india media market to 2014 - kpmg - 2009
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In�the�interval,�but�ready�forthe�next�actFICCI-KPMG�Media�&�Entertainment�Industry�Report
© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swisscooperative. All rights reserved.
© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swisscooperative. All rights reserved.
© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swisscooperative. All rights reserved.
Welcome to the 2009 edition of the Indian M&E Industry, prepared jointly by FICCI and KPMG.
In many ways, the year 2008 was a testing time for the industry. With the global economic
slowdown affecting the advertising spends, sectors like TV, Print, Radio and Outdoor which depend
on advertising revenues were affected. Further the liquidity crunch and the consequent lack of
access to funds also affected the capacity expansion plans of players across various M&E
segments.
However, behind every adversity lies an opportunity. Media companies are under pressure to
change, innovate and re-examine their existing business models. Players need to draw upon new
capabilities to survive in this environment. In immediate future, media corporates are likely to focus
more operating margins, and assessing opportunities for consolidation, while building on core
strengths.
The year was also full of interesting developments. While the GEC space witnessed the entry of
new players, entry of new DTH players expanded the penetration of digital TV households. Print
media space also saw multiple new launches and expansion activities in the first half of the year.
Last year, was also the year where Indian players made their foray in the global arena, through big
ticket acquisitions and joint ventures.
The dynamics of the industry are changing and the media universe is increasingly becoming more
complex, specialized and fragmented. With companies increasingly leveraging cross media
platforms and trying to realize synergies, there is a need for paradigm shift and examining the
entire M&E industry from the point of view of common drivers, bottlenecks and challenges that
affects players across the sectors. We have attempted the same through our detailed and reader
friendly report.
FICCI takes this opportunity to thank KPMG, our knowledge partner, for devoting precious time and
resources to prepare this report at our behest. We also acknowledge the valuable inputs provided
by the members of the entertainment committee and all other associated agency and industry
players who have provided information and support in preparation of the report.
Foreword
Kunal DasguptaCo-ChairmanFICCI Entertainment Committee
Yash ChopraChairmanFICCI Entertainment Committee
The advent of New Year 2009, has heralded interesting yet challenging times for the Media and
Entertainment (M&E) industry as a whole. The Indian M&E industry—one of the fastest growing
industries in the country over the past couple of years—is no exception. While 2008 showed
growth for the industry on the whole, the last quarter of 2008 was impacted by the economic
slowdown and liquidity crunch, and this is estimated to continue in the current year.
The year gone by, was one packed with several significant developments for the Indian M&E
industry, including the entry of DTH players, growing acceptance of the digital TV distribution
technology, the success of many small budget movies, and the rising competition in the regional
space in print. Finally, it was the year when IPL proved that innovation in traditional formats
resulted in runaway success!
On the other hand, the after effects of the global economic turmoil are being felt in India as well,
and the economy is expected to grow at a significantly lower rate over the next 2 years (between 5
to 7 percent according to various estimates)1. Consequently, advertising spends, which constitute a
significant portion of the M&E industry’s revenues have got affected, which in turn has resulted in a
lower growth rate for the industry for the current year. Moreover, this trend is expected to continue
in 2009.
Given the industry’s changing landscape and emerging challenges, the focus of industry players too
is changing; with a strong emphasis on profitable growth in the current scenario. Hence, media
companies are increasingly concentrating on strengthening existing operations and assessing
options for growth through consolidation, while continuing to innovate.
Looking at the changing contours of the industry, there are certain drivers which are likely to have
an impact across sectors, and we have examined these drivers in detail in this report. Factors like
Narrowcasting, Regionalization, Internationalization, Organized Funding, Digitization and
Deregulation have become the “buzzwords” in the industry, and we have focused on how these
drivers are affecting various players across the M&E industry value chain.
The analyses and point of view presented in the report have been validated through extensive
discussions with industry players. We take this opportunity to thank the industry players for making
this endeavor possible.
Rajesh JainHead - Information, Communication &EntertainmentKPMG in India
Russell PareraChief Executive OfficerKPMG in India
1 IMF, Cushman and Wakefield Report 2009
“Our greatest glory is not in never falling but in rising every time we fall.”- Confucius
© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swisscooperative. All rights reserved.
© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swisscooperative. All rights reserved.
© 2009 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swisscooperative. All rights reserved.
1. Indian M&E Industry: The Growth Story 01
2. Sector Snapshots 19
3. Narrowcasting 53
4. Regionalization 81
5. Digitization 101
6. Regulatory & Tax Environment 123
7. Internationalization 137
8. Deal Activity and Investment Trends 159
9. Changing Landscape in Audit for M&E 169
10. Internal Processes of M&E Companies 175
11. Way Forward: Sector wise key action steps 193
Table of Contents
Indian M&E Industry:
The Growth Story
01
Indian M&E Industry: The Growth Story
The�Indian�M&E�industry�was�one�of�the�fastest�growing
sectors�in�the�country�in�recent�times,�riding�on�the�back�of
a�buoyant�economy�and�extremely�favorable�demographics.
A�young�Indian’s�higher�propensity�for�discretionary
spending�has�propelled�more�money�flow�in�the�leisure�and
entertainment�activities�giving�a�steady�impetus�to�the�M&E
industry.�By�embracing�multiple�platforms,�expanding�into
new�geographies,�and�exploiting�the�potential�of�under
penetrated�geographies,�Indian�promoters�have�built�a�scale,
where�they�can�now�attract�foreign�media�companies�and
investors.�New�content�and�delivery�formats�have�emerged
in�the�industry�with�new�media�gaining�an�increasingly
important�role�in�the�distribution�portfolio�of�the�players.��
Succeeding in turbulent times
However,�the�market�environment�has�become�increasingly
challenging�for�the�media�and�entertainment�sector,�on�the
back�of�economic�slowdown�and�the�consequent�slowdown
in�advertising�revenues,�especially�in�the�last�quarter�of
2008.�At�the�same�time,�for�an�individual�player,�increased
complexities�have�emerged�on�account�of�greater
fragmentation�of�audiences�across�media,�and�distribution
platforms,�and�greater�need�for�accountability�and
measurability�demanded�by�advertisers.�
Notwithstanding,�over�a�5�year�period,�we�project�a�12.5
percent�growth�for�the�sector�on�the�back�of�the�following
factors:
• Favorable�demographic�composition�and�strong�long
term�fundamentals�of�the�Indian�economy.�Unlike�other
countries,�Indian�economy�is�still�growing,�albeit�at�a
lower�rate�than�before.�Further,�70�percent�of�Indian
population�is�below�30�years�of�age1,�presenting�a�good
opportunity�for�marketers
• Advertising�to�GDP�ratio�in�India�is�still�at�a�low�of�0.47
percent,�vis�a�vis�developed�economies�like�the�U.S.,
where�it�is�as�high�as�0.9�percent2
• Media�penetration�in�the�country�remains�low.�For
instance,�there�are�still�359�million�people�in�India�who
can�read�and�understand�any�language�but�do�not�read
any�publication.3 This�represents�significant�opportunity
of�expanding�the�market.
At�the�same�time,�2009-10�spells�caution�for�industry
players.�The�business�imperatives�in�these�times�need�to
undergo�change�–�with�increased�focus�on�new�mantras
such�as�the�10�shortlisted�below:
• User segmentation to�provide�increased�options�for
targeted�messaging�through�niche�vehicles
• Innovation and�flexibility,�in�content,�formats,�delivery
mechanisms�and�marketing�to�reach�out�to�new
audiences�and�advertisers�in�multiple�ways�
• Focus�on�optimizing margins,�through�re-engineering
processes,�structures,�and�working�capital�management
• Leveraging IP to�help�ensure�value�maximization�from
existing�libraries
1�Census2�SSKI�Research,�KPMG�Analysis3�IRS�2007�R2
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
• Select market expansion given�the�trends�in
regionalization,�overseas�markets�and�digital�media
• Greater�accountability,�through�demonstration�of
effectiveness�of�media�properties
• Establish�standards�for�Corporate governance and
move�towards�greater�professionalization
• Differentiation of brand through�creation�of�strong
positioning,�as�required�in�competitive�times
• For�key�players,�market�growth�through�consolidation,�is
increasingly�an�option�under�consideration,�to�ensure
development�of�strategic�portfolios�with�multimedia
capabilities�and�synergies�and�finally…�
• Producing�salient content�as�always,�remains�key!�
Size and Growth of the Industry
The�Indian�M&E�industry�stood�at�INR�584�billion�in�2008,�a
growth�of�12.4�percent�over�the�previous�year.�Over�the
next�five�years,�the�industry�is�projected�to�grow�at�a�CAGR
of�12.5�percent�to�reach�the�size�of�INR�1052�billion�by�2013.
Source:�Group�M,�KPMG�Interviews,�KPMG�Analysis����Note:�For�the�purpose�of�sizing,�we�have�considered�the�following�M&E�sectors�–�Television,�Film,�Print,�Music,�Radio,�Outdoor,�Animation,�Gaming�andInternet�Advertising.�
Size�of�the�Indian�M&E�Industry
M&E Industry
(INR billion)2005 2006 2007 2008
CAGR %
(2006-08)2009 P 2010 P 2011 P 2012 P 2013 P
CAGR %
(2009-13)
Television 163.3 182.5 211.3 240.5 13.8% 262.7 295.6 341.7 399.1 472.6 14.5%
Print 117.1 138.6 160.4 172.6 13.8% 183.9 197.9 216.0 239.3 266.0 9.0%
Film 66.9 81.7 96.4 109.3 17.7% 109.2 117.5 130.9 151.3 168.6 9.1%
Radio 4.9 6.0 7.4 8.4 19.7% 9.2 10.3 11.9 13.9 16.3 14.2%
Music 8.3 7.8 7.4 7.3 -4.4% 7.5 8.0 8.7 9.5 10.7 8.0%
Animation 10.0 12.0 14.5 17.4 20.1% 20.0 23.3 27.8 33.1 39.4 17.8%
Gaming 2.2 3.0 4.4 6.5 44.6% 9.4 13.3 17.9 22.5 27.4 33.3%
InternetAdvertising 2.0 2.0 3.9 6.2 45.2% 8.4 11.0 13.7 17.1 21.4 27.9%
Outdoor 10.0 11.7 14.0 16.1 17.3% 17.7 19.8 22.4 25.5 29.3 12.8%
Total�Size 385 445 520 584 15.0% 628 697 791 911 1052 12.5%
4
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Advertising�revenues�is�one�of�the�main�drivers�behind�the�growth�of�the�Indian
M&E�industry.�Over�the�past�3�years,�it�is�estimated�to�have�grown�at�a�CAGR�of
17.1�percent.�Going�forward,�the�advertising�industry�is�expected�to�exhibit�a
lower�growth�rate�owing�to�the�turbulent�macro�economic�environment.�We
estimate�that�advertising�revenues�will�grow�at�a�CAGR�of�12.4�percent�over�the
next�5�years.
To�be�able�to�appreciate�the�changing�contours�of�this�industry,�it�is�better�to�take
a�closer�look�at�some�of�the�key�drivers�which�have�provided�the�necessary
growth�impetus�and�altered�the�industry�dynamics.
Source:�Group�M,�KPMG�Interviews,�KPMG�Analysis
Key�Growth�Drivers
Indian�Advertising�Industry
Advertising Industry
(INR billion)2005 2006 2007 2008E
CAGR %
(2006-08)2009 P 2010 P 2011 P 2012 P 2013 P
CAGR %
(2009-13)
Television 51.9 60.5 71.1 82.5 16.7% 88.2 97.1 112.6 131.7 155.5 13.5%
Print 69.4 84.9 100.2 108.4 16.0% 114.8 123.8 136.5 153.6 174.3 10.0%
Radio 4.9 6.0 7.4 8.4 19.7% 9.2 10.3 11.9 13.9 16.3 14.2%
Internet�Advertising 2.0 2.0 3.9 6.2 45.2% 8.4 11.0 13.7 17.1 21.4 27.9%
Outdoor 10.0 11.7 14.0 16.1 17.3% 17.7 19.8 22.4 25.5 29.3 12.8%
Total 138.1 165.0 196.6 221.6 17.1% 238.4 262.0 297.1 341.9 396.8 12.4%
5
Socio Economic Environment = Demographics + Economic
India’s�demographic�composition�ensures�that�it�continues�to�remain�an�attractive
market�for�various�products�and�services.�The�high�economic�growth�that�India
has�been�witnessing�in�the�past�few�years�has�resulted�in�a�transitioned
demography�with�increased�disposable�incomes.�India’s�increasing�GDP�and
consequent�rise�in�income�levels�across�urban,�semi-urban�and�rural�households,
is�leading�to�an�increase�in�population�of�consuming�class�in�India.�
However,�global�economic�recession�has�affected�the�Indian�economy�too,�with
the�GDP�growth�rate�expected�to�fall�in�near�future.
Even�at�these�rates,�India’s�growth�rate�is�still�estimated�to�be�higher�as
compared�to�other�regions�of�the�world.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source:�Marketing�Whitebook�2008
Changing�Structure�of�Income�Groups�in�India
Source:��World�Economic�Outlook�Update,�IMF,�January�2009
GDP�Growth�Forecast�of�Selected�Countries
Country 2007 2008 2009P 2010P
China 13.0% 9.0% 6.7% 8.0%
India 9.3% 7.3% 5.1% 6.5%
Japan 2.4% -0.3% -2.6% 0.6%
U.S. 2.0% 1.1% -1.6% 1.6%
Euro�Area 2.6% 1.0% -2.0% 0.2%
World�Output 5.2% 3.4% 0.5% 3.0%
Source:�World�Economic�Outlook�Update,�IMF,�January�2009
Percentage�growth�in�India’s�GDP
6
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
As�compared�to�some�of�the�developed�countries,�India�is�in�a�better�position
since�it�is�witnessing�not�a�recession�but�a�slowdown.�Yet�the�fall�in�GDP�is
expected�to�adversely�impact�household�and�per�capita�income.�As�a�result�of�2
percent�fall�in�GDP,�in�2008-09�the�reduction�in�household�income�maybe�to�tune
of�around�INR�3200�and�in�2009-10�it�is�predicted�to�reach�around�INR�7800.�The
loss�in�Per�Capita�Income�is�estimated�to�be�around�INR�650�and�INR�1500
respectively�in�2008-09�and�2009-10.4
With�the�high�economic�growth�over�the�past�few�years,�India’s�spending
patterns�have�been�evolving,�with�basic�necessities�such�as�food�and�apparel
continuing�to�decline�in�relative�importance,�and�categories�such�as
communications,�education�and�recreation�and�health�care�increasing�their�share.�
With�the�recent�economic�downturn,�it�is�expected�that�in�the�immediate�run,
some�amount�of�discretionary�expenditure�is�to�be�reallocated�and�there�is�likely
to�be�a�trading�down�of�consumer�expenditure.�Yet,�the�consumer�sentiments�are
expected�to�remain�positive�in�the�long�run.
Further�the�favorable�demographic�composition�augurs�well�for�India.�The�average
Indian�consumer�is�getting�younger.�Around�70�percent�of�the�country’s
population�is�below�35�years�of�age.5 More�than�50�percent�of�India’s�population
is�likely�to�be�under�the�age�of�30�even�in�2015.�
4�“India’s�GDP�growth�rate�to�go�down�by�2%”,�Economic�Times,�November�20085�2001�Census,�Euromonitor
India’s�Share�of�Wallet�shifting�towards�Discretionary�Items
Source:�Marketing�Whitebook�2008
Population�Distribution�across�various�age�groups
Source:�Euromonitor
7
The�emergence�of�India’s�young�middle�class�with�greater�earning�power�and
higher�disposable�incomes�signifies�good�potential�for�increased�marketing�and
advertising�spends�in�the�country.
Further,�the�potential�for�further�rise�in�advertising�spends�remains�strong.�In
Advertising�to�GDP�ratio,�India�is�still�far�behind�the�likes�of�the�U.S.�and�U.K.�and
even�behind�its�Asian�neighbor�China.
The�lower�ratio�for�India�as�compared�to�other�nations�is�at�least�in�part�due�to
lower�spending�power�per�capita�as�compared�to�other�nations.�However�the�per
capita�income�of�the�country�has�been�rising�steadily�over�the�past�few�years.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Size�of�Adversement�Industry�as�a�percentage�of�GDP
Source:�Credit�Suisse,�Indiastat
Per�capita�income�(USD) Growth�in�India’s�per�Capita�Income
Source:�SSKI�Research,�KPMG�Analysis
8
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
The�advertisement�spend�to�GDP�ratio�for�India,�has�also�therefore�shown�a�slow
but�distinct�growth�trend�in�the�past�few�years.�
These�important�macro�economic�indicators�have�driven�the�growth�of�the�M&E
industry�in�India�in�recent�times.�It�is�believed�that�the�fundamentals�of�the�Indian
economy�remain�strong,�and�the�recent�effects�of�the�global�economic�downturn
are�likely�to�have�a�short�term�impact�in�India.�In�the�long�run,�the�Indian
economy�is�expected�to�grow�steadily,�leading�to�continuous�rise�in�the
disposable�income�of�the�country.���
Narrowcasting=Entertainment ‘niche’ Style
Over�the�past�few�years,�the�media�industry�has�witnessed�the�emergence�of
new�niche�content�genres�across�sectors�–�emergence�of�reality�television,�rising
number�of�niche�TV�channels,�cross�over�content�in�music�and�films�as�well�as
large�number�of�magazine�launches�in�the�niche�genres.�
Narrowcasting�involves�segmentation�of�the�target�group�and�coming�out�with
content,�programmes�and�formats�that�appeals�best�to�that�target�group,�thereby
enabling�advertisers�to�reach�out�to�a�focus�audience.�
Going�forward,�the�trend�of�narrowcasting�is�only�expected�to�increase�further
and�the�industry�is�likely�to�see�more�audience�fragmentation�across�a�myriad�of
content�genres.�
The�year�2008�also�saw�cricket�emerging�as�a�mainstream�entertainment�genre
with�the�advent�of�Indian�Premier�League�(IPL),�which�had�an�impact�across�the
entire�Indian�M&E�industry.�IPL�was�positioned�as�a�complete�entertainment
package�to�the�audiences.�The�8�teams’�tournament,�which�started�with�a
glittering�opening�ceremony�in�Bangalore�on�April�18,�2008,�riveted�the�attention
of�the�family�audiences�for�the�next�one�and�a�half�months.�The�telecast�of�the
tournament’s�final�on�1st�June�garnered�an�average�TVR�of�9.86,�which�was
historic�for�a�domestic�tournament�and�this�was�reflected�in�the�advertising�rates
for�the�matches.�Sports�marketing,�which�is�still�at�a�nascent�stage�in�India,�is
expected�to�grow�rapidly�now�as�broadcasters,�encouraged�by�the�IPL�example,
start�aggressively�selling�cricket�and�other�sports�as�entertainment�packages.�
6�TAM�Media�Research
Advertisement�spends�as�percentage�of�GDP
Source:�Credit�Suisse,�KPMG�Analysis
9
Regionalization = Local content in Local Language
There�are�two�aspects�to�Regionalization.�The�first�refers�to�providing�content�in
regional�languages�and�the�second�aspect�refers�to�content�providers�catering�to
a�specific�geography�by�providing�locally�relevant�content�(local�content�pertaining
to�a�consumer’s�city,�district�or�state�and�may�or�may�not�be�in�the�form�of�one’s
vernacular�language).�
In�the�past,�growth�in�media�consumption�was�largely�coming�from�the�metros.
With�the�increase�in�the�spending�power�of�population�living�in�smaller�cities,
now�even�the�Tier�2�&�Tier�3�towns�are�emerging�as�important�growth�centers.
This�has�increased�the�demand�for�regional�content,�and�companies�are�now
increasing�focus�to�cater�to�this�demand.�Regional�content�is�emerging�as�one�of
the�most�significant�aspects�of�customization�of�content,�and�hence�is�emerging
as�a�significant�growth�driver�for�the�M&E�Industry.
Some�of�the�recent�trends�in�this�aspect�have�been:
• Established�players�in�the�English�newspapers�space�foraying�into�Hindi�and
vernacular�languages
• Growth�in�regional�channels�and�expansion�of�regional�channel�portfolio�both
by�regional�players�as�well�as�national�players
• Emergence�of�city�specific�channels
Regionalization�is�likely�to�continue�to�be�an�important�growth�driver�for�the
media�industry.�In�Print�Media,�regional�dailies�are�expected�to�grow�faster�than
the�national�dailies-consequently;�the�sector�may�witness�narrowing�down�of
advertising�rates�differences�between�the�two.�In�TV,�costs�associated�with
setting�up�of�regional�channels�remain�much�lower�than�that�of�national�channels
and�the�difference�between�the�advertisement�rates�is�coming�down,�making
setting�up�of�regional�channels�an�attractive�proposition�for�broadcasters.
Internationalization = Indian Players, Global Ambitions
Indian�players�are�no�longer�limiting�their�ambitions�within�India’s�national
borders.�Similar�to�their�global�counterparts,�who�have�been�increasing�their�scale
by�entering�the�emerging�markets,�M&E�companies�in�India�too�have�started�to
eye�international�markets�by�targeting�media�consumers�outside�India.
International�demand�for�Indian�content�has�been�there�for�some�time,�with�the
telecast�of�Indian�TV�channels�across�the�world,�and�Bollywood�releases�getting�a
significant�share�of�their�box�office�earnings�from�abroad.�With�the�large�NRI
population�base�of�about�25�million�to�serve,7 M&E�companies�continue�to�have
a�good�opportunity�to�further�increase�their�revenues�from�overseas�markets.�In
fact,�Indian�companies�are�also�now�looking�beyond�the�NRI�diaspora�and
attempting�to�target�the�local�audience�in�these�countries�as�well.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
7�Ministry�of�External�Affairs
10
Further,�with�two�significant�acquisitions�of�the�foreign�media�companies�in�the
current�year,�Indian�players�have�taken�the�first�steps�towards�establishing�their
presence�in�the�mainstream�global�market.�
Internationalization�of�Indian�media�can�be�characterized�in�three�different�ways-
• Production�of�content�for�global�audience-�both�the�NRI�diaspora�as�well�as
the�local�audience�in�foreign�countries.�Some�recent�examples�of�this�include:
• Launch�of�TV�channels�catering�to�local�audiences�in�other�countries-
NDTV�launched�NDTV�Arabia�and�NDTV�Malaysia
• Foreign�Editions�of�Indian�Publications-�Filmfare�magazine�launched�its
German�edition�in�February�2008
• Co-production�and�production�of�Hollywood�movies�by�Indian�players-
Both�UTV�and�Reliance�Entertainment�announced�their�Hollywood
ventures
• Providing�media�specific�services�to�other�countries-�Animation�sector�has
emerged�as�an�offshoring�hub�for�animation�production�work.�Film�Post
Production�is�also�showing�good�potential�in�this�regard
• Acquisition/Partnerships/Strategic�Alliances�with�media�properties�abroad.�Two
notable�developments�in�this�aspect�are:
• Bennett�Coleman�&�Co�Ltd�(BCCL)�acquiring�Britain’s�Virgin�Radio�in�June
20088
• Reliance�Big�Entertainment�forming�a�Joint�Venture�with�Steven
Spielberg’s�DreamWorks�studio�in�September�20089
As�Indian�media�companies�look�to�expand�their�footprint,�international
consumption�of�Indian�media�is�expected�to�be�an�important�growth�driver�for
the�industry.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
8�Company�Website,�Press�Reports�and�Releases9�Company�Website,�Press�Reports�and�Releases
11
Organized Funding = Capital + Corporatization
Earlier,�the�M&E�industry�was�reliant�largely�on�private�and�individual�financing�at
high�interest�rates.�However,�over�the�past�few�years,�the�M&E�industry�has
witnessed�increased�investments�in�the�form�of�Public�Issues,�Strategic�Stakes
and�Private�Equity�funding.�These�investments�have�come�from�both�the
established�industry�majors�as�well�as�private�equity�players,�from�the�global�as
well�as�Indian�market.�Most�of�the�organized�funding�from�the�global�players�has
been�concentrated�on�the�medium�of�television.
Some�such�deals�in�recent�times�include:
• In�January�2008,�NBC�Universal�picked�up�26�percent�stake�in�NDTV
Networks,�the�holding�company�for�NDTV's�entertainment�and�lifestyle
channels,�digital�media�and�other�interests�for�USD�150�million10
• In�February�2008,�Walt�Disney�Company�increased�its�stake�in�UTV�Software
Communications�from�14.9�percent�to�32.1�percent�by�investing�INR�8.05
billion.�In�addition�to�this,�Disney�also�picked�up�15�percent�stake�in�UTV
Global�Broadcasting�Ltd�(UGBL)�for�about�INR�1.19�billion11
• ICICI�Ventures,�Lehman�and�Goldman�Sachs�picked�up�around�15-20�percent
stake�in�Bangalore-based�outdoor�advertising�firm�Serve�&�Volley�(S&V)�for
INR�2.50�billion12
Gradually,�more�and�more�players�in�the�industry�are�availing�organized�sources�of
finance.�This�is�ushering�an�era�of�corporatization�and�professionalism.�Availability
of�funds�has�also�resulted�in�vertical�and�horizontal�integration�between�different
players�in�the�value�chain.�
Now,�with�the�economic�downturn�and�the�liquidity�crunch,�the�overall�availability
of�funding�might�take�a�hit�in�the�short�term�but�the�long�term�prospects
continue�to�be�positive.
This�availability�of�large�sources�of�organized�funding�is�an�indicator�of�how�the
Indian�M&E�industry�has�come�of�age.�However,�it�also�means�that�smaller
players�in�the�sector�might�find�it�increasingly�difficult�to�match�the�financial
power�of�the�big�players�who�now�have�an�abundance�of�capital.�This�is�likely�to
lead�to�consolidation�across�sectors�over�the�next�few�years.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
10�Indiatelevision11�Indiatelevision12�Indiatelevision
12
Digitization = Analog into Digital
Digitization,�the�process�of�converting�analog�information�into�digital�formats,�has
transformed�many�sectors�of�the�global�media�industry.�
Television,�Films�and�Music�industries�have�been�the�major�beneficiaries�of
digitization.�In�the�past�few�years,�the�Indian�media�industry�has�witnessed
advent�of�digital�TV�distribution�platforms�–�digital�cable,�DTH�and�IPTV,
digitization�of�Film,�Prints�and�music�libraries,�and�sale�of�online�and�mobile
music.
Digitization�of�television�provides�for�a�better�quality�of�viewing�experience�for�the
consumers�along�with�a�greater�bandwidth�of�channels,�and�at�the�same�time,
through�add-on�services,�provides�multiple�monetization�opportunities�for�the
distributor.�DTH�has�led�the�digitization�drive�in�India�so�far�with�an�expected�10
million�subscribers�by�the�end�of�200813.�Digitization�of�cable,�which�was�earlier
driven�only�by�the�mandatory�imposition�of�CAS�in�certain�parts�of�the�country,�is
now�happening�in�non-CAS�areas�as�well�as�cable�players�look�to�tackle�the
increasing�competition�coming�from�digital�distribution�mediums�like�DTH.
Commercial�IPTV�services�have�also�started�in�the�country�and�these�provide
another�digital�alternative�to�consumers.�As�these�digital�platforms�garner�a
greater�share�of�C&S�users�in�India,�it�is�likely�to�lead�to�a�more�organized�and
addressable�distribution�market�in�the�coming�years.�
Digitization�of�Film�Prints�is�having�a�major�impact�on�film�distribution,�enabling
greater�number�of�prints�to�be�distributed�at�a�low�cost�thus�shortening�the
theatrical�window,�and�hence�reducing�piracy.�Therefore,�theoretically,�a�movie
can�be�released�in�the�metros�and�smaller�cities�and�towns�simultaneously.�This
reduces�the�potential�losses�caused�due�to�delay�in�movie�releases.�
In�the�ailing�music�industry,�sales�of�digital�music�are�now�showing�potential�of
offsetting�the�impact�of�the�rapidly�declining�physical�unit�sales�and�pushing�the
industry�towards�a�healthier�growth�rate.�In�India,�mobile�music�takes�a�large
portion�of�the�digital�sales�pie,�and�within�mobile�music,�ringtone�sales�command
a�dominating�share.�Going�into�the�future�however,�full�song�downloads�on
mobiles�as�well�paid�song�downloads�over�the�internet�are�expected�to�also
become�important�revenue�streams�for�the�industry.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
13�KPMG�Analysis
13
Convergence = Entertainment + Information +Telecommunications
Convergence�refers�to�the�mode�of�creating�multiple�touch�points�for�the�end
consumer�by�delivering�the�same�content�via�different�media�platforms.�The
Indian�M&E�industry�is�witnessing�increasing�convergence�between
Entertainment,�Information�and�Telecommunications,�fueled�by�the�merging�of
functionalities�of�customer�end�terminal�devices�like�Television,�Personal
Computers,�and�Mobile�Phones�to�carry�similar�kind�of�content.�Convergence�is
changing�the�traditional�industry�structures,�existing�business�models�and
distribution�mechanisms.�
Some�of�the�trends�in�convergence�across�the�Indian�Media�and�Entertainment
space�have�been:
• Leading�broadcasting�houses�like�Star,�NDTV�and�UTV�creating�separate
divisions�focusing�on�new�media�distribution�channels
• Handset�makers�entering�into�tie-ups�with�music�content�sites�as�well�as
revenue�sharing�deals�with�telecom�and�music�companies�
• Print�publications�going�beyond�their�offline�formats�to�launch�electronic
versions�of�their�newspapers�and�magazines�and�making�their�classified
sections�like�jobs,�matrimonies�and�homes�available�online
• Introduction�of�mobile�and�online�ticket�booking�facility�for�cinemagoers�along
with�the�convenience�of�seat�selection�and�launch�of�ticketing�kiosks�in
multiplexes
• Film�Production�houses,�like�Rajshri�and�Eros�making�their�library�content
available�for�paid�online�downloads
Convergence�is�expected�to�transform�the�landscape�of�the�industry�by�enabling
players�to�leverage�cross�media�synergies�and�attract�a�whole�set�of�new
consumers.�Advent�of�3G�services�in�India,�may�further�aid�convergence,�by
making�the�mobile�phone�a�convenient�access�point�for�video�and�audio�media.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
14
Deregulation = Policy + Framework
Regulations�provide�uniform�framework�and�direction�to�the�market�in�order�to
guide�it�towards�being�fair�and�efficient.
In�India,�till�early�2000,�most�segments�of�the�industry�had�grown�to�their�present
structure�and�size�in�a�largely�unregulated�environment.�Such�growth�had�resulted
in�lack�of�consumer�choice�and�creation�of�last�mile�monopolies,�especially�in�the
TV�sector.�These�hard�ground�realities�forced�the�government�to�take�some
positive�steps�on�the�regulatory�front�which�provided�a�new�wave�of�growth�for
the�Indian�M&E�industry.
The�industry�continues�to�look�at�the�government�for�more�regulatory�reforms
that�may�bring�in�the�new�waves�of�growth.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Some Regulatory Actions that spurred industry growth
• Appointment�of�the�Telecom�Regulatory�Authority�of�India�(TRAI)�in�2004
as�a�regulator�for�the�television�industry�(with�its�scope�increased�to�cover
broadcasting�and�cable�services)
• Introduction�of�Conditional�Access�System�(CAS)�in�Television
• Granting�Industry�status�to�Indian�Film�Sector�in�2000�and�permitting�FDI
up�to�100�percent�in�film�related�activities
• Providing�Entertainment�Tax�exemptions�to�multiplexes
• Relaxation�of�foreign�investment�norms�in�print�media
• Roll�out�of�Phase�II�of�the�Radio�licensing�policy�in�2005,�with�a�number�of
reforms�including�a�more�rational�license�fee�structure
Source:�TRAI,�Press�Releases
15
Outcome: New Market Expansion
All�the�above�mentioned�growth�drivers�put�together�have�transformed�the
contours�of�the�industry.�Players�are�increasingly�coming�out�of�their�traditional
domains�and�establishing�their�presence�in�new�areas.�Further�players�from�other
sectors�such�as�IT�and�Telecom�are�also�entering�the�M&E�sector.�Competition
and�technological�innovations�have�increased,�and�as�a�result,�the�overall�M&E
market�is�growing.
Technology and Competition are expanding the overall market
Technology�has�played�a�key�role�in�influencing�the�entertainment�industry,�by
redefining�its�products,�cost�structure�and�distribution.�For�instance,�with�the
arrival�of�DTH,�distributors�are�in�a�position�to�offer�more�channels,�better�picture
quality�and�add-on�services�to�the�consumers.�Similarly,�digital�cinema�has
enabled�the�industry�players�to�release�the�film�prints�simultaneously�across�both
the�big�cities�and�smaller�towns,�thus�facilitating�wider�release�of�film�prints�and
improved�collections.�Technology�has�thus�transformed�both�the�content�delivery
as�well�as�viewership�experience,�besides�providing�new�growth�opportunities�to
the�players.
As�a�result�of�the�attractive�growth�opportunities,�the�industry�is�witnessing
increased�competition�from�the�hitherto�non�competitors,�such�as�players�from
the�Telecom�and�IT�sector.�At�the�same�time,�new�players�are�expanding�the
market�size�itself.�For�instance,�entry�of�new�players�in�the�DTH�space�has
expanded�the�DTH�market�overall.�Back�in�2005,�when�Dish�TV�was�the�sole�pay
DTH�service�provider,�total�number�of�pay�DTH�subscribers�was�0.6�million.�After
the�entry�of�Tata�Sky,�number�of�pay�DTH�subscribers�more�than�tripled�to�reach
2.6�million�by�end�2006.14 At�present,�in�a�five�operator�scenario,�total�number�of
pay�DTH�subscribers�is�estimated�to�have�reached�10�million�households�by�the
end�of�2008.15 Similarly,�entry�of�new�players�in�Hindi�GEC�segment�has�resulted
in�increasing�the�Gross�Rating�Points�(GRPs)�for�the�segment.�In�a�six�player
scenario,�the�Hindi�GEC�segment�garnered�876�weekly�GRPs�during�November
2007.�About�a�year�later,�with�three�new�entrants�in�the�category,�weekly�GRPs
for�the�month�of�October�2008�stood�at�1135�points-�an�increase�of�30�percent.16
Existing players are expanding across segments
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
14�Annual�Reports,�Press�Releases15�KPMG�Analysis16�SSKI�Research
16
Faced�with�increased�competition�from�new�entrants,�businesses�are�enhancing
their�scale�of�operations�by�expanding�their�footprints�across�sectors�and
geographies.�Customer�retention�is�also�an�imperative�and�companies�are
improving�upon�their�product�features,�service�offerings�and�value�propositions.
These�activities�are�further�enhancing�the�competition�in�the�market�place,�as�a
result�of�which�an�array�of�media�content,�consumption�and�delivery�choices�are
being�presented�to�the�Indian�consumer.�
A�brief�snapshot�of�some�of�the�New�Market�Expansion�activities�of�the�industry
players�during�the�last�two�years�is�represented�below.�Market�is�defined�by�the
geographical�spread�of�a�player,�while�product�is�determined�by�the�portfolio
offering�of�the�player.
Increasing power of Media Aggregators
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
TV 18 enters Regional NewsBroadcasting with IBN - Lokmat
UTV Motion Pictures to produceHollywood Movies
Radio City launches in Ahmednagar
Times Of India enters Chennai
Sun TV Forays into Film Production
TV 18 forays into Print with the acquisition of
Infomedia
HT Media launches a job portal - shine.com
Reliance Big Entertainment enters TV distribution
Dish TV offers free set up boxes to its consumers
Mail Today introduces its ‘First’ Supplement - Mail
Today Property
‘Andhra Jyoti’ becomes the first language
newspaper in Andhra Pradesh to go all color
Miditech to start its
TV Broadcasting channel
NDTV expands into GEC segment with
‘NDTV imagine’
TV 18 forays into GEC segment with the launch of
‘Colors’ channel
Dainik Bhaskar launches its
Hindi Financial Newspaperer
Existing New
Product
Exis
tin
g
New
Mark
et
Source:�Company�Websites,�Press�Reports�and�Releases
17
The�Indian�Media�Industry,�especially�the�TV�and�Film�sectors,�is�seeing�an
increase�in�the�power�of�content�aggregators/distributors�as�distribution�gets
more�organized.�For�instance,�in�TV�distribution�the�bargaining�power�of�MSOs
and�DTH�players�is�high�and�they�command�high�bandwidth�fees�for�carrying
channels�in�their�networks.�Similarly�in�Films,�aggressive�market�expansion�plans
by�established�players�like�PVR,�Adlabs�etc.�is�leading�to�increase�in�the�market
power�of�organized�exhibitors�and�they�are�in�a�position�to�bargain�for�better
revenue�sharing�terms�with�the�distributors.�
With�increased�marketing�spends,�ambitious�growth�plans�and�by�virtue�of
access�to�the�end�consumers,�the�power�of�these�players�may�continue�to
increase�in�the�near�future.
Going�forward,�media�players�are�likely�to�increasingly�look�to�leverage�their
content�across�different�media�platforms,�leading�to�the�emergence�of�more
media�conglomerates.�As�the�same�time,�competition�is�set�to�intensify�further
and�the�rapid�rise�in�the�number�of�players,�may�eventually�lead�to�consolidation
in�most�of�the�sectors.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
18
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Sectorwise
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Snapshots
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
02
Sectorwise Snapshot
Television
The�TV�industry�is�one�of�the�largest�chunk�of�the�Indian
M&E�industry�and�has�transformed�completely�in�the�last
few�years.�The�number�of�channels�beamed�on�the�TV
screen�of�C&S�viewers�in�India�has�exploded�to�over�450
now�from�about�120�in�2003�.�There�has�been�rapid�growth
in�the�number�of�channels�in�news�and�other�niche
segments�such�as�lifestyle,�kids�and�infotainment�apart�from
GECs.
In�TV�distribution,�digital�mediums�have�emerged�in�the�form
of�DTH,�Digital�Cable�and�IPTV.�Some�of�India’s�biggest
corporate�houses�have�invested�in�the�DTH�sector.�The
subscriber�base�has�seen�rapid�growth�and�we�estimate�the
pay�DTH�market�to�have�reached�10�mn�subscribers�by�end
of�2008.�The�implementation�of�CAS�in�selected�zones�of
Delhi,�Mumbai�and�Kolkata�from�2007�gave�an�important
push�towards�digitization�of�cable.�By�September�2008,
there�were�717,722�set�top�boxes�installed�in�the�mandatory
CAS�regions�of�Delhi,�Mumbai,�Kolkata�and�Chennai2.�Even
in�areas�where�CAS�is�not�mandatory,�the�MSOs�have
already�begun�to�digitize�their�cable�networks.�IPTV,�another
digital�distribution�medium,�is�part�of�the�growth�plans�of
most�major�Indian�telecoms�and�with�commercial�IPTV
services�launched�in�Delhi�and�Mumbai�in�2008,�IPTV�has
made�a�small�beginning.
In�TV�advertising,�the�growth�up�to�now,�was�driven�to�a
significant�extent�by�increasing�advertising�spends�from�fast
growing�sectors�such�as�telecom�(although,�in�the�wake�of
the�recent�economic�downturn,�even�the�fast�growing
sectors�are�cutting�down�on�advertisement�spends)
On�the�whole,�the�television�sector�is�estimated�to�have
grown�at�a�CAGR�of�around�13.8�percent�over�from�2006�to
08.�Within�this,�advertising�has�grown�with�an�estimated
CAGR�of�16.7�percent�while�subscription�has�grown�at�an
estimated�CAGR�of�12.4�percent.
By�the�end�of�2008,�the�industry�is�estimated�to�have
reached�a�size�of�INR�241�bn,�a�growth�of�13.8�percent�over
2007.�Out�of�this,�subscription�is�estimated�to�contribute
around�INR�158�bn�to�the�industry�size,�while�advertising
revenues�are�estimated�at�around�INR�82�bn.
1�Indiastat,�KPMG�Analysis2�TRAI�Indian�Telecom�Services�Performance�Indicators�(July-Sep�2008)
Top�10�TV�advertising�sectors�by�volumes
Sector % share
Food�&�Beverages 13
Personal�Care�&�Hygiene 9
Services 6
Telecom/ISPs 6
Hair�Care 5
Banking�and�Finance 4
Auto 4
Personal�Accessories 4
Personal�Healthcare 3
Household�Products 3
Source:�TAM�AdEx�(Data�for�2008)
The�major�pain�point�for�the�broadcasters�in�recent�times
has�been�the�rapidly�growing�carriage�fee�market�which�shot
up�from�about�INR�6�bn�in�2007�to�INR�12�bn�in�2008�as
channels�increasingly�competed�for�premium�placements3.
However,�the�carriage�fee�market�is�expected�to�either
stabilize�or�drop�from�here�on.
Over�the�next�five�years�the�growth�is�likely�to�be�driven�by
a�variety�of�factors.�Digitization�of�distribution�is�expected�to
happen�at�a�rapid�pace�and�digital�distribution�platforms�are
likely�to�demand�higher�ARPUs.�The�DTH�subscriber�base�is
estimated�to�grow�to�around�28�mn�by�2013,�powered�by
the�entry�of�even�more�new�players�which�may�make�the
market�intensely�competitive�and�force�players�to�market
themselves�aggressively�and�keep�the�price�points�low.
At�the�same�time�digitization�of�cable�is�likely�to�pick�up
pace,�independent�of�whether�CAS�is�implemented�on�a
wider�scale�or�not�(although,�making�CAS�mandatory�in�55
big�cities,�as�has�been�recommended�by�TRAI,�could�further
quicken�the�process).�We�think�it�is�possible�that�about�35
mn�cable�households�could�be�digital�by�2013.�
IPTV�is�expected�to�take�some�time�to�catch�up�as
infrastructure�is�built�to�support�it�on�a�wider�scale.�It�is
estimated�to�add�4�mn�subscribers�by�2013.�
Pay�DTH�subscriber�base
Cable�households�in�India
Source:�KPMG�Interviews,�KPMG�Analysis
Source:�KPMG�Interviews,�KPMG�Analysis
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
3�KPMG�Research,�KPMG�Interviews
22
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
With�digitization�of�distribution,�bandwidth�constraints�might�get�removed,�and
the�rapid�growth�in�the�number�of�channels�is�likely�to�continue.�Thus�from�the
consumers’�point�of�view,�apart�from�better�picture�and�sound�quality,�digitization
may�also�lead�to�an�increasing�choice�in�channels�across�both�mass
entertainment�and�niche�categories.�These�factors�are�likely�to�push�up�the
average�TV�viewership�time.�The�impact�in�this�regard�is�already�visible.�The
average�daily�time�spent�by�viewers�in�watching�television�has�gone�up.
At�the�same�time,�TV�and�C&S�penetrations�is�also�likely�to�continue�to�grow�at�a
steady�rate.�By�2013,�the�total�number�of�TV�owning�total�households�in�India�is
estimated�to�be�about�149�mn�and�around�85�percent�of�these�are�estimated�to
be�C&S�subscribers.
IPTV�Subscribers
Source:�KPMG�Interviews,�KPMG�Analysis
Average�time�spent�watching�television
Source:�TAM�Peoplemeter�System;�TG:�CS�4+�years;�Markets:�All�India
23
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Driven�by�rising�ARPUs�(from�digital�distribution)�and�increasing�C&S�penetration,
subscription�revenues�are�likely�to�grow�at�a�higher�CAGR�of�14.9�percent�over
2009-13�compared�to�12.4�percent�over�2006-08.
On�the�other�hand,�due�to�the�slowdown�in�the�economy�and�the�consequent�cut
down�on�advertisement�spends�by�companies�across�sectors,�advertising
revenue�is�likely�to�suffer�especially�over�the�next�2�fiscals.�Growth�in�advertising
is�estimated�to�be�lower�at�13.5�percent�CAGR�in�2009-13�compared�to�16.7
percent�in�2006-08.�
On�the�whole,�the�television�industry�is�projected�to�grow�at�the�rate�of�14.5
percent�over�2009-13�and�reach�a�size�of�INR�473�bn�by�2013.�
Distribution�of�TV�Households
Source:�KPMG�Analysis
24
“I believe there is a tremendous opportunity to provide the Indian TV viewersground breaking services high fibre capacity coupled with minimal investment.The Indian customer is going to use fibre for a lot of different things, fibre and STBis going to make that possible.”
J S Kohli, Managing Director & CEO, Digicable Networks Pvt. Ltd.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Putting�Things�in�Perspective
Television�Sector:�Growth�Drivers
• Rapid�growth�in�the�number�of�digitized�households• Steady�increase�in�ARPUs�realized�through�digital
distribution�platforms• Growth�in�the�number�of�channels,�especially�in�niche
and�regional�categories• Growth�in�the�number�of�TV�and�C&S�households�
Television�Sector:�Challenges
• Under�declaration�of�subscribers�by�cable�operatorsresulting�in�large�subscription�revenue�losses�for�thebroadcasters
• Lower�growth�in�TV�advertising�due�to�the�economyslowdown�and�the�consequent�cut�in�advertisementspends
• Delay�in�implementation�of�mandatory�CAS�in�other�partsof�the�country,�inhibiting�the�growth�of�digital�cable�
• Increasing�content�costs�for�TV�channels,�as�thebroadcasting�space�gets�overcrowded
• Intense�competition�and�inability�of�DTH�companies�toincrease�ARPUs�thus�affecting�their�bottomlines
• Shift�of�advertisng�share�from�major�sectors�like�TV�andPrint�towards�alternate�fast�growing�sectors�like�radioand�internet
Size�of�Indian�Television�Industry
TV Industry
(INR bn)2005 2006 2007 2008E
CAGR
(2006-08)2009p 2010p 2011p 2012p 2013p
CAGR
(2009-13)
SubscriptionRevenues� 111.4 122.0 140.2 158.1 12.4% 174.5 198.5 229.1 267.4 317.1 14.9%
AdvertisementRevenues� 51.9 60.5 71.1 82.5 16.7% 88.2 97.1 112.6 131.7 155.5 13.5%
Total�IndustrySize� 163.3 182.5 211.3 240.5 13.8% 262.7 295.6 341.7 399.1 472.6 14.5%
Source:�Group�M,�KPMG�Interviews,�KPMG�Analysis
25
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Filmed Entertainment
Filmed�Entertainment�is�the�most�pervasive�and�visible�segment�within�the
industry�since�it�is�the�primary�content�source�for�Music�and�Radio�besides�being
a�major�contributor�to�the�TV�segment.�Hence�its�impact�is�not�restricted�to�one
sector�alone.
India’s�Film�industry�is�one�of�the�largest�in�the�world�with�more�than�1000�movie
releases�and�over�3�bn�movie�goers�annually.4 However�factors�such�as�poorly
developed�revenue�streams,�excessive�reliance�on�domestic�box�office
collections�and�inefficiencies�prevalent�across�the�value�chain,�resulted�in
relatively�low�revenues�for�the�industry.�The�industry�was�also�highly�fragmented
with�independent�producers�and�single�screen�theaters�dominating�the�value
chain.�Poor�infrastructure�facilities,�high�entertainment�taxes�and�long�theatrical
windows,�resulted�in�India�being�a�highly�under-screened�and�under�priced
market.
Over�the�past�three-four�years,�the�industry�has�witnessed�tremendous�changes.
These�changes�have�positively�affected�the�players�in�the�value�chain-producers,
distributors�and�exhibitors.�Availability�of�organized�funding,�advent�of�multiplexes
and�increasing�overseas�collections�have�led�to�improved�realizations�for�the
industry.�Over�the�past�couple�of�years�the�business�of�film�making�had�changed
due�to�corporatization,�increasing�production�costs,�spiraling�actor�fees�and�high
acquisition�costs�for�content.�With�the�recent�economic�slowdown�the�film
industry�is�witnessing�some�of�the�earlier�excesses�being�brought�down�to�a
more�realistic�level�playing�field.�The�industry�is�also�enjoying�greater�acceptance
and�recognition�in�the�global�arena�as�is�evident�by�the�recent�success�of�films
like�Slumdog�Millionaire�and�deals�between�DreamWorks-Reliance,�Disney-UTV,
Warner-People�Tree�Films�etc.�In�terms�of�technological�advancements�and
content,�animation�and�special�effects�have�gained�in�significance�in�recent�times,
while�small�budget�movies�have�been�doing�well�in�the�market.�With�Moser�Baer
entering�the�market,�DVDs�and�VCDs�have�become�affordable�and�Home�Video
has�come�to�stay.�Hence�the�domestic�theatrical�lifecycle�of�movies�has�gone
down,�while�due�to�ever�expanding�budgets�and�increasing�market�spends,�the
break�even�point�of�movies�has�increased.
4�SSKI�Report�on�India�Media�and�Entertainment�Industry,�2007
“Besides competitive pricing,a key driver for unlocking thepotential of home videobusiness, and tackling piracyhead on, will be the furthercompression of releasewindows”Harish Dayani, CEO -Entertainment Division, MoserBaer
26
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Size and Growth
The�filmed�entertainment�sector�is�estimated�to�have�grown�at�a�CAGR�of�17.7
percent�over�the�past�3�years.�The�industry�is�estimated�to�reach�INR�109.9�bn�in
size�in�2008,�a�growth�of�13.4�percent�over�2007.�The�performance�was�mainly
driven�by�increased�realizations�from�the�home�video�market�as�well�Cable�and
Satellite�rights(C&S),�which�have�been�estimated�to�grow�by�23�percent�and�15
percent�respectively�over�the�past�year5.�C&S�acquisition�costs�witnessed�a
decline�in�the�second�half�of�2008,�a�trend�which�is�expected�to�continue�in�the
next�year.�In�terms�of�number�of�hit�films,�2008�was�not�as�good�as�2007�with
many�of�the�big�releases�failing�at�the�box�office�and�IPL�matches�affecting�the
occupancy�levels�at�cinema�halls.�A�marked�improvement�was�witnessed�in�the
last�quarter�of�2008,�with�big�ticket�releases�leading�to�increased�footfalls�and
occupancy�rates�in�cinema�halls.�Consequently,�the�domestic�box�office
collections�have�been�estimated�to�grow�by�12�percent�to�reach�INR�80.2�bn�in
2008.6
The�industry�is�projected�to�grow�at�the�CAGR�of�9.1�percent�over�the�next�5
years,�and�reach�the�size�of�INR�168.6�bn�by�2013.�It�is�estimated�that�the�growth
rate�of�the�industry�may�remain�flat�in�the�next�year�owing�to�less�number�of
releases,�lesser�occupancy�rates�and�lesser�realizations�from�C&S�rights�and
ancillary�revenue�streams.�
Size�of�Indian�Film�Industry
Source:�KPMG�Analysis
5�KPMG�Analysis6�KPMG�Analysis
27
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
The�performance�is�expected�to�be�mainly�driven�by�improved�contributions�from
overseas�box�office�collections�and�growth�in�home�video�segment.�Cable�&
Satellite�rights�would�continue�to�remain�an�important�revenue�stream,�even
though�owning�to�cost�rationalization�by�TV�broadcasters,�the�acquisition�costs�is
expected�to�stabilize.�Regarding�domestic�box�office�collections,�capacity
expansion�by�the�organized�exhibition�players�is�likely�to�lead�to�increase�in
number�of�multiplexes�across�the�country.�The�additions�to�existing�capacity�are
not�likely�to�be�up�to�the�same�levels�as�anticipated�due�to�the�overall�liquidity
crunch�and�the�slowdown�in�construction�sector.�Still,�increase�in�number�of
multiplexes�is�expected�to�lead�to�improved�realizations�owing�to�better
occupancy�rates�and�higher�Average�Ticket�Prices�(ATPs)�at�these�multiplexes.
Further,�to�some�extent,�increase�in�number�of�digital�screens�across�the�country
is�expected�to�facilitate�wider�release�of�film�prints�as�well�as�better�occupancies
in�smaller�centers.�However�the�number�of�film�releases�is�expected�to�reduce�in
2009�owing�to�the�liquidity�crunch�and�shortage�of�funds�and�the�consequent
widening�of�gap�between�commencement�of�production�and�release�of�films.
Domestic�box�office�collections�are�likely�to�continue�to�remain�the�dominant
revenue�source�for�the�industry.�However,�other�revenue�streams�may�continue
to�grow�at�a�faster�rate.
Number�of�Multiplex�screens
Source:�Industry�Interviews,KPMG�Analysis
Film Industry (INR bn) 2005 2006 2007 2008CAGR
(2006-08)2009p 2010p 2011p 2012p 2013p
CAGR
(2009-13)
Domestic�Theatrical 52.05 62.11 71.49 80.21 15.5% 78.81 83.70 92.74 108.22 119.80 8.4%
Overseas�Theatrical 5.30 5.71 8.71 9.77 22.7% 10.75 12.12 13.86 16.0 18.65 13.8%
Home�Video 4.29 6.43 7.01 8.63 26.3% 9.84 11.31 12.90 14.47 16.06 13.2%
Cable�&�Satellite�Rights 3.31 4.97 6.21 7.14 29.2% 6.43 6.88 7.57 8.40 9.41 5.7%
Ancillary�Revenue�Streams 2.01 2.45 2.94 3.53 20.7% 3.35 3.52 3.80 4.18 4.68 5.8%
Total�Industry�Size� 66.95 81.66 96.36 109.29 17.7% 109.18 117.53 130.86 151.28 168.60 9.1%
28
“With an extremely tight liquidity market, and given the fact that themultiplex business is highly capital intensive, the focus is going to be onimproving margins, which would come by upping spends at the screens,increasing ticket admits and lower rental payouts. We see a slow down inthe roll out and deliveries of new malls, which would impact the start ofnew multiplexes in the year ahead.”Shravan Shroff, Managing Director, Fame India
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
The�performance�of�the�sector�primarily�depends�on�content.�Even�though�the
supply�side�factors�are�encouraging,�it�is�ultimately�the�number�of�patrons�visiting
cinema�halls�that�affects�movie�collections.�The�sector�also�has�to�contend�with
competition�from�other�sub�sectors.�2008�was�a�case�in�point,�when�the�movie
collections�from�the�months�of�April�to�June�were�affected�due�to�IPL�telecast;
traditionally�the�summer�season�has�been�amongst�the�most�revenue�generating
ones�for�the�industry.�Low�to�medium�budget�movies�do�have�upside�potential
but�that�does�not�imply�that�the�success�ratio�in�the�movie�making�business�is
improving.�Since�there�is�no�sure�shot�formula�guaranteeing�a�hit�in�the�box
office,�production�houses�have�to�balance�their�product�portfolio�with�a�judicious
blend�of�big,�medium�and�small�budget�movies.�Ensuring�steady�future�cash
flows�has�also�assumed�significance�in�recent�times,�and�hence�valuation�of
library�content�also�becomes�important.�
One�of�the�biggest�challenges�facing�the�industry�is�the�bane�of�piracy.�According
to�industry�sources,�piracy�is�an�INR�20�bn�market,�and�its�share�of�the�total
home�video�market�is�only�increasing.7 Industry�players�and�the�government
need�to�come�together�for�stronger�enforcement�of�anti�piracy�laws.�If�piracy�is
controlled,�the�revenue�earning�potential�of�the�sector�is�significantly�higher.
Composition�of�Film�Revenues
Source:�KPMG�Analysis
7�KPMG�Interviews
29
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Print Media
The�Indian�Print�Media�sector�is�currently�passing�through�one�of�its�most
dynamic�phases�with�most�players�expanding�their�footprints�beyond�traditional
regions,�strong�FDI�investments�pouring�into�the�industry�and�multiple�print
media�models�being�experimented�by�the�players.�The�structure�of�the�Indian
Newspaper�industry�continues�to�be�highly�fragmented�and�regional�dominant.�Of
the�total�print�publications�in�the�country,�around�90�percent�consists�of�Hindi�and
other�vernacular�languages8.�Regional�dominance�is�not�typical�of�only�vernacular
papers;�even�English�news�dailies�have�managed�to�gain�dominance�only�in
specific�pockets.�Large�print�media�players�like�HT�Media,�Jagran�Prakashan,
Dainik�Bhaskar,�Eenadu�or�Deccan�Chronicle�have�region-specific�reach.
Advertising�revenue�continues�to�be�the�key�growth�driver�behind�the�industry�as
declining�readership�and�increasing�competition�has�led�the�players�to�further
reduce�their�cover�prices.�As�a�result,�this�sector�has�been�the�most�affected�by
the�slowdown�in�advertising�due�owing�to�the�recent�downturn.�Further,�due�to
rising�newsprint�costs,�players�were�compelled�to�undertake�multiple
advertisement�rate�hikes�during�the�first�half�of�2008,�which�on�one�hand
improved�per�unit�realizations�from�advertising,�but�on�the�other�hand�made�the
media�an�expensive�proposition�for�most�advertisers.�
The�sector�witnessed�a�lot�of�action�in�2008,�especially�in�the�first�half,�with�the
spurt�in�the�number�of�specialty�magazines,�launch�of�niche�newspaper
supplements,�as�well�as�aggressive�portfolio�and�geographic�expansion�by
different�companies,�both�in�the�national�and�regional�space.�Both�the
newspapers�and�magazine�players�also�displayed�increasing�tendency�to
Putting�Things�in�Perspective
Filmed Entertainment Sector: Growth Drivers
• Expansion�of�multiplex�screens�resulting�in�betterrealizations�
• Increase�in�number�of�digital�screens�facilitating�in�widerfilm�prints�releases
• Enhanced�penetration�of�home�video�segment,�primarilyin�the�sell�through�segment
• Increase�in�number�of�TV�channels�fuelling�demand�forfilm�content,�and�hence�resulting�in�higher�C&Sacquisition�costs
• Improving�collections�from�the�overseas�markets�
Filmed Entertainment Sector: Key Challenges
• Managing�cost�of�production�and�arresting�the�fall�inprofitability�levels
• Increased�competition�from�other�media�and�majorevents�like�IPL�affecting�occupancy�rates�in�theaters
• Increased�pressure�for�supply�of�film�content�causing�thequality�of�content�to�suffer
• Home�video�piracy�and�illegal�movie�downloads�affectingthe�legitimate�revenue�collections
• Regulatory�hurdles�like�different�entertainment�tax�ratesin�different�states,�antiquated�Indian�Cinematograph�Actetc.
8�Indian�Readership�Survey
30
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
aggressively�compete�with�each�other�to�reach�their�target�audience.�More
newspaper�players�have�started�to�introduce�niche�supplements�to�counter�the
onslaught�of�specialty�magazine�launches.�These�developments�benefited�both
the�consumers,�due�to�increased�availability�of�choices�and�better�product�quality,
as�well�as�the�advertisers�due�to�better�chances�of�reaching�the�target�audience.�
With�a�readership�base�of�over�250�mn,�India�is�the�second�largest�print�market
in�the�world9.�However,�this�market�is�still�under�penetrated�for�a�country�with�a
population�in�excess�of�1,200�mn�and�highly�fragmented�with�over�60,000
newspapers�printed�in�22�languages10.�The�low�penetration�of�the�print�market
provides�a�significant�growth�opportunity�with�359�mn�who�can�read�and
understand�any�language�but�do�not�read�any�publication11.�With�an�85�percent
reach�in�the�urban�markets�(SEC�A�and�B)�and�an�abysmal�33�percent�reach�in
rural�markets�(SEC�C,�D�and�E),�we�believe�that�a�major�growth�opportunity�lies�in
the�vernacular�markets.�
The�Indian�Print�Media�industry�is�estimated�to�have�grown�by�7.6�percent�in
2008�and�reaching�around�INR�172.6�bn�in�size.�The�corresponding�size�was�INR
160.4�bn�in�2007.�The�performance�of�the�sector�was�affected�by�the�recent
economic�slowdown,�which�has�affected�advertising�industry.�Advertising
revenues�is�estimated�to�have�increased�by�812 percent�over�the�previous�year�to
reach�INR�108.36�bn�in�2008.�The�sector�has�been�adversely�affected�by�the
economic�meltdown,�and�the�advertising�rate�growth�has�been�lower�than�TV�due
to�higher�exposure�to�real�estate,�auto�and�travel,�and�lower�FMCG�contribution.
