Introduction

The Indian Media and Entertainment (M&E) industry is a sunrise sector for the economy and is making high growth strides. Proving its resilience to the world, the Indian M&E industry is on the cusp of a strongphase of growth, backed by rising consumer demand and improving advertising revenues. The industry has been largely driven by increasing digitization and higher internet usage over the last decade. Internet has almost become a mainstream media for entertainment for most of the people.

The Indian media and entertainment (M&E) industry is one of the fastest growing industries in the country. Its various segments—film, televisions, advertising, print media, music and digital among others—has witnessed tremendous growth in the last few years.

The digital medium has come to its own and is among the fastest growing segments. While the overall Indian media and entertainment industry witnessed muted growth of 11.8 per cent in 2013, digital advertising and gamingrecorded stellar growth rates of close to 40 per cent. "Digital grew upon a much larger base than last year," said Jehil Thakkar, Head (Media & Entertainment Practice), KPMG. Digital advertising last year comprised eight per cent of the overall advertising pie in 2013 compared to five per cent last year.

As per a FICCI–KPMG report, India’s M&E industry reaches 161 million TV households; 94,067 newspapers; about 2000 multiplexes; and 214 million internet users, of which 130 million access the Internet on heirt mobile phones

The television industry in India, which was estimated at Rs 41,720 crore (US$ 6.94 billion) in 2013, is projected to increase at a compound annual growth rate (CAGR) of 16.2 per cent over 2013–18, to reach Rs 88,500 crore (US$ 14.72 billion) by 2018.

With an estimated market size of US$ 5 billion, India is the 14th biggest advertising market globally, as per the latest edition of the Gunn Report. Digital advertising is also expected to witness a CAGR of 27.7 per cent by 2018.

India’s M&E industry will continue to bank on the digital area in future. With a growing internet user base of over 200 million, the industry’s potential to generate revenue is vast. In 2013, telecom companies started focusing on data as a way to generating revenue. Also, advertising agencies competed with each other to acquire the social media and digital domains. These developments suggest a bright future for the M&E industry in the country.

Market Dynamics

The Indian media & entertainment sector is expectedto grow at a Compound Annual Growth Rate (CAGR) of 13.9 per cent year-­­on-­­year to reach Rs 196,400 crore (US$ 29.11 billion)by 2019. India's Digital Advertising market has grown at a fast pace of 33 per cent annually between 2010 and 2015, while the spend as a percentage of total advertising increased to 13 per cent or nearly US$ 1 billion in 2015. In 2015, the overall Media and Entertainment industry grew 11.7 per cent over 2014. The largest segment, India’s television industry, is expected to maintain its strong growth momentum led by subscription revenues, representing a year-­­on-­­year growth of about 13.2 per cent to reach Rs 60,000 crore (US$ 8.89 billion) in 2015. Significantly, with the increased penetration of smartphones and expansion of 3G/4G network in India, the country is likely to see around nine billion mobile application (apps) downloads during 2015, which is five times more than 1.56 billion in 2012. This uptick in app-­­downloads is also expected to increase the revenue from paid apps to an estimated over US$ 241.16 million as against US$ 144.7 million in 2014. Industry estimates reveal that video games industry grew at a record 22.4 per cent in 2014 over 2013, wherein its net worth rose to US$ 392 million. The Indian animation industry was valued at US$ 748 million in 2014 and is forecasted to grow at 15-­­20 per cent per annum

The Foreign Direct Investment (FDI) inflows in the Information and Broadcasting (I&B) sector (including Print Media) in the period April 2000 – March 2016 stood at US$ 4.98 billion, as per data released by Department of Industrial Policy and Promotion (DIPP).

Recent development/Investments

• Vice Media LLC, a US-­­based digital media and broadcasting company, has entered into a Joint Venture (JV) agreement with the Times Group to open a new bureau and production hub in Mumbai, and launch digital, television, mobile and branded content in India

• Cineole’s, a Mexico-­­based multiplex chain, plans to add 160 more screens by investing around Rs 400 crore (US$ 59.29 million) in India in the next two years, thereby taking its total count to 400 screens in the country

• Dalian Wanda Group Co Ltd, world's largest cinema chain operator, has initiated talks with leading multiplex owners in India such as PVR Ltd and Carnival Cinemas Ltd, to acquire assets and enter the Indian market.

• US based investment firm Tiger Global Management LLC has acquired a 25 per cent stake in 'The Viral Fever' (TVF), an online video content creator, for US$ 10 million.

