india media market to 2014 - kpmg - 2009

228
Intheinterval,butreadyfor thenextact FICCI-KPMGMedia&EntertainmentIndustryReport

Upload: xav9238

Post on 10-Apr-2015

385 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: India Media Market to 2014 - KPMG - 2009

In�the�interval,�but�ready�forthe�next�actFICCI-KPMG�Media�&�Entertainment�Industry�Report

Page 2: India Media Market to 2014 - KPMG - 2009

© 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.

Page 3: India Media Market to 2014 - KPMG - 2009

© 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.

Page 4: India Media Market to 2014 - KPMG - 2009

© 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

Page 5: India Media Market to 2014 - KPMG - 2009

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.

Page 6: India Media Market to 2014 - KPMG - 2009

© 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.

Page 7: India Media Market to 2014 - KPMG - 2009

© 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

Page 8: India Media Market to 2014 - KPMG - 2009
Page 9: India Media Market to 2014 - KPMG - 2009

Indian M&E Industry:

Page 10: India Media Market to 2014 - KPMG - 2009

The Growth Story

Page 11: India Media Market to 2014 - KPMG - 2009

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.

Page 12: India Media Market to 2014 - KPMG - 2009

©�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

Page 13: India Media Market to 2014 - KPMG - 2009

©�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

Page 14: India Media Market to 2014 - KPMG - 2009

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

Page 15: India Media Market to 2014 - KPMG - 2009

©�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

Page 16: India Media Market to 2014 - KPMG - 2009

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

Page 17: India Media Market to 2014 - KPMG - 2009

©�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

Page 18: India Media Market to 2014 - KPMG - 2009

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

Page 19: India Media Market to 2014 - KPMG - 2009

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

Page 20: India Media Market to 2014 - KPMG - 2009

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

Page 21: India Media Market to 2014 - KPMG - 2009

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

Page 22: India Media Market to 2014 - KPMG - 2009

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

Page 23: India Media Market to 2014 - KPMG - 2009

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

Page 24: India Media Market to 2014 - KPMG - 2009

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

Page 25: India Media Market to 2014 - KPMG - 2009

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

Page 26: India Media Market to 2014 - KPMG - 2009

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

Page 27: India Media Market to 2014 - KPMG - 2009

©�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

Page 28: India Media Market to 2014 - KPMG - 2009

©�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

Page 29: India Media Market to 2014 - KPMG - 2009

©�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)

Page 30: India Media Market to 2014 - KPMG - 2009

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

Page 31: India Media Market to 2014 - KPMG - 2009

©�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

Page 32: India Media Market to 2014 - KPMG - 2009

©�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.

