Indian Entertainment & Media Industry - A Growth Story Unfolds - FICCI Frames 07

Executive Summary
Entertainment and Media Industry today
As the Entertainment and Media Industry continues to evolve due to shifting

consumer preferences, evolving technology and convergence of traditional and
new media, finding a concrete definition of the industry is similar to hitting a moving
target. The definitions will continue to blur in the coming years. The potential impact
of Convergence on the television and advertising industries has long been
predicted, but in 2006, the theory is beginning to become a reality in India.
In a converged media world consumers increasingly call the shots. No longer is

there a captive, mass-media audience. Today’s media consumer is unique,
demanding and engaged. The technology enablers have made this new breed of
consumer possible. Though this phenomenon brings about several opportunities, it
also poses challenges that Convergence is bringing to the content, distribution, and
advertising industries.
Emergence of Lifestyle Media
Consumers need a new approach that helps them maximise their limited time and
attention to create a rich, personalised, and social media environment- Lifestyle
Media: a personalised media experience within a social context. It bridges the world
of unlimited content to the world of limited consumer time and attention. It explicitly
recognises that consumers increasingly access a two-way communications
infrastructure, even if most content is still received in broadcast form today.
Realising this vision of Lifestyle Media requires two fundamental components: new
content distribution models that put consumers in control, and more accurate and
scalable data about what they are watching, doing, and creating. The combination
of these two crucial elements will create a media marketplace; a platform that
connects media providers and media seekers through an organisational and
technical infrastructure. It will enable Lifestyle Media to flourish by allowing content
owners, advertisers, and consumers to discover, select, configure, distribute, and
exchange both professionally produced and user-generated video content.
A media marketplace supports a many-to-

many interaction by bringing together
content, tools, and consumer activity
information. Tools help develop
communities and support creation, sharing,
mixing, and remixing of user-generated or
professional content across multiple touch
points.
Source: PricewaterhouseCoopers- The Rise of Lifestyle Media- Achieving Success

in the Digital Convergence Era
8 The Indian Entertainment and Media Industry - A Growth Story Unfolds

Executive Summary
Opportunities and Challenges in the

emerging media marketplace
Consumer needs are expanding beyond mass media and segmented media
Convergence is making consumers more sophisticated in their video consumption
habits by elevating them to the top of the value-creating hierarchy. What were
previously the ends (content, channels, or devices) of media and advertising
business models, are now the means for empowering consumers to organise their
productive, leisure, and social time around converged media experiences. In an era
of virtually unlimited content choices competing for limited consumer time and
attention, an approach that allows beneficial interaction between consumers,
content owners, service providers and networks will present many opportunities for
the industry to create new revenue streams.
Knowledge of consumer activity rather than exclusive ownership of content

or distribution assets will become the basis for competition.
With ubiquitous connectivity and lower barriers to content creation, convergence
empowers consumers and begins to break down the historical control points in the
content creation and distribution chain. Leading media providers will track and
measure the choices consumers make when they create, find, select, and exchange
content and services. Providers will use this information to create value for their
advertising partners. Businesses that capture consumer activity data and use it to
inform business and advertising models will be positioned to succeed.
Media marketplace provides a structure to capitalise on the opportunity.

Media consumption models, such as a media marketplace, that provide consumers
with robust search, research, customisation, configuration and scheduling tools will
capture the opportunity better than minor modifications to existing business
practices. These models resemble those used in online retail, where product
placement, dynamic pricing, and individualised service become the basis for
competition. Participants in media marketplaces must collaborate in this
transformation. In the near-term, the industry will experience increased complexity
and economic inefficiencies before a refined and efficient structure for a media
marketplace is developed.
Early movers in establishing media marketplaces will have a significant

advantage over late entrants because of network effects, whereby the value
of the marketplace increases as the number of participants increase.
Incumbents and new entrants have begun to compete for consumer loyalty and
profile information, and this trend will continue. Incumbents possess significant
content assets and a brand advantage and they have a unique opportunity to
exploit this by establishing direct relationships with consumers.
Media marketplaces will be economically viable only if operational

efficiencies can be realised through consumer activity measurement
capabilities and supporting systems.
Crucial investments in data capture, analysis, and customer and community
management systems are required to create a customer experience which
resembles that of an Internet retailer. Effectively engaging audiences can be
accomplished only through the automated capture and analysis of customer activity
data. This information would feed into marketplace operational systems to trigger
content suggestions and advertising placement. Likewise, investments in customer
The Indian Entertainment and Media Industry - A Growth Story Unfolds

9
Executive Summary
experience and community management capabilities that work across multiple

platforms are needed to provide a single touch point for advertising and marketing
partners.
Significant advancements in audience measurement technology are needed

to capture, analyse, and standardise consumer activity data across digital
platforms.
To date, much of the demographic and activity data related to audience
measurement is isolated on separate platforms (TV, broadband, mobile), even
though consumers choose content across platforms. Both the content and
advertising industries will need trusted third parties that use census and panel-
based measurement approaches to capture standardised consumer activity
information across platforms. Additionally, because discrete distribution channels
can be complementary rather than competitive, measuring and analysing the
impact of one outlet on another is also strongly needed.
Measurement standards will be crucial for advertising growth.

With the emergence of digital platforms, every programme and advertisement
delivered to a set-top box should be logged; in theory, there should be accurate
measurement of customer behaviour. But in reality, that accuracy will be relative, as
different providers will collect and define unique audience-measurement and
advertising delivery metrics, then apply them to proprietary systems and
procedures. As a result, this non-standardised consumer data will be of limited
value. This problem of inconsistent measurement data provides a challenge to the
advertisers who without standard metrics are not able to compare their return on
investment (ROI) across different channels and campaigns.
Most importantly, content providers and advertisers will be more

accountable for their performance because it is now measurable.
Given the proven effectiveness of targeted advertising in other interactive media,
television advertising will continue to become more targeted. This shift will also
raise demands for accountability. Advertising to mass audiences will continue. But
the effectiveness and better metrics of targeted environments will raise advertising
spending and move it to those environments that enable a deeper engagement with
the audience.
Lastly, Convergence will require increased collaboration between value

chain partners to drive new products and services to consumers.
As companies look to expand their current portfolio of services and revenue
streams, they will need to rely on value chain partners for many roles: technological
advancement, access to new distribution outlets, protection of intellectual property,
and so on. This will require new partnerships, alliances and joint ventures as great
value can be gained from collaborating and sharing strengths. Since many
companies will pursue these to drive incremental revenues and growth,
transparency of reporting and independent verification will be critical to all parties’
continued success.

Executive Summary
Defining Convergence
The term convergence describes two trends: the ability of different network
platforms (broadcast, satellite, cable, telecommunications) to carry similar kinds
of services; and the merging of consumer devices such as telephones,
televisions, or PCs. From a technology perspective, the twin forces accelerating
convergence are increased broadband penetration and increased
standardisation of networks and devices to use the Internet Protocol (IP).
Convergence collapses previously distinct media distribution channels (for

example, broadcast/cable television, radio, print, online) into a single media
delivery chain. A converged infrastructure supports a range of interaction modes
between users and content. Moreover, the open transport and interface protocols
of IP mean that access to content has become largely network and device-
independent.
Fundamentally, convergence affects the two-step process at the heart of any

media-based industry: content creation and transport. The first step entails
selecting, packaging, and encoding content into a medium. The second step
transports content to its destination and then decodes it for use. In most
instances, it is the second step that defines a particular media market, which
influences the form taken by the content in the first step.
Content owners are both facilitators and beneficiaries of convergence. They

make converged media experiences possible by offering consumers their
content libraries in digital format through any access device and network. They
benefit from convergence by serving consumers’ new media needs with the
appropriate distribution and business models.
Converged Media Value Chain
Content owners, aggregators, services providers
Convergence to an
Video Voice Music
Services
Gaming Messaging Other
IP-based transport
allows for all content
Broadband transport (Internet Protocol) and servicesto be
delivered across any
Infrastructure physical infrastructure
Fixed-Line Mobile Cable Wireless LAN Other
and therefore to any
Consumers other device
(Divices)


11
Executive Summary
Convergence Trends in India
Digital Cinema : Combination of three phases: digital production or post-

production, digital delivery and digital projection for enhanced movie-
viewing experience to audiences. Approx. 10% of about 12,000 movie
theatres have turned digital with digital projectors and servers to run digital
prints.
Ancillary revenues earned by film producers estimated to increase by

20 per cent a year by selling their digital rights to mobile companies and
satellite rights to TV broadcasters and distributors (cable companies and
DTH players)
Mobile Ads are currently text-based and appear along with search results
delivered to mobile devices, and they contain either a link to a mobile
website or a phone number which users can click on to generate a call. E.g.
Google has started testing mobile ads for advertisers in India
Mobile for money transfer – Indian Government has displayed positive

inclination towards reviewing banking regulations that currently disallow
cash for exchange of another unit such as airtime. This could alleviate the
problem of low penetration of bank branches in rural areas.
Enterprise Applications – Operators such as Bharti, Hutch etc. have

launched mobile based business applications such as Blackberry, Data
access, Order management, Goods Tracking while on the move.
Mobile VAS Industry (excluding SMS) is thriving on Ringtones and

Ringbacktones, which are the primary revenue drivers. Voice based and
Text based information services are also significant. Mobile Music and
Mobile Gaming market is small but is expected to grow faster than other
services
IPTV is set to pose a significant challenge to established cable and DTH

operators with its ‘Triple Play’ promise of high-speed Internet, television
(video on demand or regular broadcasts) and telephone service over a
single broadband connection. Launched by MTNL last year, other operators
like Bharti and Reliance are also undergoing trials.
Mobile TV : It works by receiving a digital TV broadcast signal optimised for

mobile devices in much the same way as televisions do at home. Operators
and broadcasters have to put up towers across cities. Nokia has tied up with
Doordarshan, the State Broadcaster, to conduct a pilot test using digital
video broadcaster-handheld (DVB-H) technology for rollout of services.
Trials are also being conducted by Mobile Operators.
Mobile Operators and Movie hall chains have started tying up for
purchase and payment of movie tickets through mobile. E.g. AirTel tie up
with PVR Cinemas for mobile ticketing services
Equipment vendor Nokia has tied up with a Film training institute

and announced a Mobile Film Award aimed at promotion of a new mobile
model that will judge entries for short movies produced using the particular
handset model.
Source: PwC Theme Paper on Communications Convergence

Executive Summary
Key Developments
Diversification of Traditional media companies
One of the most notable developments of 2006 were the several activities of
diversification in the value chain of the industry- be it the news channels launching
general entertainment channels, television broadcasters foraying into film
segments, film companies entering the radio market, print media companies getting
into radio and television and so on.
Radio was one segment which most media companies made their entry into,
propelled by the opening of FM Radio licenses under the favourable Phase-II FM
Radio policy initiative. Prominent amongst those were the television companies
such as Sun Group, NDTV Group Asiannet Communications and Print Media
Companies such as Malayalam Manorama, HT Media, Malar Publications,
Rajasthan Patrika and Dainik Bhaskar.
The other notable diversifications were the entry of telecom companies into the
E&M segment. In 2006, MTNL launched the first IPTV (Internet Protocol TV) service
in India where TV content is being delivered on television screens through a
broadband internet connection. MTNL, however, is yet to finalise its pricing for the
offering and other commercial terms. Reliance Communications is planning to roll
out IPTV services by initially targeting 200 cities across India and aims to reach five
million IPTV customers. The Company is running trials in 20,000 homes and is also
contemplating Triple Play services to its broadband subscribers. Airtel too has
initiated IPTV trials two years back for its select broadband customers.
Other diversification activities in 2006 include:
The Times of India Group, having its presence in Print, Television and
Radio entered into Filmed Entertainment business with the release of its
first English film in 2006. It also invested in Percept Picture Company,
a Film Production Company and Pyramid Saimira, a Film Exhibition
Company
Adlabs, having its presence in Films and Radio entered into Television
Production by investing in Synergy Communications
TV18 Network, launched Studio 18, a division to enter the motion picture
business involving acquisition, production, syndication and distribution
of feature films. Through CNN-IBN, it forayed into Hindi News Television
by acquiring Channel 7 from the Jagran Group.
Television news broadcaster NDTV announced its plans to launch an
entertainment channel in collaboration with filmmaker Karan Johar's
Dharma Productions and also invested in a Radio Company in
collaboration with the Sun Group.
Anand Bazaar Patrika, present in Print and Television, acquired a stake
in a Delhi-based film production company, Kaleidoscope Entertainment
in 2006.
Sri Adhikari Brothers, having dabbled in entertainment through SAB TV,
selling it off, launching Janmat in the current affairs genre in Hindi,
announced its plans to start a Marathi entertainment channel.
UTV diversified into Gaming by investing into Gaming companies
Indiagames and Ignition

13
Executive Summary
Investment in content
The impact of Convergence was felt greatest in 2006 by companies especially in
the distribution space. With more and more distribution platforms being available,
the importance of securing rights over content became paramount. As a result,
significant investments were made and committed to by companies to secure their
content pipeline. Some of these instances include:
Adlabs alongwith Reliance Capital acquired a 21% stake in Prime Focus, a

TV and video production facilities company. It also signed a co-production
and film financing deal with Ashok Amritraj-promoted Hyde Park
Entertainment Group.
Disney acquired a 15% stake in UTV, a local kids television production

company
Several Film Production Companies signed up leading artists to lock them

in of which the most notable was Adlabs which signed a contract with
Hrithik Roshan with Rs. 350 million for 3 films and Akshay Kumar for Rs.
180 million for 3 films. Adlabs also signed an 8 film deal with director Vipul
Shah for Rs. 2000 million. UTV has set aside Rs. 1000 million for contracts
with individual directors. Sahara Motion Pictures too entered into a contract
with Madhur Bhandarkar for 3 films
Increased Foreign Direct Investment (FDI) in the Industry
2006 saw the maximum flow of foreign investment in the Entertainment and
Media Industry. As many as 13 proposals for FDI in media since were cleared
by the Ministry of Information and Broadcasting in 2006 itself and the Ministry is
further examining another 22 proposals for clearance. Among these, are 8
proposals for news and current affairs segment including Mid-Day Multimedia
Ltd, Business India Publications Ltd, Deccan Chronicle Holdings Ltd, Dhara
Prakashan Pvt Ltd, Writers & Publishers Ltd and DT Media & Entertainment Pvt
Ltd. Over the last three years, the industry has secured foreign investment of
over Rs. 4 billion.

Executive Summary
FOREIGN DIRECT INVESTMENT (FDI) INFLOWS IN THE E&M INDUSTRY- COUNTRY-WISE
(Amount in million)
SR Country 2004 2005 2006 Total
No Jan-Dec Jan-Dec Jan-Oct
FDI FDI FDI FDI FDI FDI FDI FDI
in Rs in US$ in Rs in US$ in Rs in US$ in Rs in US$
1 Australia 0.00 0.00 0.00 0.00 4.98 0.11 4.98 0.11

2 Cayman Island 0.00 0.00 13.67 0.31 0.10 0.00 13.77 0.31
3 Cyprus 0.00 0.00 1,160.64 25.47 12.92 0.28 1,173.56 25.76
4 France 0.00 0.00 2.81 0.06 75.49 1.62 78.30 1.69
5 Germany 0.00 0.00 0.10 0.00 0.67 0.01 0.77 0.02
6 Indonesia 0.00 0.00 0.00 0.00 3.10 0.07 3.10 0.07
7 Italy 0.00 0.00 0.00 0.00 0.07 0.00 0.07 0.00
8 Korea(South) 13.73 0.30 0.00 0.00 0.00 0.00 13.73 0.30
9 Luxembourg 2.28 0.05 0.00 0.00 2.18 0.05 4.45 0.10
10 Malaysia 0.00 0.00 0.00 0.00 6.73 0.15 6.73 0.15
11 Mauritius 16.47 0.36 621.67 14.10 0.00 0.00 638.14 14.46
12 NRI 0.00 0.00 178.87 4.11 1,105.64 23.88 1,284.51 27.99
13 Netherlands 0.00 0.00 1.31 0.03 0.00 0.00 1.31 0.03
14 Norway 0.00 0.00 0.00 0.00 0.06 0.00 0.06 0.00
15 Singapore 0.00 0.00 5.91 0.13 1.00 0.02 6.91 0.16
16 Sri Lanka 0.00 0.00 0.00 0.00 3.70 0.08 3.70 0.08
17 Switzerland 0.00 0.00 0.89 0.02 0.00 0.00 0.89 0.02
18 U.A.E. 4.26 0.09 54.48 1.24 0.00 0.00 58.73 1.34
19 U.K. 6.82 0.15 5.25 0.12 47.29 1.05 59.36 1.32
20 U.S.A. 39.92 0.87 497.71 11.01 2.51 0.06 540.14 11.93
21 Unindicated Country 0.00 0.00 33.83 0.77 118.00 2.60 151.83 3.37
Grand Total 83.47 1.81 2,577.14 57.39 1,384.44 29.98 4,045.05 89.18
Source: Department of Industrial Policy and Promotion, Government of India

15
Executive Summary
Increased investment from Private Equity Funds

Entertainment and Media industry has traditionally been dominated by strategic
buyers. But now private equity is playing a major role in helping reshape many of
the segments of the industry. As more companies continue to put money into
growth technologies and re-evaluate traditional business that once were consid-
ered core but may have less strategic importance in the future- all these initiatives
generate the strong cash flows and hence interest private equity players.
The past two years have seen a flurry of funds entering the E&M space in India,
like 3i, Matrix Partners, Warburg Pincus, De Shaw, T. Rowe Price International etc.
A booming stock market at highest ever earnings multiples has not deterred these
firms from buying into a sizeable chunk of the Indian E&M pie, backed by the
promise of a strong economic growth rate and a highly trained workforce.

Executive Summary
Some of the deals in the private equity space in 2006 include:

Private Equity Target Segment Estimated Deal Investment
Investor (s) value Stage
(Rs. million)
Warburg Pincus Dainik Bhaskar Newspaper 1,500 Growth

(Cliffrose Investment Ltd) (Writers & Publishers Ltd.) publishing
De Shaw Crest Animation Animation 400 Growth

Studios
De Shaw Rich Crest Holdings Inc. Animation 700 Early

(subsidiary of Crest
Animation Studios)
De Shaw Amar Ujala Newspaper 1,170 Growth

Publishing
Matrix Partners (IND) Seventymm Services Online Movie Rental 315 Growth
Matrix Partners India vJive (owned by Digital Out of home media- 200 Early
Music India Pvt. Ltd.) Digital Signages
T Rowe Price International Saregama Industries Ltd. Music 191 Mature
Norwest Venture Partners Sulekha.com Online/ Internet 450 Growth

(US)
Norwest Venture Partners Yatra.com Online/ Internet N.A. Early

(US), Reliance Capital
(IND), TV-18 Group (IND)
Norwest Venture Partners Mobile2win.com Online/ Internet 675 Growth

(US)
Sequoia Capital India Travelguru.com Online/ Internet 675 Growth

(IND), Battery Ventures
(US)
West Bridge Capital (IND) Travelguru.com Online/ Internet 450 Growth
West Bridge (and Intel Mauj Online and VAS 450 Growth
and Sequio Capital) (US)
West Bridge Capital Shaadi.com Online and VAS 360 Growth
IL&FS Investment Global News Broadcasts News channel 400 Early

Managers Ltd. (a group co. of TV18 India) operators
SAIF Partners TV 18 India Home shopping N.A. Early

network
Tracer Capital Web 18 Caymans Internet Websites 450 Early

(subsidiary of TV 18 co.)
UTI Venture Funds Laqshya Media Out of Home 450 Growth

Advertising
Source: Industry estimates and PwC research

17
Executive Summary
Select public issues by E&M Companies in 2006
Company Share price) Price Band Issue Price Period IPO Size
(Rs. (Rs.) (Rs.) Rs. (million.)
Info Edge (India Limited) 10 290-320 320 Oct-Nov 06 1710
Prime Focus Limited 10 450-500 417 May 06 1150
SUN TV Limited 10 730-875 875 April 06 6,028
K Sera Sera Productions 10 64-70 68 Feb 06 340

Limited
Jagran Prakashan Limited 10 270-324 320 Jan 06 502
GBN (owners of CNN-IBN) 10 230-250 250 Jan 07 1,050
Source: Industry estimates and PwC research
Select M&A Deals in the E&M Segment in 2006

Investor Target % age Deal Value
stake (Rs. million)
Name Segment Name Segment
Disney Kids Television Hungama Television 100% 1,373

Broadcasting
& Content
Disney Kids Television UTV Software Media 14.9% 630
Communications Conglomerate
Adlabs Films, Radio Synergy Television 51% N.A.
Communications Content
Company
ABP Print & Kaleidoscope Film N.A. 200
Television Entertainment Production
CNN Television Channel 7- Television 50% 600
-IBN Broadcasting Jagran Group Broadcasting
& Content & Television
Content
Zee Television Ten Sports Television 50% 2,500
Broadcasting Broadcasting
& Content & Television
Content
NDTV Television Radio Today Radio N.A. N.A.
& Content
E-City Film Exhibition Shree Vijay Raj Film Exhibition 51% N.A.
Digital Entertainment
Cinema
(Essel
Group)

Executive Summary
Times of Varied Vijayanand Print Media N.A. N.A.

India including Printers
Group Print Media
Inox Film Exhibition Calcutta Cinema Film Exhibition N.A. N.A.
Leisure
Color Animation Millitoon Animation N.A. N.A.
Chips Animations
Media Varied United News of News Agency 60% 500
West including India (UNI)
(Essel Print Media
Group)
Times of Varied Sandesh Print Media 12% 270
India including
Group Print Media
Television Television Crisil Market Online 100% N.A.
Eighteen and Online Wire
Group
Sun TV Television Gemini TV and Television N.A. N.A.
Broadcasting Udaya TV Broadcasting
& Content & Content
UTV Films and Indiagames Gaming 51% 680
Television
UTV Films and Ignition Gaming 70% 600
Television
Prime Films and VTR Group European 55% 400
Focus Visual effects Media Service
Company
BBC Varied Radio Mid-Day Radio 17.5% 318
including Radio
Reuters News Agency Times Global Television 26% 894
& Content
United Global Business Mediworld Print Media 100% 38
Business Information Publications
Media
Times of Varied Sahara India Television 6% 378
India including Mass Broadcasting
Group Television Communications & Content
Times of Varied Percept Picture Films N.A. N.A.
India Company
Group
Times of Varied Pyramid Saimira Film Exhibition N.A. N.A.
India
Group

19
Executive Summary
Industry size and Growth Potential

The Indian Entertainment and Media industry, yet again, continues to out-perform
the Indian economy and, yet again, is one of the fastest growing sectors in India.
Entertainment and Media industry generally tends to grow faster when the economy
is expanding. The Indian economy has been growing at a fast clip over the last few
years, and the income levels too have been experiencing a high growth rate. Above
that, consumer spending is also on the rise, due to a sustained increase in dispos-
able incomes, brought about by reduction in personal income tax over the last
decade. All these factors have given an impetus to the E&M industry and are likely
to contribute to the growth of this industry in the future. Besides these economic and
personal income-linked factors, there are other factors that are contributing to this
high growth rate. Some of these are enumerated below:
Economic impetus
Demographic
Low ad spends Impetus
Key Growth
Drivers
Low media Liberalising foreign

penetration investment regime
The Economic Impetus

Over the past 10 years, India has registered the fastest growth among major
democracies, having grown at over seven per cent in four years in the 1990s. It
represents the fourth largest economy in terms of ‘‘purchasing power parity’’. The
Indian Entertainment and Media industry is expected to significantly benefit from
this fast economic growth, as this industry is a cyclically sensitive industry that
grows faster when the economy is expanding. It also grows faster than the nominal
gross domestic product growth (GDP) dur-ing all phases of economic activity due to
income elasticity wherein when incomes rise, pro-portionately more resources get
spent on leisure and entertainment and less on necessities.
The Demographic Impetus

Over the years, spending power has steadily increased in India. The consumption
expenditure is rising due to rising disposable incomes on account of sustained
growth in income levels and reduction in personal income tax over the last decade.
Lifestyle changes brought about by changes in economic activity is also spurring
the growth of the Indian Entertainment and Media industry. In urban areas of India,
the consumer mindset is changing due to increased exposure to global influences

Executive Summary
via media and other interactions leading to higher aspirations which have provided
a further fillip to leisure related spending. The Indian rural market with its vast size of
nearly three times of urban India, also offers a huge opportunity that has remained
largely untapped due to reasons of accessibility and affordability. However, as a
result of the growing affluence, fuelled by good mon-soons and the increase in
agricultural output, rural India has a large consuming class with over 40 per cent of
India’s middle-class and over 50 per cent of the total disposable income.
Liberalising foreign investment regime

Today, India has probably one of the most liberal investment regimes amongst the
emerging economies with a conducive foreign direct investment (FDI) environment.
The E&M industry has significantly benefited from this liberal regime and most
segments of the E&M industry today allow foreign investment. In 2005, FDI was
permitted in the two important sectors – print media and radio. Films, television and
other segments are already open to foreign investment.
In the print media segment, 100 percent FDI is now allowed for non-news
publications and 26 percent FDI is allowed for news publications. Printing of
facsimile editions of foreign journals are now also allowed in India. This policy is
helping foreign journals save on the cost of distribution while servicing the Indian
market audiences more effectively. The FM radio sector too was opened for foreign
investment recently with 20 percent FDI being allowed.
Low media penetration in lower socio-economic classes (SEC)

Media penetration varies across socio-economic classes. Though media penetra-
tion is poor in lower socio-economic classes, the absolute numbers are much
higher for these classes. Hence, efforts to increase the penetration even slightly in
these lower socio-economic classes are likely to deliver much higher results, simply
due to the higher base.
Low ad spends
Indian advertising spends as a percentage of gross domestic product (GDP) – at
0.34 percent – is abysmally low, as opposed to other developed and developing
countries. Advertising revenues are vital for the growth of this industry. While today
the low ad spends may seem like a challenge before the E&M industry, it also
throws open immense potential for growth. This potential can be estimated by the
fact that even if India was to reach the global average, the advertising revenues
would at least double the current advertising revenues, estimated at about Rs. 163
billion, for 2006.