Further,�enhanced�competition�has�also�led�to�fall�in�average�cover�prices�which
have�countered�the�rise�in�circulation�volumes�for�the�players.�Circulation
revenues�have�only�risen�by�7.4�percent�over�the�year�to�reach�INR�64.3�bn.�The
sector�is�thus�estimated�to�have�grown�by�a�CAGR�of�13.8�percent�over�the�past
three�years,�a�growth�rate�which�is�still�higher�as�compared�to�the�single�digits
growth�witnessed�in�other�nations.�
The�industry�is�projected�to�grow�at�a�CAGR�of�9�percent�over�the�next�five�years
and�reach�around�INR�266�bn�in�size�by�2013.
9�MRUC10�Registrar�of�Newspapers�of�India11�India�Readership�Survey12�Group�M
31
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Advertising�will�increase�its�dominance�as�the�primary�revenue�source�of�the
industry�and�is�expected�to�constitute�around�66�percent�of�2013�revenues.
Growth�in�advertising�would�be�driven�by�increasing�advertising�spends�by
emerging�sectors�like�Organized�Retail,�Telecom�and�Education.�At�a�CAGR�of�10
per�cent,�advertising�revenues�will�grow�at�a�faster�rate�as�compared�to�the
CAGR�of�7.4�percent�for�the�circulation�revenues.�While�advertising�revenue�is
basically�related�to�economic�growth�in�the�country,�the�circulation�revenues�is
expected�to�grow�owing�to�structural�growth�drivers�like�rising�penetration,�higher
literacy�levels�and�improving�affordability�of�the�medium.�
The�top�10�sectors�contributed�around�65�percent�share�of�overall�Print
advertising�in�2008.
Newspaper�publishing�would�continue�to�dominate�Print�Media�and�is�expected
to�comprise�around�92�percent�of�the�total�revenues�of�the�sector�in�2013.
Newspaper�publishing�is�expected�to�grow�at�the�compounded�annual�rate�of�9.1
percent�over�the�next�five�years�and�is�projected�to�reach�INR�245.4�bn�by�2013.
The�magazine�publishing�segment�is�expected�to�grow�at�a�compounded�annual
rate�of�8.1�percent�over�the�next�five�years,�and�is�projected�to�reach�INR�20.5�bn
in�size�in�2013.
Projected�Size�of�Indian�Print�Media�Industry
Source:�Group�M,�KPMG�Interviews,�KPMG�Analysis
Top�10�Print�advertising�sectors�byvolumes
Sector % share
Education 15
Services 12
Banking/Finance/Investment 10
Auto 7
Retail 5
Durables 4
Personal�Accessories 3
Corporate/Brand�Image 3
Personal�Healthcare 3
Media 2
Source:�Indiantelevision
32
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
The�ongoing�economic�slowdown�poses�a�huge�challenge�for�the�sector�owing�to
its�heavy�reliance�on�advertising.�Also,�with�television�fragmentation,�print
advertising’s�cost�advantage�has�been�marginalized;�existing�print�players�wanting
to�survive�this�market�need�to�move�away�from�a�single�medium�model�to�a�multi
medium�model.�Magazine�players�need�to�focus�on�arresting�the�declining
readership�levels.
Print�Media�break-up�by�Segments
Putting�Things�in�Perspective...
Print Media Sector: Growth Drivers
• Sustained�growth�in�advertisement�revenues�due�toincreased�advertising�spends�by�the�emerging�sectorssuch�as�Education,�Organized�Retail�and�Telecom
• Improving�literacy�levels�in�the�country�• Optimization�of�cover�prices�leading�to�improved
penetration�and�growth�in�sales�volume• More�launches�in�the�niche�segment,�like�newspaper
supplements�and�specialty�magazines,�by�players�
Print Media Sector: Key Challenges
• Increased�competition�from�news�channels�as�well�asnew�media�like�internet�and�mobile
• Adverse�impact�on�advertising�revenues�due�to�aprolonged�economic�slowdown
• Continuous�rise�in�newsprint�costs• Continuing�decline�in�readership�figures,�especially�in
case�of�magazines
Print Industry
(INR bn)2005 2006 2007 2008
CAGR
(2006-08)2009p 2010p 2011p 2012p 2013p
CAGR
(2009-13)
Newspapers 108.0 128.3 148.3 158.7 13.7% 169.0 181.8 198.5 220.4 245.4 9.1%
Magazines 9.1 10.3 12.1 13.9 15.4% 14.9 16.2 17.6 18.9 20.6 8.1%
Total�IndustrySize� 117.1 138.6 160.4 172.6 13.8% 183.9 197.9 216.0 239.3 266.0 9.0%
Source:�Group�M,�KPMG�Interviews,�KPMG�Analysis
33
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Radio
Radio�advertisement�spends�account�for�about�4�percent�of�the�total�advertising
spends�in�India�today,�having�grown�from�just�2�percent�in�200413.�The�growth
has�been�propelled�by�the�emergence�of�the�private�FM�industry�in�India.
In�terms�of�sheer�reach,�the�Indian�radio�industry�has�been�dominated�by�the
state�owned�All�India�Radio�(AIR),�which�covers�91�percent�of�India's�area�and
reaches�99�percent�of�the�population14.�However,�the�turning�point�for�the
industry�came�with�the�Phase�2�privatization�reforms�when�the�government
rationalized�the�licensing�fee�by�fixing�it�at�4�percent�of�the�gross�revenues�(or�10
percent�of�the�Reserve�(One-Time-Entry-Fee)�OTEF,�whichever�was�higher).�This,
for�the�first�time,�made�the�business�model�viable�for�companies,�and
consequently�many�large�corporate�houses�entered�the�private�FM�business.
From�21�operational�private�FM�stations�before�the�phase�2�licensing,�the
number�of�stations�shot�up�to�over�205�by�the�March�200815.�The�industry�now
boasts�of�players�such�as�Radio�Mirchi�and�Big�FM�with�a�pan-India�presence.�
Consequently,�the�radio�industry�is�estimated�to�have�grown�at�an�impressive
CAGR�of�19.7�percent�over�2006-08.�
It�is�estimated�to�have�reached�a�size�of�INR�8.4�bn�by�end�of�2008,�a�growth�rate
of�13.5�percent�over�the�previous�year.16
Growth�in�the�future�is�likely�to�come�through�continued�increase�in�the�number
of�radio�stations�after�phase�3�licensing,�further�liberalization�of�regulations�as
well�as�better�ability�of�the�radio�stations�to�sell�advertisement�space.�
TRAI�has�given�some�very�important�recommendations�for�phase�3�licensing�of
the�sector.�These�recommendations,�if�accepted�by�the�government,�could�give�a
new�growth�push�to�the�sector.�Some�of�the�important�recommendations�are
concerned�with�allowing�radio�stations�to�broadcast�news�(this�has�already�been
given�a�go-ahead�by�the�I&B�Ministry),�increasing�FDI�limits�to�49�percent�from
the�current�20�percent,�allowing�networking�within�the�radio�stations�owned�by
the�same�company,�permitting�tradability�of�licenses�and�allowing�ownership�of
multiples�frequencies.�The�recommendations�could�help�in�improving�the
operational�efficiencies�of�radio�companies,�getting�in�more�foreign�investments
in�the�sector�as�well�as�moving�the�industry�from�being�centered�on�a�single
genre�(i.e.�hit�music)�to�offering�more�differentiated�content.�Emergence�of�niche
radio�stations�could�also�help�the�industry�in�attracting�new�listeners�and�driving
up�overall�radio�listenership.�
13�KPMG�Analysis14�KPMG�Indian�Entertainment�Industry�-�Focus�2010�Report15�Indiastat16�KPMG�Analysis
34
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Introduction�of�a�new�performance�metric�tool�for�the�sector-�RAM�(Radio
Audience�Measurement)�-�is�also�expected�to�aid�the�growth�in�radio�advertising.
Even�though�another�radio�listener�measurement�tool-Indian�Listenership�Track
(ILT)�-�already�existed�in�the�market,�but�the�advent�of�RAM�provides�another
option�to�both�advertisers�and�radio�stations.�Both�RAM�and�ILT�are�expected�to
aid�the�growth�in�radio�advertising�by�making�the�measurement�of�return�on
investment�for�advertisers�more�scientific�and�assessable,�and�thus�allowing�radio
stations�to�sell�themselves�better.
Further,�the�size�of�the�radio�advertisement�industry�as�a�percentage�of�the�total
advertisement�industry�in�India�is�still�pretty�low�at�about�4�percent.17 This�is
against�a�global�average�of�about�8�percent.18 Also,�the�ratio�of�local�to�national
advertisements�is�skewed�in�favor�of�national,�contrary�to�global�trends,�indicating
a�large�scope�for�growth�in�the�local�advertising�segment.
As�regional�businesses�in�India�start�to�spend�more�aggressively�on�advertising�to
build�brand�consciousness,�they�are�likely�to�turn�to�media�like�radio�and�print
which�are�highly�cost�effective�for�regional�advertisement�campaigns.�
However�at�the�same�time,�like�TV�and�Print,�radio�is�also�likely�to�feel�the�pinch
of�overall�reduced�advertisement�spends�in�a�slower�growing�economy.�Already,
in�the�quarter�ending�December�2008,�advertisement�volumes�on�radio�declined
by�14�percent�compared�to�the�same�quarter�a�year�ago19.
On�the�whole,�the�radio�industry�is�expected�to�grow�at�a�CAGR�of�14.2�percent
over�2009-13�(compared�to�19.7�percent�over�2006-08)�and�reach�a�size�of�INR
16.3�bn�by�2013.
Ratio�of�local�to�national�advertisements�on�Radio
Source:�Industry
17�KPMG�Analysis18�KPMG�Indian�Entertainment�Industry�-�Focus�2010�Report19�“Slowdown�forces�FM�radios�to�cut�advertisement�rates�by�10-15%”,�Business�Standard,�February�2009
35
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Size�of�Radio�Industry
Putting�Things�in�Perspective...
Radio Sector: Growth Drivers
• Increase�in�the�number�of�radio�stations�due�-�around700�new�licenses�expected�to�be�issued�to�Private�FMstations�in�Phase�3
• Expected�regulatory�reforms�that�are�likely�to�improveprofitability�and�stimulate�foreign�investments�
• Emergence�of�robust�audience�measurement�tools�whichcould�further�catalyze�growth�in�radio�advertisementspends
• Growth�in�locally�targeted�advertising�on�radio
Radio Sector: Key Challenges
• Adverse�impact�on�revenues�due�to�a�possibly�prolongedslowdown�in�the�economy
• Overcrowding�of�FM�stations�especially�in�metros�andinability/reluctance�of�the�stations�to�differentiateamongst�themselves�in�terms�of�content
• Stiff�competiton�from�print�for�local�advertisements�
Radio Industry
(INR bn)2005 2006 2007 2008
CAGR
(2006-08)2009p 2010p 2011p 2012p 2013p
CAGR
(2009-13)
Total�IndustrySize� 4.9 6.0 7.4 8.4 19.7% 9.2 10.3 11.9 13.9 16.3 14.2%
Source:�Group�M,�KPMG�Interviews,�KPMG�Analysis
36
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Music
The�advent�of�the�MP3�format,�proliferation�of�the�internet�and�peer-to-peer
networks�and�the�widespread�availability�of�portable�music�devices�created�a
paradigm�shift�in�the�way�users�accessed�and�consumed�digital�music�worldwide.
These�trends�initially�had�a�crippling�effect�on�the�worldwide�music�industry�in
terms�of�the�significant�revenue�erosion�resulting�from�free�access�to�digital
music.
The�global�music�industry�was�initially�slow�to�respond,�but�with�supportive
legislation,�strict�law�enforcement,�effective�technology�partnerships,�innovative
marketing�and�adaptation�of�its�business�model�in�line�with�consumption�habits
were�able�to�turn�their�fortunes�around.�The�challenges�facing�the�Indian�music
industry�are�not�unlike�those�faced�by�their�global�counterparts�and�need�urgent
attention�by�following�global�best�practices�suitably�adapted�to�factor�in�the
nuances�of�the�Indian�consumer�mindset.
The�size�of�the�Indian�music�industry�was�estimated�at�around�INR�7.3�bn�in
2008,�down�from�INR�8.3�bn�in�2005,�implying�a�degrowth�of�4.8�percent�during
the�period.�One�of�the�primary�reasons�for�this�degrowth�has�been�the�erosion�of
sales�of�physical�formats,�a�trend�which�is�expected�to�continue�well�into�the
future.�The�industry�therefore�will�have�to�bank�on�revenues�from�digital
distribution,�broadcast�and�public�performance�licensing�revenues�not�only�to
compensate�for�declining�physical�sales�but�also�drive�growth�going�forward.
A�number�of�factors�are�eating�into�the�revenues�of�the�music�industry.�With�the
number�of�music�enabled�portable�devices�on�the�rise,�the�practice�of�loading
portable�storage�devices�with�unauthorized,�unlicensed�music�–�a�practice
commonly�referred�to�as�“sideloading”�is�emerging�as�a�substantial�threat�to
industry�revenues.�Add�to�that�the�classical�piracy�of�physical�music�formats�and
more�recently�compact�discs�with�unlicensed�music�is�hurting�the�industry.
Physical�formats�such�as�audio�cassettes�and�compact�discs,�which�accounted�for
approximately�87�percent�of�industry�revenues�in�2005�currently�account�for�just
under�60�percent�in�2008.�A�consistent�volume�degrowth�of�physical�formats
coupled�with�factors�such�as�price�erosion,�piracy�and�a�robust�growth�in�non-
physical�formats�such�as�mobile�value�added�services�has�contributed�to�the
changing�revenue�mix.�Going�forward�physical�revenues�are�expected�to�decline
at�a�CAGR�of�9�percent�between�2008�and�2013.�While�the�actual�degrowth�of
formats�such�as�audio�cassettes�is�expected�to�be�much�higher,�this�is�likely�to�be
partially�offset�by�initiatives�taken�by�some�leading�music�companies�such�as
Sony�BMG,�T-Series�and�SaReGaMa�to�release�MP3�music�on�compact�discs�at
price�points�similar�to�that�of�the�ubiquitous�audio�cassette.
37
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
The�Indian�digital�music�market�is�estimated�at�INR�1.8�bn�in�2008.�Digital�music
distribution�is�mainly�restricted�to�India’s�rapidly�growing�telecom�segment,
largely�through�ring�tones�and�caller�ring�back�tunes.�As�mobile�and�broadband
penetration�in�India�continues�to�grow�and�with�the�rollout�of�high�speed�3G�data
services,�the�market�for�other�digital�distribution�platforms�such�as�a-la-carte
downloads,�streaming�and�music�subscriptions�will�evolve,�as�it�has�in�other
markets�worldwide.�For�example,�in�the�United�States,�which�has�a�broadband
penetration�of�over�22�percent�and�mobile�penetration�of�88�percent�in�200820,
digital�music�sales�accounted�for�39�percent�of�total�music�sales�in�200821.�This
changing�shift�from�physical�to�digital�is�also�expected�to�contribute�positively�to
margins�in�the�near�term,�since�distribution�costs�for�digital�formats�is�far�lower
than�that�of�physical�formats.
Licensing�revenues�from�radio�and�television�which�accounted�for�2.5�percent�of
total�industry�revenues�in�2005�accounted�for�about�5�percent�of�total�industry
revenues�in�2008.�Licensing�revenues�from�television�and�radio�is�expected�to
increase�from�INR�386�mn�in�2008�to�INR�921�mn�in�2013�at�a�CAGR�of�19
percent.�A�new�genre�of�music�based�television�reality�shows�are�likely�to�drive
growth�in�this�segment�going�forward.�
The�public�performance�segment�with�revenues�of�INR�173�mn�in�2008�is
expected�to�more�than�double�to�reach�INR�378�mn�by�2013.�This�growth�is�likely
to�be�driven�by�improvement�in�live�event�infrastructure,�increasing�public
awareness�of�copyright�and�intellectual�property�laws�,�corporatization�of�the
retail�and�real�estate�segments�and�greater�action�on�the�part�of�law�enforcement
agencies�(with�support�from�industry�players)�to�ensure�compliance.
Overall,�the�industry�is�expected�to�grow�at�a�modest�CAGR�of�8.0�percent
between�2008�and�2013�to�reach�INR�10.7�bn�by�2013.
In�2008,�total�music�sales�in�the�United�States�across�all�formats�registered�a
10.5�percent�annual�growth�to�hit�an�all�time�high�of�USD�1.5�billion22,�compared
to�2002�when�the�industry�was�degrowing�at�10�percent23.�Much�like�their�US
counterparts,�Indian�music�companies�need�to�adapt�to�the�changing�business
environment�brought�about�by�technological�advances�and�changing�consumer
patterns�to�replicate�this�trend.
20�Frost�&�Sullivan21�IFPI�Digital�Music�Report�200922 Nielsen�Soundscan23 IFPI
38
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Size�of�Indian�Music�Industry
Source:�KPMG�Analysis
Putting�Things�in�Perspective...
Music Sector: Growth Drivers
• Increase�in�digital�sales,�on�the�back�of�increasing�mobileand�broadband�penetration;�shift�from�polyphonic�ringtones�to�true�tones�and�full�track�downloads
• Introduction�of�subscription�based�model�fordownloading�and�streaming�of�music
• Growth�in�parrallel�economy�–�companies�are�workingcollectlively�with�vendors�for�side-loading�of�music�incafes�and�kiosks�or�on�chips�/�memory�cards�/�handsetsand�other�points�of�consumption
• Reduced�revenue�leakages�due�to�piracy,�throughproactive�legislative�and�enforcement�action�by�lawenforcement�agencies�and�music�companies
• Differentiating�on�price,�content�and�volume�on�a�per�unitbasis�vis-à-vis�the�pirated�unit
• Development�of�regional�music�catalogs�by�musiccompanies
Music Sector: Key Challenges
• Inabilityof�the�music�companies�to�negotiate�betterrevenue�share�terms�with�mobile�operators
• Sorting�out�issues�related�to�licencing�of�rights�withbroadcating�and�radio�companies
• Sustained�revenue�leakages�through�digital�piracy�withincreasing�internet�and�broadband�penetrations�in�India
• Failure�of�adoption�of�a�paid�online�music�downloadmodel�given�the�presence�of�internet�based�free�illegalsong�download�alternatives
• Inability�to�regularise�the�parallel�economy�of�low-costsideloading�alternatives�for�portable�music�devicesthrough�innovative�marketing�and�pricing
• Public�awareness�and�enforcement�of�laws�againstcopyright�infringement�and�violation�of�intellectualproperty�rights.
Music Industry (INR
bn)2005 2006 2007 2008
CAGR
(2006-08)2009p 2010p 2011p 2012p 2013p
CAGR
(2009-13)
Physical 7.25 6.34 5.55 4.86 -12.5% 4.37 3.93 3.54 3.19 2.87 -10.0%
Digital 0.86 1.11 1.44 1.88 30.0% 2.44 3.22 4.19 5.24 6.55 28.4%
Television�and�Radio 0.21 0.26 0.32 0.39 22.5% 0.46 0.56 0.67 0.78 0.92 19.0%
Public�Performances 0.03 0.07 0.12 0.17 75.3% 0.21 0.25 0.29 0.33 0.38 17.0%
Total�Industry�Size� 8.3 7.8 7.4 7.3 -4.4% 7.5 8.0 8.7 9.5 10.7 8.0%
Source:�KPMG�Interviews,�KPMG�Analysis
39
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Outdoor
Outdoor�Media,�also�referred�to�as�out�of�home�(OOH)�media,�includes�all�types
of�advertising�that�reaches�the�consumer�while�he�or�she�is�outside�the�home.
The�sector�primarily�comprises�four�segments:
• Billboards-�These�are�the�standardized�large�format�advertising�displays.�They
include�Street�Hoardings,�Posters,�Wall�Murals,�Bulletins,�Spectaculars�as�well
as�Digital�Outdoor�Media
• Street�Furniture-�These�are�displays�at�public�amenity�for�eye-level�viewing�or
at�curbside.�Some�of�the�common�forms�include�Signages,�Information
Kiosks,�Bus�Shelters�panels,�Mall�displays,�etc.
• Transit-�These�are�displays�affixed�to�moving�vehicles�or�positioned�in�the
common�areas�of�transit.�This�segment�covers�advertising�displayed�in
airports,�railway�stations,�taxi-carriers,�bus�interiors,�etc.
• Alternative�Mediums,�which�cover�other�advertising�in�other�places�such�as
Rest�Area�Panels,�Stadium�and�Arena�displays,�Vending�Cart�Umbrellas,�etc.
Globally,�the�OOH�sector�has�outperformed�the�overall�advertising�industry�and
accounts�for�around�5.6�percent�of�the�overall�advertisement�spend.24 However
in�India,�the�growth�of�Indian�OOH�sector�has�been�traditionally�hampered�by�the
unorganized�and�fragmented�nature�of�the�sector.�
However�with�the�recent�thrust�on�infrastructure�development�in�the�country�over
the�past�two-three�years,�OOH�is�acquiring�scale�and�emerging�from�the�margins
of�advertising.�The�government�is�investing�heavily�in�infrastructure�projects�and
seeking�private�participation.�City�development�in�India�is�riding�on�the�back�of
advertising�support�from�OOH�media�companies.�Local�governments�and
municipal�bodies�have�discovered�value�in�making�outdoor�companies�invest�in
basic�infrastructure�development�in�lieu�of�media�rights�to�those�properties,�a
standard�practice�in�much�of�Europe�and�the�U.S.�This�is�fueling�the�growth�of�the
sector,�as�a�result�of�which�it�is�increasingly�attracting�organized�investments,
both�from�the�national�and�regional�players.�Further,�the�sector�is�becoming�far
more�organized�and�has�seen�significant�changes�with�emergence�of�new
segments�such�as�airports,�ambient�media,�digital�mediums�etc.�
24�Zenith�Optimedia�Report,�2008
40
OOH�media�has�grown�at�a�CAGR�of�17.3�percent�over�the�past�3�years,�and�is
estimated�to�have�reached�INR�16�bn�in�size�in�2008,�a�growth�of�15�percent�over
200725.�The�sector’s�performance�was�affected�in�the�second�half�of�the�year
owing�to�the�overall�economic�slowdown.�It�is�projected�to�grow�at�a�CAGR�of
12.8�percent�over�the�next�5�years�and�reach�a�size�of�around�INR�29.3�bn�by
2013.�
Outdoor�is�a�city�centric�and�a�local�medium,�and�due�to�increased�infrastructure
development�activities�in�the�Tier�2�and�Tier�3�cities,�industry�players�are�expected
to�focus�more�on�these�cities�in�future.�OOH�advertising�is�likely�to�grow�at�a
faster�rate�in�these�smaller�cities�and�towns,�owing�to�the�cost�effectiveness�of
outdoor�advertising�in�these�towns�in�terms�of�outdoor�advertising.�Also,�with
local�authorities�and�municipal�corporations�beginning�to�frame�guidelines�to
regulate�the�sector,�OOH�is�expected�to�get�more�organized�over�a�period�of
time.�
Currently,�the�growth�is�mainly�in�Tier�1�towns,�with�metros�accounting�for�more
than�half�of�the�total�OOH�market.�Industry�sectors�spending�the�most�on�this
medium�include�Telecom,�Media�&�Entertainment�and�Financial�Services
companies26.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Projected�Size�of�Indian�Outdoor�Industry
25�KPMG�Analysis26�Industry�Inputs
OOH Industry
(INR bn)2005 2006 2007 2008
CAGR
(2006-08)2009p 2010p 2011p 2012p 2013p
CAGR
(2009-13)
Total�Industry�Size� 10.0 11.7 14.0 16.1 17.3% 17.7 19.8 22.4 25.5 29.3 12.8%
Source:�KPMG�Interviews,�KPMG�Analysis
41
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
27�KPMG�Interviews,�KPMG�Analysis
With�increase�in�consumer�spends�and�intensified�infrastructural�development
activities�in�Tier�2�and�Tier�3�towns,�penetration�in�these�smaller�towns�are�likely
to�drive�the�growth�of�OOH�in�the�future.�With�retail�development�and�consumer
boom,�Ambient�Media�is�also�expected�to�gain�significance.�Further,�the�sector�is
expected�to�witness�increasing�vertical�segmentation�in�future,�as�players�move
towards�owning�IPR�for�their�OOH�creatives.
The�Indian�OOH�sector�has�been�traditionally�dominated�by�billboards,�which
currently�accounts�for�around�60�percent�of�total�advertising�spends�in�the
sector27.�This�segment�is�under�pressure�in�urban�centers�with�Chennai�already
banning�them�and�speculation�about�Bangalore�&�Delhi�placing�further�curbs.�The
battle�for�billboards�is�set�to�shift�to�smaller�cities.�The�share�of�billboards�is
expected�to�reduce�going�forward�as�they�increasingly�become�more�regulated.
However�it�is�still�going�to�remain�the�largest�segment�within�OOH.�
Cities�that�contribute�the�most�to�OOH�Advertising
Source:�GroupM,�KPMG�Analysis
OOH�Segment�Share�in�2008
Source:�Industry�Inputs,�KPMG�Analysis
42
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
One�of�the�biggest�challenges�that�the�sector�faces�today�is�the�lack�of�a�central
regulatory�governing�OOH�media.�Rules�and�regulations�vary�from�state�to�state,
which�inhibits�standardizations�across�locations�and�leads�to�unregulated�growth.
Lack�of�a�standard�scientific�metric�to�gauge�the�results�effectiveness�of�the
medium�is�another�bottleneck.�In�this�regard,�the�initiative�by�the�Media�Research
Users�Council�(MRUC)�of�conducting�an�Indian�Outdoor�Survey�across�the�top�10
cities�in�India28 can�set�a�good�precedent�and�is�expected�to�benefit�the�sector�as
a�whole.�Further�the�ongoing�liquidity�crunch�has�forced�many�real�estate
developers�to�go�slow�on�construction�activities,�thus�affecting�the�supply�of�retail
space29.�This�is�likely�to�affect�the�spread�of�Ambient�Media.
28�MRUC�Website,�KPMG�Interviews,�Press�Releases29�Economic�Times,�“DLF�stalls�a�fourth�of�its�projects�to�save�costs”,�February�2009
Putting�Things�in�Perspective...
Outdoor Media Sector: Growth Drivers
• Enhanced�levels�of�infrastructure�development�activitiesin�the�country,�especially�in�Ttier�2�and�Tier�3�cities
• Audience�fragmentation�in�traditional�media• Higher�spending�on�OOH�from�sectors�such�as�Telecom
and�Media�and�Entertainment
Outdoor Media Sector: Key Challenges
• Lack�of�a�central�authority�to�regulate�the�sector• Lack�of�a�scientific�metric�to�measure�the�effectiveness
of�the�medium�• Fast�changing�regulatory�framework-�in�case�there�are
more�interventions�to�ban�Billboards�in�other�cities�aswell,�the�performance�could�be�adversely�affected
• Slow�down�in�construction�development�and�reduction�inexpansion�plans�of�malls
“For OOH, the opportunity for unprecedented growth isnow – when the entire user base is desperately seekingcost efficiencies without sacrificing reach or impact orinnovativeness”Alok Jalan, Managing Director, Laqshya Media
43
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
30�Animation�Express.com31�KPMG�Estimates
Animation and VFX
At�an�estimated�size�of�INR�17.4�bn�in�2008,�the�Indian�animation�industry�is
miniscule�as�compared�to�the�global�animation�industry�with�estimated�revenues
in�excess�of�INR�153030 bn�by�2010.�However,�the�Indian�animation�industry�has
been�growing�rapidly�with�an�estimated�CAGR�of�20.1�percent31 in�2006-08.�It�is
estimated�to�reach�a�size�of�about�INR�39�bn�by�2013.
Among�the�different�segments�of�the�animation�industry,�the�animation
production�services�segment�is�estimated�to�grow�the�fastest�with�a�CAGR�of
21.9�percent�in�2009-13.
Size�of�Indian�Animation�Industry
Animation Industry
(INR bn)2005 2006 2007 2008
CAGR
(2006-08)2009p 2010p 2011p 2012p 2013p
CAGR
(2009-13)
Total�Industry�Size� 10.0 12.0 14.5 17.4 20.1% 20.0 23.3 27.8 33.1 39.4 17.8%
Source:�KPMG�Interviews,�KPMG�Analysis
“This is an industry still in its nascent stage but with hugepotential so any person with commitment will reap huge benefits”Seemha Ramanath, Managing Director, Crest Animation Studios Ltd.
44
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Increased�outsourcing�from�overseas�countries�due�to�an�inherent�cost
advantage,�maturity�of�international�animation�studios,�emphasis�on�IP�creation
and�attractive�domestic�opportunity�have�been�the�principal�growth�drivers�for�this
sector.�Hence,�services�income�comprises�approximately�60�percent�32 of�the
total�animation�industry�in�India.�Television�production,�direct�to�DVD�production
and�international�feature�films�productions�comprised�the�core�business
repertoire�of�local�animation�houses.�Increasing�international�demand�led�to�the
proliferation�of�studios�in�the�Indian�market.�However,�large�animation�players
such�as�Crest,�Tata�Elxsi�that�primarily�relied�on�services�operations�are
graduating�to�co-production�deals�to�reduce�their�dependence�on�servicing�and
create�an�IP�library.�
The�commercial�success�of�“Hanuman”,�based�on�mythological�content,�proved
that�there�is�a�growing�market�for�locally�generated�animation�content.�Realizing
this�potential,�a�number�of�global�players�have�started�tapping�the�Indian�market
either�independently�or�through�co-production�deals.�In�2008,�film�studios�such�as
Yashraj�Films,�Percept�Picture�Company,�pure�play�animation�players�such�as
Crest,�DQ�Entertainment�and�media�conglomerates�like�Disney,�MGM,
Paramount�indicated�their�intent�to�exploit�this�market�through�locally�produced
content.�Hence,�product�creation�as�a�percentage�share�of�the�animation�industry
is�slated�to�increase.
In�2008,�post�production�companies�also�grew�at�a�steady�rate�but�witnessed
significant�competition�from�countries�such�as�South�Korea,�Taiwan,�Philippines
and�China.�To�mitigate�threats�from�other�low�cost�countries�and�maintain
international�quality�and�standards�leading�Indian�companies�decided�to�acquire
front�end�operations�either�through�acquisitions�or�strategic�tie�ups.�For�example,
Pixion�acquired�two�London�studios,�Men-from-Mars�and�Molinare33.
Size�of�Indian�Animation�Industry
Source:�KPMG�Analysis,�KPMG�Interviews
32�KPMG�Estimates33�Animation�express
45
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Growth Drivers
1. Building Brand India
India�with�it’s�rich�heritage,�culture�and�a�large�talent�pool,�has�the�potential�in
creating�content�for�Indian�as�well�as�global�audiences�in�transferring�5000-year-
old�time�tested�stories�into�new�media.�The�mythology�centered�animation�films
released�in�the�last�few�years�including�the�likes�of�Hanuman,�Hanuman�Returns
and�Bal�Ganesh�are�indicators�of�this�trend.�The�Indian�animation�industry�has
used�mythology�to�start�narrating�to�the�Indian�audience.�As�the�industry�evolves
and�the�audience�matures,�locally�developed�characters�would�gain�domestic�and
international�acceptance.
2. Outsourcing Advantage
Significant�cost�advantage�due�to�low�cost�labor�and�availability�of�English
speaking�employees�makes�India�a�favorable�outsourcing�destination�for�global
production�houses.�Out�of�the�total�revenues�generated�by�Indian�animation
studios,�over�70�percent34 are�derived�from�outsourcing.�The�major�work
outsourced�includes�the�creation�of�animation�and�lip�synchronizing�which�is
labour�intensive�and�requires�lesser�creative�quality.�Thus,�Indian�studios�are�able
to�provide�cost�effective�and�quality�services�to�global�clients.�A�downturn�in�the
global�economic�environment�will�cause�major�production�houses�like�Walt
Disney,�Paramount,�IMAX,�Sony�Pictures,�Pixar�and�Warner�Brothers�to�reduce
their�cost�of�production�by�outsourcing�operations�to�low�cost�countries�like�India.
Cost�of�producing�a�full�length�animated�movie�in�the�U.S.�is�USD�100-125�mn�as
compared�to�USD�25-30�mn�from�outsourcing�to�India.35
3. Established Indian Animation Industry
One�of�the�drivers�for�the�growth�of�the�industry�is�that�it�has�already�in�place�for
the�past�20�years.�With�more�than�two�decades�of�existence,�local�animators
have�acquired�international�processes�and�systems,�quality�control�methods�and
technological�infrastructure�to�build�intellectual�property�comparable�to
international�benchmarks.
4. Changing viewership habits
Increasing�disposable�incomes�and�demographic�changes�has�resulted�in�a�break
away�from�appointment�viewing�to�user�defined�viewing.�The�leader�of�the�house
no�longer�controls�the�remote�control.�Households�have�graduated�to�2-3
television�sets�with�viewing�segmented�on�each�television�set�by�genre.�
34�KPMG�Estimates35�KPMG�Estimates
46
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Challenges
1. Categorized as a service industry
One�of�the�major�challenges�of�the�Indian�animation�industry�is�the�fragmentation
of�animation�companies�spread�across�the�value�chain.�Most�of�the�small�and
medium�Indian�companies�are�satisfied�with�providing�outsourced�services.
Hence,�the�collective�capacity�of�the�Industry�has�been�categorized�as�a�service
industry�and�not�as�a�product�industry.
2. Infrastructure Investment
With�its�Asian�competitors�making�significant�investments�to�develop�their
animation�sectors,�the�Indian�animation�industry�should�be�able�to�attract�local�as
well�as�foreign�investors�in�order�to�boost�infrastructure�development.�Many
small�and�medium�companies�are�unable�to�attract�institutional�funding�or�bank
lending�due�to�the�nature�of�the�animation�industry�where�projects�stretch�for
longer�durations.
3. Developing Talent Pool
The�industry�also�faces�the�challenge�of�investing�more�to�improve�its�local�talent
and�meet�the�needs�of�the�animation�industry�for�more�skilled�workers.�Despite
the�large�number�available�graduates�to�work�in�the�industry,�the�number�of
skilled�animators�is�still�low.�Considerable�investment�in�time�and�resources�are
needed�in�order�to�hone�the�skills�of�new�animators.�This�dilemma�is�largely
attributed�to�lack�of�training�in�relevant�animation�skill-sets�of�graduates�and
entry–level�employees.
47
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Gaming
The�gaming�industry�can�be�divided�into�3�separate�segments�–�Mobile�Gaming,
Console�Gaming�and�PC�&�Online�Gaming.
Mobile Gaming
The�Indian�mobile�gaming�segment,�estimated�at�INR�1.4�bn�in�2008�in�terms�of
end�user�revenues�has�not�lived�up�to�the�potential.�Enamored�by�its�potential,�a
number�of�players�had�entered�the�market�in�2003-04.�Plagued�by�a�number�of
issues�such�as�content�discovery�and�revenue�leakages�and�after�seeing�a�wave
of�consolidation�in�2006-2007,�the�Indian�gaming�segment�in�India�is�currently
dominated�by�a�few�players�such�as�Indiagames,�Nazara,�Hungama�Mobile�and
Jump�Games�which�constitute�over�80�percent36 of�the�industry�revenues.
Mobile�gaming�in�India�has�two�main�revenue�streams.�The�first�is�the
development,�publishing�and�porting�of�mobile�games�by�Indian�games
companies�for�distribution�in�Indian�and�overseas�markets,�either�directly�or
through�telecom�operators.�The�second�is�development�work�undertaken�by
Indian�game�development�companies�for�overseas�developers/publishers.�These
typically�range�from�art�outsourcing�and�animation,�to�late�stage�development
activities�such�as�game�testing�and�porting.�More�recently,�Indian�companies
have�also�started�getting�involved�in�core�code�development�activities.
While�the�mobile�gaming�segment�has�tremendous�potential,�a�number�of�factors
have�historically�limited�the�segment�from�achieving�the�growth�foreseen�by�the
industry�at�large.
A�key�catalyst�to�industry�growth�is�the�ability�of�the�stakeholders�to�create
awareness�of�their�products�to�end�users.�Given�the�distribution�dynamics�for
mobile�content�in�India,�most�mobile�games�are�downloaded�off�telecom
operators’�decks�making�the�availability�of�a�mobile�data�connection�a�basic
necessity.�The�problem�with�this�is�two�fold:
• Technology: Historically,�a�large�proportion�of�mobile�phones�in�India�were�not
capable�of�handling�data�and�therefore�did�not�form�part�of�the�addressable
market�for�mobile�content.
• Discovery: Secondly,�unlike�western�countries,�where�telecom�operators
bundle�mobile�connections�with�handsets,�in�India�handsets�and�mobile
connections�are�sold�separately.�Handsets�were�seldom�programmed�with
operator�settings�required�to�access�data�and�moreover,�data�packages�were
subscription�based�(even�for�on-deck�browsing)�which�required�activation�by�a
subscriber.�This�created�a�multitude�of�problems�in�terms�of�discovery�of
36�KPMG�Research
48
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
mobile�content,�since�only�high-end�evolved�users�could�actually�activate�and
subscribe�to�rich�media�content�on�their�mobile�phones.
• Consumer Education: Given�the�rate�of�monthly�subscriber�additions�(average
of�around�9.4�mn�per�month37 in�2008),�telecom�operators�are�presently�more
focused�on�customer�acquisition�than�marketing�of�on-deck�content.�Lack�of
such�marketing�initiatives�by�the�telecom�operator�implies�that�even�users
with�data�active�handsets�often�get�excluded�from�the�addressable�market
since�they�are�not�aware�of�the�existence�of�on-deck�data�content.�
Console Gaming
Console�gaming�is�the�largest�money�churner�in�the�global�market�and�is�gaining
prominence�in�India�too.�In�2008,�the�Indian�console�gaming�segment�registered
total�revenues�of�INR�4.1�bn�which�is�expected�to�go�up�to�INR�9.4�bn�in�2013�on
the�back�of�favorable�demographics,�rising�urban�disposable�incomes�and�new
generation�consoles�penetrating�the�Indian�market.�Organized�marketing,�which
was�missing�some�years�ago,�has�led�to�a�new�demand�among�the�Indian
consumers�for�console�gaming.�It�has�gone�from�being�a�product�for�the�cult
group�to�a�more�lifestyle�oriented�product.
Secondly,�easy�availability�and�affordability�of�consoles�has�led�to�a�growth�in�this
market.�The�fall�in�console�prices�from�approximately�INR�25,000�in�2006�to
approximately�INR�7,500�for�older�hardware�and�INR�13,000�–�20,000�for�current
hardware�makes�them�an�attractive�buy�for�the�non-user�to�plug�and�play.
However,�high�customs�duties�and�indirect�taxes�have�made�legitimate�console
hardware�and�software�approximately�40�percent�more�expensive�than�grey
market�imports.�Secondly,�the�release�windows�in�India�for�popular�games�do�not
coincide�with�global�launches.�Early�adopters�and�active�gamers�therefore�turn�to
grey�market�imports�and�pirated�software�to�ensure�that�they�get�to�play�their
favorite�titles�on�the�latest�hardware.
Price�point�for�games�is�very�important�in�India.�Steep�prices�of�new�games
around�USD�50�in�U.S.�plus�a�steep�import�duty�in�India�make�the�games
expensive�for�end�user.�Also,�console�gaming�faces�stiff�competition�from�mobile
and�PC�gaming�since�the�latter�are�relatively�cheaper.�
In�India,�console�gaming�has�been�more�of�an�urban�phenomenon�whereas
mobile�gaming�with�its�increased�reach�(urban�and�rural)�and�ease�of�access�has
the�potential�to�evolve�much�quicker�than�console�gaming.�With�a�reach�of�over
80038 mn�telecom�subscribers�in�India�in�2013,�mobile�gaming�is�expected�to�be
a�significant�competitor�to�the�console�gaming�market�in�India.
37�TRAI38�KPMG�Estimates
49
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
PC and Online Gaming
PC�games�have�been�around�for�a�very�long�time�too.�In�the�1980s,�the�high�cost
of�console�games�was�beyond�the�reach�of�the�average�Indian�households.�The
purchase�of�the�computer�by�a�household�meant�that�the�father�would�use�it�to
type�official�documents�with�teenagers�and�young�adults�popularizing�games
such�as�Quake,�Prince�of�Persia,�Doom,�Wolfenstein�3D,�etc.�Today,�the�PC
gaming�market�has�grown�to�INR�978.6�mn�and�expected�to�grow�at�a�CAGR�of
over�36�percent�through�2013.�The�primary�growth�drivers�for�PC�games�in�India
are�the�growing�broadband�subscriber�base,�multifunctional�nature�of�PCs�and
availability�and�price�points�of�PC�game�titles.
With�over�6539 mn�PCs�the�penetration�rate�is�increasing�at�20�percent�per
annum�thus�expanding�the�market�for�PC�gaming�in�India.�Moreover,�the�younger
generation�is�getting�hooked�to�PC�gaming�due�to�the�rise�in�the�number�of
gaming�cafes�in�the�neighborhood�including�the�entry�of�players�such�as�Reliance.
The�number�of�gaming�cafes�with�the�latest�gaming�PCs�for�playing�single�player
as�well�as�multiplayer�games�outnumbers�gaming�cafes�that�have�consoles�like
the�PS3�or�Xbox�360.
PCs�being�far�more�multifunctional�than�consoles�attract�a�wider�user�base�than
consoles.�Moreover,�the�number�of�PC�game�titles�available�in�India�far
outnumbers�those�of�console�games,�particularly�when�it�comes�to�multiplayer
online�games.�Price�points�of�PC�game�titles�are�lower�than�console�titles�making
this�segment�attractive�for�a�wider�group�of�users�across�socio-economic
classifications.�The�price�point�advantage,�however,�is�partially�offset�by�the�high
entry�cost�of�PCs,�especially�high�end�gaming�PCs�and�the�obsolence�factor,
whereby�PC’s�require�frequent�upgrades�to�play�the�latest�game�titles.�Consoles,
on�the�other�hand,�have�longer�refresh�cycles.
Even�though�the�metros�have�seen�some�improvement,�poor�infrastructure�base
for�high�speed�internet�connectivity�is�the�biggest�challenge�facing�the�online
gaming�community�in�India.�Ping�and�Frame�Per�Second�(FPS)�are�often�judged
by�players�to�be�deciding�factors�during�gameplay�and�must�therefore�be
optimum.�ISPs�and�hosting�servers�must�therefore�maintain�fast�servers�and
robust�infrastructure�to�maintain�speedy�connections.�In�the�absence�of�a
conducive�gaming�environment�the�gamer�will�look�at�alternate�media�to�satisfy
his�gaming�urge.
39�IAMAI
50
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Online�advertising�though�growing�is�being�slowly�accepted�by�advertisers�in
India.�In�game�placements�and�games�focused�on�advertiser�products�are�too
early�for�this�market�and�advertisers�have�not�been�able�to�monetize�this�feature.
Advertisers�are�relying�on�banner�advertisements�alone�but�they�cannot�be
deployed�during�game�play�since�they�would�interfere�with�the�gaming
experience.�
Communities�do�exist�in�India�but�they�have�not�assumed�scale�similar�to�the
western�world.�In�India,�communities�are�extensions�of�a�group�of�friends�or
family�members.�The�online�community�format�where�gamers�with�similar
interests�from�different�geographies�come�together�is�still�at�a�nascent�stage�and
will�take�3-4�years�to�develop.
Overall Market Size
The�overall�gaming�market�in�India�is�estimated�at�INR�6.5�bn�in�2008�and�is
expected�to�grow�over�four-fold�to�reach�INR�27.4�bn�in�2013�at�a�CAGR�of�over�33
percent.�The�Indian�gaming�market,�though�growing�at�a�healthy�rate,�is�dwarfed
by�the�size�of�the�gaming�market�in�developed�countries�such�as�the�US�which
stands�at�USD�37�billion40 in�2008.�Factors�such�as�a�young�population,�rising
disposable�incomes,�increasing�PC�and�wireless�users�are�attracting�domestic
and�international�gaming�companies,�developers,�publishers�to�this�market.
Size�of�the�Indian�Gaming�Industry
Source:�KPMG�Analysis,�KPMG�Interviews
40�NPD�Group�via�www.itfacts.biz
51
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Gaming Industry
(INR bn)2005 2006 2007 2008
CAGR
(2006-08)2009p 2010p 2011p 2012p 2013p
CAGR
(2009-13)
Mobile 0.5 0.6 0.9 1.4 37.4% 3.2 5.8 8.7 11.4 13.4 57.0%
Console 1.2 1.8 2.7 4.1 50.9% 5.0 5.9 7.0 8.0 9.4 18.0%
PC�&�Online 0.4 0.6 0.8 1.0 33.5% 1.2 1.6 2.2 3.1 4.6 36.2%
Total�Industry�Size� 2.2 3.0 4.4 6.5 44.6% 9.4 13.3 17.9 22.5 27.4 33.3%
Source:�KPMG�Analysis,�KPMG�Interviews
Putting�Things�in�Perspective...
Gaming Sector: Growth Drivers
Mobile gaming
• Increasing�telecom�base�and�arrival�of�3G:�India�telecombase�is�expected�to�grow�from�347�mn�subscribers�in2008�to�815�mn�subscribers�in�2013�at�a�CAGR�of�19percent41.�The�expected�rollout�of�3G�services�willprovide�efficient,�high�speed�data�networks�to�mobilegamers
• Decreasing�voice�ARPUs:�Given�the�declining�ARPUsfrom�voice�services,�mobile�value�added�services�willassume�increasing�significance�as�additional�revenuesources�to�offset�this�decline
Console gaming
• Demographics�and�Rising�Incomes:�India�is�a�youngcountry�with�over�two-thirds�of�its�people�aged�under�35(the�primary�target�segment).�This�coupled�with�the�risingdisposable�incomes�in�urban�India�and�the�increasingconsumerism�makes�a�good�case�for�growth�in�theconsole�gaming�segment�in�the�next�few�years
PC and Online Gaming
• Increasing�broadband�penetration:�The�number�ofbroadband�subscribers�in�India�has�increased�from�0.7mn�in�2004�to�4.942 mn�by�September�2008�andcontinues�to�grow�rapidly�–�this�will�help�in�driving�onlinegaming
• Strong�marketing�and�distribution:�Mainstreamadvertising�as�well�as�the�strong�distribution�network�ofgaming�chains�such�as�Reliance�Webworld�has�attractedmany�young�people�in�urban�areas�to�PC�gaming�–�suchchains�will�continue�to�drive�growth�in�the�PC�gamingsegment�in�the�future�as�well
Gaming Sector: Key Challenges
Mobile Gaming
• Skewed�revenue�sharing�agreements�with�mobileoperators:�Because�of�the�direct�billing�relationship�withthe�end�user,�operators�in�India�typically�get�60-70percent�of�the�revenues�for�VAS�while�content�creatorsget�only�15-20�percent
Console Gaming
• High�customs�duties�and�indirect�taxes:�These�makelegitimate�console�hardware�and�software�about�40percent�more�expensive�than�grey�market�imports.
• Release�windows�for�popular�games�do�not�coincide�withglobal�launches:�Early�adopters�and�active�gamerstherefore�turn�to�grey�market�imports�and�piratedsoftware
PC Gaming
• Piracy:�Piracy�is�and�will�continue�to�remain�the�biggestthreat�for�PC�games,�because�of�ease�of�high�streetavailability�of�illegal�CDs�at�rock�bottom�prices.�Moreoverwith�growth�of�broadband,�downloading�of�pirated�gamesthrough�internet�and�P2P�networks�are�likely�to�hurt�theindustry
41�IAMAI42�IAMAI
52
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Narrowcasting
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
03
Narrowcasting
Narrowcasting: Niche is in
Micro-segmentation of the Indian Market
One�common�trend�seen�across�media�sectors�in�India
today�is�the�growing�importance�of�niche�content.�Besides
targeting�the�masses,�the�M&E�industry�players�have�began
to�focus�on�the�“classes”�as�well.�
Different Propellers behind different SubSectors
Different�factors�have�influenced�the�advent�of�niche�content
across�different�sectors.�In�Television,�the�primary�driver�has
been�the�sharp�increase�in�the�number�of�satellite�channels;
total�number�of�channels�has�increased�from�about�120�in
2003�to�over�400�by�the�end�of�20081.�This�in�turn,�has�been
facilitated�by�the�digitization�of�TV�distribution.�Mediums
such�as�DTH�and�digital�CAS�allow�the�distributors�to
provide�a�much�larger�number�of�channels�to�the
consumers.�This�crowding�of�channels�on�television�has�had
two�direct�implications.�One,�with�the�plethora�of�GECs
offering�the�same�standard�genre�of�content�(i.e.�daily
soaps),�both�new�and�old�GECs�resorted�to�content
differentiation�in�order�to�gain�viewership.�Secondly,�with�the
ability�to�broadcast�a�much�larger�number�of�channels,�the
broadcasters�had�more�freedom�to�launch�niche�channels
which�generally�earn�lesser�revenue�per�broadcast�hour�than
GECs.�Besides,�niche�channels�have�also�started�to�garner
higher�realizations�and�a�premium�for�reaching�out�to�their
target�audience.
This�has�led�to�a�self�propelling�effect.�As�the�viewers�are
getting�more�choices�in�terms�of�content,�TRPs�of�hitherto
popular�dramas/soaps�have�witnessed�a�decline�and�reality
shows,�talent�hunts,�game�shows�etc.�have�broken�into�the
Top�100�TRP�list�-a�list�that�used�to�feature�only�soaps
earlier.�The�viewership�of�channels�considered�as�niche
categories�such�as�news,�kids�and�infotainment�has�also
risen�over�the�years.�
The�trend�is�similar�for�Films.�A�few�years�ago,�niche�films-
often�referred�to�as�parallel�cinema-�used�to�have�limited
takers�in�terms�of�distribution�and�viewing.�It�was�important
for�a�movie�to�have�mass�appeal�to�be�even�considered
financially�viable.�The�two�main�reasons�for�the�same�were
low�priced�tickets�and�under�declaration�of�cinema�goers�in
the�then�prevalent�single-screen�theaters.�Hence�the
distributors�made�money�only�if�the�number�of�people
watching�a�movie�was�high.�Therefore�there�was�not�much
experimentation�with�the�scripts,�since�most�of�the�films
were�made�keeping�mass�audiences�in�mind.�Further,�due
to�budget�constraints,�producers�had�to�rein�in�the
1�Industry,�Indiastat
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
production,�distribution�and�marketing�costs�of�niche
movies.�As�a�consequence,�in�spite�of�garnering�critical
appreciation,�these�films�did�not�see�box�office�success.�
The�emergence�and�increasing�popularity�of�the�multiplex
format�has�given�a�new�lease�of�life�to�the�niche�category�of
cinema�in�India.�These�multiplexes,�which�sometimes�have
screens�with�seating�capacities�starting�from�as�low�as�100,
allow�the�exhibitors�to�experiment�with�the�non-mainstream
movies.�Such�movies�usually�do�not�have�a�large�audience
and�by�releasing�such�films�in�theaters�with�smaller
capacity,�the�theater�can�manage�reasonable�capacity
utilizations�even�with�lesser�number�of�people.�This�helps
them�maximize�the�potential�of�any�film�irrespective�of�its
budget�and�star�cast.�Ticket�prices�in�multiplexes�are�also
much�higher�as�compared�to�single�screens,�with�no�under-
declaration�of�revenues.�This�provides�a�platform�for
thematic�exclusivity�and�creativity�to�the�producers�since
they�can�now�make�movies�keeping�only�a�particular�class
of�audience�in�mind.
The�print�sector�too�is�witnessing�a�lot�of�content�variety�in
the�newsstands-especially�in�the�case�of�magazine
publishing.�Taking�a�cue�from�their�foreign�counterparts,
Indian�magazine�publishers�are�launching�niche�magazines
across�diverse�genres,�targeted�at�different�segments.
While�earlier�it�was�news�and�film�magazines�that�used�to
dominate�the�newsstands,�the�current�publications�range
across�topics�such�as�Travel,�Lifestyle,�Healthcare,
Automobiles,�Food,�Heritage�and�Culture�etc.�The�spurt�of
magazine�titles�in�India�is�mostly�a�result�of�international
magazine�publishers�aggressively�investing�in�the�Indian
market,�after�the�government�opened�up�100�percent
foreign�ownership�rights�in�the�non-news�and�special
interest�categories�in�print�media.�As�a�result�of�the
opportunities�available,�several�foreign�magazine�publishers
set�up�shop�in�India.�This�also�prompted�established�national
players�such�as�India�Today�and�Outlook�to�expand�their
product�offering.�
The�spurt�in�niche�magazines�is�also�powered�by�the
country’s�changing�economics�and�a�new�generation�of
highly�brand�conscious�consumers.�With�global�luxury
players�also�gradually�establishing�their�presence�in�India,
there�was�a�need�for�more�targeted�advertising.�The�niche
model�has�got�more�advertisers�interested�as�they�are�now
able�to�focus�their�spending.�Further,�players�with�a�range�of
publications�can�create�baskets�of�advertising�rates�across
various�properties;�this�helps�to�attract�and�retain�a�diverse
set�of�advertisers�under�one�roof.
56
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Emerging Genres across sectors
Driven�by�these�factors�discussed�above,�the�Indian�M&E�industry�has�witnessed
great�variety�in�terms�of�new�and�innovative�content�being�introduced�over�the
past�two�years.�
TV – Growth of Niche Channels and Reality Television
Two�important�developments�have�taken�place�in�the�past�few�years�as�far�as�TV
content�is�concerned.�Firstly,�there�has�been�a�strong�growth�in�the�number�of
channels�which�come�under�niche�categories�such�as�News,�Kids,�Infotainment,
Spirituality�and�Lifestyle.
Two�factors�have�driven�this�growth.�Firstly,�the�viewership�share�of�mass
entertainment�channels�has�been�on�a�downward�trend�(although�the�trend�has
been�reversed�for�Hindi�GECs�in�2008�on�account�of�the�new�GECs�launched
expanding�the�market�itself).�
Source:�KPMG�Research�and�Analysis
Source:�TAM�Peoplemeter�System�(TG:�CS�4+,�All�India)
Viewership�share�of�GECs
Emerging�Genres�across�Sectors
Sector Niche Genres
TV
Programming•�Reality�Television•�Talent�Hunts•�Game�Shows•�Mythologicals
Channels• Lifestyle• Spiritual• Kids�Channels• Entertainment�News
Film
•�Small�Budget�Movies•�Horror�and�Kids�Genres•�Remakes�and�Sequels�•�Movies�being�adapted�from�Books
Print •�Specialty�Magazine�Genres-�Home�and�Lifestyle,�Men,�Travel�etc.•�Supplements
Radio•�Very�limited�niche�content�right�now�because�of�regulatory�
issues.�However,�in�future,�niche�stations�based�on�talk�shows,�English�music�and�Retro�Hindi�music�is�likely�to�emerge
Animation •�Mythology-based�Films�
257
At�the�same�time,�the�viewership�share�of�certain�niche�segments�has�increased.
New�niche�channels�are�being�launched�today�have�created�whole�new�genres�in
the�Indian�TV�market.�Some�examples�are�“E24”�-�a�24�hour�Bollywood�news
channel�launched�by�BAG�Films,�2�channels�launched�by�TV18�–�“Topper�Channel”
-�an�education�centered�channel�for�high�school�students�and�“Homeshop18”�-�a
home�shopping�channel.�Many�niches�like�men’s�channels,�cookery�channels,
home�and�housekeeping�channels�and�weather�channels�are�yet�to�be�fully
explored�and�there�may�be�new�channel�launches�in�these�genres�as�well�in�the
near�future.�For�instance,�the�Indian�Meteorological�Department�has�already�short
listed�three�TV�networks�for�launching�a�dedicated�weather�channel.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source:�TAM�Peoplemeter�System�(TG:�CS�4+,�All�India)
Viewership�share�of�Niche�Channels
Some�niche�channels�launched�on�Indian�television�in�2008
Genre Channels Media Company
Lifestyle NDTV�Good�Times NDTV
Business UTVi UTV
SportsNeo�Sports Nimbus�Communications
Star�Cricket Star
Kids Chutti�TV Sun
Movies
Bindass�Movies UTV
World�Movies UTV
NDTV�Lumiere NDTV
Hindi�news News�24 BAG�Films
English�News NewsX INX�Media
Education Topper TV�18
Entertainment�News E24 BAG�Films
Source:�Annual�Reports,�Company�Website�,KPMG�Research
258
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
It�is�important�to�note�that�in�absolute�terms,�GECs�still�garner�a�much�greater
share�of�viewership�than�any�other�category�of�channels.�Having�a�GEC�in�the
bouquet�gives�the�broadcaster�an�umbrella�brand�around�which�niche�channels
can�be�developed.�Three�new�Hindi�GECs�were�launched�between�November
2007�and�July�2008�–�NDTV�Imagine,�9x�and�Colors.�The�launch�of�these�channels
has�expanded�the�size�of�the�market�itself�resulting�in�a�30�percent�increase�in
weekly�GEC�GRPs�in�the�target�Hindi�speaking�markets�from�November�2007�to
October�2008.�At�the�same�time,�due�to�fragmentation�of�viewership,�the
combined�absolute�viewership�of�the�older�GECs�has�fallen�by�around�12�percent
in�the�same�period2.�
Of�the�new�GECs,�Colors�has�been�an�exceptional�performer�and�has�moved�up
to�the�number�two�slot�banking�on�new,�interesting�and�differentiated�content
with�shows�like�Ballika�Vadhu�(social�drama),�Jai�Shri�Krishna�(mythological),�Big
Boss�(reality)�and�Ek�Haseena�Ek�Khiladi�(dance�talent)�which�have�scored�high�on
TVRs.��
Source:�exchange4media.com,�SSKI�2008,�KPMG�Research
Gross�rating�points�of�GECs�
Channel GRP (Nov 07) GRP (Oct 08)
Star�Plus 356 271
Zee 254 194
Sony 102 113
Sahara�+�Star�One�+�Sab 164 193
NDTV�Imagine 74
9x 57
Colors 233
Total 876 1135
Source:�exchange4media.com,�SSKI�2008,�KPMG�Research
Viewership�share�between�GECs�(November�2007)
Viewership�share�between�GECs(October�2008)
�
2�exchange4media.com,�SSKI�2008,�KPMG�Research
59
In�terms�of�genres,�mythology�and�reality�shows�have�been�quite�successful.