• Balaji Telefilms Limited (Balaji Telefilms) has raised Rs 150.08 crore (US$ 22.25 million) through allotment of equity shares on preferential basis to catapult the launch and growth of ALT Digital Media, a Business-­­to-­­ Consumer(B2C) digital content business segment of Balaji Group.

• Global video-­­streaming service Netflix has entered India as high-­­speed Internet connectivity is becoming rapidly available to Indians and nearly one-­­fifth of India's 1.3 billion populations are now online.

• Reliance Entertainment (owned by Mr Anil Ambani) and DreamWorks (ledby Mr Steven Spielberg), along with Participant Media (led by Mr Jeff Skoll) and Entertainment One (eOne) have formed a new film, television and digital content creation company called ‘Amblin Partners’, and have raised US$ 500 million in debt to develop and produce films

• Scoop Whoop, an Indian digital media and content start-­­up, has raised US$ 4 million from Kalaari Capital and plans to use the funds for expansion of its video production unit called Scoop Whoop Talkies.

• Mobvista International Technology Ltd, a global mobile advertising and game publishing company, plans to increase its investment in India by US$ 100 million over 2015-­­18, with a view to capture a bigger share of the booming e-­­commerce and ad-­­tech space

• The digital arm of New Delhi Television Limited (NDTV) namely NDTV Convergence, that owns and operates the NDTV group's digital properties, has signed a deal worth US$ 13-­­15 million with content discovery platform Taboola.

• Cineole’s India Private Limited, the Indian movie exhibition arm of Mexican chain Cineole’s, has plans to add 60 screens to take its total count to over 250 screens by the end of 2015.

• Turner International India has announced the expansion of its television bouquet for children with the launch of Toonami, a channel dedicated to animated action. This is the American company’s third children’s channel in India after Cartoon Network and POGO. Toonami joins an assortment of over 15 channels in the kids’ genre, which attracts close to Rs 500 crore (US$ 73.36 million) in advertising

• San Francisco-­­based Twitter Inc. plans to set up a Research and Design (R&D) center in Bengaluru to grow faster in emerging markets. This will be Twitter’s first such facility outside the US.

• STAR India, a unit of 21st Century Fox, acquired the entire broadcast business of MAA Television Network Limited for an undisclosed amount.

• Carnival Films Private Limited acquired Stargaze Entertainment Private Limited, a multiplex company, from a unit of Mukesh Ambani-­­controlled Network18 Media and Investments Limited.

Government Initiatives

The Government of India has supported Media and Entertainment industry’s growth by taking various initiatives such as digitizing the cable distribution sector to attract greater institutional funding, increasing FDI limitfrom 74 per cent to 100 per cent in cable and DTH satellite platforms, and granting industry status to the film industry for easy access to institutional finance.

The Union Cabinet has approved the model Shops and Establishment Act, aimed at generating employment prospects by allowing cinema halls, restaurants, shops, banks and other such workplaces to remain open round the clock. The Ministry of Information and Broadcasting (I&B) is working towards promoting ease of doing business, which will ensure less regulation and facilitate India to become the hub of media and entertainment industry.

The Government is planning to set up a National Centre of Excellence for media, which will provide training to the industry professionals, and has also decided to fund movies, including Bollywood and regional films, for participating in foreign film festivals.

The Union Budget 2016-­­17 has proposed basic custom duty exemption on newsprint. The customs duty on wood in chips or particles for manufacture of paper, paperboard and newsprint has been reduced to 0 percent from 5 percent.

Recently, the Indian and Canadian governments have signed an audio-­­visual co-­­production deal that would help producers from both countries to explore their technical, creative, artistic, financial and marketing resources for co- ­­ productions and, subsequently, lead to exchange of culture and art amongst them.

Furthermore, the Centre has given the go-­­ahead for licences to 45 new news and entertainment channels in India. Among those who have secured the licenses include established names such as Star, Sony, Viacom and Zee. Presently, there are 350 broadcasters which cater to 780 channels. “We want more competition and we wanted to open it up for the public. So far, we have approved the licences of 45 new channels. It’s a mix of both news and non-­­news channels,” said Mr Bimal Julka, Secretary, Ministry of I&B, Government of India.

The radio industry is expected to witness growth opportunities after the Phase III auction of 839 radio channels in 294 cities, expected to complete later this year. The Phase III auction, which started in July 2015, is expected to bring in an estimated US$ 390 million in revenue to the government. With over 800 frequencies up for auction in third-­­ and fourth-­­tier towns, radio is likely to match the reach of print.

