ENTERTAINMENT

November 2010

ENTERTAINMENT

November 2010

Contents
Advantage India

Market overview
Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations
2

ADVANTAGE INDIA Entertainment November 2010

Advantage India - capital

Increasing investments by the private sector and foreign media and entertainment (M&E) majors have enhanced Indias entertainment infrastructure such as new multiplexes and digitization of TV distribution and theatre infrastructure. Digitisation and technological advancements across the value chain are improving the quality of content and reach, and also leading to new business models. For example rural DTH penetration is three times higher than in urban areas, with digital TV penetration rate of 34% in rural areas as compared to 12% in urban areas A liberalised foreign investment regime and other regulatory initiatives are resulting in a conducive business environment for Indian M&E. FDI upto 100 per cent is allowed in film and advertising, TV broadcasting (except news) and 26 per cent in newspaper publishing. Migration from fixed to revenue sharing license fee regime in radio segment and roll out of digital cable will provide further impetus to industrys growth. Improving entertainment infrastructure Digital revolution High production volumes

Advantage India
Liberal government policies Favourable demographics

Producing more than 1,000 films annually, India is the largest producer of films in the world. There are more than 500 TV channels in the country, requiring 30 hours of fresh programming per week.

Large and under penetrated In 2008, there were as many as 3.3 billion consumer theatre admissions in India. base With the TV segment reaching as many as 134 million households in the country, India is one of the largest TV markets in the world.

India is among the worlds youngest nations, as more than 52 per cent of its one billion-plus population is less than 25 years of age. This age group, with increasing disposable income levels, has given impetus to the entertainment industry.
Sources: Indian entertainment down South: from script to screen, Ernst & Young, 2009; EY M&E NewsReel, Ernst & Young, 2009; India to have 100-mn cable homes this year, Business Standard 4 January 2010; Tune-in to Indias entertainment economy: From emerging to surging, Ernst & Young, 2008; Tune into emerging entertainment markets- spotlight on BRIC, Ernst & Young, 2010; Rural India's swift digital TV embrace, Business Standard, 4 December 2010.

ENTERTAINMENT

November 2010

Contents
Advantage India

Market overview
Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations
4

MARKET OVERVIEW Entertainment November 2010

Market overview (1/2)

The Indian entertainment market continues to grow at a healthy pace.
14 12 10 US$ billion 8 6 0.11 4 2 0 2006 2007 Television Films 2008 Music 2009 Radio 2010 Online advertising 2011E 2012E 3.90 4.53 5.06 5.44 2% 0% 6.21 0.04 1.69 7.10 8.04 4% 2% 0.14 0.16 0.07 1.97 0.17 0.16 16% 15% 0.24 12% 0.12 2.20 0.19 2.20 0.22 0.20 2.45 14% 0.29 0.25 0.25 2.70 13%

Growth in the entertainment industry

18% 16% 0.30 14% 12% Y-o-y growth % 10% 8% 6%

0.18 0.15

0.14
1.92

0.20 0.16

Industry growth rate

The entertainment industry in India is estimated at about US$ 9.4 billion (INR 431.4 billion) in revenues in CY2010, which is expected to grow at a rate of 14.1 per cent to reach revenues of US$ 10.7 billion (INR 492.4 billion) in 2011.
Sources: Ernst & Young analysis; Tune-in to Indias entertainment economy: From emerging to surging, Ernst & Young, 2008.

MARKET OVERVIEW Entertainment November 2010

Market overview (2/2)

Entertainment

TV

Radio

Films

Music

New media

India is home to a The FM radio very diverse TV segment is one of market, characterised the fastestby multiple genres growing and languages and entertainment more than 500 segments in India. channels vying for Revenues in this viewer attention. segment have The country is home almost doubled to 134 million TV since 2006. households. A lot of There are close foreign investments to 248 FM radio are flowing into it. stations in India.

India is the largest producers of films in the world, with more than 1,000 films released annually. In 2008, close to 3.3 billion movie tickets were sold the highest number for any country.

Film-based music dominates music sales in India. As in most global markets, digital sales of music are becoming the norm in India. Music on internet and through mobile phones is the emerging business model for music companies

Increasing broadband penetration is expected to attract more content online. As the secondlargest mobile telephony market in the world, India has provided a new platform for content delivery.

Sources: Ernst & Young analysis; M&E NewsReel, Ernst & Young, 2009; India to have 100-mn cable homes this year, Business Standard 4 January 2010.