21
Executive Summary
The size of E&M in India is currently estimated at Rs. 437 billion and is expected to grow at a compounded annual
growth rate of 18 percent over the next five years. In the last year, the Industry has grown by 20 percent.
2004 2005 2006E 2007F 2008F 2009F 2010F 2011F CAGR
Television 128,700 158,500 191,200 219,900 266,000 331,300 431,000 519,000 22%
Print Media 87,800 109,500 127,900 144,000 162,200 182,300 206,500 232,000 13%
Filmed Entertainment 59,900 68,100 84,500 96,800 112,000 126,450 146,000 175,000 16%
Radio 2,400 3,200 5,000 6,500 8,500 11,000 14,000 17,000 28%
Music 6,700 7,000 7,200 7,400 7,500 7,600 8,000 8,700 4%
OOH advertising 8,500 9,000 10,000 12,500 14,500 16,500 19,000 21,500 17%
Live Entertainment 7,000 8,000 9,000 11,000 13,000 16,000 18,000 19,000 16%
Internet advertising 600 1,000 1,600 2,700 4,200 6,000 8,200 9,500 43%
Total* 311,600 364,300 436,500 500,800 588,300 697,150 850,700 1,001,700 18%
Sources: Industry estimates & PwC analysis
* Note: The figures taken above include only the legitimate revenues in each segment. Revenues from the Animation
and Gaming segments have not been included in the industry size as these are traditionally included in the Indian IT
and Software Revenues.
The Indian Entertainment and Media industry is projected to grow from an estimated Rs. 437 billion to Rs. 1 trillion in
2011, translating into a cumulative growth of 18 percent over the next five years. One of the key reasons for this high
projected growth is the fact that the Entertainment and Media industry is a cyclical industry that grows faster when the
economy is expanding. The Indian economy continues to perform strongly and one of the key sectors that benefits from
this fast economic growth is the E&M industry. It also grows faster than the nominal GDP during all phases of economic
activity due to its income elasticity wherein when incomes rise, more resources get spent on leisure and entertainment
and less on necessities. Further, consumption spending itself is increasing due to rising disposable incomes on
account of sustained growth in income levels, and this also builds the case for a strong bullish growth in the sector.

Executive Summary
Television Industry
Amongst the segments of the industry, the television industry segment will continue
to contribute the largest share as in the last three years. The television industry
revenues are expected to grow from the present size of Rs.191 billion to Rs.519
billion by 2011, implying a 22 percent cumulative annual growth over the next five
years. Subscription revenues are projected to be the key growth driver for the
Indian television industry over the next five years. Subscription revenues will
increase both from the number of pay TV homes as well as increased subscription
rates. The buoyancy of the Indian economy will drive the homes, both in rural and
urban (second TV set homes) areas to buy televisions and subscribe for the pay
services. New distribution platforms like DTH and IPTV will only increase the
subscriber base and push up the subscription revenues.
Source: Industry estimates & PwC Analysis

Print Media Industry
The Print Media industry, comprising of Newspaper and Magazine publishing, is
projected to grow from the present size of Rs. 128 billion to Rs. 232 billion by 2011,
implying a 13 percent cumulative annual growth over the next five years. A booming
Indian economy, growing need for content and government initiatives that have
opened up the sector to foreign investment are driving growth in the print media.
With the literate population on the rise, more people in rural and urban areas are
reading newspapers and magazines today. Also, there is more interest in India
amongst the global investor community. This leads to demand for more Indian
content from India. Foreign media too is evincing interest in investing in Indian
publications. And the internet today offers a new avenue to generate more
advertising revenues.

23
Executive Summary
Filmed entertainment
The Indian Filmed Entertainment industry is projected to grow from the present size
of Rs. 84 billion to Rs. 175 billion by 2011, implying a 16 percent cumulative annual
growth over the next five years. Indians love to watch movies. Advancements in
technology are helping the Indian film industry in all the spheres – film production,
film exhibition and marketing. The industry is getting increasingly corporatised.
Several film production, distribution and exhibition companies are coming out with
initiatives to set up more digital cinema halls in the country are already underway.
This will not only improve the quality of prints and thereby make film viewing a more
pleasurable experience, but also reduce piracy of prints. More theatres across the
country are getting upgraded to multiplexes.
Radio
The Radio industry, fuelled by the positive FM-II Radio Policy is projected to grow
from the present size of Rs. 5 billion to Rs. 17 billion by 2011, implying a 28 percent
cumulative annual growth over the next five years. The cheapest and oldest form of
entertainment in the country, which was hitherto dominated by the AIR, is going to
witness a sea-change very shortly. In 2005, the Government opened up the sector
to foreign investment along with migration to a revenue-share scheme. These
factors along with privatisation of a large number of frequencies as part of the FM II
Radio Policy will drive growth in this sector. As many as 338 licences were given
out by the Indian government for FM radio channels in 91 big and small towns and
cities. This deluge of radio stations results in opportunities for content and trained
talent. New concepts like satellite radio, visual radio and community radio have also
begun to hit the market. Increasingly, radio is making a comeback in the lifestyles of
Indians.

Executive Summary
Music
While physical sales in the music industry continue to be hampered by piracy and
falling prices, digital music has witnessed a surge that will propel this industry in the
next five years. The total music industry is currently estimated to be worth around
Rs. 7.2 billion and is expected to grow at a CAGR of 4% in the next 5 years propel-
ling it to Rs. 8.7 billion by 2011 on an overall basis. The growth in Digital Music is
expected to grow by 25 percent to Rs. 1.8 billion by 2011.
Others
Amongst the other segments, the Animation and Gaming industry is expected to
show the maximum growth albeit from a small base. The Animation and Gaming
industry is projected to grow from the present size of Rs. 11 billion to Rs. 29 billion
by 2011, implying an 22 percent cumulative annual growth over the next five years.
Other growth segments include Online Advertising, fuelled by the increased uptake
of internet and broadband services, Out-of-home advertising, Music and Live
Entertainment.
2006E CAGR 2011F
Animation Rs. 11 billion 22% Rs. 29 billion
Mobile Gaming Rs. 2 billion 68% Rs. 28.5 billion
Internet Advertising Rs. 9 billion 16% Rs.19 billion
OOH Advertising Rs. 1.5 billion 43% Rs.9.5 billion
Live Entertainment Rs. 10 billion 17% Rs. 21.5 billion

25
Executive Summary
Key Challenges
Though the Entertainment and Media industry is growing in leaps and bounds, the
full potential is yet to be tapped. One of the ways of realising the potential is not only
the removal of certain obstacles in the industry but also the provision of certain
incentives to key segments of the industry in order to fuel the industry growth drivers
further and thereby realise its full potential. Some of the recommendations as
provided by FICCI are as below:
Review of Industry Norms To Usher In Convergence

Convergence of technologies, services and markets is the emerging paradigm
around which the entertainment and communication industry is centered.
Advancement of technology has blurred the line between the telecom, broadcasting
services and networks e.g. IPTV, broadband, spectrum allocation for both
broadcasting and telecom services.
Any Regulation must change to recognize these factors and accept that change is
inevitable. Further, given the increasing convergence of Telecom, Internet, and
Cable & Satellite industries, there is an urgent need to review the policies
governing the sector.
It should be the aim of regulation to facilitate fair competition between players,

competing platforms and multiple technologies in the carriage segment and let the
markets decide the technology and platforms of choice.This has also been
recommended by the TRAI in its consultative note.
Digitalisation of Television Networks

India, today, does not have a national digital policy or plan. Though the regulator
TRAI came out with recommendations for digitalisation of cable networks, there are
several more measures that are required to be taken in order for the industry to truly
benefit from Digitalisation:
Conversion to digitalization should be mandatory and not left on a

completely voluntary basis
A clear time frame needs to be defined for transition to digital including a

launch date and a sunset date
Licensing process for allocation of spectrum should be made stringent to

filter out non-serious players e.g. net worth, proper declaration of
subscriber base, area of operation etc.
Fiscal incentives such as waiver of service and entertainment tax, income

tax holiday, etc. to be provided to operators for transition to digital.
Uniform Entertainment Tax across all states

Since levy of entertainment tax and regulation of cinemas is a State subject, the
Centre presently has a limited role to play. The long-standing demand of the film
industry is to shift ‘Entertainment and Media’ from the State List to the Concurrent
List through a constitutional ammendment. This will enable uniform policies for
Cinema Construction Bye-laws and Entertainment tax. There is a need to
implement uniform tax policies across the country, to enable standardised growth.
The recommendation is to have a uniform Entertainment tax so as to stop reportage
of short box office collections resulting in a loss to the ex-chequer.

Executive Summary
Customs Duty
Customs duty is levied on import of equipment and other hardware used in the
production and post production of filmed entertainment programmes. At a time
when India is trying to position itself as a hub for production of entertainment and
competing in the International market on an equal footing, the necessary
infrastructure and equipment is of vital importance. To provide impetus to the
technological upgradation of facilities and infrastructure, the necessary equipment
and hardware must be allowed to be imported without the additional burden of
customs duty.
Multiplexes
An Income Tax Concession under Sec. 80 –1B of the income tax act was introduced,
with effect from 1st April 2002, allowing Multiplexes commissioning before 31st March
2005, an income tax rebate to the extent of 50% on book profits. It is requested that this
concession be reintroduced so as to enable growth of exhibition sector in the country.
Piracy
As India moves into knowledge based economy, a strong Intellectual Property
regime which provides adequate safeguards to the holder of copyright becomes
increasingly important. The menace of piracy is rapidly eating away into the
foundations of the entertainment industry. The piracy issue should be handled at
three levels; Policy, Enforcement and Prosecution. The Industry recommends
allocation of specific funds to fight piracy of entertainment content. This fund should
be utilised in Advocacy and awareness of the piracy issue and also enforcement &
legal matters.
Export Promotion
To promote Brand India, it is important that Indian companies and producers
participate in global festivals and markets such as the Cannes & Berlin Film
Festivals, MIPCOM, MIDEM, MIPTV, IBC, NATPE, NAB, Interbee, AFM and CASBAA
under a common India umbrella. The Ministry of Information and Broadcasting has
taken initiative by deciding to set up the task force with the specific aim of export
promotion. This council supported by adequate funding will act as a catalyst for
exponential growth in exports of Indian Entertainment and Media Industry.
Co- Production Treaties

Signing of Co-production Treaty with Canada, UK is already being looked at by the
Information and Broadcasting Ministry. The Industry recommends that the
Government takes on further initiatives to enter into more such treaties with many
more countries so as to provide a further boost to the Indian Film industry.
Education & Training

The Entertainment and Media industry today faces an acute shortage of
professionals. It is recommended that suitable incentives should be provided by the
Government for setting up polytechnics, institutes and film schools. It is
recommended that existing universities should include Film, Broadcast, Event
Management and Digital technology in their curriculum. Similarly, institutes of
Higher Learning like the IITs and the IIMs should be encouraged to offer
specialization in Media & Entertainment

27
Executive Summary
Single window clearance for shooting in India

Today, India lacks a single-window clearance system not only for the Entertainment
and Media Industry but for other industries as well. Setting-up of such a system
could prove to be a great revenue earner for the country as a hub for production of
entertainment content.
Cinematograph Act & Other Rules

The Cinematograph Act of 1952 has become archaic and needs to be revamped to
take cognizance of emerging technology.For instance, earlier film prints were highly
combustible in nature and required many stringent guidelines. However, with the
advent of digital technology, the print process has been eliminated and hence the
rules need amendment.Similarly, the censor certificates issued by CBFC mentions
35mm as the gauge, which creates confusion whether this is also valid for digital
cinema.
Making India The Uplinking Hub

The Government should also look at establishing India as an uplinking (of satellite
channels) hub by easing the existing policies/regulations for uplinking of channels
and setting up teleports/hubs. India can be made the regional hub for channels
being beamed in the region. Some of the changes, which may make India an
attractive destination to set up uplinking centres in India, include a liberal Foreign
Investment regime and a tax friendly jurisdiction, which allows certain tax and fiscal
incentives for licensees to set up such hubs.
Tax Holiday for the Animation Industry

The Animation Industry is covered under the Software Technology Parks of India
(STPI) society, set up by the Ministry of Communications and Information
Technology with the objective of encouraging, promoting and boosting the Software
Exports from India. However, STPI predominantly holds good for an ‘outsourcing’
nature of work where outsourcing is the main module and most animation studios
that are getting benefited from STPI have to ensure an export commitment of more
than 85%. As a result many Indian animation studios wanting to produce original
content based intellectual property and use art and talent from India to produce
animation stories for India do not get any such benefits. Further, the classification is
unviable since the Indian government through this STPI route is actually subsidizing
the production cost of the foreign shows instead of content creation for Indian
companies. This is leading to more and more studios working on foreign content
and is leading to a severe lack of animated Indian stories in the domestic television
schedules and hence a tax holiday is recommended for the production houses
doing Animation, Gaming & VFX work for a period of 10 (ten) years.
Removal of Service Tax for Animation Industry

The provision for Service Tax is also financially hitting the Indian Animation Studios
extremely hard; most of these studios are those that are developing a large amount
of original content. Those studios that are export oriented and are thus under STPI
are not exposed to the Service Tax at all, whereas the ones that are making or
planning on making any Intellectual Property (original Indian content) in India for
any client or broadcaster have to pay a service tax @ 12.2%. Accordingly, removal
of the service tax from the Animation, Gaming & VFXIndustry is recommended.

Executive Summary
Rationalisation of Customs Tariffs for Gaming Industry

Though the Global Gaming industry has been growing in leaps and bounds
across the world, advanced gaming consoles are yet to penetrate the Indian
market. One of the primary reasons for the slow adoption is the high rate of
customs tariff applicable on the gaming consoles. The customs tariff of
approximately 36.74% translates to high prices for such consoles, which affect
affordability and therefore access. These high tariffs are also leading to the
growth of a grey market in such products. Rationalization of the tariff structures
will therefore mean a more affordable pricing structure that will enable greater
market access for such consoles.
Localization of Animation Content

Presently most of the animated content shown in the networks are sourced from
outside of India and generally from the existing library at a discounted price.
This is one of the serious impediments on the growth of Indian Animation
Industry. Many countries like Canada, China, Korea, France, UK etc have made
varying levels of mandatory localization of content. Hence, FICCI has proposed
10% mandatory local content on the networks to begin with and to reach 30%
over next three years as more indigenous animation content gets prepared and
available for domestic / export markets.
Tax Benefits for Digital Cinema

In view of the several advantages that Digital Cinema offers, FICCI has
proposed several tax incentives for the Digital Cinema companies that includes
the following:
Income Tax holidayunder Section 80 IB of the Income Tax Act
100% Depreciation benefit- similar to the pollution control equipments
and energy saving devices are entitled to 100% depreciation benefit as
these are part of the capital equipment used in the Digital Cinema
infrastructure.
Exemption from MAT and DDT- Akin to similar benefits given to certain
other infrastructure providers the Digital Cinema Infrastructure provider
should be entitled to exemption from MAT and DDT.
Customs Duty Benefits- Digital Cinema Infrastructure equipment
particularly the Digital Projector and digital movie compressor attract
the peak rate of custom duty.Since these items are not manufactured in
India and are a very heavy cost burden to the provider these should be
treated at par with hi-tech and information technology sector items with
customs duty being reduced to nil.
Service Tax and Lease Tax Exemption- Digital Cinema operators
provide services to distributors for converting the movie prints received
from the film producers in analogue form into a digital format and
delivering the same to the exhibitors. The exhibitors pay the service
providers rentals for the equipment and software, and a fee for software
decryption and digital screening services. The service providers also
receive advertisement revenue generated by bundling advertisements
with the content of the digital cinema. All the services described in the
business model above attract a levy of service tax at 12.24%, albeit
under different service categories, which is proposed to be waived off.
Similarly, Lease Tax Exemption is also recommended.

29
Executive Summary
Key International Trends

1995 was a landmark year for media convergence. WebTV and Yahoo were founded, and the second version of
Netscape Navigator was released. Microsoft released Windows 95 to great fanfare because it included the company’s
first version of the Internet Explorer Web browser, which had a link to a fledgling online network appropriately called
the Microsoft Network.
The telecommunications companies flexed their muscles at the International Telecommunications Union (ITU)
Telecom 1995 trade show in Geneva. A host of joint-venture announcements left little doubt that telecommunications
companies were positioning to capture the huge pent-up demand for Internet services. Average bandwidth speeds had
achieved a blistering 14,400 kilobits per second and promised to double in 1996.
Looking 10 years back in order to look 10 years forward is not particularly useful for predicting how convergence
technology and deal structures will play out. But it can be very instructive for understanding change. Like today’s
executives in media, networks, advertising, and audience measurement, the leaders of incumbent companies and the
founders of new companies in 1995 perceived and articulated the opportunities, risks, and competitive advantages at
their disposal according to the time and circumstance in which they found themselves. One must remember, bandwidth rates of
14,400 Kbps were considered fast in 1995.
Table 6: Reprentative convergence-defining events of 2005
2005 event of note Disruptive Impact Convergent Impact
Social network MySpace Introduces the power of social networks Social network defined by common
acquired by News Corp. in content value creation; defined interests, personal referrals, and
communitites to provide social comfort controlled exposure of identity will
and security to online audiences. increasingly become the new targeted
audiences for media and advertisers.
In2TV announced by Time Warner, Bypassing traditional distribution Time Warner and other media
Which will distribute older TV channels, Time Warner captures companies will learn to aggregate
shows directly over the Internet. more advertising revenue. shows around defined micro
BBC Open Archive communities, which are dynamic
announced components of media marketplaces.
Video iPod and Singbox Device and service enables users Media companies learn that the
come to market to separate video content from most important commodity is
traditional access device or consumer attention to their properties-
distribution channel. at any time and on any device;
they begin to develop business
models to monetise that attention.
AT&T, France Telecom and Traditional contracts and business Innovation in video content and
Deutsche Telecom each relationships between content delivery flourishes as commodity
announce plans to roll out owners, distributors, and technology services no longer deliver expected
bundles of voice, broadband, suppliers are strained by the profit margins.
and video services. telco entry into the video market.
Yahoo buys social networking Del.icio.us helps consumers Automation of references for products
site del. icio.us store and share information and services becomes embedded in
about their favourite places media consumption, making
on and off the Web. direct advertising inefficient.
Source: PricewaterhouseCoopers- The Rise of Lifestyle Media- Achieving Success in the Digital Convergence Era

Executive Summary
Looking back, looking forward
It is arguably more instructive to examine some significant events from 1995 and
compare the short-term, or disruptive impact, and the long-term, or convergent,
impact.In every case, the disruptive, short-term impact of these events hardly
foreshadowed the long-term, convergent impact. Convergence takes time, and
even as the events of 1995 were already being labelled “convergence” by some a
decade ago, those that sought to capitalise at that time had to wait to for their
rewards, if indeed they ever received them.
Future Outlook
In the next 5 to 10 years, it is probable that today’s leading media, distribution, and
advertising companies will continue to be significant purveyors of branded content,
services, and commercial messages. It is certain, however, that their business
models, revenue streams, competitive dynamics, and core partnerships will evolve
in radically new ways. The path ahead is fraught with risk as well as rewards. On
the supply side, media providers, network operators, advertisers, and measurement
companies must contend with the challenges and opportunities that stem from new
ways of working with one another. The demand side faces a similar set of
challenges and opportunities for consumer interaction.
In both cases, video content and delivery companies must fully grasp that theirs is
not a production challenge of porting media content onto various devices, but
rather an orchestration challenge for delivering a quality media experience that has
lifestyle-enhancing qualities.
As content owners, network operators, advertisers, and measurement companies

begin to deliver their goods and services through broadband, they become more
reliant on relatively immature technologies and on partnerships and business
relationships considered unthinkable just a few years ago. These are early days for
IP-based video services, and marketplace participants must understand how
convergence affects current business processes. During this evolutionary period,
many different paths towards a converged media environment will be tried. There is
likely to be increased complexity, as well as economic inefficiencies, early on.
However, as the different industry participants collaborate on changing consumer
activity and business models, the refinement of the media marketplace approach
will become possible.
After the buzz of convergence deal-making and new product launches has
subsided, general business principles rather than novel features will start to
differentiate companies. The payment process for on-demand video content
provides an example. From an operational point of view, this payment for a single
piece of content could include one or more of the following: direct payment to the
content originator from a consumer; a portion of revenue to the content originator,
passed back by a distribution partner such as a network provider; or payment by an
advertiser for placing a commercial message.

31
Executive Summary
Given such complexity, licensing and royalty collection becomes crucial. Content
owners and distributors must consider a number of issues- Licensing compliance
and royalty management in a media marketplace throw into sharp relief how
convergence will dramatically accelerate the pace of mergers and acquisitions,
alliances, joint ventures, and partnerships across industry sectors.
Media Marketplace Evolution
Lifestyle
Media marketplace
Segmented / niche
on demand platform on demand platform
Mass media
Linear network Linear network Linear network
Past Present Future


Executive Summary
There has never been a more opportune time for content providers and media
distributors to deliver to thoroughly engaged consumers who are ready and able to
buy. As a result, digitally converged companies, enabled by new technologies, are
completely altering their payment models in ways that better reflect the aims of
Lifestyle Advertising. We are seeing advertisers start to offer content and
communications providers greater financial incentives to deliver higher levels of
engagement with target audiences, at every purchasing stage. While media was
traditionally rewarded for delivering large viewership and broad brand awareness,
advertisers must now reward those providers who encourage individual consumers
to engage with their ads, give up personal information, or engage other consumers
in their networks against the backdrop of the brand’s offering.

33
At a glance
TV Households 112 million
TV penetration of Total Households 59%
Cable and Satellite TV Households 68 million
Cable and Satellite TV penetration 61%
Terrestrial TV Households 42 million
Terrestrial TV penetration 38%
DTH Households 2 million
DTH penetration 1.79%
TV Advertising Revenues Rs. 66 billion
TV Subscription Revenues Rs. 117 billion
TV Software Revenues Rs. 8 billion
TV Industry Revenues Rs. 191 billion
2
Television
Television
Key Developments
CAS
The introduction of CAS (Conditional Access System) effective January 1, 2007 can
be deemed as one of the most significant developments of the Indian Television
Industry not just in 2006 but in the last three years. CAS was launched in select
areas in 3 metro cities in India namely Delhi, Mumbai and Kolkata. Chennai was the
only city in India which had CAS prior to this.
As per the data released by the Broadcasting and Cable services regulator TRAI,
about half a million subscribers opted to adopt CAS in the notified areas by mid-
February 2007. Of the estimated 1.63 million homes in these three notified areas,
the overall CAS adoption rate was at 29%, with the highest in Mumbai at 41%.
CAS notified area* No. of STBs opted Estimated number of C&S Estimated rate
upto Feburary 15, 2007 homes in the CAS notified area* of adoption
Delhi 189,622 680,000 28%
Mumbai 226,543 550,000 41%
Kolkata 49,620 410,000 12%
Total 465,785 1,630,000 29%
Source: TRAI
* per TAM Media Research
Foot print of CAS Of the 7.96 million cable homes across the 3 metros,
1.63 million cable homes fall under the CAS-mandated
zones (approx. 21% homes fall under the mandated
zones)
C&S Homes under the mandated areas, in the

respective cities –
• Mumbai : 17% (0.55 million of the 3.25 million cable

homes)
• Delhi : 26% (0.68 million of 2.61 million cable homes)

• Kolkata : 20% (0.41 million of the
2.1 million cable homes)
Source: TAM Media Research

Some of the features relating to adoption of CAS, as brought out by a consumer
research study carried out by TAM during mid-January 2007, are as below:
• Mumbai was the most responsive city with 25% homes CAS-converted
homes and 20% of the homes were awaiting installation
• At an aggregate level, Delhi & Kolkatta response rates were level, however
Delhi was better served (14%) than Kolkatta (10%)
• At a 3-metro level, nearly 1/3rd of the mandated area consumers responded

favorably for conditional access to pay channels

Television
• The highest uptake of CAS was observed in the higher SEC & the uptakes
declined as one came down the SEC ladder, however the uptake levels
varied significantly across markets even at a SEC level
• Highest uptake was observed in the SEC A strata of Mumbai while zero off-
take was observed in SEC D/E of Kolkata; the response by Mumbais’ SEC C
was nearly at par with that from SEC A residing in Delhi & Kolkata
• Of the three areas that were probed to check for awareness levels of CAS-
mandated areas, requirements of a STB for viewing FTA channels and the
rental schemes for STB’s, following were observed:
– Despite low off-take in Kolkata, consumer awareness appeared to be

higher than in Delhi & Mumbai
– Consumers residing in Delhi appeared to be the least aware of

counter-parts from Mumbai & Kolkata

One of the most important facts which was revealed by this consumer research was
that price was the pre-dominant reason for non-adoption of CAS. This was inspite of
the price cap of Rs. 5 per channel per month that was imposed by the regulator and
that the notified areas of CAS were amongst the most affluent areas in the country.

