPO Industry miniscule 0.6% of the worldwide animation and gaming
market, thus indicating a huge scope for growth.
Outsourcing: India has the inherent advantages of
Indian Animation and Gaming Industry: High outsourcing, which is evident from its success in the IT/
Potential for Growth ITES outsourcing sector. However, Indian outsourcing
The Indian Animation and Gaming industry, in spite of share of the global market for animation and gaming
a robust growth rate of 32% p.a. (2005-2009) is only a industry is very low as compared to the corresponding
USD 739 million industry. share in the IT and BPO Industry. (Refer Figure 5)
Figure 5: India’s share of global outsourcing market
Figure 4: Indian Animation and Gaming Industry Revenues (USD Mn)
IT Outsourcing and BPO 51%
35% 1316
Animation & Gaming <10%
533
32%
239 1161 Source: Secondary Research
735
64 500
177
2005 2009E 2011P 2013P This shows the immense potential that the Indian
animation and gaming industry holds, especially from
Animation Gaming
overseas outsourcing.
Source: Nasscom Industry Report, Secondary Research
8

9. Animation
Introduction
Animation, as mentioned in the previous section, includes Animation Entertainment, Entertainment VFX and Custom
Content Development.
Figure 6: Animation Segments by Share
India: Animation
Animation Custom Content
Visual Effects (VFX)
Entertainment Development
Revenues (2009E) 122 (24%) 83 (17%) 295 (59%)
(USD Mn)
Animation Entertainment
Indian animation entertainment industry is highly fragmented, with top 10 players contributing less than 15% of
the overall revenues. Indian players are primarily involved in the labour-intensive production and post-production
activities, as a ‘Service Provider’ (Refer Figure 8), working on the revenue model of ‘Work-For-Hire’.
Figure 7: Animation Entertainment Value Chain
Marketing
IPR and Content Pre Post Distribution
Production
Development Production Production and Exhibition
• Identification of • Preparation • Development • Final sound • Promotion,
an existing IP or of the script, of specifica- recording, color distribution video
generation of a character design, tions regarding editing, testing DVD release and
new idea storyboard layout the character, and special sound cinema and TV
Activities
• Involves asset development background effects screening
procurement, paint, inking and
fund scheduling, painting and
and integration visual effects
of resources
Percentage
5% 10% 45% 30% –
Effort
Outsourcing Emerging Emerging High Medium –
Domestic Emerging Medium High High –
Source: Nasscom Industry Report 2009, Deloitte Understanding
Animation. Broadcasting. Gaming. On the Cusp of Growth | 9

10. Content Development and pre-production activities are nascent in India, both for the domestic and the outsourcing
market.
Figure 8 : Animation Entertainment Service Models
Marketing
IPR and Content Post
Pre Production Production Distribution and
Development Production
Exhibition
Content Creation Service Provider
Integrated Studio – Offshore Facility
Co-Production
Integrated Studio Owned Content
Source: Animation & Gaming Report, Secondary Research
10

11. Size, Growth & Segments
Animation Entertainment segment consists of custom animation development for television, DVD, or theatrical
movies.
Figure 9: Animation Entertainment Size (USD Mn), Growth & Segmental Split
253
20% 20%
170
55%
14% 122
25%
72
2005 2009E 2011P 2013P Television Direct to DVD Movies for theater
Source: Nasscom Industry Report 2009 Source: Nasscom Industry Report 2009
Figure 10: Domestic Animation Entertainment Split This segment is estimated at USD 122 Million (CY 2009)
and is expected to show a CAGR of 20% (2009-2013)
to reach USD 253 million by 2013. TV contributes to
14% majority (~55%) of the overall Animation Entertainment
market, followed by approximately equal share for
Movies and Direct-to-DVD.
32%
54% Recent Trends and Growth Indicators
The Animation Entertainment Industry in India is
expected to be shaped by both domestic (Current
Contribution: 25%) and Outsourcing (Current
Contribution : 75%) trends and growth drivers.
Television Movies for theater DVD Domestic Market
TV contributes the largest (~55%) of the domestic
animation entertainment market in India, followed by
movies.
Animation. Broadcasting. Gaming. On the Cusp of Growth | 11

12. Both demand and supply drivers are expected to shape Moreover, the share of kids’ genre in overall TV
up the domestic animation entertainment market in Viewership has been rising significantly, which indicates
India: the growing demand for animation content in India.
Indian Viewership Maturity Demand For Original Indian Content
In India there has been a cultural mindset that animation The demand for original Indian content has been
is meant for kids only. This has restricted the viewership increasing over the years. For example, Pogo, a leading
of animation content till now. However, this mindset is channel for kids has increased its original Indian content
gradually changing, leading to increased viewership of from 50 hours in 2004 to more than 200 hours in 2009.
animation content among adults. % viewership of kids Similar is the case with Nickelodeon who, inspired by
channels in 2009 indicates substantial viewership of the success of Little Krishna, is looking to expand its
kids channels among the 14+ age group category (Refer local content. Other channels are expected to follow the
Figure 11). Moreover, almost 30-35% viewership across same trend.
Cartoon Network and Pogo have been found to be in
the 15+ age group. Comics’ Players : Monetization Of Existing Content
Comics’ players are looking to monetize their
Figure 11: Percentage viewership across age groups content libraries through both TVs and Theatres.
of kids channels Indian publishers like Diamond, Raj, Vimanika and
Chandamama have announced plans to enter the movie
15.7%
space with their famous comic characters:
Table 2: Increasing influence of comics’ players in
the animation industry
3.5% 3.9%
3.0% 2.7%
Diamond comics has announced plans to launch a TV
channel targeted at the 4 to14 year age group with
4 to 14 15 to 24 25+ Male 25+ Female 45+ both animation and live action content
Source: FICCI-KPMG Indian Media & Entertainment Large production houses are also buying rights from
Industry Report 2010 these publishers to produce animated TV series - Big
Animation Pvt. Ltd has bought rights from publishers
Growing Demand for Kids’ Genre of Chandamama to produce an animated TV series.
The number of TV channels dedicated to animation and Toonz Animation India Pvt. Ltd is producing a full-
kids has been steadily increasing in India (Refer Table 1). length animated feature film based on a prime
In 2009 itself, 3 channels for kids were launched. This property from the library of Chandamama for an
trend is expected to continue, which bodes well for the estimated amount of USD 4.5 million,
animation entertainment industry in India.
Filmmaker Anurag Kashyap has bought the rights of
Raj Comics’ popular character – Doga.
Table 1: TV channels dedicated to animation and kids
Year No. of TV Channels Launched Name of channels
1995 1 Cartoon Network
1999 1 Nick
2004 5 Hungama, Pogo, Toon Disney (Jetix), Disney Channel, Animax
2007 1 Chutti TV
2009 3 Spacetoon, Khushi TV, Chintu TV
12