Analysis�of�original�programming�on�GECs,�throws�light�on�this�trend.�Reality,
game�and�talent�shows�take�about�14�percent�of�the�pie�today�compared�to
about�5�percent�in�20043.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source:�KPMG�Analysis
Original�programming�on�GECs�(2004) Original�programming�on�GECs�(2008)
3�KPMG�Analysis
60
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Apart�from�advertising�revenues,�such�shows�also�provide�other�alternate
revenue�streams�to�the�broadcaster.�Some�of�these�are�listed�below:
In�this�regard,�revenue�from�interactive�services�i.e.�Peer-to-Application�(P2A)�and
SMS�–�generated�by�reality�shows�forms�a�significant�revenue�source�for
broadcasters.�Of�the�total�P2A�market�of�about�INR�10.3�bn,�broadcasters�get�a
share�of�about�25�percent.�This�translates�into�an�INR�2.6�bn�revenue�stream,�or
about�3�percent�of�the�total�advertisement�revenues�of�broadcasters4.�It�is�likely
that�the�P2A�market�might�keep�growing�over�the�next�few�years,�mirroring�the
steady�growth�in�mobile�penetration.
Among�the�game�show�formats,�many�of�the�bigger�game�shows�in�India�have
been�hosted�by�Bollywood�stars�and�are�based�on�global�game�show�formats.
Worldwide,�the�roll-out�of�global�entertainment�formats�is�getting�faster,�with
broadcasters�increasingly�seeking�tried�and�tested�formats�with�a�proven�track
record�of�success.
Source:�Industry�Sources,�KPMG�Research
Alternative�revenue�sources�for�Reality�Shows
Applications Revenue Model Current Usage
Mobi-tones,�Mobi-Pixs,�Mobi-Video,�Mobi-Logo,�Audio�Samples,�Audio�tracks� Flat�Fee�per�download High
SMSs,�Mobi-tones,�Mobi-Pixs,�Mobi-Video,�Mobi-Logo,�Audio�Samples,�Audiotracks,�Alerts,�Games,�Chats,�Clues,�EventEntry,�Voting�
Revenue�sharing High
Merchandising�–�CDs,�Books,�Videos,DVDs,�Tickets,�Fan�memorabilia� Commission�on�Sales Low
Games,�Video�On�Demand�(VOD),Highlights�clips� Pay�per�play Low
4�Credit�Suisse,�2008
Source:�Credit�Suisse�2008,�KPMG�Analysis
Mobile�P2A�revenues�for�Broadcasters�(INR�bn)
61
The�popularity�of�international�format�based�game�shows�among�Indian
audiences�can�be�judged�from�the�fact�that�Viacom18’s�new�channel�‘Colors’
primarily�banked�on�a�reality�game�show-�‘Khatron�ke�Khildai’-�as�its�launch�pad.
After�the�first�season�of�Fear�Factor�got�over,�the�channel�replaced�it�with�another
international�format�reality�show-�Big�Boss,�which�too�became�popular�and
consistently�featured�in�the�Top�50�programmes�list5.�
Indian�content�production�houses�can�take�a�cue�from�this�and�develop�their�own
formats�and�content�that�can�travel�in�the�global�marketplace.�That�is�what�keeps
international�content�companies�like�Endemol�in�strong�financial�health�(In�2006,
75�percent�of�Endemol’s�revenues�came�from�non-scripted�format�shows6).
The�mythology�genre�is�another�attraction�for�channels�that�have�re-discovered�a
steady�demand�for�such�shows�among�the�Indian�audience.�Ramayana�was
aggressively�promoted�by�NDTV�Imagine�before�the�channel�went�on�air�in
January�2008.�From�February�2008,�SET�began�to�air�re-runs�of�Sanjay�Khan's�Jay
Hanuman�for�which�it�procured�the�rights�from�Doordarshan.�Following�the�lead,
9X�(another�new�GEC,�launched�by�INX)�launched�its�version�of�Mahabharata�in
July�2008.�
However,�to�put�things�in�perspective,�soaps�still�dominate�the�TVR�listings.�For
instance�among�the�Hindi�GEC�shows,�among�the�emerging�genres�(mythology
and�reality)�discussed,�11�shows�made�it�to�the�Top�50�programmes�(across�all
channels)�versus�22�soaps.�(based�on�TAM�Ratings�for�the�week�from�Jan�4�to
Jan�10,�2009)7.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source:�KPMG�Research
Some�Indian�Television�Shows�based�on�Global�Formats
Show Channel Global Format Country of Origin
Kya�Aap�Panchvi�PassSe�Tez�Hain Star�Plus Are�you�smarter
than�the�fifth�grader U.S.
Dus�Ka�Dum SET The�Power�of�10 U.S.
Big�Boss�(Season�2) Colors Big�Brother Netherlands
Khatron�Ke�Khiladi Colors Fear�Factor Netherlands
5�As�per�TRPs�provided�by�TAM�Media�Research6�Endemol�Investor�Roadshow�(March�2007)7�Indiantelevision.com
Source:�TAM�Top�100�programmes�(04�Jan�–�10�Jan,�2009)
Hindi�GEC�shows�among�Top�Television�Programmes�
62
In�fact�between�2006�Q1�and�2008�Q1,�soaps�actually�increased�their�overall�TVR
share�on�television�from�39�to�48�percent8.�Given�the�family�oriented�Indian
culture,�it�is�likely�that�soaps�may�continue�to�dominate�the�TRPs�in�the�future�as
well,�but�reality,�gameshows�and�talent�hunts�have�clearly�demonstrated�their
ability�to�attract�new�audiences�to�a�channel�(which�a�good�lineup�of�soaps�can
then�help�to�retain).
It�is�not�just�GECs�that�have�been�altering�their�programming�to�suit�the�new
tastes�of�audiences,�the�news�channels�too�have�experimented�with�new
content�(and�new�packaging�of�content)�over�the�past�few�years�in�an�effort�to
win�the�TRP�race.�Lifestyle�shows�which�track�the�page�3�parties,�Bollywood�and
Hollywood�shows,�automobiles�related�shows�etc.�are�some�of�the�new�content
shown�on�English�news�channels.�The�Hindi�channels,�on�the�other�hand,�have
heavily�banked�on�‘tabloid’�content�such�as�crime�shows�that�rely�heavily�on
sensationalism.�They�also�try�and�package�news�more�attractively,�often�using
animations�to�explain�news�events.�
The�following�charts�give�an�indication�about�the�content�variety�prevalent�in
news�channels.�
The�news�channels�in�India�have�evolved�from�being�serious�and�purely
information�centric�to�providing�both�information�and�entertainment�in�the�same
package�in�an�effort�to�gain�more�eyeballs.���
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
8 Industry�sources,�KPMG�Research
Source:�TAM�Media�Research,�KPMG�Analysis
Programming�Content�on�English�News�Channels�(Jan-June�2008)
Source:TAM�Media�Research,�KPMG�Analysis
Programming�Content�on�Hindi�News�Channels�(Jan-June2008)
63
Films: Small is Big-Growing Popularity of Multiplex Movies
In�the�Film�Entertainment�sector,�numerous�small�budget�movies�are�being�made
today,�keeping�in�mind�a�specific�audience�class�and�their�tastes.�While�the�gross
realizations�of�the�big�budget�films�are�much�more�considering�the�huge�sums
spent�on�making�them,�the�“non-commercial”�movies�are�considered�relatively
much�less�riskier�today�with�the�possibility�of�a�higher�return�on�investments.�This
has�prompted�even�the�large�and�established�production�houses�to�experiment
with�scripts�and�get�into�making�small�budget�films-�termed�as�“multiplex
movies”-�to�capture�the�increasing�niche�audience�for�such�films.�Some�of�these
films�have�turned�out�to�be�blockbuster�runaway�hits.�For�instance,�“Bheja�Fry”
was�a�small�budget�film�made�by�Rajat�Kapoor�at�a�reported�cost�of�INR�6
million9 and�netted�12-13�times�its�investment�at�the�box�office10.�In�2008,
“Mithya”,�another�small�budget�film�made�at�a�budget�of�INR�22.5�mn�grossed
more�than�twice�that�amount11.�Towards�the�latter�half�of�the�year,�small�ticket
movies�like�“A�Wednesday”�and�“Welcome�to�Sajjanpur”�have�all�done�well�at
the�box�office.
The�year�2008�saw�a�spate�of�small�budget�releases,�most�of�which�have�been
critically�acclaimed.�The�increase�in�the�number�of�such�films�shows�that�small
budget�movies�have�come�to�stay�in�India.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
9�Indiantelevision10�Indiaboxoffice11�Indiantelevision
Source:�Boxofficeindia
Some�Multiplex�Movies�released�in�recent�times
Film Year of ReleaseNet Collections
(INR Mn)Status
Pyaar�ke�Side�Effects 2006 130 Average
Khosla�ka�Ghosla 2006 70.9 Average
Honeymoon�Travels�Private�Ltd 2007 180 Average
Bheja�Fry 2007 79.3 Hit
Mithya 2008 54.9 Hit
Aamir 2008 30.2 Hit
Rock�On 2008 265 Hit
A�Wednesday 2008 105.7 Hit
Welcome�to�Sajjanpur 2008 104.4 Above�Average
64
Trend of Remakes and Sequels Catching Up in Films
Since�2007,�remakes�have�become�especially�popular.�Remakes�of�successful�old
Bollywood�films�like�Don,�Sholay�and�Umrao�Jaan�have�hit�the�screens.�Sale�of
remake�rights�thus�emerged�as�another�revenue�earning�opportunity�for�film-
rights�owners.�For�instance,�producer�Boney�Kapoor�bought�the�remake�rights�of
Telugu�Film�Pokhiri�while�Mukta�Arts�sold�the�remake�rights�of�its�film�“Karz”�to�T
Series.�With�players�increasingly�inclined�towards�legitimate�remake�versions,
remake�rights�can�become�a�significant�source�to�monetize�film�library�content.
Further,�like�its�Hollywood�counterparts,�Bollywood�too�has�begun�to�cash�in�on
its�success�by�making�sequels�of�box�office�hits.�Sequels�of�films�like�“Golmaal
Returns”�and�“Sarkar�Raj”�have�been�released�in�recent�times�and�received�well
by�the�audience.
Advance Booking- Celluloid Adaptations of Books
Another�emerging�genre�in�filmed�entertainment�is�the�instance�of�popular�books
being�picked�up�for�film�adaptations.�The�bond�between�books�and�cinema�is�an
old�story�for�Hollywood,�where�some�of�the�cult�films�have�been�based�on
bestsellers.
This�trend�has�recently�picked�up�in�Bollywood.�October�2008�saw�the�Box�Office
release�of�”Hello”,�which�was�the�celluloid�adaptation�of�Chetan’s�Bhagat’s�“One
Night�@�The�Call�Centre”.�Though�the�film�was�not�a�box�office�success,�the�trend
has�picked�up�in�the�movie�industry�with�a�slew�of�releases�based�on�fiction
being�lined�up�for�the�future.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source:�KPMG�Research
Some�Hollywood�Movies�adapted�from�Books
To�Kill�a�Mockingbird Jurassic�Park
Schindler’s�List Wuthering�Heights
Ben�Hur A�Passage�to�India
Sense�and�Sensibility 2001:�A�Space�Odyssey
Gone�with�the�Wind Harry�Potter�Series
Jurassic�Park Lord�of�the�Rings�Series
Some�forthcoming�movie�releases�being�adapted�from�Books
Film Producer Book Author
Zoya Red�Chillies The�Zoya�Factor Anuja�Chauhan
3�Idiots Vidhu�Vinod�Chopra Five�Point�Someone� Chetan�Bhagat
The�Japanese�Wife Aparna�Sen The�Japanese�Wife Kunal�Basu
Source:�KPMG�Research
65
The�performance�of�these�films�at�the�Box�Office�are�expected�to�determine
whether�more�film�makers�come�forward�and�adapt�more�of�bestselling�fiction
for�celluloid�depiction.
Growing popularity of mythology-based animation films in India
Television�is�not�the�only�sector�that�has�re-discovered�the�appeal�of�mythology
for�the�Indian�audience.�The�Indian�animation�industry�too�has�found�mythology�to
be�an�attractive�proposition;�it�has�banked�largely�on�the�tried�and�tested
mythological�genre�to�venture�into�end-to-end�in-house�productions.�The�table
below�lists�some�of�the�mythology-based�animation�movies�produced�by�Indian
studios�since�2005.
For�an�industry�that�is�plagued�by�lack�of�creative�talent�for�the�conceptualization
of�good�original�animation�content,�the�rich�mythology�and�folklore�of�India
provides�a�good�source�of�inspiration.�The�main�challenge�lies�in�making�these
stories�location,�religion,�language�and�culture�neutral�so�that�these�animation
films�can�be�sold�to�audiences�across�the�world.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Mythology-based�animation�movies�produced�in�India
Movie Producer/Animation Studio Year of Release
Hanuman Silvertoons 2005
Krishna ECATS,�Media�Solutions 2006
My�Friend�Ganesha Radiant�Animation 2007
Bal�Ganesh Shemaroo�Entertainment 2007
Hanuman�Returns Percept�Picture�Company� 2007
My�Friend�Ganesha�II Radiant�Animation 2008
Source:�KPMG�Research
“These are exciting and challenging times for the Indian film industry. Audienceshave shown a propensity to experiment with new genres, revenue streams haveincreased and new markets have opened up; at the same time B2B revenues areunder pressure, liquidity is tight and marketing costs have increased with mediabecoming more fragmented and cluttered. Navigating these waters will requiresome steady hands on deck and the next few years will determine who will sink orswim.”
Siddharth Roy Kapoor, CEO, UTV
66
Print-Spurt in Special Interest Magazines
In�the�print�sector,�even�though�the�readership�surveys�have�reported�decline�in
the�overall�readership�of�magazines,�emergence�of�specific�genres�is�fuelling�the
growth�trajectory�of�magazines.�Review�of�readership�growth�in�10�select
magazine�genres�taken�together�indicate�that�readership�has�grown�by�28.1
percent�in�2006�over�200512.�The�table�below�summarizes�the�growth�story�of
the�niche�genres.
Industry�players�also�seem�to�agree�that�the�growth�of�the�sector�depends�on
niche�genres.�Accordingly,�in�continuation�of�the�previous�year’s�trend,�the
magazine�market�saw�a�healthy�growth�in�the�year�2008�with�many�niche�titles
taking�off�across�genres�and�languages.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Magazines�-�Readership�Growth�across�selected�genresTotal�Readership�(Figures�in�‘000)
GenreSum of
NRS 2006
Sum of
NRS 2005% Increase
Auto 485 320 51.6
Business�and�Finance 2,628 1,926 36.4
Career�and�Education 4,707 2,743 71.6
Fashion�and�Lifestyle 11,271 7,033 60.3
General�Interest 59,389 50,271 18.1
Healthcare 1,413 519 172.3
Men's 211 96 119.8
Sports 9,144 5,650 61.8
Travel 802 505 58.8
Women's 30,637 25,310 21
Total 1,21,618 94,963 28.1
Source:�NRS,�Exchange4Media
12 NRS,�Exchange4Media
67
With�increasing�competition�from�magazines,�newspaper�publishers�have�also
started�segmenting�newspaper�readers.�Over�the�past�year,�the�Print�Media
Market�has�witnessed�increasing�proliferation�of�compact,�smaller�format�dailies
like�Mint,�Metro�Now,�Mail�Today�and�most�recently�the�Hindustan�Times�Café�in
Mumbai.�Even�the�Hindi�language�media�joined�the�bandwagon�with�the�launch
of�iNext�by�the�Jagran�Group,�and�Amar�Ujala�Compact�from�the�Amar�Ujala
Group.�Newspapers-both�national�and�regional�are�also�increasing�their�selection
of�supplements,�which�focus�on�specific�topics�of�interest.�Besides�targeting�the
youth�and�female�readership,�compacts�and�supplements�also�help�in�tapping
those�advertisers�who�normally�go�to�magazines�as�well�as�in�chaining�those
segments�of�readers�who�are�most�susceptible�to�defecting�to�the�competition.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Some�Niche�Launches�in�Magazines�in�2008
Genre Publishers/DistributorsTitle of the
Magazine
Fashion�and�Lifestyle Twenty�Onwards�Media Traffic�Life
WomenWorld�Wide�Media-Mondadori�Group Grazia
Dainik�Bhaskar�Group She
Men Living�Media�Group-Conde�NastPublications GQ
Auto Living�Media�Group-Axel�Springer Auto�Bild
Celebrity�News Outlook�Group-Time People
City�Centric Premier�Entertainment�and�Media BangaloreHappenings
MusicMW.Com�India�Pvt�Ltd-Wenner�Media; Rolling�Stone;
Media�Transasia�India-Alpha�Media�Group Blender
Food�and�Agriculture Delhi�Press Farm�‘n’�Food
Business�and�Finance Outlook�Group Outlook�Profit
IT�Magazine IDG�Media Windows�World
Heritage�and�Culture Heritage�India�Communications Heritage�India
Home�and�Interiors World�Wide�Media�Group-BBC BBC�Good�Homes
Source:�KPMG�Research
68
Radio- A Long Way to Go
Private�FM�radio�in�India�continues�to�be�dominated�by�the�mass�entertainment
category�i.e.�Bollywood�and�regional�music.�There�have�been�a�few
experimentations�in�recent�times,�like�the�Meow�FM�station�launched�in�2007,
catering�specifically�to�a�female�audience�and�having�a�large�portion�of�airtime
devoted�to�talk�shows.�However�such�channels�continue�to�be�exceptions�rather
than�the�rule.�The�reason�is�fairly�simple�-�multiple�frequencies�in�the�same�city
for�the�same�station�are�prohibited.�As�a�result,�radio�stations�prefer�to�take�the
safe�mass�segment�route�rather�than�experiment�with�niche�content.�
Globally,�the�situation�is�quite�different.�Radio�thrives�on�the�back�of�niche�and
local�advertising.�High�listener�loyalty�and�listeners�relating�to�a�particular�radio
channel�are�considered�the�key�characteristics�that�draw�advertisers�to�radio.�In
the�U.S.,�for�example,�with�over�10,000�commercial�radio�stations,�players
operate�across�genres�like�news,�sports,�talk�shows,�fashion,�religion,�etc13.
More�than�40�percent�of�the�total�audience�is�for�talk,�information�and�news
related�content14.�Even�within�music,�the�stations�operate�across�multiple�niche
and�sub�niche�music�formats.�
With�the�TRAI�recommendation�of�allowing�radio�stations�to�hold�multiple
frequencies�within�a�district15,�we�believe�the�private�FM�space�in�India�might
also�see�an�emergence�of�niche�channels,�when�a�policy�change�regarding�the
same�is�implemented�by�the�government.�In�the�metros�at�least,�the�need�for
niche�channels�is�already�being�felt�with�the�increasing�fragmentation�in�the
listenership�of�mass�music�oriented�channels.�According�to�industry�sources,
within�the�niche�segments,�stations�centered�on�talk�shows�and�retro�Hindi
music�are�expected�to�have�a�good�appeal�amongst�Indian�audiences.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
13�BBC�News�–�Country�Profile:�United�States�of�America�14�Press�Reports15�“Tune�in�for�bouquet,�FM�radio�may�do�a�TV”,�The�Financial�Express,�Feb�26,�2008
69
Sports as an Entertainment Genre
Sports�marketing,�which�includes�both�marketing�of�sports�events�and�teams�as
well�as�using�sports�to�market�non-sports�products,�is�today�a�business�worth
INR�20�bn�in�India�(out�of�which�cricket�alone�accounts�for�INR�18�bn)16.�Also,
very�importantly,�it�is�growing�at�a�rapid�pace�of�20�percent�a�year�compared�to
the�global�average�growth�of�5�percent�a�year17.�While�developed�countries�have
a�mature�sport�marketing�industry,�in�India�the�industry�has�just�started�to�take
off.
Media and Sports – Mutual Interdependence
The�symbiotic�relationship�between�Media�and�Sports�has�proved�durable
because�of�mutual�benefits�to�both.�The�sports�business�is�based�on�the�idea�that
people�are�willing�to�pay�to�watch�others�play,�and�television�expands�the
audience�vastly,�from�thousands�inside�the�stadium�to�millions�outside.�For
broadcasters,�more�eyeballs�mean�more�subscribers�and�advertisers.
Broadcasters�need�not�just�broadcast,�but�they�can�venture�out�to�own�their�own
sports�properties.�For�instance,�Essel�Group�(Zee�Network),�started�the�private
cricket�league�ICL,�and�owns�the�property.
The�marriage�between�sport�and�broadcasters,�though�long�and�successful,�has
been�changing�in�a�number�of�ways.�First,�the�fragmentation�of�audiences�among
hundreds�of�channels�has�given�the�most�popular�sports�enormous�bargaining
power.�Sports�are�one�of�the�few�things�that�still�have�people�tuning�in�by�the
mn.�As�the�number�of�channels�has�multiplied,�large�audiences�have�become
much�harder�to�find,�but�Sports�has�retained�its�ability�to�generate�eyeballs�for
the�broadcasters.�In�fact,�the�average�time�spent�watching�sports�channels�in
C&S�households�has�been�increasing�steadily.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source:�Brand�Reporter
Break�up�of�sports�marketingbusiness�in�India
16�Brand�Reporter,�200817�The�Economist,�2008
Source:�Brand�Reporter-�In�the�Fast�Lane,�TAM�Peoplemeter�System
Hindi�Mass News�Channels Sports�Channels
70
With�the�growth�in�sports�viewership,�the�number�of�advertisers�have�also�risen
steadily.�The�number�of�advertisers�in�the�sports�genre�grew�at�a�CAGR�of�32
percent�from�2005�to�2007.�Consequently,�the�size�of�the�sports�genre�in�terms
of�advertising�revenues�stood�around�INR�7�bn�in�FY2008�as�against�INR�5�bn�in
FY200518.
As�a�result�of�the�growth�in�advertising�revenues�from�sports,�the�scramble�for
sports�broadcast�rights�has�also�been�getting�frantic.�Two�years�ago�Nimbus,�a
media�and�sports�marketing�company,�paid�USD�612�mn�for�the�rights�to�India’s
international�matches�and�domestic�cricket�until�201019.�ESPN�Star�broadcasts
events�staged�by�cricket’s�global�governing�body,�including�World�Cups;�it�paid
more�than�USD�1�bn�for�the�global�rights�between�2007�and�2014.20
Cricket still the dominant sport in India
In�India,�sports�and�cricket�are�almost�synonymous.�Among�the�three�mega�sport
events�in�recent�years�in�India,�TV�viewing�of�Cricket�World�Cup�2007�was�highest
(113�mn)�followed�by�Olympics�2004�(65�mn)�and�FIFA�Football�World�Cup�2006
(39�mn)21.�This�was�in�spite�of�the�fact�that�India�crashed�out�early�in�the�Cricket
World�Cup.�On�the�whole,�cricket�garnered�about�65�percent�of�the�total�sports
viewership�pie�in�2007.�22
It�is�no�surprise�therefore�that�one�of�the�most�popular�Indian�sports�event�in
recent�times�that�caused�ripples�in�the�entire�Indian�media�industry�and�brought
Sports�as�a�mass�entertainment�genre�into�the�limelight�was�the�Indian�Premier
League�–�a�44�day�extravaganza�that�was�based�on�the�Twenty20�format�that�has
truly�caught�the�imagination�of�the�cricket�lovers�both�in�India�and�outside.�
IPL�has�modelled�itself�after�the�English�Premier�League�(EPL),�the�top�football
league�in�England.�Though�a�domestic�league,�like�EPL,�IPL�was�intended�to�be�a
global�business�with�global�investors,�global�players�and�a�global�broadcaster.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source:�exchange4media,KPMG�Analysis
Growth�in�Sports�Advertising
18�exchange4media19�Indiantelevision20�“ESPN-Star�edges�out�Nimbus,�wins�ICC�global�rights�for�$1.1billion”,�The�Financial�Express,�December�200621�The�Economist,�200822�TAM
71
EPL�was�started�in�1992,�and�has�since�transformed�English�domestic�football
from�a�provincial�sport�played�on�beach-like�pitches�in�half-empty�and�rickety
stadiums�to�an�international�phenomenon.�Billionaires�from�the�world�over�queue
up�to�buy�English�football�clubs.�One�of�them�is�steel�tycoon�Lakshmi�Mittal,�who
has�picked�up�20�percent�stake�in�the�club�of�Queens�Park�Rangers.�Russian
billionaire�Roman�Abramovich�also�infused�funds�and�turned�the�also-ran�Chelsea
FC�into�a�champion�club.�According�to�Forbes,�the�Chelsea�team�was�worth�USD
339�mn�in�2004.�By�early�2007,�after�two�Premiership�titles,�its�value�had�risen�to
USD�537�million23.�
Taking�a�cue�from�the�success�of�the�EPL�brand,�the�BCCI�too�hired�IMG,�a
global�sports�management�firm,�to�study�the�professional�sports�leagues�in�the
U.S.�and�Europe�and�model�its�IPL�business24.��
Advent�of�IPL�might�actually�be�a�precursor�of�the�formation�of�private�sports
leagues�in�India.�It�is�the�presence�of�private�sports�leagues�worldwide�that�have
made�acquisition�of�sports�rights�as�a�lucrative�broadcasting�property.�In�India
too,�such�private�leagues�are�expected�to�boost�acquisition�costs,�and
consequently�advertising�rates.�An�example�of�this�was�ESPN�STAR�Sports
bagging�exclusive�Global�Commercial�Rights�for�all�matches�in�the�Twenty20
Champions�League�(a�domestic�tournament�which�is�to�feature�the�leading
provincial�teams�from�India,�Australia,�South�Africa,�England�and�Pakistan)�for�10
years�at�a�whopping�USD�975�mn.�This�makes�the�tournament�the�highest�value
cricket�tournament�in�the�world�on�a�per�game�basis;�given�that�the�Champions
League�is�to�have�fewer�matches�-215�to�250�as�compared�to�600�in�the�IPL-the
per-match�cost�works�out�to�INR�170�mn�to�INR�200�mn�compared�to�under�INR
70�mn�for�IPL25.�This�in�turn,�implies�that�the�channel�has�to�sell�the�advertising
rates�for�these�matches�at�even�higher�rates�than�IPL�to�break�even.�Clearly,�with
sports�emerging�as�a�powerful�entertainment�genre�post�IPL,�the�scale�of�the
game�is�changing�rapidly.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
23�The�Economist,200824�The�Economist�200825�“ESPN-Star�bags�Champions�League�T20�rights�for�$975m”,�Business�Standard,�September�2008
72
Emergence of IPL as a hot Media Property: Will this Sustain?
Going�by�the�response�generated�in�its�inaugural�edition,�IPL�seems�to�have�truly�redefined�the�concept�of�sports�in
India.�In�a�country�where�cricket�is�already�considered�to�be�a�religion,�the�domestic�Twenty-Twenty�(T20)�tournament
further�added�to�its�popularity�by�providing�a�judicious�blend�of�the�game,�celebrities�and�entertainment.�In�the�process,
IPL�presented�cricket�as�a�complete�entertainment�package,�and�arguably�succeeded�in�attracting�new�viewer
segments�into�the�game’s�fold.�The�game�also�provided�a�big�boost�to�the�advertising�industry.�According�to�estimates,
IPL�is�expected�to�bring�in�INR�11.9�bn�every�year,�generate�TV�advertising�worth�INR�6.5�bn�a�year,�get�sponsorships
(both�team�and�central)�worth�INR�2.9�mn�a�year,�gate�receipts�of�INR�1.75�mn�a�year�as�well�as�stadium�advertising�of
INR�800�mn�a�year26.��
Monetization and Marketing of Brand IPL
The�IPL�innovativeness�was�marked�with�the�format�itself:�IPL�was�the�first�‘official’�league�form�of�cricket�in�the
country.�Besides,�T20�is�a�compact�form�of�cricket�where�each�team�bowls�20�overs.�As�a�result,�matches�typically�last
about�as�long�as�a�baseball�game-just�around�three�hours�or�so.�The�next�departure�from�tradition�came�with�the�teams:
not�the�usual�state-based�units�of�Indian�cricket�but�a�mere�eight�city-based�“franchises”�created�specially�for�IPL,�with
a�mix�of�Indian�and�international�cricketers.�Scarcity�created�value�as�first�the�franchises,�and�later�the�players�were
“auctioned”.�The�8�franchises�bid�a�combined�USD�723�mn�(INR�29�bn)�to�own�these�clubs.�The�Indian�Captain,�MS
Dhoni,�went�to�Team�Chennai�for�the�top�price�of�INR�60�million27.�In�a�sport�with�no�culture�of�inter-club�matches,
these�amounts�were�astronomical.
Twenty�percent�of�these�proceeds�were�to�go�to�IPL,�8�percent�was�to�be�allocated�as�prize�money�and�72�percent�was
to�be�distributed�to�the�franchisees.�The�money�is�to�be�distributed�in�these�proportions�until�2012,�after�which�the�IPL
is�supposed�to�go�public�and�list�its�shares.�The�franchises�get�80�percent�of�the�league’s�television�revenues�in�the�first
two�years,�declining�to�50�percent�from�year�11.�They�also�receive�60�percent�of�central�sponsorship�for�the�first�10
years�and�50�percent�thereafter28.�Over�time,�they�have�to�generate�their�own�money�from�sponsorship,�licensing�and
so�forth,�some�of�which�is�to�go�back�into�the�central�pool.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source:�Industry�Sources,Press�Releases
Franchise�Owners�and�their�respective�bids
Franchise Owner(s) Price (INR Bn)
Mumbai�Indians Reliance�Industries 4.48
Royal�Challengers,�Bangalore UB�Group 4.46
Hyderabad�Deccan�Chargers� Deccan�Chronicle 4.28
Chennai�Super�Kings Indian�Cements�and�N�Srinivasan 3.64
Delhi�Daredevils GMR�Holdings 3.36
Kings�XI�Punjab Preity�Zinta,�Ness�Wadia,�Karan�Paul(Apeejay�Surendra�Group)�andMohit�Burman(Dabur) 3.04
Kolkata�Knight�Riders Shahrukh�Khan�,�Juhi�Chawla�and�Jai�Mehta(Red�Chillies�Entertainment) 3.03
Rajasthan�Royals Emerging�Media 2.68
26 Businessworld,�200827 KPMG�Research28 Businessworld,�2008
73
Another�thing�that�the�organizers�did�differently�was�to�approach�the�entire�project�as�something�that�could�generate�as
much�interest�–�on�prime�time–�as�a�soap�or�a�reality�show�may�have�done.�The�IPL�package�was�custom�made�for
prime-time�television.�The�camaraderie�between�players�who�had�hitherto�been�considered�arch�rivals�and�the�presence
of�star�team�owners�further�contributed�to�the�excitement.�The�tournament’s�introduction�and�its�subsequent�impact�on
the�sports�world�left�aside,�IPL�also�proved�to�be�a�good�media�property�for�monetization.�A�consortium�consisting�of
India's�Sony�Entertainment�Television�(SET)�network�and�Singapore-based�World�Sport�Group�acquired�the�10�year�global
broadcasting�rights�of�IPL�for�USD�1.026�bn�(over�INR�42�bn).�As�part�of�the�deal,�the�consortium�is�to�pay�the�Board�of
Cricket�Control�in�India�(BCCI)�USD�918�mn�for�the�television�broadcast�rights�and�USD�108�mn�for�the�promotion�of�the
tournament29.�After�securing�the�bid,�Sony-WSG�then�re-sold�parts�of�the�broadcasting�rights�geographically�to�other
companies.�Below�is�a�summary�of�the�broadcasting�rights�around�the�world.�
Impact on the M&E Industry
The�acquisition�cost�was�then�considered�steep�for�a�domestic�tournament.�SET�has�to�pay�USD�316�mn�(INR�12.6�bn)
in�equal�installments�over�the�initial�5�years�and�USD�608�mn�(INR�24.3�bn)�for�the�next�5.�That�means�SET�had�to�pay
about�INR�2.53�bn�to�BCCI�in�200830.�However,�with�the�success�and�popularity�of�the�tournament,�the�investment
seems�to�have�paid�off�for�the�broadcaster.�The�league,�screened�every�evening�in�a�prime�slot�at�8�pm�pulled�in
viewers�in�large�volumes.�As�per�TAM�ratings,�the�final�of�IPL�on�1�June�2008�fetched�Max�an�average�of�9.8�TVR.�The
two�semifinals,�too,�delivered�ratings�of�over�6�each.�The�44�day�tournament�achieved�an�average�of�4.7�over�57
matches�on�SET�Max,�showing�that�audience�interest�was�sustained�throughout�the�long�tournament,�which�was�a
concern�at�the�beginning.�These�ratings�were�unprecedented�for�a�domestic�cricket�tournament.�Further,�the�huge
viewership�that�the�matches�gained�pushed�up�advertisement�rates�for�10-second�spots�to�INR�5-10�lakhs,�which�was
marked�at�INR�2�lakhs�per�10�seconds�at�the�start�of�the�tournament31.�ESPN�Star�Sports�had�charged�about�INR�7.5-10
lakhs�for�10-second�spots�for�the�India-Pakistan�T20�World�Cup�final�last�September,�which�delivered�a�TRP�of�15.9.32�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source:�Press�Releases,�KPMG�Research
Summary�of�Broadcasting�Rights�of�IPL
Winning Bidder Regional Broadcasting Rights Duration
SET-World�Sports Global�Broadcasting�Rights 10�years�for�INR�42�Bn
Network�Ten Free-to-air�television�in�Australia 5�years�at�INR�350-400�Mn
Setanta�Sports United�Kingdom�and�Ireland�on�a�subscription�basis 5�years
Arab�Digital�Distribution Middle�East�broadcast�rights�on�ADD's�ART�Prime�Sport�channel 10�years
Willow�TV Rights�to�distribute�on�television,�radio,�broadband�and�Internet,�forthe�IPL�in�North�America 5�years
SuperSport South�Africa�Broadcast�Rights Terms�not�released
GEO�Super Pakistan�Broadcast�Rights Terms�not�released
Asian�Television�NetworkCanadian�broadcast�rights.�Aired�on�ATN's�CBN�&�ATN�Cricket�Pluschannels�on�a�subscription�basis.�Aired�on�XM�Radio's�ATN-Asian
Radio�as�well5�years
29�“Sony-WSG�consortium�bags�IPL�rights”,�Business�Standard,�January,�200830�Businessworld,200831�Businessworld,200832�Industry�Sources
74
MAX�reaped�in�the�benefits�of�the�leap�in�viewership�which�pushed�it�to�the�number�1�slot�on�channel�viewership�share
basis�during�Q2�2008�during�the�broadcast�of�IPL.
IPL�provided�good�opportunities�for�marketers33.�FMCG�companies�like�ITC,�Mother�Dairy�and�Nestle,�insurance
companies,�Pizza�Hut�and�Cipla�were�the�leading�advertisers�during�the�first�edition�of�the�tournament.�Many�players-
like�the�suiting�major�S�Kumar’s�Nationwide�who�were�the�apparel�sponsors�of�Team�Jaipur-entered�at�the�later�part�of
the�tournament,�after�gauging�its�success�and�popularity.�Franchisee�owners�also�spend�money�on�marketing�and
promoting�their�respective�teams,�and�in�turn�generated�revenue�from�Team�Sponsorships.�Industry�players�are
unanimous�in�their�views�that�IPL�has�acted�as�a�big�driver�for�advertising�spends�this�year.
IPL�also�affected�other�segments�of�the�industry.�In�Television,�TRPs�of�other�channels�in�the�Prime�Time�Slot�got
affected.�News�channels�had�focused�programming�dedicated�to�IPL�matches.�In�films,�big�banners�postponed�their
releases�due�to�lesser�movie�goers�in�cinema�halls;�traditionally�summer�vacations�have�been�one�of�the�most
productive�seasons�for�the�film�industry�due�to�higher�footfalls.�Like�the�International�Cricket�Council�(ICC),�other�media
segments�are�also�seriously�considering�keeping�a�separate�IPL�window�every�season!�Clearly,�the�IPL�has�shown�that
it�has�a�lot�of�potential�to�deliver�high�returns�for�the�broadcaster,�the�team�franchise�owners�and�the�sponsors.
In a nutshell: Why was IPL a success that it turned out to be?
The�way�in�which�IPL�was�conceptualized,�visualized�and�organized�holds�a�lesson�for�marketers.�There�were�four�main
reasons�for�the�tournament’s�successes:
• It�started�off�on�a�scale�that�was�likely�to�make�an�impact
• The�organizers�got�specialist�marketing�firms�like�IMG�involved�well�in�advance
• The�marketing�was�PR�led
• The�tournament�was�efficiently�marketed�to�consumers.
IPL�has�given�a�whole�new�dimension�to�sports�and�sports�marketing�in�India.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source:�TAM
Channel�Share�of�MAX
33 Industry�Sources
75
Future perfect in the immediate run
Gauging�by�the�industry�reaction,�IPL�is�expected�to�continue�as�a�prime�driver�in�the�M&E�industry�for�the�coming�year.
Further,�advertising�rates�for�other�cricket�telecasts�are�also�expected�to�increase�since�the�IPL�rates�are�also�expected
to�be�used�as�future�reference�points�by�the�broadcasters.�Many�retail�majors�plan�to�tie-up�with�IPL�franchisees,�given
the�fact�that�the�business�format�of�IPL�is�modeled�on�the�English�Premier�League,�which�has�built�its�properties
through�retail�tie-ups�and�merchandise.�Industry�Players�also�plan�to�capitalize�on�celebrity�brand�ambassadors�and
merchandising.�Celebrity�endorsed�branded�T-shirts,�sunglasses,�wallets�and�travel�bags�are�expected�to�be�promoted�in
a�big�way.
In the long run
IPL’s�ability�to�sustain�and�grow�its�popularity�in�the�long�term�depends�on�the�ability�of�individual�franchises�to�“break
out”�and�become�large�media�properties�on�their�own.�Franchisees�may�have�to�increase�their�marketing�and
promotional�spends�to�effectively�monetize�their�fan�base�and�build�brands�out�of�their�respective�teams.�Franchises
also�need�to�think�about�how�to�maintain�fans’�interest�when�there�are�no�matches�to�watch.�Even�though�the�success
of�the�domestic�cricket�league�tournament�has�been�unprecedented,�ratings�show�that�it�still�trailed�the�T20�World�Cup
Final�in�terms�of�viewership34.�In�the�future�too,�till�team�loyalties�build�up,�the�ratings�for�IPL�are�expected�to�trail�those
of�international�matches.�Meanwhile,�apart�from�finding�more�team�sponsors,�franchisees�may�try�to�increase�the�mix
of�premium�seating�in�their�home�stadiums,�and�generate�revenues�from�Food�and�Beverages�(F&B).�
Further,�the�league�itself�is�set�to�expand�with�the�addition�of�4�new�franchises�from�2009-10.�This�is�likely�to�take�the
total�number�of�teams�to�12�and�is�expected�to�automatically�increase�the�scale�of�the�tournament.�In�turn,�it�is�also
likely�to�provide�more�opportunities�for�advertisers.
For�the�immediate�future�however,�even�as�India�waits�for�the�next�edition�of�IPL,�pure�business�logic�makes�the
tournament�pretty�compelling�for�the�advertisers�and�media�buyers�in�India,�and�in�turn�an�exciting�prospect�for�the
M&E�industry.�For�the�franchisees�too,�buying�an�IPL�team�is�proving�to�be�a�good�investment�decision.�Even�in�the
short�term,�they�can�fully�or�partially�offload�their�stakes�in�their�respective�teams,�and�get�a�premium�over�their
purchasing�consideration.�A�good�example�of�this,�is�the�recent�decision�of�the�Deccan�Chronicle�to�sell�its�stake�in�an
IPL�team.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
34�“IPL�final�fails�to�chase�India-Pakistan�score�in�T20�World�Class�clash”,�The�Economic�Times,�June�2008
76
Other Sports are not far behind, gradually catching up in terms of
Popularity
Even�though�cricket�is�still�the�mainstay�in�Indian�sport,�India�is�gradually�moving
from�a�one�sport�market�to�a�multi-sport�market�with�support�from�the�Indian
government�and�corporates.
The�growth�in�the�viewership�of�other�sports�has�been�driven�by�two�main
factors:
• Launch�of�several�new�sports�channels�in�India,�acquiring�and�marketing
properties�across�other�sports,�internationally
• Indian�sportsmen�doing�well�internationally�in�sports�other�than�cricket
As�a�result,�other�sports�like�Formula�1,�Tennis,�Soccer�and�Golf�are�catching�up�in
popularity�and�gaining�viewership�in�the�country.�They�also�provide�attractive
opportunities�for�advertisement�and�sponsorship,�because�they�largely�cater�to
SEC�A�and�B,�and�are�therefore�often�able�to�provide�two-three�times�ROI�for
advertisers�when�compared�to�cricket35.��
Formula One
• India�now�has�its�own�F1�Team�–�Force�India�–�owned�by�Vijay�Mallya�–�this�is
likely�to�drive�up�the�popularity�of�the�sport�in�India�
• Grand�Prix�is�expected�to�make�its�debut�in�India�in�2010�or�2011�(a�circuit�for
the�same�is�being�developed�at�Noida).�Once�it�does,�it’s�expected�to�create�a
lot�of�interest�in�the�sport�among�Indian�audiences�and�further�drive�up
viewership.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source:�exchange4media
Viewership�of�Formula�One�in�India
Economic�Times,�June�200835�Industry�inputs
77
Tennis
• With�Sania�Mirza,�Leander�Paes�and�Mahesh�Bhupathi�doing�well�in
international�tournaments,�the�popularity�of�tennis�has�grown,�particularly�in
the�Metros�and�the�SEC�A�and�B�audience
• Big�international�events�such�as�The�Kingfisher�Airlines�Tennis�Open�(part�of
the�ATP�international�series)�organized�in�Mumbai�in�2006�and�2007,�have�also
played�big�role�in�increasing�the�popularity�of�the�sport�in�India.
Soccer
• India�is�one�of�the�last�significant�untapped�markets�for�soccer�in�the�world.
Soccer�viewership�in�India�is�increasing�by�about�20-25�percent�annually36�
• The�viewership�for�English�premier�League�(EPL)�is�no�longer�restricted�to
West�Bengal,�Goa�or�Kerala�but�is�spread�across�India.�In�fact,�English�Premier
League�clubs�such�as�Manchester�United�(Man�U)�are�seeking�to�expand�their
commercial�interests�in�India.�Of�Man�U’s�estimated�333�mn�followers
worldwide,�20�mn�live�in�urban�India37.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source:�exchange4media
Viewership�of�Tennis�Grand�Slams�in�India
Source:�exchange4media
Viewership�of�FIFA�World�Cups�in�India
36�exchange4media37�The�Economist,�2008
78
Apart�from�these,�Golf,�Boxing�and�Hockey�are�the�other�sports�which�are
expected�to�grow�in�viewership�driven�by�the�good�performances�of�Indian
sportsmen�on�the�international�scene�in�recent�times.�Besides,�the
Commonwealth�Games�which�is�scheduled�to�be�held�in�India�in�2010�is�further
expected�to�boost�the�marketing�opportunity�for�sports�in�the�country38.�The
games�are�expected�to�be�revenue�neutral,�so�the�cost�of�organizing�might�have
to�be�offset�by�ticket�sales,�advertising�revenue�and�broadcast�rights.�Broadcast
rights�and�event�marketing�agency�Fast�Track�has�been�appointed�to�represent
the�International�Broadcast�Rights�by�the�Organizing�Committee�of�the�Delhi�2010
Commonwealth�Games.�Broadcast�deals�with�Network�Ten�and�Foxtel�in
Australia,�and�TVNZ�in�New�Zealand�have�already�been�negotiated.�
Conventionally,�both�public�and�private�enterprises�have�funded�sports�as�part�of
their�corporate�social�responsibility.�The�new�sports�entrepreneurs�are,�however,
looking�at�running�sports�teams�and�events�as�business.�In�order�to�further�boost
sports�as�a�business�in�India,�there�is�a�need�to�exploit�it�more�aggressively
across�multiple�formats�–�such�as�contests,�events�and�activations.�Digital�and
mobile�platforms�have�also�not�been�used�beyond�score�updates�and�download.
Live�streaming�and�interactive�gaming�is�yet�to�take�off.�Contests�and�fantasy
leagues�are�slowly�taking�shape�but�still�have�a�long�way�to�go.�These�revenue
streams�can�add�significantly�to�the�sports�business�in�India,�if�exploited
aggressively.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
38�Press�Reports
79
Future Implications
The�Indian�M&E�industry�continues�to�witness�the�emergence�of�new�content
genres�across�different�sub�sectors.�The�concept�of�universal�content�no�longer
holds�true�and�players�are�investing�in�building�a�differentiated�content�portfolio�to
help�ensure�consumer�loyalty.�Building�up�of�a�diverse�content�basket�could�also
act�as�a�risk�mitigating�mechanism�for�the�players.�
The�impact�of�emerging�content�variety�on�the�industry�is�summarized�in�the
table�below.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Emerging�Content�Genres:�Implications�for�Players
Sector Effects of Emerging Content Genres Implications
All�Media• Players�are�increasingly�diversifying�into
different�genres�and�building�a�productportfolio
• Companies�need�to�evaluate�benefits�of�portfolio�approach�(be�it�across�filmgenres,�a�TV�channel�portfolio,�multiple�magazines�)�-�in�an�environment�ofincreasingly�segmented�audience�preferences.�A�portfolio�gives�benefits�ofheding�risks,�while�still�being�able�to�aggregate�media�for�advertisers�andgetting�cost�synergies�in�operational�areas�
TV
• Increasing�programming�(time)�share�ofnew�genres�such�as�Reality�TV,�TalentHunts,�Game�Shows�etc.
• Significant�share�of�new�genre�shows�inTop�TVR�lists�
• Spurt�in�the�number�of�niche�channels�fordiverse�TGs,�such�as�Kids,�Infotainment,Lifestyle�etc.
• Increasing�viewership�share�of�nichecategory�channels�
• Emergence�of�Sports�as�a�mainstreamEntertainment�Genre�
• Channels�need�to�build�up�a�diverse�programming�library,�comprising�ajudicious�blend�of�conventional�and�new�genres.�With�the�increased�choicesavailable�to�consumers,�measures�to�help�ensure�customer�loyalty�arebecoming�increasingly�important
• Increasing�costs�for�broadcasting�rights�of�sports�events�-�Broadcastersneed�to�undertake�a�cost�benefit�analysis�and�determine�an�effective�pricebefore�acquiring�the�rights�for�a�particular�event
Film
• Small�budget,�‘multiplex�movies’�havebecome�viable�due�to�audienceacceptance
• Film�Makers�experimenting�in�new�genressuch�as�Kids,�Horror,�Sci-Fi�etc.
• Celluloid�Adaptations�of�Books�are�beingexperimented�with
• Production�houses�need�to�mitigate�their�risk�by�striving�to�ensure�that�theyhave�the�appropriate�portfolio�mix�of�big,�medium�and�small�budget�moviesin�their�content�pipeline
• Protection�of�IPR�rights�and�valuation�of�library�content�has�become�all�themore�significant�due�to�future�revenue�potential�through�remakes,�sequelsetc.
• Need�to�identify�consumer�preferences�and�gauge�audience�acceptance�fordifferent�genres�before�going�ahead�with�productions,�in�view�of�increasingcosts�of�movie�making
• Rise�in�the�number�of�supplementsoffered�by�both�English�and�RegionalNewspapers
• Increasing�number�of�specialty�magazinesin�English�segment,�by�both�existingplayers�and�new�entrants
• Need�for�players�to�help�ensure�adequate�monetization�of�supplements�byeffective�targeting�of�advertisers
• Need�for�careful�understanding�of�content�preferences�of�target�segment,and�comprehensive�evaluation�of�their�market�potential�before�launching�anew�magazine�to�capture�a�niche�audience�
80
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Regionalization
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Regionalization
04
Regional�media�has�been�an�important�growth�driver�for�the
Indian�media�industry�in�the�past�few�years.�Established
national�players�are�expanding�their�regional�footprint,
existing�players�are�diversifying�their�portfolio�offerings�and
the�regional�media�space�is�witnessing�a�host�of
investments�from�established�players�as�well�as�venture
capitalists�and�private�equity�investors.�
One�of�the�major�factors�behind�such�high�interest�levels�in
regional�media�is�the�significantly�untapped�market�in�Tier�2
and�Tier�3�cities�and�lower�socio-economic�groups�that�tend
to�be�the�primary�consumers�of�regional�media.
We�examine�this�in�greater�detail�below.
Increasing significance of Tier 2 and Tier 3cities
Of�the�urban�areas,�Tier�2�cities�having�population�of�10-40
lakhs�are�witnessing�the�highest�growth�rate�in�the�number
of�households.1 These�cities�witnessed�a�growth�of�7.4
percent�growth�in�the�number�of�households�in�2007�over
2005.�Tier�3�cities�having�a�population�in�between�5-10�lakhs
witnessed�6.9�percent�growth�in�the�number�of�households
from�2005�to�2007�as�compared�to�a�6.6�percent�growth
rate�in�cities�having�a�population�greater�than�40�lakhs.
Thus,�Tier�2�and�Tier�3�cities�are�showing�a�higher�growth�in
number�of�households�as�compared�to�the�larger�Tier�1
cities�(cities�having�population�of�more�than�40�lakhs).�As�a
result,�it�is�estimated�that�by�2025�population�of�both�Tier�2
and�Tier�3�cities�put�together�will�be�as�much�as�Tier�1
cities2.�Hence,�these�cities�are�increasingly�emerging�as�the
focus�area�for�marketers.
1�IRS�2007�R22�Marketing�Whitebook�2008
Context – the great Indian regional story
Source: IRS 2007 R2
Higher�growth�rate�in�5-40�lakhs�plus�population�towns
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
The�increasing�purchasing�power�of�Tier�2�and�Tier�3�cities�isalso�evidenced�by�the�socio-economic�data,�with�thesecities�witnessing�growth�in�the�number�of�people�belongingto�the�upper�socio-economic�classes.
Currently,�top�6�metros�constitute�only�30�percent�of�thetotal�consumption�of�goods�and�services�in�India.�However,these�6�metros�constitute�60�percent�of�the�total�mediaspends3.�This�is�an�anomaly�that�is�bound�to�change�giventhe�growth�potential�of�Tier�2�and�3�cities�due�to�an�increasein�the�numbers�as�well�as�the�increasing�purchasing�powerof�the�population�residing�in�these�cities.
Higher consumption potential in rural areas
Even�though�70�percent�of�Indian�households�reside�in�ruralIndia4,�marketers,�advertisers�and�consequently�mediaplayers�have�traditionally�focused�more�on�urban�areas.�Theperception�was�that�although�in�absolute�numbers�the�ruralpopulation�is�more�than�urban�population,�consumptionpower�is�still�concentrated�in�urban�India..�This�paradigm�hasgradually�changed�now�and�not�without�good�reason.�Inabsolute�terms,�the�size�of�the�middle�and�higher�incomehouseholds�in�rural�India�was�expected�to�be�double�that�ofurban�India�in�2007.5
A�higher�number�of�middle�and�high�income�households�hasresulted�in�higher�growth�in�per�capita�consumption�in�ruralareas.�Per�capita�consumption�in�rural�areas�went�up�by�12percent�in�2005-06�as�compared�to�9.8�percent�in�urbanIndia.6
3�NCAER,�Group�M,�“Social�Changes�and�the�Growth�of�Indian�Rural�Market:�An�Invitation�To�FMCG�Sector"�by�S�John�Mano�Raj,�Dr.�P�Selvaraj,�20074�2001�census,�IRS�2007�R25 NCAER6�National�Sample�Survey�Organisation�(NSSO)
Source: Marketing Whitebook 2008
Note: Data Points indexed between 2005-2007
Source: IRS 2007 R2
Source: National Council for Applied Economic Research (NCAER)
Growth�in�Population�of�SECs�across�cities
SECs 40 lakhs + 10-40 lakhs 5-10 lakhs 1-5 lakhs 50K – 1 lakh <1 lakh
A 106 105 104 98 94 96
B 97 96 101 98 94 97
C 100 95 97 100 94 95
D 99 98 100 103 105 98
E 100 107 101 100 104 105
Estimated�2025�Urban�Population�(in�millions)
Number�of�Middle�and�Higher�Income�Households
84
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Hence,�rural�India�offers�a�tremendous�potential�for�marketers,�advertisers�andmedia�players�alike.�Again,�due�to�differences�in�the�media�consumption�habitsand�language�preferences�of�rural�people,�media�players�have�to�target�andengage�these�audiences�in�a�different�way�as�opposed�to�target�groups�in�urbanareas.
Low Media penetration in smaller towns and rural areas
Despite�the�significant�consumption�potential�of�smaller�towns�and�rural�areas,the�reach�of�the�media�is�relatively�lower�in�the�smaller�category�towns�and�citieswhile�larger�cities�are�reaching�saturation�in�terms�of�growth�in�media�reach.Hence,�these�smaller�towns�offer�good�potential�for�growth�in�mediaconsumption.�
Further,�overall�Media7 Reach�is�much�lower�in�rural�areas�as�compared�to�urbanareas.
7�Note:�Media=TV+Print+Radio+Cinema+Internet
Source: IRS 2007 R2
Source: IRS 2007 R2
Media�Reach�among�different�Town�Categories
Media�Reach�
85
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Implications on Media Players
To�summarize,�media�players�are�looking�at�a�diverse�set�of�target�groups�forsustaining�a�higher�growth�rate�and�hence�need�to�practice�effective�consumersegmentation�and�targeting�to�reach�these�audiences.�Tremendous�media�growthopportunities�lie�in�significantly�untapped�target�groups�of�population�in�smallertown�and�rural�India,�as�well�as�amongst�lower�socio�economic�classes.�Since�theeconomic�profile�and�media�consumption�habits�of�these�people�are�differentfrom�that�of�the�conventional�consumers�of�the�media�companies,�there�is�aneed�to�target�them�in�a�different�way.�These�consumers�want�content�that�isrelevant�to�them,�in�a�language�that�they�are�comfortable�with.
Regional Trends in TV
In�the�TV�sector,�both�national�level�broadcasters�like�Star�and�Zee,�as�well�asregional�level�players�like�Sun�and�Raj�continue�to�invest�heavily�to�provide�morecontent�choices�to�the�audiences�which�prefer�languages�other�than�Hindi�andEnglish.�Regional�content�assumes�special�significance�in�the�South�since�itaccounts�for�the�largest�proportion�of�TV�viewing�households�in�India�(about�32percent8).�Regional�language�channels�account�for�35�of�the�top�100�shows�ontelevision�according�to�TAM�Peoplemeter�data�for�the�week�beginning�18�January,2009�to�24�January,�20099.
8�Exchange4media.com
9�Indiantelevision.com
86
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
One�likely�impact�of�the�increase�in�consumption�of�regional�content�on�televisioncould�be�an�increase�in�the�value�of�library�content�of�national�broadcasters.�Anybroadcaster�with�a�good�content�library�can�have�it�dubbed�in�other�languages�forbroadcast.�This�has�two�advantages;�first,�the�production�cost�is�much�lesser�thanbuilding�the�content�from�scratch,�and�second,�the�risk�is�minimized�as�thecontent�has�already�proven�been�successful�in�another�language.
Domestic Content Syndication – A significant opportunity for
ancillary revenues
Channels�such�as�Zee,�Star�and�Sahara�already�have�syndication�deals�in�rich
Non-Resident�Indian�(NRI)�concentrated�countries�such�as�the�U.S.�and�the
U.K.�However,�it’s�the�domestic�syndication�market�that�is�now�beginning�to
catch�on.
New�GEC�entrants�such�as�NDTV�Imagine�are�betting�big�on�syndication
with�dubbed�versions�of�its�top�show�–�Ramayana�-�being�aired�on�the�South
Indian�channels�-�Gemini�TV�in�Andhra�Pradesh,�Sun�TV�in�Tamil�Nadu�and
Surya�TV�in�Kerala.
This�could�add�directly�to�the�bottom-line�as�the�costs�involved�for�dubbing
the�existing�library�content�into�other�languages�are�relatively�low.
In�fact,�creative�teams�of�various�channels�are�now�actively�conceptualizing
shows�with�the�goal�that�they�should�be�able�to�generate�multiple
syndication�opportunities.
However,�as�a�whole,�domestic�syndication�still�remains�a�relatively
unexplored�area�in�Indian�television.�Therefore,�over�the�next�few�years,�as
producers�look�to�maximize�their�revenues�by�repurposing�content,�domestic
syndication�is�likely�to�offer�them�a�strong�revenue�potential.�
87
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Hindi Powerhouses expand their regional presence
Given�the�over�crowding�and�the�resulting�fragmentation�in�the�Hindi�segmentwith�the�spurt�in�the�number�of�GEC�and�other�channels�launched�in�recenttimes,�it�has�become�even�more�important�for�the�broadcasters�to�diversify�theirrisk�by�exploiting�the�full�potential�of�the�regional�segment.�Hence�in�recenttimes,�several�regional�channels�have�been�launched�by�the�established�players�ofthe�Hindi�broadcasting�industry.
Zee�entered�into�the�Tamil�GEC�space�in�2008�with�Zee�Tamizh�-�this�is�the�one�ofthe�most�competitive�market�in�the�South�right�now�with�the�domination�of�SunTV.�Zee�already�has�Kannada�and�Telugu�GECs.�The�channel�further�strengthenedits�presence�in�the�Bengali�market�by�acquiring�26�percent�stake�in�Sky�B(Bangla)�Pvt.�Ltd.,�the�company�which�runs�Bengali�infotainment�channel�AkaashBangla,�in�November�200810.�Previously�it�had�acquired�a�60�percent�stake�inBengali�news�channel�24�Ghanta�from�Sky�B.�
Regional Channels of National Players
Mainstream Player Existing regional channels (before 2005) New regional channels
Zee
Zee�Gujarati�(GEC) Zee�Telugu�(GEC)
Zee�Marathi�(GEC) Zee�Kannada�(GEC)
Zee�Bangla�(GEC) Zee�Tamizh�(GEC)
24�Ghante�(News)
24�Taas�(News)
StarStar�Vijay�(GEC) Star�Mazaa�(News)
Star�Ananda�(News)
Network�18 IBN�Lokmaat�(News)
Source: KPMG Analysis
10�“Zee News India acquires 26% stake in Sky B”, Business Standard, November 2008
88
The�Star�network�too�has�ambitious�plans�for�expansion�in�the�South�Indianmarket�and�has�formed�a�joint�venture�with�Jupiter�Entertainment�called�StarJupiter�to�target�south�Indian�audience.�Under�the�agreement�Star�Jupiter�willhave�a�majority�stake�in�Asianet�Communications�Limited�(ACL)�which�currentlybroadcasts�channels�in�Kannada�(Suvarna),�Telugu�(Sitara)�and�Malayalam�(Asianet,Asianet�Plus).11 Vijay,�the�Tamil�language�general�entertainment�channel,�currentlyoperated�and�owned�by�Star,�is�also�to�come�under�Star�Jupiter.
Reliance�ADAG�is�planning�a�simultaneous�foray�into�the�regional�and�Hindibroadcasting�space.�The�company�intends�to�launch�a�bouquet�of�regionalchannels�along�with�the�launch�of�its�mainstream�Hindi�channels.