MARKET OVERVIEW Entertainment November 2010

Domestic demand (1/3)

TV

In 2010, the industry is estimated to generate revenues worth US$ 6.2 billion (INR 298 billion), of which around 65 per cent was contributed by subscription, while the rest came from advertising. India is home to 134 million TV households, of which 90 million are served by cable and satellite TV and is expected to reach 100 million in 2010. As of March 2010, as many as 503 TV channels were registered with the Ministry of Information and Broadcasting (MIB) and more channels are being added across genres. The adoption of digital distribution platforms direct-to-home (DTH) and digital cable is helping TV distribution become more organised. From about two million digital TV households in 2006, the platform currently caters to about 15 to 17 million digital subscribers. Regional TV is becoming prominent and several regional-language TV networks have emerged to leverage the potential of regional markets, across key genres. In 2010, the industry is estimated to generate revenues of US$ 2.2 billion (INR 105.5 billion). The industry remains dependent on domestic theatrical collections, which generate 70 to 80 per cent of a films revenue. More than 1,000 films are produced annually in more than 20 languages. Regional-language cinema is an integral part of the Indian film industry. The four South Indian languages of Telugu, Tamil, Kannada and Malayalam cumulatively account for 60 per cent of all movies produced in India. There are presently around 850 multiplex screens in India, and this is estimated to grow to 1,600 screens by 2013. Digital cinema is helping film producers reduce cost, release more prints and combat piracy. A digital print cost around one tenth of the physical print. Corporatisation and globalisation of Indian film companies is driving the growth.

Films

Sources: Ernst & Young analysis, Tune-in to Indias entertainment economy: From emerging to surging, Ernst & Young, 2008; India to have 100-mn cable homes this year, Business Standard 4 January 2010; Tune into emerging entertainment markets- spotlight on BRIC, Ernst & Young, 2010; TP report on Media and Entertainment, Ernst & Young, September 2010;

MARKET OVERVIEW Entertainment November 2010

Domestic demand (2/3)

Radio

In 2010, the industry has been estimated at US$ 0.20 billion (INR 9.4 billion), GoI-controlled All India Radio (AIR) and 37 private FM radio companies that operate close to 248 FM radio stations in India cater to this segment. The yet-to-be-launched Phase-III FM radio licensing policy is likely to give further impetus to the FM radio industry and open up licences for close to 700 stations and raise the FDI limit from current 20 per cent to 26 per cent. There is a growing advertiser interest in radio amongst the country level and the local advertisers. International radio players such as Radio Netherlands Worldwide (RNW) and BBC have made content-syndication deals with FM radio stations in India. The music industry is estimated to generate revenues of US$ 0.20 billion (INR 9.4 billion) in 2010. Distribution via digital formats on the Internet and through mobile phones is the emerging business model for music companies. Music sold via mobiles as ringtones, caller-back ringtones (CBRTs) and downloads of complete songs contribute 25 to 35 per cent of music companies revenues. Business models built around mobile music such as track downloads and on-demand streaming are expected to emerge in the near future and gain further impetus with the rollout of 3G services. Music sales in physical formats are affected and music companies are repositioning their products to counter this decline by introducing low-cost, MP3-based compact discs (CDs) for low-end customers and premium packaged CDs for high-end customers. It is also being sold on memory cards and pen drives. By December 2011, the industry is expected to generate revenues of US$ 0.26 billion (INR 12.1 billion), exhibiting growth of 26.8 per cent over 2010.

Music

Sources: Ernst & Young analysis; Tune-in to Indias entertainment economy: From emerging to surging, Ernst & Young, 2008. FM-III 1st phase to auction 160 stations, The Financial Express website, http://www.financialexpress.com/news/fmiii-1st-phase-to-auction-160stations/674181/, accessed 11 November 2010; Tune into emerging entertainment markets- spotlight on BRIC, Ernst & Young, 2010;

MARKET OVERVIEW Entertainment November 2010

Domestic demand (3/3)

New media

In India, the trend to access videos through the Internet and mobile phones is fast gathering momentum. Almost every major M&E player now has a strategy to host its content on new media platforms. Consumers can now access entertainment content online or on their mobile devices. Online advertising is one of the fastest-growing advertising markets in India. This platform is witnessing increased interest from advertisers, since advertising through this medium can be targeted as well as measured. The online advertising industry in India is estimated at US$ 0.19 billion (INR 9 billion) in 2010, in 2011 this segment is expected to generate revenues of US$ 0.25 billion (INR 11.3 billion), growing at 25.6 per cent over the previous year. The impending rollout of 3G and Wimax services is expected to open up the market for content on mobile phones and improve accessibility for laptop user. Media and entertainment companies can expect to monetise content through subscription in addition to advertisement revenues.