13. Animation in TV Advertising
The Indian TV advertisement industry size is expected to increase from USD 1.9 billion in 2009 to USD 3.3 billion in
2013, growing at a rate of 13% p.a. This, coupled with growing popularity of animated characters is expected to
boost the industry. Animation commercials cost far lower compared to advertisements with celebrities and establish
a connect with the target group of children and young adults. They relate to audiences irrespective of language and
cultural barriers. All this points to increased usage of animation in TV Advertising.
Figure 12: Examples of animation used in Indian TV advertising
Animation Movies For Theatres
India lags the global market significantly in terms of number of animation movies produced in India. The box-office
failure of Roadside Romeo, coupled with the effects of recession, made Indian filmmakers shelve their projects on
Indian animation movies. However, Hollywood films such as Ice Age 3 and Monsters vs. Aliens enjoyed success
on Indian screens. The release of ‘Avatar’, a movie that is a hybrid of live action and computer generated animated
characters became the largest grosser in India indicating that Indian audience is interested in animated content. The
Hindi, Tamil and Telugu dubbed versions of the film did equally well, highlighting the extremely responsive regional
market for animated content in India. As the country moves out of recession and Indian audience matures, animation
movies in the pipeline are expected to see execution.(Refer Table 3 )
Table 3: Animation movies in the pipeline for 2010
Movie Name Produced by
Sultan Soundarya Rajnikant
Toonpur Ka Superhero Kumar Mangat, krishika Lulla
Kuchi Kuchi Hota Hai Karan Johar
Delhi Safari Krayon Pictures
Arjun UTV
Alpha and Omega Crest Animation
EKEH 2.0 Motion Pixel Corporation and PNC motion entertainment
Animation. Broadcasting. Gaming. On the Cusp of Growth | 13

14. Outsourcing Market Figure 13: Split of outsourcing revenues across its
Similar to the domestic market, TV contributes the sub-segments
largest (~55%) of the outsourcing animation entertain-
ment market in India, followed by Direct-to-DVD.
Outsourcing work to India is dependent on the
• Animation Content Worldwide 28%
• % of Content Outsourced Globally and
• % Outsourced to India
55%
17%
Trends and growth drivers for each of these param-
eters need to be understood / analysed to estimate the
direction of the ‘Animation Entertainment’ Outsourcing
pie.
Animation Content Television Movies for theater DVD
Animation movies in the largest animation market i.e.
US have been growing (US produced 29 animation
movies in 2009). This is primarily propelled by the high % Outsourced
box-office earnings of these movies The recent recession has forced the production houses
worldwide to step up their focus on cost savings
Table 4: Box Office Earnings of certain animation measures. Comparison of production costs coupled
films worldwide with their increased focus on cost savings is expected
to translate into higher % of work outsourced globally.
Table 5 provides an indication of India’s advantage over
Animation Year of Worldwide Box Office
other countries.
Film Release Earnings (USD Mn)
Shrek 3 2007 799
Table 5: Estimated costs for 30 minutes of animated content
Wall E 2008 533
UP 2009 711
India Korea, Philippines North America
Plans of the two largest animation houses in the world 2D Hand drawn USD 45,000 USD 60,750 USD 180,000
Disney Pixar and DreamWorks point to a similar growth - 50,000 - 67,500 - 200,000
for future. Disney Pixar released 8 movies in the last two 3D USD 90,000 USD 121,500 USD 360,000
years. It plans to increase the number to 13 movies from Backend USD 200,000 USD 270,000 USD 800,000
2009-2012. Similarly, DreamWorks plans to produce production
5 movies every two years from 2009 compared to 2 Flash Animation USD 20,000 USD 27,000 USD 80,000
movies a year previously. However, in wake of the recent
economic recession, the budgets for these movies are Source: Analyst Report
expected to stagnate.
14

15. % Outsourced to India Indian Animation Entertainment Industry:
Animation Services outsourced to India is not only a Overall Outlook
function of the cost but also depends on the capability Indian Animation Entertainment Industry is expected
of the Indian players and its recognition world-wide. to witness a significant growth, both in terms of
Indian animation players are surely moving up the value revenue and participation in the value chain. The Indian
chain with their experience and are gradually getting animation industry started by doing work for foreign
recognized as well. This is evident from the large no. of companies. Increasingly, it is developing characters,
recent co-production deals: lines and voices of its own. Studios are looking at new
business models, including partnerships, to produce
Table 6: Co-production deals in India films and shows. Sometimes, the partnership may just
be an investment. In return, they get to own a big
DQ Entertainment: 30+ global Co-productions deals chunk of merchandising rights. Some are even nego-
with many leading companies like BBC UK, American tiating distribution rights. This ensures flow of money
Greetings Properties, M6 etc. even if there is no cash flow in the short term. Today,
global companies are looking at India for co-production.
Sanraa Media: Deal with UK based Endemol for the
co-production of animated series – The 99
As the industry gains expertise and tries to move up the
Toonz Animation: Co-production deal with Spectra
value chain, it faces a few daunting challenges, which
Animation of Canada to co-produce 52 episodes of a
it needs to overcome to come close to realizing its
Malayalam animated TV serial ‘Paddy’s Pages’
potential:
Improved capability and perception of the Indian players Skilled Manpower
is encouraging for the outsourcing pie of the animation Similar to IT Services, skilled manpower is the basic
services in India. requirement for producing quality animated content. As
per Nasscom Industry Report 2009, manpower require-
ment for animation in India is expected to grow from
17,500 in 2009 to 29,500 by 2012. However, lack of
employable resources poses a large constraint, which is
primarily due to the following reasons: Low awareness
of animation as a career and non-existence of a stand-
ardized and quality curriculum across the handful of
institutes in India.
Animation. Broadcasting. Gaming. On the Cusp of Growth | 15