For�a�new�entrant�into�regional�markets,�it’s�important�to�identify�which�regionalmarkets�offer�the�greatest�opportunity.�
In�general,�the�basic�strategy�followed�by�new�entrants�in�the�regional�markets�isto�first�establish�their�presence�in�the�regional�market�through�a�GEC,�a�newschannel�and�a�movie�channel�before�getting�into�more�niche�categories.�Sun,�theleading�channel�in�South�India,�has�followed�the�same�strategy�in�the�past.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Parameter Gujarati Marathi Punjabi Kannada Tamil Telugu Malayalam Bengali
Size of target audience
Purchasing power of target audience
Advertising size and revenue potential
Number of players present in the space
- least favourable
- Slightly favourable
- Moderately favourable
- Highly favourable
- Most favourable
Key:
Evaluation�of�Regional�Market�Opportunities
Source: KPMG Analysis
* The table presents a snapshot of the situation as on October, 2008. The parameters like the one
relating to competition are constantly subject to change with number of new regional channels
being launched every year. Therefore, these must be re-evaluated frequently.
11�“STAR�Jupiter�to�hold�majority�stake�in�Asianet”,�The�Economic�Times,�November,�2008
89
Growth of niche channels in Regional Markets
The�regional�market�itself�is�getting�sub-segmented�as�it�gets�more�mature,�andincreasingly�the�advertisers�are�also�beginning�to�differentiate.�Consequently,�thewell�established�regional�players�are�now�targeting�niche�channel�segments�tofurther�augment�their�network�viewership.�Sun�TV’s�Tamil�kids�channel�Chutti�TVhas�been�quite�successful�and�it�has�plans�to�launch�kids’�channels�in�other�SouthIndian�languages�as�well.�Raj�TV�has�added�Raj�News�to�its�Tamil�network�with�anestimated�investment�of�INR�200�million,�adding�to�its�Tamil�generalentertainment�channel�Raj�TV,�music�channel�Raj�Musix,�and�Raj�Digital�Plus.�Rajis�also�planning�music�channels�in�Telugu,�Malayalam�and�Kannada.12
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Some�Niche�channels�of�Regional�players�in�South�India
Genre Channels of Regional players Language
Music
Sun�Music Tamil
SS�Music Tamil,�Telugu,�Kannada,�Malayalam
Gemini�Music Telugu
Udaya�2 Kannada
MoviesK�TV Tamil
Teja�TV Telugu
News
Sun�News Tamil
Jaya�Plus Tamil
Raj�News Tamil
Kalaignar�TV Tamil
Mega�TV Tamil
TV9 Telugu
ETV�2 Telugu
NTV�News Telugu
TV5�News Telugu
Gemini�News Telugu
Asianet�News Malayalam
Indiavision Malayalam
Manorama�News Malayalam
People�TV Malayalam
TV9 Kannada
Suvarna Kannada
Udaya�Varthegalu Kannada
Kids Chutti�TV Tamil
Source: CompanyWebsites, Press Releases KPMG Research
12�Indiantelevision
90
Regional News rules the roost
News,�clearly,�the�focus�area�is�on�the�regional�niche�segments,�with�as�many�as17�news�channels�catering�to�the�4�regional�language�markets�in�South�India�(asof�September�2008).�The�growth�in�the�regional�news�market�has�beenexceptional�over�the�last�three�years.�The�advertising�volume�on�regional�newschannels�(including�Marathi,�Bengali,�South�Indian)�in�2006�was�17,682�seconds.The�amount�virtually�doubled�in�2007�to�touch�31,167�seconds.13
Apart�from�the�subcontinent,�these�channels�also�have�viewership�in�Sri�Lanka,China,�the�Middle�East,�th�U.K.,�Canada,�Europe,�Australia�and�parts�of�SouthAfrica�and�the�U.S.�because�of�tsignificant�presence�of�Indian�origin�population�inthese�countries,�especially�those�from�South�India.
The�other�big�regional�markets�are�Marathi�and�Bengali.�The�Bengali�market�hasan�added�advantage�that�channels�targeting�West�Bengal�are�also�watched�inneighboring�Bangladesh,�making�it�lucrative�for�broadcasters.�
Niche�news�channels�are�not�the�only�focus�of�regional�players;�they�alsocontinue�to�expand�their�presence�in�the�southern�GEC�market.�Asianet�launchedits�Telugu�GEC�Sitara�in�October�2008.�It�already�has�GECs�in�Malayalam�andKannada.
Regional Trends in Cinema
India�is�one�of�the�biggest�movie�markets�in�the�world�with�over�a�1000�moviereleases�every�year.�While�the�mainstream�commercial�cinema�might�bedominated�by�the�Hindi�language,�Indian�states�too,�have�their�own�productionhouses.
South Indian Cinema Market
South�India�is�a�big�market�in�terms�of�number�of�movie�releases.�The�foursouthern�states�comprising�of�Andhra�Pradesh,�Tamil�Nadu,�Karnataka�and�Keralatogether�account�for�over�50�percent�of�the�total�films�released�in�India.14
After�Bollywood,�Telugu�film�industry,�referred�to�as�Tollywood,�is�one�of�thebiggest�in�India�in�terms�of�the�number�of�movies�produced�and�released�peryear.�About�200�films�are�made�every�year�of�which�around�20�are�the�big�budgetfilms15-�typically�big�banner�films�with�the�best�star�cast,�relatively�better�qualityof�shooting�and�typically�and�socially�acceptable�themes.�A�big�budget�filmtypically�has�a�budget�of�about�INR�120-200�million,�with�around�INR�30-40
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source: Central Board of Film Certification,
KPMG Analysis
13�Brand�Reporter14�KPMG�Analysis15�KPMG�Interviews,�Cental�Board�of�Film�Certification
Market�Share�by�number�of�releases
91
million�each�paid�as�remuneration�to�the�leading�actors�and�director�of�the�film.While�a�budget�film�has�a�production�cost�of�about�INR�40�million,�smaller�filmshave�a�budget�of�around�INR�10-30�million16.�
Apart�from�Telugu,�Tamil,�Kannada,�Malayalam,�Marathi�and�Bhojpuri�are�some�ofthe�other�important�regional�languages�in�which�films�are�made�in�India.�Thebudget�of�these�regional�films�are�very�small�as�compared�to�Bollywood,�wherethe�production�costs�of�big�budget�films�range�between�INR�300-600�million.�Theaverage�time�to�market�for�a�big�budget�Telugu�Film�is�10�months�as�opposed�to15-18�months�taken�for�a�Bollywood�film.17
Opportunities in Exhibition
In�the�exhibition�space�too,�the�uneven�geographical�distribution�of�the�theatersin�India�gives�the�four�southern�Indian�states�an�advantage.�Andhra�Pradesh,Kerala,�Karnataka�and�Tamil�Nadu�together�account�for�about�60�percent�of�thetotal�theaters�in�the�country,�while�housing�just�22�percent�of�the�population18.This�provides�a�canvas�for�wider�film�releases�there.�Further,�with�malldevelopment�activities�picking�up�in�the�southern�region,�multiplex�players�havealso�started�to�foray�into�the�southern�market.�Companies�like�Pyramid�Saimirahave�made�investments�to�acquire�and�upgrade�single�screen�theaters�in�SouthIndia.�Going�forward,�the�aggressive�plans�of�the�multiplex�players�to�expandtheir�presence�in�the�southern�market�is�expected�to�increase�the�average�ticketsize�and�improve�the�collections�of�regional�movies,�thus�providing�a�furtherboost�to�regional�cinema�in�the�country.
Corporatization of Regional Cinema
Given�the�huge�market�potential�as�well�as�cost�advantages,�the�regional�filmindustry�has�also�started�to�attract�the�attention�of�leading�players�from�the�Hindifilm�industry.�For�instance,�in�2007,�Adlabs�released�their�first�Tamil�film‘Kireedam’,�which�was�a�joint�co-production�with�Sujatha�Cine�Arts.�ErosInternational�acquired�a�51�percent�controlling�stake�in�Ayngaran,�a�Tamil�homevideo�and�distribution�arm.�UTV�also�entered�the�Telugu�film�sector�with�a�deal�fortwo�movies�with�Mahesh�Babu,�one�of�the�biggest�Telugu�film�stars;�and�a�co-production�deal�with�Indira�Productions�for�two�Telugu�films.�The�company�alsoacquired�Andhra�Pradesh�theatrical�distribution�rights�to�“Atidhi”19.�2008�sawmore�such�investments.�Ultra,�whose�core�business�lies�in�acquiring�andmarketing�of�home�video�rights�of�Bollywood�films,�forayed�into�regional�cinemaby�announcing�plans�of�investing�INR�200�million�for�producing�and�distributingMarathi�and�Gujarati�films.�Reliance�Entertainment�also�made�an�entry�into�theKannada�film�industry�by�signing�two�film�projects�there.�Reliance’s�music�label-Big�Music-also�acquired�the�music�rights�of�two�Kannada�films20.�These
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
16�Industry17�Industry18�Film�Federation�of�India19�Company�Website,�Press�Releases
92
developments�augur�well�for�the�industry,�and�are�gradually�ushering�in�an�era�ofcorporatization�in�the�regional�industry,�a�la�Bollywood.
With�the�availability�of�funds,�many�of�these�regional�films�are�now�beingreleased�on�a�scale�comparable�to�Bollywood,�and�as�a�result�earning�relativelymore�in�theatrical�revenues.�The�Tamil�film�”Chandramukhi”�grossed�INR�800million�on�box�office.�Another�Tamil�blockbuster�“Shivaji:�The�Boss”�was�releasedin�800�cinemas�across�the�country.21 Many�of�the�leading�artists�from�Bollywoodare�also�working�in�regional�films.�South�has�always�been�a�popular�destinationfor�Bollywood�directors�and�actors;�other�cinemas�have�also�started�picking�upnow.�Leading�Hindi�film�industry�stars�like�Amitabh�Bachchan�and�Ajay�Devganhave�acted�in�Bhojpuri�films.�This�has�further�changed�the�perception�of�regionalcinema�in�the�eyes�of�the�audience.
Way Forward
Industry�players�agree�that�the�main�problem�plaguing�regional�cinema�is�not�theabsence�of�quality�content�or�talent�pool,�but�lack�of�effective�marketing�andpromotional�activities.�Establishing�organized�industry�forums�can�help�regionalfilms�do�much�bigger�business.�The�Government�can�also�help�promote�regionalcinema�by�providing�a�level�playing�field.�For�instance,�in�Andhra�Pradesh�there�isa�price�cap�of�INR�100�on�ticket�prices�as�well�as�a�restriction�on�the�screening�ofmore�than�4�shows�per�screen.�This�hampers�the�growth�of�organized�exhibitionplayers.�Removal�of�such�restrictions�can�go�a�long�way�in�promoting�the�industry.Industry�players�also�need�to�take�up�these�issues�in�appropriate�forums�for�thedevelopment�of�regional�cinema�in�the�country.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
20�Company�Website,�Press�Releases21�Regional�Cinema�–�Needed,�efficient�marketing�&�promotion”�Exchange4media,�March�2008
93
Regional Trends in Print
Readership-Dominance of Regional Players
The�Indian�Print�industry�is�highly�fragmented.�Hindi�language�newspaperscomprise�44.6�percent,�while�English�language�newspapers�comprises�of��a�mere7.4�percent��of�the�total�registered�dailies.22 Hindi�is�the�most�widely�knownlanguage�followed�by�English,�Marathi,�Tamil�and�Telugu23.
The�market�has�seen�newspapers�rolling�out�editions�and�providing�regionfocused�content�in�an�attempt�to�increase�circulation.�This�is�because�of�theincreased�significance�of�regional�media�in�recent�times.�Readership�andcirculation�is�directly�correlated�with�literacy�levels,�which�have�increased�from62.5�percent�in�2002�to�over�73�percent�in�200724.�Moreover,�69�percent�ofIndia’s�population�is�rural25.�With�faster�literacy�growth�rate�in�rural�areas,�printmedia�circulation�is�likely�to�grow�faster�in�regional�print.�Moreover,�both�thereadership�surveys,�Indian�Readership�Survey�(IRS)�and�National�ReadershipSurvey�(NRS),�have�reiterated�the�dominance�of�language�publications�over�thoseof�national�publications�over�time.�The�readership�figures�of�IRS�2008�Round2(R2)�survey�goes�on�to�strengthen�this�fact.�Times�of�India�(ToI)�is�the�onlyEnglish�newspaper�among�the�top�10�dailies�in�India.�Out�of�the�total�readershipof�the�top�10�daily�newspapers�each�in�English,�Hindi�and�Vernacular�category,English�gets�the�least�readership�share�at�11�percent26.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source: IRS 2008 R2 Survey, KPMG Analysis
22�Registrar�of�Newspapers�in�India23�IRS�2007�R224�NRS,IRS25�Census26�IRS�2008�R2
Total�Newspaper�Readership�in�India
94
Even�in�magazines,�only�1�among�the�10�most�read�Indian�magazines�belongs�tothe�English�language.
Readership�figures�clearly�show�consumer�preferences�for�regional�press.�Hindi�isthe�most�read�language�in�the�country�followed�by�Tamil,�Malayalam�and�Telugu.
Brand Extensions by National Players in the Regional Segment
Sensing�the�immense�potential�of�regional�players,�established�national�playersare�leveraging�their�brand�value�to�enter�into�the�regional�space�and�have�chalkedout�aggressive�plans�in�the�regional�space.�HTML�announced�plans�to�launchrevamped�version�of�Hindustan�in�200827.�The�Times�Group,�after�having�launcheda�Gujarati�version�of�its�business�daily�‘Economic�Times’�in�2007,�furtherintroduced�a�Hindi�version�of�the�same�in�2008.�Its�competitor�Business�Standardalso�introduced�the�Hindi�edition�of�its�financial�daily�in�the�same�year28.
Rapid Expansion by existing players
The�regional�print�space�has�also�witnessed�a�huge�flurry�of�new�launches�withestablished�players�leveraging�their�existing�strengths�to�roll�out�into�newergeographies,�which�are�otherwise�dominated�by�a�few�highly�entrenched�players.For�instance,�Dainik�Bhaskar�launched�six�editions�in�Chhattisgarh;�Bhilai,Jagdalpur�and�Ratlam�in�Madhya�Pradesh�and�strengthened�its�North�Indiapresence�with�launches�in�Punjab,�Haryana,�Chandigarh;�Shimla�in�HimachalPradesh;�and�Pali�and�Nagpur�in�Rajasthan.�Hindi�daily�Hari�Bhoomi�launched�itsJabalpur�edition�in�October�2008.29
Further,�like�their�national�counterparts,�players�are�expanding�their�brand�portfolioby�venturing�into�specialty�genres.�For�example,�Dainik�Bhaskar�launched�its�Hindifinancial�daily,�Business�Bhaskar,�in�June�2008.�Business�Bhaskar,�in�turn�wentinto�an�expansion�drive�for�within�a�month�of�its�launch�the�daily�had�13�editionsspanning�Madhya�Pradesh,�Chhattisgarh,�Punjab,�Haryana�and�Chandigarh.30
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
27�“HT�Media�announces�launch�of�Hindi�daily”,�DNA,�May�200828�Company�Website,�Newswatch.in29�exchange4media30�exchange4media
Source: IRS 2008 R2 Survey, KPMG Analysis
Total�Magazine�Readership�in�India
95
Regional players going National
With�success�achieved�in�their�respective�markets,�regional�players�are�graduallytargeting�higher�Socio-Economic�classes�in�larger�towns�as�well�to�increase�theirnational�reach.�One�of�the�ways�adopted�for�the�same�is�diversification�into�theEnglish�segment.�For�instance,�the�Jagran�Prakashan�(JPL)�group�launched�acompact�bi-lingual�daily�i-Next�in�Lucknow�and�Kanpur,�targeting�SEC�AB�readersof�18-35�years�of�age.31�The�newspaper�uses�a�combination�of�Hindi�andcommonly�used�English�words�keeping�in�mind�the�spoken�language�of�thetargeted�group�in�mini-metros.�
Similarly,�the�Dainik�Bhaskar�group�has�also�built�up�a�portfolio�of�brandscomprising�of�Dainik�Bhaskar,�Divya�Bhaskar,�DNA,�Business�Bhaskar�launched�in2008�and�DB�Star-the�latter�2�also�launched�in�2008.�In�early�2008,�the�DainikBhaskar�Group�also�launched�a�fortnightly�weekly�magazine�titled�‘She’�forwomen.32 The�magazine�was�primarily�targeted�at�women��in�SEC�A�and�Bcategory�in�Madhya�Pradesh,�Chhattisgarh,�Rajasthan,�Punjab,�Haryana�andChandigarh.�Sakaal�Group,�publishers�of�the�Marathi�Daily�Sakal,�launched�theEnglish�daily�Sakaal�Times�in�Pune�in�May�2008.�
The�other�way�by�which�players�are�planning�to�expand�their�national�reach�isthrough�launching�editions�from�big�cities�like�Delhi�and�Mumbai.�Deshbandhu,one�of�the�oldest�newspapers�in�Madhya�Pradesh�and�Chhattisgarh,�launched�itsnational�edition�in�Delhi�in�April�2008.33 Besides�being�made�available�in�Delhi�andNCR,�circulation�was�also�meant�for�selected�cities�in�Bihar,�Uttar�Pradesh,Himachal�Pradesh,�Uttarakhand,�Haryana,�Punjab�and�Rajasthan.
Narrowcasting in Regional Space too
Like�their�English�counterparts,�regional�players�are�also�moving�towardsnarrowcasting.�The�first�example�is�an�increase�in�the�number�of�supplementsoffered�by�the�players.�For�instance,�Naidunia�offers�six�supplements�to�captureniche�readers.�Fortnightly�supplements�“Sehat”�and�“Spectrum”�cater�to�healthand�children.�A�supplement�for�women�appears�every�Wednesday�and�one�oncareers�every�Thursday.�The�supplement�on�Friday�covers�glamour,�movies,�TVand�fashion.�In�addition,�there�is�a�regular�Sunday�features�supplement.34
There�were�instances�of�launching�niche�magazines�as�well.�The�ToI�grouplaunched�a�monthly�health�magazine�titled�‘Jeevet�Sharad�Shatam’,�on�May2008.35 The�niche�magazine�is�targeted�at�40-�plus�women.36�The�contentincludes�clinical�issues�related�to�women�and�general�health�remedies.�
In�the�newspaper�space,�the�regional�sector�has�also�witnessed�the�emergenceof�tabloids.�Hindi�afternoon�tabloid�DLA�was�launched�in�Agra�in�May�2007.37
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
31�exchange4media32�exchange4media,�Company�Websites33�exchange4media34�exchange4media,�Company�Website35�exchange4media,�Company�Website
36�exchange4media37�exchange4media
96
Since�then,�it�has�also�launched�four�similarly�priced�editions�in�other�cities.
Increasing competition reducing cover prices
Aggressive�competition�in�the�regional�print�media�space�has�resulted�in�an
inevitable�price�war.�The�enhanced�competition,�in�turn,�resulted�in�an�inevitable
price�war.�Since�players�are�venturing�into�each�other’s�geographic�turf,�the
market�is�getting�fragmented�and�established�players�in�a�particular�region�are
reducing�their�rates�as�a�strategy�to�retain�their�circulation�base.�One�illustration
was�to�be�seen�in�June�2008�in�Dehradun,�when�leading�players�there-�Amar
Ujala,�Dainik�Jagran�and�Hindustan-�reduced�the�cover�prices�of�their�respective
editions�by�INR�1;�price�of�all�the�3�newspapers�fell�from�INR�3�to�INR�2.
Similarly,�when�ToI�entered�the�Chennai�market,�existing�players�responded�by
reducing�their�prices�to�counter�the�increased�competition38.
Localization of Content in Newspapers
Traditionally,�the�extent�of�national�and�regional�coverage�in�the�Indian�Print�Mediahas�been�far�greater�than�local�news.�The�situation�seems�to�be�changing�nowwith�newspapers,�both�national�and�regional,�increasing�the�coverage�of�local�andregional�news.
As�means�of�overcoming�of�space�constraint�in�the�main�issues,�players�haveincreased�the�number�as�well�as�frequency�of�city�centric�supplements.�The�mainissues�of�most�national�dailies�have�been�carrying�daily�supplements�like�a�‘DelhiTimes’�or�‘HT�City’�in�the�metro�towns.�But�with�smaller�centers�and�towns�alsoemerging�as�significant�centers�for�media�consumption,�players�have�startedextending�supplement�issues�to�these�towns�as�well.�Hence,�supplements�like‘Gurgaon�Plus’�or�‘Patna�Times’�have�become�a�regular�feature�now.
As�a�large�scale�extension�to�the�concept�of�supplements,�players�have�leveragedthe�distribution�power�of�their�mother�brand�to�launch�full�fledged�new�citycentric�newspapers.�Times�Group’s�‘Mumbai�Mirror’�and�the�HTML-BCCLpromoted�‘Metro�Now’�are�some�of�the�pointers�in�this�direction.�The�strategy�ismostly�a�defensive�one�since�in�most�cases;�the�aim�is�to�prevent�the�exodus�ofsubscribers�from�the�main�group�in�the�face�of�increasing�competition.�But�thevery�fact�that�national�players�seem�to�take�recourse�to�the�localization�strategyfor�retaining�their�market�reiterates�the�increasing�power�of�local�content.�
Some�new�players�have�also�emerged�who�tend�to�concentrate�purely�on�thelocal�market.�One�example�being�the�English�Language�Compact�“Deccan�Post”,which�was�launched�in�the�twin�cities�of�Hyderabad�and�Secunderabad�onFebruary�200839.�Essentially�a�Hyderabadi�Weekly,�the�publication�was�meant�toreflect�the�typical�”Deccan”�culture,�tradition�and�cuisine;�essentially�an�“out�andout”�local�newspaper.�Similarly�in�the�magazine�space,�Premier�Entertainment�&
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
38�“TOI’s�launch�all�set�to�heat�up�Chennai”,�Livemint,�April�200839�exchange4media40�exchange4media
97
Media�Pvt.�Ltd.�unveiled�“Bangalore�Happenings”.40 As�the�name�itself�suggests,the�magazine�was�targeted�at�providing�a�comprehensive�city�guide�of�Bangalore,its�hotels,�restaurants,�spas,�resorts,�bookstores,�music�stores,�cultural�institutes,airport�and�places�of�tourist�interest.�
Hindi�and�other�vernacular�dailies�are�perceived�to�be�more�local�friendly�ascompared�to�their�English�counterparts.�That�is�the�reason�why�regionaladvertising�is�growing�at�a�relatively�faster�pace.�Of�course,�with�his�enhancedaspirations�and�increased�purchasing�power,�the�rural�consumer�has�also�becomethe�new�target�group�of�the�marketers.�With�that,�advertisers�have�realized�theneed�for�local�campaigns�and�hence�media�planners�are�finding�the�regionalmedia�attractive�to�reach�the�local�consumers.�Newer�and�localized�sectors�suchas�education,�retail,�and�jewellery�are�tapping�into�this�market.�Newspapers,through�their�classified�sections,�have�traditionally�been�the�popular�choice�ofthese�sunrise�sectors.�Now�with�the�increasing�market�segmentation�and�thefocus�being�on�micro-customers,�city�specific�editions�and�customized�localcontent,�newspapers�are�gaining�more�favor�among�these�sectors.
Advertising: The primary driver behind the scenes
Interestingly,�for�all�the�heated�action�in�regional�print�media,�the�activities�of�theplayers�are�advertising�driven.�Geographical�expansions�and�brand�extensionsenhance�the�ability�of�the�players�to�derive�synergies�from�common�editions�andas�a�consequence,�build�brand�equity.�Hence,�players�can�offer�the�benefits�ofAd-bundling�to�the�advertisers.�Advertisers�remain�the�primary�reason�behind�theplayers�increasing�their�color�proportion�and�investing�in�quality�improvements;customers�are�the�means�through�which�these�brands�attract�advertisers.�Printhas�always�been�a�high�volumes�game�and�low�pricing�game,�with�the�coverprices�insufficient�to�recover�total�costs.�Hence�these�players�are�highlydependent�on�advertising�to�recover�their�costs�and�improve�margins.�TraditionallyHindi�and�other�Vernacular�dailies�used�to�have�higher�cover�prices�than�theirEnglish�counterparts.�However,�with�the�regional�market�also�getting�fragmented,players�have�dropped�average�cover�prices�to�improve�circulation,�and�hencethere�is�the�need�to�improve�the�look�and�feel�of�the�paper�in�order�to�providevalue�for�money�to�the�advertisers.�
At�the�prevailing�advertising�rates,�an�English�reader�is�valued�9�times�more�thana�Hindi�reader�and�13�times�over�a�vernacular�reader.�The�language�garners�only�a25�percent�share�in�circulation�while�still�accounting�for�48�percent�share�inadvertising.41 This�anomaly�is�expected�to�get�corrected�and�the�difference�inAdvertisement�rates�between�national�and�regional�press�is�expected�to�come
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
41�“TOI’s�launch�all�set�to�heat�up�Chennai”,�Livemint,�April�2008
98
down�as�the�regional�media�begins�to�get�its�due�importance.
Implications- More Monetization of RegionalMedia
Growth in Regional Advertising
The�consumer�shift�towards�regional�media�is�borne�out�by�the�growth�trends�inregional�advertising.�Until�some�time�ago,�there�was�a�substantial�mismatchbetween�the�viewership/readership�numbers�and�advertising�revenues�for�theregional�media�players.�The�regional�media�seldom�got�their�share�of�advertisingrevenues�congruent�to�the�viewership�or�readership�numbers.�All�that�is�changingnow�and�the�gap�between�the�share�of�advertising�revenues�and�viewership�isdecreasing,�resulting�in�higher�revenues�for�regional�media.�
Media�planners�find�the�regional�media�attractive�for�a�number�of�reasons.Especially�in�TV�the�share�of�regional�advertising�on�television�is�substantial.According�to�AdEx�India,�during�2008,�national�and�regional�channels�were�usedin�an�advertising�ratio�of�58:42.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Source: TAM Adex
Per�Reader�Economics�for�Newspapers
Language Advertising Circulation Total
English 2099 728 2827
Hindi 233 208 441
Vernacular 157 203 360
Premium�of�English�Over�Hindi 9.0x 3.5x 6.4x
Premium�of�English�over�Regional 13.4x 3.6x 7.9x
Source: ICICI Securities
Share�of�Advertisement�Volumes�in�2008
99
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Sector Effects of Regionalization Implications
TV
• Rapid�growth�in�the�number�of�regionalchannels
• Consistent�rise�in�Advertising�revenueshare�of�regional�channels�in�the�total�TVadvertisement�pie
• National�Broadcasters�venturing�intoregional�space�by�launching�regionalchannels�
• Regional�players�strenghtening�theirproduct�portfolio�by�launching�nichechannels
• Launch�of�city�centric�channels�by�nationalplayers
• Demand�for�regional�content�is�likely�tocontinue�to�grow�and�even�Hindi�contenthouses�may�increase�exposure�to�regionalcontent�development�to�exploit�thegrowing�demand�
• As�regional�markets�begin�to�saturate,there�might�be�need�for�a�carefulevaluation�of�market�potential�of�aparticular�region�before�launching�a�newchannel�
• Enhanced�significance�of�library�contentbecause�of�the�ability�to�dub�good�contentand�exploit�it�in�different�languages.�Needfor�proper�valuation�of�the�library�content.
Film
• Improving�collections�of�regional�cinemadue�to�expansion�of�multiplexes
• Trend�of�corporatization�picking�up,�withBollywood�players�venturing�into�regionalcinema
• Cross�Pollination�of�talent�betweenBollywood�and�Regional�Cinema
• Need�for�the�regional�industry�players�toorganize�themselves�and�get�themselvesheard�in�appropraite�industry�forums
• Quality�of�regional�cinema�is�likely�toimprove�due�to�infusion�of�funds
• Players�to�enhance�their�production�coststo�attract�new�talent�as�well�as�matchinternational�standards
• Imperative�for�players�to�enhancemarketing�spends�to�match�the�popularityof�Hindi�Cinema,�both�within�the�countryand�abroad.
• Increased�competition�due�to�both�nationaland�regional�players�venturing�into�eachother’s�territories
• Established�players�expanding�theirproduct�portfolio�by�adding�new�languages
• Competition�leading�to�reduction�in�coverprices,�and�thus�leading�to�price�wars
• Rise�in�the�number�of�supplements�due�tolocally�relevant�content�gaining�insignificance
• Need�for�evaluating�market�potentialbefore�expanding�into�particular�territories
• Advertising�revenues�to�further�grow�forHindi�and�regional�players,�leading�to�needfor�more�effective�targeting�of�advertisersand�efficient�advertising�inventoryutilization
• Imperative�for�players�to�effectivelymonetize�the�supplements.
The�growth�in�regional�advertising�today,�is�quite�significantly,�by�new�advertisingsectors�such�as�education,�hospitality,�real�estate�and�jewellery�–�which�often�aremostly�local�brands�and�therefore�advertise�through�local�advertising�campaigns.
Going�forward,�as�the�importance�of�regional�media�grows�across�the�M&E�subsectors,�the�difference�in�the�advertising�rates�between�the�national�and�regionalmedia�is�expected�to�narrow�down�further�and�hence�advertising�spends�areexpected�to�be�much�more�evenly�spread�between�the�two�media.�For�themedia�companies�this�is�likely�to�mean�an�increasing�focus�on�innovation�andcustomization�to�create�specific�content�for�regional�media�audiences.
100
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Digitization
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
05
Digitization
IntroductionDigitization�of�media�is�playing�a�major�role�in�transforming
the�face�of�the�Indian�entertainment�and�media�industry.
In�Television,�advent�and�increasing�penetration�of�digital
delivery�platforms�implies�a�multi�channel�and�multi
distribution�platform,�alongside�an�addressable�system�for
the�broadcasters.�Digital�solutions�in�Filmed�Entertainment
have�helped�the�producers�to�reach�relevant�audience�and
increase�the�number�of�prints�without�additional�costs.�The
music�industry�is�bullish�on�digital�music�platforms�offsetting
the�decline�in�physical�sales�in�outdoor�media,�the�players
are�now�gradually�shifting�from�traditional�hoardings�to�other
forms�of�outdoor�advertising�such�as�digital�signages�like
LED’s�and�LCD�screens.�Digitization�is�thus�transforming�the
industry�across�sectors.
Digitization in TVThe�Indian�TV�distribution�space�is�evolving�fast.Past�three-
four�years,�we�have�seen�the�Conditional�Access�System
being�introduced�which�gave�the�necessary�impetus�to
digital�cable,�the�advent�of�5�DTH�players�which�together�are
expected�to�have�garnered�10�million�subscribers�by�the�end
of�2008,�and�the�commercial�launch�of�IPTV.�
Digitization�has�also�been�a�focus�area�for�TRAI�for�the�past
two-three�years�and�it�is�with�this�goal�that�it�has�brought�in
regulations�to�pave�the�way�for�Conditional�Access�System
(CAS),�DTH,�HITS�and�IPTV.
Increasing Penetration of Digital DeliveryPlatforms
One�of�the�most�important�developments�in�the�TV
distribution�industry�has�been�the�introduction�of�mandatory
CAS�by�the�government�in�specified�areas�of�Delhi,�Mumbai
and�Kolkata�since�2007.�However,�the�system�has�met�with
limited�success.�The�adoption�rate�of�set�up�boxes�in�the
CAS�mandated�areas�was�around�38�percent�in�these�3
cities�on�a�combined�basis�by�the�end�of�20071.�Since�a�set
up�box�is�not�required�to�view�Free�to�Air�(FTA)�channels,
many�of�the�households�have�actually�opted�to�receive�only
FTA�channels2.�However,�for�the�first�time�consumers�in
these�3�cities�got�a�say�in�what�they�wanted�to�watch�and
pay�for�(CAS�had�been�introduced�in�Chennai�earlier�from
September�2003�onwards3).
It�is�actually�the�entry�of�DTH�players�that�has�given�a�strong
push�towards�the�digitization�of�TV�distribution.�One�of�the
reasons�for�the�high�penetration�of�DTH�vis-à-vis�digital
cable�is�the�high�adoption�of�DTH�in�rural�areas.�This�is
mostly�owing�to�the�penetration�of�DD�Direct+,�a�Free�to�Air
(FTA)�DTH�service�provider,�in�these�areas.�As�a�result,�total
1�TAM�Media�Research2�TRAI3�“Conditional�Access�System�–�Wait�for�a�clearer�picture”,�The�Hindu�Business�Line,�September�2003
number�of�digital�homes�in�Rural�India,�at�6�million,�was
more�than�three�times�that�of�Urban�India�which�stood�at�1.8
million�households�as�of�August�20074.
Digital�penetration�shot�up�further�in�2008,�especially�due�to
increased�competition�in�the�Pay�DTH�space.�With�the�entry
of�Reliance�Communications�and�Bharti,�there�are�currently
five�private�players�operating�in�this�segment�-�Dish,�Tata
Sky,�Sun,�Big�TV�and�Airtel�Digital�TV.�There�is�an�aggressive
marketing�push�by�the�new�players,�which�is�likely�to
expand�the�DTH�market�in�a�big�way.�Cable�networks,�facing
the�heat�due�to�competition�from�DTH�players�with
ambitious�growth�targets,�seem�to�have�realized�the�need�to
digitize�and�to�grow�to�a�bigger�scale�if�they�want�to�survive.
Multi�System�Operators�(MSOs)�are�going�into�a�digitization
drive�to�upgrade�their�networks�to�a�digital�format.
Consolidation�of�MSOs�is�also�under�way.�For�instance,
Hathway�is�taking�the�inorganic�route�for�expansion.�In
March�2008,�it�acquired�a�controlling�interest�in�two�mid-
sized�cable�TV�companies�as�part�of�its�strategy�to�expand
its�footprint�and�limit�the�challenge�of�new�MSOs�entrants5.
Another�MSO,�Digicable�Network�(India)�acquired�a�51
percent�stake�in�Kolkata-based�CableComm�as�part�of�its
strategy�to�expand�in�the�eastern�region�of�India�in�June
20086.�
With�TRAI�recommending�100�percent�mandatory�cable
digitization�within�the�next�5�years7,�the�digitization�and
consolidation�trend�among�MSOs�is�expected�to�continue�in
future.�Total�number�of�Digital�Pay�TV�households�(including
digital�cable,�DTH�and�IPTV)�in�India�is�projected�to�grow�at
the�compounded�annual�rate�of�35.4�percent�to�reach�71
million�by�2013,�or�about�56�percent�of�the�total�Cable�and
Satellite�Households�in�India.�Share�of�subscription�revenues
coming�from�digital�platforms�is�likely�to�be�even�higher�at
about�64�percent�on�account�of�higher�ARPUs�in�digital
distribution8.
4�IMRB�and�TAM�Study�Estimates5�“Hathway�acquires�51percent�in�Bhaskar's�cable�TV�arm�and�Gujarat�Telelinks�“,�Indiantelevision.com,�March�20086�“Digicable�acquires�51percent�in�CableComm”,�Indiantelevision.com,�June�20087�“TRAI�sets�5�year�timeframe�for�digital�cable�TV”:,�The�Hindu�Business�Line,�July�20088�KPMG�Analysis,�KPMG�Interviews
Digital�Divide�between�Rural�and�Urban�India
Source:�IMRB�and�TAM�Study�and�Estimates
Source:�IMRB�and�TAM�study�estimates,�KPMG�Analysis
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Number�of�Digital�TV�Households�in�India
104
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Although�in�terms�of�absolute�numbers,�cable�is�expected�to�exhibit�a�small
growth,�reaching�90�million�subscribers�from�about�72�million�now,�in�terms�of
market�share,�it�is�expected�to�fall�from�about�84�percent�now,�to�71�percent�by
2013,�in�face�of�stiff�competition�from�attractively�priced�and�aggressively
promoted�DTH�and�IPTV�services9.�A�strong�growth�driver�for�DTH�and�IPTV�is
also�likely�to�come�when�CAS�is�implemented�on�a�larger�scale�across�Indian
cities,�as�has�been�suggested�by�TRAI.�Consumers,�who�had�been�sticking�to
analogue�cable�simply�out�of�inertia,�may�then�be�forced�to�make�a�choice
between�either�CAS�based�digital�cable�or�DTH�or�IPTV.
DTH – Stiff Competition keeps ARPUs low
India�being�a�price�conscious�market,�has�helped�ensure�that�players�here�have
had�to�compete�with�each�other�on�the�basis�of�price.
Sun�Direct,�the�new�entrant�in�the�DTH�in�the�beginning�of�2008,�was�able�to
garner�1�million�subscribers�in�200�days�from�just�4�southern�states�with�a�low
subscription�pricing�model.�The�network�launched�4�regional�basic�tiers�consisting
of�over�100�plus�channels�specific�to�each�southern�state�(Tamil�basic,�Telugu
Basic,�Kannada�Basic�and�Kerala�basic)�at�the�rate�of�INR�75�per�month.�In
addition�it�launched�add�on�packages�starting�from�as�low�as�INR�1010.
Following�this,�Dish�TV�also�slashed�its�setup�box�price.�A�new�Dish�TV
connection�in�South�India�was�available�for�INR�1990�(plus�INR�200�as�installation
charges)�from�the�earlier�INR�2950�(plus�INR�200)11.�Tata�Sky�too�dropped�its�
set-top�box�(STB)�price�by�50�percent�to�INR�149912.�
9�KPMG�Analysis,�KPMG�Interviews10�“Dish�TV�to�take�on�Sun�Direct”,�Indiantelevision.com,�July�200811�“Dish�TV�to�take�on�Sun�Direct”,�Indiantelevision.com,�July�200812�“Tata�Sky�slashes�set-top�box�prices�by�50percent”,�Indiantelevision.com,�February�2008
Pay�TV�Household�in�India
Source:�KPMG�Analysis,�KPMG�Interviews
105
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Reliance�Communications�and�Bharti�Airtel�entered�the�DTH�segment�in�August
and�October�2008�respectively.�Like�other�players,�both�of�them�offer�multiple
entry�as�well�as�multiple�subscription�packages.�
In�a�highly�competitive�market,�it’s�difficult�for�any�player�to�keep�prices
significantly�higher�than�others.�At�the�same�time,�the�players�can’t�afford�to�have
subscription�rates�much�higher�than�those�of�cable.�Also,�paid�add�on�services
such�as�video-on-demand�are�yet�to�truly�take�off�in�India�and�the�demand�for
such�services�remains�low.
As�a�result�of�these�factors,�the�ARPU�for�DTH�in�India�remains�low�at�around
USD�3-4�per�month�versus�about�USD�21�for�most�of�the�big�DTH�players�in�Asia
Pacific�and�between�USD�60�to�80�in�U.S.,�U.K.�and�Australia.13
Although�competition�in�the�Indian�DTH�market�is�likely�to�keep�the�DTH�ARPUs
low�in�the�short�term,�in�the�medium�to�long�term�we�think�it�is�likely�that�ARPUs
may�pick�up�as�add-on�services�will�catch�up�in�India�as�the�consumer�becomes
better�prepared�to�pay�more�for�better�quality�of�services.
ARPU�for�DTH�Services
13�KPMG�Research
Source:�KPMG�Analysis
“Digitization is not something that suddenly happens one fine day. It isalready happening and will continue to permeate increasingly in everyaspect of the media business causing a multi-dimensional impact. Mediaorganizations have the choice to either lead digitization or be led by it. Atthe same time, the challenge for the media sector as a whole is to helpshape an economically sensible and sustainable digital environment thatis value-additive rather than value-destructive for the sector as a whole.”Anuj Poddar, Sr. Vice President – Strategy & Business Development,Viacom 18 Media Pvt. Ltd.
106
Pay TV ARPUs – India vs. Rest of the World
The�average�pay�TV�ARPU�in�India,�at�around�USD�4,�remains�low�by
global�standards,�coming�in�the�second�last�position�among�the�major
Asia�Pacific�nations.
However�a�more�careful�analysis�based�on�ARPUs�as�a�percentage�of�per
capita�income,�indicates�that�India�is�placed�somewhere�in�the�middle
among�these�nations.
Therefore,�no�significant�“correction”�in�the�ARPU�is�expected�in�the�near
future.�However,�as�discussed�earlier,�we�do�think�it�is�likely�that�ARPUs
start�picking�up�from�2010�onwards,�largely�on�account�of�increased�usage
of�add-on�services�associated�with�digital�distribution�mediums�(Digital
cable,�DTH�and�IPTV)�as�well�as�a�cooling�down�of�the�highly�competitive
environment�in�TV�distribution�that�exists�today.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Pay�TV�ARPUs�(USD)
Pay�TV�ARPUs�as�Percentage�of�Per�Capita�Income
Source:�Credit�Suisse,�KPMG�Research
Source:�Credit�Suisse,�KPMG�Research
107
IPTV takes off
The�Aksh-MTNL�foray�into�IPTV�services�in�Mumbai�and�Delhi�have�taken
commercial�IPTV�services�a�step�forward�in�India.�This�was�followed�with�an
Aksh�and�BSNL�joint�venture�for�IPTV�services�in�smaller�cities�like�Jaipur�and
Jodhpur.�These�IPTV�services�have�been�set�at�very�attractive�levels�with
subscription�charges�varying�between�INR�100�and�INR�200�per�month
(depending�on�the�city).�The�setup�box�is�free�and�available�against�a�refundable
security�deposit�of�INR�99914.�At�such�price�points�and�with�unique�features�like
time�shifted�viewing�(a�viewer�is�able�to�see�any�programme�telecast�in�the�last
few�days�at�a�time�of�his�convenience),�IPTV�is�competitively�priced�with�other
distribution�services�–�Cable�and�DTH.�However,�the�quality�and�reliability�of�the
service�provided�continues�to�be�an�issue�and�has�inhibited�good�adoption�rates
till�now15.�
In�January,�2009,�Bharti�also�announced�its�foray�into�the�IPTV�segment.�It�offers
triple�play�services�(land�line�+�broadband�+�IPTV)�at�INR�999�per�month�after�a
one�time�installation�charge�of�INR�399916.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Triple Pay opportunity for Indian Telecoms
The�average�pay�TV�ARPU�in�India,�at�around�USD�4,�remains�low�by
global�standards,�coming�in�the�second�last�position�among�the�major
Asia�Pacific�nations.
In�this�break�up,�the�IPTV�ARPU�has�been�assumed�conservatively�but�if
add-on�services�such�as�video-on-demand�were�to�take�off�in�India,�the
average�ARPU�from�the�IPTV�segment�could�be�significantly�higher.
Revenue�break-up�in�triple�pay�services
Service ARPU (in INR)
Landline 200
Internet 400
IPTV 200
Total 800
14�Icontrol.in15�Industry16�Airtel.in
Source:�Industry,�KPMG�Analysis
108
HITS: A new growth opportunity
The�other�new�technology,�that�is�being�looked�at�positively�by�TRAI�is�Head�End
in�the�Sky�(HITS)�because�of�the�acceleration�it�can�bring�to�the�spread�of�both
digitization�and�conditional�access�in�India.
HITS�is�similar�to�DTH�services;�in�both�these�platforms�of�digital�cable,�channels
are�distributed�at�one�go�through�a�satellite.�But�unlike�DTH,�where�the�end-user
is�the�consumer,�the�HITS�end-user�is�a�cable�operator,�who�then�delivers�the
signals�to�the�end�consumers.�
Once�I&B�Ministry�comes�out�with�detailed�regulations�for�the�sector,�many�new
players�are�likely�to�enter�the�market�and�start�competing�with�the�DTH,�Cable
and�IPTV�companies�for�a�share�of�the�Pay�TV�distribution�pie.�WWIL�of�the�Essel
Group�is�the�only�HITS�licensee�currently,�although�it�is�yet�to�begin�commercial
operations17.
Mobile TV: Television content on the Mobile screen
Mobile�television�refers�to�provision�of�television�channels�and�content�on
portable�devices�such�as�mobile�phones.�This�content�can�be�same�as�that
broadcasted�on�ordinary�television�or�may�be�content�specifically�made�for�mobile
phone�viewing.
In�2007,�Public�broadcaster�Doordarshan�launched�its�mobile�TV�pilot�with�handset
major�Nokia�and�Samsung,�on�the�DVB-H�platform18.�The�service�offered�eight
free�channels,�including�DD�National,�DD�News,�DD�Sports�and�services�in�some
regional�languages.�In�August�2008,�state�run�telecom�operator�MTNL�also
launched�mobile�TV�services.�The�TV�service�on�mobile�handsets�'MTNL-TV'�is
available�in�Delhi�and�the�NCR�for�MTNL�customers,�and�provides�20�channels�at
INR�99�per�month19.�
Industry�players�are�bullish�on�the�prospects�of�Mobile�TV�in�India,�the�anticipated
allocation�of�3G�spectrum�services�in�India�in�2009�is�to�allow�live�streaming�of
video�content�on�3G�enabled�mobile�handsets.�The�stake�holders,�mobile�service
providers�and�television�content�providers�are�also�likely�to�be�looking�at�different
business�models�for�monetization�of�mobile�TV�and�revenue�sharing.�Both�fee-
based�and�free,�advertisement�driven�provision�of�mobile�TV�services�are�likely�be
experimented�with.�However,�in�the�short�term,�mobile�TV�services�in�India�are
likely�to�have�limited�penetration�as�only�a�small�proportion�of�mobile�phone
owners�have�handsets�capable�of�live�video�streaming.�Most�of�the�3G�phones
sold�in�India�are�in�the�INR�10,000�and�above�price�range20.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
17�“Wire�and�Wireless�ready�for�HITS�operations”.�Economic�Times,�April�200818�“Doordarshan�launches�mobile�TV�pilot�service”,�Televisionpoint.com,�May�200719�“MTNL�launches�MTNL-TV�for�mobile”,�Techtree.com,�August�200820�KPMG�Research
109
Digitization in TV – Advantageous for both Industry andConsumers
One�of�the�prime�potential�benefits�of�digitization�of�television�signals�is�in
overcoming�the�bandwidth�constraints�of�the�analog�networks.�This�has�played�an
important�role�in�driving�the�growth�in�the�number�of�television�channels.
Digitization�is�also�leading�to�a�more�organized�and�addressable�distribution
market.�This�is�ultimately�expected�to�increase�subscription�revenues�for�the
broadcasters.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Increasing channel bandwidth through digitization
Most�of�the�Cable�TV�Networks�in�India�deliver�TV�channels�in�analog
mode�to�the�subscribers.�In�the�beginning�cable�operators�were�able�to
show�only�6-14�analog�channels�on�their�networks�due�to�limited
bandwidth.�Since�then,�the�capacity�has�been�enhanced�by�extending�the
bandwidth�of�the�Cable�TV�distribution�system.�From�a�bandwidth�of�225
MHz�in�the�early�days�of�Cable�TV,�the�networks�has�progressively
enhanced�their�capacity�to�300�MHz,�450�MHz,�550�MHz,�750�MHz�and
now�to�860�MHz,�which�is�the�largest�available�bandwidth�for�Cable�TV
Networks�worldwide.�In�the�future�this�could�get�enhanced�to�1000�MHz.
The�bandwidth�of�cable�systems�and�maximum�possible�analog�channels
on�such�systems�are�given�in�the�table:
In�metros,�most�of�the�cable�TV�homes�receive�65�to�90�channels�using�a
combination�of�optical�fiber�and�coaxial�cables.�Such�cable�networks�are
being�gradually�introduced�throughout�the�country.�In�fact,�presently�cable
TV�services�in�most�of�the�cities�serve�up�to�60�channels�over�a�550�MHz
bandwidth.�These�networks�typically�cater�to�5000�customers�per�head.
Carrying�Capacity�of�Bandwidths
Bandwidth(in MHz) Maximum number of Analog Channels
300 36
450 54
550 67
750 92
860 106
Source:�TRAI
110
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
The�smallest�Cable�TV�Networks�in�the�country�may�typically�deliver�up�to
30�channels�over�a�300�MHz�bandwidth.
Since�channel�carrying�capacity�of�the�cable�network�even�in�its�highest
bandwidth�slot�of�860�MHz�is�just�106�channels,�the�only�feasible�option
left�to�enhance�the�channel�carrying�capacity�is�digitization�of�network.�A
single�analog�video�signal�occupies�8MHz�of�bandwidth�on�the�cable.�By
using�bandwidth�efficient�digital�modulation�techniques�such�as
Quadrature�Amplitude�Modulation�(QAM),�data�rates�in�excess�of�56Mb/s
can�be�transmitted�within�8MHz�band.�Using�Motion�Picture�Expert�Group
(MPEG)�compression�techniques,�a�high�quality�video�signal�can�be
compressed�into�3-4Mbps�data�stream.�Therefore,�by�upgrading�a�cable
plant�from�analog�to�digital�TV�transmission,�one�can�achieve�more
channel�capacity.�The�800�MHz�of�available�downstream�bandwidth�in�a
modern�cable�plant�could,�in�theory,�support�over�1000�channels�of�video
services�with�MPEG�and�other�compression�techniques.
In�DTH�services,�the�channel�carrying�capacity�for�all�the�existing�service
providers�is�at�least�50�percent�higher�than�the�106�channels�upper�limit
for�analog�cable.�The�channel�carrying�capacity�on�DTH�depends�on�two
factors�–�the�number�of�transponders�and�the�digital�compression
technique�used.
With�MPEG-2�compression,�around�12-15�channels�can�be�carried�per
transponder.�Therefore�with�12�transponders�each�(as�on�July�2008),�the�2
biggest�DTH�players�in�India�–�Tata�Sky�and�Dish�TV�had�maximum
capacities�of�150�plus�channels.�With�MPEG-4�compression,�the�number
of�channels�per�transponder�increases�to�more�than�20.�Thus,�the�recently
launched�Big�TV�DTH�service�by�Reliance�is�offering�200�plus�channels
with�its�8�transponders�to�start�with.
Source:�TRAI
111
Access�to�more�number�and�better�quality�of�channels�remain�the�top�two
reasons�the�consumers�are�opting�for�DTH�technology.
These�figures�indicate�that�add-on�features�such�as�gaming�and�Video-on-Demand
(VoD)�are�yet�to�catch�up�with�the�consumers.�
As�a�result,�for�services�like�Movies�on�Demand,�one�of�the�challenges�that�the
DTH�players�face�is�getting�into�revenue�share�deals�as�they�can't�pay�high
minimum�guarantees.�On�the�other�hand,�revenue�share�deals�are�not�attractive
for�the�content�suppliers�if�they�don’t�see�high�volumes.
However,�the�industry�continues�to�be�bullish�about�the�potential�of�add-on
services�to�add�to�the�ARPUs�in�the�near�future.�
Apart�from�DTH�and�IPTV,�these�and�other�add-on�services�can�be�offered�on
digital�cable�as�well.�For�instance�in�North�America,�which�like�India,�is�a�cable
dominated�distribution�market,�about�50�percent�of�Internet�connections�are
provided�by�Cable�TV�operators22 resulting�in�fierce�competition�between�telecom
operators�and�Cable�TV�operators�providing�various�value-added�services.
Therefore,�digitization�of�cable�sector�in�India�is�also�expected�to�enable�a�much
wider�scope�for�such�services�in�comparison�to�what�exists�today�and
significantly�increase�the�ARPUs�for�cable�players.�
We�think�that�it�is�possible�that�such�value�added�services�offered�by�digital
distribution�players�may�pick�up�in�India�from�2010.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Key�Reasons�for�Consumers�opting�for�DTH
Source:�IMRB�and�TAM-S�Digital�Studies
21�“TRAI�proposal�urges�cable�operators�to�digitize�networks”,�The�Hindu�Business�Line,�July�2008
112
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
The Digital Consumer
The�year�2008�was�when�Digital�TV�viewing�in�India�came�to�its�own.
With�increase�in�digital�penetration�and�sample�sizes�in�key�markets
crossing�the�reporting�threshold,�TAM�started�reporting�digital�households
as�a�separate�analysis�target�group�from�August�2008.�This�further
reiterated�the�growing�significance�of�Digital�Households�for�the�M&E
industry.�
A�survey�to�measure�the�TV�viewing�habits�of�a�digital�consumer�lead�to
the�following�conclusions:
1.�A�Digital�Viewer�watches�more�channels�as�compared�to�an�analog
one.�This�was�measured�by�percentage�of�channels�contributing�to�80
percent�viewing�time
2.�Digital�homes�spend�more�time�on�TV.
A�Digital�viewer�spends�25�percent�more�time�on�watching�TV�per�day.
Therefore,�as�digital�TV�distribution�continues�to�increase�its�share�in
the�C&S�subscribers’�pie,�one�can�expect�a�corresponding�increase�in
the�average�TV�viewing�times�as�well.
Number�of�Channels�contributing�to�80�percent�viewing�time
Target Group No of Channels
Digital�Viewer 43
Analog�Viewer 31
Time�Spent�on�TV�per�day
Target GroupNo of Channels
(minutes per day)
Digital�Viewer 186
Analog�Viewer 150
Source:�TAM
Source:�TAM
113
Digitization in Films
Digitization�of�Film�technology�is�expected�to�change�the�face�of�“traditional”
cinema�business.�Digital�cinema�encompasses�every�aspect�of�the�movie�making
process,�from�production�and�post-production�to�distribution�and�projection.�While
investment�in�exhibition�infrastructure�is�increasing�theatrical�capacity,�digitization
of�distribution�is�helping�filmmakers�maximize�revenues.�In�the�global�context,
while�digital�cameras�are�nothing�new,�and�post-production�houses�have�been
using�digital�equipment�to�edit�and�master�movies�and�animation�for�some�time,
the�all-digital�distribution�and�projection�of�movies�has�only�recently�arrived�to
complete�the�chain.�Over�the�past�two-three�years,�such�technologies�have�also
made�their�presence�felt�in�India.�Indian�film�content�is�increasingly�going�digital
with�use�of�more�graphics�and�visual�effects.�Besides,�the�distribution
mechanism�is�undergoing�a�change�with�the�advent�of�digital�cinema,�which
envisages�providing�a�high�definition�cinematic�experience.
Use of Digital Technology in Film Making
Over�the�past�two�years,�an�increasing�number�of�films�in�India�have�used�the
Digital�Intermediate�(DI)�technology,�whereby�a�film�gets�converted�to�digital
format�and�affords�more�control�of�colors�and�images�as�well�as�room�for�the
adjustment�of�image�structure.�Consequently,�there�has�been�increasing
instances�of�use�of�computer�graphics�imaging,�3D�animation�and�VFX
technology�in�films.�During�2008,�Adlabs�through�a�technology�tie-up�with�Israel-
based�Cinema�Park�Networks�(CPN),�opened�India’s�first�6D�entertainment
center-The�Cinema�Park-�in�Agra.�At�present,�the�screening�is�meant�for
educational�movies�catering�to�foreign�tourists,�students�and�families.�The
technology-driven�visual�effects�and�acoustics�of�6D�combine�strikingly�real�three-
dimensional�images�with�the�senses�of�smell,�sound,�touch,�motion�and,�above
all,�interactivity.�This�provides�a�unique�cinematic�experience�to�the�viewer.�If�the
concept�is�successful,�more�exhibitors�and�post�production�studios�might�be
keen�to�go�for�usage�of�such�advanced�digital�technologies�in�future.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
114
Digital Cinema –The Technology
Film�Industry�has�witnessed�the�arrival�of�digital�technology�in�cinema�over�the
past�two�years.�Digital�Cinema�replaces�celluloid�films�with�digital�projection.
Movies�are�filmed�and�then�stored�on�digital�media�such�as�hard�disks�or�servers.
These�are�then�distributed�through�physical�media�such�as�DVDs�or�are
transmitted�to�digital�cinema�with�the�help�of�high-speed�networks�(satellite�or
optical�fiber).�At�cinemas,�these�movies�are�beamed�using�special�digital
projectors.�
This�technology�implies�several�advantages�for�the�Film�Industry.�The�theater
server�has�the�capacity�to�store�multiple�digital�movies,�thus�allowing�flexibility�to
run�multiple�movies�even�for�single�screen�theaters.�In�addition,�cost�per�copy�of
digital�print-at�INR�3,500-5,000-�is�much�less�as�against�cost�per�copy�of�physical
print,�which�stands�at�INR�65,000-70,000�(excluding�the�cost�of�the�projector)23.
Moreover�this�streamlines�the�distribution�of�cinema�through�satellite�technology
to�geographically�remote�places.�This�reduces�the�scope�of�piracy�and�more
number�of�people�get�to�see�the�original�print�in�lesser�amount�of�time.�The
industry�thus,�could�derive�significant�economic�benefits�from�the�digitization
process.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
The Economics of Cinema Prints- How does Digital Cinema Help?
The Scene two years earlier….
Producing�a�Bollywood�Film�can�cost�anything�between�INR�20-600�million.�Whatever�the�size�of�the�producer’s
wallet,�there’s�a�cost�that�remains�constant-INR�65,000-70,000�for�making�a�single�print.�For�500�prints�it�works�to
around�INR�30-40�million�or�around�20�percent�of�the�total�cost�of�big�budget�movies24.�For�a�small�budget�movie,
the�cost�of�the�same�works�out�to�be�even�more�than�the�total�cost�of�production!�
In�Hollywood,�the�dynamics�are�different.�Budgets�are�so�high�that�the�cost�of�making�4,000�prints�is�generally,
merely�5�percent�of�the�total�cost.�So,�it�becomes�easy�for�a�distributor�to�carpet�bomb�cinemas�with�a�new�release
and�recoup�investments�on�the�first�weekend.�In�India,�however,�to�even�attempt�carpet�bombing,�a�producer�might
need�at�least�1000�prints.
It�is�this�cost�that�earlier�used�to�compel�low-budget�filmmakers�in�India�to�create�just�about�50-60�prints.�The�big
production�houses�managed�50025.�Even�with�superb�logistics�in�place,�they�used�to�at�best,�hope�to�reach�out�to
600�cinemas�in�the�first�week.
This�inability�to�launch�nationally�in�the�first�week�lies�at�the�root�of�Bollywood’s�problem.�Films�are�typically
launched�first�in�urban�areas.�After�that�the�prints�are�shifted�to�second�rung�theaters.�Later,�they�are�shipped�to
what�are�called�B�and�C�class�towns.�By�the�time�a�movie�hits�these�towns,�it�can�take�as�long�as�five�months.�At
the�end�of�the�day,�producers�and�cinema�hall�owners�lose�because�the�economics�of�movie�making�don’t�allow
them�to�reach�out�to�their�audience�ahead�of�the�pirates.�So�revenues�from�the�smaller�centers�and�towns�were
almost�non-existent�for�the�filmmakers.
23�ufomoviez.com24�India�Brand�Equity�Foundation25�India�Brand�Equity�Foundation
115
The ‘Glocal’ Indian Model of Digital Cinema
Digitization�has�taken�off�in�Indian�Cinema�due�to�the�adapted�technology�that�the
Indian�players�have�brought�to�India.�In�the�western�countries,�mostly�the�D
Cinema�kind�of�digital�technology�has�been�adopted.�D�Cinema�refers�to�digital
screens�adhering�to�system�specifications�as�prescribed�by�Digital�Cinema
Initiatives�(DCI).�DCI�standards�help�ensure�a�uniform�and�high�level�of�technical
performance,�reliability�and�quality�control,�with�the�final�cinematic�viewing
experience�being�better�than�the�normal�analog�35�mm�films.�Globally�D�Cinemas
are�the�norm;�they�are�the�only�format�in�which�Hollywood�Films�are�released
today26.�In�India�too,�players�such�as�PVR�and�Adlabs�are�making�efforts�to
introduce�the�D-Cinema�type�of�digital�format�screens�in�India
For�all�its�advantages,�the�high�end�D�Cinema�comes�out�to�be�expensive�for
small�centers�theater�owners�in�India.�The�cost�of�DCI�approved�equipment
comes�out�to�be�USD�125,000�and�the�Hollywood�model�of�upfront�investment
by�theater�owners�renders�this�technology�financially�unviable�for�small�scale
cinema�operators27.�Further,�the�technology�had�to�be�rugged�enough�to�take
care�of�erratic�and�unstable�electric�supply�and�the�dusty�environments.