Sources: Ernst & Young analysis; Tune-in to Indias entertainment economy: From emerging to surging, Ernst & Young, 2008. Tune into emerging entertainment markets- spotlight on BRIC, Ernst & Young, 2010; TP report on Media and Entertainment, Ernst & Young, September 2010;

MARKET OVERVIEW Entertainment November 2010

International demand

Indian films are increasingly gaining popularity among international audiences. Indian producers are releasing more prints to reach wider international audiences. As a result, collection from the overseas market is improving. The recent Hindi blockbuster, 3 Idiots, was released with an unprecedented 344 prints. Many Indian TV channels are available overseas on major TV distribution platforms.
Sources: Ernst & Young analysis; 3 Idiots makes bwood history, Business Standard, 5 January 2010.

10

MARKET OVERVIEW Entertainment November 2010

Growth drivers

Favourable demographics
Apart from being home to the second-largest population in the world, India is among the worlds youngest nations, with more than 52 per cent of its population below 25 years of age.

Increase in disposable income

With consumers disposable income rising, spending on leisure and entertainment has increased.

Changing consumer landscape

Driven by changing consumption patterns there is a growth in consumer spending on leisure and entertainment which is expected to accelerate growth in advertising expenditure.

Urbanisation
The proliferation of organised retail outlets and malls is facilitating the rapid expansion of multiplexes across the country.

Supportive regulatory framework

FDI is permitted in almost all segments of the industry, with 100 per cent FDI permitted in up-linking TV channels (except news) and the film and music segments.

11

MARKET OVERVIEW Entertainment November 2010

Growth drivers

Digitisation
Digitisation and technological advancements across the value chain are improving the quality of content and reach. Digital distribution of content is making it possible to distribute it across many platforms and also resulted in new revenue models.

Globalisation of Indian companies

Indian companies are expanding their international footprint by acquiring theatre chains and production studios in the US and Europe and partnering with international studios to produce Hollywood films.

Corporatisation and easier access to capital

The M&E industry in India has witnessed increased corporatisation in sectors such as filmed entertainment.The industry is now able to attract funds from various organised sources such as private equity, media funds and IPOs both in India and abroad.
Sources: Tune-in to Indias entertainment economy: From emerging to surging, Ernst & Young, 2008; Indias digital revolution: impact on film and television sectors, Ernst & Young, 2007; Tune into emerging entertainment markets- spotlight on BRIC, Ernst & Young, 2010; TP report on Media and Entertainment, Ernst & Young, September 2010;

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MARKET OVERVIEW Entertainment November 2010

Key trends

Decoupling of content from platforms

Content is becoming independent of platforms. For instance, a film typically made for theatrical releases is now cashing in on revenues from multiple platforms such as satellite, home video, mobile and the Internet. Digitisation enables decoupling. The digitisation of content makes it possible to distribute it across many platforms, while the digitisation of platforms enables interactivity and the aggregation of many types of content.
Large Indian media conglomerates are increasingly shifting from a one-platform business model to a multi-platform one. Companies are becoming integrated media players with interests across various M&E segments such as TV, film and new media.

Business model redefinition

Globalisation

An increasing number of global players have made investments across segments, be it TV, radio, film or the Internet. Hollywood studios are entering into co- production deals with Indian companies. The Indian M&E industry is becoming increasingly popular among international audiences.

Relatively easier access to capital

Previously, the industry was dependent on only a handful of private financiers. However, it is now raising funds through private equity, media funds and IPOs both in India and abroad.

13

MARKET OVERVIEW Entertainment November 2010

Key trends

Regionalisation

Media companies are innovating content to suit changing consumption preferences of small town India as regionalisation is becoming a significant factors driving growth with growing increase in literacy, consumption and disposable incomes in tier 2 & 3 cities. Demand for regional content is growing, advertisers are also increasing focus on rural markets. National broadcasters are adding regional channels to their portfolios, regional cinema is growing and international film studios are tapping regional markets in India.

Changing consumer preferences

Consumer preferences are shifting towards international programming formats. There is an opportunity for global production houses to localise their content for the Indian audiences. There is a demand for youth oriented content and niche and regional content. Reality shows are also gaining popularity among the viewers.