16. Lack of Government Support The Entertainment VFX Industry has shown a very high
Indian Government has been providing support to the growth rate of 53% over 2005-2009 and is estimated at
IT and IT Enabled Services industry in India, thus leading USD 83 million in 2009. 60% of the market is for work
to its growth. Indian animation players lack any such done for overseas clients.
Government support either through tax rebates or
grants. Moreover, competing outsourcing destinations Recent Trends and Growth Indicators
e.g.Canada, UK have signed tax treaties with the US. Domestic and overseas markets are expected to shape
the Entertainment VFX Industry in India
Tight Budgets
Indian animation movie is a low budget INR 10-12 Domestic Market
crore movie, primarily meant to hedge the involved
financial risks. In doing so, the quality takes a beating VFX in Movies
and the movie fails to compete with a USD 100-200 The use of VFX in live action films has seen a steady and
Mn Hollywood Production. As production houses significant growth over the years. Many live action films
grow bigger and financially stronger, the budgets are today include a VFX sequence and the sheer duration of
expected to improve. these screen shots has also risen substantially.
IP Protection Usage in Broadcast and Advertising
Piracy of DVD-based videos is rampant in India, which Usage of VFX in broadcast helps in significant reduction
eats into the revenues for the producers and distribu- of costs. Its usage brings down the set creation costs for
tors. Weak IP Regulation and ineffective enforcement a broadcast by almost 60-65%, particularly for mytho-
discourage animation players in India to produce their logical shows. It also helps in costs savings of 30-40%
own IP. Moreover, it also discourages International for commercials.
Players, who are generally very protective of their IPs, to
outsource to India. Pre-Visualization Trend
Pre-Visualization trend is a technique where-in the shots
Entertainment VFX can be visualized on computers before they are actually
Similar to Indian animation entertainment industry, shot. This increases the efficiency of production and
Indian animation VFX industry is a highly fragmented reduces cost of production. Growth of this trend would
industry with the top 5 players contributing to ~20% contribute to increased overall usage of visual effects.
of the overall market. The revenue model used in
animation VFX is ‘Work for Hire’, where revenues accrue Overseas Market
on a per hour basis.
VFX in Movies
Figure 14 : Animation Entertainment VFX Market The whopping success of VFX extensive movies at the
Revenues (USD Mn) box office overseas is expected to drive the VFX usage
in other movies as well. This, coupled with the cost
222 savings through outsourcing is expected to lead to
greater outsourcing.
28%
In addition to the demand drivers, players have taken
135
supply side initiatives, which will certainly boost the
market in India
83
%
53
Initiatives of Players
The Indian players are also increasing their presence
15
overseas to tap the international market and build an
outsourcing pipeline for their Indian studios:
2005 2009E 2011P 2013P • ixion has acquired two London-based studios,
P
Source: Nasscom Industry Report 2006, 2009 Men-From-Mars and Molinare
16

17. • ixion also plans to acquire a studio in Los Angeles
P
• ata Elxsi has launched a new facility of Visual
T
Computing Labs (VCL) in Los Angeles
Indian Entertainment
VFX industry faces
Indian Entertainment VFX Industry: Overall Outlook
Indian Entertainment VFX Industry, similar to the
Indian Animation Entertainment industry is on the
cusp of significant growth, both on the domestic and
outsourcing front. However, as the Indian industry
players take initiatives to boost their presence on the
numerous challenges :
global map, they face similar challenges : Lack of Skilled
Manpower, low budgets for VFX in a movie and no
Lack of skilled manpower,
Government support / incentives.
Custom Content Development
Low budgets, Little
Custom content development, estimated at ~ USD 295
Million (2009) has grown at 35% p.a. (2005-09) and
is expected to continue its growth at a healthy rate of
Government support
24% p.a. (2009-13) to reach USD 685 Million by 2013. Corporate (for their training requirements), K-12, Higher
Educational Institutes and industries such as Defence,
As per leading players in the industry, 90% of custom Aviation for their training requirements are customers
content development in India is outsourcing work. of this segment. Similar to the animation entertain-
ment industry, it is the production and post-production
activities which are primarily outsourced to countries like
Figure 15: Indian Custom Content Development
India.
Market Revenues (USD Mn)
685 Recent Trends and Growth Indicators
24% Domestic and overseas markets are expected to shape
the Custom Content Development in India
429
Domestic Market
% 295 E-Learning Demand from Corporate Sector
35
As the corporate sector expands its distribution and
adopts IT increasingly, demand for custom content
90 development is expected to increase. Most of the
increased demand is expected to come from the small
2005 2009E 2011E 2013E and medium enterprises (SMEs) who are currently low
Source: Nasscom Industry Report 2006, 2009
users of e-Learning, but are willing to adopt the cost-
effective high-quality channel.
Figure 16: Custom Content Development Value Chain
Content Owner/ Sourcing Animation Content Developer Platform Owner
Content can be for educational This can be done in-house or by an Can publish onto:
institutions, corporate or talent integrated studio or outsourced in part of • CD/ DVD
development companies full to an animation developer • Website
• Learning Management System
Source: Secondary Research
Animation. Broadcasting. Gaming. On the Cusp of Growth | 17

18. Demand From Higher Education
Compared to the US where 90% of the institutes
leverage e-Learning, current adoption of e-Learning by
higher education institutes in India is very poor. This has The Indian mindset
large scope for growth and can only go up, given the
current status. emphasises significantly
Overseas Market on human interactions
Major markets for e-Learning globally are the US and
select European nations across both educational institu- and face-to-face
tions and Corporate Sector for training purposes.
sessions, which has
Increased requirement for content
Content requirement for corporate e-Learning is to impeded the growth of
grow at 11% p.a. (2009-13).
e-Learning in India
Figure 17: Worldwide Corporate e-Learning Content Revenue (USD Bn)
Indian Custom Content Development Industry:
16.0
Overall Outlook
11% 14.0
13.5 Indian Custom Content Development Industry is slated
12.5 to show robust growth, both on the domestic and
10.5 outsourcing front. However, ‘Change in the Indian
9.0
Mindset’ and ‘Government Thrust’ can go a long way in
developing the industry:
Cultural Constraint
The Indian mindset emphasises significantly on human
interactions and face-to-face sessions. This has impeded
the growth of e-Learning in India.
2008 2009 E 2010 P 2011 P 2012 P 2013 P
Source: Skillsoft report
Government Thrust
Government Aided Institutes do not enjoy any incentive
Increased outsourcing for adoption of e-Learning in the institute. The fee for
Increased pressure on bottomline for the corporate these institutes is capped, thus restricting the authorities
and higher education institutes is expected to increase to pass on the extra cost of an e-Learning initiative to
the focus on cost savings, thus leading to higher the students. This impedes adoption of e-Learning even
outsourcing. among willing insititues to adopt e-Learning.
18