Page 33: India Media Market to 2014 - KPMG - 2009

©�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

Page 34: India Media Market to 2014 - KPMG - 2009

©�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

Page 35: India Media Market to 2014 - KPMG - 2009

©�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

Page 36: India Media Market to 2014 - KPMG - 2009

©�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

Page 37: India Media Market to 2014 - KPMG - 2009

“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

Page 38: India Media Market to 2014 - KPMG - 2009

©�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

Page 39: India Media Market to 2014 - KPMG - 2009

©�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

Page 40: India Media Market to 2014 - KPMG - 2009

©�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

Page 41: India Media Market to 2014 - KPMG - 2009

©�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

Page 42: India Media Market to 2014 - KPMG - 2009

©�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

Page 43: India Media Market to 2014 - KPMG - 2009

©�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

Page 44: India Media Market to 2014 - KPMG - 2009

©�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

Page 45: India Media Market to 2014 - KPMG - 2009

©�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

Page 46: India Media Market to 2014 - KPMG - 2009

©�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

Page 47: India Media Market to 2014 - KPMG - 2009

©�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

Page 48: India Media Market to 2014 - KPMG - 2009

©�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

Page 49: India Media Market to 2014 - KPMG - 2009

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

Page 50: India Media Market to 2014 - KPMG - 2009

©�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

Page 51: India Media Market to 2014 - KPMG - 2009

©�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

Page 52: India Media Market to 2014 - KPMG - 2009

©�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

Page 53: India Media Market to 2014 - KPMG - 2009

©�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

Page 54: India Media Market to 2014 - KPMG - 2009

©�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

Page 55: India Media Market to 2014 - KPMG - 2009

©�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

Page 56: India Media Market to 2014 - KPMG - 2009

©�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

Page 57: India Media Market to 2014 - KPMG - 2009

©�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

Page 58: India Media Market to 2014 - KPMG - 2009

©�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

Page 59: India Media Market to 2014 - KPMG - 2009

©�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

Page 60: India Media Market to 2014 - KPMG - 2009

©�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

Page 61: India Media Market to 2014 - KPMG - 2009

©�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

Page 62: India Media Market to 2014 - KPMG - 2009

©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.

Page 63: India Media Market to 2014 - KPMG - 2009

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.

Page 64: India Media Market to 2014 - KPMG - 2009

©�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

Page 65: India Media Market to 2014 - KPMG - 2009

©�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

Page 66: India Media Market to 2014 - KPMG - 2009

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

Page 67: India Media Market to 2014 - KPMG - 2009

©�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

Page 68: India Media Market to 2014 - KPMG - 2009

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

Page 69: India Media Market to 2014 - KPMG - 2009

©�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

Page 70: India Media Market to 2014 - KPMG - 2009

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

Page 71: India Media Market to 2014 - KPMG - 2009

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

Page 72: India Media Market to 2014 - KPMG - 2009

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

Page 73: India Media Market to 2014 - KPMG - 2009

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

Page 74: India Media Market to 2014 - KPMG - 2009

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

Page 75: India Media Market to 2014 - KPMG - 2009

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

Page 76: India Media Market to 2014 - KPMG - 2009

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

Page 77: India Media Market to 2014 - KPMG - 2009

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

Page 78: India Media Market to 2014 - KPMG - 2009

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

Page 79: India Media Market to 2014 - KPMG - 2009

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

Page 80: India Media Market to 2014 - KPMG - 2009

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

Page 81: India Media Market to 2014 - KPMG - 2009

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

Page 82: India Media Market to 2014 - KPMG - 2009

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

Page 83: India Media Market to 2014 - KPMG - 2009

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

Page 84: India Media Market to 2014 - KPMG - 2009

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

Page 85: India Media Market to 2014 - KPMG - 2009

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

Page 86: India Media Market to 2014 - KPMG - 2009

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

Page 87: India Media Market to 2014 - KPMG - 2009

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

Page 88: India Media Market to 2014 - KPMG - 2009

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

Print

• 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

Page 89: India Media Market to 2014 - KPMG - 2009

©�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

Page 90: India Media Market to 2014 - KPMG - 2009

©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.

Page 91: India Media Market to 2014 - KPMG - 2009

©�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

Page 92: India Media Market to 2014 - KPMG - 2009

©�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

Page 93: India Media Market to 2014 - KPMG - 2009

©�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

Page 94: India Media Market to 2014 - KPMG - 2009

©�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

Page 95: India Media Market to 2014 - KPMG - 2009

©�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

Page 96: India Media Market to 2014 - KPMG - 2009

©�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

Page 97: India Media Market to 2014 - KPMG - 2009

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

Page 98: India Media Market to 2014 - KPMG - 2009

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

Page 99: India Media Market to 2014 - KPMG - 2009

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

Page 100: India Media Market to 2014 - KPMG - 2009

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

Page 101: India Media Market to 2014 - KPMG - 2009

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

Page 102: India Media Market to 2014 - KPMG - 2009

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

Page 103: India Media Market to 2014 - KPMG - 2009

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

Page 104: India Media Market to 2014 - KPMG - 2009

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

Page 105: India Media Market to 2014 - KPMG - 2009

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

Page 106: India Media Market to 2014 - KPMG - 2009

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

Page 107: India Media Market to 2014 - KPMG - 2009

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

Page 108: India Media Market to 2014 - KPMG - 2009

©�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.