37
Television
CAS also brought along with itself some key regulations and policies, of which the most highly debated was the imposition of
a price cap of Rs. 5 per channel per month by the regulator TRAI. The same price cap of Rs. 5 was imposed for all channels
irrespective of the genre of the channel and which city the subscriber belonged to. Further, no such price caps were imposed
upon DTH services.
At the time of writing this report, the leading broadcasters had filed a petition in the Indian courts against this price cap, which
was upheld by the Court in favour of the regulator.
The other important provision introduced for CAS was that of revenue sharing between the broadcaster, MSO and local cable
operators (LCO) in the ratio of 45:30:25 respectively. However, revenues collected from the Free-to-Air (FTA) homes by the
LCO would not be required to be shared with the broadcasters, though the sharing ratio of the same between the MSO and
LCO is yet to be finalised. Similarly, sharing ratio of carriage fee, where collected by the MSO from the broadcasters is also yet
to be finalised.
Other important CAS regulations included mandatory provision of all pay channels on an a-la-carte basis by broadcasters,
provision of a minimum of 30 FTA channels at a rate of Rs. 77 per month plus taxes, minimum period of subscription to a pay
channel to be atleast 4 months and one month’s notice to be given to subscribers before conversion of a free to air channel to
pay channel or vice versa.
The regulator TRAI has stated that CAS will be scheduled to be launched in other cities of India, but only after careful study of
the adoption trends of CAS in the notified areas and readiness of MSOs and local cable operators for the rollout in
the balance areas.
DTH
2006 was also the year of launch of the second private DTH player Tata-Sky, after Zee’s Dish TV in 2003. Though the DTH
services were launched in August 2006, the real impact of the DTH services was felt when introduction of CAS was an-
nounced and thus the month of December 2006 saw some heavy advertising and marketing by both the DTH players and
MSOs offering Digital Cable under CAS.
Tata-Sky’s launch of its DTH services also brought into effect the TRAI legislation of ‘Interconnection’, which mandated that all
channels must be provided by all players on all platforms at comparable market rates. However, in the absence of a second
DTH player, the ‘comparable market prices’ phenomenon could not be established and hence Zee’s Dish TV was unable to
offer the competitors’ channels as part of its bouquet of channels.
During 2006, the Ministry of Information and Broadcasting also issued a letter of intent to Anil Ambani’s DTH service, Blue Sky
Magic. The other player in waiting Sun TV’s plans were dithered a little for launch of its services in 2006 due to a satellite
failure because of which its allocation of frequency for DTH services was delayed.
Profile of DTH subscribers- Lower SECs lead in the urban areas while the higher SEC take command in rural:

Television
IPTV
Followed by extensive trials, MTNL launched the first IPTV services in Mumbai and
Delhi in 2006. Though the current base of IPTV subscribers is extremely low, the
year marked a beginning of IPTV services in India. Amongst the various challenges
that face IPTV service providers, the most significant one is that of whether the
services fall under the ambit of telecom services or television services. TRAI has
sought certain clarifications from the Department of Telecom on whether MTNL is
allowed to provide IPTV services under the Cable Television Networks (Regula-
tions) Act as it does not have the Unified Access Service Licence (UASL) under
which a company is allowed to offer Triple Play services.
New Television Channels
Unfazed by the large number of existing channels, several new channels were
launched in 2006 and several more were announced for launching in the coming
year 2007. Some of these include announcements by NDTV of its plans of launch-
ing a ‘General Entertainment Channel’ in collaboration with Indian filmmaker Karan
Johar, UTV’s announcement of the launch of a Youth Channel by the name Bindass
and others.
Top Five TV Channels

Rank TV Channels Households Tunning (in m)
1 DD1 91.2
2 DD News 55
3 Star Plus 30
4 Aaj Tak 29.5
5 Zee TV 29.2
Source: IRS Survey - Round 2
Public Issues
Unlike the previous year, the year 2006 saw only one Television Company i.e. SUN
TV going public this year. At an issue price of Rs. 875 per share, the IPO size was
estimated to be over Rs. 6 billion. In early 2007, CNN-IBN (Global Broadcast News)
went public with an issue of Rs. 1 billion. Other public issues proposed in the
coming year include that of Raj TV of around Rs. 1 billion and Sony Entertainment
Television of around Rs. 9 billion.

39
Television
Audience Measurement
TAM, India’s leading advertising measurement company increased its panel meters
from January 1, 2007 from 4,500 to 7,000 and it now covers 145 cities instead of 73.
TAM has also updated the number of cable and satellite homes to 68 million from
the 41 million figure it was using as the base to analyse viewership data.
Genre split of channels in terms

of total advertising duration in Q1 2006
% Share
Regional entertainment 24
Music 16
Hindi news 13
Movie 10
Hindi entertainment 10
Business 5
English news 5
Kids 5
Others* 12
* Includes regional news, english entertainment, sports, religious channels
Source : Adex India
Sports Broadcasting Rights
Cricket Television was highlighted in 2006 not just by the values paid by television
broadcasters to acquire their telecast rights but also by its ‘national importance’.
The controversy of ‘events of national importance’ started with the sharing of
telecast rights of the World Cup Football in 2006 by ESPN-Star Sports with the
Public Broadcaster Doordarshan and went on to the disputes with Nimbus for the
Cricket rights. Nimbus stole the limelight this year by winning the four-year global
cricket rights for $612 million from the Board of Control for Cricket in India. The
recent ordinance passed by the Government in early 2007 requires broadcasters to
share telecast rights of all ‘events of national importance’ with the Public Broad-
caster Doordarshan on a 75:25 basis n favour of the private broadcaster.
Content disputes
The year 2006 also saw several instances where television channels were banned
by regulatory authorities over telecast of ‘content’ not as per the ‘content code’.
Notably, most of these instances were bans on channels for showing ‘adult content’
and included channels such as AXN and others.
Down-linking policy implemented
May 10, 2006 was the deadline for all foreign channels being up-linked from
outside India and beaming into India to register under the Down-linking Policy with
the Ministry of Information and Broadcasting. The down-linking policy, which was
the subject of a lot of debate and discussions last year was implemented this year
without any significant amendments. As many as 54 television channels were
registered under this policy in 2006 with the Ministry of Information and

Television
Broadcasting. The down-linking guidelines stipulated a time of 6 months from

November 2005 for completion of all formalities of registration. Some of the
important compliances required under the guidelines include having a commercial
presence in India, a net worth of at least Rs. 15 million, having a facility where on-
line monitoring of content is possible and a system having a capacity to store the
data for 90 days, which should be available to the Govt at any point of time, in India,
at a pre-designated place etc. Hitherto, the Cable and Television Network
(Regulation) Code 1995 was the only provision available to regulate down-linked
TV signals in the country. This policy aims at controlling content being transmitted
through satellite either at the point of uplinking or after downlinking.
M&A
The year 2006 was also prominent for the various M&A activities in the television
industry. Some of the notable deals in 2006 included buy-out of UTV’s Hungama TV
(Kids Television and Content Company) by Disney India, CNN-IBN’s buy-out of
Jagran Group’s Jagran TV which was renamed as Channel 7, Private Equity 3i’s
investment in Nimbus for launching Sports Channels and Adlabs’ investment in
Synergy Communication, a television content company. During 2006, Zee Telefilms
also announced their acquisition of stake in Venus Records & Tapes and Venus
Films to help in the improvement of Zee Cinema channel and Zee Music channel.
Zee also acquired a 51% stake in Pacenet, a broadband service provider and
technology company.
Industry size
Over the next five years, the growth of India’s television industry will be propelled by
the economic growth of the country, which will drive the revenues of all of its key
constituents i.e. advertising revenues, subscription revenues as well as the televi-
sion software revenues.
Today, India represents the fitth largest market for colour televisions in the world,
growing at an average rate of 10-12 percent a year. India today has approx. 200
million households but the television reaches only about 112 million homes. Thus,
the TV penetration is roughly only 56 percent having grown over 3.2% over the
previous year. The television manufacturing industry projects a demand of about 15
million units of colour televisions alone by 2010. Though a portion of this demand
would be on account of replacement, this translates into a projected size of televi-
sion households to about 130 million by 2011, thus a cumulative growth of 3
percent over the next five years. The key drivers for the growth of television homes
include rising disposable income, leading to an increase in the number of house-
holds above the threshold income level leading to increased sales to first-time
buyers (new sales). Coupled with this, declining threshold levels due to price
reductions across categories/segments and increasing replacement demand due to
ageing TVs (Black and White TVs and Colour TVs) along with growing aspiration
levels further fillip the demand. With an increase in the upper middle class popula-
tion, the demand for multiple TVs per household is also expected to increase.
Replacement demand is expected to increase with shortened replacement cycles,
which can be attributed to the availability of newer models. This demand is further
projected to grow based on the increasing number of families entering the high-
income brackets.

41
Television
Source: Industry estimates and PwC analysis
Of the approx. 112 million television households, there are an estimated 70 million
Pay TV households in India. Of these, 68 million are cable households as per the
data released by NRS 2006 and an estimated 2 million Direct-to-home (DTH)
households. This translates into a penetration of about 56 percent. The cable
households are expected to grow by 4-5% per annum over the next five years
whereas the DTH households are expected to grow by 43%, albeit from a lower
base. The combined Pay TV households are expected to reach 113 million by 2011
of which the significant share is expected to be retained by cable.
Though the prices of DTH services and cable services in the non-CAS areas are not
regulated, the current price cap on cable services in the CAS areas is also seen to
be a temporary measure. These are likely to be reviewed by the Regulator for a
complete removal in mid-2007. However, the mandatory ‘inter-connect’ regulation
is likely to continue in the short-medium term as a result of which the basic prices for
both cable and DTH services are likely to remain competitive and similar.

Television
The television industry today is estimated to be Rs. 191 billion of which the largest
chunk continues to be the television distribution segment. The Indian television
industry is projected to grow at an annual compounded rate of 22 percent per
annum over the next five years to reach the estimated size of Rs. 519 billion, nearly
three times its present size..
Subscription revenues are projected to be the key growth driver for the Indian
television industry over the next five years. Subscription revenues will increase both
from the number of pay TV homes as well as increased subscription rates. The
buoyancy of the Indian economy will drive the homes, both in rural and urban
(second TV set homes) areas to buy televisions and subscribe for the pay services.
New distribution platforms like DTH and IPTV will only increase the subscriber base
and push up the subscription revenues. The TV distribution market is expected to
grow from the present size of Rs. 117 billion to Rs. 378 billion by 2011, implying a
26 percent cumulative annual growth over the next five years. Thus, the television
subscription revenues are projected to rise by 26 percent compounded annually
over the next five years, led primarily by growth in the subscription revenues
collected from households.
Source: Industry estimates and analysis

43
Television
Television advertising is also expected to grow significantly over the next five years.
Economic growth is encouraging Indian companies to increase their ad spends.
This is benefiting the television broadcasting industry, since their revenues are
increasing, in spite of a stagnant share in the overall ad pie. The share of ad spends
of terrestrial and C&S networks have not changed over the last two years and are
not projected to change for the next five years, as both the broadcast mediums are
expected to gain from the increasing advertisement pie. The TV advertising market
is expected to grow from the present size of Rs. 66 billion to Rs. 123 billion by 2011,
implying a 13 percent cumulative annual growth over the next five years.
Projected growth of Television advertising in India
150,000
109,000 123,000
Million
83,000 94,500
100,000
66,200 74,000
48,000 54,500
50,000
0
2004 2005 2006E 2007F 2008F 2009F 2010F 2011F
Source : Industry Estimates & PwC Analysis
As a result of increases in both subscription revenues and thereby advertising

revenues, several new channels are being added to the existing 300 channels
being beamed across Indian skies. But that is not discouraging the investors who
believe that there is still room for more. Their belief is based on the fact that
television as a medium has immense potential to reach a larger number of people
which no other medium can match. This, has resulted in an increase in demand for
content for these. Hence, the TV software market is expected to grow from the
present size of Rs. 8 billion to Rs. 18 billion by 2011, implying a 18 percent
cumulative annual growth over the next five years.
Projected growth of the Indian TV Software Market
20,000 18,000
16,000
12,800
Million
15,000
11,000
8,000 9,400
10,000
7,000
5,700
5,000
0
2004 2005 2006E 2007F 2008F 2009F 2010F 2011F
Source: Industry Estimates & PwC Analysis
Projected Growth of Indian Television Industry
600,000 519,000
Million
500,000 431,000
400,000 331,300
266,000
300,000 219,900
158,500 191,200
200,000 128,700
100,000
0
2004 2005 2006E 2007F 2008F 2009F 2010F 2011F
Source: Industry Estimates & PwC Analysis

Television
Challenges ahead
Proposed Broadcasting Bill, 2006

One of the immediate challenges that face the Indian Television Industry is the lack
of a ‘Converged’ Bill which addresses the distribution of television content over both
the broadcasting/cable medium and telecommunication channels. Though the
Ministry of Information and Broadcasting in 2006 did bring out a draft of a Broad-
casting Bill, it failed to address this technological advancement. Further, the Bill
itself brought about several other points of disputes within the industry members of
which the most debated was the lack of ‘independence’ of a Broadcasting Regula-
tory Authority of India (BRAI) which was proposed to be set up under this Bill as an
‘Independent’ Regulatory Body overseeing the television carriage issues. After
seeking the views of the Industry, the draft Bill is under review by the Government.
Digitalisation of Cable Television

Telecom Regulatory Authority of India (TRAI) gave recommendations regarding
digitalisation of Cable Television in India in 2004 where it suggested that there
should be a national plan for digitalisation from 1st April, 2006 till 31st March, 2010.
The essential component of this plan was to introduce digital cable services in the
top 35 cities of India with population exceeding one million by 2010 amongst
others. The introduction of CAS has brought about some digitalisation however in a
very small segment of the envisaged coverage. Though roll-out of CAS to other
areas could bring about the said digitalization, the Government needs to come up
with a more holistic and practical approach to Digitalisation. TRAI is believed to be
working on its original recommendations for Digitalisation in view of the develop-
ments in the last two years an is expected to bring out its revised recommendations
shortly.
Digitalisation of Television Content

With technological advancements in existing distribution platforms such as Digital
CAS and DTH and emergence of new digital platforms such as IPTV, Mobile TV,
Home Video, Webcasting etc., the opportunity for television content owners (Televi-
sion Broadcasters and others) lies in monetising their library content by distributing
it on all these platforms. However, the challenge that remains is that of digitising
content such that not only can the existing library content be repurposed for
distribution but also reformatted to suit the typical needs of the relevant distribution
platform. Zee Group made the first move in this direction by setting up a separate
company to look into this opportunity. Doordarshan also announced its plan of
digitising its 45-year old content library for this purpose.
Regulation of content storage on IPTV platforms

Internet Protocol Television (IPTV) service providers have asked the Telecom
Regulatory Authority of India (TRAI) to regulate content storage, as more global
players are coming to India to deliver their services. They claim a need for regula-
tion, a licensing policy and guidelines to be put in place for storing television
content. IPTV stores content from the TV with the help of the internet, as against
cable, to deliver scheduled TV programs or video on demand (VOD) and requires
either a computer, software media player or an IPTV set-top box to decode the
images in real-time. IPTV is facing various challenges regarding the content and
security issue mainly due to scepticism on the part of content providers. .

45
Television
Sharing of infrastructure
2006 saw a coming together of India’s top news channel companies to discuss
sharing of infrastructure and equipment on the lines of sharing of infrastructure by
telecom service operators to enhance profitability of such news channels. There are
also preliminary talks of setting up a common television news agency on the lines of
Press Trust India, which provides identical feed to print media outfits. Some of the
infrastructure that is proposed to be shared includes OB Vans for covering live
events, bureau and studio facilities, news gathering equipments and crew. However
the challenge of sharing the infrastructure remains, since some of the key distin-
guishing factors such as providing ‘breaking news’ or ‘exclusive coverage’ of the
news channels could get impacted by sharing of such infrastructure.
Digital Transmission for Delhi Commonwealth Games 2010

According to requirements from the Commonwealth Games Federation, the entire
television and radio production of the Delhi Commonwealth Games 2010 is
required to be in the digital format. The rights for production of content for the
Games are with the Public Broadcaster Prasar Bharati, which currently broadcasts
content on analogue format and hence will be required to shift to the high-definition
TV (HDTV) format. Turning digital could lead to big annual savings for Prasar
Bharati as post-digitisation, a larger number of channels can be hosted on the
transponders and thereby help reduce the number of terrestrial transmitters.
However, this digitalisation plan will require heavy capital investments (estimated in
the range of Rs. 35 billion for Doordarshan over the next 8 years and Rs. 59 billion
for All India Radio over the next 10 years) which is yet to be sanctioned by the
Ministry of Information and Broadcasting to undertake this project.
Mobile TV
The next big thing that has everyone in the Television industry enthralled is the
onset of mobile television. However, there are several challenges that remain for
this dream to become a reality. Of those, allocation of 3G spectrum to private
operators remains the key, for which currently there seems to be no concrete
decisions made by the Government either in terms of policy for allocation of
spectrum or license fee payable to access such spectrum. Coupled with this, newer
handsets supporting 3G technologies will be required to access Mobile TV along-
with with higher battery lives and television content repurposed to suit such mobile
handsets.

A. Television Networks: Broadcast and Cable
The global television network market is projected to grow to a total of $226.6 billion
in 2010, growing at a compound annual rate of 6.6 percent from 2005. Latin
America is projected to be the fastest-growing market, with a compound annual
increase of 10.8 percent. The United States is projected to grow at a 7.4 percent
compound annual rate and Asia Pacific by 7.1 percent compounded annually,
followed by 5.2 percent growth in EMEA and 4.3 percent in Canada. The U.S. is
projected to remain the largest market in 2010, at $84.5 billion, followed by EMEA at
$75.1 billion and Asia Pacific at $51.2 billion. Latin America will total $11.3 billion,
with Canada at $4.5 billion.

Television
Principal drivers
Multi channel advertising will be the fastest-growing sector in each region, buoyed
by rapid growth in digital households and advertising on new channels that the
digital platforms support. New analog channels, digital broadcasting, and high
definition television will also make free-to-air channels more appealing, while new
distribution outlets, including distribution to mobile devices, will expand viewing and
boost advertising. Public license fees, which represent a slow-growing component
of the market, will hold down overall expansion in EMEA and Asia Pacific. Projected
increases in advertising in those two regions will be significantly higher. A stronger
and more stable economic climate will lead to large increases in Central and
Eastern Europe and in Latin America. Increased funding from the Canadian
Television Fund will support programming in Canada, while the lack of progress in
improving the regulatory environment, including the restrictions on foreign invest-
ment in certain key markets, will impede the otherwise strong growth in Asia Pacific.
In the United States, the possibility of à la carte distribution could slow license fee
growth for cable networks.
Television Network Maket (US$ Millions)

Region 2001 2002 2003 2004 2005p 2006 2007 2008 2009 2010 2006-10
CAGER
United States 67,957 74,942 79,723 86,798 90,090 96,010 99,901 106,513 110,244 117,114
% Change -1.0 10.3 6.4 8.9 3.8 6.5 4.1 6.6 3.5 6.2 5.4
EMEA 27,746 24,867 27,955 31,306 35,188 39,653 44,511 49,986 55,496 60,958
% Change 15.6 14.4 12.4 12.0 12.4 12.7 12.3 12.3 11.0 9.8 11.6
Asia Pacific 10,583 11,866 13,836 16,413 18,736 21,196 24,114 27,553 31,555 35,957
% Change 8.9 12.1 16.6 18.6 14.2 13.1 13.8 14.3 14.5 14.0 13.9
Latin America 7,102 5,991 6,005 6,401 7,026 7,809 8,755 9,728 10,716 11,744
% Change 4.5 -15.6 0.2 6.6 9.8 11.1 12.1 11.1 10.2 9.6 10.8
Canada 2,565 2,715 2,936 3,116 3,311 3,534 3,783 4,024 4,276 4,509
% Change 8.0 5.8 8.1 6.1 6.3 6.7 7.0 6.4 6.3 5.4 6.4
Total 109,953 120,381 130,455 144,034 154,351 168,202 181,064 197,804 212,287 230,282
% Change 3.4 9.5 8.4 10.4 7.2 9.0 7.6 9.2 7.3 8.5 8.3
Source: PwC Global Entertainment and Media Outlook

47
Television
compound annual growth rate of 8.3 percent during the five-year forecast period.
Asia Pacific and EMEA will be the fastest-growing regions, at 13.9 percent and 11.6
percent, respectively, followed by Latin America at 10.8 percent. Canada will grow
at a projected 6.4 percent rate, and the United States by 5.4 percent compounded
annually.
Principal drivers
Subscription TV household growth will drive spending in Asia Pacific, Latin
America, and EMEA, but saturated markets will dampen growth in the United States
and Canada. The introduction of IPTV will contribute to subscriber growth. The
migration of subscribers to higher-priced digital services with more channels will
boost spending in all regions and expand the potential market for VOD services.
Increased revenue per user from enhanced services such as VOD, pay-per-view,
and premium services will bolster growth in most regions.

Television

Region 2001 2002 2003 2004 2005p 2006 2007 2008 2009 2010 2006-10
CAGER
United States 39,782 43,566 47,354 54,304 59,138 64,160 68,525 74,520 79,080 84,470
% Change 0.5 9.5 6.7 14.7 8.9 8.5 6.8 8.9 6.0 6.8 7.4
EMEA 49,387 50,325 52,125 56,652 58,224 61,995 64,730 68,254 71,156 75,061
% Change 1.2 1.9 3.6 6.8 4.6 6.5 4.4 5.4 4.3 5.5 5.2
Asia Pacific 30,365 31,250 32,733 35,003 36,406 39,332 41,387 45,578 47,434 51,201
% Change 0.3 2.9 4.7 6.9 4.0 8.0 5.2 10.1 4.1 7.9 7.1
Latin America 4,558 4,396 4,742 5,672 6,770 7,751 8,259 9,346 9,875 11,299
% Change -6.8 -3.6 7.9 19.6 19.4 14.5 6.6 13.2 5.6 14.4 10.8
Canada 2,956 3.116 3,372 3,530 3,684 3,849 4,019 4,193 4,370 4,546
% Change 8.0 5.4 8.2 4.7 4.4 4.5 4.4 4.3 4.2 4.0 4.3
Total 127,048 132,653 140,326 154,161 164,222 177,087 186,920 201,993 211,915 226,577
% change 0.6 4.4 5.8 9.9 6.5 7.8 5.6 8.1 4.9 6.9 6.6
B. Television Distribution: Station, Cable and Satellite

The global television distribution market is projected to increase from $154.4 billion in 2005 to $230.3 billion in 2010, a
United States
• The disparity between cable and broadcast network advertising growth will
be reduced as viewership levels stabilize.
• The disparity between cable and broadcast network advertising growth will
be reduced as viewership levels stabilize.
• New non-television distribution outlets will stimulate interest in network

programming on television.
• The dampening impact of the emergence of family tiers and à la carte

service from cable and satellite basic network license fee increases should
be offset by low à la carte take-up rates and new competition from telephone
companies.
• With digital cable and direct broadcast satellite (DBS) subscriber growth
moderating to single-digit increases, premium subscriber spending and
license fees for premium services will slow.
• Digital video recorders (DVRs), digital television, and high-definition

television (HDTV) will enhance the appeal of television, leading to increased
viewership and advertising.
• The TV network market will expand at a 7.4 percent compound annual rate
to $84.5 billion in 2010 from $59.1 billion in 2005.

49
Television
• Advertising will continue to be the dominant revenue stream, totaling $52.0

billion in 2010, or 62 percent of the total, and growing at a 7.1 percent rate
compounded annually.
• License fee growth will drop to single-digit gains beginning in 2006,

averaging 7.9 percent compounded annually to $32.5 billion in 2010 as its
growth advantage over advertising narrows.
• Cable networks will generate $61.2 billion in 2010 from both advertising and
license fees—an 8.3 percent compound annual increase from 2005—while
broadcast network advertising will grow at a 5.2 percent rate.

• Changes in the telecommunications regulatory structure will enable
telephone companies to become major players in the television distribution
market, putting downward pressure on basic subscription fees.
• Efforts to boost average revenue per user (ARPU) will sustain subscription
spending in the face of new competition, slow subscriber growth, and the
introduction of family tiers, under which subscribers get fewer channels and
pay a lower price.
• Benefiting from aggressive rollouts and the availability of current TV shows,
which are not available on pay-per-view, VOD will cut into pay-per-view
growth and will overtake pay-per-view revenue in 2010.
• Declining cable subscribership will lead to slower growth in cable system
advertising, while the migration to digital will sustain TV station audiences
even as the political advertising cycle continues to produce large year-to-
year swings.
• The TV distribution market in the United States will rise to $117.1 billion in
2010, growing at a 5.4 percent compound annual rate.
• End-user spending, including both subscription and non-subscription
spending by consumers, will grow at a projected 6.0 percent compound
annual rate, rising to $80.0 billion in 2010.
• Subscription spending on basic services will total $58.3 billion in 2010—a
5.5 percent compound annual increase—and premium subscriptions will
expand 5.1 percent compounded annually to $14.4 billion.
·• VOD will be the fastest-growing category, at 22.0 percent compounded
annually, and will grow to $3.9 billion in 2010.
• Pay-per-view growth will drop to single digits in 2006 and average 5.7
percent growth compounded annually, rising to $3.4 billion in 2010.
•· Advertising will increase to $37.2 billion, a 4.1 percent compound annual
increase. TV station advertising will grow by 4.0 percent compounded
annually to $30.5 billion in 2010, and local cable will expand at 4.7 percent
annually to $6.7 billion.
Europe, Middle-East and Africa (EMEA)

• The proliferation of digital platforms and the launch of new channels will
drive television advertising.