19. Animation. Broadcasting. Gaming. On the Cusp of Growth | 19

20. Gaming
Global Gaming Industry • Console Gaming: Sale of hardware e.g. gaming
The global gaming industry has been growing at ~21% consoles
p.a. (2005-2009) to reach ~ USD 40 billion (CY2009). • Online Gaming: Advertising and subscription of
This growth is expected to reduce to 10% p.a. and is online games
expected to reach USD 59 billion by 2013.
Gaming services market in India comprises:
Figure 18: Global Gaming Market (USD Bn)
• Outsourcing development services
• Ancillary services such as voice and email BPO
10% 59 support, porting, testing, etc.
49
Gaming industry in India is a fragmented industry,
% 40
21 with players present across the value chain. It is the
development and post development activities (Refer
19 Figure 21) which are outsourced. Concept creation,
feasibility testing and pre-production are still limited to
only the online and mobile platforms in India, that too
2005 2009E 2011P 2013P done only by a handful of players.
Source: Nasscom Industry Report 2006, 2009
Figure 20: Gaming Value Chain
Key segments for gaming are Console Gaming, PC
Concept Post Final
Gaming, Mobile Gaming and Online Gaming. North creation Pre Gold
Development production Testing / Consumer
America, Western Europe and Japan lead the gaming feasibility Production release
testing Porting
testing
market. However, China is the fastest growing market
• nvolves
I • reation of
C • rogramming • nvolves
P I • he final
T • ame made
G
especially for online gaming. concept story board 3-D • -D Art asset final sound build is compatible
3
creation Pre-production, building: recording, delivered with various
character color to the graphic
Indian Gaming Industry Overview • ublisher
P
drawing
This includes
testing publisher cards/ mobile
validates the character
The Indian gaming market is estimated at ~ USD 239 concept and • ame engine
G modeling, and special handsets
sound (for mobile
million (CY 2009) and expected to grow rapidly to reach identifies decision (for se design
effects games)
the market console, PC modeling
~ USD 1.3 billion by 2013, showing a CAGR of ~53%. opportunity and online) texturing
Consumer market in India comprises revenues from:
Figure 19: Indian Gaming Consumer and Services Figure 21: Presence of Indian Gaming Players Across the Value Chain
Market (USD Mn)
Concept Creation Pre Post
Development Final Testing
Feasibility Production Testing
328 / Porting
Testing Production
% Console
53
Mobile
PC
988
150
Online
21%
80 380 Note: For Mobile, PC, and Online Games, concept creation and feasibility testing Limited Presence
29
158 and pre-production are done only for domestic clients while the other steps
35 Moderate Presence
are done for both domestic and overseas clients. For Console Games, all stages
2005 2009E 2011P 2013P except content creation are done only for overseas clients No Presence
Source: Nasscom Industry Report Secondary Research
Source: Nasscom Industry Report 2009
Consumer Services
• PC Gaming: Sale of CD-based gaming software
• Mobile Gaming: Sale of software through mobile
downloads
20

21. • Integrated companies that have presence in the Mobile Gaming
complete gaming value-chain – from conceiving a • Growing mobile subscribers Introduction of
gaming idea, publishing it, developing the complete 3G-enabled handsets
game and distributing it across geographies are Mobile phone is the most widely owned screen in
again limited to a few companies, that too only for India today and is expected to continue its growth,
mobile gaming. given the large scope for further penetration of
mobile phones in India. As the Indian populace’
Among the various segments exposure to mobiles increases, higher downloads on
• Mobile and Online Gaming are the largest the mobile phones are expected. Moreover, it is the
contributor to gaming service revenues introduction of 3G in the country, which will enable
• Consoles are the largest contributor to Gaming the user experience a high quality game and demand
Consumer Revenues. However, one needs to note more. Such a demand will foster innovation in games
that a large % of the consumer revenues is shared on the mobile and encourage an ecosystem for
with international players viz. Sony, Nintendo, greater development of mobile games.
Microsoft, Electronic Arts, etc.
• Telecom operators : Declining ARPU and Need for
Figure 22: Consumer and Services revenues across
Differentiation
type of games (USD Mn) (2009)
Telecom sector in India has been experiencing an
7 increase in competitiveness between operators as
well as handset manufacturers, which has resulted
in a greater need to differentiate themselves from
their competitors through Mobile Value Added
23 Applications and Services. Moreover, the ARPUs of
90 telecom operators have been declining: Telcos are
looking forward to Mobile Value Added Services
34 as an alternate revenue source. Mobile gaming is
43 16
expected to significantly grow on account of this
12 14 supply driver: Mobile Entertainment being considered
Console Mobile PC Online as a means to differentiate and a channel for
increased revenues per user.
Consumer Services
Source: Nasscom Industry Report 2006, 2009
Figure 23: Non-voice Revenues per country
• Moreover, the margins involved in this distribution
business are very low. This high revenue share model
China 27
applies to PC and Online Gaming as well, where
Indian presence in creating games is limited. Japan 27
Distribution business (Low revenue share, Low margins) Korea 26
is not a significant contributor to growth of gaming
industry in India. Hence, in this report, trends related to UK 21
consumer business of consoles or distribution of games
of foreign players have not been considered. Both Germany 21
domestic and outsourcing trends and growth drivers
Italy 17
have been analysed to understand the future of gaming
market in India:
India 8
Domestic Market
Source : IAMAI Paper, Deloitte Analysis
Domestic market is expected to witness high growth, Notes : Data is approximate and is based on the data % of large
both from the demand and supply side: telcos in respective countries
Animation. Broadcasting. Gaming. On the Cusp of Growth | 21

22. Online Gaming Trends and growth drivers for each of these parameters
Increasing internet penetration in India, introduction of need to be understood / analysed to estimate the
Broadband Wireless Access (BWA) and growing trend direction of the outsourcing for gaming services in India
of Massive Multi-player Online Role Playing Games • Increase in production of console games overseas
(MMORGs ) are expected to grow the online gaming and MMORGs
market in India significantly. Currently, revenues from console game development
services are completely derived by providing
• Increased internet penetration and Broadband services to international companies. Global console
Wireless Access Introduction software market is expected to grow at 11% p.a.
Internet penetration in India has increased from a This indicates a greater need for console game
mere 0.7% in 2003-04 to a 1.2% in 2008-09. This development services. Similarly, the trend of growing
growing penetration, along with introduction of MMORGs worldwide is expected to continue.
BWA, which would lead to increased broadband Both these are expected to lead to higher need for
penetration would facilitate playing of high end development of games on the respective platforms.
online games in India.
• Cost Savings
Figure 24: Internet Penetration in India There is a significant cost differential between the
production costs in India and that in US. As per
23% Nasscom, game development in India saves 50%,
1.10% 1.16%
compared to the US.
1.00%
Figure 25: Production Cost Indices (India Vs US)
0.60%
100 100
2005-06 2006-07 2007-08 2008-09
Source: TRAI
41 40
• Growing trend of MMORGs
All types of games in India can be broadly classified
into: Single Player Single Session Games, Multi Player
Single Session Games and Multi-Player Online Role
Playing Games. Currently in India, Single Player Console Mobile
Games dominate the market with 80% of the active
Internet using gamers playing such games. Only US India
27% of Indian online gaming populace is playing Source: Nasscom Industry Report 2009
MMORGs. However, it is the fastest growing among
the three, not only in India but worldwide as well. • Growing expertise and recognition from Indian
Growing MMORGs is expected to boost the online Players
gaming in India. As the Indian Players gain expertise across the
multiple gaming platforms, they are also earning
Outsourcing Market recognition from global publishers. This is
Today, majority of gaming services revenues in India evident from the recent co-publishing (Revenue
comes from outsourcing, especially for Console, PC and Sharing) deals between Indian players e.g.
Online Gaming. Outsourcing work to India is dependent Trine Entertainment and foreign publishers for
on the development of games worldwide and the % development of games.
outsourced to India.
22