Sources: Tune-in to Indias entertainment economy: From emerging to surging, Ernst & Young, 2008; Whats next? for Indian media and entertainment, Ernst & Young, 2009; Tune into emerging entertainment markets- spotlight on BRIC, Ernst & Young, 2010; TP report on Media and Entertainment, Ernst & Young, September 2010;

14

MARKET OVERVIEW Entertainment November 2010

Key players TV (1/2)

Company Parent A 50/50 joint venture between Viacom Inc and the Network18 Group Channels Colors: Hindi GEC* MTV youth channel Nick kids channel Studio18- Motion picture brand that produces, acquires and distributes Hindi films VH1 international music and lifestyle channel Star Plus Hindi GEC Star World English entertainment channel Star One Hindi entertainment channel Channel V Music channel Star News Hindi news channel Star also has other channels in the entertainment, sports and regional genres. Zee TV Hindi GEC Zee Cinema Hindi movie channel Zee News Hindi news channel Zee Caf English channel ETC music channel Ten Sports Sports channel It also has channels in the entertainment, sports and regional genres.

Viacom 18

Star

News Corporation

Zee Entertainment Enterprise Ltd (ZEEL)

Essel Group

*GEC: General entertainment channel

15

MARKET OVERVIEW Entertainment November 2010

Key players TV (2/2)

Company Sony Pictures Television International (SPTI) Parent Multi Screen Media Private Ltd ( a subsidiary of Sony pictures entertainment) Time Warner has acquired a 92 per cent stake in NDTV Imagine through its subsidiary, Turner International. Disney has a strategic stake in UTV Software Communications Ltd Channels Sony Entertainment Television: Hindi GEC MAX movies and special events channel SAB Hindi entertainment channel PIX Hollywood movie channel NDTV Imagine Hindi GEC NDTV 24x7 English news channel NDTV India Hindi news channel NDTV Good Times lifestyle channel NDTV Lumiere world movies NDTV Profit Business channel UTV World Movies international movie channel UTV Movies Hindi movie channel UTV Bindass youth channel UTV Action genre-specific movie channel

New Delhi Television Limited (NDTV)

United Television (UTV) Software Communications Ltd

*GEC: General entertainment channel **GRP: Gross rating points Sources: Viacom18 website, www.viacom18.com, accessed 11 November 2010; Channels, Star website, www.startv.in/channels_collection.asp, accessed 11 November 2010; Brands, ZEE Entertainment website, www.zeetelevision.com/html/AboutZee.asp?Content=3, accessed 11 November 2010. Sources: About Sony Entertainment Television, Sony Entertainment Television website, www.setindia.com/about_set.php, accessed 11 November 2010; About us, UTV website, www.utvnet.com/about-us/, accessed 11 November 2010,; The company, NDTV website, www.ndtv.com, accessed 11 November 2010.

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MARKET OVERVIEW Entertainment November 2010

Key players films (1/2)

Company Parent Portfolio Yash Raj Films is involved in the production of Hindi movies and home entertainment including marketing and distributing DVDs and VCDs music, film distribution and the creation of ad films, music videos, music albums, TV software and documentaries. It has its own past production facilities. The companys film services include motion picture processing and digital intermediate (DI), digital mastering, film restoration and studio and equipment rentals. It also operates as a media business process outsourcing (BPO) entity. The company is engaged in the production of Hindi movies, regional movies, animation films, international productions and co-productions. It has an exclusive distribution arrangement with The Walt Disney Company for India, which holds a strategic stake in UTV. It is also engaged in broadcasting, games content, interactive and TV content.

Yash Raj Films

Reliance MediaWorks Ltd

Reliance Anil Dhirubhai Ambani Group

UTV Motion Pictures

UTV Software Communications Ltd

17

MARKET OVERVIEW Entertainment November 2010

Key players films (2/2)

Company Parent Portfolio PVR Ltd is a cinema exhibition company and has 33 cinemas with 142 screens. PVR Pictures, a subsidiary of the company, is engaged in film production and distribution. 40 per cent stake is held by JP Morgan Mauritius Holding Ltd and ICICI Venture in equal proportion. Reliance MediaWorks Ltd has 516 screens across India, the US and Malaysia. It has launched 3D as well as 6D technologies and is expected to also introduce megaplexes in the country. INOX operates 37 multiplexes and 140 screens across 25 cities. It is expanding in various cities, including Kanpur, Visakhapatnam, Bhubaneshwar, Jodhpur and Ahmedabad. INOX merged with Calcutta Cine Pvt Ltd (CCPL), which resulted in additional access to 9 multiplexes located in Assam and West Bengal.