Consequently,�the�Indian�market�evolved�its�own�business�model�that�has
facilitated�wide�spread�adoption�of�digital�cinema.
Majority�of�the�screens�that�have�gone�digital�have�not�been�sold�the�high�end�D
cinema�but�the�E-Cinema�technology,�which�is�about�10�percent�poorer�in�quality
but�comes�at�about�a�third�of�D�Cinema’s�cost.28 Also�in�most�cases,�cinema
owners�do�not�have�to�make�up�front�investments�for�cost�of�projectors�and
other�infrastructure�requirements;�all�the�logistical�arrangements�are�borne�by�the
technological�players,�in�return�of�revenue�sharing�arrangements.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
The Solution…Digital Cinema and how it could help
Digital�Cinema,�at�its�core,�works�on�the�principle�of�simply�eliminating�prints.�Once�a�cinema�hall�signs�up�with�a
Digital�Cinema�Technology�Provider,�such�as�UFO�or�Real�Image,�it�installs�high�end�computers,�digital�projectors�and
a�smart�card�with�a�password.�The�movie�is�broadcast�via�high�speed�satellite�links�to�the�cinema�hall�where�it
resides�on�the�computer.�The�smart�card�comes�programmed�with�licenses�from�the�producer.�So,�if�a�hall�is
authorized�to�telecast�a�film�35�times�over�one�week,�it�can�do�just�that.�At�the�end�of�35�shows,�the�movie�deletes
itself—unless�the�license�is�extended.�
The�computer�can�store�as�many�as�12�movies.�For�a�single�screen�owner,�it�translates�into�an�ability�to�screen
different�movies�at�different�times.�Rural�India�apart,�it�is�the�kind�of�thing�that�has�given�a�new�lease�of�life�to�single
screen�cinema�halls�even�in�big�cities.�In�the�past�they�had�to�stick�to�running�a�single�movie.�Now�they�have�the
flexibility�to�show�different�movies�at�different�times.
Hence,�cinema�owners�are�more�receptive�to�exhibit�small�budget�films,�and�producers�get�the�benefit�of
simultaneous�theatrical�window�across�the�country.�
26�“Multiplexes:�Big�picture�ahead”,�India�Infoline,�April�200627�“Multiplexes:�Big�picture�ahead”,�India�Infoline,�April�200628�“Multiplexes:�Big�picture�ahead”,�India�Infoline,�April�2006
116
For�instance,�Real�Image�sells�cinema�system�against�a�down�payment�of�around
10�percent�while�UFO�Moviez�collects�a�fee�per�show�(INR�200�from�the
distributors�and�INR�250�from�the�exhibitors)�while�retaining�ownership�of�the
systems29.�Both�get�the�rights�for�on-screen�advertising,�in�some�cases�a�bigger
revenue�component�than�digital�cinema�solutions.�Thus,�unlike�Hollywood�which
views�digital�solutions�as�a�quality�investment�device,�digital�cinema�is�more�of�a
cost�saving�instrument�in�India,�which�explains�the�business�model�novelty.
D-Cinema vs. E-Cinema
Impact on the Film Industry
This�‘glocal’�model�has�led�to�an�explosion�in�penetration�of�digital�screens�in
India-�the�rate�of�adoption�in�India�is�higher�than�those�in�the�developed
countries.�Players�such�as�Real�Images�and�UFO�have�equipped�around�1800
theaters�in�India�with�digital�technology�and�have�aggressive�expansion�plans�till
2010.30 At�present,�penetration�of�digital�screens�in�India�is�higher�than�that�in
U.S.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
D-Cinema�vs.�E-Cinema
Parameter D-Cinema E-Cinema
Quality Equal�to�or�better�than�35�mm Below�analog�quality
Price Expensive(USD�1,00,000-1,50,000) Inexpensive�(USD�20000-50000)
Developed�For Cinema�Market Video�Market
Driver Quality Price
29�“Direct�to�theater”,�Outlook�Business,�May�200830�KPMG�Interviews
Source:�“Multiplexes:�Big�picture�ahead”,�India�Infoline,�April�2006
Penetration�of�digital�screens
Source:�Credit�Suisse,�KPMG�Research
117
This�has�facilitated�wider�release�of�film�prints,�since�movies�now�can�be
released�both�in�big�cities�and�smaller�towns�simultaneously.�Some�of�the
biggest�hits�of�2008�were�released�with�relatively�higher�number�of�prints.�In
December�2008,�the�movie�“Ghajini”�was�released�with�1200�prints,�the�highest
number�of�prints�so�far�for�a�Bollywood�film31.�
Digitization�has�brought�in�a�revolution�in�the�way�films�are�distributed�and
exhibited�in�India-The�number�of�prints�of�recent�hits�that�has�been�released�in
the�digital�theaters-over�and�above�the�ones�released�in�non-digital�format�give
another�indication�of�the�things�to�come.
With�the�economic�slowdown�and�the�consequent�focus�on�containing�costs,�we
believe�that�digital�cinema�with�its�lesser�recurring�costs�may�gain�even�wider
acceptance.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Some�Prominient�Bollywood�Releases�in�Digital�Theaters
Film Digital Theaters
Singh�is�Kingg� 415
Rab�ne�Bana�Di�Jodi 400
Sarkar�Raj 372
Heyy�Babyy 340
Tashan 322
Love�Story�2050 320
Jodha�Akbar 302
Bhool�Bhulaiya 297
Advantages�of�Digital�Cinema
Wider release of films and reduction in time to
market
Smaller�centers�in�Tier�2�and�Tier�3�towns�can�attract�more�audiences�and�chargehigher�ticket�prices.�This�restricts�losses�due�to�piracy�and�adverse�reviews.
Savings in cost of printsEntails�one�time�investment�in�cost�of�digital�prints;�cost�per�copy�of�print�is�muchlower�than�physical�prints.
Durability of Films
Optical�prints�deteriorate�in�quality�over�time;�digital�prints�retain�their�quality�andhence�pictures�do�not�get�distorted�on�transportation.�A�distributor�thus�does�nothave�to�spend�on�re-prints�to�provide�quality�in�case�a�film�does�well.
Reduces Piracy
High�definition�content�production�software�guards�against�piracy.�Also,�digitalcinema�reduces�the�theatrical�window�by�facilitating�simultaneous�releases�insmaller�towns.�This�leads�to�higher�theatrical�occupancies,�thus�curbing�piracy.
Improved Profitability
Wider�release�of�films�promotes�early�recovery�of�investments-�higher�occupancyresults�in�costs�getting�spread�over�a�larger�patron�base�resulting�in�betterprofitability.
Conversion of Old FilmsOld�classics�can�be�re-released�in�digital�format;�this�adds�a�potential�new�revenuestream�for�the�producers�and/or�copy�right�owners.
Promotes Parallel and Regional Cinema
Digital�Cinema�eliminates�the�cost�of�print.�This�means�that�even�small�budget�andlocal�language�films�can�be�produced�and�distributed�widely�at�lower�cost.�Similarly,art�films,�which�have�a�limited�audience,�can�be�shot�in�digital�format�and�releaseddigitally�in�select�theaters,�keeping�the�financial�viability�in�mind.
31�“Why�Ghajini�is�a�lesson�in�PR”,�DNA,�December�2008
Source:�UFO�Moviez,�"�Films�take�the�Digital�Route�to�hit�Jackpot",�Times�of�India,�August�2008
118
The�Indian�Market�displayed�a�great�level�of�maturity�in�taking�care�of�high
investments�and�other�related�problems�faced�in�developed�countries�like�the
U.S.�Going�forward,�both�D�and�E�Cinemas�are�expected�to�co-exist�in�India,�with
a�players�advocating�and�promoting�both�these�technologies.�However,�with�the
Tier�2�and�Tier�3�towns�emerging�as�next�growth�centers�and�India�being�a�price
sensitive�market,�E�Cinema�may�have�a�higher�rate�of�adoption,�owing�to�its�early
head�start�and�aggressive�growth�plans�by�players,�at�least�in�the�short�to
medium�term.�By�2013,�it�is�estimated�that�there�might�be�around�7000�digital
screens�in�India32.�This�is�expected�to�result�in�higher�reach�of�films�and�higher
realization�per�film,�thus�increasing�the�financial�viability�of�movies.
Digitization in MusicMusic�companies�in�India�continue�to�digitize�their�music�catalogues�for�licensed
delivery�of�content�over�the�internet�and�mobile.�Digital�music�sales�are�now
showing�potential�to�offset�the�declining�physical�unit�sales�and�drive�growth�of
the�industry.
Online Music Content
Music�companies�now�offer�their�music�library�on�multiple�third�party�websites
apart�from�their�own�website�for�a�fee�based�download.�
However�the�online�music�industry�faces�a�major�challenge�in�the�form�of�illegal
file�swapping�services.�Extensive�violation�of�copyright�and�digital�stream�ripping
are�hurting�the�industry�hard.
Players�have�started�to�put�efforts�in�addressing�these�issues.�For�instance,�in
2007�T�Series�filed�a�case�against�YouTube.com�and�its�parent�company�Google
Inc.�for�infringement�of�their�copyright;�the�company�was�successful�in�obtaining
an�interim�restraint�against�YouTube�and�Google.�In�2008�as�well,�the�company
filed�a�case�against�Yahoo�Inc.�and�its�Indian�subsidiary�Yahoo�Web�Services
(India)�Pvt.�Ltd�for�infringement�of�their�copyright�caused�by�unlicensed�streaming
of�T�Series’�copyright�works�on�Yahoo's�portal33.
Growth in Mobile Music
Bulk�of�the�digital�sales�in�India�comprises�of�mobile�music�and�within�this
ringtones�download�occupies�the�dominant�share.�
In�future,�songs�embedded�in�handsets�are�also�expected�emerge�as�a�significant
revenue�stream�for�music�companies.�For�instance,�a�handset�may�be�offered
with�certain�number�full�track�downloads�(the�price�of�which�is�to�be�covered�in
the�cost�of�the�phone)�with�further�options�of�downloading�new�songs�for�a�fee.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
32�Crisil�–�State�of�the�Industry,�October�200733�“T-Series�continues�fight�against�piracy”,�Buzz18.com,�July�2008
119
Digital Formats in Outdoor MediaOver�the�past�two�years,�digital�formats�in�outdoor�advertising�like�LCD�and�LED
screens�have�gained�wider�acceptance.�The�year�2008�witnessed�the�introduction
of�new�formats�and�technology�in�OOH,�through�international�standards�Bus�Q,
digital�media�introduction�in�housing�complexes,�cafes,�restaurants,�malls,�office
complexes,�airports�and�in�retail�stores.�Cost�effectiveness�and�scalability�are�the
two�main�advantages�that�digital�billboards�offer�over�the�traditional�formats�in
case�of�OOH�advertising.�Digital�billboards�are�expected�to�expand�the�effective
out-of-home�inventory�because�multiple�ads�can�be�shown�on�the�same�display,
generating�many�times�the�revenue�of�a�traditional�billboard.�Further,�with�big
cities�like�Chennai,�Delhi�and�Bangalore�putting�a�ban�on�street�hoardings,�players
are�betting�on�putting�digital�signages�in�malls�for�effective�engagement�of
customers.�Industry�players�believe�that�since�hoardings�and�billboards�alone�may
not�be�able�to�capture�enough�consumer�attention,�customer�engagement�has�to
come�through�interactivity.
However,�Digital�Media�is�yet�to�fully�pick�up�in�India.�The�current�conversion�rate
from�static�to�digital�hoardings�is�7-10�percent.34 There�are�two�main�pre
requisites�for�the�widespread�adoption�of�Digital�Media:
• Availability�of�suitable�infrastructure
• Separate�content�for�digital�medium.
Most�of�the�established�players�have�already�started�to�address�these�issues.
There�are�currently�around�10-12�players�operating�in�the�digital�outdoor�media
space;�many�of�them�are�in�the�process�of�setting�up�in�house�creative�teams�to
design�commercials�especially�for�this�medium.�From�2011�onwards,�digital
formats�are�expected�to�dominate�the�OOH�media�space�and�provide�a�big
impetus�to�OOH�advertising.�This�is�expected�to�lead�to�consolidation�of�the
industry�and�wiping�out�of�the�smaller,�unorganized�players.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
34�KPMG�Interviews
“The number of music listeners have not reduced, but music buyers have. Ifdigital music has to affirm its footing in India as it has begun in the rest of theworld, then we need a strong judicial system on an urgent basis that protectsthe IPR of the creative assets and its creators.”
Kumar Taurani, Chairman & Manging Director, Tips Industries
120
Convergence: Accessing media acrossdevices
One�direct�impact�of�digitization�has�been�convergence�of�media�over�the�last
few�years�giving�consumers�the�convenience�of�accessing�audio�and�visual�media
content�(in�digital�formats)�across�multiple�devices�including�PCs/laptops,�MP3
players�and�mobiles�in�digital�formats.
The�potential�market�for�convergent�media�content�is�sizeable�and�growing.�There
are�about�12.24�million�active�internet�users�in�India,�out�of�which�4.90�million�are
broadband�subscribers.�Mobile�penetration�is�even�more�promising.�There�are
about�315.31�million�mobile�subscribers�out�of�which�about�88.27�million�users
logon�to�the�internet�form�their�mobile35.�
The�increasing�penetration�of�the�PC�and�the�mobile�phone�has�opened�up
numerous�opportunities�for�media�companies�to�provide�content�such�as�music,
news�and�entertainment�for�access�on�these�devices.�There�are�multiple�models
that�can�be�followed�to�monetize�this�content�such�a�one�time�download�fee,
subscription�fee�or�ad-supported�free�content.�Given�the�way�media�consumption
has�evolved�over�the�internet�and�mobile�phones�and�the�easy�access�available
for�free�illegal�content�on�the�internet,�the�users�now�expect�the�media�content
such�as�music�to�be�free.�In�this�scenario,�the�third�option�–�free�advertisement
supported�content�is�likely�be�a�good�bet�for�media�companies�at�least�till�the
time�digital�piracy�is�brought�under�control.
With�the�convenience�it�offers�to�the�end�consumer,�media�consumption�on�PC,
mobile�phone,�digital�music�players�and�other�devices�may�naturally�continue�to
command�an�increasing�share�of�the�medic�consumption�time�of�consumers�that
have�access�to�these�devices.�Recognizing�this,�Indian�media�companies�are
adapting�themselves�to�serve�this�new�consumer�demand.
For�instance,�NDTV�has�consolidated�its�web�and�mobile�properties�under�NDTV
Convergence,�a�wholly�owned�subsidiary�which�is�focused�exclusively�on
providing�content�for�the�internet,�mobile�phone�and�new�media�platforms�such
as�IPTV.�Its�mandate�includes�both�repackaging�NDTV’s�television�content�for
consumption�on�the�internet�and�mobile�phones�as�well�as�developing�exclusive
properties�for�these�domains.�
Similarly�UTV�New�Media,�the�digital�media�arm�of�UTV�Software
Communications�has�focused�on�creating�content�for�its�web�properties�and�on
acquiring�rights�for�digital�music�and�creating�assets�such�as�images,�ring�tones
and�videos�around�it.�Its�web�properties�include�the�personal�finance�portal�UTVi,
entertainment�portal�UTVatplay�and�properties�such�as�Techtree�which�were
brought�under�its�umbrella�through�the�acquisition�of�Indian�technology�company
IT�nation.�For�the�first�half�of�FY�2009,�new�media�accounted�for�3�percent�of
UTV�Software�Communication’s�total�revenues36.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
35�TRAI,�The�Indian�Telecom�Services�Performance�Indicators�July�–�September�2008�36�UTV�Investor�Presentation,�November�2008
121
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.
Digitization:�Implications�for�the�Industry
Sector Effects of Digitization Implications
TV
• More�choice�available�to�consumers�due�to�greaternumber�of�channels
• Enhancement�of�over�all�TV�viewing�experience�dueto�better�picture�and�sound�quality
• Availability�of�multiple�add-on�services�apart�fromstandard�channel�subscription�packages
• Lesser�under�declaration�of�subscriber�base�leading�toincrease�in�subscription�revenues�for�the�broadcaster
• Increase�in�average�TV�viewing�time�due�to�better�viwingexperience�and�more�channel�choice
• Potentially�higher�ARPUs�for�digital�distribution�playersbecause�of�ability�to�offer�add-on�services�
Film
• Wider�release�of�prints�with�simultaneous�release�insmaller�centers
• Shorter�theatrical�windows
• Advanced�visual�effects�and�technology
• Higher�occupancies�can�facilitate�quicker�recovery�ofinvestment�and�enable�more�film�releases
• Universal�reduction�in�the�theatrical�life�of�a�film�in�cinemahalls-status�of�the�film�can�be�decided�in�the�first�week�itself�
• Reduction�in�piracy�in�Tier�2�and�Tier�3�cities• Post�Production�works�are�likely�to�gain�increased
significance,�with�enhanced�time�and�budget�allocations
Music
• Alternate�revenue�streams�available�to�musiccompanies�to�compensate�for�declining�physical�unitsales�
• Companies�making�their�entire�music�librariesavailable�on�the�internet�for�legal�download
• Rapidly�growing�mobile�music�market�in�India�with�alarge�percentage�of�mobile�music�revenues�comingfrom�ringtone�downloads�currently�but�expectedincrease�in�the�share�of�full�track�downloads�in�themedium�to�long�term
• Clubbing�of�mobile�music�and�mobileservices/handsets�emerging�as�an�effective�revenuestream�for�music�companies�
• Increasing�share�of�revenues�for�music�companies�comingfrom�digital�music
• Better�bottomlines�for�music�companies�as�digital�musicsales�involve�lower�costs�to�the�company�because�of�morecost�effective�distribution.
• Even�further�fall�in�physical�unit�sales�as�digital�musiccatches�on
Outdoor
• Increasing�use�of�digital�signages�vs�traditionalhoardings
• Customers�may�expect�more�interactivity�in�the�medium• Cost�of�doing�business�to�increase,�and�smaller�businesses
are�likely�to�suffer.�Consolidation�might�set�in�and�theindustry�is�likely�to�become�more�organized�in�the�future
• With�increasing�costs�and�outlay�involved,�more�efficientmetrics�of�performance�effectiveness�are�likely�to�emerge,which�can�help�in�attracting�advertisers
Implications of DigitizationUndoubtedly,�digitzation�is�set�to�transform�the�media�industry�in�India�by
enhancing�the�quality,�the�speed�and�scope�of�delivery�as�well�as�the�user
interactivity�of�various�media�formats.�In�the�following�table,�the�implications�of
digitization�on�the�different�sectors�of�the�media�industry�are�summarized.
122
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Regulatory and Tax
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Environment
06
Regulatory and Tax Environment
Introduction
Media�plays�an�important�role�in�dissemination�of
information,�thereby�stimulating�development�in�any
country.�The�significant�function�assumed�by�the�media
industry�has�been�primarily�responsible�for�regulatory
intervention�in�this�sector.�Our�country’s�past�experience
manifests�that�effective�regulations�(which�may�be�formed
through�a�consultative�approach)�contribute�to�the�growth
and�competition�in�any�sector�(e.g.�telecom).�The�current
regulatory�structure�in�M&E�sector�demonstrates�a�drive�in
the�same�direction.
Several�factors�have�been�responsible�for�regulatory
intervention�in�the�sector,�which�have�contributed�to
furtherance�of�consumer�interest,�viz.
• Making�available�new�alternative�technology�platforms
for�accessing�the�broadcasts�(e.g.�DTH,�IPTV)
• Quality�of�services
• Checking�monopolistic�trends�(e.g.�specifying�ceiling
rates�for�pay�channels)�
• Commercial�aspects�(as�between�network�operators�and
broadcasters),�inter-alia,�under reporting of�subscribers
by�the�cable�operators,�offering�of�channels�by�the
broadcasters�as�a�bouquet�rather�than�a-la-carte�etc.
• Piracy.
Government�intervention�by�way�of�regulations�also�stems
from�its�planned�objectives�(laid�down�in�the�Five�year
plans).�Regulations�may�be�brought�out�to�help�ensure�that
the�objectives�are�achieved�as�per�the�government�design.
Furthermore,�the�need�for�huge�investments�also�calls�for
clear�regulations�to�generate�investor�confidence.�
Historically,�media�has�been�kept�under�check.�The�sector�is
still�regulated�and�has�not�been�opened�for�foreign
participation�as�much�as�other�sectors.�This�has�been�due�to
media’s�inherent�power�of�influencing�public�opinion.�This
strength�gives�media�immense�responsibility�too.
Governments�of�several�developed�nations�have�provided�for
checks�on�media�(helping�ensure�control�of�media�firms�in
the�hands�of�residents�of�their�country,�conservative
approach�on�media�acquisitions�etc.)�by�way�of�regulations.
In�today’s�times,�growth�and�objectives�of�the�sector�can
only�be�achieved�responsively�if�transparency,�involvement
of�the�stakeholders�(in�formulation�of�the�regulations)�and
changing�consumer�behavior,�tastes�and�technology�are
given�due�consideration.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
1�TRAI�has�been�following�a�consultative�approach�(with�the�industry�stakeholders)�in�respect�of�several�issues�confronted�by�the�Industry,�thereby�involvingsuch�stakeholders�in�the�policy�formulation�process.�After�receiving�the�comments�from�the�stakeholders,�TRAI�releases�its�recommendations�to�the�concernedMinistries�2�Foreign�Investment�in�the�broadcasting�sector�(radio,�television,�DTH�etc.)�allowed�under�the�‘approval�route’�only.3�Additional�conditions�include,�inter�alia,�ownership�of�at�least�51�percent�of�total�equity�by�largest�Indian�shareholder�(as�defined�in�the�Uplinking�guidelines)4�The�Union�Government�decided�to�permit�DTH�TV�service�in�Ku�Band.�The�prohibition�on�the�reception�and�distribution�of�television�signal�in�Ku�Band�hasbeen�withdrawn�by�the�Government�vide�notification�No.�GSR�18�(E)�dated�January�9,�2001�of�the�Department�of�Telecommunications�(DoT).
Snapshot�of�Regulatory�Interventions
Sector Parameter Earlier NowProposals/
recommendations1Implications
Television UplinkingGuidelines
Separate�uplinkingguidelines�for:�
a)�News�and�currentaffairs�channels
b)�Non-news�andcurrent�affairs�channels
c)�Satellite�NewsGathering�(SNG)/�DigitalSatellite�NewsGathering�(DSNG)activities
-�ConsolidatedUplinking�Guidelinesdated�December�2,2005�(for�televisionchannels�and�SNG/DSNG)
-�Telecom�RegulatoryAuthority�of�India(TRAI)�has�given�itsrecommendation�inrespect�of�issuesrelating�to:
a)�Private�terrestrial�TV�broadcastservices�
b)�Mobile�televisionservices
The�recommendation�makesprovisions�for:
a)�Television�channels�without�anysubscription�fee�(to�cable�operatoretc.)
b)�Enhanced�coverage�of�localissues,�events�etc�(against�primarilythe�coverage�of�national�issues�bythe�satellite�channels)
c)�Additional�mode�of�accessingtelevision�channels�being�explored(in�mobile�TV)
ForeignInvestment
limits2
a)�Television�channels:�
(i)�News�and�currentaffairs�televisionchannels�-�26�percent�
(ii)�Television�channelsother�than�(i)�-�100percent3
b)�Cable�network-�49percent
c)�No�Direct-to-home(‘DTH’)�guidelines4
a)�Television�channels-�Same�as�earlier�
b)�Cable�network�-Same�as�earlier�
c)DTH:�49�percent(FDI�+�FII);�FDI�not�toexceed�20�percent
TRAI�has�also�givenits�recommendationson�foreigninvestments�limitsfor�broadcastingsector.�TRAI�hasrecommendedincrease�in�foreigninvestment�limit:
a)�For�cable�networkto�74�percent
b)�For�DTH-�74percent�(Incl.�FDI)
Downlinkingguidelines
No�Downlinkingguidelines
Downlinking�policyannounced�
-�Mandatory�for�television�channelsto�get�registration
-�Foreign�channels�made�to�havelocal�presence�in�India
Note:�The�above�information�is�updated�up�to�December�31,�2008
126
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
5�Provided�under�the�Guidelines�for�Uplinking�from�India.�Further�mandated�by�Sports�Broadcasting�Signals�(Mandatory�Sharing�with�Prasar�Bharti)�Act,�20076�TRAI�has�issued�a�consultation�paper�dated�September�23,�2008�on�‘Media�Ownership’�to�gather�industry’s�views�on�the�issues�of�cross�media�andownership�restrictions7�TAs�per�the�Telecommunication�(Broadcasting�and�Cable)�Services�Tariff�Order,�2004�(as�amended�till�date)8�The�Register�of�Interconnect�Agreements�(Broadcasting�and�Cable�services)�Regulation,�2004�[as�amended];�TRAI�also�issued�its�Consultation�Paper�onInterconnection�Issues�on�15�December�2008�to�deal�with,�inter�alia,�issues�arising�with�the�advent�of�new�technologies,�viz.�IPTV,�HITS
Snapshot�of�Regulatory�Interventions
Sector Parameter Earlier NowProposals/
recommendationsImplications
Television Legislation forcontent etc.
Programme�andAdvertisement�codeincluded�under�theCable�TelevisionNetworks(Regulations)�Act,1995�and�CableTelevision�NetworksRules,�1994�[theCable�Act]
Same�as�earlier Broadcasting�ServicesRegulation�Bill,�2007suggests�acomprehensive�contentcode,�cross�mediaholdings6,�publicservice�obligation�andestablishment�of�thebroadcasting�regulatoryauthority�of�India
The�bill�is�detailedand�incorporatesthe�provisions�ofthe�Cable�Act.However,�there�isa�need�to�addressthe�concerns�of�allstakeholders.
Regulator No�separate�regulator TRAI�appointed�as�a�broadcastingand�cable�services�regulator�witheffect�from�January�9,�2004
Appointment�of�aregulatorfacilitatedaddressing�ofisuues�faced�bythe�industry.�It�hasalso�brought�moretransparency�inthe�policy�makingprocess
Pricingregulations/Choice of
channels forconsumers
-�Not�regulated
-�Channels�offered�inbouquets�(than�a-la-carte)
-�Conditional�Access�System�(CAS)implemented�in�Chennai�and�someparts�of�Mumbai,�Delhi�and�Kolkata
-�Pricing�caps7 on�
a)�Pay�channel�in�CAS�areas�(INR5.35�per�channel�per�subscriber)�
b)�Amount�payable�per�month�inNon-CAS�areas�is�to�range�betweenINR�82�and�INR�278;�and
c)�Pay�channels�offered�to�DTHoperators�(at�50�percent�of�therates�at�which�channels�are�offeredfor�non-CAS�areas)
-�Provision�of�channels�on�a-la-cartebasis�made�mandatory
-�Interconnect�agreementsbetween�broadcasters�and�networkoperators�(DTH,�cable�operatorsetc)�governed8 by�TRAI�
-�Choice�toconsumers�to�payfor�the�channelsthat�they�watch
-�Transparency�forthe�broadcastersas�the�number�ofsubscribers�can�beknown
-�Better�for�theconsumers�as�thediscretion�of�thecable�operatorswould�not�befunctional
-�Regulationsgoverninginterconnectagreementsenable�acquisitionof�content�bydistributors�oncompetitive�terms�
Sharing of feedwith public
broadcasters
Based�on�commercialarrangements;�notmandatory
Mandatory5�sharing�of�live�feeds�inrespect�of�sports�programmes�ofnational�importance
-�Revenue�leakagefor�privatechannels
-�Availability�ofimportant�sportingevents�to�themasses
Note:�The�above�information�is�updated�up�to�December�31,�2008
127
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Snapshot�of�Regulatory�Interventions
Sector Parameter Earlier NowProposals/
recommendationsImplications
Television PrincipalLegislations
Cable�TelevisionNetworks(Regulations)�Act,1995�and�CableTelevision�NetworksRules,�1994�
Additional�guidelinesinclude:
-�DTH�guidelines9
-�Internet�ProtocolTelevision�(IPTV)10
-�TRAI�has�issuedrecommendations�for:�
a)�the�restructuring�ofcable�TV�services;
b)�Headend-In-The-Sky(HITS)11
The�recommendation�is�likely�tohelp�to�regulate�the�cable�industry,attract�foreign�investment�andbecome�more�competitive.�It�isalso�expected�to�make�available�analternate�form�of�distributingtelevision�channels�for�the�cableoperators.
Films�&Music
PrincipalRegulations
-�Indian�Copyright�Act,1957�(‘Copyright�Act’)
-�CinematographAct,1952
-�Policy�for�import�ofCinematograph�filmsetc.
Amendments�in�theCopyright�Act�proposedin�the�year�2006
The�amendments�proposed,�interalia,�include�‘digital�rightsmanagement’�and�aspectsemanating�from�India’smembership�of�the�World�TradeOrganization�(WTO).�It�is�likely�tomake�the�Copyright�Act�morestringent�and�in�compliance�withthe�international�scenario.
ForeignInvestment
100�percent�FDI�infilm�allowed�subjectto�entry�levelconditions
100�percent�FDIallowed�in�with�noentry�level�conditions
Removal�of�entry�level�conditionsmay�allow�more�tie-ups/�foreignplayers�to�come�into�the�country.
Co-productionAgreements
(Treaty)
Treaties�with�Italy.U.K.�and�France
Further�treaties�withGermany�and�Brazil
Treaties�with�China�andCanada�in�process
Such�treaties�enable�thedevelopment�of�film�industries�ofboth�the�countries�and�furthereconomic�and�cultural�exchanges.Treaties�also�accord�status�of�a‘national�film’�to�the�co-producedfilm.
Print�Media PrincipalRegulation
-�The�Press�andRegistration�of�BooksAct,�1867
-�The�Registration�ofNewspapers�(Central)Rules,�1956
Additional�guidelines/regulations�include:
-�Guidelines�forpublication�offacsimile�editions�offoreign�newspapers
-�Guidelines�forsyndicationarrangements�Bynewspapers
-�Guidelines�forpublication�of�Indianeditions�of�foreigntechnical/�scientific/specialty�magazines/journals/�periodicals
-�Guidelines�forPublication�of�IndianEditions�of�ForeignMagazines�dealingwith�News�andCurrent�Affairs
Editions�of�foreign�newspaperscould�be�made�available�to�theIndian�readers�(which�were�earlierimported�into�the�country).However,�there�is�no�facsimileedition�in�India�till�date.
-�Indian�newspapers�can�procurematerial�(photographs,�cartoonsetc.)�from�foreign�publications
The�government’s�decision�to�allowIndian�editions�of�foreign�news�etcmagazines�may�result�in�reductionin�prices�of�such�magazines�andalso�inclusion�of�Indian�content/advertisements�in�suchpublications.
9�Telecom�Disputes�Settlement�Appellate�Tribunal�(‘TDSAT’)�has�recently�ruled�that�it�is�not�mandatory�for�a�DTH�operator�to�carry�all�the�channels�on�itsnetwork10�Ministry�of�Information�and�Broadcasting�(‘MIB’)�has�issued�guidelines�on�IPTV�which,�inter�alia,�provides�for�the�following:-�No�registration�required�in�case�of:
a)�Telecom�licensees�having�a�license�to�provide�triple�play�services;�b)�Internet�Service�Providers�(‘ISP’)�having�net�worth�of�more�than�INR�1000�million�and�having�permission�to�provide�IPTV�services;�and�c)�Registered�cable�operators.
-�Telecom�service�providers�and�ISPs�to�pay�license�fee�based�on�adjusted�gross�revenue�as�applicable�from�time�to�time;-�Prior�approval�of�the�government�(or�licensing�authority)�required�for�adding�any�new�value�added�service�to�the�network.11�Government�of�India�had,�in�the�year�2003,�issued�permission�to�two�companies�to�operate�HITS�service�for�fast�implementation�of�CAS.�However,�thisservice�has�not�taken�off�so�far.
Note:�The�above�information�is�updated�up�to�December�31,�2008
128
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
12�TRAI�has�issued�draft�guidelines�on�satellite�radio�which,�inter�alia,�provides�for�annual�fee�of�4�percent�of�gross�revenues,�FDI�up�to�74�percent;�provision�ofsubscription�based�services�only�(no�commercial�advertising),�specific�news�broadcast�of�All�India�Radio�and�certain�channels�of�Prasar�Bharti.13�As�per�the�Policy�on�expansion�of�FM�radio�broadcasting�services�through�private�agencies-�Phase-II�issued�on�July�13,�200514�Recommendations�in�respect�of�all�parameters�for�radio�have�been�given�by�TRAI�on�Phase-III�of�FM�radio�broadcasting15�These�are�MIB’s�views�on�TRAI’s�recommendations�on�3rd�phase�of�FM�radio�broadcasting
Snapshot�of�Regulatory�Interventions
Sector Parameter Earlier NowProposals/
recommendationsImplications
Print�Media ForeignInvestment
Not�permitted Indian�entitiespublishing:�a)Newspapers/�Indianeditions�of�foreignmagazines�etc.dealing�with�newsand�current�affairs�–26�percent
b)�Scientific/technical�journalsetc-�100�percent
c)�Publication�offacsimile�edition�offoreign�newspapers100�percent.
Above�limits�of�FDIare�permitted�withprior�approval�of�theGovernment�
The�present�foreign�investmentlimit�brings�a�level�playing�field�inthe�news�segment�of�televisionbroadcasting�and�print�media.
Radio12 License fee Fixed�license�feeregime�(with�15percent�escalationevery�year)
-�One-Time�EntryFee�(OTEF)�for�a�city13;�and�
-�Annual�fee-basedon�higher�of�4percent�of�grossrevenue�and�2.5percent�of�OTEF
-�OTEF�for�a�district;and14
-�Annual�fee-based�onhigher�of�4�percent�ofgross�revenue�and�2.5percent�of�OTEF
Concessions�forstations�in�North-Eastand�Jammu�&Kashmir
-�Enhanced�viability�of�thestations�as�annual�fee�alignedwith�the�size�of�the�market�
The�recommendation�forchanging�the�geographical�basisof�licensing-�city�to�district�mayfurther�augment�viability.�
However,�MIB�considers�thatsuch�shift�from�city�to�districtmay�not�be�possible�in�view�ofthe�some�operational�issuesinvolved15.
Multiplelicenses
Restriction�onmultiple�licenses�in�acity
-�Restriction�onmultiple�licenses�in�acity
-�Cap�on�totalchannels�held�by�alicensee�in�thecountry�fixed�at�15percent�of�allchannels
-�At�least�3�[excludingAll�India�Radio�(AIR)]channels�in�any�districtto�be�allotted�todifferent�entities;
-�Cap�(per�licensee)�of50�percent�of�totalchannels�in�a�district�
-�No�all-India�cap
The�recommendations�are�likelyto:
-�Increase�competition;�and
-�Provide�for�differentiatedcontent�to�the�consumers
However,�MIB�does�not�favorremoval�of�cap�of�15�percent�ofall�channels�in�the�country�andrecommends�that�total�numberof�channels�owned�by�a�licenseeshould�not�be�more�than�40percent�of�all�channels�in�a�city
Note:�The�above�information�is�updated�up�to�December�31,�2008
“MRUC is expected to release first set of data from Indian Outdoor Study byMarch – April, 09. This would overcome the biggest challenge faced by OOHmedia and is definitely expected to kick off a significant industry growth phase”
Indrajit Sen, President, Laqshya Media
129
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Snapshot�of�Regulatory�Interventions
Sector Parameter Earlier NowProposals/
recommendationsImplications
Radio ForeignInvestment
No�FDIpermitted
(portfolioinvestment�tothe�extent�of�20percentallowed)
Foreign�investment�(FDI/portfolio)�to�the�extent�of�20percent�permitted16
Foreign�Investmentin�stationsbroadcasting:�
-�News�and�currentaffairs-�26�percent�
-�Other�than�Newsand�current�affairs�–49�percent
-�Increase�in�options�of�mobilizingfunds�
-�Foreign�radio�players�may�alsoparticipate�in�India�through�directinvestment�in�the�Indian�companyand�with�their�expertise�furtheraugment�the�operational�efficiencies
The�recommendation�is�likely�tobring�consistency�and�a�level�playingfield�in�the�news�and�current�affairssegment�of�broadcasting�(print,television�and�radio).
MIB�agrees�with�TRAI’s�proposals
Provision ofnews and
current affairs
Not�permitted Not�permitted Content�sourcedfrom�AIR,Doordarshan�(DD),authorized�TVchannels�etcallowed,�withoutany�substantivechange
The�recommendations�are�expectedto�make�the�stations�more�viableand�extend�the�dissemination�ofinformation�to�the�masses.
MIB�is�open�to�airing�of�newsbulletins�of�AIR�or�DD�only.�It�hasalso�listed�certain�broadcastcategories�that�shall�be�treated�asnon-news/�current�affairs,�viz.�sportsevent�commentaries,�traffic�andweather�information,�etc.
Networking
(simultaneousbroadcast of
same content)
Not�permittedwithout�priorapproval
-�Not�permitted�between�twolicensees
-�Allowed�by�a�licensee�for�ownstations�in�category�C�and�Dcities17 within�a�region�only.
Networking�allowedwithin�a�licensee’snetwork�only
-�Increasing�the�viability�and�qualityof�content�in�smaller�cities
The�recommendation�is�likely�tofurther�reduce�the�cost�of�contentfor�the�operators.
MIB�has�accepted�the�TRAI’sproposal.�However,�it�has�alsosuggested�ensuring�at�least�20percent�broadcast�to�be�in�the�localdialect�of�the�city
OutdoorAdvertising
18
Regulations No�formalregulatory�codeat�the�unionlevel;�stateshave�their�ownpolicies�
-�West�BengalPrevention�ofDefacement�ofPublic�PropertyAct�
-�Supreme�Court�(SC)�hadbanned�hoardings�in�Delhi�in1997—on�grounds�of�roadsafety
-�Municipal�Corporation�of�Delhi(MCD)�sets�up�an�UrbanGraphics�Forum�on�April�30,2003�for�regulating�outdooradvertising�and�evolving�a�newadvertising�policy�for�the�city
-�Delhi�Outdoor�advertisementpolicy�2008�approved�by�SC
-�Chennai�High�Court�bannedhoardings�etc.�to�help�ensureroad�safety�in�2006�(upheld�bythe�SC�in�2008)
-�Centralgovernment�hasalso�asked�stategovernments�toimpose�a�ban�onhoardings
There�is�a�need�for�appropriatepolicy/�regulations�across�thecountry�which�has�been�absent�tillnow.�It�is�imperative�to�bring�uniformnorms�at�national�level.
16�Additional�conditions�include,�inter�alia,�ownership�and�management�control�of�more�than�50�percent�of�paid�up�equity�by�an�Indian�individual�or�company17�Categorization�based�on�size�of�population�in�a�city�as�per�the�FM�Radio�policy�(Phase-II)�18�News�articles�and�web�search
Note:�The�above�information�is�updated�up�to�December�31,�2008
130
Certain tax related aspects- Direct tax
Deduction of expenses for film producers/ distributors
Specific�rules�have�been�provided�under�the�Income�Tax�Rules,�1962�[Rule�9A�&
9B]�in�relation�to�deduction�of�expenditure�on�production�of�films/acquisition�of
distribution�rights�therein.�As�per�the�prescribed�rules,�a�film�producer�who�sells
the�entire�exhibition�rights�of�the�film�is�entitled�to�a�deduction�of�the�entire�cost
of�production�incurred�by�him�in�the�year�in�which�the�Censor�Board�certifies�the
film�for�release�in�India.�A�similar�deduction�is�also�available�for�a�film�distributor
for�outright�sale�of�the�distribution�rights�acquired�by�him.�Other�conditions�also
exist�in�case�of�partial�sale/exhibition.�
Tax issues for foreign television channels/telecastingcompanies (FTC)
The�two�primary�sources�of�revenue�for�FTC’s,�inter�alia,�is�income�from�the�sale
of�advertising�airtime�on�the�TV�channel�and�subscription�revenues.�Under�the
domestic�tax�law,�income�of�the�FTC’s�is�taxed�in�India�in�case�they�constitute
business�connection�in�India.�
In�case�an�FTC�operates�from�a�country�with�which�India�has�a�tax�treaty,�it�is
taxable�in�India�only�if�it�constitutes�a�Permanent�Establishment�(PE)�in�India.
The�provisions�of�a�tax�treaty�apply�to�the�FTC�to�the�extent�they�are�more
beneficial�as�compared�to�the�provisions�of�the�domestic�law.�The�term�‘business
connection’�is�widely�interpreted�and�is�based�on�case�laws.�The�definition�of�PE
is�generally�narrower�as�compared�to�the�term�business�connection.�In�case�the
FTC�has�a�business�connection/�PE�in�India,�the�profits�attributable�to�such
presence�in�India�need�to�be�computed.�In�case�the�FTCs�do�not�maintain
country�wise�accounts,�then�this�could�pose�considerable�difficulty�in�computing
the�profits�which�can�be�taxed�in�India.
Subscription�revenues�are�usually�collected�by�the�Indian�distributors�and
subsequently�paid�to�the�FTCs.�The�Indian�tax�authorities�are�contending�that�the
payment�of�subscription�fees�repatriated�to�the�FTC’s�are�liable�to�tax�withholding
considering�the�same�to�be�royalties.
Some�other�issues�which�the�TV�channel�companies�need�to�consider�is
withholding�taxes�on�the�payments�made�in�respect�of�uplinking�and�use�of
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
131
transponder�and�satellite�space.�The�withholding�tax�issues�may�arise�on�account
of�characterization�of�payment�as�royalty�or�fees�for�technical�service,�existence
of�permanent�establishment/business�connection�of�the�non-resident�payee�(e.g.
satellite�company)�in�India.�
In�the�past,�Indian�tax�authorities�have�held�that�payments�made�by�a�TV�channel
company�to�a�non-resident�company�owning�satellites�towards�lease�of
transponder�capacity�is�in�the�nature�of�‘royalty’�for�use�of�process�under�the�tax
treaty.�On�this�issue,�there�are�two�contradictory�decisions�issued�by�the�Tax
Tribunal�in�the�case�of�Asia�Satellite�Telecommunications�Co.�Ltd.19 and�Pan
AmSat�International�Systems�Inc.20).�As�per�one�decision,�such�payments�have
been�regarded�as�in�the�nature�of�royalty�based�on�the�provisions�of�the�Act�(no
treaty�benefit�available),�while�as�per�another�ruling,�the�same�has�been�regarded
as�“royalty”�based�on�the�interpretation�under�the�India-U.S.�tax�treaty.
Recently,�the�tax�authorities�have�taken�a�view�that�the�processes�involved�in�the
receipt�and�transmission�of�signals�by�the�transponder�on�the�satellite�is�a�secret
process�and�that�a�transponder�is�‘equipment’.�The�issue�creates�uncertainties�for
the�stakeholders�in�relation�to�the�withholding�tax�implications.�It�is�pending
before�the�Courts�and�continues�to�remain�contentious.
Permanent Establishment exposure
The�downlinking�guidelines�issued�by�Ministry�of�Information�and�Broadcasting,
Government�of�India�(MIB)�mandate�that�either�the�applicant�company�should�be
the�owner�of�the�channel�or�it�should�have�exclusive�marketing/�distribution�rights
for�the�territory�of�India,�which�includes�rights�to�advertisement/subscription
revenues�for�the�channel.�In�case�it�has�such�rights,�it�should�also�have�the
authority�to�conclude�contracts�on�behalf�of�the�channel�for�advertisements,
subscription�and�programme�content.�It�is�necessary�to�comply�with�the
aforesaid�conditions�to�obtain�approvals�from�the�MIB.
However,�conforming�to�the�aforesaid�conditions�may�lead�to�an�exposure�of
creation�of�a�Permanent�Establishment�(PE)�of�the�foreign�company�in�India.�
Some important aspects relating to Transfer Pricing (TP)
Given�the�increased�linkages�between�the�Indian�media�players�with�their
counterparts�across�the�globe�(coupled�with�the�impressive�growth�achieved�and
targeted�for�the�sector),�the�transactions�between�Indian�players�and�their�related
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
19�[2002]�85�ITD�478�(Del.)20�[2006]�9�SOT�100�(Del.)
132
parties�overseas�have�increased�manifold.�Such�related�party�transactions�come
under�the�purview�of�TP�regulations�and�require�the�same�to�be�carried-out�at
arms-length.�These�regulations�prescribe�mandatory�documentation�which�needs
to�be�maintained�annually.
In�the�recent�past,�a�number�of�companies�in�this�industry�have�been�scrutinized
closely�by�the�Indian�TP�administration�on�account�of�related�party�transactions.�In
the�case�of�Star�India�(P)�Ltd.,�the�Mumbai�Tribunal�held�that�a�robust/detailed
Functions,�Assets�and�Risks�analysis�is�critical�to�support�adequacy�of�the�arm’s
length�price�concept.�In�addition,�the�concept�of�a�transaction�specific�approach
has�also�been�emphasized�in�this�ruling�and�it�has�been�confirmed�that�the�choice
of�tested�party�in�an�economic�benchmarking�analysis�depends�on�the�level�of
complexity�of�the�transacting�entities�along�with�the�availability�and�reliability�of
the�data.�
An�important�element�that�has�also�evolved�is�the�use�of�TP�methodology�in�the
determination/attribution�of�profits�to�Permanent�Establishments�in�India.�Towards
this�end,�the�Mumbai�High�Court,�in�the�case�of�SET�Satellite�(Singapore)�Pte.
Ltd.21 held�that�in�case�the�correct�arm’s�length�price�is�paid�to�a�dependant
agent�in�India,�no�further�income�would�be�taxed�in�the�hands�of�the�foreign
enterprise�having�a�Dependant�Agent�Permanent�Establishment�(DAPE)�in�India�–
i.e.�payment�of�the�arm’s�length�price�to�the�dependant�agent�would�extinguish
the�tax�liability�of�a�foreign�company�having�a�DAPE�in�India.
TP�policies�should�be�based�on�a�thorough�functional�and�economic�analysis�that
identifies�the�various�functions�including�the�value�drivers,�risks�and�location�of
the�company�assets.�The�existence�of�TP�documentation,�alongside�policy�and
procedures�documentation,�could�streamline�the�discussions�with�Indian�tax
authorities.�In�addition,�establishing�a�robust�set�of�TP�policies�and�guidelines
could�help�to�proactively�identify�and�effectively�manage�new�TP�exposures�that
are�created�as�a�result�of�business�expansions,�acquisitions,�restructuring,�etc.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
21�[2008]�307�ITR�205�(Mum.)�
133
Tax Incentives
In India: Special Economic Zones (SEZ)
The�SEZ�regime�in�the�country�allows�tax�breaks�(subject�to�fulfillment�of�certain
conditions)�to�eligible�entities�on�export�earnings�for�a�period�of�15�years�(in�a
phased�manner).�The�benefits�are�available�to�entities�operating�in�various�sectors
and�can�be�explored�for�media�activities�such�as�content�development/�animation/
film�restoration�etc.�However,�feasibility�of�the�same�needs�to�be�analyzed�on�a
case�to�case�basis.
Overseas Incentives
As�Indian�media�companies�reach�for�a�global�footprint�and�target�audiences
worldwide,�an�appropriate�overseas�presence�may�be�deemed�necessary.�The
same�mandates�analysis�of�tax�laws�of�various�jurisdictions�(including�fiscal�and
other�incentives�that�some�countries�may�provide�for�media�companies)�to
manage�the�global�tax�incidence.
Latest development for FM Radio companies
The�Union�cabinet�has�recently�permitted�private�FM�radio�companies�to
restructure�their�businesses�before�the�five-year�lock-in�period.�Accordingly,�the
Government�has�now�allowed�mergers,�demergers,�setting-up�of�subsidiaries�and
amalgamation�in�FM�Phase�II�Policy�on�fulfillment�of�certain�prescribed
conditions22.�This�could�help�such�companies�consolidate�their�businesses�and
make�them�more�efficient.�Further,�TRAI�in�its�recommendations�on�Phase�III�of
FM�radio�broadcasting�has,�inter�alia,�suggested�that�dilution�of�ownership
beyond�51�percent�should�be�permitted�after�the�expiry�of�three�years�from�the
date�of�operation�of�the�station,�with�a�written�approval�from�the�Ministry�of
Information�&�Broadcasting.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
22�As�per�news�articles�on�the�matter,�the�prescribed�conditions�include�continuance�of�minimum�51percent�holding�by�majority�shareholders�or�promoters�
134
Certain tax related aspects- Indirect tax
Central and state levies
There�are�levies,�central�as�well�as�state,�which�directly�affect�the�media�and
entertainment�industry-�central�levies�being�central�excise�duty,�customs�duty
and�service�tax�and�State�levies�being�state-VAT�and�entertainment�tax.�Of�the
various�indirect�taxes�applicable�in�the�media�sector,�service�tax�and�state-VAT
merit�special�attention.�Applicability�of�these�taxes�on�programme�production,�in-
film�placements,�grant�of�various�rights�such�as�distribution�rights,�theatrical
rights,�cable�and�satellite�rights,�sale�of�airtime�for�advertisement�purposes,
recording/editing�of�programme,�sale/lease�of�programme�content,�etc�are
becoming�increasingly�contentious�and�leading�to�disputes�with�authorities.�
Applicability of State VAT on Sale of a Film
Factors�such�as�interplay�of�multiple�indirect�taxes,�availability�of�various�options
for�computation�of�tax,�frequent�evolution�of�concepts�in�taxation�through
changes�in�law�and�judicial�rulings,�have�given�rise�to�complex�tax�issues�in�this
space.�For�example,�a�High�Court�has�held�that�production�and�sale�of�a�film
resulted�in�creation�of�a�work�of�art�and�not�sale�of�goods.�However,�some�other
state-VAT�laws�have�included�films�as�'goods'�liable�to�sales�tax.�Further,�certain
states�levy�state-VAT�on�intangibles�like�copyright�and�also�on�grant�of�film�rights
to�use/hire.�There�is�need�for�greater�consistency�and�uniformity�in�taxation�for
such�an�important�industry.
Service Tax
Service�tax�is�levied�on�provision�of�certain�notified�categories�of�services
(including�broadcasting,�cable,�development�and�supply�of�content,�sound
recording�and�video�production�services).�Service�Tax�being�an�indirect�tax,
normally�the�service�provider�recovers�the�service�tax�from�the�service�recipient.
However,�in�some�cases�such�as�services�provided�by�non-residents,�goods
transport�agencies,�sponsorship�services�etc.,�the�reverse�charge�mechanism�is
applicable�(i.e.,�the�obligation�to�pay�service�tax�is�that�of�the�service�recipient
and�not�of�the�service�provider).�A�mechanism23 for�credit�of�input�service�tax
and�central�excise�duty�on�input�services,�inputs�and�capital�goods�is�also�put�in
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
23�CENVAT�Credit�Rules,�200424�Notification�12/2007�dated�1�March�2007�
135
place�by�the�Government.�Effective�from�1�March�2007,�subject�to�fulfillment�of
specified�conditions,�exemption24 is�granted�from�levy�of�service�tax�to�services
provided�for�granting�right�to�authorize�any�person�to�exhibit�cinematograph�film,
the�content�of�the�film�being�in�digitized�form�and�is�transmitted�through�use�of
satellite�to�a�cinema�theater.
Entertainment Tax
Entertainment�tax�is�levied�on�various�modes�of�entertainment�such�as�on�film
tickets,�cable�television,�live�entertainment,�etc.�India�has�one�of�the�highest�rates
of�entertainment�tax�across�the�globe�and�there�has�been�a�constant�cry�from
the�stakeholders�to�reduce�it.�Recently,�some�states�have�granted�exemption
from�entertainment�tax�to�multiplexes.
Other challenges
The�key�challenge�under�indirect�tax�regime�in�India�includes�analysis�of
transactions�and�identification�of�the�indirect�tax�implications�on�such�transactions
and�entities�involved.�Some�typical�transactions�include:
• Internet�services�(e.g.�sale�of�space,�including�”content”�provided�to�telecom
companies,�e-mail�subscription�services,�e-commerce�transactions,�etc.)
• Taxability�of�subsidiary/agent�in�India�where�the�principal�broadcasting�agency
is�outside�India
• Sale�of�advertisement�time/space�by�media�companies�to�advertisement
agency�and�subsequent�sale�from�agency�to�advertisers
• Transactions�involving�transfer�of�right�to�use�film/programme�content
• Special�transactions�(e.g.�cost�sharing�arrangements,�import�of�technology,
sharing�of�telecom�revenues�generated�through�contests/opinion�polls,�hiring
of�equipments�for�film�production,�etc.).
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
24�Notification�12/2007�dated�1�March�2007�
136
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Internationalization
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Internationalization
07
No�longer�are�the�Indian�M&E�players�confining�themselves
to�domestic�shores�for�their�target�consumers;�they�are
increasingly�reaching�out�to�global�audiences.�Indian�media
companies,�especially�in�the�television�and�film�segments
continue�to�target�the�25�million�NRI�diaspora1 settled�in
various�parts�of�the�world.
However,�now�that�the�industry�has�few�established�players
who�have�the�necessary�capital�and�are�eager�to�increase
their�scale�of�operations,�media�companies�have�begun�to
produce�content�not�just�for�the�NRIs�but�also�for�the
mainstream�global�audience�in�other�countries.
At�the�same�time,�global�demand�for�media�services�from
India�is�also�growing.�Animation�has�been�at�the�forefront,
with�India�emerging�as�a�major�outsourcing�destination�due
to�its�cost�advantage.�Film�post�production�has�also�shown
potential�in�this�regard.
Finally,�year�2008�witnessed�one�of�the�biggest�landmarks�in
Indian�M&E�industry�when�two�of�the�biggest�Indian�media
players�acquired�media�properties�abroad.�The�move�was
significant�since�the�acquisitions�were�not�merely�aimed�at
providing�synergies�to�Indian�operations�or�targeting�the
Indian�population�but�establishing�a�distinct�brand�identity
abroad.�These�acquisitions�reiterated�the�increasing�global
ambitions�of�Indian�Media�Inc.
In�a�nut�shell,�the�aspect�of�internationalization�covered�in�this
chapter�involves�the�following�distinct�aspects:
• Producing�content�catering�to�the�NRI�diaspora�
• Targeting�the�mainstream�global�audience
• Indian�companies�emerging�as�an�off�shore�hub�for
media�services
• Acquisition�of�foreign�media�properties.
Targeting NRI Diaspora
TV: Broadcasting across Foreign Shores
With�more�than�25�million�NRIs�spread�across�the�globe,
the�international�market�is�an�important�source�for�Indian
broadcasters�to�augment�their�domestic�revenues.�Today,
leading�Indian�broadcasters�typically�have�a�presence�in
foreign�markets�through�distribution�tie�ups.�For�instance,
Indian�broadcaster�Zee�has�channel�bouquets�in�Europe,
North�America,�Africa,�Middle�East�and�South�East�Asia.�
1�Ministry�of�External�Affairs
*�Only�countries�with�over�500,000�people�of�Indian�origin�are�shown�
Source: Ministry of External Affairs (Data as on December 2006)
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Estimated�size�of�overseas�Indian�Community
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Apart�from�Zee,�some�of�the�other�Indian�broadcasters
beaming�to�different�parts�of�the�world�are�NDTV,�UTV
Global�Broadcasting�(UGBL),�TV18,�Aaj�Tak�and�regional
language�players�like�Sun,�Eenadu�and�Asianet.�(Star�and
Sony�too�have�global�distribution�networks�but�they�are�in
any�case�part�of�multinational�media�companies).�Besides
the�conventional�cable�networks,�broadcasters�also�rely�on
new�platforms�like�IPTV�to�distribute�their�content.�For
instance,�UGBL�recently�entered�into�an�agreement�with
IPTV�service�provider,�The�New�Media�Group�(TNMG),�to
launch�3�of�its�channels�on�TNMG’s�IPTV�platform,�”World
On-Demand”�in�Japan,�Australia�and�New�Zealand�from
August�1,�2008.�Viacom18�also�joined�hands�with�TNMG,�to
enable�its�newly�launched�GEC�channels�“Colors”�to�be
seen�via�the�IPTV�service�World�On-Demand2.
Films: Bollywood riding high on overseascollections
Indian�films�have�always�been�a�favorite�with�the�NRI
diaspora.�Therefore,�as�the�number�of�NRIs�has�increased
substantially�worldwide,�the�popularity�of�Indian�Films�has
also�increased�abroad.
A�few�years�back,�Bollywood�film�makers�saw�overseas
collections�as�too�marginal�a�revenue�source�to�be
considered�important.�“Dilwaale�Dulhaniya�Le�Jayenge”,
released�in�1995,�was�the�first�wake�up�call.�With�an
overseas�realization�amounting�to�INR�90�million�in�U.K.�and
INR�175�million�worldwide3,�the�movie�was�termed�as�an�all
time�blockbuster�in�the�overseas�market.�In�later�years,
there�were�cases�of�certain�movies�like�“Taal”,�“Yaadein”
and�“Dil�Se”�which�were�either�flops�or�did�average
business�at�domestic�bourses�but�were�otherwise�big�hits
overseas4,�thus�allowing�the�film�makers�to�recover�their
money.�In�more�recent�times,�“Kabhi�Alvida�Na�Kehna”�and
“Don”�performed�relatively�better�overseas�vis-à-vis�the
domestic�market;�they�were�top�two�Bollywood�releases�at
the�U.K.�box-office�in�20065.�
U.K.�and�U.S.�are�the�top�two�overseas�markets�respectively
for�Indian�films�in�terms�of�both�box�office�collections�as
well�as�the�number�of�releases.�
2�Company�Website,�Press�Releases3�Boxofficeindia4�Press�Releases5�Boxofficeindia
Overseas vs. Domestic Box Office Collections of some
Indian Films
Film
Net
Domestic
Collections
(INR�Million)
Domestic
Verdict
Overseas
Earnings
(INR�Million)
Overseas
Verdict
Dil�Se 86.6 Flop 83 Hit
Taal 255 Average 137.5 Hit
Yaadein 133 Flop 91 AboveAverage
Don 501 Hit 320 Blockbuster
Kabhi�AlvidaNa�Kehna 464 Hit 445 All�Time
Blockbuster
Source:�India�Box�office�Database
140
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
The�importance�of�overseas�collections�for�Indian�films�can�be�gauged�from�the
fact�that�many�of�the�big�Indian�film�distributors�such�as�Yash�Raj,�UTV,�Adlabs
and�Eros�have�established�their�distribution�offices�overseas.�In�2008,�UTV
Motion�Pictures,�with�its�releases�in�the�U.S.�grossed�USD�5.48�million�in�the�first
28�weeks�of�the�2008�and�emerged�amongst�the�top�20�film�distributors�in�North
America�(the�only�foreign�language�distributor�in�the�top�20�list).6
Crossover and Drama dominate overseas market
While�movies�across�genres�have�been�largely�popular�overseas,�‘crossover’�and
‘drama’�movies�have�done�especially�well.�An�analysis�of�top�50�movies�in�terms
of�overseas�collections�over�a�period�of�5�years�reveals�that�the�overseas
audience�has�a�maximum�preference�for�movies�belonging�to�these�genres.