Print

• 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

Page 109: India Media Market to 2014 - KPMG - 2009

©�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

Page 110: India Media Market to 2014 - KPMG - 2009

©�2009�KPMG,�an�Indian�Partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firms�affiliated�with�KPMG�International,�a�Swisscooperative.�Allrightsreserved.

Page 111: India Media Market to 2014 - KPMG - 2009

©�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

Page 112: India Media Market to 2014 - KPMG - 2009

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

Page 113: India Media Market to 2014 - KPMG - 2009

©�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

Page 114: India Media Market to 2014 - KPMG - 2009

©�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

Page 115: India Media Market to 2014 - KPMG - 2009

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

Page 116: India Media Market to 2014 - KPMG - 2009

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

Page 117: India Media Market to 2014 - KPMG - 2009

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

Page 118: India Media Market to 2014 - KPMG - 2009

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

Page 119: India Media Market to 2014 - KPMG - 2009

©�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

Page 120: India Media Market to 2014 - KPMG - 2009

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

Page 121: India Media Market to 2014 - KPMG - 2009

©�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

Page 122: India Media Market to 2014 - KPMG - 2009

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

Page 123: India Media Market to 2014 - KPMG - 2009

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

Page 124: India Media Market to 2014 - KPMG - 2009

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

Page 125: India Media Market to 2014 - KPMG - 2009

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

Page 126: India Media Market to 2014 - KPMG - 2009

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

Page 127: India Media Market to 2014 - KPMG - 2009

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

Page 128: India Media Market to 2014 - KPMG - 2009

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

Page 129: India Media Market to 2014 - KPMG - 2009

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

Page 130: India Media Market to 2014 - KPMG - 2009

©�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

Page 131: India Media Market to 2014 - KPMG - 2009

©�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

Page 132: India Media Market to 2014 - KPMG - 2009

©�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

Page 133: India Media Market to 2014 - KPMG - 2009

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.

Page 134: India Media Market to 2014 - KPMG - 2009

©�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

Page 135: India Media Market to 2014 - KPMG - 2009

©�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

Page 136: India Media Market to 2014 - KPMG - 2009

©�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

Page 137: India Media Market to 2014 - KPMG - 2009

©�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

Page 138: India Media Market to 2014 - KPMG - 2009

©�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

Page 139: India Media Market to 2014 - KPMG - 2009

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

Page 140: India Media Market to 2014 - KPMG - 2009

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

Page 141: India Media Market to 2014 - KPMG - 2009

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

Page 142: India Media Market to 2014 - KPMG - 2009

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

Page 143: India Media Market to 2014 - KPMG - 2009

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

Page 144: India Media Market to 2014 - KPMG - 2009

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

Page 145: India Media Market to 2014 - KPMG - 2009

©�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

Page 146: India Media Market to 2014 - KPMG - 2009

©�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.