PVR Ltd

BIG Cinemas

Reliance MediaWorks Ltd Part of INOX Group and subsidiary of Gujarat Flurochemicals Ltd

INOX Leisure Ltd

Sources: Motion pictures, UTV website, www.utvnet.com/motion-pictures/, accessed 16 November 2010; About us, INOX website, http://www.inoxmovies.com/corporate_about_us.aspx , accessed 16 November 2010; About us, BIG Cinemas website, www.bigcinemas.com/in/aboutus.asp, accessed 16 November 2010; :About us, Yash Raj Films website, www.yashrajfilms.com/AboutUs/CompanyInfo.aspx?SectionCode=PRO001, accessed 16 November 2010; About us, PVR website, www.pvrcinemas.com/page?page=about, accessed 16 November 2010; About us, RelianceMediaworks website, www.reliancemediaworks.com/bigmediaworks/aboutus.html, accessed 16 November 2010. Note: This is an indicative list of companies.

18

MARKET OVERVIEW Entertainment November 2010

Key players radio

Company Parent company Bennett, Coleman & Company Ltd (BCCL) and Times Infotainment Media Ltd Reliance Media World Ltd Sun TV Network Major brands Radio Mirchi has a presence in 32 cities across India, including Mumbai, Delhi, Kolkata, Chennai, Pune, Indore, Ahmedabad, Bengaluru, Hyderabad, Jaipur, Patna and Jalandhar. BIG FM has a 45-station network covering 45 cities, 1,000 towns and 50,000 villages. Suryan FM has a presence in seven cities in Tamil Nadu, while Red FM has a presence across 37 cities in the country.

Entertainment Network (India) Limited (ENIL)

Big FM South Asia FM Ltd (SAFL)

Sources: About us, ENIL website, www.enil.co.in/profile.html, accessed 16 November 2010; FM Radio, SUN TV Network website, www.sunnetwork.org/FM/default.htm, accessed 16 November 2010; About us, BIG 92.7 FM website, www.big927fm.com/Content.php?Id=3, accessed 16 November 2010.

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MARKET OVERVIEW Entertainment November 2010

Key players music

Company T-Series Portfolio The company has rights to more than 2,000 video and 35,000 audio titles, comprising nearly 24,000 hours of music software. Venus holds audio rights for various regional language movies, including Hindi, Marathi, Bhojpuri and Bengali. It also holds video, satellite and cable rights. The company is also involved in acquiring and creating re-recording rights, film presentations, sound recording and film production. This company owns a library of about 48,000 albums and 300,000 songs in 14 languages. Saregama The company is also involved in home videos, films, TV software, digital distribution of video and audio content, event management, artist management and theatrical film distribution. The company holds 3,500 titles and the soundtrack copyright of about 50 Hindi movies and has the highest number of platinum and gold discs.

Venus

Tips

Sources: About us, T-series website, www.tseries.com/Aboutus.aspx, accessed 16 November 2010; About us, Tips Industries website, www.tips.in/aboutus/index.htm, accessed 16 November 2010; About us, Venus Records website, www.venusgroup.org/newaudio/about_us.html, accessed 16 November 2010; Entertainment, RPG website, www.rpggroup.com/saregama.html, accessed 16 November 2010.

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ENTERTAINMENT

November 2010

Contents
Advantage India

Market overview
Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations
21

INDUSTRY INFRASTRUCTURE Entertainment November 2010

Industry infrastructure
Investments from the private sector and foreign M&E majors primarily fund Indias entertainment infrastructure. Government-owned enterprises, too, have developed extensive infrastructure to provide entertainment services to the majority of Indias population.
Segment Films Infrastructure Theatre infrastructure in the form of multiplexes has been witnessing rapid developments over the past decade. Currently, there are more than 10,000 operational theatre screens in India, of which about 850 are multiplexes. The industry has also added state-of-the-art studios and post-production facilities. There are 503 registered TV channels beaming into India, supported by the robust infrastructure of modern studios and other support infrastructure. In addition, the public broadcaster, Doordarshan (DD), has a countrywide infrastructure of 66 studios and 1,135 transmitters for terrestrial broadcasting.