23. Indian Gaming Industry: Overall Outlook by lack of budgets and quality manpower have not
Indian Gaming industry is expected to witness large been successful with development of PC / Console
changes, primarily in the domestic market. Introduction Games.
of 3G and telco’s focus on Value Added Services are • Revenues Sharing with Telecom Operators: Telecom
expected to lead to exponential growth for mobile operator keeps a large % of the revenue (60% -
gaming in India. This will also lead to the Indian gaming 70%) that accrues from mobile game downloads.
players moving up the value chain and getting involved This revenue-sharing agreement does not foster
in end-to-end game development and publishing. As the right ecosystem for mobile game developers to
the Indian market matures and gains expertise, Indian develop their own IPs and distribute them.
players will gain confidence of their foreign counterparts
and attract greater % share of the outsourcing pie and Indian Animation Gaming Industry : Future
co-publishing deals. Outlook
The Indian Animation and Gaming industry is today at a
However, realizing the potential of the Indian gaming nascent stage, but holds significant potential for growth,
industry is constrained by factors very similar to the both in terms of its size and moving up along the value
animation industry in India: chain. While the abysmally low current share (0.6%) of
• Lack of Skilled Manpower: Lack of employable the worldwide animation and gaming market points
manpower, primarily arising out of high quality to Indian industry’s potential for domestic growth, the
institutes, lack of perception of gaming as a potential 10% share of the outsourced market indicates the
career is a key challenge for the industry. large scope for growth from the outsourcing market.
• Mindset of Indian Populace: Gaming is considered Increasing number of co-production deals, increasing
to be just a means of entertainment and even a focus on development of original content and own IPs,
worthless activity by a large section of the Indian setting up overseas offices, recent investments from
population. This is the largest factor impeding the Private Equity / Other Funds – All these developments
growth of the domestic market in India. are evident of its demonstrated capability and growing
• High Standards of Foreign Games: Indian gamer is confidence. However, regular availability of employ-
already exposed to the best quality games globally able talent needs to be ensured for the potential to
and would expect similar quality games from Indian be realized. Certain Government incentives could also
games as well. Indian gaming players, constrained encourage the industry and help it go a long way.
Increasing number of co-production deals,
development of own IPs, recent investments from
Private Equity – All these developments are
evident of the demonstrated capability and
growing confidence of the Indian Animation and
Gaming Industry
Animation. Broadcasting. Gaming. On the Cusp of Growth | 23

24. Television
Introduction The television sector in India has grown at a CAGR of
Television plays a significant role in dissemination of ~14% (2005-2009) and is estimated to continue to
information and is equipped with an innate power to grow. By the end of 2011, the industry is estimated to
influence people, their beliefs and their opinions. A reach USD 7.8 billion. While the media entertainment
global Deloitte study on ‘Media democracy’ in 2009 market in India is relatively small when compared
across over 2000 respondents offers some interesting with other Asian countries, India has the third largest
insights about the popularity of television in current television market in the world after China and the US.
times. TV remains a favorite media source for most TV continues to dominate the sector followed by print
consumers – 72% of the respondents rank ‘watching and filmed entertainment.
TV’ as their top media source. 84% respondents
consider ‘advertising on TV’ as the most influential Figure 27: TV Revenue Streams
media source to impact their buying decisions. Online
TV matters to a minority of viewers, though the share Television
of such viewers has gradually increased as compared to content
4%
2008.
Indian entertainment today has a far more global Television
audience across South Asia, the Middle East, and advertising Television
34% distribution
Africa. The large base of expatriates ensures that
62%
Indian TV channels and films are a premier medium of
entertainment. Indian films and TV channels have been
able to attract audience beyond expatriates in the US
and the UK – an audience that enjoys and identifies
more with the contemporary Indian culture.
Figure 26: Size of TV Industry in India (USD Bn) Source: IBEF, Industry estimates
17%
Television – Revenue Streams
10.7 In 2009, subscription revenues contributed around
14%
7.8 62% to the total television revenues and stood at
5.7 USD 3.5 billion; while advertising constituted 34%
3.4
at USD 1.9 billion. The television content constitutes
2005 2009E 2011P 2013P approximately 4% to the total television market at
Source: IBEF, Secondary Research USD 250 million.
24

25. Figure 28: TV Value Chain
Content Creators/
Broadcasters Distributors End Users
Content Aggregators
• Content providers • Further, content is • The distribution • End users get access
operating directly or distributed through companies, using to the content after
Role in the TV through aggrega- audio and video signals various technologies, paying a subscription
Value Chain tors who re-package to transmit programs make the content fee
content to an audience available to audience
Key players
• In the next 2-3 years • Competition among • Lack of transparency in • Consumers are experi-
the companies can broadcasters leading sharing of revenues by menting and open
Challenges/
expect to look beyond to drop in Gross Rating distributors has been a to new technologies,
Consideration
and target local Points (GRPs) especially challenge. Local Cable content and offers
viewers with custom- for channels in Hindi Operators still garner
ized content in markets GEC space 75% of the subscrip-
like North America, tion revenues
Europe, Middle East,
and Africa
Source: Deloitte analysis
i. Television Distribution the DTH platform. DTH is an upcoming segment even in
India’s television distribution industry is the world’s rural India, increasing its share among all DTH homes to
second largest with over 105 million cable and satellite 64% in 2010 as compared to 34% in 2008. Digitization
(CS) homes in 20091. New digital mediums are is expected to speed up, not only in Direct-to-home but
emerging – DTH, Digital Cable and IPTV. DTH is being also in the hitherto-analog cable segment. An industry
instrumental in the growth of television industry in India. report by IDFC suggests that total digital homes are
There are multiple organized players that are providing expected to increase four times to 86 million by 2015 –
satellite signals directly to the homes. There are 22 which would potentially address the ‘under-reporting’
million digital homes – 18 million out of these are on of revenues earned by local cable operators. DTH would
1 elevision distribution report
T
2009, IDFC
Animation. Broadcasting. Gaming. On the Cusp of Growth | 25

26. constitute 48 million homes (18 million in 2009) and cable would be 38 million homes (as against 4 million in 2009).
This indicates digitization is underway and the television distribution is moving towards being more organized.
Figure 29: Digital TV Homes in India
Total potential
(in millions of homes)
Undeclared
homes
Undeclared Declared 105 51 mn
140
homes homes
82 mn 23 mn Declared
homes
89 mn
30
20
2009 2015E
Non CS Home CS Home
Digital homes 22 million 86 million
Source: IDFC, Deloitte analysis
India is an extremely cluttered cable and DTH market: The cable distribution industry in India is extremely fragmented,
with the presence of over 7000 MSOs and more than 50,000 LCOs.
Figure 30 : Cable DTH Market in India
Source: IDFC
ii. elevision Advertising
T
Television advertising in India stood at USD 1.90 billion in 2009 – seeing a marginal growth of 2% over 20082. In
2010, the overall advertising industry is expected to see a y-o-y growth of 13% over 2009.
2 BEF, Industry estimates,
I
Until recently, the growth in TV advertising was largely driven by significant advertising spends by fast growing
Pitch-Madison, Edelweiss
Research sectors such as banking and financial services, telecom etc. As a result of the economic slowdown, players in these
26