Television
• Investment in Central and Eastern Europe is boosting the economy,

stimulating advertising, and making advertising the fastest-growing
component of the region.
• A ramp-up in HD programming will boost viewership and shift advertising
funds from other media to television.
• Public television license fee growth will slow following rate increases in a
number of countries in 2005 and growing resistance to large hikes.
• The television network market will expand from $58.2 billion in 2005 to $75.1
billion in 2010, a 5.2 percent compound annual increase representing an
improvement compared with the past five years, when growth averaged 3.6
percent compounded annually.
• Central and Eastern Europe will be the fastest-growing area, increasing at a
12.0 percent annual rate from $7.0 billion in 2005 to $12.3 billion in 2010,
when it will account for 16.4 percent of the EMEA (Europe, Middle East,
Africa) market.
• Western Europe, which accounted for 85 percent of the overall market in
2005 at $49.2 billion, will rise by 3.8 percent compounded annually to $59.4
billion in 2010, when it will account for 79 percent of EMEA.
• Middle East/Africa, which constituted only 3 percent of the market in 2005,
will average 10.8 percent growth compounded annually, rising from $2.0
billion to $3.3 billion in 2010, when it will account for 4 percent of EMEA.
• The United Kingdom and Germany are the two largest markets in the region,
at $10.7 billion and $10.1 billion, respectively, in 2005. Italy ranks third, at
$7.8 billion, and we expect it will reach the $10-billion threshold in 2010.
• Telephone companies will become significant players in television

distribution, with IPTV contributing to subscription growth.
• Free digital terrestrial television (DTT) and free direct-to-home (DTH) satellite
services will cut into the potential for subscription spending.
• Increased capacity, new launches, and more-attractive programming will
boost the demand for premium services and help drive overall spending.
• Cable operators are consolidating to strengthen their competitive position
and enable them to offer advanced services that will boost revenue in the
face of sluggish subscriber growth.
• VOD will take off, benefiting from IPTV rollouts and cable’s conversion to
digital.
•· The TV distribution market in EMEA (Europe, Middle East, Africa) will
continue to grow at double-digit rates through 2009 before dropping to a
high-single-digit gain in 2010 and averaging 11.6 percent compounded
annually during the forecast period as a whole. The market will total $61.0
billion in 2010 from $35.2 billion in 2005.
• Western Europe will grow at a 9.7 percent rate compounded annually, with
spending reaching $43.5 billion in 2010.
• Central and Eastern Europe will post steady double-digit gains throughout
the forecast period, averaging 14.7 percent on a compound annual basis to
$12.7 billion in 2010.

51
Television
·• Middle East/Africa will post double-digit gains during 2006–07 and high-
single-digit increases thereafter, averaging 9.5 percent annually to $1.7
billion in 2010.
• An emerging VOD market will grow explosively, rising at a 56.0 percent
compound annual rate to $3.0 billion in 2010.
• The United Kingdom is the largest market in the region, at $7.2 billion,
followed by Russia at $4.7 billion, Germany at $4.2 billion, and France at
$3.7 billion.
• Italy will be the fastest-growing country in EMEA, with 22.9 percent
compound annual growth, fueled by a rapidly expanding satellite market and
growing IPTV.
Asia Pacific

• New channels, the digitization of television, and the emergence of
alternative distribution outlets will expand advertising inventory and grow
television advertising.
• The tightening of both government control of programming and foreign
investment in certain key growth markets hampers investment in the
development of new and compelling content, which will limit the ability to
make television more attractive to viewers at a time of increased competition
from other media, thereby limiting the growth potential for advertising.
• Continued TV household growth will sustain modest gains in TV license fees
for public broadcasters.
• The television network market will expand to $51.2 billion in 2010 from $36.4
billion in 2005, a 7.1 percent compound annual increase, which will be
nearly twice the 3.8 percent annual gain during the past five years.
• Japan is the dominant country in the region in terms of value, at $19.7 billion in
2005, equivalent to 54 percent of total spending. Japan is slowly emerging from
its long-term economic slump, and its television network market will expand at a
3.9 percent annual rate through 2010, a significant improvement compared with
the 0.2 percent growth compounded annually during the past few years.
• The People’s Republic of China (PRC) has the second-largest market, at $4.5
billion, and has been the fastest growing of the major countries in the region,
posting a 19.7 percent increase in 2005, and will continue to record healthy
increases averaging 16.7 percent compounded annually through 2010.
• Double-digit compound annual growth is also projected for India, Indonesia,
Malaysia, the Philippines, and Thailand.
• Excluding Japan, the region will expand at a 10.4 percent compound annual rate.
• South Korea, the third-largest country in the region, at $3 billion, has
experienced declines during the past two years as a result of its slumping
economy, but a turnaround is anticipated beginning in 2006 with growth
projected to average 6.6 percent compounded annually through 2010.
• Increased infrastructure capacity will facilitate the introduction of new
channels, making subscription television more attractive and boosting
subscribership.

Television
• The rollout of IPTV by telephone companies and further satellite launches

will increasingly contribute to subscriber growth and make the market more
competitive, thereby stimulating infrastructure investment by cable
operators.
• The expansion of digital cable and IPTV will create opportunities for VOD,
leading to increased VOD spending during the next five years.
• While piracy will continue to limit market potential, digital platforms will make
it more difficult to steal signals.
• We project overall spending to rise to $36.0 billion in 2010 from $18.7 billion
in 2005, a 13.9 percent compound annual increase.
• Subscription spending will increase at a 12.9 percent compound annual rate
to $33.9 billion from $18.5 billion in 2005.
• VOD will grow from $281 million in 2005 to $2.1 billion in 2010, with more
than half of that projected gain occurring during 2009–10.
• Double-digit and high-single-digit increases are expected throughout the
region, with the exception of South Korea, with a saturated market in terms
of penetration of pay TV services.
• Japan is the largest market, at $4.3 billion, followed by the People’s
Republic of China (PRC), at $3.9 billion.
• In 2005, the PRC surpassed South Korea, which totaled $3.6 billion. We
expect the PRC to grow by a projected 16.7 percent compound annual
increase, moving it ahead of Japan in 2008 and rising to $8.4 billion in
2010. Japan will total $8.0 billion in 2010.
• Hong Kong has been the fastest-growing market during the past two years,
more than doubling as a result of the introduction of new channels and a
developing IPTV market. Although Hong Kong constituted less than 1
percent of all subscription households in Asia Pacific in 2005, it accounted
for 57 percent of the region’s IPTV households.
• Following a surge in cable rates in the Philippines in 2004, a number of
households discontinued their subscriptions, which will lead to a drop in
spending in 2006.
• Declining monthly fees will lead to a surge in satellite subscribership growth
in Indonesia in 2006 and propel subscription spending during the next five
years at a 48.7 percent compound annual rate, fastest in the region.
Future Outlook
In the coming years, the last-mile of television distribution will see a lot of action
with the entry of new DTH and IPTV players. Digitalisation of content delivery
system including DTH, digital cable and IPTV services will change the whole arena
of Indian TV market in a big way. As a result, subscription revenues are bound to
increase and are likely to drive growth in the television segment. With DTH becom-
ing stronger, the cable industry will have to undergo a sea of change and the
quality of product and its price to meet the competition in the DTH arena. With
improvement in quality of transmission and content, coupled with economic growth,
television penetration is bound to increase by leaps and bounds thereby fuelling
the growth of television advertising and content software also.

53
At a glance
Reach of Print Media 222 million readers
Reach of Newspapers 204 million readers
Reach of Magazine 68 million readers
Size of Indian print media industry Estimated at INR 128 billion in 2006 ;
projected to grow to INR 232 billion by 2011
Size of Indian newspaper industry Estimated at INR 111.5 billion in 2006;
projected to grow to INR 201.5 billion by 2011.
Size of Indian magazine industry Estimated at INR16.5 billion in 2006.
projected to grow to INR 30.5 billion by 2011
3
Print Media
Print media
Key Developments
New Launches
The year 2006 saw the launch of several specialty magazines. Some of these
launches include:
• Marie Claire, a women’s magazine published by Groupe Marie Claire of France,
was launched in India in 2006 in partnership with the Outlook Group.
• UK’s popular gadgets magazine, T3, was launched in India by Infomedia India
under a licensing arrangement with the title owner Future Media.
• Wolters Kluwer, in 2006, announced is plans for getting into the business of
printing and publishing scientific journals and magazines in India.
• UK-based publishing company Parragon in 2006 formed a joint venture in India
for launching 250 books in India ranging from children’s to reference books on
subjects like art and architecture, food and drink, cookery, gardening, lifestyle
etc.
• The Conde Nast group of the US, which brings out a string of top end lifestyle
publications, has decided to bring two of its best-known magazines, Vogue and
Glamour, to India through a 100 per cent subsidiary.
• The TimeWarner group-owned Fortune announced its plans for publishing in
India and is reportedly in talks with Indian publishers for an Indian edition.
• Cambridge University Press announced its foray in the Indian publishing
segment with its 51 per acquisition of city based Foundation Books Pvt Ltd and
said it will publish books locally.
The newspaper industry too announced several new launches in 2006. Some of
these included announcements by the Bhaskar Group to launch 3 new editions in
Punjab (Amritsar, Ludhiana and Jalandhar) and by the Indian Express Group for
launch of several new editions including one for the Gulf.
Increased Investment in Print Media
There were several investments and deals that took place in 2006 in the Print
Media segment. The largest of those included the investment by Warburg Pincus
through its affiliate Cliffrose Investment in Dainik Bhaskar (Writers and Publishers)
for Rs. 1.5 billion and by De Shaw in Amar Ujala for Rs. 1.2 billion. Others deals
included investment by the Times of India Group in ‘Vijayanand Printers’ to enable
its entry into the regional language publishing space. The Times Group picked up
12 percent stake in ‘Sandesh’, a regional daily for Rs. 270 million.
In 2006, there were eight proposals for Foreign Direct Investment with the
Government of India in the news and current affairs media. These included Mid-Day
Multimedia Ltd, Business India Publications Ltd, Deccan Chronicle Holdings Ltd,
Dhara Prakashan Pvt Ltd, Writers & Publishers Ltd and DT Media & Entertainment
Pvt Ltd. Financial Times (India) Pvt Ltd has also submitted a proposal for coming out
with its newspapers and periodicals. All these are under consideration by the
Government. Of the 20 proposals awaiting approval, 12 belong to Springer India Pvt
Ltd, which is looking to start the Indian edition of international publications in niche
areas like orthopaedic surgery, intensive care, neurology and cancer.

Print media
National Readership Survey 2006

For the second consecutive year, the National Readership Survey 2006 was
brought out, of which the salient features were:
• The reach of the press medium growth has been marginally lower growth in the vernacular dailies
(dailies and magazines urban areas (84.4% to 85.3%) than segment. To elaborate, vernacular
combined) has increased from in rural areas (63.6% to 64.8%). One dailies have grown from 191.0
216 million to 222 million over the would expect this to boost the market million readers to 203.6 million while
last one year. for the press medium. English dailies have stagnated at
• As a proportion however, press • Dailies continue to grow, adding around 21 million.
reach has stabilized in urban 12.6 million readers from last year to • Magazines overall show a decline in
India – at 45%. Press reach in reach 203.6 million while there has the reader base, both in urban and
rural India has also stayed the been a drop of 7.1 million magazine rural India. The reach of magazines
same at 19% — needless to say, readers. It must be remembered that has declined from 75 million in 2005
on a much larger population base. this refers only to mainstream to 68 million in 2006. Magazines
The number of readers in rural magazines. A host of niche titles that have lost 12% of their reach since
India (110 million) is now roughly continue to be launched regularly 2005.
equal to that in urban India (112 are not fielded and their collective • There are now two dailies that have
million). readership estimate is outside the captured more than 2 crore readers
• Dailies have driven this growth in purview of the study. – Dainik Jagran (with 2.12 crores)
the press medium, their reach • Over the last 3 years the number of and Dainik Bhaskar (with 2.10
rising as a proportion of all readers of dailies and magazines crores). The gap between Dainik
individuals aged 12 years and put together among those aged 12 Jagran & Danik Bhaskar has
above – which is the universe years and above has grown from reduced from 38 lakh readers to 2
defined for NRS – from 24% to 216 million to 222 million – a growth lakh readers this year.
25%. Magazines have declined in of almost 3% over last year. • The Times of India is the most read
reach from 9% to 8% over the last • There is still significant scope for English Daily with 7.4 million
one year. growth, as 359 million people who readers, but The Hindu has taken
• The time spent reading has can read and understand any the second spot with 4.05 million
remained the same – at 39 language do not read any readers, pushing Hindustan Times,
minutes daily on an average per publication. Of this 359 million, 68% to the third spot with an estimated
day over the last year. But there read Hindi. It is not just affordability readership of 3.85 million. Though
has been increase in urban India that is a constraint, since 20 million Hindustan Times adding 3.6 lakh
(from 41 to 44 minutes daily) and of these literate non-readers belong new readers in Mumbai, it has but
decrease in rural India (from 36 to to the upscale SEC A and B lost readership in U.P. and Punjab.
35 minutes daily). segments. • Today the average urban adult
• Literacy as measured in the NRS • The Hindi belt has been witness to spends 44 minutes per day reading
has risen from 69.9% to 71.1% intense activity from large dailies dailies and magazines. The average
over the last year. The rate of and is an indicator of the general reading time used to be 41 minutes.

57
Print media
NRS 2006 : Top Dailies
Urban + Rural 2006 Urban + Rural 2005

Rank Nos Rank Nos Rank
(‘000’s) (‘000’s)
Dainik Jagran 21165 1 Dainik Jagran 21244 1

Dainik Bhaskar 20958 2 Dainik Bhaskar 17379 2
Eenadu 13805 3 Eenadu 11350 3
Lokmat 10856 4 Lokmat 8820 7
Amar Ujala 10847 5 Amar Ujala 10469 5
Hindustan 10437 6 Hindustan 10557 4
Daily Thanthi 10389 7 Daily Thanthi 9445 6
Dinakaran 9639 8 Dinakaran 1485 39
Rajasthan Patrika 9391 9 Rajasthan Patrika 8651 8
Malayala Manorama 8409 10 Malayala Manorama 7985 10
Times of India 7502 11 Times of India 8092 9
Mathrubhumi 7415 12 Mathrubhumi 6412 13
Ananda Bazar Patrika 7295 13 Ananda Bazar Patrika 7215 11
Gujarat Samachar 6416 14 Gujarat Samachar 6780 12
Punjab Kesari 6302 15 Punjab Kesari 4427 18
Dinamalar 5977 16 Dinamalar 4877 17
Divya Bhaskar 5490 17 Divya Bhaskar 5162 15
Sakal 5066 18 Sakal 4191 19
NRS 2006 : Top Magazine

Urban + Rural 2006 Urban + Rural 2005
Rank Nos Rank Nos Rank
(‘000’s) (‘000’s)
Saras Salil 7139 1 Saras Salil 10561 1

India Today - Eng 5150 2 India Today - Eng. 6295 2
Vanitha - Mal. 4115 4 Vanitha - Mal. 3832 8
Grihashobha - Hin 3788 5 Grihashobha - Hin 4121 6
Kungumum 3698 6 Kungumum 4675 4
Swati Sapari Vara Pat 3408 7 Swati Sapari Vara Pat 3959 7
Kungumum 3347 8 Kungumum 5600 3
Saritha 2820 9 Saritha 4191 5
Meri Saheli 2610 10 Meri Saheli 2811 10
Balarama 2526 11 Balarama 2196 13
Ananda Vikatan 2426 12 Ananda Vikatan 2760 11
Cricket Samrat 2370 13 Cricket Samrat 2156 14
Malayala Manorama 2351 14 Malayala Manorma 2947 9
Reader’s Digest 2321 15 Reader’s Digest 1330 22
Grihalakshmi (Mal) 2312 16 Grihalakshmi (Hin) 2070 15
Nirogdham 2034 17 Nirogdham 902 42

Print media
Language/Periodicity-wise Total Number of Registered Newspapers - 2005-06
Language Dailies Ter/Bi- Weekies Fortnightlies Monthlies Quarterlies Bi-mont Annuals Total
Weeklies hies/
Half -
Yearly
Assamese 27 3 84 41 73 13 11 1 253
Bengali 116 16 672 618 782 533 221 26 2,584
Bilingual 107 21 835 477 1,697 467 205 53 3,862

English 481 37 1,193 855 3,513 1,491 986 222 8,778
Gujarati 186 15 1,283 263 707 76 56 15 2,550

Hindi 2,912 128 11,434 3,567 4,734 892 280 53 24,000
Kannada 428 6 487 352 863 64 31 4 2,235
Kashmiri 0 0 1 0 0 0 0 0 1
Konkani 1 0 3 1 6 2 0 0 13
Malayalam 242 7 194 177 933 73 42 16 1,684

Maniuri 17 0 7 5 11 7 5 0 52
Marathi 469 22 1,576 285 697 141 56 134 3,380
Multilingual 20 5 142 82 305 76 41 15 686

Nepali 5 2 29 7 14 18 11 0 86
Oriya 93 3 198 110 335 100 24 4 867

Others 58 16 86 33 132 56 18 1 400
Punjabi 110 15 389 110 314 41 20 1 1,000

Sanskrit 4 0 9 6 18 18 6 0 61
Sindhi 13 0 40 11 39 10 2 0 115
Tamil 375 43 434 291 1,267 44 32 10 2,496

Telgu 282 4 327 273 791 39 23 2 1,741
Urdu 583 21 1391 395 587 80 19 3 3,079

India 6,529 364 20,814 7,959 17,818 4,241 2,089 560 60,374
Source : Registrar of Newspapers for India.
Possibility of a common Readership Survey

The Advertising Agencies Association of India, Audit Bureau of Circulations, and Indian Newspaper Society, which are the
bodies responsible for the National Readership Survey (NRS) and Indian Readership Survey (IRS) are in talks for a joint
industry body to bring out a common survey. Not only will a common study prevent duplication of resource allocation, but also
result in an increase in the overall sample size of the study, leading to better coverage.

59
Print media
Industry size
Lower cover prices, spreading literacy and rising incomes have translated into
rapidly growing newspaper sales. Elsewhere in the world, print may be losing out to
television and the Internet, but in India, the leading print media players enjoy
revenue growth rates of between 20 and 30 per cent, with even faster growth in
profits because advertising has been buoyant.
Print as a medium continues to dominate over other media in terms of revenues

from advertising with the highest market share of total advertising spend in India in
2006 (48 per cent), which amounted to Rs. 78 billion. Backed by increasing overall
ad spends, the print media industry grew by a healthy 17% to Rs. 128 million in
2006 over 2005. The size of the industry is expected to further increase to Rs. 232
million by 2011.
With several new publications released in recent years, both the newspaper and
magazine industry are expected to show healthy growth rate. The newspaper
industry currently estimated to be worth Rs. 112 million is expected to grow at a
CAGR of 13% to Rs. 201 million by 2011. The magazine industry is expected to
grow at a similar rate and is currently estimated to be worth Rs. 16 million. Both
industries have a major proportion of their revenue accruing from advertising
expenditure.

Print media
The total number of registered newspapers, as on 31st March, 2006: 62,483
The number of new newspapers registered during 2005-06: 2,074
Percentage of growth of total registered publications over the previous year:

3.43 %
The largest number of newspapers & periodicals registered in any Indian

language (Hindi): 24,927
The second largest number of newspapers & periodicals registered in any

language (English): 9,064
The state with the largest number of registered newspapers (Uttar

Pradesh):9,885
The state with the second largest number of registered newspapers (Delhi):
8,545
The number of newspapers that submitted Annual Statements: 8,512
The total circulation of newspapers : 18,07,38,611
The largest number of newspapers & periodicals that submitted Annual

Statements in any Indian language (Hindi): 4,131
The second largest number of newspapers & periodicals that submitted Annual
Statements in any language (English) : 864
The largest circulated Ananda Bazar Patrika Bengali, Kolkata. : 12,34,122
The second largest circulated Daily: The Hindu ,English,Chennai (Printed from
12 different Printing Press):11,68,042
The third largest circulated Daily: Hindustan Times,English, Delhi: 11,36,644
The largest circulated multi-edition Daily: The Times of India, English(six

editions):25,42,075
The second largest circulated multi-edition Daily: Dainik Jagran,Hindi,(fifteen

editions):21,11,316
The largest circulated periodical: The Hindu, English,Weekly, Chennai (Printed

from 12 different Printing Press) :11,02,783
Source: Registrar Office of Newspaper for India

61
Print media
Newspaper Publishing
The global newspaper market is projected to climb 3.1 percent compounded
annually from $178.8 billion in 2005 to $208.1 billion in 2010. The United States
will expand from $60.3 billion to $69.7 billion in 2010, growing at a 2.9 percent
compound annual rate. Spending in EMEA (Europe, Middle East, Africa), the largest
newspaper market, will increase at a 2.5 percent average rate, reaching $72.0
billion in 2010 from $63.6 billion in 2005. Growth in Asia Pacific will average 3.8
percent annually from $46.6 billion to $56.2 billion. The Latin American market will
advance by a 5.4 percent compound annual rate to $7.0 billion in 2010 from $5.4
billion in 2005. The newspaper market in Canada will grow from $2.8 billion to $3.2
billion, a 2.4 percent average increase.
Paid circulation will continue to decline in the United States, EMEA, and Canada
but will expand in Asia Pacific and Latin America, while rising circulation prices will
generate modest increases in circulation spending. Free daily papers will attract
younger readers, and the opportunity to reach this younger demographic will
contribute to advertising growth. In EMEA, new printing presses will enhance
overall newspaper production quality. In Asia Pacific, price cuts will contribute to
unit circulation growth, but the lower prices will limit overall circulation spending. In
Latin America, promotions gained the attention of readers in 2005, and rising
disposable income will sustain circulation gains. In Canada, possible cutbacks in
the geographic coverage for household delivery will adversely affect circulation. In
the United States, newspaper Web sites will drive advertising growth as online
distribution becomes a significant delivery channel. Online advertising revenues
are likely to be significant for newspapers in other regions as well, but there is
currently little information available for the markets outside the U.S.

Print media
Newspaper Publishing Market (US$ Millions)
Region 2001 2002 2003 2004 2005p 2006 2007 2008 2009 2010 2006-10
CAGER
United States 56,087 55,128 57,380 59,232 60,344 62,034 63,786 65,880 67,546 69,739
% Change -7.0 0.1 4.1 3.2 1.9 2.8 2.8 3.3 2.5 3.2 2.9
EMEA 62,163 60,632 60,195 62,209 63,616 65,027 66,630 68,360 70,161 72,031
% Change -3.8 -2.6 -0.6 3.3 2.3 2.2 2.5 2.6 2.6 2.7 2.5
Asia Pacific 43,060 42,534 43,666 45,465 46,594 48,343 49,913 52,670 54,026 56,159
% Change -0.7 -1.2 2.7 4.1 2.5 3.8 3.2 5.5 2.6 3.9 3.8
Latin America 4,816 4,729 4,699 4,955 5,371 5,709 6,040 6,365 6,686 7,002
% Change 1.1 -1.8 -0.6 5.4 8.4 6.3 5.8 5.4 5.0 4.7 5.4
Canada 2,649 2,659 2,700 2,806 2,835 2,932 2,999 3,064 3,130 3,198
% Change -2.9 0.4 1.5 3.9 1.0 3.4 2.3 2.2 2.2 2.2 2.4
Total 167,775 165,582 168,640 174,667 178,760 184,045 189,368 196,339 201,549 208,129
% change -4.0 -1.3 1.8 3.6 2.3 3.0 2.9 3.7 2.7 3.3 3.1

63
Print media
Magazine Publishing
The overall spending in the United States, EMEA (Europe, Middle East,
Africa), Asia Pacific, Latin America, and Canada is projected to grow at a
3.6 percent compound annual rate from $98.5 billion in 2005 to $117.6
billion in 2010. The U.S. market will increase to $42.9 billion in 2010 from
$35.7 billion in 2005, expanding by 3.7 percent compounded annually.
EMEA, the largest region, at $41.6 billion in 2005, will rise at a 3.3
percent compound annual rate to $49.0 billion in 2010.
The Asia Pacific market will advance at a 3.9 percent average rate,
increasing from $17.1 billion in 2005 to $20.7 billion in 2010. The
magazine publishing industry in Latin America will total $3.7 billion in
2010, rising by 5.8 percent compounded annually from $2.8 billion in
2005. In Canada, the magazine publishing industry will expand from $1.3
billion to $1.4 billion, growing at a 1.8 percent rate compounded annually.
Rising incomes and continued maturation to a more sophisticated market

economy will fuel growth in Eastern Europe, Latin America, and a number
of countries in Asia Pacific, but moderating economic growth will dampen
magazine publishing in other regions. Postal rate increases will hurt
subscription circulation in the United States and Canada in 2006, but
improved newsstand sales in those regions will cushion the decline.
Online editions will help stimulate the print market in the U.S., EMEA, and
Asia Pacific. Growth among the 15- to 44-year-old population, the
principal target demographic segment for magazines, will have a favor-
able impact on magazines in Latin America and several countries in Asia
Pacific, but a decline in that segment will have an adverse impact in
EMEA. Increased foreign investment will contribute to expansion in Asia
Pacific and Latin America.