Note:
1 Analysis�done�on�top�50�movies�in�terms�of�overseas�collection�over�a�period�of�5�years
2 Box�Office�performance�based�on�the�size�of�collections
3 Size�of�the�circle�represents�relative�average�net�adjusted�collection�in�the�overseas
market
Source:�KPMG�Analysis
6�Company�Website,�Press�Releases
Overseas�Releases�–What�has�worked�at�Overseas�Box�Office
141
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Online and Overseas Editions of Print Media
Almost�all�leading�newspapers�and�magazines�in�India�(both�English�and�other
languages)�have�their�online�editions,�providing�free�access�to�the�latest�news
and�analysis.�These�electronic�versions�are�used�by�advertisers�to�target�Indians
living�abroad.�Almost�80�percent�of�hits�on�these�websites�come�from�the�NRI
diaspora.7
Globally,�electronic�versions�have�emerged�as�separate�revenue�models�for�the
print�media�players;�their�content�is�also�differentiated�from�that�in�the�offline
versions.�However�in�India,�electronic�versions�have�originated�more�as�a�brand
building�and�brand�salience�medium.�Currently,�the�e-papers�are�just�electronic
reproductions�of�the�offline�editions.
Many�national�and�regional�newspapers�also�publish�their�overseas�editions
targeting�the�NRI�population.
Indian�magazine�players�too�have�started�to�come�up�with�their�international
editions.�For�instance,�Filmfare�launched�its�German�edition�as�part�of�its�effort�to
spread�readership�in�international�markets.�The�magazine�is�published�in�German
language�as�well.8
Overseas�Edition�of�some�Indian�Newspapers
Newspaper Frequency Country/City
Sandesh Weekly Chicago
Anand�Bazaar�Patrika Fortnightly Average
Malaya�Manorama Daily Bahrain,�Dubai
Madhyamam Daily Bahrain,�Dubai
Gujarat�Samachar Weekly New�York
Divya�Bhaskar Fortnightly New�York
Source:�KPMG�Analysis
7�KPMG�Interviews8 exchange4media
142
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Targeting Mainstream Global Audiences
Dedicated TV programming for local audiences abroad
Apart�from�targeting�the�NRI�population�by�beaming�Indian�content�in�other
countries,�broadcasters�have�now�begun�to�take�things�to�the�next�level,�and�are
starting�to�offer�dedicated�programming�for�the�local�audiences�in�these
countries.
Zee�Network,�for�example,�has�Zee�Astro�which�is�broadcast�in�the�South-East
Asia�in�the�local�Bahasa�language.�NDTV�too�has�launched�two�channels
specifically�for�markets�outside�India�–�Astro�Awani�in�South-East�Asia�in�2006
and�NDTV�Arabia�in�the�Middle�East.�While�NDTV�Arabia�is�in�English,�Astro
Awani�is�primarily�in�Bahasa.9 Both�channels�carry�locally�relevant�infotainment
programming.�
Films: Looking beyond the diaspora
It’s�no�longer�just�the�NRIs�that�have�a�taste�for�Bollywood�movies.�Increasingly,
non�Indian�movie�audiences�in�different�parts�of�the�world�are�discovering�the
charm�of�Bollywood�song-and-dance�routines�and�melodramas.�The�striking
popularity�of�Indian�films�among�non�Indian�audiences�in�Asia,�the�Middle�East
and�Europe�show�that�Hindi�films�reach�beyond�the�barriers�of�language,�culture,
and�religion,�and�are�a�truly�global�media.�Key�markets�for�the�film�industry
include�India’s�neighboring�and�culturally�similar�countries�such�as�Pakistan,�Sri
Lanka�and�Bangladesh.�Besides�the�Indian�diaspora�in�these�countries,�there�is�a
great�demand�for�Bollywood�content�among�the�local�audience�there.�Pakistan,
for�example,�has�a�165�million�strong�population�that�has�a�keen�interest�in
Bollywood�films.�With�Pakistan�relaxing�laws�against�the�theatrical�release�of
Indian�films,�the�country�has�emerged�as�very�big�potential�market�for�Hindi�film
industry.�Indian�films�are�already�popular�there�and�people�understand�the
language�as�well.�Similarly,�countries�like�Bangladesh�(147�million�strong�Bengali
speaking�population),�Sri�Lanka�(3.8�million�Tamils),�Malaysia�(2.3�million�Tamil
speakers),�Singapore,�UAE,�and�Fiji�also�have�good�potential�for�different�regional
Indian�films,�as�has�been�proven�by�the�popularity�of�Indian�television�channels�in
these�countries.�
Besides�these�culturally�similar�countries,�popularity�of�brand�Bollywood�has�also
improved�in�new�markets�such�as�Israel�and�Poland.�Also,�countries�such�as
Indonesia,�Malaysia,�Thailand,�Germany,�Russia�and�China,�all�of�which�consume
dubbed�Hollywood�content,�offering�good�market�potential�for�Bollywood�films�as
well.
9�Company�Website,�Press�Releases
143
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
It�is�also�worth�mentioning�that�in�recent�times,�western�film�makers�have
started�noticing�Indian�cinema�and�are�making�movies�with�India�centric�theme
and�artists.�The�success�and�popularity�of�”Slumdog�Millionaire”,�with�its�Indian
locales,�artists�and�music�underscores�the�growing�influence�of�Indian�Cinema
and�augurs�well�for�Bollywood�movie�makers�targeting�the�global�audiences.
Clearly,�Bollywood�is�a�much�bigger�brand�today�than�few�years�back.�The
development�of�this�brand�and�the�awareness�about�Bollywood�has�been
catalyzed�by�many�factors�in�recent�times:�
• Indian�producers�aggressively�promoting�their�films�in�international�film
festivals�such�as�Cannes
• Increasing�use�of�foreign�locations�in�Indian�films
• Increasing�coverage�given�to�Bollywood�in�the�western�media�
• Indian�film�award�functions�such�as�IIFA�which�are�held�at�an�international
scale�outside�of�India.
To�unlock�the�true�potential�of�overseas�markets�however,�film�companies�need
certain�key�capabilities:
• Allocating�sufficient�time�and�budgets�for�market�research�in�the�overseas
market�to�understand�the�content�preferences�of�the�overseas�audience�
• Modifying�the�existing�content�before�releasing�in�overseas�markets.�For
example,�the�longer�length�of�Indian�films�acts�as�a�deterrent�for�acceptability
by�western�audiences.�This�can�be�taken�care�of�by�crisp�editing�of�content�
• Allocating�more�time�at�the�post�production�stage�so�that�the�end�output�is
technically�comparable�to�a�Hollywood�film�and�meets�international�standards.
At�present,�filmmakers�in�Bollywood�allocate�only�one-fourth�the�time�taken
by�Hollywood�for�post�production�work10
• Entering�into�tie-ups�and�alliances�with�agents�who�have�the�right
relationships�with�major�distributors�along�with�an�understanding�of�different
markets�and�theatrical�revenue�streams.�Similar�alliances�and�a�more�focused
approach�to�distribution�and�marketing�of�DVDs,�VCDs,�etc.�are�required�to�tap
the�potential�of�the�overseas�home�video�segment
• Investing�heavily�in�marketing�and�promotion�of�Indian�films�abroad.
Bollywood�allocates�only�around�10-15�percent�of�its�total�budget�in
marketing,�vis-à-vis�30�percent�in�Hollywood.11 Ensuring�a�wider�release�of
Indian�prints�in�mainstream�theaters�abroad�is�critical�for�bringing�overseas
audiences,�due�to�which�marketing�assumes�significance
10�KPMG�Analysis,�KPMG�Interviews11�KPMG�Analysis,�KPMG�Interviews
144
Production and Co-Production of Hollywood Films
Apart�from�aggressively�selling�Bollywood�in�the�U.S.,�Indian�film�studios�and
distributors�have�now�begun�to�make�their�mark�in�an�even�more�fundamental
way�–�by�getting�into�the�production�of�Hollywood�films�themselves.�Similar�to
their�western�counterparts�like�Sony,�Disney�and�Warner�Bros,�who�are�co-
producing�Indian�movies;�Indian�film�companies�are�also�looking�at�overseas
ventures.�Increased�corporatization�has�also�brought�the�confidence�in�the�Indian
players�to�extend�their�influence�outside�of�Indian�borders.�
One�of�the�companies�at�the�forefront�in�this�regard�is�UTV�Motion�Pictures,
which�has�already�co-produced�three�Hollywood�films.
In�2006,�UTV�Motion�Pictures�had�also�signed�a�USD�30�million�deal,�with�Will
Smith’s�production�company�Overbrook�Entertainment�and�Sony�Pictures
Entertainment�to�produce�two�films12.�According�to�the�agreement,�UTV�and
Overbrook�are�to�co-produce�two�films�and�Sony�Pictures�Entertainment�is�to
distribute�the�movies�worldwide,�excluding�India.
Another�company�with�ambitious�global�expansion�plans�is�Reliance’s�Big
Entertainment.�In�May�2008,�it�announced�its�plans�to�make�10�Hollywood
movies13.�In�order�to�do�this,�Reliance�has�signed�deals�with�the�production
teams�of�the�Hollywood�stars�Nicolas�Cage,�Jim�Carrey,�George�Clooney,�Tom
Hanks�and�Brad�Pitt.14 The�company�is�also�pursuing�opportunities�in�the�movie
exhibition�sector�around�the�world.�In�the�first�half�of�2008,�it�bought�over�230
cinemas�in�the�U.S.�and�another�50�in�Malaysia.�The�company�has�also�bought
some�theaters�in�Mauritius�and�Nepal.15
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Source: Company Website,KPMG Research
Hollywood�Films�co-produced�by�UTV
Film Year of Release Co-Producers
The�Namesake 2007Cine�Mosaic,�Entertainment�Farm,�FoxSearchlight
I�Think�I�Love�My�Wife 2007 Fox�Searchlight,�Zahrlo�Productions
The�Happening 2008Blinding�Edge�Pictures,�Barry�MendelProductions,�Spyglass�Entertainment,�FoxSearchlight
12 “UTV�to�produce�films�with�Fox,�Sony”,�The�Times�of�India,�August�200613�Company�Website,�“Reliance�Big�Entertainment�lays�out�a�USD�10�billion�game�plan”,�Livemint.com,�May�200814�Company�Website,�“Reliance�Big�Entertainment�lays�out�a�USD�10�billion�game�plan”,�Livemint.com,�May�200815�Company�Website,�“Adlabs�forays�into�Malaysia”,�Business�Standard,�May�2008
145
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
16�Company�Website,�Press�Releases
Co-production agreements with other countries-How do they
help?
India�has�signed�film�co-production�treaties�with�Germany,�Britain,�Italy�and
Brazil.�The�advantages�of�such�treaties�for�film�makers�of�both�countries�are
generally�in�terms�of�access�to�technical�expertise�and�production�standards,
tax�benefits�and�access�to�finance.
Other�than�access�to�subsidized�finance,�a�co-production�treaty�signed�with
one�country�also�allows�both�parties�to�avail�the�advantages�of�other�co-
production�treaties�that�the�respective�countries�may�have.�For�instance,�as�per
the�Indo-U.K.�treaty�the�Indian�producers�can�take�advantage�of�the�six�co-
production�treaties�that�U.K.�is�already�a�signatory�to,�namely�South�Africa,
New�Zealand,�Australia,�Jamaica,�France�and�Canada�while�U.K.�can�similarly
leverage�India’s�agreement�with�Germany,�Brazil�and�Italy.�
There�are�other�advantages�as�well.�The�U.K.�treaty,�for�example,�provides�for
the�co-productions�to�be�given�national�status�in�both�countries.�According�to
the�agreement,�both�countries�also�intend�to�waive�off�import�or�export�duties
on�any�equipment�necessary�for�production.�
However,�among�the�conditions�in�the�agreement,�at�least�25�percent�of�the
total�production�expenditure�incurred�on�filming�activities�must�take�place
within�U.K.�This�poses�problems�for�Indian�producers�as�production�costs�in
U.K.�are�extremely�high.�
This�condition�is�likely�to�increase�budgets�by�25-30�percent.�So,�even�the�25-
30�percent�exemption�might�get�negated.�However,�for�a�film�that�needs�to�be
shot�in�Britain�because�of�the�script�demands,�the�treaty�is�likely�to�help�in
reducing�the�cost�through�tax�incentives.
Going�one�step�ahead,�the�global�market�expansion�plans�of�film�production
houses�have�proceeded�beyond�co-productions;�companies�have�started
embarking�on�the�path�of�solo�productions.�For�instance,�UTV�Motion�Pictures
has�ventured�into�its�first�solo�Hollywood�production�titled�‘The Ex-Terminators’
starring�Heather�Graham.�It�is�the�first�ever�solo�Hollywood�production�by�an
Asian�film�company.�Reliance�has�also�announced�plans�to�produce�an�American
Gangster�movie�titled�‘Broken Horses’,�to�be�directed�by�Indian�film�maker�Vidhu
Vinod�Chopra.�Such�Hollywood�productions�by�Indian�producers�are�also�expected
to�open�the�doors�for�Indian�directors�and�technicians�to�work�in�Hollywood.16
Not�only�will�their�Hollywood�projects�open�up�additional�revenue�streams�for�the
Indian�film�companies,�but�will�could�also�help�Bollywood�work�with�advanced
techniques�on�a�bigger�scale.�At�present,�the�Indian�film�industry,�with�releases�of
around�1000�movies�a�year,�produces�twice�the�number�of�Hollywood�movies.�In
sharp�contrast�however,�Hollywood�has�ten�times�the�sales.�If�the�principles�that
146
the�Indian�film�companies�learn�from�their�Hollywood�experiences�are�applied�to
India’s�film�industry,�it�could�certainly�help�make�bigger�movies,�targeting�a�more
global�audience.
Off-shoring hub for Media Services
Although�a�late�entrant�on�the�scene,�the�Indian�media�and�entertainment�(M&E)
industry�is�catching�up�in�the�outsourcing�trend.�Outsourcing�of�media�and
entertainment�related�services�accounts�for�a�very�small�proportion�of�the�global
outsourcing�market,�but�is�witnessing�rapid�growth�in�the�last�few�years,�both
through�captive�centers�as�well�as�third�party�outsourcing.�The�major�drivers�for
offshoring�to�India�are�cost�savings�and�the�availability�of�suitable�talent.
Companies�such�as�Reuters,�Chicago�Tribune,�Sony,�Yahoo,�Walt�Disney,�Viacom
and�AOL�are�offshoring�a�variety�of�services�to�India.�While�a�large�proportion�of
the�work�is�in�standard�services�like�IT,�HR,�finance�and�accounting,�customer
relationship�and�supply�chain�management,�offshoring�is�being�tried�in�fairly�niche
areas�such�as�publishing�and�editorial�services,�animation�and�visual�effects�and
gaming�development.
Some�areas�of�opportunity�for�M&E�outsourcing�going�forward�are,
•�Indian�newspaper�publishers,�graphic�design�companies�and�publishing�BPO
vendors�are�poised�to�exploit�a�USD�3�-5�billion�opportunity�in�the�newspaper
outsourcing�segment17,�by�providing�services�to�media�companies
•�Media�companies�in�India�are�leveraging�the�growing�opportunity�in�areas�such
as�editing,�digitization�and�closed�captioning,�re-purposing,�archiving�and�meta-
tagging�of�content
•�Global�entertainment�companies�are�increasingly�partnering�with�Indian
creative�houses�to�send�a�significant�part�of�their�digital�production�and�post
production�work�to�processing�studios�in�India
•�Gaming�studios�in�India�are�being�outsourced�gaming�development�work�for
various�media�such�as�personal�computers,�consoles,�internet�as�well�as
mobile�phones�
Of�these,�the�animation�and�film�post�production�sectors�are�discussed�is�detail
in�the�following�sections.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
17� “U.S.�Newspapers�may�opt�for�outsourcing”,�The�Times�of�India,�Spetember�2008
“I believe that this isthe best time for theIndian VFX industry. Withbooming growth rates ofthe domesticentertainment industryand untapped potential ofHollywood,the Indianvisual effects/postproduction business isreaching closer to a pointwhere it will berecognised as apowerhouse of talentoffering internationaltechnology and qualitystandards”
Namit Malhotra, ManagingDirector, Prime Focus
147
Animation industry as an Outsourcing Hub
India�is�one�of�the�major�animation�production�centers�of�the�world.�It�has�a
distinguished�track�record�in�business�process�outsourcing�and�the�wide�array�of
generic�advantages�of�outsourcing�to�India�also�accrue�to�animation�production.
Animation�production�consists�of�four�main�stages�–�conceptualization,�pre-
production,�production�and�post-production.�In�the�outsourcing�model,�the�pre-
production�and�conceptualization�is�generally�handled�in�countries�like�U.S.,
France�and�Canada�after�which�the�labor-intensive�production�process�is
outsourced�to�the�Asian�studios�including�those�in�India.�
The�outsourcing�of�the�production�stage�of�the�value�chain�has�become�a�norm�in
the�global�industry�because�of�the�considerable�cost�advantage.�Production�is�a
labor�intensive�process,�and�because�the�cost�of�talent�is�much�lower�in�the
Asian�nations,�places�the�outsourcer�at�an�advantage.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Major�markets�and�export�centers�for�Animation
Major Markets Major Export Centers
U.S. South�Korea
France Taiwan
Japan India
Canada China
Philippines
Source:�KPMG�Analysis
Source:�”Animation�Industry�set�to�Accelerate”,�Crisil�Research,�May�2008,�KPMG�Research
Share�of�India�in�animation�outsourcing�market
148
Apart�from�the�cost�advantage,�splitting�the�production�process�and�distributing�it
between�studios�also�helps�cut�down�the�production�times�through�parallel
processing.
Moving up the value chain - The business growth model
While�outsourcing�constituted�a�large�portion�of�the�revenues�of�the�industry�in
the�past,�the�Indian�animation�industry�is�now�maturing�and�is�targeting�co-
production�opportunities�with�international�studios�and�at�the�same�time
increasing�focus�on�end-to-end�in-house�productions�where�they�can�retain�the
IPR�with�themselves.
For�Indian�animation�movies,�mythology�has�so�far�provided�an�easy�content
source�and�one�that�has�already�proven�to�be�successful.�These�movies�have�had
a�good�appeal�among�the�Indian�audiences,�for�whom�these�were�primarily
made.�However,�the�Indian�animation�industry�is�already�taking�the�next�step�and
many�of�the�new�projects�are�based�on�non-mythological�subjects�and�target�a
more�global�audience.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Upcoming�Indian�Animation�Features�
Animation Category Animation company & Producer
Alibaba Film UTV�Motion�Pictures
Bommi�&�Friends TV�Series Image�Ventures
The�Secret�of�Seven�Sounds Film Kahani�World
Sultan-The�Warrior Film Orccher,�Adlabs
Source:�KPMG�Research
Typical�Cost�Breakup�for�creating�ananimated�featuremarket Cost�per�hour�of�animation
Source:�KPMG�Analysis Source:�KPMG�Analysis,�KPMG�Interviews
149
This�is�a�movement�in�the�right�direction�and�to�become�truly�global�and�extract
maximum�value�from�animation�production�chain�products.�The�Indian�animation
industry�has�to�create�content�that�is�location,�language�and�culture�neutral�and
has�universal�appeal.�The�market�for�global�animation�properties�with�good
content�is�enormous�and�this�is�the�market�that�Indian�animation�industry�should
be�targeting�in�the�long�term.
Potential to emerge as a major Offshoring Hub for Film PostProduction Services
Post-production�services�are�a�key�component�for�Hollywood�films�where�the
post-production�(including�visual�effects)�can�cost�over�50�percent�of�a�VFX-rich
film’s�total�budget.�With�spiraling�labor�costs�and�reduced�timelines,�international
production�houses/VFX�houses�are�looking�to�outsource�part�of�the�work�to�other
studios�to�be�able�to�sustain�the�demand�variants�of�their�local�industry.
India�has�the�potential�to�emerge�as�a�major�outsourcing�hub�for�post�production
work.�Indian�post�production�studios�provide�a�whole�gamut�of�services�including
scanning,�editing,�sound,�special�effects�and�film�packaging.�Apart�from�technical
know-how�and�talent,�India’s�competitive�edge�comes�from�people’s�fluency�with
English�language.�Also,�the�cost�differential�for�India�in�comparison�to�the�U.K.
market�is�as�high�as�6-8�times�and�3-4�times�for�the�U.S.�market.18 Hence,�there
is�substantial�cost�reduction�to�do�offshoring�in�India.�Therefore,�overseas
production�houses�and�special�effects�studios�are�beginning�to�outsource�work�to
India�to�cut�costs.�Studios�like�Ramoji�and�Prime�Focus�have�been�providing�post-
production�facilities�to�many�Hollywood�Productions.�For�instance,�in�2007,
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Biggest�grossing�animation�films
Animation Film Year of ReleaseWorldwide Box Office Earnings
(USD Billion)
Shrek�2 2004 881
Finding�Nemo 2003 865
Shrek�The�Third 2007 791
The�Lion�King 1994 783
Kung�Fu�Panda 2008 633
Source:�IMDB
18�KPMG�Interviews
150
Mumbai-based�Prime�Focus�did�the�entire�post�production�work�for�the
Hollywood�Film�“28�Weeks�Later”.�The�company�subsequently�also�worked�on
visual�effects�for�the�British�independent�film-�“Tales�of�the�River�Bank.”�Tata
Elxi’s�visual�computing�lab�(VCL)�is�working�with�several�Hollywood�studios�in�this
regard.19
The�fastest�growing�area�of�post-production�outsourcing�is�visual�effects.�Indian
technicians�that�work�in�this�field�are�experts�in�producing�and�editing�special
effects�for�a�wide�variety�of�projects�including�independent�films�as�well�as�big-
budget�blockbusters.�Recognizing�this�potential,�Hollywood�studios�are�either
entering�into�partnerships�with�the�Indian�studios�or�opening�their�offices�in�India.
In�2005,�Barrie�M.�Osborne,�the�producer�of�Hollywood�films�such�as�“Lord�of
the�Rings”,�“The�Matrix”,�and�“Face-Off”,�had�entered�into�partnership�with�N
Madhusudhanan,�an�Indian�visual�effects�specialist,�and�founded�a�visual�effects
studio�in�India�to�produce�films�globally�and�create�a�high�caliber�of�three-
dimensional�and�special�effects�for�those�films.�More�recently,�in�2007,�the�Oscar-
winning�special�effects�for�the�2007�Hollywood�blockbuster�“The�Golden
Compass”�were�put�together�in�Indian�headquarters�of�Rhythm�&�Hues�(R&H),
the�leading�Los�Angeles-based�special�effects�studio.�The�company�has�now
opened�another�studio�in�Hyderabad.20
Another�area�of�good�potential�in�post-production�services�is�digital�film
restoration.�Film�restoration�is�a�highly�laborious�process�and�a�very�expensive
job�in�the�west.�Some�of�the�films�are�not�restored�due�to�the�prohibitive�costs,
and�because�they�cannot�be�commercially�exploited.�However�in�India,�the�digital
restoration�can�be�done�at�fraction�of�the�cost.�The�Indian�post-production�studios
are�well�versed�with�the�digital�technology�and�have�showcased�their�capabilities
by�restoring�the�black�and�white�classic�Mughal-e-Azam�in�technicolor.�Besides,
Indian�studios�can�also�offer�value�added�services�such�as�color�grading�and
movie�packaging�at�highly�competitive�prices.�Chennai-based�Prasad�Labs�is�one
of�the�notable�players�engaged�in�digital�restoration�work�for�Hollywood�studios.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
19�Company�Website,�Businessofcinemas.com20�Company�Website,�Press�Releases
“We see 2009 as a major metamorphosis for the industry. Themarket will dictate that premium content; strong stories and worldclass execution is going to bring the best results to the ‘studios’such as EROS. The number of global releases will increase and wesee almost 6 to 7 such products from our stable. The value additionthrough digital and VFX technologies is going to make a bigdifference to the scale and packaging going forward. Finally, nichessuch as regional and boutique content will also see a huge growthwith the emerging distribution paradigms.”Biren Ghose, Executive Director, Eros Pictures India
151
In�summary,�Indian�studios�offer�a�number�of�advantages�to�foreign�studios
looking�to�outsource�post�production�services:
• Modern�facilities/equipment-�after�the�granting�of�industry�status,�the�film
industry�has�witnessed�an�influx�of�organized�funding,�which�has�led�to�the
emergence�of�studios�which�have�invested�in�developing�their�post�production
services
• Availability�of�skilled�technical�staff�at�lower�costs
• Ability�to�operate�24/7�through�shift�work,�which�leads�to�greater�utilization�of
assets
• Ability�to�provide�highly�competitive�digital�restoration�and�visual
effects/services.
One�of�the�notable�weaknesses�for�Indian�post�production�studios�has�been�the
lack�of�adequate�professional�courses�in�the�field.�There�is�no�specialized�full�time
accredited�courses�on�film�post-production�in�India.�Most�of�the�courses�being
offered�are�by�software�training�institutes�such�as�Arena,�NCST�and�NIITs.�Most
of�these�are�short�term�courses�where�they�train�the�students�only�on�the
software�and�training�on�aesthetics�and�artistic�side�of�post-production�is�missing.
The�industry�needs�to�come�together�and�proactively�start�courses�to�cope�with
this�problem.
The Business Growth Model for the global market
There�exists�a�good�potential�for�outsourcing�of�post�production�work�from�the
western�countries,�since�the�proportion�of�special�effects�required�in�these�films
are�increasing.�Especially�in�Hollywood,�several�big�budget�movies�are�using�a�lot
of�special�effects�–�in�action-oriented�films�such�as�the�last�episodes�of�The�Lord
of�the�Rings�and�Star�Wars,�almost�every�shot�may�have�had�a�digital�effect.�And
yet,�while�volumes�have�increased,�release�schedules�have�not�changed.�So�the
amount�of�workload�for�post�production�have�increased,�with�the�time�allocated
remaining�the�same.�Studios�are�thus�breaking�projects�into�multiple�facilities�to
handle�the�volume�of�work�and�release�the�film�on�schedule,�and�are�thus�looking
for�outsourcing�the�post�production�services.�India�is�well�positioned�to�obtain
some�percentage�of�this�outsourced�work,�provided�players�can�demonstrate
capabilities�which�are�at�par�with�their�competitors�in�the�U.S.,�Canada�or
elsewhere.�
To�unlock�its�full�potential�as�a�post�production�hub,�Indian�studios�have�to�move
beyond�the�cost�positioning�and�aggressively�target�getting�high�end�post
production�work�from�the�best�of�global�studios.�This�can�be�achieved�by�opening
up/acquiring�studios�abroad.�Opening�up�a�studio�in�foreign�shores�helps�in
establishing�the�right�contacts�and�managing�customer�requirements�during�a
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
152
project,�and�thus�helping�in�securing�more�work.�Once�the�studio/producer�sees
physical�infrastructure�in�place�abroad,�and�is�assured�of�the�quality�a�VFX�studio
can�offer�him,�he�can�clearly�understand�the�value�proposition�of�getting�the�work
done�in�half�the�time�and�at�lower�costs�by�sharing�work�with�the�Indian�studio.
Some�players,�like�Prime�Focus�have�successfully�adopted�this�path.�Further,�the
workload�can�be�divided�between�the�Indian�and�foreign�offices.�For�example,�the
post�production�work�for�28�weeks�later�was�shared�between�Primefocus’s
London�and�Indian�Studios;�Rhythm�&�Hues�regularly�outsources�work�to�its
center�in�India.�
Acquisition of Foreign Companies
Indian�corporates�are�marching�into�the�global�arena�and�are�taking�small�steps�to
become�net�exporters�of�deals�to�the�developed�world.�KPMG�analysis�of�deals
between�emerging�and�developed�economies�since�2003�shows�there�were�322
completed�deals�where�Indian�buyers�have�acquired�companies�in�the�major
developed�economies,�as�compared�to�340�deals�completed�in�the�opposite
direction.21
Post�production�and�animation�and�gaming�are�some�of�the�segments�that�have
seen�a�constant�stream�of�acquisitions�in�the�recent�past.�In�2006,�Prime�Focus,
an�integrated�end-to-end�post-production�and�visual�effects�service�company
acquired�a�55�percent�stake�in�VTR�Group,�a�European�media�service�company,�at
an�estimated�4.7�million�pounds.�Shortly�thereafter,�Prime�Focus�also�bought
Clear�Post�Production,�a�visual�effects�company,�and�merged�it�with�VTR.22 The
idea�was�to�help�ensure�a�constant�flow�of�work�by�setting�up�a�pipeline�in
Western�markets.�In�2007,�Prime�Focus�further�acquired�two�North�American
companies-�Post�Logic�Studios�and�Frantic�Films�VFX,�and�thus�added�new
facilities�in�Los�Angeles,�New�York,�Vancouver�and�Winnipeg.23 The�aim�was�to
provide�clients�in�the�U.S.�better�value�proposition�by�offering�a�complete�back
end�facility�in�India.�
In�gaming�and�animation,�UTV’s�acquisition�of�U.K.-�based�Ignition�Entertainment
in�2006�and�U.S.-�based�True�Games�Interactive�in�2008�have�been�some�of�the
notable�acquisitions.24
However,�in�the�past�year,�the�two�most�significant�developments�have�been�in
radio�and�films�-�with�Times�Group�acquiring�U.K.’s�Virgin�Radio�and�Reliance
entering�into�a�50:50�Joint�Venture�with�DreamWorks.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
21�KPMG�2008�report�on�Emerging�Markets�International�Acquisition�Tracker22�Company�Website,�Press�Releases23�Company�Website,�Press�Releases24�Company�Website,�Press�Releases
153
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
The�Virgin�Radio�deal�was�significant�because�an�Indian�media�company�re-
branded�and�re-launched�a�new�entertainment�brand.�The�target�here�was�not
the�Indian�diaspora�but�the�local�U.K.�audience,�Virgin�being�Britain's�first
national�commercial�rock�radio�station.�This�was�the�first�instance,�where�an
Indian�media�company�was�acquiring�a�foreign�property�to�target�the�global
audience.�The�acquisition�was�a�key�entry�point�into�the�vibrant�British�radio
market�and�reinforced�the�growing�power�and�international�presence�of�Indian
media�companies.
Times Acquisition of Virgin Radio-
On�June�2008,�the�Times�Group,�through�its�wholly�owned�subsidiary-
Times�Infotainment�Media�Limited�(TIML),�acquired�Virgin�Radio�Holdings
and�its�subsidiaries�in�the�U.K.�from�Scottish�Media�Group�(SMG)�Plc�for
an�all�cash�consideration�of�GBP�53.2�million�(INR�4.48�billion).�It�was�the
first�ever�overseas�acquisition�by�the�Times�Group�in�the�media�space.�
Virgin�Radio�is�Britain's�first�national�commercial�rock�radio�station�which
reaches�2.7�million�listeners�every�week.�It�operates�under�an�FM�license
in�London,�an�AM�license�in�the�rest�of�the�U.K.�as�well�as�a�digital�radio
station�that�operates�online�at�virginradio.co.uk.�It�is�also�commonly�held
to�be�the�first�radio�station�in�Europe�to�broadcast�on�the�internet,�a�feat�it
pulled�off�in�1996.�It�was�a�distress�sale�by�SMG�and�hence�the�deal�was
financially�attractive�for�the�Times�Group;�TIML�closed�the�deal�at�almost�a
quarter�of�what�SMG�had�paid�in�2000�to�acquire�the�radio�station.
According�to�the�terms�of�the�deal,�TIML�did�not�gain�the�right�on�the
Virgin�brand�and�hence�does�not�retain�and�use�the�original�brand�name
after�a�period�of�90�days�from�the�transaction.�TIML�is�to�manage�the
station�along�with�the�Irish�radio�consultancy�company,�Absolute�Radio,
and�is�also�committed�to�invest�GBP�15�million�for�the�re-branding�of�the
radio�station,�over�the�next�two�years.�TIML�subsequently�re-launched�the
radio�station�as�Absolute�Radio�from�September�2008.�Going�forward,�the
station�is�also�expected�to�diversify�into�new�areas�like�stand-alone
branded�properties,�event�ownership,�TV�and�customer�transactions�like
music�subscriptions,�downloads�and�ticketing.
154
September�2008�witnessed�another�important�milestone�in�Indian�M&E�industry,
when�Reliance�Big�Entertainment�and�Steven�Spielberg’s�DreamWorks�SKG�inked
a�USD�1.2�billion�deal�to�set�up�a�new�DreamWorks�Studio,�based�in�Los�Angeles.
As�per�the�terms�of�the�deal,�the�new�studio�is�to�be�a�50:50�Joint�Venture�-�the
first�such�instance�between�a�Hollywood�entity�and�a�Bollywood�company�-�and
thus�marked�the�biggest�union�between�the�two�industries�till�date.25
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
There�are�certain�key�benefits�from�the�deal�for�the�Times�Group:
•�Entry�point�and�foothold�in�what�is�considered�as�the�most�mature�and
sophisticated�radio�market�in�the�world�-�the�U.K.�market.�Virgin�owned
one�of�Britain’s�three�commercial�radio�licenses
•�Gaining�the�requisite�experience�for�operating�the�digital�radio�medium.
Digital�medium�and�radio�on�net�are�big�in�the�west�and�Virgin�is
especially�strong�on�the�digital�front�with�an�online�music�subscription
service,�online�video�and�mobile�applications�-�Its�online�revenues
comprises�about�25�percent�of�all�online�revenues�in�the�U.K.�radio
market
The�deal�was�perceived�in�the�western�media�as�a�sign�of�things�to�come
from�India�and�other�emerging�markets.�Traditional�media�companies�in
the�United�States,�Western�Europe�and�Japan�have�been�struggling�with
falling�advertising�rates,�a�gloomy�economic�environment�and�competition
from�the�Internet.�But�newspaper,�television�and�radio�companies�in
emerging�markets�are�expected�to�expand.
25�Company,�Press�Reports�and�Release
Source:�Company,�Press�Reports�and�Releases
155
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Reliance Joint Venture with DreamWorks SKG- A ‘Big’ Step for Indian Cinema
September�2008�witnessed�a�marriage�of�Bollywood�and�Hollywood�of�significant�proportions�in�the
history�of�cinema.�Iconic�Hollywood�director�Steven�Spielberg's�DreamWorks�SKG�film�studio�signed
a�deal�with�Reliance�ADA�Group's�entertainment�arm,�Reliance�Entertainment�as�per�which�Reliance
agreed�to�pump�USD�500�million�into�DreamWorks�that�can�enable�the�DreamWorks�team�end�their
association�with�Paramount�Pictures�and�float�a�new�USD�1.25�billion�film�studio�that�could�produce
more�than�30�films�over�the�next�5�years�(the�funding�is�contingent�on�the�additional�money�being
raised�as�debt).�According�to�the�deal,�DreamWorks�is�to�henceforth�function�as�a�50:50�joint�venture
between�Spielberg,�current�DreamWorks�Chief�Executive,�Stacey�Snider�and�Reliance�Big
Entertainment.�Spielberg�retained�the�rights�to�the�name�DreamWorks�and�affixed�it�to�the�new
entity.�Viacom’s�Paramount�Pictures�had�bought�DreamWorks�in�2006�for�USD�1.6�billion�with�the�aim
of�using�the�company�as�a�creative�engine�to�reinvigorate�Paramount,�but�was�looking�for�buyers�to
save�on�overhead�costs.�Reportedly,�prior�to�DreamWorks'�exit,�Paramount�was�paying�USD�50
million�a�year�in�overheads�for�DreamWorks.
The�deal�was�hailed�as�one�of�the�most�important�deals�in�the�history�of�Indian�cinema�-�not�only�due
to�the�size,�but�also�due�to�its�impact.�Spielberg�is�one�of�Hollywood’s�most�successful�directors�of
all�time.�Some�of�his�well-known�films�are�“Raiders�of�the�Lost�Ark”,�“ET”�and�“Jurassic�Park”.
DreamWorks�has�an�impressive�track�record�of�producing�box�office�successes�like�“Saving�Private
Ryan”,�“Dreamgirls”,�“Gladiator”�and�“Transformers”.�The�deal�is�expected�to�benefit�both�DreamWorks
and�Reliance�Entertainment�as�the�former�is�to�have�access�to�a�stable�source�of�financing�from
Reliance,�while�the�latter�is�to�hold�distribution�rights�in�India�for�future�film�releases�by�DreamWorks
across�platforms-�theaters,�television,�DTH�and�Home�Video�-�for�a�period�of�six�years.�Further,�the
company�is�able�to�tap�Spielberg’s�popularity�to�expand�its�presence�in�the�U.S.�market.�Reliance
Entertainment�does�not�have�any�creative�control�over�the�studio.
The�deal�is�expected�to�give�a�further�boost�to�Reliance�Entertainment’s�global�ambitions.�Earlier�in
March,�through�its�exhibition�arm�Adlabs,�Reliance�had�bought�several�multiplexes�in�the�U.S.,�giving
it�250�screens�in�28�North�American�cities,�including�New�York,�Los�Angeles,�Chicago�and�Washington
D.C.�The�company�had�also�bought�another�50�theaters�in�Malaysia,�and�some�theaters�were�also
taken�over�in�Mauritius�and�Nepal.�Also�in�the�May�2008�Cannes�Film�Festival,�Reliance�Big
Entertainment�had�announced�production�deals�with�some�of�the�biggest�names�in�Hollywood�such
as�Brad�Pitt,�George�Clooney,�Tom�Hanks,�Jim�Carrey�and�Nicholas�Cage.�
The�new�deal�comes�in�the�wake�of�a�financial�crunch�in�Hollywood,�with�the�industry�looking�to
foreign�investors�to�replace�the�funding�that�has�now�reduced�from�Wall�Street�due�to�the�prevailing
economic�downturn.
Source:�Company,�Press�Reports�and�Releases
156
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
From�the�perspective�of�India�Media�Inc.,�these�deals�were�significant�due�to�thescale�of�their�ambitions,�since�both�these�companies�did�not�go�down�the�welltrodden�Asian�diaspora�route�and�chose�the�more�expensive,�intensely�cut-throat,mainstream�audience�route�instead,�to�enter�the�global�market.�Theseacquisitions�signified�the�foray�of�aspirational�Indian�media�companies�outsidetheir�ethnic�comfort�zones.�Besides�signifying�India�Inc.’s�increasing�thrusttowards�climbing�new�frontiers,�the�acquisition�underlines�the�fact�thatgeography,�language�and�cultural�barriers�no�longer�count�for�Indian�industry.Such�aggressive�acquisition�of�foreign�properties�have�also�set�precedents�forother�Indian�M&E�companies,�and�it�is�expected�that�these�two�deals�may�be�theprecursors�of�many�more�such�international�acquisitions�by�Indian�players.However,�there�are�some�important�points�which�Indian�media�companies�needto�consider�before�acquiring�a�foreign�media�property.
Points�to�consider�for�evaluating�acquisition�of�a�foreign�Target�Brand
Assessing�market�conditions Product�category�evaluation Target�brand�performance Synergy�with�acquirersexisting�portfolio
Ascertaining�market�sizeand�growth�potential�of
the�overall�M&E�industryof�the�target�
Assessing�market�sizeand�growth�potential�ofthe�product�category
Analysis�of�the�brand’shistorical�performance
and�pace�of�growth
Experience�and�expertiseof�the�acquirer�to�operatein�that�particular�category
Evaluate�key�oppurtunityareas�in�the�market
Risk�return�analysis�of�theoppurtunity�presented�by
the�product�category
Awareness,�salience�andrecall�of�the�brand�among
its�target�audience
Organization’s�capabilitiesrequired�to�support�the
growth�plans�of�thetarget�brand�and�whetherthe�acquirer�possesses
these�capabilities
What�are�possibleavenues�for�the�target�to
leverage�its�existingcapabilities�/brand�image?
What�are�the�areaswhere�the�company�can
use�its�current�capabilitiesto�differentiate�in�the
market?
Target’s�performancevis-à�-vis�the�intensity�ofcompetition�faced�in�the
market
Whether�expectedreturns�commensuratewith�investment�levels
required
How�have�internationalcontent�producers
diversified�and�grown�inscale?
What�are�the�final�set�ofoppurtuinities�to�be
pursued
Evaluating�existingdistribution�capabilities�of
the�brand�and�futureinventory�pipeline
Acquirer’s�abilities�andchange�readiness�tohandle�the�risk�and
challenges�arising�out�ofintegration�of�twodifferent�cultures
157
Implications for Players
For�the�industry�players,�international�forays�provide�access�to�more�mature�andsophisticated�western�media�markets,�which�results�in�a�more�competitiveorientation�and�outlook.�This�also�encourages�Indian�media�companies�to�absorband�imbibe�the�best�practices�of�their�foreign�counterparts.�Knowledge�andresource�sharing�across�geographical�boundaries�can�help�in�building�up�the�skilland�capability�base�of�the�Indian�companies�which�can�eventually�equip�them�totake�on�the�best�in�the�world�market.�
Internationalization�also�represents�potentially�lucrative�new�market�opportunitiesfor�the�Indian�M&E�industry�as�a�whole.�As�competition�in�the�domestic�marketincreases�and�the�industry�gets�more�fragmented,�international�markets�presenta�good�risk�mitigating�and�revenue�augmenting�option�for�the�Indian�players.Leading�industry�players�across�the�world,�like�News�Corporation�and�SonyPictures�Entertainment�have�created�and�established�global�networks.�Indianmedia�companies�are�also�now�beginning�to�show�that�they�have�globalambitions.�Synergies,�access�to�funds,�favorable�regulatory�mechanism�and�tradeagreements�can�help�give�further�impetus�to�the�industry�in�this�direction.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Internationalization�-�Implications�for�Players
Sector Effects of Internationalization Implications
TV • Steadily�increasing�penetration�of�Indianchannels�abroad�(meant�for�NRI�audiences)across�multiple�distribution�platforms�
• Launch�of�channels�by�Indian�broadcastersthat�cater�to�local�audiences�in�othercountries
• Steadily�increasing�international�revenue�stream�for�broadcasters
• After�a�sufficient�scale�has�been�built�in�India,�big�broadcasters�in�India�can�start�launchingchannels�catering�to�mainstream�audiences�in�other�countries�and�create�international�televisionbrands�such�as�the�ones�that�Star�and�Sony�have�created�
• Need�to�understand�the�content�preferences�and�tastes�of�target�audience,�be�it�NRI�orglobal�mainstream,�and�have�a�programming�mix�tailor�made�for�them�
Film • Increasing�popularity�of�Indian�films�amongthe�NRI�diaspora
• Bollywood�films�have�started�makinginroads�amongst�the�mainstream�globalaudience
• Established�players�in�Bollywood�venturinginto�co-production�and�production�ofHollywood�films
• Indian�post�production�studios�can�developas�a�potential�off�shoring�destination�forforeign�studios
• Need�to�understand�the�type�of�content�that�works�for�the�NRI�audience,�and�developcontent�accordingly
• Imperative�for�players�to�tie�up�with�marketing/distribution�agents�abroad�to�secure�release�inmainstream�theaters�and�unlock�the�potential�of�the�overseas�home�video�market
• Technical�and�creative�quality�of�the�film�should�be�able�to�match�international�standards;accordingly�time�and�cost�allocation�at�the�script�development�and�post�production�stageneeds�to�go�up
• Players�need�to�aggressively�market�themselves�in�international�markets�as�well�asinternational�film�festival�forums;�marketing�spends�abroad�to�increase
Print • Players�have�launched�overseas�editions�ofnewspapers�and�magazines�
• Online�editions�of�Print�media�targetedprimarily�for�the�NRI�audience
• Need�for�evaluating�the�target�market�potential�and�consumer�preferences�before�getting�intoparticular�territories
• Players�need�to�effectively�tap�advertisers�abroad�to�capitalize�on�their�reach�among�the�Indiandiaspora
• Need�for�players�to�effectively�monitize�their�online�versions
Animation • India�has�a�share�of�about�8�percent�in�theglobal�animation�outsourcing�market
• About�80�percent�of�the�revenues�of�theIndian�animation�industry�comes�fromoutsourcing�work
• As�a�result,�India�has�a�thriving�and�fastgrowing�aniamtion�industry�inspite�of�lowlocal�demand
• Because�of�the�excessive�dependence�on�the�outsourcing�model�right�now,�there�is�a�riskthat�the�Indian�industry�may�lose�a�large�portion�of�it’s�revenues�if�outourcing�dips.�This�couldhappen�if�other�alternative�outsourcing�hubs�emerge�or�if�India�begins�to�lose�its�costadvantage�due�to�higher�talent�costs�because�of�talent�demand�outstripping�supply
• The�Indian�industry�uses�world�class�software�and�technology�as�it�handles�outsourcedanimation�production�of�some�of�the�biggest�international�studios
• Because�of�the�already�existing�high�quality�infrastructure,�their�remains�a�big�untappedpotential�for�Indian�animation�studios�to�develop�their�own�global�IPs.�The�demand�and�marketfor�such�global�animation�properties�is�huge�as�witnessed�by�the�box�office�collections�ofanimation�films�produced�by�studios�such�as�Walt�Disney�and�Pixar�
158
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Deal Activity and
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Investment Trends
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
08
Deal Activity and Investment Trends
M&A Activity: Media andEntertainment1
Overall�deal�volumes�registered�a�25�percent�drop�in�2008
but�the�number�of�M&E�deals�increased�from�59�to�85�as
compared�to�2007.�In�2008,�the�85�deals�were�valued�at
USD�1.7�billion�as�compared�to�59�deals�in�2007�at�USD�1.0
billion.
The�sector�witnessed�36�private�equity�deals�as�compared
to�27�in�2007,�with�deal�values�amounting�to�USD�496�mn.
M&A�activity�registered�49�deals�at�USD�636�mn�as
compared�to�32�deals�in�2007.�The�Indian�media�sector
continued�to�explore�international�synergistic�opportunities
recording�12�cross�border�deals�amounting�to�USD�612�mn.�
In�2008,�television�continued�to�attract�investor�interest
through�24�deals�at�USD�380�mn.�As�compared�to�7�deals
for�USD�22�mn�in�2007,�film�and�content�production
registered�10�deals�valued�at�USD�775�mn�in�2008.
Investors�were�attracted�by�one�of�the�only�growing�print
markets�in�the�world�with�10�deals�at�USD�91�mn�in�the
same�year.�Alternate�media�platforms�such�as�out�of�home
attracted�foreign�investment�of�USD�124�mn�through�7
deals.�In�2008,�the�investors�capitalized�on�the�MVAS�space
through�10�deals�valued�at�USD�94�mn�due�to�the�increasing
subscriber�growth�potential�of�this�medium.�In�2008,�radio
witnessed�1�cross�border�deal�valued�at�USD�105�mn.
Some�of�the�model�profitable�media�companies�worldwide
are�conglomerates�with�presence�across�the�media�value
chain�such�as�News�Corporation,�Disney,�Time�Warner,
Viacom�and�NBC�Universal.�These�conglomerates�have�been
able�to�create�value�by�the�exploitation�of�their�content
libraries�across�media�platforms�thereby�aggregating�their
customer�base�and�addressing�diverse�media�consumption
patterns.
Among�the�main�trends�in�the�sector�that�is�driving�M&A
activity�is�the�creation�of�specialized�media�and�multimedia
holding�companies�that�include�print�and�publishing
companies,�internet�resources,�radio,�TV�and�a�number�of
other�media�assets.
In�India�too,�several�companies�such�as�UTV;�Network18;
Reliance�Big�Entertainment;�Bennett,�Coleman�&�Co.�and
NDTV�have�expanded�their�presence�across�the�media�value
chain.�These�domestic�conglomerates�have�seen�increased
interest�from�their�global�counterparts�as�evidenced�by
Viacom’s�joint�venture�with�Network�18,�Time�Warner’s
investment�in�Miditech,�Disney’s�investment�in�UTV
Software�Communications�and�NBC�Universal’s�investment
in�NDTV�Networks�plc.�
1�Bloomberg,�Research�Reports,�Mergermarket
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
2�Bloomberg,�Research�Reports,�Mergermarket3�Bloomberg,�Research�Reports,�Mergermarket4�Bloomberg,�Research�Reports,�Mergermarket5�Bloomberg,�Research�Reports,�Mergermarket
6�Industry�sources7�Industry�sources
Television BroadcastingHistorically,�television�has�been�the�largest�value�creator�inthe�Indian�media�and�entertainment�sector�on�the�back�ofrobust�advertising�growth,�and�it�is�no�surprise�that�thissegment�has�seen�a�flurry�of�deal�activity�from�privateequity�and�global�media�conglomerates�alike.�Keytransactions�in�2008�include�Disney’s�acquisition�of�a�15percent�stake�in�UTV�Global�Broadcasting2,�NBC�Universal’sacquisition�of�a�26�percent�stake�in�NDTV�Networks�plc�forUSD�150�mn3,�Merrill�Lynch’s�investment�of�USD�30�mn�inZoom�Entertainment�Network�and�News�Corporation’s�jointventure�with�the�Rajeev�Chandrashekhar�backed�JupiterEntertainment�Ventures�(which�owns�leading�South�Indiantelevision�channels)4.
This�year�also�saw�the�exit�of�Reuters�from�their�26�percentjoint�venture�with�Times�Global�Broadcasting�and�the�sale�ofPeter�Mukherjee�backed�INX�Media’s�sale�of�its�Englishnews�channel�to�NaiDunia5.
Since�broadcasters�derive�approximately�80�percent6 of�theirrevenues�from�advertising,�a�slowdown�in�advertisinggrowth�in�2009,�coupled�with�increasing�placement�costs�islikely�to�put�severe�pressure�on�the�less�establishedbroadcasters.�Broadcasters�with�strong�channel�bouquetsand�those�that�can�aggregate�niche�audiences�are�expectedto�continue�to�see�advertiser�and�investor�interest�in�thenear�term�and�also�benefit�from�the�imminent�digitization�ofthe�distribution�landscape.
Television DistributionThe�television�distribution�segment�has�not�witnessed�toomuch�deal�activity�in�2008�with�Morgan�Stanley�and�IndiaInfrastructure�Holdings�Fund’s�USD�60�mn�investment�inHathway�Cable�and�Datacom�being�the�only�significantreported�investment�this�year7.
This�segment�is�plagued�by�a�number�of�inefficiencies�whichare�impediments�to�value�creation.�In�addition,�some�of�themeasures�taken�by�the�government�such�as�implementationof�CAS�have�not�seen�the�level�of�enforcement�andexecution�as�one�might’ve�hoped.�However,�distribution�islikely�to�emerge�as�a�major�area�of�investment�both�in�DTHand�cable,�given�future�opportunistic�growth.
The�distribution�landscape�in�India�is�dominated�by�largeconglomerates�such�as�Tata,�Zee,�Reliance�ADAG�and�theHinduja�Group�which�have�the�ability�to�invest�for�the�longterm�as�compared�to�the�unorganized�local�cable�operators.With�limited�financial�strength�and�imminent�digitization,there�consolidation�is�expected�in�the�fragmented�cablemarket.
Deal�activity�in�television�distribution�2009�is�likely�to�bedriven�by�requirements�to�raise�capital�to�fund�ambitiousroll-out/customer�acquisition�obligations�andopportunistically�acquire�the�local�cable�operators�whereverpossible.
“2009 will also be a year of consolidation and mergers. Half the TV broadcastindustry is already in fire sale mode in India. Similarly, Cinema exhibition space ispoised for consolidation, since economies of scale is a prime value driver in thisbusiness.”Rajesh Sawhney, President, Reliance Entertainment
162
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
With�just�38�percent8 of�penetration�in�print,�India�is�one�of�the�few�growing�print
markets�in�the�world�and�is�expected�to�sustain�its�growth�rate�and�create�value
for�the�next�5-6�years,�supported�by�strong�underlying�fundamentals�such�as
growing�literacy�rate,�emergence�of�local�centric�businesses,�low�PC�penetration,
absence�of�pan�Indian�players�(except�BCCL)�and�a�huge�vernacular�market.�DE
Shaw’s�second�round�of�investment�into�Amar�Ujala9 highlights�the�importance�of
extensive�vernacular�reach�and�regional�advertising�growth.�Kotak�Mahindra
Bank’s�increased�stake�in�Business�Standard10 supports�the�thesis�that�readers�of
English�financial�news�dailies�are�considered�to�be�in�the�higher�income�bracket
thus�luring�advertisers�to�channel�a�larger�portion�of�their�advertising�spends
through�English�financial�news�dailies.
However,�the�print�market�faces�two�major�challenges�–�growth�of
internet/television�news�and�high�newsprint�costs.�The�rise�of�computer�and
internet�penetration�is�likely�to�erode�print�market�share�in�the�long�term�and
consequently�the�return�on�investment�for�advertisers.�Second,�rising�newsprint
costs�seen�in�2008�have�eaten�into�the�profit�margins�since�newsprint�accounts
for�approximately�50�percent11 of�the�total�cost�of�a�newspaper�publisher.
As�a�result�this�industry�is�likely�to�go�through�a�consolidation�phase�wherein�the
larger�players�may�seek�margin�growth�by�acquiring�smaller�regional�players.
Second,�print�companies�might�also�seek�to�leverage�their�news�distribution
model�through�different�platforms�such�as�the�internet,�television�and�mobile.
Radio
The�presence�of�increasing�number�of�players�in�this�industry�vying�for�a�pie�of
USD�3�billion12 in�2010�–�that�too�with�zero�differentiation�has�led�to
cannibalization�of�revenues�in�this�sub�sector.�Hence,�this�sector�has�seen�limited
M&A�activity�in�2008.�The�incumbents�have�focused�on�strengthening�their
existing�operations�and�the�international�players�played�a�waiting�game�due�to
foreign�investment�constraints�faced�by�this�segment.
Regulatory�changes�such�as�relaxation�of�FDI�limits,�granting�permission�to�own
multiple�frequencies�in�a�city�and�the�permission�to�air�news�and�current�affairs
hold�the�key�to�the�growth�of�this�segment.
In�the�near�future,�relaxation�of�regulatory�hurdles�is�likely�to�facilitate�active
interest�from�large�international�private�equity�players�and�global�radio�majors
such�as�Fox,�Walt�Disney,�Hearst,�Rogers�Communications,�Virgin�Group�and�CTV
Globemedia.
8�Industry�sources9�Bloomberg,�Mergermarket10�Bloomberg,�Mergermarket11�Industry�sources
12�IDFC�SSKI�Research�Reports
163
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Out of Home
The�Out�of�Home�segment�witnessed�a�reasonable�interest�from�private�equity�in
2008.�Key�deals�consummated�during�the�year�were�Goldman�Sachs�and�Lehman
Brothers’�investment�of�USD�50�mn�in�the�out-of-home�advertising�subsidiary�of
ENIL�and�Warburg�Pincus’�USD�75�mn�investment�in�Laqshya�Media13.�A�number
of�others�were�also�reported�to�have�been�in�discussions�with�private�equity
funds�during�the�year�to�raise�growth�capital.
The�growth�prospects�of�this�segment�remain�strong�with�key�drivers�being
format�expansion�on�the�back�of�airport�privatization,�public�infrastructure
projects,�upgradation�of�street�furniture�and�technological�advances.�The
fragmentation�of�other�media�and�OOH’s�proposition�of�providing�a�localized,�low
cost�medium�of�advertising�enhances�the�medium’s�appeal�to�advertisers.
However,�near�term�challenges�due�to�the�rationalization�of�advertising
expenditure�due�to�the�economic�slowdown�remains�a�concern.
Some�of�global�OOH�majors�such�as�JCDecaux�and�Clear�Channel�have�a�limited
presence�in�India�and�may�look�to�scale�up�Indian�operations�through�inorganic
means.�However,�since�most�of�the�Indian�companies�are�in�growth�phase�and
lack�scale,�M&A�activity�in�2009�may�be�limited�to�growth/expansion�capital
investments,�joint�ventures�and�alliances.
Gaming
In�2007,�UTV�Software�Communications�acquired�Indiagames�and�the�U.K.-based
Ignition�entertainment�marking�their�foray�into�the�mobile,�online�and�console
gaming�market.�In�2008,�UTV�continued�to�strengthen�their�position�in�this
segment�with�the�acquisition�of�True�Games�Interactive,�a�U.S.-based�developer
and�distributor�of�online�games.
Going�forward,�we�believe�that�Indian�gaming�companies�are�likely�to�seek�capital
infusion�to�acquire�technology,�develop�content�and�retain�people.�We�also
believe�that�incumbents�such�as�Zapak�and�Indiagames�are�likely�to�seek�to
complement�their�existing�portfolios�and�technologies�through�acquisitions�in
India�and�overseas.�The�Indian�gaming�industry�is�expected�to�grow�at�106
percent�annually�to�reach�USD�250�mn14 by�2010�and�is�likely�to�witness�strategic
interest�from�international�players�such�as�Vivendi,�Electronic�Arts,�etc.
Outbound Deals
In�2008,�a�number�of�Indian�media�companies�extended�their�presence�to�other
geographies.�Key�deals�included�Bennett�Coleman’s�acquisition�of�U.K.�based
Virgin�Radio�for�USD�105�mn�to�gain�a�foothold�in�the�U.K.�radio�market,�UFO
Moviez’s�acquisition�of�Moviebeam,�a�leading�U.S.�based�on-demand�movie
service�and�UTV’s�acquisition�of�True�Games�Interactive,�a�U.S.�based�publisher�of
13�Bloomberg,�Mergermarket14�Industry�sources
164
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
online�games.�Reliance�Big�Entertainment�was�by�far�the�most�active�Indian
media�acquirer�abroad�with�the�acquisition�of�Willow�TV�(sports�webcaster),�DTS
Digital�Images�(film�restoration�company)�and�the�expected�USD�550�mn�joint
venture�with�Steven�Spielberg’s�Dreamworks�SKG15.
Indian�media�companies�are�likely�to�continue�to�scout�for�opportunities�to
establish�a�global�footprint�in�2009,�especially�at�attractive�valuations�brought
about�by�the�global�economic�crisis.
PE investment trends in Media andEntertainment
While�there�is�a�large�amount�of�capital�available�for�the�right�business�venture,
investors�follow�extremely�rigorous�assessment�and�evaluation�processes�before
actually�committing�funds�to�a�particular�business.�A�typical�private�equity�fund
invests�in�only�about�2-3�percent�of�the�investment�opportunities�that�are�shown
to�it;�approximately�85�percent�of�investment�opportunities�are�rejected�after
initial�screening�or�assessment.
Several�reasons�(including�interest�in�the�underlying�industry�or�segment)�can
result�in�a�potential�investment�being�rejected�by�the�investor.�Main�concerns�that
investors�often�have�specifically�in�the�case�of�media�businesses�are:
• Volatility�of�cash�flows�in�the�case�of�certain�businesses�or�industry�sectors
• Absence�of�operating�infrastructure�to�support�its�growth�projected�in�the
business�plan
• Significant�involvement�of�the�promoter/owner�in�decision-making
• Outdated�and�inconsistent�accounting�policies,�not�in�line�with�current
practices.