TV broadcasting

TV distribution

In addition to its terrestrial network, DD operates a free-to-air DTH service DD Direct Plus. Private players have built a vast TV distribution network spread across the country. There are around 60,000 local cable operators, 6,000 multi-system operators, six private subscription-based DTH operators, and two head-end-in-the-sky (HITS) licence holders.
Primarily, state-owned telecom companies MTNL and BSNL have laid out broadband infrastructure in the form of optic-fibre cables across cities and villages. Private-sector players such as Reliance Communications, and Bharti Airtel, too, have built robust broadband infrastructure across major Indian cities and towns.

New media

Sources: Doordarshan Networks across India, Doordarshan website, www.ddindia.gov.in, accessed 11 November 2010; TRAI gets five months to fix non-CAS cable tariffs, Financial Express (India), 19 January 2010.

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ENTERTAINMENT

November 2010

Contents
Advantage India

Market overview
Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations
23

INVESTMENTS Entertainment November 2010

Investments (1/3)

The largest deal in the sector was Inox Leisures acquisition of Fame India for US$14.5 million. Another important deal was the acquisition of India Book House Pvt Ltd by ACK Media for US$ 4.7 million.

M&A scenario details Period : January 1, 201031 October 2010 Deal type Inbound Outbound Domestic No of deals 12 8 17

Sources: Thomson One Banker, accessed 16 November 2010

24

INVESTMENTS Entertainment November 2010

Investments (Major acquisitions) (2/3)

Deal Domestic Deal type ACQ Announce date October 15, 2010 Announced deal value (US$ million) 40.01 Target name Mid-Day Multimedia Ltd-Print Target country India Acquirer Jagran Prakashan Ltd Zee Entertainment Enterprises SIDOFI Communications Astro All Asia Networks PLC Alva Brothers Entertainment Alva Brothers Entertainment Astro All Asia Networks PLC Reliance Capital Ltd Investor Group Komli Media India Pvt Ltd Reliance Big Ent Pvt Ltd Acquirer country India

Domestic
Inbound Inbound Domestic Domestic Inbound Domestic Inbound

ACQ September 22, 2010

ACQ ACQ ACQ ACQ ACQ ACQ ACQ September 7, 2010 August 8, 2010 July 30, 2010 July 30, 2010 July 26, 2010 June 16, 2010 June 16, 2010

NA
NA 21.76 NA NA NA NA 4.71

INX Media Pvt Ltd

Asianet Satellite Commun Ltd Getit Infoservices Pvt Ltd Real Global Broadcasting Miditech Pvt Ltd Turmeric Vision Pvt Ltd Bloomberg UTV Amar Chitra Katha Media

India
India India India India India India India

India
Mauritius Malaysia India India Malaysia India United Kingdom

Outbound
Outbound

ACQ
ACQ

June 10, 2010

May 7, 2010

NA
NA

PostClick
IM Global LLC

Australia
United States

India
India

Source: Thomson One Banker, accessed 16 November 2010; Note: ACQ:Acquisition; PE: Private equity

25

INVESTMENTS Entertainment November 2010

Investments (Major acquisitions) (3/3)

Deal Outbound Deal type ACQ Announce date April 6, 2010 Announced deal value (US$ million) NA Target name Target country Acquirer Acquirer country India

Domestic
Domestic Domestic Domestic

ACQ
ACQ ACQ ACQ

March 24, 2010

February 5, 2010 February 3, 2010 January 28, 2010

NA
2.75 14.46 16.43

Domestic
Outbound Outbound

ACQ
ACQ ACQ

January 20, 2010

January 18, 2010 January 7, 2010

NA
44.15 NA

Codemasters United Reliance Big Ent Pvt Ltd Software Co Ltd Kingdom India Book House India Amar Chitra Katha Media Pvt Ltd Fame India Ltd India Inox Leisure Ltd Fame India Ltd India Inox Leisure Ltd Maya Entertainment India Aptech Ltd Ltd Next Gen Publishing Shapoorji Pallonji & Co India Ltd Ltd Taj Television Ltd Utd Arab Zee Entertainment Mauritius Em Enterprises United i lab(UK)Ltd Reliance MediaWorks Ltd Kingdom

India
India India India

India
India India

Source: Thomson One Banker, accessed 16 November 2010; Note: ACQ:Acquisition; PE: Private equity

26

ENTERTAINMENT

November 2010

Contents
Advantage India

Market overview
Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations
27

POLICY AND REGULATORY FRAMEWORK Entertainment November 2010

Policy and regulatory framework

TV

In 2004, the Telecom Regulatory Authority of India (TRAI) was appointed as a regulator for the TV industry.