Page 147: India Media Market to 2014 - KPMG - 2009

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

Page 148: India Media Market to 2014 - KPMG - 2009

©�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

Page 149: India Media Market to 2014 - KPMG - 2009

©�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

Page 150: India Media Market to 2014 - KPMG - 2009

©�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

Page 151: India Media Market to 2014 - KPMG - 2009

©�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

Page 152: India Media Market to 2014 - KPMG - 2009

©�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

Page 153: India Media Market to 2014 - KPMG - 2009

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

Page 154: India Media Market to 2014 - KPMG - 2009

©�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

Page 155: India Media Market to 2014 - KPMG - 2009

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

Page 156: India Media Market to 2014 - KPMG - 2009

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

Page 157: India Media Market to 2014 - KPMG - 2009

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

Page 158: India Media Market to 2014 - KPMG - 2009

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

Page 159: India Media Market to 2014 - KPMG - 2009

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

Page 160: India Media Market to 2014 - KPMG - 2009

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

Page 161: India Media Market to 2014 - KPMG - 2009

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

Page 162: India Media Market to 2014 - KPMG - 2009

©�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

Page 163: India Media Market to 2014 - KPMG - 2009

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

Page 164: India Media Market to 2014 - KPMG - 2009

©�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

Page 165: India Media Market to 2014 - KPMG - 2009

©�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

Page 166: India Media Market to 2014 - KPMG - 2009

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

Page 167: India Media Market to 2014 - KPMG - 2009

©�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

Page 168: India Media Market to 2014 - KPMG - 2009

©�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

Page 169: India Media Market to 2014 - KPMG - 2009

©�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

Page 170: India Media Market to 2014 - KPMG - 2009

©�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

Page 171: India Media Market to 2014 - KPMG - 2009

©�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

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

Page 172: India Media Market to 2014 - KPMG - 2009

©�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

Page 173: India Media Market to 2014 - KPMG - 2009

©�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

Page 174: India Media Market to 2014 - KPMG - 2009

©�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

Page 175: India Media Market to 2014 - KPMG - 2009

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

Page 176: India Media Market to 2014 - KPMG - 2009

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

Page 177: India Media Market to 2014 - KPMG - 2009

©�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

Page 178: India Media Market to 2014 - KPMG - 2009

©�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

Page 179: India Media Market to 2014 - KPMG - 2009

©�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

Page 180: India Media Market to 2014 - KPMG - 2009

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

Page 181: India Media Market to 2014 - KPMG - 2009

©�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

Page 182: India Media Market to 2014 - KPMG - 2009

©�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

Page 183: India Media Market to 2014 - KPMG - 2009

©�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

Page 184: India Media Market to 2014 - KPMG - 2009

©�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

Page 185: India Media Market to 2014 - KPMG - 2009

©�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.

Page 186: India Media Market to 2014 - KPMG - 2009

©�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

Page 187: India Media Market to 2014 - KPMG - 2009

©�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

Page 188: India Media Market to 2014 - KPMG - 2009

©�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

Page 189: India Media Market to 2014 - KPMG - 2009

©�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

Page 190: India Media Market to 2014 - KPMG - 2009

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

Page 191: India Media Market to 2014 - KPMG - 2009

©�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

Page 192: India Media Market to 2014 - KPMG - 2009

©�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

Page 193: India Media Market to 2014 - KPMG - 2009

©�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

Page 194: India Media Market to 2014 - KPMG - 2009

©�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

Page 195: India Media Market to 2014 - KPMG - 2009

©�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

Page 196: India Media Market to 2014 - KPMG - 2009

©�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

Page 197: India Media Market to 2014 - KPMG - 2009

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

Page 198: India Media Market to 2014 - KPMG - 2009

©�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

Page 199: India Media Market to 2014 - KPMG - 2009

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

Page 200: India Media Market to 2014 - KPMG - 2009

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

Page 201: India Media Market to 2014 - KPMG - 2009

Way Forward: Sector

Page 202: India Media Market to 2014 - KPMG - 2009

wise key action steps

Page 203: India Media Market to 2014 - KPMG - 2009

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.