27. sectors trimmed their advertising spends especially in the volumes. Players such as HUL, Reckitt Benckiser and
first half of 2009. PG intensely compete with each other on television
advertising. Many other leading FMCG players have
Figure 31 : Leading Advertising Categories on TV also joined the TV advertising battle; given that
TV broadcasting has historically been an effective
Top 10 TV advertising sectors in 2009 advertising vehicle for consumer products. Apart from
FMCG, sectors such as telecom, automobile, banking
Top Categories % share
financial services and consumer durables have also
Food beverages 14
joined the TV advertising bandwagon.
Personal care/ personal hygiene 11
Services 6 iii. Television Content
Telecom/internet service providers 5 Most channels produce their own television content.
Hair Care 5 Given the increasing demand for differentiated content,
a handful of content creators have emerged who sell
Auto 4
television content to channels. This contributed about
Banking/finance/investment 4 4% of the overall television industry in 2009 at USD 250
Personal accessories 4 million. Since the number of channels is growing by the
Personal healthcare 3 day and there is a need for differentiation, television
Household products 3 content segment is expected to surge further.
Source: TAM Media Television Channels in India – the Problem of
Plenty
Food and Beverages leads the charts in advertising The last few years witnessed a near explosion of the
on television in 2009 with ~ 14% share, followed by number of television channels in India. From the black
Personal care / Personal Hygiene at 11%. FMCG firms and white television broadcasting on a single national
such as PG, HUL, Coca Cola, Pepsi, ITC were the television channel (Doordarshan) in 1980s to over 500
leading television advertisers in 2009. channels spanning various genres – Indian television
industry has truly come a long way.
A win-win for TV Advertising
Let’s have a look at some interesting advertising spend Television Genres in India – From Generic to Niche
insights. 9 of the Top 10 advertisers on TV are from The Indian television broadcasting segment currently
FMCG. FMCG accounts for over 45% of TV advertising has more than six genres. High number of genres is
Figure 32 : Evolution of TV Channels in India
2010: Over
500 channels
2015: Annual growth
Doordarshan was 1992: 5 new 2003: Entry of already in India
rate for the television
the single national channels authentic news and another
industry is projected
broadcaster introduced by channels such 100 waiting to
2006: 2 to be15% over the
Hong Kong as AajTak and go live
million next 5 years
based Star TV Star News
digital TV
households
2002-03: More
Ramayan and 1996: More than 2009: 394 TV channels in
international channels such
Mahabharat were the 50 channels 2009. Non-news current
as Nickelodeon, Cartoon
popular shows with available to affairs TV channels grew
Network, VH1, Disney
record viewership Indian viewers from 0 to 183; news
were launched in India.
current affairs TV channels
The number of channels
grew to 211
increased to ~ 100
Animation. Broadcasting. Gaming. On the Cusp of Growth | 27

28. primarily driven by the growing need for more and more
differentiated and niche content. Since the viewers
today have far greater choice in terms of content, varied
national and regional channels have emerged across Regional GECs are
almost matching the
genres.
I. GEC (General Entertainment Channels)
Figure 33: Viewership across TV Genres in India strength of their national
counterparts, and have
emerged as a key focus
area for most players
Here are some key highlights of emerging changes in
the Hindi GEC space in the last calendar year:
• Increasing popularity of reality shows and fiction
addressing social and realistic issues
• Advertisement rates nose-diving in the IPL month
• Channels such as Colors, Imagine going global as
they also strongly race for the top slot in the highly
competitive TV broadcasting battlefield
• Leading GECs acquiring broadcasting rights for new
movies for sprucing up the ratings and adding to
their viewer base, by reducing the gap between
theatre release and time-to-market through television
b. Regional GECs: Gaining rigor
Regional GECs are almost matching their strength with
the national GECs and have emerged as a key focus
Source: TAM Media area for most players. The number of regional channels
has increased from 114 in 2008 to 135 in 20093. While
a. National GEC: Cutthroat and competitive the share of advertising on genres such as Hindi News,
2009 was a roller-coaster ride when it comes to the Hindi GECs and Hindi Movies almost remained constant,
top hindi GEC slot. While Star TV was at the top till the it increased for regional GEC from 22% in 2008 to 24%
first half of the year, Colors occupied the top position in 20094. High demand for regional content by viewers
and got the highest gross ratings points (GRPs) of 325 settled outside India, low cost of production (relatively
in September 2009. This was also the highest among low talent cost, no carriage and placement fee, low
all Hindi GECs in a span of over a year – 50 GRPs ahead acquisition cost), affordable local advertisement reaching
of its closest competitor Star TV and 70 GRPs over Zee the right audience are some factors contributing to the
TV. Differentiated content such as its flagship drama success of regional channels.
‘Balika Vadhu’ and ‘Utaran’, second season of stunt-
3 Going native’, article
‘
based reality show Fear Factor-Khataron Ke Khiladi and Regionalization has caught the eyes of most established
published in Financial Times
BigBoss; coupled with meticulous distribution strategy broadcasters, catering to specific interests of the in Oct 2010
worked wonders for Colors. viewers: 4 TAM Media
28

29. • Tamil, Malayalam, Telugu, Kannada, Bengali and specific type of content. TV Today launched an English
Marathi are the key languages in the regional GEC Channel, Headlines Today; and then another Hindi
space channel, Tez (meaning fast). Both these channels were
• Sun TV Networks has been a leading TV broadcaster aimed at the busy viewer who does not have time for
in the South Indian television market long and detailed news bulletins.
• Zee Networks that established a strong presence
in northern and eastern India with channels in III. Music: Journey away from music
Bengali, Gujarati, Marathi and Punjabi by 2004; also Music channels in Indian television are facing winds
commands a significant present in South India with of change. Four years ago, there were 12 pure music
their first South Indian channel launch - Zee Telugu in channels. Today, there are only four - 9XM, ETC, Music
2005, Zee Kannada in 2006, Zee Tamil in 2008 India and VH1. Audience viewership for music channels
is dipping across all age groups. Most traditional music
Other broadcasters such as Sony, NDTV, UTV are eyeing channels are also embracing non-music content since
the growing regional channel space, intensifying the these channels are finding it increasingly difficult to
need for more and more specialized content targeted at retain and attract interest of audience due to growing
the regional viewers. competition from GEC and other genres.
II. ews channels: Losing steam
N IV. Sports: Creating its own niche
India currently has about 250 news channels as Sports channels in India have increased manifold over
against 215 in 20085– highest as compared to any the last few years. The Indian cricket fans constitute the
other country. 42 new news channels were permitted primary viewers of the Indian sports channels. Events
in 2009 and 2010. Except for a handful of leading such as Twenty20 World Cup and IPL have offered
news channels such as AajTak, most national as well exactly what the Indian cricket fans look for. Games
as regional news channels are losing steam to the such as hockey and football are also gaining more
GECs. While the GECs are fast catching up with their importance – increased demand and viewership for live
differentiated content, the news channels struggle telecasts, along with attracting sponsorships from bigger
to strike the right balance between traditional brands. For example, initiatives such as ESPN Star Sports
news content such as politics, current affairs; and association with the Indian Hockey Federation to create
entertainment content. The news channels also grapple the Premier Hockey league can offer further growth of
with holding the viewer’s attention. Some channels have this genre.
tried to address this by creating dedicated channels for
5 inistry of Information and
M
Broadcasting. March 2010
Animation. Broadcasting. Gaming. On the Cusp of Growth | 29

