May 1, 2010
By Kamlu Rupani
The Indian media and entertainment (M&E) industry currently valued at US$13.17 billion is projected to grow at a compound annual growth rate (CAGR) of 13% over the next fi ve years. The industry is expected to reach US$24.57 billion by 2014, according to a report released by accounting group KPMG. According to the report, the television industry is projected to grow at the rate of 15% over 2010- 14 and reach a size of US$11.69 billion by 2014. This growth is expected to be driven by a rise in subscription and advertisement revenues for the industry. The television industry, which is currently pegged at US$5.73 billion, has been growing at the rate of 6.8% since 2008. The industry has seen growth in TV penetration and an increase in the number of digital homes, leading to a rise in subscription revenues for distributors and broadcasters. Though the average time spent on watching television remained largely flat, the number of TV advertisers increased from 8,500 in 2008 to 9,400 in 2009. Out of this, 4,600 were new advertisers on the medium. Apart from that, TV’s share of ad spend was 40% in 2009, indicating its nature as a powerful medium for advertisers. Rajesh Jain, head media and entertainment, KPMG India, said, “2009 saw the M&E industry growing through a tough phase as advertising revenues were impacted in line with the challenging economic scenario. However, the subscription revenues continued to grow. The untapped potential for growth in media reach, impact of digitisation and convergence, better consumer understanding, sustained efforts in innovation and enhanced penetration of regional markets all augur well for the industry.” The report also highlights that the growing potential of the regional markets, penetration of newer digital TV distribution platforms, increasing competition, innovation across product, processes, marketing and distribution models and growing importance of pay audiences were some of the key highlights of the previous year. However, it was DTH sector that proved to be a successful medium and helped in increasing the pay TV subscriber base even during challenging market conditions. However the report emphasised that to see positive results taking shape, the Indian M&E industry was in need of improved institutional mechanisms to ensure greater transparency and strong enforcement of the existing laws. An increase in documentation, awareness of rights among people and adoption of international practices were positive steps towards adopting a new legal and fi nancial framework for the industry. Executive director (M & E) of the market research firm, KPMG, Jehil Thakkar stated the pressing need for a financial framework for the industry in the wake of increasing activity like Foreign Direct Investment (FDI) flows, mergers and acquisitions, private equity deals in the entertainment sector. “Although India was increasingly becoming compliant with the global legislations, there was a need to open the doors to give remake rights and obtain picture licenses,” said consultant Dina Dattani. Besides the obvious benefits of avoiding legal hassles, it would also lead to opportunities for greater funding. Patricia Myer, partner, MS & K, welcomed the change in selling of rights of Bollywood films to Hollywood, which indicated greater acceptability of Indian films. For this trend to continue there was a need to ensure better legislative processes and resolving the problem of the change of titles. Bobby Bedi, managing director of Kaleidoscope Entertainment, feels the changing financing model of the Indian film industry has revamped the process of filmmaking. With the fi lm sector accorded industry status, banks, corporates and film studios were coming in with investments. However, he emphasised that the growth of newer models of financing would overtake the traditional models only if the risks were covered through the creation of a robust and more stable financial framework. Karan Ahluwalia, executive vice president & country head, (Media & Entertainment, Fine Arts, Luxury, Sports Banking) of YES Bank, disclosed the rising appetite of the banking sector to lend to the media business. He said there should be actualisation in terms of newer products such as syndicated bank film financing structure. He pointed out that the adoption of International Financial Reporting Standards (IFRS) would lead to greater transparency and discipline, which in turn would help acquire more support from the banking sector. On the adoption of international practices in India, Ashni Parekh, legal consultant, said these would surely benefit India in the long run. She talked about the advantages arising out of the amendment to the Copyright Act, which was underway. While the broadcasting industry is in favour of establishing an independent and autonomous regulator for the sector, which would spearhead India in the new media space, it would want selfregulation as far as content code and policing issues are concerned. The assessment was based on the industry’s feedback from the recently concluded FICCI Frames 2010 conference. More than 600 representatives from the broadcast sector attended the event. Top decision-makers and industry representatives deliberated on the pressing issues relating to the broadcast sector. Amit Mitra, secretary-general of FICCI, said while big broadcasters have their own content code, all stakeholders should come to an agreement with the code of this nature