Print media
Magazine publishing Market (US$ Millions)
Region 2001 2002 2003 2004 2005p 2006 2007 2008 2009 2010 2006-10
CAGER
United States 34,166 32,588 32,999 34,481 35,744 37,072 38,635 40,438 41,879 42,880
% Change -12.4 -4.6 1.3 4.5 3.7 3.7 4.2 4.7 3.6 2.4 3.7
EMEA 39.679 39.152 39,260 40,486 41,613 42,954 44,383 45,904 47,445 48,988
% Change 0..4 -1.3 0.3 3.1 2.8 3.2 3.3 3.4 3.4 3.3 3.3
Asia Pacific 15.171 15.274 15,649 16,231 17,052 17,749 18,465 19,285 19,934 20,656
% Change -0.7 0.7 2.5 3.7 5.1 4.1 4.0 4.4 3.4 3.6 3.9
Latin America 2,514 2,205 2,333 2,554 2,764 2,937 3,119 3,299 3,477 3,662
% Change -0.3 -12.3 6.8 9.5 8.2 6.3 6.2 5.8 5.4 5.3 5.8
Canada 1,238 1,211 1,232 1,253 1,280 1,293 1,313 1,341 1,370 1,399
% Change -0.6 -2.2 1.7 1.7 2.2 1.0 1.5 2.1 2.2 2.1 1.8
Total 92,758 90,430 91,473 95,005 98,453 102,005 105,915 110,267 114,105 117,585
% change -4.9 -2.5 1.2 3.9 3.6 3.6 3.8 4.1 3.5 3.0 3.6
United States
• Newspaper Web sites will become an important distribution channel for

publishers and a significant source of advertising revenue.
• Unit circulation for print copies will continue to fall, hurt by rising prices in
the near term, but declines will moderate during 2008–10 as the industry
adjusts to the impact of new media, new delivery mechanisms, and the
overall competitive environment.
• Newspapers will continue to attract print classifieds despite online

competition, but local (retail) and general (national) advertising will
remain weak.
• We project the newspaper publishing industry will grow from $60.3 billion
in 2005 to $69.7 billion in 2010, a 2.9 percent compound annual increase.
• Advertising will average 3.5 percent compound annual growth, reaching

$58.7 billion in 2010 from $49.4 billion in 2005.
• Circulation spending will expand at an average annual rate of 0.2 percent,

edging up to $11.0 billion in 2010 from $10.9 billion in 2005.

65
Print media
Magazine Publishing
• Restrained price increases, rising disposable income, and new titles serving
growing markets will contribute to a turnaround in newsstand sales, while
increased postal costs will cause increased prices and curtail subscriptions
in the near term.
• Moderating economic growth and lower rate bases will dampen consumer
magazine advertising, but online editions and brand extensions will continue
to show growth.
• Surging corporate profits will boost business magazine advertising in the

near term, but increased use of the Internet and trade shows will keep
increases at mid-single-digit levels over the forecast period.
• Spending on U.S. consumer and business magazines will grow at a 3.7

percent compound annual rate through 2010 to $42.9 billion.
• Consumer magazine spending will average 3.6 percent annual growth to

$27.8 billion in 2010, while spending on business titles will increase to $15.1
billion, growing at a 3.9 percent compound annual rate.

Print media
• Free dailies and slower circulation declines will

provide a modest advertising stimulus.
• We project the newspaper market in EMEA will grow

at a 2.5 percent compound annual rate from $63.6
billion in 2005 to $72.0 billion in 2010.
• Advertising will increase from $37.7 billion in 2005

to $44.4 billion in 2010, a 3.3 percent increase
• Circulation spending will expand by 1.3 percent

compounded annually, totaling $27.7 billion in
2010.
Magazine Publishing
• Rising consumer incomes will generate rapid
advertising growth in developing markets, but
mature markets will remain sluggish.
• New genres and new titles will attract new readers,

but the core demographic base of readers 15 to 44
years old is eroding.
• Digital editions and new distribution channels will

generate incremental revenues while promoting
• Advertising will total $29.2 billion in 2010, up 4.5 print editions.
percent on a compound annual basis, with consumer
magazines reaching $16 billion, growing by 4.5
percent compounded annually, and business
magazines rising to $13.2 billion, a 4.4 percent
average annual increase.
• Circulation spending will increase at a 2.2 percent

annual rate to $13.7 billion. Consumer magazine
circulation spending will rise to $11.8 billion, a 2.4
percent annual gain, while business magazines
distributed on a paid basis rather than for free via
controlled distribution to qualified readers will
generate $1.9 billion in 2010, up 0.8 percent
• New formats and giveaways will boost circulation
temporarily—largely at the expense of competitors
utilizing traditional approaches—while increased
investment in presses will improve the appearance of
newspapers and help attract readers over the longer
run.
• New launches and growth in community papers will

limit further unit circulation declines, but free dailies
will cut into paid circulation in some markets.

67
Print media
• The magazine publishing market in EMEA will • Free papers, strong economic growth, and
increase from $41.6 billion in 2005 to $49.0 expanding unit circulation will stimulate
billion in 2010, growing by 3.3 percent newspaper advertising.
• We project the newspaper publishing industry in
• Magazine advertising in EMEA will rise by 4.0 Asia Pacific will expand at a 3.8 percent
percent compounded annually from $20.4 billion compound annual rate from $46.6 billion in 2005
in 2005 to $24.8 billion in 2010, surpassing to $56.2 billion in 2010.
circulation spending from 2009 onward.
• Advertising will average 5.8 percent growth
• Circulation spending will grow by 2.6 percent compounded annually, from $22.3 billion in
compounded annually from $21.2 billion to 2005 to $29.6 billion in 2010.
$24.2 billion.
• Circulation spending will increase from $24.3
Asia-Pacific billion to $26.5 billion, a 1.8 percent rate
Magazine Publishing
• New papers, declining prices, and relaxation of
• New upscale magazines tapping into the
government restrictions will expand newspaper
emerging wealth of the region are fueling
circulation in India and the People’s Republic of
magazine advertising.
China (PRC).
• New regulations will encourage international
• Price cuts for paid dailies will attract readers
publishers to invest in the People’s Republic of
from free papers, but low price points will limit
China (PRC) and India, thereby stimulating
circulation spending growth.
magazine publishing in those territories.

Print media
• Generally favorable demographic trends and improvements in distribution

will enhance circulation spending.
• We project the magazine industry in Asia Pacific will grow at a compound

annual rate of 3.9 percent through 2010, reaching $20.7 billion from $17.1
billion in 2005. Excluding Japan, which will grow at only 1.3 percent
compounded annually, the rest of the countries in the region will grow by 7.2
percent compounded annually.
• Advertising will increase at a 5.0 percent compound annual rate from $6.4
billion in 2005 to $8.1 billion in 2010.
• Circulation spending will rise from $10.7 billion to $12.5 billion in 2010,
growing by 3.2 percent compounded annually.
Future outlook
The good news for print is that sales will continue to grow as literacy rates improve
and incomes rise. Newspapers could also tap the 360 million potential consumers
who can read but do not subscribe to any newspaper today. On the cost side,
newsprint prices have stopped soaring and even taken a dip, thanks to the arrival of
cheaper newsprint in the country. Further, the growing demand for Indian content in
the international market, due to rising interest in India amongst the international
business fraternity will only spur more growth for this sector.

69
At a glance
Number of films produced in 2006 1,090
Number of single screens Approx. 12,000
Number of multiplex screens Approx. 325
Filmed Entertainment Industry Estimated at Rs.84.5 billion in 2006;
projected to grow to Rs.175 billion by 2011
Domestic Box Office Market Estimated at Rs.64 billion in 2006;
Home Video Market Estimated at Rs.6.5 billion in 2006;

4
Filmed Entertainment
The Indian film industry has been one of the oldest segments of the Indian enter-
tainment industry. Motion pictures were brought to India in 1896 by Lumie re
Brothers, and since then there has been no looking back. Today, India produces the
largest number of films and has the largest number of admissions in the world. The
Indian film industry is witnessing marked improvements in all spheres – from the
technology used in making films, to internationally-appealing themes of movies,
digital exhibition, increased focus on marketing and transparent distribution, finance
and business environment. In 2006, the growing trend of corporitisation of the
industry along with the shift to digital cinema and multiplexes gained further
momentum making it an extremely great year for the Indian film industry.
Key Developments
Corporatisation of Indian Film Industry
The trend of corporatisation of the Indian film industry, considered to be one of the
most important aspects for the growth of the industry, continued to gather momen-
tum in 2006. Some of the key indicators of corporatisation in 2006 include:
Following the IPOs of production house like UTV and Saregama in 2005,
2006 witnessed the IPOs of Prime Focus Ltd. and K Sera Sera Productions
Company Share Price Issue Period IPO Size
price(Rs.) Band(Rs.) Price (Rs.) (RS. mn.)
Prime Focus Limited 10 450-500 417 May 06 1,150
K Sera Sera Productions 10 64-70 68 Feb 06 340
Film production house Percept Picture Company received funding from

Bennett & Coleman and UFO Moviez received funding in the amount of Rs.
968 million from 3i, a private equity player.
Several companies entered into long term contracts with directors and
actors to secure their content pipeline- Adlabs signed contracts with Hrithik
Roshan with Rs. 350 million for 3 films, Akshay Kumar for Rs. 180 million
for 3 films and Vipul Shah for Rs. 2 billion for 8 films and are reportedly
signing a Rs. 220 million- 3 film deal with John Abraham. UTV reportedly
has set aside Rs. 1 billion for contracts with individual directors while
Sahara Motion Pictures locked in Madhur Bhandarkar for 3 films.
Industry sources also indicate that more than half of the releases in 2006
were by corporates rather than individuals.
Corporates are also establishing their presence in the film distribution

space with media conglomerates like UTV Software, Sahara Group and
Eros International entering this segment.
Growth of Multiplexes
The increasing corporatisation of the Indian film industry, entertainment tax sops
offered by several state governments, frantic pace of development of retail malls
that have multiplexes as anchor tenants, improvements in projection and sound
technology resulting in the infrastructure of single-screens becoming outdated,
superior economics of multiplexes along with growing consumerism have all led to
a significant increase in the number of multiplexes in India.

Company Current Projected screens

in next 5 years
Multiplexes Screens Seats
PVR 17 67 16,578 208
Inox 11 41 12,299 165
Cinemax 9 29 8,260 141
Shringar 7 30 9,051 168
Adlabs 7 26 9,146 225

Source: Industry estimates and PwC Research
Improved models for financing films

Since 2000, when the Government of India accorded ‘industry’ status to Indian film
making doors to organized funding from banks, financial institutions, corporates and
venture funds for making films which hitherto were largely financed through
unorganized means. Corporatisation has helped in bringing the interest rates for
financing films down, which makes these Film Projects more viable and also opens
up possibilities for undertaking some big budget movie projects. Corporatisation
has also opened up possibilities for creative producers who had good scripts but no
financing options. In 2006, IDBI Bank doubled its exposure limit to Rs. 2 billion for
film financing. It has sanctioned Rs. 1.8 billion while actual disbursals stood at Rs.
850-900 million towards movie projects.
Growth in Home Video Market

2006 saw a tremendous surge in home theatre surround sound systems, plasma
televisions due to a boost in purchasing power, especially in the high-income
groups. As a result, there was a significant increase in the demand for home video
products like DVDs and VCDs. The overall positive growth and trend of
organisation in India’s retail sector is another factor which contributed to the boost
in DVD sales.
A major development in the DVD market in 2006 was the entry of media power-
house Nimbus Communications in to the DVD rental business. The company plans
to invest Rs. 1.5 billion in trying to create a DVD retail chain by offering over 60,000
movie titles in 56 cities. Optical storage company Mosabaer is also planning an
major entry in to the DVD business in India. However, piracy continues to be
significant barriers to the exponential growth of the Home video market in India.
Digital Cinemas
Digital cinemas are expected to change the face of the century-old cinema business
just as Internet (e-mail) and mobile phones changed the face of communication;
digital cameras changed the face of imaging; satellite & cable television changed the
face of home entertainment; and MP3 technology changed the face of music. Digital
cinema envisages providing a high definition cinematic experience using computer
servers, telecom and satellite technology. Spearheading this digital revolution in
India are companies such as Essel Group, PVR Talkies, Pyramid Saimira, Adlabs,
and United Film Organizers (part of the Apollo Group) amongst others.
United Film Organizers (UFO) Moviez, the digital cinema network launched by
Valuable Media Pvt. Ltd. (a subsidiary of the Apollo International Ltd.) plans to

73
create the largest chain of digital cinema houses (2,000 nos.) worldwide by 2008.
The company invested Rs. 800 million to increase it’s number of digital cinemas to
585 in 2006 and plans to scale it progressively to 2,000 cinema halls across India at
a total investment of Rs. 3 billion. Technology companies such as DG2L Tech,
Panasonic, Hughes Escorts Communication Ltd. and Famous Studios Ltd.
(Mumbai) are partnering it.
Digital cinema help curb piracy as Digital Prints are less prone to illegal duplication
and are also cheaper. In the traditional system, the cost of the print (Rs. 60,000 plus)
is prohibitive and restrictive in terms of ensuring the penetration of the films into the
hinterland (Class B and C towns). Digital cinema has a lower cost per print. Further, if
satellite delivery technology is adopted, it can penetrate 100 cities and towns without
any additional incremental costs. It offers savings in handling and transportation and
has a longer virtual shelf life as physical prints wear out, thus helping film marketers
factor in bigger promotional budgets due to these reduced costs.
DIGITAL CINEMA
Benefits
A. Curb on piracy
In India, software piracy has assumed gigantic proportions. It is esti-
mated that the Indian film industry loses almost 42% revenue due to
piracy. This is money on which the Government earns neither Entertain-
ment Tax nor Income Tax. An early and widespread release of movies,
enabled by Digital Cinema will act as an effective deterrent to piracy.
The digital camera infrastructure network itself is designed to eliminate
possibilities of piracy.
B. Increased box office and Entertainment tax collections
Early migrants to the digital cinema system have reported more than
100% increase in revenue collections by way of increased box office
collections due to early screening of movies which has also translated
into enhanced collections of Entertainment and Income Tax.
C. Employment opportunities in rural areas due to growth of new cinemas
Digital Cinema makes niche cinema and regional language films more
commercially viable. This in turn helps generate employment for local
artists and technicians and other regional film industry related
infrastructural suppliers.
D. Savings in Foreign Exchange and minimizing wastage in print
Besides involving huge costs, analogue prints cannot be recycled and
amount to a national wastage. Digital Cinema, on the other hand, does
not require any prints, thus, eliminating wastage and saving the country
precious foreign exchange.
E. Eliminates environmental pollution
Analogue prints are made from polyester film and are destroyed by
burning which is a huge bio hazard. Digital prints are mere digital files
and can be simply erased from our server’s memory.
F. Savings in Power Consumption
The Power consumption of a Digital Projection System is far less as
compared to that of an optical projection system. Thus in a power strapped
state this can translate into huge power savings as illustrated below:

Particulars Optical Projection
KVA per hour 15
Power Factor 0.75
Actual Utilisation 11.25
Savings in Nos. of Units

(KVA)
Per theatre per hour Savings in Digital Projection (Rs.)10.125
Per theatre Daily Savings in Digital Projection (Rs.)121.5
Per Theatre Monthly Savings in Digital Projection (Rs.)3,645
Per Theatre Annual Savings in Digital Projection (Rs.)43,740
Total Annual Savings for 200 Theatres (Rs.)87,48,000
G. Promotes Regional and Parallel Cinema

It has been seen that regional films are losing out to mainstream Hindi
cinemas mainly due to the problems in exhibition and distribution sector.
Digital Cinema eliminates the cost of print. This means that even local
Bhojpuri language films can be produced and distributed widely without
any risk and at a lower cost. For e.g. a regional film produced for even a
budget of Rs. 2 million can be released simultaneously over 200
cinemas. Similarly, art films, which have a limited audience, can be shot
in digital format and released digitally in select theatres, keeping the
financial viability. With Digital Cinema, the constraints for growth of art
films will be removed.
H. Good Quality Images and Virtual shelf life.

With analog movie prints, with repeated screenings, there is consider-
able deterioration in the print quality. With digital cinema, Print quality
does not deteriorate and every show is as good as the first show,
irrespective of the number of screenings.
I. Provides new business opportunities

Over the past years, cinemas in smaller towns have been reeling under
acute economic crisis, leading to the closure of many theatres. Piracy,
poor box office collection of films and availability of only dated films have
been the main contributing factors. Digital Cinema shall bring the small
town cinemas halls at par with the cinema halls in the big cities, thus
providing them a second lease of life and offering renewed business
and employment opportunities.
J. New Compact Cinemas

The advent of Digital Cinema has seen proliferation of new and compact
cinema houses in small towns and cities. With our efforts and research
we have designed compact cinemas, which can be opened with a
minimum investment. This shall provide additional business opportuni-
ties to local businessmen and also increase the State’s revenue.
Source: UFO Moviez

75
Use of Digital technology in film making

Cinema has increasingly become technology-centric. Not only are computer
graphics imaging or 3D animation picking up, film content itself is going digital with
more graphics and visual effects.
In 2006, there was an increased use of the Digital intermediate (DI) technology in
Indian films. DI involves a process whereby a film gets converted to digital format
and affords more control of colours and images as well as room for the adjustment
of image structure. This process helps in maintaining the consistency of the film. It is
estimated that in 2007 more than 90 per cent of the films made would go through it.
Prasad EFX of the Prasad Group did the DI work for films such as ‘Rang de Basanti’
and ‘Taj Mahal’.
Further, 2006 also saw increased use of VFX in Films. Though among the top 20
Hollywood films of all time, almost all of them were high on visual effects whether it
was Lord of the Rings, Spiderman or King Kong, in India too this trend is picking up
with several Indian filmmakers looking to create larger than life films with a super-
natural edge such as in Krrish and Dhoom 2.
Increased Marketing Spends

Corporatisation of the film industry also brought along with it the concepts of
organized and innovative marketing, an arena which was lacking in the industry.
The producers of ‘Rang De Basanti’ allocated 40% of the budget to marketing of the
film a very large amount compared to the 5% which has been the industry norm not
too long ago. Indian films are also exploring the avenue of the internet as a very
effective medium for marketing.
Collections from overseas markets

The growing Indian diaspora around the world has created a market for Indian films
overseas that continues to grow at a rapid rate. The market is currently estimated to
be worth Rs. 7 billion and is expected to grow at a CAGR of 18% which is in fact
higher than the estimated CAGR of the domestic box office which is estimated at
16%. However the contribution of the overseas box office collections to the total
Indian film industry is still below 10% and can be increased through more effective
marketing and better sub-titling/ dubbing. Further, increased number of prints for a
wider release of film overseas facilitates this process.

Varied Subjects
2006 yet again saw films on a large variety of topics made. The topics ranged from
biographic films of the likes of ‘Guru’, to patriotic films like ‘Rang De Basanti’ and
‘Lage Raho Munnabhai’, comedies like ‘Phir Hera Pheri’ and ‘Gol Maal’, films
based on political situations such as ‘Kaabul Express’ to modern action flicks like
‘Dhoom 2’. The year even saw the creation of India’s first super-hero movie ‘Krishh’.
Moreover, the gross collections of the top five films in 2006 were almost 100%
higher than those of 2005 clearly reflecting what a good year it was for the Indian
film industry.
Source: Industry estimates

77
Number of Films produced in 2006

Language Number of films
1 Hindi 223
2 Tamil 162
3 Telugu 245
4 Malayalam 77
5 Kannada 75
6 Bengali 42
7 Gujarati 16
8 Marathi 73
9 English 9
10 Oriya 21
11 Assamese 7
12 Chattisgrahi 4
13 Rajasthani 5
14 Bhojpuri 76
15 Punjabi 12
16 Harayani 1
17 Tamil (dub) 11
18 Konkani 1
19 Telugu(dub) 17
20 Maithali 1
21 Santhali 3
22 Hinglish 1
23 Sadari 1
24 Persian English 1
25 Nepali 4
26 Tind 2
TOTAL 1,090
Source: Film and Television Producers Guild of India

Foreign Films in India

With changing demographics of Indian Society there is also a growing market for
English Films in India. Several Hollywood blockbusters such as ‘Pirates of the
Caribbean – Dead Man’s Chest’, ‘Harry Potter and the Goblet of Fire’ and several
others had mediocre success in Indian metros.
In 2006, approx 74 foreign films were released in India which garned a share of Rs.
2.5 billion as box office collections, roughly 4% of the total Box Office Collections.
‘Casino Royale’ was considered as the #1 film for Hollywood in India as it collected
an estimated Rs. 410 million in Box Office Revenues in 2006.
Casino Royale: 2006’s biggest Hollywood fare in India

001 Largest opening day for any foreign film in India (Friday, 17th Nov, 06) –
Rs. 47.4 million
002 Largest single day for a foreign film in India – Rs. 52 million on Sunday
003 Largest opening weekend – Rs. 149. 4 million at the box office
004 Largest 2nd weekend – Rs. 60.5 million at the box office, which is also
the 4th largest weekend of all time
005 Largest Bond film ever by a stretch
006 A foreign film in India to cross the Rs. 100 million mark the fastest - in just
2 days
007 Rs. 410 million in 2006 itself. Biggest Foreign film in India in 2006 and
the 2nd Biggest all time, behind Titanic.
Source: Sony Pictures Releasing of India

79
Looking at the potential for films in India, Hollywood too is looking at co-producing
films in India. Sony Pictures Entertainment announced their first Indian co-produc-
tion in collaboration with Indian Film Director Sanjay Leela Bhansali titled
‘Saawariya’ in the Hindi language. Such co-production offers opportunities for
Indian talent to leverage the size and scale offered by such global studios to
showcase their work outside India and thus acquire greater exposure for their films.
Top Foreign Films in 2006

Title No. of Prints Release Date Estimated Gross
Box Office
Collections
(Rs. million)
Casino Royale 427 17-Nov-06 410
Pirates of the Caribbean-2 198 21-Jul-06 190
The Da Vinci Code 108 26-May-06 140
The Chronicles of Narnia 99 26-Jan-06 120
Underworld Evolution 47 7-Apr-06 60
House of Flying Daggers 40 8-sep-2006 35
Industry Size
The key factors impacting the filmed entertainment market in any given year are the
quality of releases and releases’ appeal to consumers—developments that cannot
be predicted.
2006 was an excellent year for the Indian box office. The top five films alone
grossed over Rs. 3 billion. This powered a total 21% growth in box office revenues
in 2006 taking the estimated size of the Indian domestic box office market to Rs. 64
billion. This growth can also be attributed to the growing number of multiplexes and
digital cinemas in the country, the increasing corporatisation of the Indian film
industry and the improvement in content for films. The domestic box office market is
expected to grow at a CAGR of 13% and nearly double its size to an estimated
Rs. 119 billion over the next five years.
Overall, the size of the Indian film industry is estimated at Rs. 85 billion, having
grown by 24% from 2005. This high increase was attributed to higher average ticket
prices, propelled by the growth of multiplexes, estimated to have increased to
Rs. 20 per ticket on an all-India average basis. The ticket prices are projected to
grow to Rs. 35 per ticket on an all-India average basis over the next five years, as a
result of which the Box Office Market (Domestic) is projected to increase cumula-
tively by 13.5 percent. Overall, the Indian film industry is expected to grow at a
CAGR of 16% to Rs. 175 billion by 2011.

The Indian films industry’s revenues continue to be dominated by the domestic box
office. In 2006, the domestic box office accounted for 76% of the total revenues of
the industry. It is expected that in the coming years, this dominance will reduce
slightly with other segments, particularly the Home Video segment, contributing
greater revenues to the Indian film industry.

81
In terms of growth rates among the various segments, the home video market
shows the maximum potential. The market grew a whopping 63% from 2005 to
touch the Rs. 6.5 billion mark. This segment is expected to make a continually
increasing contribution to the total revenues earned by the Indian film industry. It is
expected to grow at a CAGR of 31% to Rs. 25 billion by 2011.

Filmed entertainment spending in the United States, EMEA (Europe, Middle East,
Africa), Asia Pacific, Latin America and Canada is projected to rise at a 5.3 percent
compound annual rate, reaching $104.1 billion in 2010 from $80.5 billion in 2005.
EMEA will be the fastest-growing region, rising by 5.9 percent compounded
annually to $30.3 billion in 2010 compared with $22.8 billion in 2005. The U.S.
market is projected to grow by 5.1 percent compounded annually to $44.2 billion in
2010 from $34.4 billion in 2005. Spending in Asia Pacific will increase from $16.5
billion in 2005 to $20.9 billion in 2010, growing at a 4.9 percent compound annual
rate. Filmed entertainment in Latin America will total $2.3 billion in 2010, up from
$1.8 billion in 2005 and representing a 5.1 percent gain compounded annually.
Canada will expand at a 5.0 percent annual rate from $5.1 billion in 2005 to $6.5
billion in 2010.
Box office will be enhanced by digital cinemas in the United States, EMEA,
and Asia Pacific and by modern theaters and more screens in a number of
countries in EMEA, Asia Pacific, and Latin America.
The introduction of high-definition DVDs will stimulate home video sell-

through in the United States and Asia Pacific, new funding programs will
have a positive impact on all regions, and emerging online DVD rental
services will augment the rental market in every region except Latin
America.
Film streaming services will generate incremental revenue in the United

States and EMEA.