The Union Cabinet chaired by the Prime Minister, Mr Narendra Modi, has given its approval for entering into an Audio-­­Visual Co-­­Production Agreement between India and the Republic of Korea (RoK) and to complete internal ratification procedure, to enable the agreement to come into force. Cooperation between the film industries of the two countries will not only promote export of Indian films but would also act as a catalyst towards creating awareness.

Road Ahead

The Indian Media and Entertainment industry is on an impressive growth path. The revenue from advertising is expected to grow at a CAGR of 13 per cent and will exceed Rs 81,600 crore (US$ 12.09 billion) in 2019 from Rs 41,400 crore (US$ 6.14 billion) in 2014. Internet access has surpassed the print segment as the second-­­largest segment contributing to the overall pie of M&E industry revenues

Television and print are expected to remain the largest contributors to the advertising pie in 2018 as well. Internet advertising will emerge as the third-­­largest segment, with a share of about 16 per cent in the total M&E advertising pie. The film segment which contributed Rs 12,640 crore (US$ 1.87 billion) in 2014 is projected to grow steadily at a CAGR of 10 per cent on the back of higher domestic and overseas box-­­office collections as well as cable and satellite rights

Digital advertising is expected to lead the CAGR with 30.2 per cent, followed by radio with 18.1 per cent. Animation and VFX, and television are expected to register a CAGR of 16.3 per cent and 15.5 per cent respectively, followed by growth rates of gaming (14.3 per cent), music (14.0 per cent), films (10 per cent) and OOH with 9.8 per cent expected CAGR. Within TV, subscription revenues are expected to be three times more than advertising revenues, by 2018. Growth in the regional reach of print and radio shall provide opportunities to further improve the advertisement revenue

Exchange Rate Used: INR 1 = US$ 0.0148 as on July 11, 2016

The Role of Media and Entertainment in ModernIdia

The media and entertainment panel at the 2011 Kellogg India Business Conference was the first panel of the day.At the conclusion of the panel, one of the panelists, Shivnath Thukral, Group President, Corporate Branding and Strategic Initiatives, Essar Group, tweeted that the, “hunger to know about Indian Media was immense.” There are no better words to describe the mood in the room during the most exciting panel of the day. The featured panelists, with impressive resumes, approached the panel in a candid manner and did not hold back to voice their opinions. Moderated by Professor Sree Srinivasan, Dean of Journalism at Columbia University, the panel’s key element was the use of new media such as Twitter and Facebook that he updated constantly with questions and inputs from the attendees and a global twitter audience. This tactic generated enthusiasm, excitement, and kicked up the level of interest and audience engagement in the panel a couple of notches.

Role of Media and Entertainment in Social Issues

The state of media and entertainment in India was debated during the panel. Bobby Ghosh, Time Magazine, Deputy International Editor, suggested a mixed picture of the state of media and entertainment.

He spoke of the flourishing Indian entertainment industry that was successful in addressing themes of social and political importance that other media has not been able to achieve as successfully. Social media is also gaining relevance and has been able to force main media to bring topics to national debates. The confluence of mainstream movies and social issues has resulted in a positive movement for critical issues like education in India. However, it is unfortunate that journalists are not as active as commercial cinema in bringing similar social issues to the forefront.

Infotainment and Bollywood

No discussion on Indian media and entertainment is complete without a discussion of Bollywood, the world’s largest film industry. The panel lamented the devolution of news into‘Infotainment’ and highlighted that the distinction between news and opinions had blurred only because the audience wanted it that way. No profit-­­driven media firm in India or even the US had found a way to drive revenues through a balanced reporting of facts. Despite vigorous debate on other issues, all panelists were in agreement that serious news doesn’t command much viewership and that Bollywood and Entertainment tend to dominate the headlines.

Afsar Zaidi, CEO of Carving Dreams (the top talent management company in India) brought some Bollywood sparkle to the conference, and talked about the evolution of a professional talent management sphere in India. Introduced as the Jerry Maguire of Indian entertainment, Afsar stated that in this industry one is successful by, “creating value, providing value and delivering value” to all stakeholders. Carving Dreams creates value in the entertainment and media space by enabling its talent to reach and stay at his/her peak as there is a small window of opportunity to touch a chord with the public. These services become increasingly important as billions of rupees are at stake in the Indian entertainment industry.