15�Industry�sources,�research�reports,�Mergermarket
“Internationally the mobile gaming segment in particular is ripe for another round ofconsolidation after seeing some significant M&A activity between 2004-2006. Somelisted companies are trading well below cash and at fractional revenue to salesmultiples. This is clearly a buyers’ market. However given the overall marketsentiment, the natural instinct of most companies who have cash will be toconserve it and hence we may see some long gestation periods before dealsactually get consummated.”Samir Bangara, COO, Indiagames
165
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
There�are�several�actions�that�a�media�company�can�take�in�order�to�become
more�investor-friendly�–�in�a�sense�to�make�itself�“ready�for�investors”.�These
actions�span�different�functional�areas�and�some�of�them�are�described�in�more
detail�below.
Alignment of the business model to industry themes
Companies�looking�for�investment�need�to�examine�their�business�models�and
assess�how�it�is�aligned�to�critical�growth�and�competitive�themes�in�their
industries.�This�includes�assessing�the�following:
• Who�is�the�target�audience?
• What�is�the�value�proposition�being�offered�to�this�customer�base?
• Is�this�an�attractive�customer�segment?
• Is�the�value�proposition�superior�to�that�of�competition?�For�example,�a
newspaper�that�leads�a�particular�language�genre�in�a�city�may�need�to
evaluate�whether�it�provides�advertisers�an�attractive�audience�that�cannot
otherwise�be�reached.�
• To�what�extent�they�can�exercise�control�over�their�position�in�the�industry
value�chain�and�their�revenue�streams.�For�instance,�a�television�channel�that
is�not�a�part�of�a�strong�distribution�bouquet�may�not�have�strong�control�over
its�ability�to�reach�cable�households�in�order�to�drive�viewership�and
advertising�revenues.
• How�the�company�plans�to�mitigate�risks�particular�to�its�industry�segment�or
business�model:�for�instance,�a�film�production�company,�whose�year-to-year
revenue�could�vary�widely�depending�on�the�performance�of�its�films�in�the
box�office,�might�pre-sell�some�of�its�rights�or�enter�into�co-financing
arrangements�in�order�to�reduce�its�dependence�on�performance�of�any
specific�film.
Development of a robust business plan
Investors�today�expect�robust,�professionally�developed�business�plans�from
companies�that�they�are�considering�an�investment�in.�The�plans�need�to�cover
following�key�elements:
• Detailed�assumptions�underlying�such�business�plans,�which�are�typically
derived�either�from�industry�trends�(e.g.�size,�growth)�or�the�management’s
strategy�(i.e.�target�audience,�pricing,�market�share�etc.).�
• Scenario�analysis�with�regard�to�industry�trends�as�well�as�success�of�the
company’s�strategy;�identifying�and�analyzing�key�sensitivities�in�the
166
assumptions�is�a�good�way�to�signal�to�a�potential�investor�that�the�manager
is�aware�of�the�risks�associated�with�the�business�plan�and�is�in�the�process
of�planning�ahead�for�them.�A�television�broadcaster,�for�instance,�could
analyze�the�break�even�for�a�new�show�by�testing�the�impact�of�different
levels�of�viewership�and�advertisement�rates;�a�newspaper,�on�the�other
hand,�could�evaluate�the�impact�of�an�increase�in�newsprint�prices�on�its
profitability.
Increasing visibility of cash flows in the projections
Reducing�volatility�of�cash�flows�reduces�the�risk�perception�for�investors,�making
the�company�more�attractive�to�investors.�Some�possible�ways�to�do�this�are:
• In�an�industry�such�as�film�production,�where�revenues�can�vary�significantly
from�film�to�film,�producers�can�increase�visibility�of�future�revenues�by�pre-
selling�some�of�the�rights�of�upcoming�films�–�this�reduces�the�downside�risk
in�case�a�film�performs�badly�at�the�box�office
• Similarly,�television�broadcasters�and�newspapers�could�increase�visibility�of
future�cash�flows�by�signing�long�term�sponsorship�deals�or�newsprint
purchase�contracts�
• Another�common�strategy�employed�by�media�companies�to�reduce�earnings
volatility�is�to�adopt�a�portfolio�approach.�For�instance,�a�record�label�can
produce�several�albums�each�year;�while�the�returns�of�individual�albums�may
vary�substantially,�the�returns�of�the�portfolio�could�be�expected�to�be�steadier
from�year�to�year.
These�strategies�do�not�protect�a�company�from�poor�performance�in�its�core
business,�but�it�does�reduce�the�volatility�of�earnings�between�one�year�and�the
next;�lower�volatility�makes�the�same�expected�returns�more�attractive�for
potential�investors.�Companies�wishing�to�attract�investment�need�to�understand
which�strategy�is�most�relevant�for�reducing�volatility�in�their�business�projections
and�how�best�to�apply�it�to�their�business.
Development of the infrastructure supporting the growth plan
For�most�media�companies,�as�the�case�for�investment�is�based�on�business
scalability,�companies�need�to�demonstrate�the�ability�to�execute�their�business
plans.�A�critical�aspect�of�this�is�the�development�of�operating�infrastructure,�in
the�form�of�management�teams,�information�and�control�systems,�and�decision-
making�processes,�to�support�a�larger�scale�of�operations.�Key�areas�to�focus�on
are:
• Operational�and�creative�dependence�on�few�key�individuals�resulting�from
legacy�of�family/�individual�driven�business�set�up.�Such�dependence�on�few
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
167
individuals�coupled�with�absence�of�professional�management�raises
concerns�regarding�scalability�of�the�business�as�the�existing�management
may�not�have�the�bandwidth�to�manage�significant�growth�in�the�business.
Media�companies�therefore�need�to�develop�a�strong�management�team
combined�with�a�professional�set�of�second�tier�management�and�also�look�to
develop�a�well�defined�succession�plan�for�key�management�individuals�and
reduce�business�discontinuity�risk
• Lack�of�focus�on�supporting�infrastructure�leading�to�situations�such�as
unsophisticated�IT�systems�which�are�unable�to�handle�complexities,�absence
of�a�formalized�and�strong�MIS,�ill�defined�processes,�roles,�responsibilities
and�management�controls.�Weak�systems�and�processes�place�major
constraints�on�the�ability�of�an�organization�to�increase�scale�and�also�reduce
the�reliability�of�the�business�plan�from�an�investor’s�perspective.
Improving corporate governance
Weak�corporate�governance�processes�are�a�key�concern�among�investors�with
respect�to�the�media�industry�primarily�due�to�small/medium�scale�of�a�number
of�companies�and�traditional�lack�of�corporatization�in�the�space.�These�are
typically�evidenced�by:
• Weak�accounting�policies�resulting�from�absence�of�any�accounting
pronouncements�on�industry�specific�issues�allowing�companies�the�flexibility
to�develop�accounting�policies�focusing�on�improving�profitability�and�tax
savings.�For�example,�there�is�no�set�standard�for�accounting�treatment�of
content�costs�due�to�which�companies�tend�to�have�varied�and�inconsistent
accounting�treatments
• High�risk�of�management�override
• Weak�board�oversight
• Lack�of�transparency�in�operations�stemming�from�absence�of�agreements�for
key�arrangements�and�reliance�on�trust/relationships�with�regard�to�key
operations.�Agreements,�if�they�exist,�are�not�typically�enforced�or�are�difficult
to�enforce�from�a�practical�perspective.�Increasingly,�companies�are�entering
into�agreements�with�various�stakeholders,�evaluating�means�to�enforce�the
agreements,�looking�for�means�to�control�and�audit�the�supply�and
distribution�chain�etc.
Stronger�corporate�governance�and�processes�are�likely�to�increase�the�reliability
of�the�business�plan�and�the�reported�financial�performance�from�an�external
investor’s�perspective.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
168
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Changing Landscape in
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Audit for M&E
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
09Changing landscape inaccounting for Media andEntertainment industry
The�convergence�of�accounting�standards�across�the�globe
is�gaining�increasing�momentum.�Most�standard-setting
bodies�have�acknowledged�that�the�ultimate�goal�of
convergence�is�to�have�a�single�globally�accepted�financial
reporting�system.�Accordingly,�the�International�Financial
Reporting�Standards�(IFRS)�issued�by�the�International
Accounting�Standards�Board�(IASB)�have�emerged�as�an
ever�greater�focus�of�attention�for�reporting�entities�in
recent�years.
While�the�IASB�and�the�U.S.�Financial�Accounting�Standards
Board�continue�to�work�closely�on�their�convergence�project
between�IFRS�and�U.S.�Generally�Accepted�Accounting
Principles�(U.S.�GAAP),�the�U.S.�Securities�and�Exchange
Commission�(SEC)�has�made�significant�progress�to
increase�the�acceptance�of�IFRS.�The�SEC's�decision�to
accept�foreign�private�issuers'�financial�statements�prepared
in�accordance�with�IFRS�as�issued�by�the�IASB�without
reconciliation�to�U.S.�GAAP,�has�demonstrated�the�SEC's
willingness�to�continue�to�support�the�move�towards
convergence.�Additionally,�the�SEC�recently�proposed�a
"roadmap"�for�phasing�in�IFRS�filings�by�U.S.�public
companies�beginning�for�years�ending�on�or�after�December
15,�20141.�Back�home,�the�Institute�of�Chartered
Accountants�of�India�has�also�released�a�‘Concept�Paper�on
Convergence�with�IFRS�in�India’,�which�details�the�strategy
and�roadmap�for�convergence�of�Indian�Accounting
Standards�with�IFRS�effective�April�1,�20112.�
With�these�developments,�the�growing�use�of�IFRS�in�the
world’s�markets�and�its�current�position�as�the�most�widely
used�set�of�accounting�standards�in�the�world,�the
accounting�landscape�as�we�know�it,�is�significantly
changing.�
The�aim�of�this�publication�is�to�provide�a�high-level
summary�of�how�financial�statement�results�of�the�Media
and�Entertainment�(M&E)�industry�may�get�impacted�upon
adoption�of�IFRS.�IFRS�is�likely�to�affect�most�companies,
not�only�those�from�the�M&E�industry,�on�various�topics
such�as�accounting�for�business�combinations,�financial
instruments�and�derivatives,�share-based�payments�etc.�In
this�publication,�we�have�discussed�how�adoption�of�IFRS
may�impact�the�area�of�“revenue�recognition”�for�entities
within�the�M&E�industry�especially�transactions�involving
barter�transactions,�multiple-element�deliverables�and�right
of�return�provisions.�Each�of�these�concepts�has�been
explained�by�way�of�examples�below.�
Barter transactions
Barter�transactions�involving�advertising�services�are
commonly�entered�into�by�entities�within�the�M&E�industry.
IFRS�could�have�a�significant�impact�on�the�accounting�and
reporting�of�such�transactions�in�the�financial�statements.�
A�barter�transaction�involving�advertising�services�occurs
when�two�unrelated�entities�transact,�under�which�one
entity�provides�advertising�services�and�in�return�receives
advertising�services�from�the�other�entity.�These�advertising
1�SEC�Release�No.�33-8982,�Roadmap�for�the�Potential�Use�of�Financial�Statements�Prepared�in�Accordance�with�International�Financial�Reporting�Standards�byU.S.�Issuers,�available�at�www.sec.gov.2�Concept�paper�on�convergence�with�IFRSs�in�India,�available�at�icai.org
services�may�consist�of�publishing�advertisements�in
newspapers�or�magazines,�broadcasting�commercials�on
television�or�radio,�displaying�advertisements�on�websites�or
advertising�through�other�media.�In�most�cases,�no�payment
is�made�between�the�two�entities�exchanging�services.�
Under�IFRS,�revenue�from�barter�transactions�is�to�be
recognized�in�the�financial�statements,�provided�the
services�exchanged�are�dissimilar�and�the�amount�of
revenue�can�be�reliably�measured3.�
IFRS�does�not�provide�a�definition�of�similar�or�dissimilar
transactions.�As�an�example,�transactions�involving
exchange�of�advertising�services�for�supply�of�goods�would
be�considered�dissimilar.�By�contrast,�transactions�involving
exchange�of�advertising�services�in�similar�media�do�not
result�in�revenue�recognition�under�IFRS.�In�this�regard,
media�may�be�considered�to�be�similar,�if�they�share�some
of�the�characteristics�such�as�the�target�group,�format�or
position�and�size�of�the�advertisement,�frequency�and�timing
with�which�the�advertisement�is�broadcast/placed.�
With�respect�to�the�second�criteria,�revenue�from�the
exchange�of�advertising�services�may�only�be�measured
reliably�by�the�advertising�service�provider�at�the�fair�value
of�its�own�advertising�service,�and�not�at�the�fair�value�of
the�advertising�service�received.�As�a�benchmark�for
measuring�fair�value,�the�advertising�service�provider�may
only�use�other�advertising�transactions�that�are�non-barter
transactions,�involve�advertising�services�similar�to�those�in
the�barter�transaction,�occur�frequently,�involve�payment�of
consideration�and�do�not�involve�the�same�counterparty�as
the�one�in�the�barter�transaction�in�question.
The�above�can�be�explained�by�way�of�the�following
example:�
• Publisher�X�provides�Television�Broadcaster�Y�with
advertising�space�in�its�magazine.�In�return,�Y�broadcasts
X’s�television�commercials�on�its�channel.�No�payments
are�made�between�the�two�counterparties.�The�fair�value
of�the�advertising�service�provided�by�X�to�Y�is�USD
100,000
• As�the�magazine�and�the�television�channel�are�two
different�advertising�media,�the�advertising�services
exchanged�are�dissimilar.�X�therefore�recognizes�revenue
of�USD�100,000�for�the�advertising�service�it�has
provided.�This�amount�is�the�fair�value�of�the�advertising
service�provided�by�X�as�part�of�the�barter�transaction,
based�on�other�similar�advertising�services�provided�by
X.
Certain�related�financial�reporting�issues�may�also�arise�if
the�barter�transactions�cross�two�accounting�periods.�For
example,�if�at�the�end�of�a�reporting�period�one�party�to�the
barter�transaction�has�performed�only�part�of�its�services
and�the�other�party�has�delivered�all�the�services,�then�a
necessary�asset�or�liability�need�to�be�recorded�in�the
financial�statements.
Therefore,�before�adoption�of�IFRS,�entities�that�enter�into
barter�transactions�need�to�analyze�their�contracts�to
evaluate�financial�reporting�implications.�
3�International�Accounting�Standard�(IAS)�18,�Revenue,�paragraph�12�and�20;�Standing�Interpretations�Committee�(SIC)�31
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
172
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Multiple-element transactions
A�multiple-element�arrangement�is�an�arrangement�with�a�customer�under�which
different�deliverables�are�required�to�be�provided�to�and/or�performed�for�that
customer�for�a�composite�fee.�In�these�cases,�it�may�be�necessary�to�separate
this�single�arrangement�into�its�various�components,�with�different�revenue
allocations�for�each�component�to�reflect�the�substance�of�the�transaction.�
IFRS�does�not�contain�detailed�guidance�on�the�breakdown�of�multiple-element
arrangements.�However,�it�is�common�practice�to�follow�U.S.�GAAP�(EITF�00-21),
which�requires�an�arrangement�to�be�accounted�for�as�a�multiple-element
arrangement�if:
• It�has�stand-alone�value�to�the�customer,�which�is�the�case�if�it�is�sold�on�a
stand-alone�basis�by�any�vendor�or�the�customer�could�resell�it
• There�is�objective�and�reliable�evidence�of�the�fair�value�of�the�undelivered
item�and�
• Delivery�of�undelivered�elements�is�probable�and�substantially�under�the
control�of�the�vendor,�i.e.,�if�the�customer�has�a�general�right�to�return�the
delivered�elements.
In�the�media�industry,�publishers�often�sell�comprehensive�“information
solutions”�that�combine�print�and�online�products.�While�the�print�product�has�a
fixed�edition�status�at�the�time�of�sale,�the�online�product�includes�regular
updates�to�the�information�contained�in�the�print�product,�which�are�provided
over�the�Internet�for�a�certain�period�of�time�in�the�form�of�a�time-limited
subscription.�In�such�cases,�under�IFRS�when�the�customer�buys�a�combined
print�and�online�product,�the�arrangement�involving�the�two�deliverables�may
need�to�be�separated�for�revenue�recognition�and�the�total�purchase�price�may
need�to�be�allocated�among�the�individual�elements4.�
"Relative�fair�value�method"�is�one�of�the�methods�that�can�be�used�to�allocate
the�total�purchase�price�among�the�individual�elements.�Under�this�method,�the
portion�of�the�total�consideration�received�or�receivable�to�be�allocated�to�the
different�components�is�determined�by�the�ratio�of�the�fair�values�of�the
components�relative�to�each�other.�
The�above�can�be�explained�by�way�of�the�following�example:�
A�publisher�sells�books�containing�collections�of�accounting�text.�Customers�can
also�purchase�an�online�solution�from�the�publisher,�which�provides�regular�online
updates�to�the�relevant�accounting�text.�The�products�are�sold�at�the�following
prices:
4�IAS�18,�paragraph�13;�example�11�of�the�Appendix�to�IAS�18
173
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
• Bound�print�edition�as�a�single�purchase�USD�100�
• Three-year�online�subscription�as�a�single�purchase�USD�50�
• Bound�print�edition�including�three-year�online�subscription�USD�120
Let�us�assume�that�customer�X�purchases�the�bound�print�edition�including�the�3-
year�online�subscription�and�pays�USD�120.�Under�the�relative�fair�value�method,
two�thirds�of�the�total�consideration�of�USD�120�is�to�be�allocated�to�bound�print
edition�amounting�to�USD�80�and�one�third�to�the�3-year�online�subscription
amounting�to�USD�40.�
Right of return provisions
Another�area�of�revenue�recognition�that�needs�to�be�evaluated�includes
customer�contracts�having�right�of�return�provisions.�Publishers�generate
publication�revenue�by�selling�their�publications�through�wholesalers�and�retailers,
which�form�the�link�in�the�commercial�chain�between�the�publisher�and�the�end
customer.�Generally,�wholesalers�and�retailers�have�the�contractually�agreed�right
to�return�unsold�products�to�the�publisher�for�a�reimbursement�of�the�selling
price.�This�may�affect�music�and�print�products.
In�such�situations,�if�the�wholesaler�or�retailer�has�a�right�of�return,�and�there�is
uncertainty�as�to�the�probability�of�return.�Under�IFRS,�revenue�is�recognized
when�the�period�in�which�the�wholesaler�or�retailer�may�exercise�its�right�of
return�has�passed�or�the�publications�have�been�sold�to�end�customers5.
However,�revenue�may�be�recognized�at�the�time�of�delivery,�if�the�volume�of
expected�returns�can�be�reliably�estimated�(e.g.,�from�supportable�historical�data)
and�revenue�is�deferred�for�the�risks�based�on�the�expected�returns�ratio.�For
new�titles,�it�may�be�difficult�to�reliably�estimate�expected�returns�due�to�a�lack�of
historical�experience.�In�the�absence�of�a�reliable�estimate,�revenue�is�usually
recognized�for�new�titles�only�when�the�time�period�for�exercising�the�right�of
return�has�elapsed�or,�if�sooner,�when�the�products�have�been�sold�to�end
customers.
Upon�adoption�of�IFRS,�publishers�may�have�to�analyze�their�contracts�having
right�of�return�provisions�and�make�necessary�adjustments�in�the�financial
statements.�
In�conclusion,�while�we�have�only�covered�certain�broad�areas�of�‘revenue
recognition’�in�this�publication,�there�are�various�M&E�industry-specific
accounting�issues�that�companies�need�to�address�upon�of�adoption�of�IFRS�such
as�accounting�for�program�assets,�publishing�and�distributing�rights,�contract
productions�etc.�Companies�in�the�M&E�industry�should�start�thinking�about
adoption�of�IFRS�-�determining�a�strategy�and�project�management�plan,
knowledge�and�resource�requirements,�changes�to�information�technology
systems�and�processes�and�communication�to�internal�and�external�stakeholders.�
5�IAS�18,�paragraph�14;�example�2b�of�the�Appendix�to�IAS�18
174
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Building Robust And
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Scalable Internal Processes
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
10
Building Robust And ScalableInternal Processes
The�Media�and�Entertainment�(M&E)�companies�in�India
today�are�operating�in�a�much�more�turbulent�and�volatile
environment�as�compared�to�their�predecessors.�The
exponential�growth�witnessed�in�certain�media�sub-sectors
along�with�the�need�to�constantly�innovate�the�business
model,�to�create�a�perceivable�differentiator,�has�put
significant�pressure�on�the�internal�processes�of�these
companies.�Considerable�focus�has�been�put�on�the�top�line
and�valuations�by�Media�companies�in�recent�times�with
little�regard�to�profitability.�But�successful�players�realize�that
if�they�need�to�be�profitable�they�need�to�make�sure�that
not�only�is�their�strategy�well�articulated�but�also�that�they
have�robust�internal�processes�to�efficiently�execute�that
strategy.�In�addition�to�these�complexities,�corporate
governance�requirements�have�increased�manifold;�investors
and�rating�agencies�are�now�closely�looking�at�an
organization’s�risk�management�and�governance�practices.
Organizational�processes,�systems,�performance�metrics�as
well�as�procedures�have�to�be�aligned�to�the�Company’s
strategic�priorities.�Then�and�only�then�is�it�likely�that�a
company�could�be�able�to�successfully�face�the�risks,
challenges�and�opportunities�being�presented�by�the
external�environment.�Thus,�having�robust�internal
processes�is�now�a�pre-requisite�for�success.
To�be�specific,�at�each�stage�of�their�evolution,�M&E�players
must�ask�themselves�the�following�questions:
• Does�the�design�of�the�business�processes�established
by�my�company�support�its�strategic�objectives?
• Are�our�processes�robust�enough�to�support�scale�up�of
operations�and�improve�our�revenue�realizations?
• Has�the�management�developed�a�comprehensive
understanding�of�the�business�risks�that�could�prevent
my�company�from�achieving�its�strategic/business
process�objectives?
• Does�the�design�of�the�internal�processes�established�by
my�company�adequately�address�the�risks�identified?
• Has�the�management�derived�a�set�of�critical�success
factors�and�key�performance�indicators�that�monitor
objectives�and�management�of�the�risks?
• Do�we�have�a�good�oversight�function�to�review�whether
these�established�processes�are�working�the�way�they
should�be?
If�players�understand�and�prepare�for�these�questions�well
enough,�then�they�are�well�placed�to�leverage�their�internal
capabilities�to�take�on�the�external�and�internal�threats�and
opportunities.�Further,�they�can�also�gain�insights�into�those
areas�where�their�business�design�may�not�be�optimized,
and�thus,�are�able�to�identify�areas�where�their�company
may�be�able�to�improve�their�performance.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
An�organization�is�governed�by�the�interrelationships�of
many�systems,�functions�and�processes�that�contribute�to
its�success.�For�the�M&E�companies�in�particular,�there�are
certain�key�processes�that�are�an�imperative�for�their
progress�up�the�value�chain.
In�this�section,�KPMG�has�attempted�to�analyze�the�impact
of�the�external�environment�and�recent�trends�on�the
following�key�internal�processes�of�M&E�companies�as�well
as�identify�the�critical�success�factors�and�key�performance
indicators�for�managing�these�processes:
1. Content�Acquisition�and�Development�
2.Advertising�Sales
3.Distribution
Content Acquisition andDevelopment
Business Objectives
Content�remains�the�king,�especially�with�the�wide�variety
of�leisure�and�entertainment�choices�available�to�the
consumer.�Content�has�to�be�enriching�enough�to�attract
and�engage�the�viewer�and�a�rich�content�library�can�be�a
lucrative�long�term�revenue�source.�Increasing�number�of
players�across�M&E�sub�sectors,�and�the�resultant
competition�has�fuelled�the�demand�for�quality�content.�As�a
result,�the�cost�of�content�acquisition�and�development�has
also�been�rising�in�recent�times.�The�main�business
objectives�with�respect�to�content�acquisition�and
development�should�be�to:
• Offer�content�that�maximizes�consumption�(i.e.
viewership,�readership,�listenership�etc.)
• Maximize�return�on�content�production�and/or�acquisition
costs
• Maximize�the�content�library�valuation�by�creating
content�with�resale�potential�across�time,�mediums�and
geographies.
To�achieve�these�objectives,�players�have�to�build�in�certain
internal�capabilities�to�face�the�risks�and�uncertainties
arising�out�of�the�business�environment.
178
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
M&E�Industry:�Towards�effective�Content�Acquisition�and�Development
Sector Environmental Context Critical Success Factors Key Performance Indicators
TV • Rapid�growth�in�the�number�of�GECswhich�typically�obtain�originalprogramming�content�from�externalcontent�houses.�Consequently,expected�increase�in�contentacquisition�costs�for�broadcasters
• Increasing�demand�for�non-fictionprogramming�such�as�reality,�gameand�talent�shows
• Growing�opportunities�for�establishedplayers�to�syndicate�content�tosmaller�TV�houses�not�competing�inthe�same�genre�as�well�asinternational�players
• Increase�in�equity�barter�deals�in�lightof�the�decrease�in�advertisementspends�due�to�cost�reductionmeasures�by�corporates
• Hedging�against�the�risk�ofincrease�in�cost�of�content�bysigning�long�term�contracts�withcontent�houses
• Comprehensive�and�continuousmarket�research�to�keep�a�track�ofconsumer�preferences�for�content
• Modification�of�programmingdistribution�to�reflect�thesechanges
• Creating�alliances�to�share�contentcreated�over�time�so�as�tooptimize�returns,�contentacquisition�costs
• Clear�segregation�of�editorialdecision�making�fromAdvertisement-for�equity�barterdeals�to�maintain�independence�ofeditorial�content
• Rating�points�(TRPs)�for�individualprogrammes
• Viewership�share�of�channelwithin�its�category�
• Cost�of�programming�per�episode
• Percentage�of�projects�meetingproduction�budgets
• Return�on�contentdevelopment/acquisition�costs
• Hours�of�original�content�per�dayrelative�to�peers
• Value�of�programming�library
• Budget�vs.�actual�variations�inprogram�acquisition�anddevelopment�costs
• GRP�trend�analysis�for�programs
• Cost�per�GRP�of�content�acquired/developed
• Revenue�growth�from�contentsyndication
• Number�of�customers�for�contentsyndication
Film • Increasing�audience�acceptance�ofcross�over�content�and�small�budget,multiplex�movies
• Emergence�of�studio�model�leadingto�increase�in�content�inventory�forproduction�houses
• Increasing�demand�of�Indian�filmcontent�for�overseas�market
• Increase�in�number�of�multiplexesfuelling�demand�for�content
• Enhanced�use�of�digital�technology�incinema�plus�the�race�to�lock�in�talentleading�to�an�increase�in�productionbudgets
• Ensuring�a�balanced�portfolio�ofbig�as�well�as�small�budget�filmsto�mitigate�risks�as�well�asmaximize�revenues
• Proper�valuation�as�well�asmonetization�of�content�library
• Production�of�content�that�istechnically�compatible�as�well�asuniversal�enough�to�cater�to�thediscerning�overseas�audience
• Working�on�multiple�filmssimultaneously�withoutcompromising�on�the�quality�ofcontent
• Efficient�management�and�controlof�film�production�processes�toprevent�time�and�cost�overruns
• Number�of�films�in�content�library
• Value�of�content�library
• Percentage�of�projects�meetingproduction�budgets
• Return�on�content�development
• Number�of�films�released�in�theyear
• Size�of�content�pipeline�relative�topeers
• Budget�vs.�actual�variations�inproduction�costs�and�timelines
179
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Sector Environmental Context Critical Success Factors Key Performance Indicators
Print • Increasing�significance�of�nichecontent�with�growth�in�the�numberof�specialty�magazines�as�well�asnewspaper�supplements
• Growing�preference�for�locallyrelevant�content
• Change�in�business�model�aimed�atde-risking�Advertisement�salesrevenue�and�creating�newerplatforms�such�as�internet,�radio�etc.
• Spiraling�increase�in�newsprint�costsresulting�in�pressure�on�margins
• Increasing�competition�from�newschannels
• Increase�in�equity�barter�deals�in�lightof�decrease�in�Advertisement�spendsdue�to�cost�reduction�measures�bycorporates
•�Conducting�continuous�marketresearch�to�keep�a�track�ofconsumer�preferences
• Proper�consumer�segmentationand�matching�these�segments�totheir�content�preferences
• Ensuring�a�judicious�mix�ofdifferent�languages�and�genreswhile�deciding�upon�productportfolio
• Increasing�local�supplements�tocater�to�specific�local�contentneeds
• Effectively�leveraging�existingcontent�for�newer�businessventures
• Creating�alliances�to�sharecontent�created�over�time�so�as�tooptimize�returns�on�contentacquisition�costs
• Clear�segregation�of�editorial�fromAdvertisement-for�equity�barterdeals�to�maintain�independence�ofcontent
• Average�Issue�Readership�
• Total�number�of�copies�sold(Circulation)
• Average�Realization�per�copy
• Market�share�within�its�category
• Pagination�vs.�Compete
• Revenue�growth�from�contentsyndication
• Number�of�customers�for�contentsyndication
Radio • Over�250�channels�expected�to�beoperational�by�end�of�20081
• Over�700�new�licenses�expected�tobe�issued�under�phase�32
• Very�little�differentiation�among�theradio�stations�with�all�of�themfocused�on�mass�music�segment�
• Excessive�fragmentation�oflistenership�specially�in�metrosresulting�in�lower�Advertisementrates�for�each�player
• Targeting�specific�consumersegments�and�differentiatingcontent�accordingly
• Differentiating�through�focus�onparticular�music�genres
• Differentiating�through�thestation’s�RJs�and�non�musicprogramming
• Targeting�geographies�whereradio�penetration�is�lower�ratherthan�focusing�on�metros�only
• Percentage�share�of�Listenership
• Return�on�music�royalty�fee�paid
• Return�on�number�of�RJsemployed
• Saturation�of�interest�amongconsumers�with�the�same�musicgenres�across�all�stations
Music • High�acquisition�costs�for�film�musicrights
• Not�all�movies�are�box�office�hits.�Asmusic�sales�of�hit�films�generallyearn�a�majority�of�the�profits,therefore,�high�risks�are�involved�forthe�music�distributor
• Film�studios�opening�their�own�musicdistribution�arms�thereby�limiting�thecontent�available�for�pure�musicplayers
• Conducting�continuous�marketresearch�to�keep�a�track�ofconsumer�preferences
• Bargaining�for�more�rational�pricesfor�music�rights
• Careful�evaluation�of�future�sellingprospects�before�buying�rights
• Return�on�total�music�acquisitioncosts
• Percentage�of�albums/movies�forwhich�music�rights�are�acquiredamong�top�50�music�albums�sold
• Value�of�content�library
• Size�of�content�pipeline�relative�topeers
1�”FM�Radio,�music�industry�out�of�tune�on�royalty”,�Rediffnews,�December�20082�”FM�Phase�III�Policy�in�offing�to�add780�radio�channels�in�another�275�cities,�says�secretary�I&B”,�ASSOCHAM,�November�2008
180
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Managing Content Acquisition and Development risks - Asummary
Most�of�the�anticipated�risks�can�be�managed�by�embedding�the�following
control�processes�in�the�operations:
• Conducting�market�research�to�ascertain�consumer�preferences�at�regular
intervals�
• Undertaking�competitor�research�surveys�and�monitoring�their�product
offerings�
• Regularly�tracking�consumer�acceptance�(viewership,�listenership,�readership
etc.)�and�taking�corrective�action�as�per�the�feedback�
• Maintaining�proper�schedules�and�plans�and�monitoring�deviations�from�the
actual�standards�
• Implementing�procedures�to�help�ensure�that�intellectual�properties�are
protected.�
Therefore�to�conclude,�anticipating�future�content�preferences�and�proactive
production�of�such�properties,�rather�than�reacting�to�market�trends,�may�help
players�emerge�as�leaders�in�the�market�space.�Developing�standards,
procedures�and�resource�requirements�for�product�design,�testing�and�production
and�monitoring�adherence�to�the�development�process�and�methodologies�may
also�help�in�ensuring�the�desired�production�quality�and�efficiency.
Sector Environmental Context Critical Success Factors Key Performance Indicators
Animation • Primary�focus�on�the�low�valueproduction�part�of�the�animation�valuechain�which�is�outsourced�to�India
• Very�few�in�house�productionsindulge�in�genres�other�thanmythology�(which�tends�to�have�onlylocal�appeal)�
• Lack�of�creative�talent�required�for�thehigh�value�conceptualization,�pre-production�and�post-production�partsof�the�value�chain
• Conducting�continuous�marketresearch�to�keep�a�track�ofconsumer�preferences
• Focus�on�complete�in�houseproductions
• Focus�on�creating�global�propertieswhich�are�region,�religion�&�cultureneutral�
• Creating�strategic�alliances�toacquire�the�technical�skills�requiredto�produce�quality�animationcontent
• Size�of�content�library
• Value�of�content�library
• Percentage�of�projects�meetingproduction�budgets
• Return�on�content�development
• Number�of�films�released�in�theyear
• Size�of�content�pipeline�relative�topeers
• Budget�vs.�actual�variations�inproduction�costs�and�timelines
181
Advertising Sales
Business Objectives
The�emergence�of�multiple�media�platforms�and�the�consequent�customer
fragmentation,�advertisers�have�become�more�demanding�and�players�are�being
required�to�demonstrate�value/results.�As�a�result,�the�targets�and�goals
pertaining�to�this�function�have�become�steeper�than�before.�The�main�objectives
of�the�business�with�respect�to�advertising�sales�are:
• Maximize�price�per�spot�and�revenue�per�unit
(viewership/listenership/readership)
• Optimize�Advertisement-program/Advertisement-edit�ratio
• Maximize�Advertisement�inventory�utilization
• Enhance�the�advertiser’s�perception�of�product�value.
To�achieve�these�objectives,�players�have�to�build�in�certain�internal�capabilities�to
face�the�risks�and�uncertainties�arising�out�of�the�business�environment.
M&E�Industry:�Towards�an�efficient�and�effective�Advertisement�Sales�process
Sector Environmental Context Critical Success Factors Key Performance Indicators
TV • More�number�of�channels�leading�toincreasing�clutter�and�audiencefragmentation
• Increase�in�number�of�regional�andniche�channels�that�offer�more�costeffective�and�better�targetingmediums�to�advertisers
• Stagnant/declining�Advertisementrates�due�to�audience�fragmentation
• Increasing�competition�fromemerging�sectors�like�radio�andinternet
• Increase�in�equity�barter�deals�in�lightof�decrease�in�Advertisement�spendsdue�to�cost�reduction�measures�bycorporates
• Dynamic�Pricing-�Dynamicallylinking�spot�pricing�to�TRPs
• Creating�appropriate�discountingpolicy�for�network�sales
• Mapping�advertisers�to�increasepenetration
• Dynamic�monitoring�of�sales�andavailable�inventory�spots
• Coordination�as�well�as�integrationof�systems�betweenAdvertisement�sales�andscheduling�teams
• Key�account�management�forlarge�advertisers
• Identification�and�negotiation�ofequity�barters�to�utilize�unusedAdvertisement�inventory
• Advertisement�inventoryutilization
• Advertisement�revenues�perrating�point�for�individualprogrammes�as�well�as�for�thewhole�channel
• Ratio�of�advertisement�units�soldat�original�price�to�those�sold�atdiscount
• Ratio�of�paid�to�free�advertisingslots
• Average�price�per�spot�for�primetime�and�non-prime�time�relativeto�peers
• Average�Discounting�rate
• Percentage�of�old�accountsretained
• Number�of�new�advertisers
• Value�and�number�ofAdvertisement�for�equity�barterdeals
• IRR�on�Advertisement�for�Equitybarter�deals
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
182
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Sector Environmental Context Critical Success Factors Key Performance Indicators
Print • Increase�in�competition�leading�to�decline�incover�prices,�leading�to�enhanceddependence�on�advertising�revenues
• Declining�readership�figures�leading�toincrease�in�bargaining�power�of�advertisers
• Rise�in�the�number�of�specialty�magazinesand�newspaper�supplements,�as�well�asregional�press�offer�more�cost�effective�andbetter�targeting�mediums�to�advertisers
• Indiscriminate�increase�in�pagination�withoutcorresponding�in�Advertisement�volumes.Now�resulting�in�lower�pagination�to�cutspiraling�newsprint�costs
• Increasing�competition�from�emergingsectors�like�radio�and�internet
• Increase�in�equity�barter�deals�in�light�ofdecrease�in�Advertisement�spends�due�tocost�reduction�measures�by�corporates
• Optimizing�pagination
• Optimizing�the�Advertisement-editratio
• Increasing�the�proportion�of�colorinventory�sold
• Appropriate�advertising�mixbetween�display�ads,�classifieds,tenders�and�supplements
• Offering�optimized�discount�ratesto�advertisers�for�buying�spotsamong�the�diverse�portfolioofferings
• Mapping�different�categories�ofadvertisers�to�the�differentportfolio�offerings�
• Key�account�management�forlarge�advertisers
• Identification�and�negotiation�ofequity�barters�to�utilize�unusedAdvertisement�inventory
• Advertisement�Edit�Ratio
• Total�Advertisement�spacesold�commercially
• Proportion�of�color�inventorysold
• Average�price�per�insert
• Advertisement�inventoryutilization
• Paid�to�free�inserts
• Percentage�of�old�accountsretained
• Number�of�new�advertisers
• Ratio�of�Advertisement�unitssold�at�original�price�to�thosesold�at�discount
• Average�Discounting�Rate
• Value�and�number�ofAdvertisement�for�equitybarter�deals
• IRR�on�Advertisement�forEquity�barter�deals
Radio • Radio�Advertisement�spends�in�India�stillaccount�for�only�5�percent�of�the�totalAdvertisement�pie�versus�about�8�percentglobally
• Increase�in�number�of�radio�stations�has�ledto�fragmentation�of�listenership�and�hencestagnation/decline�of�Advertisement�rates�forindividual�stations
• Local�to�National�advertisement�ratio�is�25:75in�Indian�radio�versus�75:25�globally
• Lack�of�content�differentiation�due�tocontinued�regulatory�bottlenecks�can�lead�tostagnation�in�listenership�and�thereforeAdvertisement�revenues
• Dynamic�Pricing-�Dynamicallylinking�spot�pricing�to�listenershipfigures
• Creating�appropriate�discountingpolicy�for�network�sales
• Targeting�local�advertisers�andensuring�optimized�mix�of�nationalto�local�advertising
• Mapping�advertisers�to�helpensure�salience�with�programs
• Excellent�coordination�as�well�assystems�integration�betweenAdvertisement�sales�andscheduling�teams
• Key�account�management�forlarge�advertisers
• Advertisement�inventoryutilization
• Advertisement�revenues�perunit�listenership
• Ratio�of�Advertisement�unitssold�at�discount�to�those�soldat�original�price�
• Percentage�of�old�accountsretained
• Number�of�new�advertisers
Outdoor • Increased�PILs�and�consequent�ban�onhoardings�in�major�cities�putting�advertisersunder�pressure�since�billboards�is�the�largestsegment�in�outdoor�media
• Rising�consumerism�leading�to�increasingsignificance�of�ambient�media�and�digitalformats
• Absence�of�a�scientific�metric�for�consumerresponse�measurement�limits�the�advertisingpie�in�this�medium
• Cinema�advertising�generating�increasinginterest�with�advertisers�but�is�still�in�anascent�stage
• Optimize�mix�of�advertisinginventory�across�varioussegments-�Billboards,�StreetFurniture,�Transit�as�well�residualmedia
• Designing�differentiating�ads�fordigital�and�ambient�media
• Developing�in�house�capabilitiesfor�designing�as�well�as�executionof�creatives
• Advertisement�inventoryutilization
• Percentage�of�old�accountsretained
• Number�of�new�advertisers
183
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Managing Advertising Sales risks - A summary
Most�of�the�anticipated�risks�can�be�managed�by�embedding�the�followingcontrol�processes�in�the�operations:
• Mapping�advertisers�across�to�increase�the�customer�base
• Adopting�timely�and�appropriate�measures�for�tracking�advertiser�feedback�andtaking�action�on�the�same
• Maintaining�up�to�date�inventory�status�reports�as�well�as�monitoring�sales�andprofitability�across�various�channels�and�markets
• Establishing�standard�processes�for�Advertisement�scheduling,�billing�andreceivables.�
Therefore,�to�conclude,�adopting�dynamic�pricing,�de-risking�the�business�modelby�relying�on�advertising�sales�from�more�than�one�medium�and�mappingadvertisers�may�help�players�emerge�as�leaders�in�the�market�space.�Developingstandards,�procedures�and�resource�requirements�for�Advertisement�Scheduling,Billing�and�Collections�can�also�help�in�ensuring�the�desired�efficiency.
Distribution
Business Objectives
Building�up�an�efficient�content�inventory�and�optimizing�advertisement�sales�are
of�no�use�unless�content�is�delivered�in�a�timely�manner�to�the�end�consumer.�An
efficient�distribution�process�minimizes�the�time�to�market�and�helps�ensure�that
this�objective�of�the�business�is�met.�The�primary�business�objectives�for�building
a�distribution�function�are�mainly�the�following:
• Maximize�total�reach
• Increase�ARPUs�through�ancillary�revenue�streams
• Maximize�utilization�of�content�inventory
• Facilitate�content�monetization�across�alternate�platforms.
Creating�efficient�and�effective�distribution�capabilities�involves�certain�challenges
and�risks�for�the�industry�players�as�enumerated�below.
184
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
M&E�Industry:�Towards�a�more�effective�Distribution�Process
Sector Environmental Context Critical Success Factors Key Performance Indicators
TV For Broadcasters
• Increasing�penetration�of�digital�distributionplatforms�like�CAS,DTH�and�IPTV�as�well�ascable�digitization
• Increasing�number�of�channels�leading�tohigh�carriage�and�placement�fees�forchannels(even�for�digital�platforms)
• Issues�of�revenue�leakages�still�prevail�dueto�under�reporting�by�cable�operators
• Opportunity�to�build�in�additional�revenuestreams�by�providing�value�added�servicesthrough�digital�distribution�channels
For Distributors
• Long�term�viability�of�businesses�may�beuncertain�in�the�face�of�sustained�losses�dueto�low�price�points
• Fickle�consumer�loyalties�due�to�lack�ofcontent�exclusivity�amongst�competingdigital�distribution�platforms�(and�no�otherpoint�of�differentiation�as�well)�
• Inability�to�increase�ARPUs�through�add�onservices�because�of�low�uptake�of�suchservices�among�Indian�consumers
For Broadcasters
• Efficient�negotiation�of�distributioncontracts�and�ensuring�desiredplacements
• Enhancing�bargaining�power�withdistribution�by�adding�more�channelsand�thus�strengthening�channelbouquet
• Monitoring�of�cable�carriage�contractsto�help�ensure�compliance�with�agreedterms
• Assessing�benefit�of�paying�excessivecable�carriage�with�respect�toincreased�reach�and�resulting�increasein�Advertisement�Sales
For Distributors
• Maintaining�competitive�price�points�–this�is�critical�in�strongly�priceconscious�market�like�India
• Strong�marketing�and�aggressiveselling�of�add�on�services�like�video�ondemand�by�digital�distribution�players
For Broadcasters
• Percentage�of�total�C&S�viewingpopulation�reached
• Percentage�of�target�consumersegments�population�reached
• Carriage�costs�negotiated�withdistributors�relative�to�peers
For Distributors
• Net�Customer�additions�perquarter
• Customer�churn
• Market�share
• Average�customer�acquisitioncost
• ARPU-�Average�Revenue�peruser
• ARPU�through�value�addedservices
• Average�subsidy�given�per�setup�box
Film • Digitization�of�cinema�facilitating�widerrelease�of�films
• Growing�revenues�through�C&S�distributiondue�to�increase�in�number�of�channels�
• Increasing�penetration�of�home�video�marketdue�to�lower�price�points�in�the�sell�throughsegment
• Digital�streaming�and�download�of�moviesthrough�the�internet
• Despite�growing�popularity�of�Indian�filmsoverseas,�contribution�of�overseascollections�to�the�total�revenues�of�filmindustry�is�below�10�percent
• Piracy�issues�continue�to�prevail
• Making�investments�in�digitaltechnology�and�negotiation�ofagreements�with�digital�screenexhibitors�as�well�as�multiplex�owners
• Negotiation�of�agreements�withsatellite�channels;�dynamic�linking�ofrevenues�with�the�number�ofscreenings
• Monetizing�content�library�throughalternate�distribution�platforms�likehome�video�and�internet
• Aggressive�marketing�initiatives�as�wellas�tie�up�with�agents�to�facilitate�widerrelease�of�films�in�overseas�markets
• Proactive�litigation�against�unauthorizeduse�of�content�
• Percentage�of�Total�Populationreached
• Rate�of�commission�paid�todistributors�in�relation�to�peers�
185
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Sector Environmental Context Critical Success Factors Key Performance Indicators
Print • Increase�in�number�of�newspapersand�magazines�leading�to�increase�inbargaining�power�of�the�distributorsand�vendors
• Emergence�of�electronic�and�mobileversions�of�newspapers�andmagazines
• Inability�to�increase�cover�prices�dueto�competition�coupled�withincreasing�bargaining�power�ofvendors�putting�pressure�on�marginsof�companies
• Negotiation�of�agreements�withdistributors�and�vendors
• Enhancing�bargaining�power�bystrengthening�product�portfolio
• Monetization�avenues�for�alternatedistribution,�especially�in�case�ofclassifieds�and�other�display�ads
• Agreements�and�policies�regardingunsold�inventory
• Percentage�of�total�literatepopulation�reached
• Percentage�of�target�consumersegments�population�reached
• Rate�of�Commission�negotiatedpaid�to�distributors�or�vendorsrelative�to�peers
• Unsolds�vs.�Compete
Music • Continuous�decline�in�sales�ofphysical�units
• Growing�importance�of�alternatedistribution�platforms;�more�than�halfthe�revenues�of�the�sector�is�fromlicensing�revenues�–�from�FM,�mobilemusic�sales,�online�music�sales�etc.
• Piracy�is�still�rampant�in�the�sector;the�sector�loses�more�than�60percent�of�its�revenues�through�piracy
• Film�producers�introducing�their�ownmusic�labels�and�retaining�the�musicrights�with�themselves
• Bargaining�for�better�revenueshare�in�case�of�digital�music,especially�in�case�of�MobileMusic(currently�operators�takeabout�70�percent�of�revenuesgenerated)
• Ensuring�content�availability�acrossall�major�third�party�internetplatforms�such�as�iTunes
• Proactively�pursuing�legislationagainst�illegitimate�online�musicdistribution�platforms�
• Total�number�of�distributioncenters�where�physical�units�ofthe�company�is�being�sold
• Percentage�share�of�online�musicdownloads
• Percentage�share�of�mobile�musicdownloads
Managing Distribution risks - A summary
Most�of�the�anticipated�risks�can�be�managed�by�embedding�the�following
control�processes�in�the�operations:
• Effective�relationship�management�with�distribution�partners
• Monitoring�and�evaluating�technological�changes�and�new�distribution
opportunities
• Maintaining�sufficient�infrastructure�back�up�and�internal�check�points�to�plug
last�mile�revenue�leakages.�
Therefore,�to�conclude,�adopting�managing�relationships�with�distribution�partners
and�anticipating�technological�changes�may�help�players�emerge�as�leaders�in�the
market�space.�Developing�standards,�procedures�and�resource�requirements�for
contracting,�paying�and�monitoring�distribution�costs�may�also�help�in�ensuring
the�desired�efficiency.
186
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Internal Audit – A Catalyst for Change
Media�&�Entertainment�companies�are�increasingly�waking�up�to�the�potential�of
their�Internal�Audit�functions�to�strengthen�their�internal�processes�as�well�as
monitor�compliance�with�the�same.�A�‘real’�Internal�Audit�function�is�well
positioned�to�not�just�to�share�industry�best�practices�with�process�owners�but
also�link�the�strategic�business�risks�with�‘on�the�ground’�internal�controls.�The
following�questions�can�help�you�assess�if�your�Internal�Audit�function�is�geared
to�meet�the�today’s�challenges:
• Does�the�Internal�Audit�function�have�a�charter�outlining�its�authority�and
responsibility�that�has�been�approved�by�the�Audit�Committee�of�the�Board?�
• Is�your�Internal�Audit�plan�linked�to�the�risks�facing�your�business�and�has�it
been�approved�by�the�Audit�Committee�of�the�Board?
• Do�your�Internal�Audit�personnel�possess�adequate�industry�and�audit
experience?
• Is�the�Internal�Audit�work�focused�on�improving�business�process�and�IT
system�controls�instead�of�merely�verifying�transactions?
• Does�your�Internal�Audit�function�have�the�independence�to�report�its�results
to�the�Audit�Committee�of�the�Board�and�the�Executive�Management?
• Do�you�track�whether�the�recommendations�made�by�your�Internal�Audit�team
have�been�implemented?�
Media�companies�have�a�long�way�to�go�to�implement�strong�and�scalable
processes.�However,�strengthening�their�Internal�Audit�function�could�be�start�in
the�right�direction.�As�the�industry�grows,�serious�players�are�likely�to�realize�that
focusing�on�processes�is�no�longer�a�luxury�but�a�necessity
“There are many challenges facing the fledgling radio sector. Its biggest challenge is to trim itscost structure and bring viability to the business. The biggest cost elements are music royalties.Radio companies must seriously consider moving away from music formats. Secondly, radio coshave to protect cash - by working together with each other on credit control in the market.Thirdly, radio players need to band together in promoting the medium - there are manyadvantages of radio that should help it increase its share of advertising but this will not happenuntil they band together. If radio companies do this, they will actually emerge a stronger bunch.It is a well known fact that in economic slow-downs, radio does well. Clients are bound tosubstitute costly media like TV and print with a more cost-effective medium like radio.”- Prashant Panday, CEO, Entertainment Network India Limted
187
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
People Management in Media andEntertainment Industry
In�a�knowledge�economy,�it�is�people,�not�capital�or�market,�who�make�all�the
difference.�As�talent�occupies�center�stage�in�the�Indian�workplace,�managing
and�retaining�manpower�is�becoming�crucial�to�an�organization’s�success.�To
achieve�this,�companies�across�sectors�are�focusing�on�some�of�the�more�critical
HR�practices.�
Riding�on�the�economic�growth�and�rising�income�levels�the�Indian�Media�and
Entertainment�(M&E)�industry�too�experienced�a�high�growth�phase.�It�was
envisaged�to�emerge�as�one�of�the�fastest�growing�industries�and�possibly,
among�the�larger�employment�generators�of�the�country.�The�role�of�HR�within
this�sector�has�also�undergone�a�major�change.�The�siloed�HR�department,
focusing�predominantly�on�basic�administrative,�record-keeping�and�transactional
duties,�is�a�thing�of�the�past.�The�industry�has�already�opened�doors�to�trained
HR�professionals�from�outside�the�industry.�Changed�scenario�in�the�global
economic�front�has�also�changed�business�priorities�for�the�M&E�sector.�These
changes�taking�place�within�the�sector�have�given�rise�to�some�key�imperatives
for�HR�to�act�upon.
Increasing Cost Pressures
With�the�media�industry�too�experiencing�the�effects�of�downturn,�there�is�an
increasing�pressure�on�keeping�the�costs�down�while�simultaneously�retaining
its�key�talent.�Companies�are�acutely�feeling�the�strain�of�training,�managing�and
retaining�good�staff.
There�may�be�a�need�to�take�some�hard�decisions,�during�which�HR�may�have�to
work�alongside�the�CEO�to�implement�these�measures�without�hurting�the
employee�morale.�These�measures�need�to�be�implemented�with�utmost
sensitivity�and�with�elaborate�planning.�HR�needs�to�constantly�communicate�to
the�employees�in�a�forthright�and�transparent�manner.�
With�the�business�priorities�shifting�to�cost�optimization�and�working�capital
management,�HR�has�to�examine�its�own�cost�structure�and�avenues�for�cutting
costs�without�sacrificing�effectiveness.�It�needs�to�identify�the�talent�and�roles
which�contribute�and�create�the�maximum�organizational�value�and�focus�its
limited�funds�towards�them.�
188
Formalizing Organization Structure and Systems
The�Indian�film�industry,�with�over�3�billion�admissions�per�annum,�is�the�largest
in�the�world,�in�terms�of�number�of�films�produced�per�year.�The�opening�of�the
film�industry�to�foreign�investment�coupled�with�the�granting�of�industry�status
to�this�segment�has�had�a�favorable�impact,�leading�to�many�global�production
units�entering�the�country.�
Today,�every�function�and�activity�related�to�the�Indian�film�business�is�becoming
well�defined�and�systematized,�be�it�production,�film�retail�infrastructure,
financing,�marketing�or�distribution.�As�film�production,�distribution�and�exhibition
companies�are�being�listed�on�stock�markets;�an�increasing�number�of
companies�are�seriously�looking�at�creating�corporate�structures.�HR�needs�to
contribute�to�this�business�need�of�consolidation�of�operations�by�instituting�a
formal�and�efficient�organization�structure�by�aligning�it�to�the�changes�in�the
business�model�and�assigning�responsibilities�to�the�critical�positions.
Decentralizing�decision�making�to�bring�speed�and�efficiency�and�implementing
performance�management�systems�to�measure�the�value�delivered�are�the
needs�of�the�hour.
Changed focus of training
Many�companies�in�the�M&E�sector�have�in�the�past,�focused�on�continuous
learning�and�development�initiatives�to�address�issues�of�talent�scarcity.�Attrition
was�another�important�reason�why�companies�looked�at�training�their�employees.
As�the�economic�slowdown�continues,�attrition�and�skill�gap�are�no�longer�issues.
Many�companies�have�reacted�with�a�halt�on�these�initiatives�and�have�replaced
them�with�others�like�smaller�increments�and�hiring�freeze.�For�many
organizations�the�hiring�freeze�is�total,�others�have�hiring�for�replacement
vacancies�or�for�certain�positions�based�on�business�needs.�
Training�however�is�closely�linked�to�the�overall�HR�strategy�of�the�company.�With
new�employees�taking�over�roles,�even�if�they�are�limited�in�number,�it�becomes
important�to�equip�them�with�all�the�requisite�knowledge�and�skills�to�make�them
productive�at�the�earliest�possible�time.�
Earlier,�corporate�training�was�undertaken�by�many�medium�to�large-sized
companies�to�hone�their�employees�in�various�areas�such�as�management�skills,
leadership,�communication,�change�management,�negotiation,�customer�service,
conflict,�time�management,�strategic�planning,�stress�management,�attitude�and
delegation.�Now�the�focus�of�training�needs�to�shift�towards�increasing
productivity�imparted�through�internal�training.�
The�key�issue�that�most�M&E�companies�should�continue�to�address�is�the�need
for�more�middle�managers.�Corporate�training�in�such�companies�needs�to�aim�at
developing�middle�managers�and�creating�a�future�leadership�pipeline.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
189
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Ensuring talent pipeline for the future beyond the slowdown
With�the�advent�of�new�sectors�like�internet,�gaming�and�animation;�and�the
established�sectors�like�film,�television�and�radio�growing�at�a�fast�pace�talent
requirement�is�likely�to�grow�manifold�in�a�short�period.�For�instance,�the
animation�industry�is�expected�to�double�its�revenues�to�nearly�USD�1.5�billion�by
2010.�The�manpower�demand�in�the�sector�has�grown�multifold�in�the�last�two
years,�though�has�ebbed�recently.�Not�withstanding�the�current�slowdown,�which
perhaps�has�blunted�the�focus�on�talent�acquisition,�the�industry�may�certainly
need�many�more�trained�hands.�
The�challenge�for�the�industry�is�to�build�a�pipeline�of�talent.�Specifically,�it�is�the
middle�and�senior�level�talent,�which�is�difficult�to�locate.�This�has�led�to�a�trend
of�recruiting�people�from�outside�the�industry.�It�is�increasingly�seen�in�the
marketing,�sales�and�administration�roles�in�media�companies.�Poaching�from
competition�is�an�easy�path�for�recruitment,�however�with�limited�choice.�In�the
digital�business,�as�systems�grow�bigger�and�more�complex,�the�need�for�“highly
skilled�super�specialized�techies,�product�developers�and�designers”�is�going�to
grow�with�further�growth�of�the�industry.
From�a�larger�perspective,�there�is�also�a�need�for�creating�world�class
universities�and�institutions�which�can�cater�to�the�demand�created�in�the
industry.�These�institutions�can�help�in�creating�compact�module�courses�with�a
good�combination�of�academic�learning�and�practical�orientation/exposure.
The�M&E�industry�needs�to�take�cue�from�other�industries�like�IT�&�ITES�in�laying
structured�procedures�for�management�of�its�talent.�The�HR�function�also�needs
to�expand�much�more�with�specialists�in�place�to�design,�implement�and�manage
scientific�HR�systems�in�the�organization.�HR�also�needs�to�put�HR�policies�in
place�on�the�lines�of�other�evolved�industries�and�that�meet�the�global�standards
of�working.�Deployment�of�HR�policies�and�structured�procedures�in�media
companies�are�likely�to�help�ensure�transparency�and�fairness�in�the�work�culture,
which�go�a�long�way�in�attracting�and�retaining�talent.
As�digital�media�experiences�further�growth,�new�business�models�and�ideas�get
rolled�out;�people�with�potential�join�the�fray�as�entrepreneurs�thus�creating
niches�and�skill-sets�that�are�more�specialized.�
190
However,�it�is�to�be�recognized�that�the�opportunities�earlier�regarded�as�mere
hobbies�are�becoming�full�time�career�options.�Right�from�radio�jockeys,�actors,
musicians,�dancers,�journalists,�video�technology�creators�and�managers�to
accounts�planning,�cameramen,�editors,�soundmen�and�public�relations
managers,�this�sector�offers�career�opportunities�for�all,�challenge�being�to
maintain�and�nurture�these�skill-sets;�therefore,�to�build�and�grow�a�talent�pool,
we�need�greater�coordination�with�academic�institutions.�Further,�Media�and
Entertainment�sector�offers�various�high�profile�careers�that�are�in�constant�public
glare�and�can�help�to�earn�handsome�incomes.�
The�need�is�to�create�a�mindset�amongst�the�parents�to�encourage�their�children
to�look�beyond�the�traditional�disciplines�like�medicine,�engineering�and
management,�and�foray�into�this�sector�that�can�cater�to�the�youngsters’�skill
sets�and�competencies.�The�prospective�employees�have�to�deduce�just�what
can�open�the�doors�of�opportunity�for�them.�Some�of�the�jobs�related�to�M�&�E
industry�involve�information�technology,�communication�engineering,�event
management,�production�management,�ideation,�celebrity�management,�financial
management,�brand�management,�business�development�and�consulting.�Care,
however,�should�be�taken�in�right�skilling,�or�matching�jobs�with�a�particular�level
of�training�rather�than�hiring�over�skilled�workers.
Continue with the long-term strategies of “Building anemployer brand”
Creating�an�employer�brand�is�one�of�the�many�long-term�strategies�that
organizations�across�industries�employ.�When�most�employment�strategies�are
short�term�and�reactive�to�requirements,�building�an�employer�brand�addresses
the�problem�on�a�longer-term�basis�as�it�is�designed�to�provide�a�steady�flow�of
applicants�to�the�company.�
An�employment�brand�creates�an�image�that�makes�people�want�to�work�for�the
company�because�it�is�a�well�managed�organization�where�employees�are
continually�learning�and�growing.�The�image�of�an�organization�as�a�‘great�place�to
work’�in�the�minds�of�people�creates�loyal�customers�and�employees.