United States
Private funding sources, digital cinemas, and rising ticket prices will
generate box office growth.
High-definition DVDs and continued growth in TV shows on DVD will boost

the sell-through market, but unit sales growth will moderate as the industry
matures.
Online rentals and digital streaming will bolster the market, but in-store
rentals will continue to decline.
The overall filmed entertainment market will expand at a compound annual

rate of 5.1 percent to reach $44.2 billion in 2010.
Box office growth will average 4.3 percent compounded annually during
the next five years from a weak 2005, taking total box office spending from
$9.0 billion in 2005 to $11.1 billion in 2010. However, admissions in 2010
will remain below the levels achieved during 2002–04.
Home video sell-through spending will expand by 6.9 percent compounded

annually to $23.3 billion in 2010 from $16.7 billion in 2005.
In-store rental spending—at video stores and similar retail outlets—will

decline 4.1 percent compounded annually from $7.6 billion in 2005 to $6.2
billion in 2010.
The in-store home video market will total $29.5 billion in 2010 from $24.3
billion in 2005, a 3.9 percent compound annual increase.
Online rental subscription service will become a major channel for home
video rentals, while digital streaming service will augment spending.
Together they will total $3.6 billion in 2010, constituting more than half the
traditional rental market and growing at a 26.4 percent compound annual
rate from $1.1 billion in 2005.

83
The overall home video market will advance at a 5.4 percent compound
annual rate, reaching $33.1 billion in 2010 from $25.4 billion in 2005.
Europe, Middle East, Africa (EMEA)
Investment incentives and the proliferation of digital cinemas will turn

around the box office market.
TV DVDs will boost sell-through, but low prices will slow spending growth.
Rental vending machines and kiosks will support the traditional rental
market, while online film rental subscription services will boost overall
rental activity.
Filmed entertainment spending in EMEA (Europe, Middle East, Africa) will
total $30.3 billion in 2010, averaging 5.9 percent growth compounded
annually.
Box office spending will expand by 5.0 percent annually to $9.4 billion in
2010 from $7.4 billion in 2005.
Rebounding from its first decline in 2005, the in-store home video market
will rise from $15.2 billion to reach $18.7 billion in 2010, a 4.2 percent
compound annual increase.
Online subscription services and video streaming services are entering the
market. Together they will reach $2.2 billion by 2010 from only $216 million
in 2005, averaging 59.1 percent growth compounded annually.

Asia Pacific
Digital cinemas, modern theaters, and support of local films will boost the
box office market.
High-definition videos will enhance the sell-through market, but piracy will
continue to limit growth.
Online rentals will grow rapidly, cutting into in-store activity but boosting the
overall rental market.
Filmed entertainment spending will expand at a 4.9 percent compound

annual rate to $20.9 billion in 2010 from $16.5 billion in 2005.
Box office will rise from $5.9 billion to $7.4 billion, a 4.7 percent increase
In-store home video will grow by 2.7 percent compounded annually to

$12.1 billion.
Online subscription services will grow explosively from $17 million in 2005
to $1.4 billion by 2010.
Future Outlook
Increased number of Multiplexes and Digital Cinema screens, increased consumer
spending on films and entertainment and better exploitation of films through
corporatisation will influence the growth of the Indian Film Industry in the next five years.

85
At a glance
Number of licenses bid for in FM Phase II 338 licenses in 91 cities
Number of bidding companies 37 companies
Number of licenses allocated 245 licenses in 87 cities
Listenership 99% of India’s population
Regular listeners 27% of India’s population
Size of Indian radio industry Estimated at Rs.5 billion in 2006;

Projected to grow to Rs.17 billion
by 2011
5
Radio
Radio
Indian Radio Industry
Radio has been the cheapest mode of entertainment in India for a long time.
Dominated by the state broadcaster – All India Radio – it reaches out to nearly 99
percent of the Indian population making, by far the most reach amongst all the
modes of mass media. In the past few years, there has been a sea change with the
second phase of the FM licensing already rolled out and the third phase expected
to be conducted in the near future. The opening up of the radio industry to foreign
investment has been a major boost to its growth. With the additional impetus
provided by the emergence of new concepts like satellite, internet and community
radio, the Indian radio industry is set to be the top performer in terms of overall
growth rate and growth in advertising spends amongst the main segments of the
Indian Entertainment & Media Industry.
Key Developments
FM phase II results
2005 was a key year for the radio industry as it saw the liberalization of the radio
sector with the government announcing the roll out of the second phase of FM
licensing. This included the opening up of 338 licenses to private players by way of
a bidding process. The licenses that were to be bid for were spread over 91 cities
throughout India. The move from the Government was greeted with a positive
response from private players, with several large Indian as well as International
media companies winning bids for the licenses.
In 2006, a total of 245 licenses out of 338 licenses were allocated to 37 different
companies, covering 87 cities. The success of this licensing phase is expected to
be witnessed in the coming years. These 245 new channels are all expected to be
fully functional by the end of 2007.
Adlabs Films Ltd. (now Reliance Unicom Ltd.) 45 licenses
South Asia FM Ltd. 23 licenses
Synergy Media Entertainment Ltd. 17 licenses
Music Broadcast Pvt. Ltd. 16 licenses
Entertainment Network India Ltd. 25 licenses
Kal Radio Ltd. 18 licenses
BAG Infotainment Pvt. Ltd. 10 licenses
PAN India Network Infravest Pvt. Ltd. 8 licenses
Radio Today Broadcasting Pvt. Ltd. 7 licenses
Radio Mid-day West (India) Pvt. Ltd. 6 licenses
Source: Ministry of Information and Broadcasting

Radio
Adlabs Reliance’s ‘BIG’ entry into the radio industry

Adlabs Films (a Reliance Group Company) emerged as the Company with the
largest number of winning bids in the phase II licensing with 45 licenses to their
name. The Company de-merged their radio business, forming Reliance Unicom
Limited and launched their services under the brand ‘BIG 92.7 FM’.
Entry of foreign players in the Indian radio industry

In 2005, as soon as the Government opened up the radio sector to foreign invest-
ment of up to 20%, immediately BBC Worldwide, Malaysian Broadcaster Astro and
Virgin Radio made investments in Indian radio companies. BBC Worldwide tied-up
with Radio Mid-Day West, Astro alongwith NDTV tied up with Value Labs for
acquiring Radio businesses from the India Today Group and Virgin Radio joined
the Hindustan Times Group.
Radio channels launched in 2006

Of the 245 FM radio licenses issued, some of the radio channels launched in 2006
include:
"Entertainment Network (India) ltd. extended the reach of its channel

'Radio Mirchi' from 7 cities to 10, launching the channel in Bangalore,
Hyderabad and Jaipur in April 2006.
"MyFm of Synergy Media Entertainment Pvt. Ltd. launched at Jaipur on

May 28, 2006.
"Radio City 106.4, Hyderabad became the fifth FM Radio station of Music
Broadcast Pvt Ltd (MBPL) and was launched on May 29, 2006.
"Sun TV launched three more FM Radio Stations under the brand `S FM' in
November 2006 through its subsidiaries Kal Radio Ltd. and South Asia FM
Ltd on 93.5 MHz frequency in Bangalore, Hyderabad and Jaipur.
Increased profitability of radio channels

The switch from a fixed licensing regime to a revenue sharing model has contrib-
uted significantly to increased profitability of radio channels. The new regulatory
regime has cut the license fee to 5.3% of the net revenues (4% of gross revenues)
against approx. 40-50% earlier while other costs have remained unchanged. This
has significantly addressed the profitability issue positively, which has led to a spate
of media players and other Corporates entering the space.
As part of the bidding process, it is estimated that over Rs. 20 billion has already
been invested with approx. Rs. 13 billion invested as Bid amounts and Rs. 7 billion
as capital expenditure on equipments and facilities.

89
Radio
Radio
Key Features of the FM II Radio Policy

Annual License Fee at 4% of gross revenues or 10% of reserve OTEF
(One-time Entry Fee), whichever is higher.
Reserve OTEF – 25% of the highest valid bid for that city.
50% of the bid amount to be submitted with the bid along with a perfor-
mance bank guarantee for 50% of the bid amount.
License validity for 10 years from the date of operationalisation and from
1st April 2005 for license under migration.
Existing players were also given an option to shift to Phase II on payment
of OTEF, which was equivalent to average paid by successful bidders in
the city.
No player is allowed to operate through more than one frequency in a
market.
No single player can operate more than 15% of the total operational
stations.
No news and current affairs programmes are permitted.
Foreign Direct Investment or any form of foreign investment is restricted to
20%.
Source: Ministry of Information and Broadcasting
Growing Ad Spend on Radio

Although radio as a medium covers 99% of the population in India, the share in ad
spend is relatively low (just 2.4% in 2005) as compared to the global average of
8.4% in 2005. However while the percentage share of radio in total ad spend is
declining globally, it is on the rise in India. In 2006, this share increased to 3.1%
from 2.4%. It is further expected to increase to 5.5% by 2011. The liberalization of
the Indian radio industry and the several new players expected to enter the market
as a result of this are the primary drivers of this growth in ad spend. Radio is a very
effective medium for advertising as it targets local markets and has very low ad
avoidance levels.
Source: AdEx India

Radio
FM Radio Listenership trends

People listen to FM at home (70%), while driving (32%), at public places
(9%) and at the office (7%).
Almost 51% of the people listen to FM for an average time of one hour
and another 39% listen to FM for a longer period of 1-3 hours
Sunday listener-ship is dramatically low with only 10% of the people

tuning in to FM vs. weekdays where the number of tune-ins is as high as
94%.
Majority of the people listen to Hindi film songs (63%), followed by Hindi
pop (40%), remixes (37%) and English pop (33%)
Source: Madison Media Research
Source : PwC Global Entertainment and Media Outlook

91
Radio
FM Radio Phase III

After the success of the second phase of FM licensing, the Government is planning
to open up another 700 channels in the third phase of FM licensing. This phase is
expected to see several licenses being given in smaller cities and towns. However,
prior to that, the balance 93 frequencies which remain unallocated during the
Phase II licensing will be bid out.
City Balance Frequencies City Balance Frequencies
1 Delhi 1 25 Nanded 2
2 Mumbai 2 26 Rajamundri 2
3 Bangalore 1 27 Sholapur 1
4 Hyderabad 3 28 Srinagar 3
5 Ahmedabad 1 29 Tiruchy 2
6 Nagpur 2 30 Tirunelveli 1
7 Allahbad 1 31 Sagar 4
8 Jamshedpur 1 32 Warangal 2
9 Patna 3 33 Bikaner 3
10 Ajmer 1 34 Kota 1
11 Akola 2 35 Rourkela 2
12 Aligarh 1 36 Tuticorin 1
13 Aurangabad 1 37 Udaipur 1
14 Bareily 2 38 Agartala 3
15 Bhubaneshwar 1 39 Aizawl 3
16 Bilaspur 2 40 Gangtok 1
17 Dhule 1 41 Imphal 4
18 Gorakhpur 3 42 Itanagar 3
19 Gulbarga 2 43 Kohima 4
20 Jalgaon 1 44 Shillong 2
21 Jammu 2 45 Shimla 1
22 Jhansi 3 46 Daman 1
23 Muzzafarpur 3 47 Port Blair 4
24 Mysore 2 TOTAL 93
Source: Madison Media Research

Radio
Breakthrough for Community Radio in India

In December 2002, the Government of India approved a policy for the grant of
licenses for setting up of Community Radio Stations to well established educational
institutions including IITs/IIMs.
The matter was reconsidered and in 2006 the Government decided to broad-base
the policy by bringing ‘Non-profit’ organisations like civil society and voluntary
organisations etc under its ambit in order to allow greater participation by the civil
society on issues relating to development & social change.
No. of Applications / Letters of Intent / Licenses Issues in respect

of Community Radio
Upto Upto
30.6.2006 30.9.2006
Total No. of Applications Received 93 100
No. of Licenses issued 26 34
No. of Stations Operational 17 19
Source: Ministry of Information & Broadcasting

93
Radio
Key Features of the Community Radio Policy 2006

Basic Principles interests and needs of the local community.
An organisation desirous of operating a Community Radio At least 50% of content shall be generated with the partici-
Station (CRS) must be able to satisfy and adhere to the pation of the local community, for which the station has been
following principles: set up. Programmes should preferably be in the local
It should be explicitly constituted as a ‘non-profit’ language and dialect(s).
organisation The Permission Holder shall have to adhere to the provi-
It should have a proven record of at least three years of sions of the Programme and Advertising Code as pre-
service to the local community. scribed for All India Radio.
The CRS to be operated by it should be designed to serve The Permission Holder shall not broadcast any
a specific well-defined local community. · It should programmes, which relate to news and current affairs and
have an ownership and management structure that is are otherwise political in nature.
reflective of the community that the CRS seeks to serve. Transmitter Power and Range
Programmes for broadcast should be relevant to the CRS shall be expected to cover a range of 5-10 km. For this,
educational, developmental, social and cultural needs of a transmitter having maximum Effective Radiated Power
the community. (ERP) of 100 W would be adequate.
It must be a Legal Entity i.e. it should be registered (under However, in case of a proven need where the applicant
the registration of Societies Act or any other such act organisation is able to establish that it needs to serve a
relevant to the purpose). larger area or the terrain so warrants, higher transmitter
Selection Process wattage with maximum ERP up to 250 Watts can be
considered on a case-to-case basis, subject to availability of
Applications shall be invited by the Ministry of I&B once
frequency and such other clearances as necessary from the
every year through a national advertisement for establish-
Ministry of Communication & IT.
ment of Community Radio Stations. However, eligible
organisations and educational institutions can apply Universities, Deemed Universities and other educational
during the intervening period between the two advertise- institutions shall be permitted to locate their transmitters and
ments also. antennae only within their main campuses.
Universities, Deemed Universities and Government run For NGOs and others, the transmitter and antenna shall be
educational institutions will have a single window located within the geographical area of the community they
clearance by putting up cases before an inter-ministerial seek to serve.
committee chaired by Secretary (I&B) for approval. Funding & Sustenance
In case of all other applicants, including private educa- Applicants will be eligible to seek funding from multilateral
tional institutions, LOI shall be issued subject to receiving aid agencies. Applicants seeking foreign funds for setting up
clearance from Ministries of Home Affairs, Defence & the CRS will have to obtain FCRA clearance under Foreign
HRD (in case of private educational institutions) and Contribution Regulation Act, 1976.
frequency allocation by WPC wing of Ministry of Commu- Transmission of sponsored programmes shall not be
nication & IT. permitted except programmes sponsored by Central & State
Grant of Permission Agreement Governments and other organisations to broadcast public
The Grant of Permission Agreement period shall be for interest information.
five years and will be non-transferable. Limited advertising and announcements relating to local
No permission fee shall be levied on the Permission events, local businesses and services and employment
Holder. However, the Permission Holder will be required opportunities shall be allowed. The maximum duration of
to pay the spectrum usage fee to WPC wing of Ministry of such limited advertising will be restricted to 5 (Five) minutes
Communication & IT. per hour of broadcast.
An applicant/organisation shall not be granted more than Revenue generated from advertisement and announce-
one Permission for CRS operation at one or more places. ments as per Para 8 (ii) shall be utilized only for the opera-
tional expenses and capital expenditure of the CRS. After
Content regulation & monitoring
meeting the full financial needs of the CRS, surplus may,
The programmes should be of immediate relevance to the with prior written permission of the Ministry of Information &
community. The emphasis should be on developmental, Broadcasting, be ploughed into the primary activity of the
agricultural, health, educational, environmental, social organization i.e. for education in case of educational
welfare, community development and cultural institutions and for furthering the primary objectives for
programmes. The programming should reflect the special which the NGO concerned was established.

Radio
Satellite Radio
WorldSpace continues to be the solo player in the satellite radio sector in India. In
India, the Company added 18,568 net subscribers during the third quarter of
FY2006, ending the year with 138,065 subscribers. During the year, WorldSpace
announced a series of content and business highlights. The Company teamed with
global content providers, including BBC World Service, TWI, and Radio Mid-Day, to
deliver India ‘s first all-sports satellite radio channel, “PLAY” . In November 2006,
the company signed an exclusive broadcast license agreement with ESPN STAR
Sports to provide its subscribers with live audio coverage of over 200 days of
cricket, including a minimum of 77 days featuring the Indian national team. The
Company also expanded its branded line-up of specialty programming with the
launch of “Falak,” India’s first exclusive 24-hour Urdu channel. The Company
launched in Kolkata in early 2006, taking its reach to ten cities in 2006.
Visual Radio
Radio Mirchi, in 2006, launched visual radio with Hewlett Packard and Nokia. A
connection with Hutch (Hutchison Essar Limited) or Airtel along with General
Packet Radio Service (GPRS)-enabled mobiles enable the reception of visual
signals. The content is created entirely by Radio Mirchi, HP provides the technology
solution, Nokia produces the sets on which visual radio is made available and
Hutch provides the conduit for the content to reach the subscriber through the
GPRS network. With this, India became only the third country in the world after
Finland and Singapore to have a commercial visual radio service.
Industry Size
The Indian radio industry is set to grow at the fastest rate amongst all the other
major segments in the Entertainment & Media Industry. It is expected to grow from
Rs.5 billion in 2006 to Rs.17 billion in 2011, which translates into a cumulative
growth of 28 percent over the next five years.
Source: Industry estimates & PwC analysis
However, many industry experts believe that this impressive growth rate is only a
result of the small value of the industry currently. They believe that the Indian radio
industry is being help up by several regulatory and other blockades and may not
reach its full potential.

95
Radio
Top 10 Categories of Radio Advertisers % share(in secondages)

Jan- Nov 2006
TV Channel Promotions 11.8
Properties/Real Estate 6.2
Cellular Phone Service 5.5
Independent Retailers 3.8
Publications/books 3.1
Jewellery 2.3
Mutual Funds 2.7
Life Insurance 2.3
Biscuits 2.1
Internet/SMS Service 1.5
Source: AdEx India, A Division of TAM Media Research
Top 10 Radio Advertisers % share (in secondages)
Hindustan Lever Ltd 5.9
Reliance Communications 1.6
MTNL 1.5
Life Insurance Corporation Of India (LIC) 1.3
GTM Buliders and Promoters 1.2
Bhawani Textiles 1.1
Bharti Airtel Ltd 1.1
Hutchison Essar Telecom Ltd 0.8
Maruti Udyog Ltd 0.8
Bennett Coleman & Co Ltd 0.8
Source: AdEx India, A Division of TAM Media Research

The global radio market is projected to increase from $44.6 billion in 2005 to an
estimated $58.8 billion in 2010, averaging 5.7 percent compound annual growth.
Canada and Latin America, the two smallest markets, will be the fastest growing, at
compound annual rates of 8.8 percent and 8.1 percent, respectively. Canada will
total $1.5 billion, and Latin America, $1.9 billion in 2010. The United States will
increase at a 7.4 percent compound annual rate, reaching $29.9 billion in 2010
from $20.9 billion in 2005. Europe, Middle-East and Africa (EMEA) will expand by
3.3 percent compounded annually rising from $15.3 billion in 2005 to $18.0 billion
in 2010. Asia Pacific will climb from $5.9 billion in 2005 to $7.3 billion in 2010, a 4.2
percent annual growth rate.

Radio
The radio market will grow by 5.7 percent compounded annually to $58.8
billion in 2010 from $44.6 billion in 2005.
Slow-growing public radio license fees will hold down increases in EMEA
and Asia Pacific to 3.3 percent and 4.2 percent, respectively, while
compound annual increases of 8.8 percent, 8.1 percent, and 7.4 percent
are projected for Canada, Latin America, and the United States, respec-
tively.
Digital broadcasting will lead to improved radio advertising, but its positive
impact will be partially offset by growing audience fragmentation that will
dampen ad rates.
Satellite radio will boost spending in the United States and Canada and
provide modest incremental revenue in Asia Pacific. Slow-growing public
radio license fees will continue to hold down overall market growth in
EMEA and Asia Pacific.
Radio Market (US$ Milions)

Region 2001 2002 2003 2004 2005p 2006 2007 2008 2009 2010 2006-10
CAGER
United States 17,862 18,901 19,229 19,975 20,982 22,625 24,043 25,813 27,862 29,915
% Change -7.4 5.8 1.7 3.9 5.0 7.8 6.3 7.4 7.9 7.4 7.4
EMEA 13,222 13,569 14,061 14,823 15,341 15,881 16,427 16,962 17,478 18,029
% Change 1.1 2.6 3.6 5.4 3.5 3.5 3.4 3.3 3.0 3.2 3.3
Asia Pacific 5,433 5.448 5,574 5,780 5,933 6,154 6,395 6,709 6,977 7,301
% Change 0.9 0.3 2.3 3.7 206 3.7 3.9 4.9 4.0 4.6 4.2
Latin America 761 734 1,072 1,147 1,302 1,562 1,549 1,674 1,797 1,922
% Change -13.0 -3.5 46.0 7.0 13.5 20.0 -0.8 8.1 7.3 7.0 8.1
Canada 875 903 979 996 1,044 1,108 1,179 1,274 1,398 1,589
% Change 4.5 3.2 8.4 1.7 4.8 6.1 6.4 8.1 9.7 13.7 8.8
Total 38,153 39,555 40,915 42,721 44,602 47,330 49,593 52,432 55,512 58,756
% change -3.3 3.7 3.4 4.4 4.4 6.1 4.8 5.7 5.9 5.8 5.7

97
Radio
United States
The emergence of new formats, improved sound quality, and reduced
clutter will reinvigorate terrestrial radio, although growth rates will be
dampened by audience fragmentation.
Niche formats, celebrity hosts, sports programming, and the emergence of

advertising will drive strong growth in satellite radio, albeit from a low
base.
The radio market will reach $29.9 billion in 2010, growing at a 7.4 percent
compound annual rate.
Terrestrial radio advertising will rise to $24.5 billion in 2010 from $20.0
billion in 2005, averaging 4.2 percent compound annual growth.
Satellite radio will increase from $1.0 billion in 2005 to $5.4 billion in 2010,
a 39.5 percent compound annual increase.
The overall radio market will total $29.9 billion in 2010, growing at a 7.4
percent compound annual rate from 2005.
Europe, Middle East, Africa (EMEA)

Digital radio and new multiplexes will enhance the appeal of radio but will
increase audience fragmentation. Growth will improve compared with
2005 but will not match the gains achieved during 2003–04.
Moderating fee increases will lead to slower growth in public radio license
fees.
The radio market in EMEA is projected to expand from $15.3 billion in

2005 to $18.0 billion in 2010, growing at a 3.3 percent compound annual
rate.
Public radio license fees—the largest component, at $8.8 billion in 2005

and 38 percent of the total—will be the slowest growing, increasing at a
1.3 percent compound annual rate to $9.3 billion in 2010.
Radio advertising will increase at a 5.7 percent compound annual rate

from $6.6 billion in 2005 to $8.7 billion in 2010.
Asia Pacific
New radio stations in India, a surging market in the People’s Republic of
China (PRC), and sustained growth in other countries will fuel radio
advertising.
Increased promotion will raise awareness of satellite radio and generate a

modest subscription market in India.
Public radio license fees will continue to post modest increases, limited by
slow household growth.
Radio—which consists of terrestrial advertising, public radio license fees,

and a small satellite radio subscription market—will increase at a 4.2
percent compound annual rate to $7.3 billion from $5.9 billion in 2005.
Radio advertising will expand by 5.7 percent compounded annually to

Radio
$4.5 billion in 2010 from $3.5 billion in 2005.
Satellite radio subscriptions will begin to gain traction, increasing from $1

million in 2005 to $43 million in 2010, a 112.2 percent compound annual
increase, albeit from a very small base.
Public radio license fees will expand at a 1.8 percent compound annual
rate to $2.7 billion in 2010 from $2.5 billion in 2005.
Challenges that remain…
Zero Differentiation amongst FM Radio channels

FM Radio companies are not allowed to own multiple frequencies in the same city,
which is singularly responsible for ‘zero differentiation’ amongst the FM radio
channels. This means that Companies do not have the freedom to experiment with
content and hence are forced to cater to the mass segment by playing ‘Hit Music’.
This thus excludes the space for niche players in the market, something which
global radio markets have been built on.
Unrealistic Content costs

With music as the only content, radio operators are required to pay royalty fee to the
Indian Performing Rights Society (IPRS) and Phonographic Performance (PPL).
While the per needle hour charges has been set at Rs 667, these are set irrespec-
tive of the city or town in which the music is played, or type of music or whether the
music from a latest album or an old album.
Simultaneous emergence of other infotainment media

Unlike in other global nations, reforms in India have happened too late and the
radio opportunity is coinciding with the emergence of alternative entertainment
media like podcasting, Internet, satellite radio, etc. Internet advertising, which is the
fastest growing segment of the Entertainment & Media industry in India, in particu-
lar, is expected to snatch a large portion of the market form radio.
Robust listenership-tracking system

One of the major obstacle for exponential growth in the radio sector is the absence
of a robust listenership measurement system. However, the first steps to it have
already been taken in the setting up of Radio Broadcasters Federation which is
working with TAM towards this goal.
Future Outlook
The sector has never had it so good. The Indian radio listener is going to have a
wide variety of radio channels to choose from. Newer technologies, more interest-
ing content, a cheaper and effective medium for advertisers…the potential of the
Indian radio sector today is simply enormous. For the listener, if music be the food of
life, play on.