Competition and professionalism in Indian Journalism

Mitra Kalita, Senior Writer (Housing), Wall Street Journal led the launch of a startup online publication, Mint, in India. The competitive nature of the business was apparent to her when 7 different newspapers were deposited at her doorstep each morning. She knew that the pace of delivering news in India was much faster than she had been used to in the past. Here, “before you had the time to think about the concept, somebody else was already doing it.” However, it was not all doom and gloom for the crowded newspaper industry. Mitra shed light on the fact that while competition in journalism was severe in the metros, there is immense opportunity in the 2 and 3 tier cities that are hungry for legit and unbiased journalism.

The panelists expressed their dissatisfaction on the inadequacy of professionalism in journalism in India. Mitra worked on transforming journalism professionalism at Mint by establishing a “code of conduct” centered on ethical fairness and accuracy of information. Bobby Ghosh voiced his disappointment on the aggressive nature and narrow focus on the issues being written and the lack of efforts to take steps outside of the mainstream issues by journalists in India. The panel concluded that sheer scale and competition was making professional representation in media a necessity

Business of Media and Entertainment

The panel successfully balanced opportunities with realism. Shivnath Thukral, voiced his concern of an impending industry crisis if the media channels end up in a ‘me too” race and avoided differentiating themselves. The ingredient that made this panel very intriguing was the contrast in the highs and lows in this industry. For every stride this industry has taken to prove its mettle, a statistic and opinion was provided for the lack of impact of the same industry. For instance, there are as many as 6businesses specific news channels in India, however the average household savings in India has not increased. Overall, the panel ended on a high note by calling attention to the colossal business opportunity that is Indian media and entertainment. Shivnath Thukral stated, “India has 600 TV channels.Of these, 260 are news channels,” a statistic unmatched by any other nation in the world. This sheer number underscores the vast extent of media’s power in India. The question that played on everyone’s mind was, ‘how will this business focused audience harness the power and opportunity presented by the media and entertainment industry in India?’

2016 Entertainment & Media Industry Trends

A few recent, seemingly disparate, events illuminate the seismic shifts occurring in entertainment and media (E&M). When basketball superstar Kobe Bryant announced his retirement from the NBA on November 29, 2015, it occurred not on a major sports network but via social media and the Players’ Tribune, an athlete-­­centric digital publisher. That same month, CBS — which like NBC, FOX, and ABC is trying to grow viewership outside of traditional pay-­­tv — announced plans to revive Star Trek, one of its best-­­known franchises, exclusively on CBS All Access, its new subscription video on-­­demand service. Fox declared it will no longer track same-­­day TV ratings; rather, it will report on program viewership occurring after three and seven days, responding to the prevalence of on-­­demand viewing. Mobile operators like AT&T and Sprint responded to users’ surging demand for streaming video by emphasizing their unlimited wireless data offerings in their marketing and subscriber acquisition efforts. And some of the hottest-­­ selling gifts in the holiday season of 2015 were streaming video devices and smartphones

These developments foreshadow the E&M industry’s rapid transition to a direct-­­to-­­consumer world, where most content will remain the same — at first, anyway — but the packaging and distribution will change significantly. Specifically, the expansion of digital technology, manifested in more ubiquitous fixed and wireless network connectivity enabling growing numbers of connected devices and new routes to the user, is altering the industry’s structure, driving new ways to produce, distribute, and monetize content across its landscape. Creators can more readily pursue opportunities outside traditional studios and distribution channels. Consumers have far more content to choose from, available to them at any time, in any mix, through many more delivery options and devices. In every corner of E&M, empowered users are gravitating to brands, experiences, and platforms that are differentiated as much by the quality of their curation, customization, and convenience as by the quality of their content.

For E&M executives, the formula for success is shifting radically. No longer is it enough to develop content for eyeballs. Now, you must create a fan-­­centric business.

If you are an executive in E&M, your formula for success is already shifting radically. No longer is it enough to develop content solely to attract eyeballs, seeking the largest audiences possible for advertising and subscription revenues. Now, you must create fans: active users united by shared ideas, interests, and experiences, who will return every day to your brands and properties. As a fan-­­centric business, buoyed by the loyalty of passionate users, you will command substantial strategic advantages. You will know more about who your users are, what they want, and how to deliver what they want. This will enable you to monetize your products and experiences more effectively and more broadly. Current fans recruit new fans. Best of all, fans spend more per capita and are less likely to churn. In every E&M sector, disruptive companies are racing against incumbents to drive fan value — to be the first to deliver what users want, perhaps even before it is clear they want it. In 2016, the pace will accelerate. Any companies hoping to join the fray will need to be better than the competition at locking up fan engagement, loyalty, and spending, and at investing in efforts that drive fan value. Here’s a strategic look at the industry developments in which companies have the most at stake.