Up to100 per cent FDI is permitted in TV channels.

The foreign investment limit in the direct-to-home (DTH) business is 49 per cent, of which the FDI component limit is 20 per cent. The cable networks business has a 49 per cent foreign investment limit. TRAI has proposed to raise the FDI limit from 49 per cent to 74 per cent for DTH and national and state level MSOs. The regulatory body also recommended an FDI cap of 74 per cent on IPTV and mobile TV. There is no foreign investment policy on mobile TV at present. The rollout of DTH TV licenses and GoI-mandated digital conditional access systems (CAS) initiated the digitisation process. The recently announced Headend-in-the-Sky (HITS) policy which has 74 per cent FDI limit and a concessional customs duty of 5 per cent on importing digital headend equipment is expected to give further impetus to the digitisation process. To promote digitisation, the GoI is considering a conditional hike in foreign investment limits for those TV distributors who digitise their networks. TRAI has proposed four phase digitisation of cable TV networks by December 2013 and lifting the cap on the number of satellite-based TV channels intended for down-linking or up-linking from India.
Sources: Tune-in to Indias entertainment economy: From emerging to surging, Ernst & Young, 2008; The Telecommunication (broadcasting and cable) services tariff order 2004 [1 of 2004], TRAI, 15 January 2004; Cabinet approves policy to digitise cable TV operations, Mint, 13 November 2009. Tune into emerging entertainment markets- spotlight on BRIC, Ernst & Young, 2010; EY M&E Newsreel, August 2010, EY M&E Newsreel, September 2010.

28

POLICY AND REGULATORY FRAMEWORK Entertainment November 2010

Policy and regulatory framework

Films

In 2000, the GoI granted industry status to the Indian film industry and permitted FDI of up to 100 per cent in film-related activities. Various state governments have also provided entertainment tax exemptions to multiplexes. In the Union Budget 201011, the GoI announced a rationalisation in the customs duty structure for the import of cinematographic films by charging customs duty only on the actual cost of the film and not on the value of the content. Following the opening of FM radio broadcasting to private players in March 2000, the rollout of the second phase of the FM radio licencing policy in 2005 provided a thrust to the sector. In radio companies, FDI is limited to 20 per cent of the companys paid-up equity capital. With the FM phase 3 policy this limit will be raised to 26 per cent. An increase in foreign investment limits is expected to attract additional growth capital for the industry. Political advertisements are now allowed on FM radio stations in India. In April 2010,The Cabinet Committee on Infrastructure approved the MIBs proposal on the All India Radio (AIR) and Doordarshans digitisation of transmitters and studios, setting aside US$ 191.7 million and US$ 129.2 million, respectively, for the purpose.

Radio

Sources: Tune-in to Indias entertainment economy: From emerging to surging, Ernst & Young, 2008; The Telecommunication (broadcasting and cable) services tariff order 2004 [1 of 2004], TRAI, 15 January 2004; Cabinet approves policy to digitise cable TV operations, Mint, 13 November 2009; FM-III 1st phase to auction 160 stations, The Financial Express website, http://www.financialexpress.com/news/fmiii-1st-phase-to-auction160-stations/674181/, accessed 11 November 2010; Tune into emerging entertainment markets- spotlight on BRIC, Ernst & Young, 2010.

29

ENTERTAINMENT

November 2010

Contents
Advantage India

Market overview
Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations
30

OPPORTUNITIES Entertainment November 2010

Opportunities (1/3)

Investment in regional markets

Rising affluence levels have directly led to increasing levels of consumption across semi-urban and rural towns. According to a study by Ernst & Young, non-metro and semi-urban towns constituted more than 70 per cent of the total consumption market of 100 cities mapped. In addition, the growth rate of consumer expenditure in these regional markets was higher than the metros.

As the demand for regional content is growing, entertainment companies, both Indian and international are expected to focus on penetrating these regional markets, which hold the possibility of high returns.
Entertainment companies are expected to form partnerships or alliances across content creation, distribution or sales to de-risk their businesses and optimise resources. The number of contentsharing alliances with domestic as well as foreign players has been increasing. Global studios have entered the Indian film industry to co-produce Indian and international films. Indian companies are also partnering with global studios for doing visual effect and post production work. Consumer preferences are shifting towards international programming formats. There is an opportunity for global production houses to localise their content for the Indian audiences.