99
At a glance
Current Size in 2006 Projected Size in 2011
Music Industry Rs.7.2 billion Rs.8.7 billion by 2011
Indian Animation Industry Rs.11 billion Rs.29 billion by 2011
Indian Gaming Industry Rs.2 billion Rs.28.5 billion by 2011
Internet Advertising Industry Rs.1.5 billion Rs.9.5 billion by 2011
Out-of-Home Advertising Industry Rs.10 billion Rs.21.5 billion by 2011
Live Entertainment Industry Rs.9 billion Rs.19 billion by 2011
6
Others
Others
Indian Music Industry

The music industry in India as well as globally continues to be plagued by piracy
leading to a fall in the price of CDs which subsequently leads to a decline in
revenues, as these falling prices are not compensated by increasing volumes. The
high cost of acquisition of film music and the low priority accorded to the sectoral
issues by the authorities have also contributed to the relative stagnation of the
music industry. Global majors have recent taken a number of revenue enhancing
and cost cutting steps that they expect will lead to a recovery of the global music
industry.
While CD sales are on the decline, it is ‘mobile music’ and digital distribution of
music that continue to be the key growth drivers of the industry so much so that it is
estimated that they will soon overtake the conventional music industry in terms of
revenues.
The trend of an increasing popularity and market for non-film music has continued
with several non-film albums and remixes released during the year. Music videos,
also, continue to grow in popularity especially as they are available on more
platforms other than music channels on television such as on the internet or on i-
pods. Despite this, the Indian music industry still has a much higher dependency on
the film industry than its global counterparts.
Others
Source: Indian Music Industry
Key Developments & Growth drivers
Aggressive anti-piracy measures in India

The Indian Music Industry has been indefatigable in its efforts to tackle the problem
of music piracy. The number of raids conducted and the number of seizures has
been steadily rising over the last few years. In 2006 the total number of raids was
over 250 with seizures of approx. 1.4 million CDs and over 2 million VCDs. The
setting up of “IP” (intellectual property) cells in the state police forces has
contributed significantly to reducing the spread of piracy. The Indian Music Industry
(IMI) reports, that more than 40% of all raids they conduct in Tamil Nadu and Kerala
were in conjunction with these IP cells. Other government initiatives such as the
Goonda Act in Tamil Nadu have also acted as detterents to piracy with music sales
receiving a 30% boost since the introduction of this law in 2003. The IMI has also
conducted several training programs 9more than 75) for various state police forces
instructing them on ways to detect intellectual property right infringements. The IMI
is now set to target internet service providers facilitating online infringement.
Despite these aggressive steps the level of piracy in the music industry is still very
high at 55% leading to losses of close to USD 53mn. A growing worry is the piracy
in mobile music which is estimated to drive the music industry over the next 5 years.

103
Others
It is estimated that around 500,000 ring tones are being illegally downloaded in
India everyday.
Source: Indian Music Industry
Digital music
It is estimated that this year India will become the second largest market in the world
to see digital (both online and mobile) music sales outpace physical sales. Mobile
music downloads in India are estimated to constitute 60 percent of all digital music
sales in the world for the coming two years. The mobile music market in India
consists of polyphonic ring tones, true tones, ring back tones and full track mobile
downloads. With CD sales continuing to decline, it is digital music that is set to drive
the music industry in the future.
While mobile music started off with the introduction of simple ringtones, it has been
fuelled by additional formats such as ring-back tones, caller ID tones, and full track
audio and video downloads. The mobile music market in India is estimated to be
showing 50 percent year-on-year growth. This is in large part due to the flourishing
mobile phone business India with cell phone ownership set to cross the 200 million
mark in 2007. Further, mobile service providers are discovering the importance of
mobile music as a value added service and the impetus of their marketing is shifting
from SMS related services to mobile music services. Most operators have launched
facilities like ‘Easy Music’ which allows users to download songs from mobile
phone outlets. Hutch recently introduced ‘fun cards’ which are scratch cards that
offer multiple caller and ring tones.
With the growth of the online music market, online marketing of music has also
become a key area for music companies.
However, the debate continues as to how does this benefit the India music
industry? With increased proliferation of digital music, it is estimated that the mobile
phone operators and digital music distributors walk away with the major share of
this revenue leaving the content providers in the Indian Music Industry with little.
Live Music Concerts
India has witnessed an increasing number of music concerts in recent years with
international artists like Roger Waters, Bryan Adams, Jethro Tull, Sting, Shaggy,
Mark Knofler and others gracing the Indian stage with others such as Iron Maiden
and Aerosmith set to do so in the coming year. There have also been several music
Others
festivals such as the jazz festival ‘One Tree Hill’ in Mumbai. These events as well as
the marketing surrounding them increases the general interest in music thus
benefiting the music industry.
Flourishing FM radio industry
The radio is the ideal low-cost marketing platform for music launches. Driven by the
launch of 250 new private FM radio stations as part of government’s second phase
expansion plans, the FM radio industry has been registering an extremely high
growth in the last two years. Within this year, all the 250-odd private FM stations will
be operational. Further, the Government has already initiated the processes for
bidding the balance 90-odd stations and strongly indicated the possible rollout of
another 700 FM stations in the third phase which will sustain the high growth rate of
the radio industry. The increase in number of radio stations would allow for the
marketing of a much more diverse array of music. The current growth of the FM
Radio industry is thus a significant boost to the music industry.
Remixes and non-film albums
Whilst the Indian music industry was once almost completely dependent on film
music, recent years have seen a growing market for non-film music. The new
platforms for listening to music such as mobile music have increased the scope of
Indian listeners thus creating a market for non-film music. Over the years, the shelf
life of new albums has shrunk considerably creating a demand for remixes of the
original soundtrack or album. A notable feature is the fusion of Hindi songs with
English songs and the inclusion of international artists in Indian remixes such as the
recent remix of Robbie Williams’ song “Rock DJ” featuring vocals by Asha Bhosle.
Music videos
The growing popularity of music videos has created an excellent platform for
marketing music. These videos are also available in digital form on mobile phones,
i-pods etc. thus increasing their popularity and reach.
Organised music retailing
Specialised music stores- such as Planet M, Rhythm House, Groove, Music World-
by music production companies, bundling offers with cinema tickets and other
promotional merchandise, tie-ups with coffee chains are some of the examples of
corporatisation of the distribution segment of the music industry. An organized retail
chain for music helps reduce piracy by increasing availability of legitimate content.
The Government allowing limited FDI in retail has provided a further filip to the
growth of organized music retailing in India.
Overseas potential
The increasing popularity of Hindi movies overseas amongst the growing Indian
Diaspora has created a parallel market for the Indian music industry
Compilation albums and singles
One of the major deterrents to a rise in sales of CDs and cassettes has been the
album concept. Consumers do not want to purchase an entire album just for one
song. Hence consumers prefer downloading digital music which allows them
flexibility to choose only the songs that they want for purchase. In order to boost

105
Others
physical sales the music industry is promoting the release of compilation albums
containing several hit songs and singles.
Corporitisation of film industry
The Indian music industry is highly dependent on the film industry with 40% of sales
coming from new Hindi film music. The corporatisation in the film industry would
have a beneficial effect on the music industry, as they jointly move towards a more
equitable revenue and risk-sharing model.
Industry Size
It is strongly believed that the growth of the music industry in the coming years will
be driven by distributing it over the digital medium rather than the current physical
medium. To harner this robust growth potential, the current music formats will have
to be digitized for appropriate content monetization. However, the pace of change
required for this purpose by the Indian music industry has been slower as
compared to the development in the rest of the world. Further, the beneficiaries of
the growth in digital music have largely been the mobile operators and the digital
music distributors. Thus, the actual growth for the Indian music industry has been
low and is expected so in the immediate future unless the current business models
are adapted suitably in favour of the Indian music industry.
Overall, the Indian music industry is projected to increase by 4 percent over the next
five years on a cumulative basis. This projected growth of 4 percent is the combined
growth of both physical music sales and share of revenues from digital music which
will be distributed via mobiles and online music sales.
Source : Industry Estimates & PwC Analysis.
Global spending on recorded music rose by 1.2 percent in 2005, its second consecutive increase following four years of
decline. Mobile music and licensed digital distribution services fueled the recovery while spending on music in physical
formats decreased in most territories except Latin America. Mobile music and licensed digital distribution are projected to
Others
drive spending during the next five years, steadily replacing the physical market. Spending is projected to expand from $37.1
billion in 2005 to $47.9 billion in 2010, a 5.2 percent compound annual increase.
Growth in digital distribution and mobile music will drive spending in each market, offsetting further declines in spending on
physical formats. Digital distribution will be fueled by rising broadband subscribership, the launch of new services, content
availability and attractive pricing. An expanding wireless universe, upgrades to next-generation wireless networks that can
support high-capacity applications such as music, and the migration of the market from ring tones to higherpriced ring tunes
will drive mobile music spending. In Asia Pacific, the world’s largest mobile music market, mobile music will surpass physical
Newspaper Publishing Market (US$ Milions)

Region 2001 2002 2003 2004 2005p 2006 2007 2008 2009 2010 2006-10
CAGER
United States 13,741 12,643 12,025 12,762 12,270 12,639 13,250 13,845 14,299 14,739
% Change -4.1 -8.0 -4.9 6.1 -3.9 3.0 4.8 4.5 3.3 3.1 3.7
EMEA 15,034 14,731 13,989 13,880 14,002 14,616 16,301 16,209 17,193 18,160
% Change 0.4 -2.0 -5.0 -0.8 0.9 4.4 4.7 5.9 6.1 5.6 5.3
Asia Pacific 8,222 8,048 7,764 8,120 8,739 9,447 10,287 11,048 11,537 12,002
% Change -4.7 -2.1 -3.5 4.6 7.6 6.1 8.9 7.4 4.8 3.7 6.6
Latin America 1,133 1,063 942 1,167 1,277 1,395 1,538 1,663 1,743 1,899
% Change -17.5 -6.2 -11.4 23.9 9.4 9.2 103 7.5 5.4 9.0 8.3
Canada 878 805 784 770 835 868 911 967 1,046 1,127
% Change -5.8 -8.3 -2.8 -1.8 8.4 4.0 5.0 6.1 8.2 7.7 6.2
Total 39,008 37,290 35,604 36,699 37,123 38,965 41,287 43,722 45,854 41,927
% change -3.0 -4.4 -4.8 3.4 1.2 5.0 6.0 5.9 4.9 4.5 5.2
distribution in 2010. Meanwhile, antipiracy initiatives are beginning to yield results, and we
expect incremental losses to piracy will moderate. However, physical formats will face
growing competition from licensed digital distribution and from distribution of full tracks to
wireless devices.
United States
• Attractive prices, ease of use, rising broadband penetration, and improved search
facilities will continue to drive digital distribution.
• New handsets and the rollout of next-generation wireless networks are facilitating the
distribution of actual songs to mobile devices, thereby propelling the mobile music
market.
•The Indian Entertainment
The overall and Media
physical market is beingIndustry
replaced -by
A Growth Story Unfolds
digitally distributed products.
107
Others
• The recorded music market will expand at a 3.7 percent compound annual
rate to $14.7 billion in 2010 from $12.3 billion in 2005.
• Growth will be fueled by rapidly expanding digital sales that will offset
declines in the physical market. Physical distribution will drop from $11.2
billion in 2005 to $8.5 billion in 2010, a 5.4 percent compound annual
decrease.
• Physical album sales—excluding singles and music videos—will fall to $8.0

billion in 2010 from $10.6 billion 2005, a 5.5 percent decline compounded
annually.
• The traditional physical singles market—supplanted by digital singles

downloads—will virtually disappear, dropping from $24 million in 2005 to
only $5 million in 2010.
• Music videos—distributed in the U.S. on DVD and VHS rather than CD—will
decline by 3.5 percent compounded annually to $503 million in 2010.
• Licensed digital distribution will rise from $653 million in 2005 to $4.9 billion
in 2010, a 49.5 percent compound annual increase. From a 5 percent share
in 2005, digital distribution will constitute 33 percent of recorded music
spending in 2010.
• Mobile music will advance at a 26.7 percent compound annual rate to $1.4
billion in 2010 from $422 million in 2005.
• Digital distribution and mobile music together will constitute 42 percent of

industry spending in 2010.
• The launch of new digital distribution services and growth in the number of
broadband Internet subscribers will fuel digital download spending.
• Efforts to combat piracy are beginning to yield meaningful results in 2006

and are slowing the steep erosion of the physical market, but competition
from licensed online and wireless services will continue to cut into spending
on physical music.
• Wireless telephone carriers are using music to drive customers to their 3G

networks, but approaching wireless saturation in many European countries
will moderate growth in mobile music spending.
• The downward trend in the recorded music market stabilized in 2005 as

large gains in mobile music and an emerging digital distribution market
offset continued declines in physical distribution. Overall spending will build
on the momentum generated in 2005 and expand at a 5.3 percent
compound annual rate to $18.2 billion in 2010.
• Physical distribution will continue to decline, but—helped by intensified

antipiracy efforts—at a more moderate, 3.1 percent rate compounded
annually, falling to $10.3 billion in 2010 from $12.1 billion in 2005.
• Licensed digital distribution will become a significant component of the

market, rising to $3.2 billion in 2010 from $154 million in 2005.
Others
• Mobile music will grow from $1.7 billion in 2005 to $4.6 billion in 2010, a
21.3 percent compound annual gain.
• Mobile music and digital distribution together will constitute 43 percent of

recorded music sales in 2010 compared with 14 percent in 2005.
Asia-Pacific
• Fueled by the shift to full-length songs, mobile music will become the
dominant component of the industry, surpassing physical distribution in
2010.
• Piracy will continue to cut into sales, but improved enforcement, combined
with an increasingly more sophisticated and enabled economy, will lessen
its incremental impact as antipiracy efforts begin to yield results.
• The licensed digital distribution market has been tiny to date but will begin to
grow rapidly as new services enter the market and as increased content
becomes available.
• Physical distribution will continue to decline during the forecast period,

falling by 4.7 percent compounded annually to $5.2 billion in 2010 from $6.6
billion in 2005.
• Mobile music will become the largest component of the market in 2010,
totaling $5.8 billion, up 22.8 percent on a compound annual basis from
2005.
• Digital distribution will grow to $1.0 billion by 2010 from $32 million in 2005,
a 99.1 percent compound annual gain.
• The market as a whole will expand from $8.7 billion in 2005 to $12.0 billion
by 2010, a 6.6 percent compounded annual increase.
Future Outlook
Growth in digital distribution and mobile music will drive consumer spending in the
future which will offset the declines in spending on physical formats. Digital
distribution in India will be fueled by the growth of mobile phones and the attractive
pricing related to music downloads. However, piracy will continue to dampen the
growth of the music industry, though anti-piracy initiatives will help losses to piracy
to be moderate. However, physical formats will face growing competition from
licensed digital distribution and from distribution of full tracks to wireless devices.
Future Outlook for India

• The music industry is set to be dominated by digital, especially mobile music
in the coming years. It is hence important for the music content providers to
negotiate better deals for themselves so that they can benefit from the boom
in this segment.
• The fight against piracy will continue with the IMI continuously increasing
their efforts. The International Intellectual Property Alliance has suggested
the creation of a national anti-piracy task force as a priority.
• FDI if allowed in retail in the music segment could help in creating an

organised retail system.

109
Others
Indian Animation Industry
Animation had an early start in India

when Dadasaheb Phalke made one of
the first stop-motion films animating
coins and matchsticks as early as 1914.
Subsequently the medium stagnated
until 1956 when the Films Division of
the Government of India setup the
Cartoon Film Unit.
Though the Indian animation was

initially slow to take-off, it has now
become a fast emerging sector with
high growth rates. Technological
advancements and the growing use of
animation in media and entertainment
has led to healthy growth rates in the
entertainment segment of the animation
industry, which makes up for 67 percent
of the total animation industry.
The Indian animation industry gener-

ates maximum revenue from
outsourcing, but there is a growing
demand for development of animation
content, for local markets.
Entertainment Segment
The Indian animation industry has three segments - Web designing, Entertainment
and E-Education. Within the Entertainment segment there are four segments – TV/
Broadcast, VFX, Movies and Direct to DVD.
Source: Nasscom
The entertainment segment accounts for 67 percent of the animation develop-

ment market in India, with a number of companies catering exclusively to this
segment. This share is expected to decrease marginally to 63 percent over the
forecast period, as newer segments of E-education and web-designing gain
traction but still remain the largest segment for animation driven by demand for
animated movies and television content.
Others
Share of Indian Entertainment Segment in Indian Animation Industry
Drop by 4 percent-
age points
Source : Nasscom
Key Developments & Growth Drivers
Growth in number and quality of training institutes.

Training institutes imparting training in animation are slowly improving their training
methodologies. It is expected that in future these institutes will create increasing
number o f production-ready people. The demand for training is increasing in the
market because of the skilled manpower in the industry. Some of the institutes
currently conducting courses in animation are Arena Multimedia, Maya Academy of
Advanced Cinematics, National Institute of Design, Takshaa and Whistling Woods
International. Although the current scenario as far as human capital development
for the animation industry is on the upswing, there is potential for further improve-
ment. Currently there is some Government involvement in training in the animation
industry such as with Toonz-Webel Academy and KINFRA, both run as a Public
Private Partnership. Indian training institutes are also starting to engage in collabo-
rations with foreign universities to improve the quality of their courses. Animaster
has a collaboration with Algonquin college Canada, while Whistling Woods and
Picasso animation have alliances with Seneca College of Applied Arts & technol-
ogy, Canada and Centennial College, Canada, respectively.
Mergers and Acquisitions

Like many other segments in the Entertainment & Media Industry, Animation too has
seen quite a few mergers and acquisitions in the past few years, some of which
have seen Indian companies buying overseas in order to obtain international
market knowledge and skills as well as leverage the marketing capability of the
overseas companies and target international clients. Some of the select deals in
this segment in 2006 include:
De Shaw’s investment in Crest Animation Studios of Rs. 400 million and in

its US subsidiary Rich Crest of Rs. 700 million
Maverick Productions bought a 51 percent stake in Mumbai based

Sankranti creations, a mid-sized animation firm.
Prime Focus acquired a 55 percent in the UK based media service

company, VTR group.
DQ Entertainment alongwith French Company CGI Films formed joint

venture with Onyx films, a France based Animation Company for production
of 10 high-end computer generated feature films with an initial investment
of Rs. 90 million.

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DQ Entertainment also acquired a 20 percent stake in the France based

TV production house, Method Films by investing Rs. 150 million
Color Chips acquired Militoon Animations, a 100 percent subsidiary of

European Animation major Millimages of France.
Waygate Capital and Biren Ghose formed a joint venture Kahani which
aims at acquiring a Chinese animation studio, venturing into satellite
distribution of animation series for kids and co-producing an animation
feature with Virgin Comics and filmmaker Shekhar Kapur
Continued growth of Animation Outsourcing

Of the total revenues generated by the Indian studios, approximately 70 percent
comes from undertaking outsourced work. India is a hot destination for animation
outsourcing mainly due to the cost advantage and talent offered by the country. It is
estimated that foreign production houses can save up to 60 percent of their costs by
outsourcing work to India. India also benefits from the advantage of having a high
number of professionals proficient in English which makes it a preferred destination
to other competing countries like Philippines and Taiwan. The Indian animation
industry has produced world-class animation content with many Indian studios able
to procure animation projects from big foreign production houses. In 2006, Indian
animation companies continued to contribute to several large-scale foreign films.
Frame Flow worked on the Hollywood movie ‘Ghost Rider’. Virgin Animation Ltd.
worked on Guy Ritchie’s ‘The Gamekeeper’, while Rhythm & Hue was involved in
the production of ‘The Chronicles of Narnia’.
The animation outsourcing market is set for healthy growth over the next few years
with several major film production houses such as Walt Disney, I Max, Sony
Pictures, Warner Bros., Paramount, 20th Century Fox etc. all moving towards
outsourcing of animated content.
The majority of the outsourcing work comes from off-shore, mainly from the U.S. and
Europe.
Source : Nasscom
Others
Growth of Global Animation Industry

Since, a large percentage of animation work done in India is for offshore clients, the
Indian Animation industry is greatly influenced by the global scenario. An upswing
in the amount of animated content produced worldwide results in production
houses having to outsource work which benefits the Indian animation industry. The
global animation industry is expected to grow at a healthy CAGR of 8.6 percent over
the next four years. 75 percent of this industry is comprised of the entertainment
segment.
Source : Nasscom
Co-productions
Several Indian studios are entering into co-production agreements, picking up a
stake in the projects they are executing, in order to ensure long term revenue
sustainability. Crest Animation, VCL, Maya Entertainment, Toonz Animation, UTV
Toons are some of the studios developing capabilities to focus more on co-produc-
tion projects.
Some of the big co-productions by the Indian animation companies in 2006 include:
Leading Indian animation studio Color Chips is working along with UK

Based Zoo group and Australian studio Albert Tross productions to create
‘Tales of Tross’ (2D animation, 26 x 22 minutes) in a part service, part co-
production deal.
Kerala based Toonz Animation India recently inked an MOU with Mumbai
based production house Impact Vision to c0-produce for the first time the
grand Indian epic ‘Mahabharat’ as an attractive combination of Animation,
Lyrics and Music in Hindi.
Virgin Comics, LLC and Kahani World, Inc. an independent animation

company based in Toronto, Canada have teamed up to co-produce
Secrets of the Seven Sounds, a full length animated feature for kids 7 and
up, inspired by the Ramayana.
Ittina Animation Studios has formed a co-production deal with U.K. based
Uli Meyer Animation to create ‘MonsterMania’, a fully animated computer
graphics feature film

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Pre-production and Post-production work execution

Currently most of the work outsourced to animation companies is in the production
stage of the animation value chain. This work is typically labour intensive and
requires less precision. The post-production stage is slowly emerging as a new
outsourcing segment. To a lesser extent, animation studios have been executing
some pre-production work too. Certain studios are executing end to end projects for
their clients. The increase in post and pre production work is fuelled largely by the
growing demand for local content.
Growing Demand from Domestic Market
Television
Presently, most of the animated content shown on Indian television is developed
overseas. The overseas content is localized for the Indian channels by dubbing the
animated serial in Hindi. Channels like Nickelodeon and Cartoon Network use this
format. However, with the increasing focus on the Indian market, companies have
started developing content and this is expected to increase. The ‘Mahabbharata’
T.V. show which is currently being produced by Toonz Animation and Impact Vision
is a good example of this. In 2006, Virgin Comics, LLC and Kahani World, Inc. an
independent animation company based in Toronto, Canada teamed up to co-
produce ‘Secrets of the Seven Sounds’, a full length animated feature for kids 7 and
up, inspired by the Ramayana. Other examples of animated television content
created especially for the Indian market are Vikram and Betaal, and Krishna by
Green Gold Animation, J Bole Toh Jadoo by Graphiti Multimedia etc.
Over the next four years the growth in domestic demand for TV/Broadcast animated
content is projected to grow at a CAGR of 49.5 percent as compared to a CAGR of
13 percent for the total demand, taking it from under 10 percent of the total market to
30 percent.
Source : Nasscom
Others
Movies
Indian mythology continues to be a major source of stories for domestic animated
films. Some of the major films produced or under production stage in 2006 were
‘Hanuman 2’, ‘Krishna’, ‘Geet Mahabharat’, ‘Ghatothkach ‘, ‘Shakuntala’, ‘Bheem’,
‘Lava Kusa’, etc. Color Chips Ltd. allocated approximately Rs. 45 million for the pre-
production of ‘Krishna’. Rayudu Vision has allocated around Rs. 225 million for
‘Lava Kusa’, while ‘Hanuman’ has been allocated approximately Rs. 100 million.
Over the next four years, the market for fully animated movies for the domestic
market is likely to match the offshore segment, growing from its current size of Rs.
650 million to Rs. 3,400 million.
Source : Nasscom
VFX
Apart from fully animated movies, several other Bollywood and other local produc-
tions make use of animated content. Prasad EFX has worked on the visual effects of
movies like Krrish, Vivah, Vettaiyadu, Villayaidu, Vattaram and others. Prime Focus
Ltd. has also executed visual effects sequences for films of the likes of Jaan-e-man.
Visual Computing Labs worked on BAFTA nominated ‘Rang De Basanti’ as well as
box-office blockbuster ‘Dhoom’. VFX is the one segment in which domestic demand
for animated content is much higher than demand from offshoring.
The domestic demand in this segment is expected to grow from the current Rs. 900
million to Rs. 2700 million at a CAGR of 32.5percent.
Source : Nasscom

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Direct-to-DVD Segment
Currently the domestic demand for animation content in this segment is absent with
all the work being done fore foreign production houses. However, the fast growth of
the Home DVD market in India is expected to result in Indian production houses
making movies directly for DVD to save costs. This will result in the development of
some domestic demand for animated content in the Direct-to-DVD segment.
The total size of the segment is Rs. 1,500 million and is expected to grow to Rs.
2,900 million by 2010, with domestic demand contributing minimally.
Source : Nasscom
Growing number of animation studios

The Indian animation industry
currently comprises of approxi-
mately 300 studios. The
industry employs a total of
12,000 professionals. Two of
the major road-blocks faced by
the animation industry are the
lack of experienced profession-
als, with only 1,000 out of the
12,000 employed estimated to
be experienced and well
trained artists, and the small
size of the animation studios.
Only 12 out of the 300 anima-
tion firms in the country are
large studios with more than
150 artists.
These challenges are currently

being met through growing
focus on training of profession-
als is animation and conver-
gence of firms leading to bigger
studios.
Others
Industry Size
The Entertainment segment of the Indian animation industry is currently estimated

to be worth Rs. 11 billion. This is expected to increase to Rs. 29 billion by 2011
growing at a CAGR of 22 percent over the next five years. A noticeable trend is the
increasing contribution of the domestic segment to the total market. The domestic
segment is expected to touch the Rs.10 billion mark by 2011.
Source : Nasscom
Currently the Television, broadcast segment contributes most to the total industry
and is worth Rs. 6 billion. The fully animated film segment will have the highest
CAGR of 33 percent growing from Rs. 1.9 billion in 2006 to Rs. 8 billion. The
percentage contribution of the VFX and Direct-to-DVD formats will also increase
slightly with VFX growing from Rs. 1.1 billion to Rs. 4.6 billion and Direct-to-DVD
growing from Rs. 1.5 billion to 4.3 billion.
Source : Nasscom

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Percentage share of various segments in Entertainment segment of Indian Anima-

tion Industry
Source : Nasscom
Gaming
Gaming, especially mobile gaming is becoming an important industry in India,

fuelled primarily by the growth of mobile phones. The online gaming segment is
also growing rapidly due to increased internet availability and usage. Growing
demand for domestic content is also adding impetus to the growth of the Gaming
industry which includes PC gaming, console gaming, mobile gaming and online
gaming.
Mobile Gaming
Mobile gaming accounted for approximately half of the Indian gaming market in
2006 and the same trend is expected to continue in the future, with only a marginal
decrease due to increase in the shares of console and online gaming.
Share of various segments in Indian Gaming Market
Source : Nasscom
Others
Mobile gaming is experiencing growth due to increasing demand from both the
domestic market and offshore outsourcing work. The market size is expected to
grow at a CAGR of 69.5 percent from 2006 to 2010.
Source : Nasscom
Most of the outsourced work done by Indian gaming companies in the mobile
gaming segment is in the Porting (making games compatible with handsets) and
Testing phases of the gaming value chain, with porting accounting for 75 percent of
the outsourced work. India offers a cost advantage of almost 100 percent to compa-
nies outsourcing their porting work and also offers the advantages of strong
technical and engineering capabilities. Several small companies like Small Device
Technologies, in India specialize in porting. With the arrival of 3-D mobile gaming,
India can expect more outsourced work in the graphic designing phase. Since
mobile games have relatively shorter development cycles, some companies like
Jump Games engage in end-to-end third party development services.
There is also a rise in domestic demand in the mobile gaming market buoyed by the
increasing number of mobile subscribers in India (growing at 53.7 percent CAGR
from 2002-2010), an increase in the number of game-capable handsets and high
focus of service providers on Value Added Services (VAS).
This growth of mobile gaming in India is helping developers move up the value
chain and adopt the role of publisher, creating their own IP in mobile games. This
segment is expected to see the emergence of B2C model and an increase in
mainstream advertisements.