30. V. Kids: It will be more quality now GEC as well as non-GEC genres over the last 2 years.
Tiny-tots are migrating from other genres of channels In the GEC genre, Colors, NDTV Imagine, 9X and few
to the specific genre of cartoon channels for them. The others were launched, while channels such as Discovery
channels are responding well enough by incorporating Science, UTV Movies were introduced in the non-GEC
increasingly vivid and superior content. While Cartoon genre. Since the Ministry of Broadcasting decided to
Network continues to hold the fort in the all-India temporarily suspend the issuance of new licenses to
kids segment, the channel has seen a 3% dip over the new channels due to the lack of spectrum in 2009; the
previous year to end 2009 with a 24% market share4. increase in number of new channels in 2010 and 2011
Channel Pogo too has managed to retain the number is expected to be driven only by players already holding
2 slot in this space. The channel has seen a rise in its the licenses and are yet to launch the channels.
market share from 20% in 2008 to 22% in 20094. This
genre has tremendous potential to grow given that the Policy Framework
target audience for the ‘kids’ channels is not only kids, TRAI was designated as the regulator for broadcasting
but also some viewers from the adult segments. and cable services in 2004. While much is still uncertain
A host of new channels were launched across the about the broadcasting guidelines for the newly
Figure 34: Colors – Breaking the Monopoly and Monotony of Family Drama
• Colors spiraled to the No. 2 spot in the competitive general entertainment channel (GEC) space within 10
weeks of its launch and became a well-entrenched channel available in 66.8 million homes, with a 24%
What did Colors do?
market share.
• Colors was taking on the challenge of competing with giants like Star Plus, Zee and Sony, who controlled
the entertainment space and seemed to have set into a comfortable equilibrium in rankings and revenue.
Target Audience • Hindi speaking audience in 90 Indian cities
The success strategy was three pronged:
Explosive Marketing Differentiated Content Debut with Two Big-Ticket
Used all Played ‘Bring the Colors’ disruptive
Promotion Routes Difference’ Game programming strategy
• 1300 hoardings road shows across • New hue to the existing Hindi GEC • Launched with two blockbuster
country Category properties Khatron Ke Khiladi and
• 3000 taxis and 2000 auto rickshaws • Variety of FRESH content across genres Bigg Boss 2, winning the eyeballs
painted with Colors brand covering the entire spectrum of immediately
• 65000 ad spots booked on TV 15 emotions • Soaps addressing social issues and
million SMSs • Content customized to fit evolving stayed away from the family drama.
• Big Bazaar stores McDonald’s helpers viewers with a desire to escape to their
and counter-guys flaunted Colors fantasy world, while still remaining
T-shirts within the realm of reality
30

31. emerging distribution segments, one thing can be stated • Spiraling production costs: Managing production
with certainty: we have moved into a new era of digital costs is one of the key challenges for content
transmission of television content. The Government of producers. With the almost waning economic
India mandated digital conditional access systems (CAS) slowdown, the talent costs are rising again to the
and rollout of DTH TV licenses highlights the regulator’s levels they were prior to the pre-recession times
focus on speeding up the digitization process. The • Falling ARPUs: The highly competitive DTH market
Headend-in-the-Sky (HITS) policy and a concessional is experiencing lower ARPUs, while also moving
customs duty of 5% on importing digital headend neck to neck with local cable operators (LCOs) and
equipment is expected to give drive the digitization multi system operators (MSOs). Most players are
process even faster. experiencing and are likely to witness for few more
years, a squeezing bottom-line growth. High cost of
FDI policy across various distribution segments: customer acquisition further intensifies the pressure
• Cable Network: Foreign investment and portfolio • Evolving viewer interests: The viewer today is not
investments are permitted up to 49% only looking for new-fangled content but is also
• Direct-to-Home: Foreign investment and portfolio very quality conscious. From new movie broadcasts
investments are permitted up to 49%. Within the to the IPL craze, from series such as ‘Balika Vadhu’
limit of 49%, FDI will not exceed 20% addressing social issues to reality shows with more
• Head end in the sky (HITS): Foreign investment and and more celebrity appearances – the need for
portfolio investments are permitted up to 74% differentiated and fresh content is on an all time
high. Regional viewers, both in India and overseas,
Since more and more telecom companies are entering are also gaining importance
the broadcasting space, FDI ceilings would need to be • Fragmented viewership: Increasing number of
rationalized to facilitate the anticipated convergence. channels has fragmented the TV audience. The only
way to garner a significant market share within
Future Outlook the viewership is through differentiated content.
The television industry is truly transforming. Increasing This would require a deep understanding of the
pay TV penetration, multiple channels in each genre consumer segments and their media consumption
racing against each other for TRPs, expanding yet habits
fragmented local as well overseas viewership of Indian
channels, demand for more specific content – clearly Players across the television value chain need a sound
sets the stage for the next level of growth and transition action plan to address some of these challenges and
for players across the television value chain. Content harness the opportunities in a growing and high
creators and broadcasters need to be cognizant of the potential sector. While there isn’t any one-size-fits-all
ever increasing demand for differentiated content. While approach to realize the true potential of this sector,
on one hand, new digital content distribution platforms there are some areas that the players may need to
are emerging; on the other hand, new formats of focus more on and prioritize. It would be important, for
entertainment - computers, mobiles and other handheld instance, to address the demand for regional content;
devices are gaining importance. Monetization of content to work closely with the regulator in developing
through these new media platforms is going to be a key transparent and more accurate techniques to measure
focus area for the content owners. Some key trends and viewership; to influence the regulator for an increased
challenges that lie ahead are: impetus on digitization; to influence stakeholders across
the value chain for controlling production costs; and to
• Digital. Digital. Digital: ‘Digital’ is already the enhance value delivered to the end-customer both in
buzzword today – digital content, digital production, terms of varied content experience (by content creators
digital distribution, digital platforms… It is imperative / broadcasters) and effective customer-service (by
for players across the value chain to be digitally distributors).
adept to fully garner these opportunities
Animation. Broadcasting. Gaming. On the Cusp of Growth | 31