Page 204: India Media Market to 2014 - KPMG - 2009

©�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

Page 205: India Media Market to 2014 - KPMG - 2009

©�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

Page 206: India Media Market to 2014 - KPMG - 2009

©�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

Page 207: India Media Market to 2014 - KPMG - 2009

©�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

Page 208: India Media Market to 2014 - KPMG - 2009

©�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

Page 209: India Media Market to 2014 - KPMG - 2009

©�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

Page 210: India Media Market to 2014 - KPMG - 2009

©�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

Page 211: India Media Market to 2014 - KPMG - 2009

• 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

Page 212: India Media Market to 2014 - KPMG - 2009

©�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

Page 213: India Media Market to 2014 - KPMG - 2009

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

Page 214: India Media Market to 2014 - KPMG - 2009

©�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

Page 215: India Media Market to 2014 - KPMG - 2009

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

Page 216: India Media Market to 2014 - KPMG - 2009

©�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

Page 217: India Media Market to 2014 - KPMG - 2009

©�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

Page 218: India Media Market to 2014 - KPMG - 2009

©�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

Page 219: India Media Market to 2014 - KPMG - 2009

©�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

Page 220: India Media Market to 2014 - KPMG - 2009

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

Page 221: India Media Market to 2014 - KPMG - 2009

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

Page 222: India Media Market to 2014 - KPMG - 2009

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

Page 223: India Media Market to 2014 - KPMG - 2009

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

Page 224: India Media Market to 2014 - KPMG - 2009

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

Page 225: India Media Market to 2014 - KPMG - 2009

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

Page 226: India Media Market to 2014 - KPMG - 2009

©�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.

Page 227: India Media Market to 2014 - KPMG - 2009

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

Page 228: India Media Market to 2014 - KPMG - 2009

in.kpmg.com

MumbaiKPMG House, Kamala Mills Compound448, Senapati Bapat Marg,Lower Parel,Mumbai 400 013Tel: +91 22 3989 6000Fax: +91 22 3983 6000

DelhiDLF Building No. 10,8th Floor, Tower B,DLF Cyber City, Phase 2, Gurgaon 122 002Tel: +91 124 307 4000Fax: +91 124 254 9101

BangaloreSolitaire139/26, 3rd Floor,Inner Ring Road, Koramangala,Bangalore 560 071Tel: +91 80 3980 6000Fax: +91 80 3980 6999

ChennaiNo.10 Mahatma Gandhi RoadNungambakkamChennai 600 034Tel: +91 44 3914 5000Fax: +91 44 3914 5999

Hyderabad8-2-618/2Reliance Humsafar, 4th FloorRoad No.11, Banjara HillsHyderabad - 500 034Tel: +91 40 6630 5000Fax: +91 40 6630 5299

KolkataPark Plaza, Block F, 6th Floor71 Park StreetKolkata 700 016Tel: +91 33 4403 4000Fax: +91 33 4403 4199

Pune703, Godrej CastlemaineBund GardenPune 411 001Tel: +91 20 3058 5764/65Fax: +91 20 3058 5775

©�2009�KPMG,�an�Indian�Partnership�and�a�member�firmof�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.All�rights�reserved.KPMG�and�the�KPMG�logo�are�registered�trademarks�ofKPMG�International,�a�Swiss�cooperative.�Printed�in�India.

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: [email protected]: +91 80 3980 6100

Rajesh JainExecutive DirectorHead - Information, Communications &Entertainmente-Mail: [email protected]: +91 22 3983 5300

Jehil ThakkerExecutive DirectorHead - Media & Entertainmente-Mail: [email protected]: +91 22 3983 6232

Nandita da CunhaAssociate DirectorBusiness Advisorye-Mail: [email protected]: +91 22 3983 6294

Samik RayAssociate DirectorCorporate Financee-Mail: [email protected]: +91 22 3983 5347

Nisha BainsAssociate DirectorMedia & Entertainmente-Mail: [email protected]: +91 22 3983 6224

KPMG�Contacts

Amita SarkarFICCI Federation House 1 Tansen Marg ,New Delhi - 110001e-Mail: [email protected]: +91 11 2335 4285

Leena JaisaniFICCI Federation House 1 Tansen Marg ,New Delhi - 110001e-Mail: [email protected]: +91 11 2376 6967

Manish AhujaFICCI Federation House 1 Tansen Marg ,New Delhi - 110001e-Mail: [email protected]: +91 11 2331 6527

FICCI�Contacts