Most�importantly,�it�helps�organizations�to�rebound�quickly�and�get�on�tract�as�the
effects�of�the�slowdown�wear�off.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
191
An�important�aspect�of�creating�a�successful�employer�brand�is�supporting�the
entire�brand�building�campaign�with�a�work�environment�and�culture�conducive�to
professionals,�where�the�employees�get�opportunities�to�grow�professionally�as
well�as�personally.��
Companies�that�offer�variable�pay�options,�flexible�work�hours,�part-time�options,
and�multiple-shifts,�give�employees�the�option�to�planning�their�work�so�that�they
can�find�the�right�balance�between�work�and�home.�It�also�provides�the�immense
benefit�of�being�able�to�manage�its�employee�costs�effectively�during�the�time�of
economic�downturn.�
Wealth�creation�in�today’s�era�is�transiting�from�a�financial�resource�base�to�a
knowledge�capital�base�especially�in�those�sectors�which�are�growing�at�a
breathtaking�pace�like�the�M�&�E�industry.�The�market�is�increasingly�dependent
on�intellect�which�lies�in�knowledge�lies�within�individuals�and�the�cultural�context
of�the�enterprise.�HR�needs�to�concentrate�on�converting�this�abstract
knowledge�into�a�corporate�property�without�sacrificing�the�larger�perspective�of
organizational�effectiveness.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
192
Way Forward: Sector
wise key action steps
Way Forward: Sector wise key action steps
11
Based�on�a�detailed�understanding�of�the�industry�and�our
interactions�with�various�players,�the�following�initiatives�are
recommended�to�be�undertaken�by�those�companies
operating�in�various�sub�sectors�of�the�M&E�industry.�The
industry�is�looking�to�capitalize�on�new�opportunities�driven
by�favorable�socio-economic�changes�and�smarter
distribution�technologies.�This�section�focuses�on�key�action
steps�that�players�need�to�keep�in�mind�in�order�to�unlock
greater�potential�and�to�help�themselves:
• Increase�their�Market�Share
• Maximize�their�revenues
• Improve�profitability�levels
Television
With�the�explosion�in�the�number�of�TV�channels,�and
increase�in�the�choice�available�to�the�viewer,�TV�viewership
has�been�seeing�continuous�fragmentation.�Maintaining�high
quality�standards�in�content�and�differentiating�oneself�from
competition�is�thus�becoming�more�important�than�ever
before.�Both�broadcasters�and�content�houses�need�to�be
constantly�aware�of�the�changing�consumer�preferences�for
content�and�their�products�accordingly.�Monetization�of
content�libraries�through�internet�and�new�media�platforms
such�as�Mobile�TV�is�also�likely�to�be�important�to�augment
revenues.�In�the�distribution�end�of�the�segment�the
competition�is�likely�to�be�intense�between�cable,�DTH�and
IPTV,�and�since�ARPUs�are�already�fairly�low,�players�need�to
differentiate�through�their�add-on�services�and�quality�of
customer�service�to�attract�new�customers.�
To�summarize,�the�main�challenges�for�the�sector�are�likely
to�be:
• Fragmentation of viewership:�As�the�number�of
channels�increase�differentiation�of�content�is�likely�to
become�increasingly�important
• Under declaration of subscribers by Cable operators:
In�an�analog�cable�dominated�distribution�market�like
India,�rampant�under�declaration�of�subscribers�at�the
LCO�and�MSO�levels,�results�in�large�subscription
revenue�losses�for�the�broadcasters.�This�will�continue�to
be�a�challenge�until�addressable�digitized�platforms
garner�a�higher�share�in�the�distribution�markett
• High production costs:�With�rising�costs�of�acting�and
technical�talent,�managing�production�costs�is�likely�to�be
critical�for�television�content�producers
• Low ARPUs for DTH players:�Competition�is�likely�to
help�ensure�that�the�ARPUs�are�kept�low�in�the�short
term,�directly�affecting�the�bottom�lines�of�DTH
companies.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
To�manage�these�challenges,�while�capitalizing�on
opportunities,�stakeholders�across�the�value�chain�need�to
take�further�action�to�unleash�the�true�growth�potential�in
the�sector.
At�an�industry�level,�some�important�initiatives�that�could
help�in�unlocking�growth�are:
• Pushing�for�government�regulations�for�mandatory
digitization�of�all�TV�distribution
• Development�of�alternate�audience/viewership
measurement�systems
• Rationalization�of�content�production�costs�through
discussions�with�stakeholders�at�all�levels�–
actors/technical�staff,�production�houses�and
broadcasters�
At�a�player�level,�broadcasting�companies�need�to�focus�on
content�differentiation�to�attract�viewers�in�an�increasingly
fragmented�environment.�They�also�need�to�create�content
for�audiences�in�the�Tier�2�and�3�towns�from�where�the�next
wave�of�growth�is�likely�to�come.
Digital�distribution�players�may�need�to�improve�and
monetize�their�add-on�offerings�to�augment�their�top�lines.
Since�differentiating�on�cost�is�likely�to�be�difficult,�they
need�to�differentiate�on�the�quality�of�customer�service
levels.
196
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Television�Sector:�Key�Action�Steps
Broadcasters
Building�channel�bouquetsGoing�forward,�a�basket�approach�will�be�important�for�success�in�the�broadcastingindustry.�Creation�of�channel�bouquets�will�increase�the�bargaining�power�of�broadcasterswith�distributors.�Innovative�bouquet�offerings�will�also�help�in�attracting�advertisers
Focus�on�differentiation�of�content
With�the�over�crowding�of�television�channels,�the�TV�viewer�is�likely�to�be�spoilt�forchoice�and�those�channels�that�are�able�to�differentiate�in�terms�of�their�content�to�caterto�specific�audiences�are�likely�to�do�well.�Channels�with�differentiated�content�andspecific�target�audiences�may�also�be�more�attractive�to�advertisers
Building�a�strong�content�library�to�capitalizeon�various�revenue�streams
Players�need�to�focus�on�building�a�strong�content�library�to�help�ensure�steady�source�offuture�revenues.�Some�of�the�avenues�for�future�revenues�are�dubbing�of�content�inregional�languages,�internet�distribution,�and�distribution�across�Mobile�TV�etc.�Propervaluation�of�library�content�also�assumes�added�significance�in�such�a�scenario
Realizing�the�revenue�potential�of�mobileinteractive�services
Broadcasters�must�intelligently�exploit�mobile�interactive�services�i.e.�Peer-to-Application(P2A)�and�SMS�–�for�reality�shows�and�talent�hunts�–to�augment�the�revenues�earnedfrom�such�shows.�With�India’s�large�and�growing�mobile�subscriber�base,�this�can�be�asignificant�revenue�stream
Focus�on�content�relevance�for�Tier�2/Tier�3towns�and�Rural�India
Growth�in�TV�and�C&S�penetration�is�expected�to�be�driven�primarily�by�small�town�andrural�India�over�the�next�five�years�and�hence�it�is�very�important�for�the�broadcasters�todevelop�content�that�is�relevant�to�these�audiences
Backward�integration
With�the�increasing�competition�in�the�GEC�broadcasting�space,�the�content�costs�tobroadcasters�are�likely�to�go�up.�A�good�long�term�strategy�for�GEC�broadcasters�couldtherefore�be�to�get�into�content�production�themselves,�and�thus�hedge�the�risksassociated�with�the�cost�of�content�acquisition
Maximizing�reach�of�channels
With�a�large�number�of�distributors�across�segments�–�cable,�DTH�and�IPTV�–�negotiatingdeals�with�distribution�players�is�likely�to�become�more�complex�and�may�need�to�bemanaged�intelligently�so�that�the�channel�reach�can�be�maximized�while�making�sure�thatcarriage�costs�to�the�broadcaster�remains�reasonable
Distributors
Increasing�revenue�from�add-on�services(digital�distribution�players)
With�the�pressure�to�keep�monthly�subscription�price�points�low�and�subsidize�setupboxes,�it�is�likely�to�become�increasingly�important�for�DTH,�IPTV�and�digital�cable�playersto�augment�their�revenues�through�add-on�services�such�as�video�on�demand.�Useradoption�for�these�services�may�have�to�be�driven�through�keeping�the�price�points�low,offering�free�trial�periods�and�aggressively�marketing�these�services�among�customers.�
Providing�quick�and�efficient�customer�service
As�competing�on�price�becomes�increasingly�difficult,�distribution�players�can�effectivelydifferentiate�themselves�is�by�building�a�reputation�for�quick�and�efficient�servicing�ofcustomer�complaints�(which�is�another�important�consideration�that�people�have�whendeciding�which�service�to�go�for)
197
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Regulatory Wishlist
With�regard�to�support�from�the�government,�some�of�the�important�regulations
that�the�industry�is�looking�at�are:
Foreign Investment
• Enhancement�in�FDI�limits�in�case�of�cable�network�and�DTH�to�74�percent
in�order�to�bring�them�at�par�with�competing�technologies�in�IPTV�(in�view
of�the�convergence�of�broadcasting�and�communication�technologies)
Double Whammy
• DTH�players�are�subjected�to�both�service�tax�and�entertainment�tax.�There
is�a�demand�for�removal�of�such�double�taxation
Income-tax provisions
• Rectification�of�the�anomaly/disconnect�between�the�down�linking�policy
and�the�tax�provisions�regarding�conclusion�of�contracts�or�holding�of
marketing/�distribution�rights�by�the�Indian�Company�and�its�consequential
taxability.
• Clarifications�regarding�categorization�of�satellite�payments�(whether�royalty
or�not)�to�prevent�litigation.
Filmed Entertainment
The�year�2008�was�a�learning�year�for�the�industry�with�the�sector�reeling�under
the�twin�impact�of�lower�success�ratio�as�compared�to�last�year�as�well�as�facing
tough�competition�from�sporting�events�such�as�IPL.�The�ongoing�liquidity�crunch
has�also�affected�the�movie�making�business�and�has�slowed�down�the�funding
to�producers�and�corporates.�Consequently�the�number�of�film�releases�is
expected�to�reduce�in�the�near�future.�Even�though�in�recent�times,�small�budget
movies�have�displayed�an�upside�potential,�yet�the�overall�profitability�of�films�has
been�adversely�impacted.�
To�summarize�and�reiterate�the�challenges�for�the�sector:
• Piracy –�This�is�truly�the�bane�of�the�Indian�film�industry.�It�is�estimated�that�as
much�as�INR�20001 crores�is�lost�due�to�piracy�annually.�Films�are�sometimes
released�in�the�pirated�market�no�sooner�than�12�hours�after�the�official�release
for�as�little�as�INR�20.�If�the�industry�can�combat�piracy�then�the�potential
revenue�upside�for�the�sector�could�be�significant
1�Industry�Inputs
198
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
• High Remuneration Costs –�Actors’�fees�have�been�growing�steeply�of�late
which�renders�some�projects�economically�unviable�as�they�are�not�able�to
recover�their�costs
• Content –�Film�making�is�a�creative�business�and�the�primary�driver�for�a�good
film�is�its�content.�The�industry�needs�to�come�up�with�good�quality�and
original�content�which�appeals�to�the�audience
• Liquidity Crunch –�In�the�last�few�years�we�have�witnessed�corporate�houses
jump�onto�the�film�making�bandwagon;�however�due�to�the�recent�economic
downturn�they�are�facing�a�liquidity�crunch�and�funding�that�was�easily
available�in�the�film�industry�has�now�dried�up.�As�a�result�of�this�we�are�likely
to�see�movies�that�have�been�produced�not�being�released.�Sporting�events
like�the�IPL�may�also�impact�the�releases�of�the�films.�Producers�opt�to�time
their�films�release�after�the�sporting�events�such�as�IPL�which�could�then
result�in�a�glut�of�films�being�released�at�the�same�time�leading�to�plenty�of
vying�for�similar�resources�such�as�distributors,�exhibitors�etc.�Low�to�medium
budget�films�may�be�impacted�the�most�due�to�this�as�they�do�not�have�the
necessary�clout
• Infrastructure –�The�industry�is�grappling�with�inadequate�facilities�in�terms�of
number�of�shooting�floors�available,�dubbing�studios,�equipment,�exhibition
centers,�this�is�compounded�by�the�fact�that�the�burgeoning�Television�industry
is�also�competing�for�the�same�finite�resources.�The�need�of�the�hour�is�to
establish�additional�state�of�the�art�studio�facilities�which�can�serve�as�a�one
stop�shop�for�all�the�pre�and�post�production�activities.
“Going forward, differentiation of brands will be key for a broadcaster;there will be emergence of channels catering to specific demographics- across different age groups, cities”Kunal Dasgupta, CEO, Multiscreen Media (Sony Entertainment)
199
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
• Competition-�There�is�increasing�competition�for�the�audience�wallet�and
mind�share�from�sources�like�IPL,�online�gaming,�formula�1�etc.�It�is�becoming
increasing�harder�for�films�to�break�through�the�clutter�and�emerge�as�the
winner�in�this�battle.�
These�challenges�also�underscore�that�going�forward�the�industry�is�likely�to�be
driven�by�original�content,�technological�advances�and�agility�in�responding�to
changing�customer�preferences.�Stakeholders�across�the�value�chain�may�need�to
take�further�action�to�unleash�the�true�growth�potential�in�the�sector.�
At�an�industry�level,�the�following�initiatives�are�likely�to�help�in�unlocking�value
for�the�sector:
• Improve�consumer�connect�by�investing�in�new�formats�and�content
• More�wide�spread�distribution�of�Home�Video,�e.g.�at�grocery�stores�etc.,�to
facilitate�easy�access
• Take�coordinated�and�proactive�action�to�tackle�piracy
• Promote�and�experiment�with�new�talents
• Improve�organizational�ability�to�attract�and�retain�talent
At�an�individual�level,�players�need�to�focus�on�developing�new�capabilities�and
reinforce�their�strong�areas.�Companies�need�to�focus�on�maximizing�their
revenue�from�alternate�revenue�streams.�With�the�Video�on�Demand�services�on
both�DTH�and�IPTV�expected�to�pick�up�in�future,�players�need�to�build�up�a
strong�and�diverse�content�library�to�capitalize�on�content�demand�as�well�as
mitigate�their�risks.�
200
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Filmed�Entertainment�Sector:�Key�Action�Steps�for�Industry�Players
Focus�on�developing�innovative�storylines�andcontent
Film�makers�may�have�to�focus�on�innovative�content�and�original�screenplays�to�helpensure�higher�occupancy�rates�in�the�theaters.�Visual�enhancements�and�presence�of�bigstars�can�never�be�substitutes�for�good�content.�To�help�ensure�higher�occupancy�rates�intheaters,�production�houses�may�need�to�keep�enriching�the�content�for�viewers.Segregating�content�development�and�aligning�it�with�the�different�sections,�i.e.urban/rural�audiences,�age-wise�bifurcation,�etc.�are�likely�to�be�essential.�Companies�mayalso�need�to�invest�in�significant�advancements�in�audience�measurement�technology�inorder�to�capture�and�analyze�consumer�preferences�and�develop�content�accordingly.
Create�a�diverse�library�to�balance�returns
Consumers�today�need�better�stories,�super�acting�performances�and�wish�to�watch�anoverall�entertaining�movie�irrespective�of�the�subject�matter.�Moreover,�with�the�rapidexpansion�of�multiplexes�in�the�country,�there�is�a�continuing�need�for�good�movies�tofulfill�the�variety�appetite�of�the�viewers.�In�the�absence�of�any�sure�shot�formula�for�boxoffice�hits,�players�need�to�focus�on�creating�a�diverse�content�library,�comprising�differentsubjects�and�consisting�a�judicious�blend�of�big,�medium�and�small�budget�movies.Besides�helping�ensure�a�steady�supply�of�content,�this�could�also�help�in�getting�balancedreturns�and�derisk�the�business�model.�Library�content�valuation�is�also�likely�to�gain�insignificance�for�helping�ensure�steady�future�cash�flows�from�diverse�revenue�streams.
Focus�on�enhancing�collections�fromOverseas�Markets
It�may�be�important�for�Indian�producers�to�tie-up�with�agents�who�have�the�rightrelationships�with�major�distributors�along�with�an�understanding�of�different�markets�andtheatrical�revenue�streams.�Similar�alliances�and�a�more�focused�approach�to�distributionand�marketing�of�DVDs,�VCDs,�etc.�may�also�be�required�to�tap�the�potential�of�theoverseas�home�video�segment.�A�more�comprehensive�and�concerted�distribution�effort�isexpected�to�be�the�key�to�increasing�the�revenue�potential�of�Indian�films�frominternational�audiences.
Maximize�Returns�from�the�Satellite�Market
With�the�spurt�in�the�number�of�Television�channels,�there�is�an�increase�in�demand�formovie�content.�Players�can�take�advantage�of�this�situation�and�enter�into�innovativearrangements�with�the�channels.�Instead�of�sale�of�satellite�rights�for�a�specific�period,companies�can�enter�into�revenue�arrangements�based�on�number�of�screenings�withsatellite�channels.�This�way�the�players�need�not�get�tied�up�for�a�specific�number�of�yearsand�also�can�sell�these�rights�to�multiple�number�of�channels.
Ensure�Effective�Time�and�Cost�Controls
Players�need�to�improve�their�operational�effectiveness�to�help�ensure�strict�adherence�totime�and�cost�commitments.�Production�houses�may�have�to�deploy�tighter�controls�andinsist�on�time�bound�scripts�and�provide�adequate�provisions�for�contingencies�to�enabletimely�release�of�movies�and�prevent�cost�escalation.�
Focus�on�Innovative�marketing�and�packagingof�content
Today�with�the�theatrical�windows�being�greatly�compressed�it�is�imperative�to�packageones�product�innovatively�that�could�get�the�audience�into�the�theaters�in�the�openingweek�itself�and�sustain�it�self�post�that�with�word�of�mouth�and�second�rung�ofpromotional�activity.�In�today’s�age�of�clutter,�it�is�as�important�to�package�and�presentyour�product�cleverly�as�much�as�focusing�on�the�right�content.
201
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Regulatory Wishlist
The�sector�is�likely�to�receive�a�strong�impetus�if�the�following�steps�are�taken�by
the�government�to�correct�the�existing�anomalies:�
• Greater�uniformity�in�entertainment�tax�and�VAT�regimes�across�States
• Relax�constraints�on�pricing,�number�of�shows�etc.�in�South�India
• Set�up�a�separate�body/association/�regulator�for�IPR�related�jurisdiction�that�is
empowered�to�tackle�copyright�infringements�and�IPR�violation�cases
• Review�of�the�Indian�Cinematograph�Act,�1952
• Stringent�enforcement�of�anti�piracy�laws.
Print Media
Print�Media�is�witnessing�increasing�proliferation�of�the�niche�and�specialty
genres,�as�well�as�aggressive�market�expansion�in�the�regional�space.�As�a�result
of�the�competition,�the�cover�prices,�and�consequently�the�circulation�revenues
are�coming�down.�At�the�same�time,�rising�cost�of�newsprint�is�increasing�the
cost�of�operations�for�print�companies.�In�such�a�scenario,�advertising�revenues
are�further�gaining�in�significance�for�the�print�companies.�
Owing�to�the�dynamic�and�competitive�environment,�the�sector�is�facing�certain
challenges:
• Effect of economic slowdown -�Print�largely�being�an�advertising�driven
medium,�the�economic�slowdown�and�the�consequent�reduction�in
advertisement�budgets�of�marketers�has�affected�this�medium.�Newspapers
receive�a�large�portion�of�their�advertising�revenues�from�verticals�such�as
Retail,�Real�Estate,�Jobs�and�Classifieds.�A�prolonged�slowdown�in�these
sectors�is�likely�to�have�its�rub�off�on�print�media.
202
• Competition from internet -�The�increasing�popularity�of�online�services�and
increasing�investments�in�the�internet�distribution�platform�poses�a�long�term
challenge�to�print�media.�The�development�of�niche�portals�makes�online�an
effective�and�cheaper�way�to�reach�the�target�audience�as�compared�to
newspapers.�Globally,�the�sector�has�witnessed�migration�of�advertising
revenues�from�print�onto�online�services;�Indian�players�need�to�prepare
themselves�to�avoid�such�a�situation�at�home
• Rising cost of Newsprint -�Newsprint�accounts�for�approximately�50�percent
of�the�total�cost�of�a�newspaper�publisher.2 In�2008,�global�newsprint�costs
shot�up�due�to�the�demand�supply�mismatch�leading�to�strained�margins�for
Indian�print�companies.�Sharp�decline�in�newsprint�demand�in�the�U.S.�led�to
the�closure�of�many�newsprint�factories�in�U.S.�and�Canada.�However�in�2009,
we�believe�that�newsprint�costs�may�remain�stable�as�the�demand�from
emerging�markets�remains�relatively�stable�while�the�supply�continues�to
reduce.�The�reduction�in�supply�due�to�capacity�reduction�of�Canadian
companies�and�the�depreciating�rupee�could�be�complemented�by�reducing
energy�costs�and�capacity�addition�in�China.�This�is�expected�to�provide�relief
to�print�media�companies�
These�are�challenging�times�for�Print�Media.�To�tackle�these�challenges�as�well�as
provide�growth�impetus,�industry�as�well�as�the�government�needs�to�take
certain�action�steps.�
Industry�can�take�the�following�concerted�steps�to�unlock�the�growth�potential�of
the�sector:
• Invest�in�quality�improvements,�especially�in�regional�media�to�attract
advertisers
• Collective�negotiations�and�bulk�purchase�of�newsprint
• Constitute�forums�to�encourage�and�promote�regular�reading�habits�among
youth
• Adopting�innovative�practices�like�trading�media�space�in�publication�platforms
in�return�for�equity
• Improve�organizational�ability�to�attract�and�retain�talent
At�the�player�level,�there�is�a�need�to�consolidate�ones�respective�position�in�their
respective�markets,�as�well�as�increase�their�niche�and�specialty�offerings.�Strong
investments�need�to�be�made�in�quality�improvements�to�attract�more�advertisers,
as�well�build�consumer�loyalty.�Companies�also�need�to�monetize�their�news
content�over�alternate�media�platforms�to�scale�up�their�presence.�
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
2�“Indian�Print�Media�Industry”,�Systematix�Institutional�Research,�May�2008
203
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Print�Media�Sector:�Key�Action�Steps�for�Industry�Players
Strengthen�Distribution�Avenues
There�are�limited�numbers�of�print�vendors�in�each�city,�enjoying�monopolies�over�aparticular�area.�With�competition�heating�up�and�growth�in�the�number�of�newspapers�andmagazines�available,�there�is�a�need�to�retain�and�manage�these�vendors�effectively.�Hencecompanies�may�need�to�focus�on�building�vendor�loyalties�in�order�to�reach�the�endconsumers�effectively.�
Enhance�Presence�in�Regional�Markets
With�the�smaller�towns�growing�in�terms�of�per�capita�income�and�consumer�spends,�andadvertisers�opening�their�eyes�to�the�cost�advantage�that�regional�dailies�offer�vis-à-vis�theirEnglish�counterparts’,�players�have�to�focus�on�enhancing�their�presence�in�the�regionalmarkets�to�maintain�their�growth�momentum.�Inorganic�growth�is�likely�to�be�more�costeffective�vis-à-vis�organic�growth.
Focus�on�niche�and�specialty�product�offerings
Players�may�have�to�focus�on�effective�consumer�segmentation�and�define�their�targetgroups�so�that�they�are�able�to�customize�their�offerings�according�to�their�targetsegments.�Indian�consumers�have�become�quite�discerning�in�their�choices,�and�the�axiom“One�Size�Fits�All”�is�no�longer�valid�for�the�Indian�Media�market.�Players�have�to�offerdifferent�products�to�capture�different�target�segments,�and�niche�and�specialty�productscould�further�grow�in�significance.
Exploit�alternate�distribution�platforms�tomonetize�content�and�de-risk�the�businessmodel
Similar�to�their�global�counterparts,�Indian�Print�Media�Players�are�facing�a�big�threat�fromTV�and�Internet�in�the�long�run;�these�two�media�are�eating�into�the�share�of�newsdistribution�for�the�print�players.�Hence,�players�may�need�to�realign�themselves�acrossnews�distribution�media-�TV,�Internet�and�Radio-�rather�than�being�standalone�publishers.Most�of�the�larger�players�have�already�taken�the�lead�in�this�aspect.�Further,�players�alsoneed�to�try�to�monetize�their�online�versions�by�providing�differentiated�content�andfocusing�on�classified�sections�such�as�properties,�jobs�and�matrimonies.�Development�ofinternet�verticals�can�also�help�insulate�players�from�the�growing�challenge�of�the�internet.
Invest�in�quality�improvements
To�attract�advertisers,�players�have�to�focus�on�improving�their�product�quality.�This�couldbe�done�by�enhancing�by�having�more�colored�pages,�increasing�the�proportion�of�coloredadvertisements�and�innovative�format�layout.�Per�unit�revenues�from�color�inserts�are�morethan�those�of�black�and�white.�Hence�these�quality�improvements�could�automatically�leadto�improved�bottomlines.�
Monetize�Electronic�Versions
At�present,�e-versions�of�newspapers�and�magazines�are�primarily�a�cost�center�for�printmedia�companies,�with�very�few�monetizing�them.�Players�have�to�provide�distinct�and�upto�date�content�for�their�online�versions�and�then�find�avenues�for�monetizing�the�same,especially�the�display�ads�section�like�job�portals,�matrimonials,�classifieds�etc.
Manage�Newsprint�Costs
Globally�newsprint�costs�are�escalating�at�a�rapid�pace,�and�Indian�print�media�playerssource�around�55�percent�of�their�demands�from�imports3.�Therefore�Indian�players�arealso�getting�affected�by�the�rising�prices.�Players�have�to�focus�on�managing�these�costseffectively,�by�inventory�stockpiling�and�entering�into�long�term�contracts.
3�“Indian�Print�Media�Industry”,�Systematix�Institutional�Research,�May�2008
204
Regulatory Wishlist
The�government�can�also�facilitate�the�growth�of�Print�Media�in�these�challenging
times�by�taking�the�following�action�steps:
• Reducing�the�custom�duties�for�newsprint�which�can�help�the�players�in
controlling�their�costs
• Ensure�uniform�tax�rates�for�Indian�and�foreign�players�which�can�provide�a
level�playing�field�in�the�industry.
Radio
After�the�Phase�2�reforms�and�the�rationalization�of�the�license�fee,�the�Private�FM
sector�in�India�has�been�on�a�rapid�growth�mode�with�the�number�of�Private�FM
station�increasing�from�just�21�at�the�end�of�2005�to�205�by�March,�2008.�As�there
is�very�little�differentiation�in�content�between�the�stations,�this�has�led�to
continuous�fragmentation�of�listeners�especially�in�the�metros.�With�the�grant�of
Phase�3�licenses�expected�soon,�the�competition�may�increase�further�and�it�may
become�necessary�for�the�players�to�differentiate�themselves�to�build�a�brand
identity�and�get�loyal�listeners.�At�the�same�time,�it�may�also�be�important�for�the
sector�to�aggressively�target�local�advertisers,�which�currently�make�up�only�about
a�fourth�of�the�radio�advertising�pie.�
To�summarize,�the�main�challenges�for�the�sector�are�likely�to�be:
• Fragmentation of listenership: As�there�is�very�little�differentiation�in�contentbetween�the�stations,�this�has�led�to�continuous�fragmentation�of�listenersespecially�in�the�metros.�With�the�grant�of�Phase�3�licenses�expected�soon,�thecompetition�and�fragmentation�is�likely�to�increase�further
• Increasing share of Radio in the total advertisement pie:This�is�currentlyaround�4�percent�versus�an�average�of�8�percent�globally.�Increasing�this�sharemay�require�making�greater�efforts�in�convincing�advertisers�of�theeffectiveness�of�radio�as�an�advertising�medium.
• Attracting regional advertisers: Local�advertisements�make�up�only�a�fourthof�the�radio�advertising�pie�currently�(as�against�75�percent�in�U.S.4),�andtherefore�tapping�this�segment�adequately�may�continue�to�be�a�big�challenge.�
To�manage�these�challenges,�while�capitalizing�on�opportunities,�stakeholders
across�the�value�chain�may�need�to�take�further�action�to�unleash�the�true�growth
potential�in�the�sector.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
4�KPMG�Interviews
205
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
At�an�industry�level,�some�important�initiatives�that�can�help�in�unlocking�growth
are:
• National�implementation�and�acceptance�of�the�listenership�measurement
mechanism�–�there�is�a�need�for�greater�consensus�on�nature�and�system�of
measurement�
• Initiatives�for�ongoing�messaging�to�the�advertising�community�on�the
effectiveness�of�the�medium�by�radio�industry�forums
• Developing�consensus�on�a�mutually�acceptable�method�of�determining�radio
music�royalties�along�with�music�companies
At�a�player�level,�companies�may�need�to�focus�on�differentiating�the�content�on
their�radio�stations.�They�also�need�to�target�local�advertisers�and�increase
awareness�of�the�effectiveness�of�radio�as�a�local�advertisement�medium.
Key�Action�Steps�for�Industry�Players
Differentiation�in�music�content
With�the�crowding�of�FM�channels�especially�in�metros,�retaining�loyal�listeners�is�likely�tobecome�increasing�difficult�for�the�radio�stations�if�all�of�them�are�offering�the�same�genreof�music�–�new�Bollywood�hits.�Focusing�instead�on�other�genres�like�retro�Bollywood�orEnglish�music�could�help�ensure�differentiation
Differentiation�in�non-music�content
Apart�from�music�content,�the�other�option�for�radio�stations�to�differentiate�themselvescould�be�through�other�programming�such�as�chat�shows,�comedy�shows�etc.�In�suchprogramming,�how�good�or�bad�the�RJ�is�can�make�a�lot�of�difference;�therefore�retainingand�attracting�the�best�RJ�talent�may�be�of�great�importance�in�a�competitiveenvironment.�
Target�local�advertisers
With�local�advertisement�accounting�for�only�25�percent�share�of�the�radio�advertisementpie,�against�as�high�as�75�percent�in�U.S.,�regional�advertising�still�remains�a�largeuntapped�potential�in�India.�The�whole�industry�needs�to�take�steps�to�sell�the�medium�tolocal�advertisers�and�educate�them�about�the�cost-effectiveness�of�radio�for�localadvertisement�campaigns.
Brand�buildingBrand�building�to�ensure�greater�listener�stickiness�is�all�the�more�critical�in�the�currentscenario�with�limited�content�differentiation
Exploring�alternate�revenue�streamsAssessing�potential�of�alternate�revenue�streams�such�as�activations�and�internet�radiomay�also�be�important�to�augment�the�standard�advertising�revenues.
“Radio, however, is severely underserved and in fact requires more release of supply ofradio frequencies rather than consolidation. Similarly, Internet will become big in thenext 2/3 years on the back of 3G/Wimax and Broadband initiatives and enterpreneurialinnovations.”Rajesh Sawhney, President, Reliance Entertainment Pvt. Ltd.
206
Regulatory Wishlist
The�industry�is�looking�at�the�government�for�regulatory�support�in�some
important�areas:
• Foreign�Investment:�Raising�FDI�limit�above�the�current�level�of�20�percent�to
bring�in�more�foreign�investment
• Royalties�paid�to�Music�Companies:�Rationalization�of�music�royalties�with�a
variable�fee�system�
• Permission�to�broadcast�News�and�current�affairs�programmes
• Networking�between�players:�Allowing�of�networking�between�licensees�for
sharing�content,�resources�etc.
• Government�Advertising:�Mandatory�share�in�government�advertising�to�the
sector
• Removal�of�cap�on�number�of�channels�across�the�country:�Relaxation�of�cap
on�total�number�of�channels�that�can�be�held�by�a�player�in�the�country
• Allowing�of�multiple�licenses�within�a�city:�This�could�allow�radio�companies�to
experiment�with�different�genre�for�radio�stations�apart�from�hit�film�music
• Raising�loans:�Considering�loans�extended�to�the�Radio�sector�as�“priority
lending”
Music
With�rampant�piracy�eating�away�half�of�the�revenues�and�resulting�in�dismally
low�growth�rate,�the�Indian�Music�Industry�has�been�going�through�hard�times
like�the�rest�of�the�world.�However�the�increasing�revenue�from�the�mobile�and
online�sales�as�well�as�radio�royalties�is�now�showing�potential�to�offset�the
declining�physical�unit�sales�and�push�the�industry�towards�higher�growth�rates.
Mobile�music�may�be�the�most�important�category�here�with�high�cell�phone
penetration�levels�in�India.�Piracy�is�expected�to�continue�to�be�the�biggest
menace�to�the�industry�and�players�could�get�together�to�tackle�it�more
aggressively.
To�summarize�and�reiterate,�the�main�challenges�for�the�sector�are�likely�to�be:
• High rights acquisition cost: Acquisition�cost�of�music�rights�had�been
consistently�rising.�This�combined�with�higher�marketing�spends�had�severely
constrained�the�profitability�of�the�music�companies.�Though�the�companies
have�reduced�their�acquisition�costs�by�entering�into�revenue-sharing
agreements�with�producers,�bringing�them�further�down�is�likely�to�be�a
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
207
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
challenge.
• Rampant piracy:The�risk�related�to�piracy�of�both�digital�and�physical�music�is
very�high.�Consumers�can�easily�share�songs�amongst�themselves�through
peer-to-peer�file�sharing.�On�a�global�level�the�industry�has�managed�to�clamp
down�on�and�successfully�shut�down�some�file�sharing�websites�like�Napster,
Kaaza�and�Limewire,�and�established�legitimate�digital�distribution�platforms.
However,�a�lot�remains�to�be�done�before�piracy�can�be�brought�under�control.
The�lengthy�legal�and�arbitration�process�coupled�with�lack�of�empowered
officers�for�enforcement�of�anti-piracy�laws�continue�to�undermine�the
crackdown�on�piracy.�
• Adaptation to digital business models:To�stand�up�against�the�new�realities
of�music�business,�companies�need�to�adopt�new�strategies�for�content
monetization�such�as�entering�into�mobile�music�revenue�sharing�agreements
with�music�companies�and�content�aggregators.�To�monetize�digital�music,
they�need�to�invest�in�digitalizing�their�entire�music�libraries.
To�manage�these�challenges,�while�capitalizing�on�opportunities,�stakeholders
across�the�value�chain�need�to�take�further�action�to�unleash�the�true�growth
potential�in�the�sector.
At�an�industry�level,�some�important�initiatives�that�can�help�in�unlocking�growth
are:
• Forming�joint raid and intelligence teams with�the�local�policy�to�bring
piracy�under�control
• Providing�assistance�to�the�Internet�Service�Providers�in�identifying the
websites allowing download of illegal music content and�blocking
access
• Negotiating better revenue sharing terms for mobile music with�mobile
service�providers
At�a�player�level,�companies�need�to�focus�on�monetization�of�their�libraries�on
new�media�platforms�–�mobile�and�internet.�For�mobile�music,�they�could�consider
getting�in�“bundling”�deals�with�handset�manufactures.�Aggressively�pursuing
legislation�against�copyright�infringement�may�also�be�critical�to�reduce�losses
occurring�due�to�piracy.�
208
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Regulatory Wishlist
Support�from�the�government�and�law�enforcement�agencies�is�likely�to�be
critical�for�the�music�industry�in�the�coming�years�as�it�continues�to�grapple�with
piracy.�The�current�state�of�law�enforcement�against�individuals�indulging�in�music
piracy�remains�poor.�Joint�teams�of�music�industry�forums�and�the�police�to
conduct�raids�can�prove�to�be�an�effective�way�to�control�piracy�but�these�teams
need�to�be�deployed�on�a�much�larger�scale,�have�adequate�manpower�and�be
spread�throughout�the�country�to�have�measurable�impact.
The�music�industry�is�in�a�state�of�paradigm�shift,�reinventing�its�business�model,
entering�into�more�partnering�in�response�to�dramatic�transformation�in�the�way
the�music�is�being�consumed�and�distributed.�Music�companies�may�not�be
building�an�economic�future�based�not�just�on�selling�music�but�on�“monetizing”
consumer�access�to�it.�“Music�for�free”�is�the�myth�that�the�industry�needs�to
drive�a�campaign�against�with�the�cooperation�of�the�government�and�internet
service�providers.
Music�Sector:�Key�Action�Steps�for�Industry�Players
Maximizing�monetization�of�music�librariesacross�new�media
With�the�continuing�decline�of�cassette�and�audio�CD�sales,�the�revenue�from�newdistribution�media�–�i.e.�mobile�and�internet�is�likely�to�become�increasing�important�formusic�companies.�In�mobile�music,�it�is�important�for�the�music�companies�to�negotiatefor�better�revenue�sharing�terms�with�mobile�service�providers.�For�monetizing�music�onthe�internet,�music�companies�need�to�provide�complete�‘entertainment�packages’�toattract�consumers�and�roll�out�their�own�video�and�music-streaming�services�,�along�withother�value�added�services�like�artist�interviews,�live�performances�and�‘behind-the-scenes’�footage�directly�to�consumers.
Exploring�avenues�for�‘bundling’�of�musicsubscriptions�with�other�devices
With�the�popularity�of�music�phones�in�the�country,�players�need�to�tie�up�with�handsetmakers�to�provide�music�subscription�services�for�a�limited�period�and�tap�this�consumersegment.�The�cost�of�providing�such�services�can�be�bundled�with�the�handset�prices.�Thisidea�can�be�extended�beyond�handsets.�“Free”�music�can�also�be�bundled�with�mobile-phone�contracts,�broadband�service,�music-players,�PCs�or�even�cars.�Firms�that�providethese�things�may�be�prepared�to�chip�in�towards�the�cost�of�the�music�service�in�return�forcustomer�loyalty.
Taking�proactive�measures�against�piracy
Proactive�legislation�like�the�recent�instances�of�T-Series�suing�Yahoo�and�Youtube�forcopyright�violations�can�also�go�a�long�way�in�curbing�online�piracy.�If�such�legislativeactions�are�systematically�pursued�by�the�industry�players,�it�could�act�as�a�strongdeterrent�to�online�piracy.
209
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Outdoor
Over�the�past�two�years,�the�sector�has�benefited�from�the�increase�in
consumption�power�of�Indian�customers.�As�consumption�increases,�new
products�are�being�made�available�to�new�markets�and�it�becomes�essential�for
marketers�to�build�brand�awareness.�Other�demographic�changes�like�women
entering�the�workforce�have�also�led�to�creation�of�new�products�and�services
such�as�ready�to�eat�products,�online�payment�services�etc.�These�new�products
and�services�need�awareness�building.�Building�awareness�has�been�a�traditional
strength�of�the�OOH�medium.�
However,�like�its�counterparts�from�other�M&E�sectors,�OOH�medium�faces
certain�inherent�challenges.�Some�of�the�most�notable�challenges�are:
• Effect of economic slowdown - OOH�being�completely�an�advertising�driven
medium,�the�economic�slowdown�and�the�consequent�reduction�in
advertisement�budgets�of�marketers�has�affected�this�medium.�The�sector
witnessed�decreased�ad-spends,�especially�towards�the�last�quarter�of�2008
when�financial�categories�like�international�banks�and�mutual�funds�reduced
their�exposure�towards�the�sector.�Further�the�slowdown�in�construction
sector�as�well�as�postponement�of�retail�supply�plans�is�expected�to�impact
the�sector�adversely.
• Lack of a scientific measurement system -The�lack�of�a�scientific�metric�to
measure�the�efficacy�of�OOH�medium�continues�to�be�a�deterrent�to
advertisers.�Research�that�gives�accountability�for�the�rupee�spent�has�long
been�the�need�of�the�hour.�The�panel�set�up�by�MRUC�and�Hansa�Research�to
measure�the�efficiencies�of�outdoor�advertising�is�expected�to�play�a�crucial
role�in�the�growth�factor�for�the�industry.�The�research�is�in�an�advanced�stage
and�results�are�awaited�shortly.
• Ban on billboards/hoardings in some cities - Authorities�across�the�country
initiated�"city�beautification"�drives�and�introduced�new�byelaws�for�OOH.�The
impact�was�felt�through�reduced�clutter�levels�in�cities�and�standardization�of
sizes.�Some�cities�witnessed�a�complete�large�format�media�ban,�viz.�Chennai.
Traditionally,�Billboards�has�been�one�of�the�largest�segment�within�the�sector
with�over�60�percent�share�of�the�outdoor�pie5;�but�now�there�is�an�imperative
upon�players�to�reduce�dependencies�on�this�medium.�
• Need to provide end to end services as well as customized content -
Integration�of�services�provided�including�content�design�and�development
and�media�integration�is�a�trend�that�could�further�consolidate.�An�increasing
need�to�create�and�provide�customized�content�for�this�medium�is�being�felt�in
the�industry.�Companies�need�to�address�this�demand�to�unleash�the�growth
5�KPMG�Interviews,�KPMG�Analysis
210
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
potential�of�OOH.
These�challenges�also�represent�a�potential�for�consolidation�in�the�industry.�As
players�change�their�business�models,�and�go�for�integration�across�their�value
chain�to�provide�end�to�end�services,�the�sector�could�witness�more�acquisitions
and�exit�of�smaller�players.�Bigger�players�may�expand�from�City�to�State�and
hence�become�stronger,�thus�leading�to�a�more�organized�sector�in�the�medium�to
long�run.�
To�capitalize�on�favorable�trends�and�opportunities,�stakeholders�across�the�value
chain�need�to�take�further�action�to�unleash�the�true�growth�potential�in�the
sector.
At�an�industry�wide�level,�the�following�steps�need�to�be�jointly�taken:
• Improve�governance�standards�and�move�towards�greater
professionalization�
• Improve�consumer�connect�by�providing�end�to�end�integrated�services
• Invest�in�creative�innovations�for�this�medium,�both�in�terms�of�technological
formats�as�well�as�communication�mediums
• Explore�consolidation�options�by�expanding�across�the�value�chain
• Promote�the�development�of�a�uniform�scientific�measurement�system�for
this�medium
• Improve�organizational�ability�to�attract�and�retain�talent
In�particular,�players�need�to�invest�in�developing�certain�capabilities�that�could
provide�growth�impetus�at�an�individual�level.�It�is�becoming�an�imperative�for
players�to�optimize�their�advertising�inventory�across�various�formats�as�well�as
expand�their�presence�in�smaller�towns.�Investments�in�building�digital�capabilities
211
could�also�give�good�returns�in�the�long�run.
Regulatory Wishlist
Support�from�the�government�is�critical�for�this�rapidly�evolving�sector�in�the
coming�years.�In�particular,�government�can�propel�the�growth�of�the�sector�by
taking�the�following�action�steps:
• Clarity�in�regulatory�framework�given�the�thrust�for�infrastructure
development
• Dialogue�with�industry�players�before�framing�guidelines�on�the�sector,�as
against�unilateral�decisions�like�ban�on�hoardings�across�cities
• Provide�investment�and�operational�incentives
• Appointing�a�unified�regulator�for�the�sector
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Key�Action�Steps�for�Industry�Players�
Optimize�mix�of�advertising�inventory�acrossvarious�segments
The�traditional�billboards�segment�is�under�pressure�in�urban�centers�with�Chennai�alreadybanning�them�and�speculations�about�Bangalore�and�Delhi�placing�further�curbs.�Furtherthis�segment�is�highly�fragmented�with�a�large�number�of�unorganized�players�operating�inthese�segments.�On�the�other�hand,�street�furniture�&�transit�segments�are�growingrapidly�on�account�of�the�growth�in�transport,�retail,�malls�and�real�estate.�Therefore,players�need�to�focus�on�maintaining�a�judicious�blend�of�inventory�across�thesesegments.
Expand�Presence�in�smaller�towns
With�smaller�towns�emerging�as�important�growth�sectors�and�increased�spends�oninfrastructural�developments�in�these�towns,�expansion�to�these�through�focusedinvestments�have�to�be�the�thrust�area�for�players.�Players�should�lay�emphasis�onproviding�localized�services.
Invest�in�building�digital�capabilities
Rapid�onset�of�organized�retail�and�the�consequent�expansion�in�malls�and�multiplexesimply�the�need�to�engage�customers�through�interactive�mediums.�To�capitalize�on�thesame,�players�need�to�focus�on�asset�deployment�of�screens�using�digital�technology.Further,�this�type�of�interactive�media�calls�for�content�that�is�distinct�from�the�traditionaloutdoor�media.�Hence�companies�have�to�concentrate�on�building�capabilities�to�ofcreating�separate�ads�and�designing�different�creatives�for�the�digital�and�ambient�media.
Expand�presence�across�the�value�chain�toprovide�end�to�end�services
With�companies�increasingly�looking�for�one�stop�destination�for�receiving�end�to�endservices,�players�have�to�invest�in�providing�integrated�services,�including�content�designand�development�and�media�integration.�Smaller�outdoor�companies�too�need�to�enterinto�tie-ups�with�creative�designing�agencies�and�other�players�to�enhance�their�valuechain�and�offer�a�complete�their�portfolio�of�services
Develop�new�capabilities�to�capitalize�oninfrastructure�development�in�public�transportsystem
With�rapid�technological�advancements�and�onset�of�public�transport�system�like�MetroRail,�Mass�Rail�Transport�system�etc.,�there�is�a�need�to�enhance�the�creative�capabilitiesand�kind�of�outdoor�media�to�take�advantage�of�this�huge�opportunity.�Players�need�toinvest�in�capability�building�to�take�advantage�of�the�same.
Build�scale�and�take�advantage�ofconvergence�between�event�managementand�outdoor
With�the�advent�of�sporting�leagues�like�IPL,�sports�and�events�in�general�are�likely�tohave�a�large�outdoor�component�and�there�is�likely�to�be�convergence�between�eventmanagement�and�outdoor.�Given�such�a�scenario,�large�scale�outdoor�companies�mayventure�into�event�management�and�vice-versa.�Further,�there�is�a�possibility�ofacquisitions�and�consolidation�in�the�industry,�and�players�need�to�be�well�prepared�for�thesame.�
212
Animation and VFX Industry
Driven�by�growth�in�the�global�market�for�animation�content�and�the�compelling
business�case�for�outsourcing,�the�Indian�animation�sector�has�been�on�a�rapid
growth�mode�over�the�last�few�years.�With�the�success�of�recent�Indian�animated
films�and�the�increase�in�the�number�of�children’s�channels,�animation�content
demand�in�the�domestic�market�is�growing�too.�We�expect�the�industry�to�grow�at
a�CAGR�of�approximately�18�percent,�over�the�next�five�years,�to�reach�INR�39
billion�by�2013,�as�most�of�the�underlying�growth�drivers�remain�strong.�
In�order�to�make�Indian�Animation�and�VFX�industry�globally�competitive�and
churning�out�products�for�domestic�as�well�as�global�audience,�the�industry�will
need�to�manage�the�following�key�challenges
• Absence of co production treaties: Countries�like�Korea,�China,�Singapore,
France�etc�have�enjoyed�Government�support�for�ingeniously�promoting�this
sector.�The�Government�assists�the�industry�for�the�development�of�robust
domestic�industry�and�to�explore�exports�avenues�through�co�production
treaties.�For�example,�France�has�a�fund�created�out�of�entertainment�tax,
which�supports�co-production�to�the�extent�of�25�–�40�percent,�with�a
condition�that�40�percent�of�the�production�to�be�done�in�France.6 India�has�no
such�exemptions�from�the�government�or�any�co�production�treaties�with
countries�such�as�France,�Korea,�Japan�etc.
• No restriction on networks for airing content: Presently�most�of�the
animated�content�downlinked�on�networks�is�sourced�from�the�overseas
market�and�generally�from�an�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.�According�to�CASBA�Korea�has
mandatory�local�content�programming�quota�for�movie�channels�30�percent
and�for�animation�channels�it�is�35�percent.7
• Lack of awareness: Countries�like�Japan,�Korea,�China�etc�provide�assistance
to�the�local�Animation�&�VFX�Industry�for�overseas�business�promotion.�Indian
companies�suffer�because�there�is�a�lack�of�international�awareness�about�the
potential�of�the�Indian�animation�and�VFX�industry�as�a�library�of�rich�original
content�and�a�hub�for�co�productions.
To�manage�these�challenges,�while�capitalizing�on�opportunities,�stakeholders
across�the�value�chain�will�need�to�take�further�action�to�unleash�the�true�growth
potential�in�the�sector.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
6�FICCI7�FICCI
213
At�an�industry�level,�some�important�initiatives�can�help�in�unlocking�growth
would�be:
• Indian�companies�creating�international�presence�through�acquisitions�/�joint
ventures�/�strategic�tie�ups�will�provide�access�to�the�front�end�and�transferring
back�end�production�to�India.
• While�capital�is�an�important�element�for�companies�increased�focus�on
creativity�through�implementation�of�processes,�systems�and�technology
management�will�hold�the�key�to�development�of�this�industry.
• With�an�increasing�focus�to�cut�back�on�production�costs,�Hollywood
companies�such�as�Pixar,�Disney�etc�would�be�attracted�to�the�Indian
animation�and�VFX�market.�For�example,�a�typical�production�budget�of
approximately�USD�150�million�in�the�US�could�be�reduced�in�low�cost
countries�such�as�India�to�approximately�USD�30�million.8
• Education�initiatives�such�as�the�growth�of�animation�and�VFX�education
institutes�will�supply�this�industry�with�the�required�talent�pool�to�create�IP�of
international�repute.
On�a�player�level,�companies�will�need�to�invest�in�increasing�the�scale�and�scope
of�their�activities�and�aim�at�creating�global�animation�properties.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Key�Action�Steps�for�Industry�Players�
Produce�animation�properties�with�auniversal,�global�appeal
A�world�class�animation�film�can�have�a�production�and�marketing�budget�of�over�USD�100million,9 and�the�revenues�necessary�to�recover�this�cost�can�only�be�earned�through�a�mix�ofdomestic�and�international�markets.�Therefore,�to�become�truly�global,�the�industry�will�need�tobuild�not�only�the�creative�capabilities�to�develop�animation�properties�and�story�conceptswhich�have�a�universal�appeal,�but�also�the�marketing�skills�and�relationships�to�pre-sell�theirfilms�in�international�markets�and�the�financial�muscle�to�take�a�project�from�pilot�tocompletion.�Aggressively�targeting�co-production�deals�with�international�studios�could�be�oneway�to�build�valuable�IP;�focusing�on�low-cost�films�with�local�storylines�and�characters�couldbe�another.�Further,�international�acquisitions�could�help�Indian�players�rapidly�enhance�theirskills.
Increase�scale�and�profitability
It�will�be�important�that�the�animation�studios�in�India�increase�the�scale�and�scope�of�activitiesthat�they�can�handle.��Some�progress�has�been�made�in�this�regard�in�the�past�few�years,�andseveral�Indian�players�are�recognized�internationally�for�world�class�infrastructure�and�highquality�talent.�In�order�to�support�this�move�up�the�value�chain,�Indian�animation�studios�wouldneed�to�extend�their�capabilities�from�television�to�film�content,�and�to�strengthen�theirpresence�in�pre-production�activities�such�as�storyboarding�and�character�modeling,�and�post-production�activities�such�as�visual�effects�and�compositing.
Continue�to�attract�outsourced�work
In�the�short�term,�outsourced�work�continues�to�be�the�primary�revenue�stream�of�theindustry.�Key�neighbouring�countries�and�competing�outsourcing�hubs�such�as�Singapore,Philippines�and�China�benefit�from�high�quality�infrastructure�and�strong�government�support,and�thus�players�must�work�hard�to�maintain�their�cost�advantage�without�compromising�onquality.�Animation�and�VFX�studios�need�to�develop�their�own�tools�and�processes�to�increasethe�efficiency�of�accomplishing�repetitive�tasks�while�maintaining�quality.
Invest�to�build�a�strong�talent�poolTo�build�a�strong�talent�pool�requires�developing�educational�infrastructure�keeping�in�mind�theprojected�demand�for�animators.�Thus,�to�ensure�a�good�talent�pool�in�both�quantity�andquality,�the�industry�players�will�have�to�invest�in�improving�the�education�infrastructure.
8�KPMG�Estimates9�KPMG�Estimates
214
Regulatory Wishlist
The�industry�is�looking�at�the�government�for�regulatory�support�in�some
important�areas:�
• Tax�holiday:�Animation�industry�is�covered�under�the�Software�Technology
Parks�of�India�(STPI)�society,�set�up�by�Ministry�of�Communication�&
Information.�STPI�holds�goods�for�an�‘outsourcing’�business�and�most
animation�studios�that�are�getting�benefited�from�STPI�have�to�ensure�an
export�commitment�of�more�than�85�percent.�As�a�result�many�Indian
animation�studios�wanting�to�produce�original�content-based�IP�and�use�art
and�talent�from�India�to�produce�animation�stories�for�India,�do�not�get�any
such�benefits.�The�classification�is�unviable�since�Indian�govt.�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�&�more
studios�working�on�foreign�content�and�is�leading�to�a�severe�lack�of�animated
Indian�stories�in�domestic�television�schedules.
• Service�Tax�relaxation:�Original�content�studios�developing�local�content�should
be�subject�to�a�much�lower�level�of�the�12.36�percent�levy�of�service�tax�to
enable�growth�during�the�intial�phase.
• Entertainment�tax:�The�entertainment�tax�in�India�varies�from�21�percent�to�a
high�of�125�percent�across�various�States�of�India�with�the�average�rate�of�tax
being�60�percent.10 High�incidence�of�taxation�adds�to�the�cost�of�operations
for�young�animation�companies.�Hence,�the�Indian�animation�industry�should
not�be�classified�in�the�same�league�as�the�live�action�film�category�that�has
already�achieved�industry�status.
• Government�Advertising:�Mandatory�share�in�government�advertising�to�the
sector
• Implementation��of�a�cap�on�airing�content�on�networks�across�the�country:
Implementation�of�a�cap�on�number�of�hours�of�licensed�content�that�can�be
aired�by�a�network�as�against�fresh�programming�in�the�country
• Raising�loans:�Considering�loans�extended�to�the�Animation�and�VFX�sector�as
‘priority�lending’
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
10�FICCI
215
Gaming
Video�games�have�been�a�popular�pastime�since�the�1970s.�There�was�a�time
when�the�global�gaming�market�was�dominated�by�the�ubiquitous�PC�games.�But
with�the�advent�of�newer�options�such�as�mobile,�console,�and�online�games,�the
gaming�market�and�its�dynamics�have�undergone�a�major�change�the�world�over.
PC�gaming�is�no�more�the�leader�in�the�worldwide�gaming�segment.��Mobile
gaming,�with�revenues�of�USD�4.5�billion11 in�2008,�has�become�the�fastest-
growing�segment�because�of�its�rising�popularity�amongst�gamers�and�the�advent
of�devices�such�as�the�2nd�generation�iPod�Touch�and�the�iPhone,�which�greatly
improve�on�the�mobile�gaming�experience.�
To�summarize,�going�forward,�the�main�challenges�for�the�sector�would�be:
• Skewed revenue sharing agreements with Mobile operators: Because�of
the�direct�billing�relationship�with�the�end�user,�operators�in�India�typically�get
60-70�percent�of�the�revenues�for�VAS�while�content�creators�get�only�15-20
percent.�This�puts�mobile�game�developers�at�a�disadvantage
• High customs duties and indirect taxes: These�make�legitimate�console
hardware�and�software�about�40�percent�more�expensive�than�grey�market
imports�and�therefore�encourage�piracy.
• Internet piracy: Piracy�is�and�will�continue�to�remain�a�big�challenge�for�PC
game�developers,�because�of�easy�availability�of�illegal�free�downloads�of
games�on�the�internet�through�P2P�sharing�services.
To�manage�these�challenges,�while�capitalizing�on�opportunities,�stakeholders
across�the�value�chain�will�need�to�take�further�action�to�unleash�the�true�growth
potential�in�the�sector.
At�an�industry�level,�some�important�initiatives�can�help�in�unlocking�growth
would�be:
• Developing�a�consensus�on�and�implementing�a�nation�wide�anti�piracy
campaign�jointly�with�law�enforcement�agencies�(for�conducting�raids)�and
Internet�service�providers�(for�blocking�access�to�illegal�online�game
downloads)��
• Pushing�the�government�towards�lowering�of�duties�–�such�as�custom�duties,
and�indirect�taxes�such�as�VAT�that�eat�into�games�companies�margins.
• Publishing�dedicated�gaming�publications,�organizing�gaming�events,�contests
etc.�can�go�a�long�way�help�in�creating�more�awareness�and�attracting�new
consumers�to�the�gaming�world.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
11�FICCI
216
At�a�player�level,�companies�will�need�to�focus�on�differentiating�the�content�on
their�radio�stations.�They�will�also�need�to�target�local�advertisers�and�increase
awareness�of�the�effectiveness�of�radio�as�a�local�advertisement�medium.
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
Key�Action�Steps�for�Industry�Players�
Developing�networks�around�games
Communities�do�exist�in�India�but�they�have�not�assumed�scale�similar�to�the�western�world.In�India,�communities�are�extensions�of�a�group�of�friends�or�family�members.�The�onlinecommunity�format�where�gamers�with�similar�interests�from�different�geographies�cometogether�is�still�at�a�nascent�stage�in�India.�Actively�developing�such�communities,�will�help�thegaming�companies�retain�loyal�gamers.
Brand�buildingBrand�building�through�sustained�advertising�will�be�important�to�ensure�greater�gamerstickiness
Exploring�alternate�revenue�streamsExploiting�the�potential�of�alternate�revenue�streams�such�as�in-game�advertising�andadvergames�will�also�be�important�to�augment�revenues
Regulatory Wishlist
The�industry�is�looking�at�the�government�for�regulatory�support�in�some
important�areas:�
• Recognition�of�industry�status�for�the�gaming�industry
• Relaxation�of�customs�duties�and�indirect�tax�regime
• Government�assistance�to�clamp�down�on�rampant��piracy�in�this�industry�
• Considering�loans�extended�to�the�gaming�sector�as�‘priority�lending’
217
©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�All�rights�reserved.
We�would�like�to�thank�all�those�who�have�contributed�and�shared�their�valuable�domain�insights�in�helping�us�put�thisreport�together.�
Images�courtesy�:�NDTV,�Star�India�Pvt.�Ltd,�Zee�TV,�Zee�News,�Dish�TV,�DNA,��Rajshri�Media�Pvt�Ltd,�Laqshya�OOH,�Colors,�Red�Chilies�Entertainment,�Tips,
Shemaroo�Entertainment�Pvt.�Ltd,�Next�Gen�Publishing,�Sony�BMG,�Zoom
in.kpmg.com
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The�information�contained�herein�is�of�a�general�nature�and�is�not�intended�to�address�the�circumstances�of�any�particular�individualor�entity.�Although�we�endeavor�to�provide�accurate�and�timely�information,�there�can�be�no�guarantee�that�such�information�isaccurate�as�of�the�date�it�is�received�or�that�it�will�continue�to�be�accurate�in�the�future.�No�one�should�act�on�such�informationwithout�appropriate�professional�advice�after�a�thorough�examination�of�the�particular�situation.
KPMG�in�India
Pradip KanakiaExecutive DirectorHead - Marketse-Mail: pkanakia@kpmg.comTel: +91 80 3980 6100
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