Entertainment poised for big growth

The Indian entertainment industry is expected to record a 17 per cent compound annual growth rate to reach a revenue level of Rs.42,300 crore in 2008 from the Rs.19,200 crore recorded in 2003, a according to a FICCI-Ernst & Young study titled 'The Indian Entertainment Industry: Emerging Trends and Opportunities' presented at the Ficci-Frames meeting in Mumbai on 17 March 2004.

In 2003 the industry grew 15 per cent to Rs 19,200 crore, outperforming the economy, as a result of an increase in TV viewership and improved realisations from subscriptions. The study identifies an increase in viewership and realisations from film exhibitions as a primary driver for the growth.

The study says rationalisation of entertainment tax and extension of concessions offered to multiplexes would accelerate growth. A common ticketing platform for film tickets and a re-look at the current licence fee regime for FM radio players would also help provide a conduce environment for the industry, the study says. The FICCI-E&Y study also calls for the government to empower a central body that would issue licences to cable operators, based on mandatory information such as entertainment duty registration, service tax and income tax registration and details of subscriber base.

The report says the changing distribution landscape, a key industry fundamental, is propelling growth across all segments. The steps taken towards addressability in a highly fragmented cable television market, introduction of direct-to-home, or DTH, services; the multiplex boom, the experimentation with digital cinema to expedite film exhibition in semi-urban/ rural markets and FM radio, will spur growth in the sector.

"An increasing focus on the distribution chain, with a view to improve transparency an accountability will enable fair sharing of revenues across the value chain and foster growth," the report says. According to the report, the evolving efficiencies in distribution, better use of technology, consolidation, progressive policy initiatives to attract new players, rationalisation of entertainment tax in some states, infrastructure sops for spurring exhibition infrastructure will provide a fillip to the industry.

The key trends seem to be the change in the distribution set-up across all segments and consolidation through vertical and horizontal alignments through players straddling segments from films to television film producers getting into distribution, and film distributors getting into the exhibition space, the report adds.

A robust macro economic environment with GDP target at an annual 8 per cent growth will not only ensure a conducive environment for the Indian entertainment industry to grow, but also result in an increased demand for entertainment.

Films
According to the FICCI-E&Y report, the year 2003 was a good year for the Indian film industry. As many as 16 Bollywood films grossed more than Rs 10 crore from domestic exploitation compared to13 films in the previous year. Since a good proportion of these were medium to low budget affairs, the return on investment ratio was also higher.

Revenues from international markets have been impressive, with four films crossing the $2-million mark in gross collections from the US and UK markets. The total revenues of the industry in 2003 are estimated at Rs.4,500 crore, and expected to grow at a compounded annual growth rate of 18 per cent to Rs 10,100 crore ($2,244 million) by 2008.

The key growth drivers in this segment are an increase in the number of multiplexes, the advent of digital technology, creating films as brands through corporate tie-ups, merchandising, etc., and corporatisation, with producers adopting a more structured approach to film production

Television
With approximately 8.5 crore television households, India is the third largest television market in the world behind China and the US. Of the total TV households, 4.4 crore households receive cable television services.

From a single public service broadcaster, Indian television has grown into a thriving industry with over 300 channels being beamed across the Indian footprint. Revenues from television are expected to grow at a compounded annual growth rate of 17 per cent over the next five years to gross Rs.28,852 crore ($6,411 million) by 2008, and a significant portion of this growth is expected from the subscription stream.

Cable television reaches around 50 per cent of the total TV households (and only 20 per cent of total households in the country). A survey conducted by Ernst & Young indicated that a "strong cable distribution system" is the most pertinent driver for growth, with more than 80 per cent of respondents endorsing this view.

The implementation of the conditional access system (CAS) dominated headlines for the most part of the year. Thought the intentions were good, implementation was half-hearted. As a result, after more that one year of introduction of the regulation, it appears that nobody wants CAS — yet everyone needs it — to bring choice to the viewer, transparency for the broadcaster and the multi-system operators, revenues for the government and fair sharing of revenues across the value chain.

Notwithstanding the fact that CAS has proved to be a non-starter, the amount of time, effort and money invested by the various stakeholders in the industry indicates that the industry has felt the need to organise and strengthen the cable distribution leg. The launch of DTH opens up a new era for satellite television in India — it eliminates the need for a 'last mile' operator, gives consumers greater choice, increases transparency and multiplies product offerings. Other technologies on the horizon, such as wireless, will bypass the physical form of distribution and are expected to be highly scalable.