32. Radio
Introduction
Radio broadcasting in India has evolved from an All India Radio monopoly (1936) to a Government of India
controlled All India Radio (AIR) and 37 private FM radio companies that operate close to 280 FM radio stations. FM
radio stations are contributing to its rapid growth.
Figure 35 : Evolution of Radio in India
2005: Second
1993: Private Phase with 338
AIR started its slots up for
participation on a
services auction
experimental basis
on FM channels in
Delhi Mumbai
1936
Awaiting
1999: Government pulled 2001: First phase of India’s Third Phase
1977: First
out the plug on private radio development began and
FM service
participation Government conducted open
auctions issuing 108 licenses
Radio industry in India is ~USD 200 million, having grown at a CAGR of 22% (2005-2009). Most of the revenues for
Radio are driven by advertisements (~85%-90%), while 10-15% are driven by events and activations on the radio
(Refer Fig. 37).
Figure 36 : Radio Industry in India (USD Mn) Figure 37: Radio Broadcasting Players
(Revenue Split %)
10%
25%
500
54% 36%
22% 350
200
90
2005 2009E 2011P 2013P
Events Activation Local Ads National Ads
Source: IBEF, Secondary Research Source: Industry Estimates
Advertising revenues from radio in India are only ~3% of Figure 38: Radio Ad Revenue
the overall advertising industry in India. This is less than (% of Overall Ad Revenue)
50% of the global average (~8%) (Refer Fig. 38). This
India 3%
clearly indicates the immense potential and scope for
growth for radio in India. World 8%
Selected Developed 15%
Countries
Source: Secondary Research
32

33. Key Growth Drivers Constraints enabled mobile phones, the radio audience is bound to
Uniqueness of radio, its utility on the move and the 3rd increase.
Phase of Licensing are expected to drive its growth in
Figure 40: FM Enabled Mobile Phone Growth
India:
392.0
Unique value proposition
Radio is a unique medium compared to other 261.0
advertising media. It is a local medium and can deliver 65%
locally relevant content. It is a highly interactive medium 165.0 59%
and can be used most effectively for promotional 37%
campaigns. This value proposition of the radio is
expected to be increasingly realized and leveraged by
advertisers.
2007 2008 2009
Mobile Subscribers (Mn) % of FM Enabled Handsets
High utility on the move
Source: TRAI, Business Press, IDC India 2010
Radio finds high utility by people on the move, whether
it be inside the car or inside a public transport (via
mobile phones). India is a rapidly growing car market 3rd phase of licensing
(Refer Fig. 39), which will increase both the number of A significant number of licenses are expected in the 3rd
radio listeners and the time spent listening to radio. phase of licensing: 3 in Top 8 Metros, 22 in other top 30
cities and 600 licenses in smaller cities are expected to
Figure 39: Passenger Vehicle Sales India (2009)
be made available.
(‘000 Units)
1950
While radio, based on both international comparison
13% 1549 1552
and the prevailing drivers in India, carries the potential
1380 to grow at a significant rate, current financial viability
1143 and regulatory restrictions pose large constraints for the
1061 industry.
• Type of content: FM radio stations are permitted to
play music only. This has kept the private industry
deprived of leveraging other potential genres such
as news, emerging sports genre in India and other
niche content genres. Globally, radio stations have
2005 2006 2007 2008 2009 2010
the freedom to broadcast channels across genres like
Source: SIAM
news, sports, fashion, talk shows, religion, weather,
Moreover, the growth of mobiles (Refer Fig. 40) bodes cookery e.g. Walt Disney has more than 3000 radio
well for the radio industry. According to Radio Audience channels, each dedicated to everything from weather
Measurement data, 49 % listeners access radio from to cookery. In the US, radio listeners spend almost 50%
their mobile phones. With the availability of low cost FM of their radio listening time on news or talk channels.
Animation. Broadcasting. Gaming. On the Cusp of Growth | 33

34. • Number of frequencies per city networking of content or infrastructure across cities makes it unviable
cities: Indian stations are limited to one frequency for radio broadcasting players, especially in non-metros
per city. Multiple frequencies per city can help radio and smaller cities.
companies earn higher revenues for the same tower
infrastructure and enable them to propose bundled Table 7: Cost Structure of Radio Broadcasters in
offerings to advertisers. Networking of cities is India
currently not allowed. Setting up of radio stations
is equally expensive across metros and small cities. Cost % of Revenues
While revenue prospects are far higher in metros License Fee 4
and large cities; allowing networking across cities Music Royalty 20**
and content syndication will make it feasible for the
Tower 12
radio players to reach out to the non-metro small city
audience Staff 30
• Initial license fee: The initial license fee for radio
** Some smaller stations pay upto 70%
licenses has proved to be very high and cumbersome Source: Business Outlook
for the players. Most of the players paid huge sums
as license fee to get into the sector: Big FM spent
USD 23 million to get licenses for 45 Stations, HT Lack of adequate audience measurement data
Music paid USD 15 million for 4 licenses. Revenues Radio Audience Measurement (RAM), launched by
earned by radio broadcast players, thus far, do not TAM Media Research is a recent initiative and has a
justify the license fee. limited coverage. Lack of such data has restricted radio
• Music royalties: Radio operators pay a high broadcasting players to analyse the consumer habits,
per needle hour rate ( USD 12.7) to the India the market potential and plan accordingly, especially for
Performing Rights Society (IPRS) and Phonographic smaller cities and towns. Data would be of importance
Performance Limited (PPL) , as they are mandated to media planning agencies and radio broadcasters.
to do so. This arrangement, which is independent
of the earned revenues, becomes very challenging Future Outlook
for the operators, especially for the small cities and The fate of the radio broadcasting industry in India is
towns where the earned revenues are much lower. primarily dependent on the regulatory support. The 3rd
Internationally, in many markets, it is a revenue phase of licensing could prove to be an inflection point
sharing model, ranging from 1% - 5% of revenues. for the industry, if it happens with certain reforms and
relaxes one or more of the regulations: allows multiple
Huge initial license fee, combined with a regular revenue licensing, permits networking across cities, changes the
sharing of 4%, high royalty share and inability to use royalty sharing arrangement, permits various type of
content on the radio. Unless any of these happen, the
industry is not expected to even come closer to realizing
its immense potential, especially in smaller towns and
multiple cities. For the players, the way forward, in
The fate of the radio addition to influencing the regulators is to use the
radio audience measurement data to understand the
broadcasting industry in
consumer segments and decide the type of association
they would like for their particular station, radio jockey
etc. Radio broadcasting players also need to explore
India is primarily dependent other avenues for earning revenues eg. Activation and
events. They have already realized this and are working
on the regulatory support towards it. However, this does not offer a long-term
solution.
34

36. Animation, Gaming and
Broadcasting all have the
potential to see near future
as inflection points in their
growth story
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