Alliances and partnerships

Development of content for a specific target audience

Entertainment companies will have to generate content that appeals to specific target audiences. More content is expected to be generated for youth and emerging niche audiences. Reality shows are making a headway and there is an opportunity as the new formats have helped TV companies earn revenue from mobile VAS services such as audience votes.
Companies will have to understand consumer preferences to develop content and subscription models that can help them acquire and retain the right consumers.

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OPPORTUNITIES Entertainment November 2010

Opportunities (2/3)

India has witnessed significant growth in mobile penetration. In 2010 the number of mobile subscribers have crossed the 500-million mark and internet and broadband penetration is increasing. New formats for entertainment such as computers, mobiles and other handheld devices are likely to be the most significant channels, as digital media has the highest visible return on investment. The launch of 3G and WiMax is expected to throw open myriad opportunities in value added services segment. New media investments are becoming critical for certain sectors such as music and publishing. Entertainment companies will have to develop a focused new media strategy to monetise their content better. Traditional entertainment companies could also consider diversifying their risk by entering the new media segment. For instance, broadcasters could venture into mobile and Internet services. Traditional film production houses could increase revenues from their content libraries by going online.

Investment in new media

With the emergence of new media, Indian media conglomerates are moving from being a oneplatform business to being a multi-platform one and are becoming integrated media players with interests across various M&E segments such as TV, film and new media. Opportunities exist to tap consumers horizontally across the different strata of the society and vertically, diversifying into various businesses. Companies are also moving toward different revenue models. For instance, gaming companies, which till the 1990s focused on video gaming alone, are moving to online versions.

New business and revenue models

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OPPORTUNITIES Entertainment November 2010

Opportunities (3/3)

IP protection and monetisation

Entertainment companies will try to protect and monetise their intellectual property (IP). For instance, content producers and broadcasters can jointly own content and explore ways to tap revenues from different streams.

Alternatively, broadcasters whose content reaches vast audiences in various countries would ensure effective monetisation of these rights.
The industry is adopting digital technologies to overcome distribution inefficiencies, reduce the cost of distribution and curb piracy. There are around 35 million digital TV households currently, growing from around 17 million households in 2009. With local cable operators (LCOs) and multi-system operators (MSOs) going digital and the advent of DTH and Internet Protocol Television (IPTV), companies are likely to be witness vast opportunities in the long run through value-added services provided on these digital media. Companies will have to digitise their content and become digitally enabled to fully leverage such opportunities. With the introduction of HITS it will lead to enormous cost savings and elimination of digital headend across locations. Indian M&E market mirrors the global M&E market, with more than 70 per cent of the share contributed by television and print media. However, the share of other segments such as radio (2 per cent), internet, music(1 per cent) and out-of-home media is significantly less than their share in global M&E market. This indicates an attractive growth opportunity for players in the market to tap the emerging segments as the consumer spending on media increases.

Digitisation

Media wise spend

Sources: EY analysis; Tune-in to Indias entertainment economy: From emerging to surging, Ernst & Young, 2008; Whats next? for Indian media and entertainment, Ernst & Young, 2008. Tune into emerging entertainment markets- spotlight on BRIC, Ernst & Young, 2010; TP report on Media and Entertainment, Ernst & Young, September 2010;

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ENTERTAINMENT

November 2010

Contents
Advantage India

Market overview
Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations
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INDUSTRY ASSOCIATIONS Entertainment November 2010

Industry associations
Indian Motion Picture Producers' Association IMPPA HOUSE

Dr Ambedkar Road, Bandra (West),

Mumbai 400 050, INDIA Phone: 91 22 2648 6344/45/1760 Fax: 91 22 2648 0757 The Film & Television Producers Guild Of India Ltd G-1, Morya House, Veera Indl. Estate, Off Oshiwara Link Road, Andheri (W), Mumbai 400 053, INDIA Tel: 91 22 56910662, 91-22 26733065 Fax: 91 22 5691 0661

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NOTE Entertainment

November 2010

Note
Wherever applicable, numbers in the report have been rounded off to the nearest whole number. Conversion rate used: US$ 1= INR 48

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ENTERTAINMENT

November 2010

DISCLAIMER
India Brand Equity Foundation (IBEF) engaged Ernst & Young Pvt Ltd to prepare this presentation and the same has been prepared by Ernst & Young in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of Ernst & Young and IBEFs knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Ernst & Young and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Ernst & Young nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.

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