developed by the Indian Broadcasting Foundation (IBF) for its members. Weak infrastructure is an area which needed to be looked at by the government. Efforts also had to be made to improve the reportage of cable subscription in the country. Further, a clear roadmap from the government on the digitalisation process would make a positive impact on the sector. In order to enhance the technical aspects of the Indian film industry and to increase the trend of animation and gaming, the ministry also had plans to set up a national centre for animation and gaming industry at an initial investment of US$115,000. The need for a single-window clearance for producers reemerged as a topic. Veteran media professional, Ravi Gupta, said, “The last thing a producer needs is to have to go from the state to the central government, to defence and archaeology departments and railway departments and so on, only to find that once he has set up, some authority comes along and disallows shooting saying some licenses are missing. We need reforms for people to shoot in India. Just being cheaper and offering good landscapes is not enough.” This issue was brought to the fore at the Cinemascapes conference when filmmaker Shekhar Kapoor pointed out the significance of locations to producers and also how producers helped destinations gain large-scale visibility. Cinemascapes is an annual convention aimed at creating alliances between Indian producers and potential locations including destinations and hotels. It also includes a forum and business sessions to debate issues between the film industry, locations and the government. Kapoor cited the multi-Oscar winning movie Slumdog Millionaire as a successful example of the importance of a film’s location and the role that backdrop and environment played in allowing the film to tell its story. In various interviews, director Danny Boyle had related how his interaction with the locals and the environment’s representation in the film was key to the success of the film. Filmmakers lamented that while overseas destinations tried to woo Indian producers, there was little assistance from the Indian authorities towards India’s fi lmmaking industry. “The infrastructure is not adequate and there is no support from the local government and from the local police to control crowds, or any facility to obtain permissions and licenses. We need a much longer lead time to shoot in India as a lot of time is lost in obtaining permissions and licenses,” said renowned filmmaker Yash Chopra. In response to Chopra’s comments, Maharaja Arvind Singh Ji Mewar of Rajastan remarked, “Unfortunately, films are considered no more than entertainment and, sadly, its contribution to the economy and to employment is overlooked. If this dimension could be projected to the government by filmmakers, it could result in a change in attitude.” Producer Kuldeep Sinha went on to suggest that approvals should be all encompassing and government controlled locations could be made available to producers at no hire charge. He also pointed out the duplicity in permission requirements for news shooting (where there is no need for permissions) and film shooting (which entails an endless list of permissions required). While domestic locations presented a host of licensing problems, thus sending producers overseas, producers claim that shooting overseas often leaves a hole in their pockets, particularly in European destinations. However, film commissions in these countries were more than willing to offer reduction in costs, free shooting in some areas, assistance in obtaining permissions etc., to offer some relief to producers. Meanwhile, other industry issues raised included piracy and high entertainment tax in some states – some as high as 40%. Information & Broadcasting minister Ambika Soni praised the industry on its proactive approach to solving problems and expressed her desire to introduce positive reforms to aid the industry in solving its issues. “I sincerely appreciate the film industry’s depiction of the plurality of India and therefore accelerating tourism over the years. I do believe in the industry’s role in creating employment,” she said. Minister Soni explained that a meeting had already been called between individual state Information & Broadcasting ministers to discuss issues with piracy regarded as the first on the agenda She also added that a tax structure was being planned, termed as a ‘general sales tax’ which would address the taxation issues. Archiving of old films was another concern that the industry put forward suggesting that the treasure of archival films could be lost due to lack of storage facilities and maintenance. To this minister Soni remarked, “We have identifi ed 8,000 films to be archived out of which 7,000 have already been digitised and restoration work has already begun on those that have been digitized. A temperature-controlled facility in Pune for these has already been established.” If there were any doubts about the importance of the Indian media and entertainment industry, they were dispelled when minister Soni revealed government plans to set up a national museum for Indian cinema by 2013 to commemorate the centenary of the film industry. “We are committed to the national heritage mission and will be celebrating 100-years of Indian cinema in 2013 for which we are setting up a national museum of Indian cinema in Mumbai … we have already allocated US$1.45 million for the project,” said Soni.