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PC and Console Gaming

The PC segment is expected to witness a growth in value terms from Rs. 250 million
to Rs. 2 billion, but due to higher growth rates of other segments, its contribution to
the total gaming market is expected to fall by one percentage point in the same
period. The console game market is expected to witness an impressive CAGR of
75.2 percent over the next four years, increasing its share in the total gaming market
to 30%.
Source : Nasscom
The animation and artwork development phase of development account for one
third of the total development costs for PC and console games and it forms the
major chunk of the outsourced work in PC and Console segment and due to
introduction of next generation artwork assets this offers increasingly higher
potential to Indian companies. Certain Indian companies such as RelQ are focused
on offering testing activities for console games. Since the development cycle in this
segment is long and due to cultural differences between different geographical
regions, end-to-end game development is not outsourced to Indian companies.
Also core activities like programming are generally not outsourced.
A significant growth is expected in the domestic market for console games mainly
due to the launch of next generation consoles in India. The Xbox 360 was launched
by Microsoft in India in September 2006 and this expected to be followed up by the
launch of Sony’s Play station 3 in 2007. Industry estimates that the Indian market
will have an installed base of half a million consoles (only the legitimate sales i.e.
excluding the large grey market) by the end of 2007. This expected to be achieved
with the help of promotions and publicity for the consoles as well as making
available easy payment options to buy consoles.
After working on the Xbox 360 game Project Gotham Racing 3 in late 2005, Dhruva
Interactive were part of the development of Battlefield: Modern Combat in 2006,
also for the Xbox 360. They were also involved inn the development of the game
Asterix & Obelix XXL2: Mission Las Vegum, which is a PS 2 game.
After successfully undertaking projects in the development of games like

Tradewinds Legends and revamping the ‘Kingdom of Drakker’ game, Lakshya
Digital signed a huge deal in 2006, to work on the development of a console game
based on a top rate U.S. television series.
Others
Online gaming
Over the period 2006-2010, the online gaming development market is expected to
witness a CAGR of 82.7 percent and is estimated to reach Rs. 2.600 billion by 2010.
Online gaming accounted for 11 percent of the overall gaming development market
in India in 2006 and this share is expected to increase to 14 percent by 2010.
Source : Nasscom
This growth is primarily due to growth in consumer demand for online games and
entry of online publishers and portals, who are expected to source a larger percent-
age of games from India, as compared to 2006. In 2006, this percentage was
minimal; however, it is expected to increase to around 75percent by 2010 with the
improvement in quality of games developed in India.
Much of the growth will be domestically driven as in case of online gaming market,
only a small amount of work is currently being outsourced to India.
The demand for online games is growing largely due to the growth in internet
usage. The number of active internet users rose to 21 million in 2006, with a
significant percentage being in the college student or young adult category, which
is the major target audience for online games. Faster internet speeds and the
growing number of broadband connections (780,000 in 2006) are also providing
impetus to the online gaming market.
Many Indian publishers in the online segment have started their own gaming
portals, such as zapak.com (supported by Reliance, which plans to invest Rs. 4.5
billion in the gaming space over a period of 3 years) and games2win.com (focusing
on casual games). Moreover there are other upcoming portals such as Gametantra
by Dhruva Interactive, Kreeda (focusing on MMOG segment). These publishers
presently get most of their games developed abroad or they develop their games in-
house. However, with the improvement in quality of the Indian game developers
and the exisiting cost advantage of Indian developers, their share in online gaming
revenues from the domestic market will increase.
Another driver of the online gaming market in India is the new concept of ‘Game on
Demand’, which enables users to download games on demand along with the
security features, which prevents piracy. This concept has been adopted by
Indiagames in India.
The focus of Indian online gaming is on casual games for the Indian market such as
games based on cricket and the other popular concepts in India, followed by
MMOGs. Most of the upcoming portals plan to increase the market by introducing

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casual games, such as ‘Pool on the Net’ (a 3 D game) by Dhruva and ‘Kis-mat’ by
games2win, since the market is in a nascent stage currently. In the future, they plan
to introsuce more hardcore games once the gaming culture becomes prevalent in
India
Challenges
Low share of revenue

Indian mobile game developers presently get only a 20-30 percent share of the
revenue generated by the game, which is very low compared to the global market.
Developers in Japan get around 70-80 percent shares of revenue. With the emer-
gence of the B2C model, alternative payment mechanisms and rationalization of
revenue share, this situation is expected to improve in the future.
Fragmented industry
The Indian Gaming industry is made up mostly of small companies. Only 6-7 game
development companies have over 100 employees, with over a 100 out of the
estimated 150 developers having less than 50 employees. The total number of
employees in the industry is estimated to be around 2500. The fragmented nature of
the industry makes it difficult for the small developers to work on large projects,
especially end-to-end game development projects.
Industry Size
The Indian Gaming Industry is currently worth around Rs. 2 billion and is expected
to grow at a high CAGR of 68 percent to Rs. 28.5 billion in 2011. The online and
console segments have the highest growth rates. While the share in the total market
of mobile games and PC games will reduce, these two segments will also grow
steadily in absolute terms.
Source : Nasscom
Others
Internet Advertising
Internet advertising is a huge opportunity in India, a country which was an integral
part of the dot. com boom and continues to be one of the major IT forces in the
world. In 2006, it is estimated that 32 million people in India have used the internet
at some point in their lifetime while 21 million people are regular/ active users. This
figure is continuously growing thus creating a budding market for internet advertis-
ing.
Growth Drivers
Growing number of internet users
The number of PC literates in India has grown by 270% since 2000 creating a base
of 59 million potential internet users. Of these, 32 million people have used the
internet at one point of time or another. This figure has increased significantly
recently from only 16 million in 2004. Thus now every second PC user in India
(54%) has used the internet. 66% of these 32 million are active users of the internet.
Source: IAMAI (Surveys were not conducted in 2002 and 2005)
PC Literates: are defined as those who know how to use a PC. While this term
does not signify the extent of PC usage, it essentially means that a computer literate
is able to work on a PC without any assistance
Ever User: is someone who has used the internet at any point of time
Active User: is someone who has used the internet at least once in the last one
month
The number of users is expected to further grow in the coming years and industry
experts are looking at a figure of 50+ ever users and 35+ active users by 2008.
Source: IAMAI

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Growth in Internet Connections and Internet Subscribers

The number of internet subscribers is growing steadily and has increased from just
620,000 in 2000 to over 2.9 million in 2006. 76% of PC owners currently own an
internet connection.
Source: IAMAI
The growth in Internet subscribers especially in 2006, can be attributed to faster and
cheaper internet access driven by broadband technology.
Currently broadband connections account for 27% of total connections, but they are
growing rapidly and are expected to overtake dial-ups by 2009 and account for
75% of the connection by 2010.
Rapid growth in Broadband Connections
Source: IAMAI
Others
Trends in Internet Usage
Small towns and non-metros have been witnessing a

growing internet user base. They now account for
39% of the total number of internet users as compared
to 25%, just two years ago. This means that marketers
can target quite a broad geographic area through
internet marketing.
Source : IAMAI
A majority of the internet users are from the richer

segments of society. Hence internet advertising is
mainly restricted to higher end products.
Source : IAMAI
69% of internet users are between 18-35 years

of age. This young, technology savvy genera-
tion is accustomed to keeping in touch
instantaneously via instant messaging, sms
and email.
37% of the internet users are either school or

college students. This is a key segment for
adver tisers and can be targeted during school
holidays, screening of children’s films etc.
There has been an increase in internet usage

amongst Indian house wives. They now
account for 9% of total users. This creates a
new opportunities for advertisers to market
household goods. Source : IAMAI
The number of daily users has increased to 28%,

while another 18% using the internet 4-6 times a
week. Currently 87% of the users use the internet at
least once a week. This shows that the internet is
becoming an integral part of the lives of users thus
opening up huge opportunities for advertisers.
Source : IAMAI

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The number of users who use the internet exclusively

for chatting and e-mail purposes is gradually reducing
and users are expanding in to various other applica-
tions. The increase form 20% to 33% usage for
information and education purposes over the last five
years is indicative of the growing use of internet in
offices and educational institutes.E-commerce is yet to
kick off in India, but is slowly emerging as a new
segment. The success of E-commerce is vital to the
growth of Internet advertising as advertisers would be
more inclined to advertise for a product on the internet
if they had an opportunity to make an immediate sale.
Source : IAMAI
Internet users access the internet from more than one

point indicating that they use the medium for a
plethora of activities and not just for work.
Source : IAMAI
Others
Industry Size
Globally, internet advertising is emerging as one of the fastest growing segments of

the entertainment and media industry. The share of the internet, in the total ad
spend, is also steadily increasing, which can be seen from the table below:
The Indian Internet industry grew by 60% in 2006 to INR 1.6 billion. The industry
accounted for 1% of the total ad spend. This contribution is expected to increase in
the coming years, due to increasing internet usage and the industry is expected to
grow at a CAGR of 43% over the next five years to INR 9.5 billion in 2011.

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Out of Home Advertising

The Indian Out-Of-Home (OOH) advertising industry is being recognised as an
effective medium for executing creative ideas. The advertisers who now use it
understand that outdoor displays are much more than flat surfaces that boringly
convey your brand or idea.
Though the industry has taken some steps towards becoming more professional
and organised, a total lack of laws and regulations means that it is still largely
fragmented. Outdoor media sites in India are predominantly owned or operated by
small, local players and are typically, directly marketed by them to advertisers and
advertising agencies.
Key Developments and Growth Drivers
Technological Innovations
The most significant development in the out of home advertising industry in
the past few years has been the several technological advancements that
have taken place allowing advertisers a much broader scope for creativity
and getting their message across to the target audience.
One latest innovation is the convergence between billboards and mobile

phones wherein an sms alert would be received by a cell phone user
when the person passes a particular billboard. This technology is already
being used in the U.S. and is currently under development in Bangalore.
LED billboards are also driving the market. These are brighter than
conventional billboards and require less electricity and can be changed
from a central location.
GPRS and GPS are also being used in OOH advertising in buses and bus
shelters.
Currently, Plasma Technology, LED Technology, Holo-FX (a proprietary 3-D

holographic system), Ambient Projection systems, World Class Signage Designs
and materials and various other technologies are being used in the Indian OOH
industry. However the technology used is still not as state of the art as that used
globally mainly due to the unorganized nature of the industry and unwillingness of
advertisers to spend extravagant amounts on out of home advertising.
Client perception
Clients used to look at OOH simply as a support medium and something that served
as a reminder after print and television ads have done their job. Today, it is being
used increasingly as a client-building medium in addition to being a reminder call.
There are companies who focus their advertising budget on this medium. The best
example of this would be the launch of Reliance Mobile on OOH. The launch was
done simultaneously in 110 cities. It later went on to cover a total of 567 cities. 410
vendors were used to provide the various advertising products. A total of 12 lakh
square feet of printing space was covered. 1700 billboards were put up. 45 different
kinds of medium were used, that ranged from hoardings to glowsigns to building
wraps. In some places a 100-ft cutout of the handset was used.
Others
Increasing workforce
Another key factor contributing the growing importance of OOH advertising is that
the number of people who go out of the house has increased. More people go out
of the house to make a living and hence are targets for outdoor advertising. In
metros, mobility has significantly increased thus making OOH advertising very
important in the overall advertising plan.
Creative flexibility
The out-of-home or OOH medium allows for extended creativity and provides
images available from a distance. Current imaging technology provides diplays that
were not possible earlier by hand-painting thus allowing more scope for creativity. A
good example of using the technological advancements in the OOH medium to
come up with a creative campaign was the Hutch Music Campaign in Delhi and
Mumbai wherein advertising company Ogilvy created a rotating record on a
billboard thus giving life to a flat screen.
Impact medium
OOH displays are designed to grab people’s attention while they drive or walk.
OOH advertising is an effective way to remind the audience of the product being
advertised. This works as an impact medium for national advertisers as it reinforces
the impact of a particular brand. Amul has used this well by putting up billboards
featuring jokes and puns on current affairs at regular intervals.
Attracts local advertising

OOH advertising successfully focuses on the target audience. Due to the localized
nature of the medium, this medium turns out to be relatively cheaper and cost-
efficient for local advertisers than other broad-based regional or national media.
Organisation & Professionalism in the industry

The OOH market is highly fragmented and is dominated by small local players,
each owning/ operating very few properties. There are also no regulations or laws
governing the industry thus making it quite unprofessional and disorganised.
However off late, there have been some positive steps taken towards making this
industry more professional. Large groups such as the Times of India Group, Jagran
Group and STAR Network have entered the OOH space. This is in keeping with the
global trend of media giants owning media. Also there are plans for the establish-
ment of an industry body under the name of Indian Outdoor Advertising Association
(IOAA).
Concentrated in metros and large towns

A successful OOH vehicle requires a minimum critical mass of targeted audience.
As a result, this medium finds widespread acceptance for large advertisers in metro
cities and a few large towns. With increased incidence of advertising spends by
local advertisers, the attractiveness of OOH in smaller towns could increase.
Better infrastructure
Infrastructure is very important for the out-of-home advertising industry as world
class outdoor formats must go hand-in-hand with the cityscape and must form part
of the city. The impact of infrastructure development on the OOH advertising
industry can be gauged from the fact the Delhi metro alone earned an estimated
INR 30 crore in 2006 thus springing the growth rate of the city’s OOH industry to
20% (higher than Mumbai’s.)

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Favourable shares in total ad pie

Today, the Indian OOH market is estimated at INR 10 billion and accounts for 6
percent of the total ad spends in India. As shown by the two table, the OOH spends
in India compared favourably to the global ad spend in terms of percentage of the
total ad spend.
Others
Based on these figures, if the Indian OOH industry is able to maintain its present
share of 6 percent in the growing ad pie, it is likely to grow to around Rs. 21 billion
by 2011 from its current size of Rs. 10 billion.
Source : Industry estimates & PwC analysis

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Live Entertainment
The live entertainment industry (also known as the “events management industry”)
comprises a wide gamut of on-the-ground events that include corporate events,
felicitations and contests, festivals and personal events.

Portfolio of Events in 2006-07
Sub segment Genre Examples in 2006

Corporate Product launches/ Wills Lifestyle India
Product promotions Fashion Week 2006

Training/ meets S. Kumars launches
Annual parties Belmonte brand

Exhibitions/ trade fairs WNEC India Conference
Celebrity management
Facilitative/ Competitive Awards Filmfare Awards
Contests/talent searches MTV Awards
Beauty pageants Femina Miss India
Arts Film 37
th
IFFI 2006 Goa
Theatre Prithvi Theatre Festival
Music Bryan Adams, Roger
Dance Waters, Channel V and

other concerts.
Fever Nites (Dance
festival)
Sports Sporting events ICC Champions trohy
(individual and combined) 2006

ATP Kingfisher Mumbai
open
Festivals Government sponsored Goa Carnival
Festival of Kerala
Kumbh Mela
Rajasthan Desert
Festival
Personal Birthday parties Bombay Times Party
Wedding parties and
related functions
General parties
Others
As the market grows, event managers will have to extend their services to new
sectors and niche segments. While this industry in India is still evolving, Indian
event managers have clearly demonstrated their capabilities in successfully
managing several mega national and international events over the past few years.
However, issues like high entertainment taxes in certain states, lack of world-class
infrastructure and the unorganized nature of most event management companies,
continue to hinder growth in this segment of the industry.
Key growth drivers
Ability to move up the value-chain

The event management value chain comprises the following:
Execution Marketing Creativity Ownership
Most event management companies started off with expertise in executing events.
Over a period of time, some event management companies have contributed
significantly to marketing events including obtaining sponsorships, promoting the
event on various media, etc. The next step for these companies is creating new
event properties for their customers and thereby, offering a complete marketing
solution to their clients. Finally, event managers could become owners / part-
owners of such properties. This progression up the value-chain could result in
creating a strong, profitable and sustainable event management business.
Event Management integral to any marketing plan

Integration of live events into marketing plans is increasing at a rapid pace in India.
Indian marketers are using a combination of sales promotions and advertising for
marketing their products. Experiential marketing (largely through live entertainment
/events) has begun to emerge as a key element of the sales promotion spends of
marketers.
Growth of global presence in India’s corporate sector

As Indian companies globalize, new foreign brands enter India, and marketing
managers realize the increased effectiveness of focused brand launches and
promotions, the largest sub-segment - corporate events – is poised for tremendous
growth.
Increased share of organized sector in live entertainment

The live entertainment business has recently seen the entry of a number of orga-
nized players from the media and advertising agency space. Moreover, the size and
scale of an event is also increasing. As a result, the organized sector is likely to
capture a larger share of the overall live entertainment business.
Creation of New Categories

The live entertainment business could benefit from creation of event properties in
relatively new categories. Some of the relatively under-explored event categories,
which are experiencing or are likely to experience greater number of organized
events, are as follows :
Sports – Recent large events include Mumbai and Delhi Marathon, Chennai
Open (tennis), Kingfisher Mumbai Open (Tennis), Premier Hockey League,

133
Others
ONGC Cup (Football), ICC Champions Trophy 2006 (Cricket). Some important
sports event properties in the future include the 2010 Commonwealth Games
and the 2011 Cricket World Cup.
Festivals – Some Indian festivals, which are also associated with specific
destinations, are being used for creating strong live entertainment properties.
These include the Mumbai Festival, the Pushkar Fair, the Khajurao Dance
Festival and the Goa Carnival.
Reality Shows on Television – Event properties are being developed around

some television reality shows.
In addition creation of new properties such as property melas, industry specific

events and trade fairs will also drive growth in this segment.
Rationalization of Tax and Permissions Structures

The live entertainment business could benefit from an overall rationalization of tax
structures, removal of multiplicity of tax and simplification of the various permissions
required to organize events. The recent past has seen a reduction in the levels of
entertainment tax across different states. Concerted efforts by the industry in
working closely with the respective state governments, could enable rationalization
of the tax rates.
Challenges
Lack of Adequate Infrastructure for large format events

Live entertainment requires large open spaces or large auditoriums, with capacities
of over 2,000 people. India’s metros and large cities have a scarcity of such
facilities. Hospitality giants like the Taj, the Oberoi, etc. are among the key suppliers
of facilities, through their resorts, banquet halls and palaces. However, this infra-
structure is still limited from the point of view of large events.
Largely unorganized market

The organized live entertainment business has about 10-15 large players. The live
entertainment business has a large unorganized component, which comprises
approximately 70% of the industry size.
High level of taxes

The live entertainment industry has been historically plagued with high entertain-
ment taxes. Presently, different states levy different tax rates with most South Indian
states levying lower taxes as compared to the rest of the country However, the
recent past has seen a reduction in the levels of entertainment tax across different
states. Concerted efforts by the industry in working closely with the respective state
governments could enable rationalization of the tax rates.
Multiplicity of Taxes
In addition to entertainment tax, an event management company is also required to
pay service tax for services secured from ancillary companies supporting the event.
This leads to multiple taxation, which also needs to be rationalized.
Multiplicity of licenses and permissions

Licenses required for events are very state specific. For example, the State of
Maharashtra requires as many as 13-18 government and municipality permissions
Others
to hold a live event. These include permissions from the police departments (for use
of loudspeakers, traffic, etc.), customs (in the event of foreign equipment etc. being
used), local municipal corporation and central government, amongst others. This
makes the task of organizing events difficult, resulting in this business not achieving
its full potential.
Industry Size
The size of the organized live entertainment business is currently estimated to be

around INR 9.4 billion having grown by around 17% from the previous year. It is
estimated that the industry will grow at a CAGR of around 19% over the next five
years to approximately INR 22 billion by 2011. This growth is on mainly on account
of increased marketing budgets, and an increased focus on the importance of live
entertainment, as part of the promotional spends of corporates.

135

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Executive Summary

Entertainment and Media Industry today

As the Entertainment and Media Industry continues to evolve due to shifting

In a converged media world consumers increasingly call the shots. No longer is

Emergence of Lifestyle Media

A media marketplace supports a many-to-

Source: PricewaterhouseCoopers- The Rise of Lifestyle Media- Achieving Success

8 The Indian Entertainment and Media Industry - A Growth Story Unfolds

Opportunities and Challenges in the

Knowledge of consumer activity rather than exclusive ownership of content

Media marketplace provides a structure to capitalise on the opportunity.

Early movers in establishing media marketplaces will have a significant

Media marketplaces will be economically viable only if operational

The Indian Entertainment and Media Industry - A Growth Story Unfolds

experience and community management capabilities that work across multiple

Significant advancements in audience measurement technology are needed

Measurement standards will be crucial for advertising growth.

Most importantly, content providers and advertisers will be more

Lastly, Convergence will require increased collaboration between value

10 The Indian Entertainment and Media Industry - A Growth Story Unfolds

Convergence collapses previously distinct media distribution channels (for

Fundamentally, convergence affects the two-step process at the heart of any

Content owners are both facilitators and beneficiaries of convergence. They

Converged Media Value Chain

Content owners, aggregators, services providers

Source: PricewaterhouseCoopers- The Rise of Lifestyle Media- Achieving Success

The Indian Entertainment and Media Industry - A Growth Story Unfolds

Convergence Trends in India

Digital Cinema : Combination of three phases: digital production or post-

Ancillary revenues earned by film producers estimated to increase by

Mobile for money transfer – Indian Government has displayed positive

Enterprise Applications – Operators such as Bharti, Hutch etc. have

Mobile VAS Industry (excluding SMS) is thriving on Ringtones and

IPTV is set to pose a significant challenge to established cable and DTH

Mobile TV : It works by receiving a digital TV broadcast signal optimised for

Equipment vendor Nokia has tied up with a Film training institute

Source: PwC Theme Paper on Communications Convergence

12 The Indian Entertainment and Media Industry - A Growth Story Unfolds

Other diversification activities in 2006 include:

The Indian Entertainment and Media Industry - A Growth Story Unfolds

Adlabs alongwith Reliance Capital acquired a 21% stake in Prime Focus, a

Disney acquired a 15% stake in UTV, a local kids television production

Several Film Production Companies signed up leading artists to lock them

Increased Foreign Direct Investment (FDI) in the Industry

14 The Indian Entertainment and Media Industry - A Growth Story Unfolds

FOREIGN DIRECT INVESTMENT (FDI) INFLOWS IN THE E&M INDUSTRY- COUNTRY-WISE

1 Australia 0.00 0.00 0.00 0.00 4.98 0.11 4.98 0.11

Source: Department of Industrial Policy and Promotion, Government of India

The Indian Entertainment and Media Industry - A Growth Story Unfolds

Increased investment from Private Equity Funds

16 The Indian Entertainment and Media Industry - A Growth Story Unfolds

Some of the deals in the private equity space in 2006 include:

Warburg Pincus Dainik Bhaskar Newspaper 1,500 Growth

De Shaw Crest Animation Animation 400 Growth

De Shaw Rich Crest Holdings Inc. Animation 700 Early

De Shaw Amar Ujala Newspaper 1,170 Growth

T Rowe Price International Saregama Industries Ltd. Music 191 Mature

Norwest Venture Partners Sulekha.com Online/ Internet 450 Growth

Norwest Venture Partners Yatra.com Online/ Internet N.A. Early

Norwest Venture Partners Mobile2win.com Online/ Internet 675 Growth