Analysis_of_Media_Sector

Overview The Indian Media & Entertainment (M&E) industry is highly driven by strong consumption in non-metro and small cities, intense emergence of regional media and burgeoning new media businesses and formats. According to a report jointly prepared by KPMG and an industry body, the industry registered a growth of 12 per cent in 2011 over 2010. While television (TV) retains its top slot as an entertainment medium, segments like animation, VFX, digital media and gaming are up-coming as major mediums. Multiple movies crossed Rs 100 crore (US$ 20.04 million)-business in domestic theatrical collections and Rs 30 crore (US$ 6 million) mark in Cable & Satellite (C&S) rights. Advertising spends across all media accounted for 41 per cent of the overall M&E industry revenues, aggregating to Rs 300 billion (US$ 6 billion) while advertising revenues witnessed a growth of 13 per cent in 2011. Television and Digitisation Television continues to be the most prominent entertainment medium in the Indian M&E industry. As per the report (by KPMG and another industry body), television would account for almost half of the Indian M&E industry revenue and would also be over twice the size of print media (the second largest media sector) by 2015. While the current level of penetration is estimated at around 60 per cent, there is still a lot of room for expansion on Indian TV landscape. The report further estimates that pay-TV subscription revenue will increase from 65 per cent in 2011 to 69 per cent by 2016. Moreover, TV accounted for Rs 329 billion (US$ 6.6 billion) of revenues in overall M&E industry in 2011 and is estimated to grow at a CAGR of 17 per cent over 2011-16 to touch Rs 735 billion (US$ 14.73 billion) in 2016. Indian television industry has undergone many changes over the past decade, majorly due to the introduction of digitised modes which include digital cable, direct to home (DTH) and IPTV. This has not only transformed the business models for the stakeholders, but has also facilitated more choices and convenience to consumers. At present India's DTH subscriber base is totalled at 45 million. India's top four metros-Delhi, Mumbai, Chennai and Kolkata-will replace all analog television networks with digital transmission from July 1, 2012. Radio The radio industry in India has around 36 FM radio operators and is estimated at Rs 1,200 crore (US$ 240.46 million). Emergence of regional media in a big way has driven the growth of Indian radio segment. According to an industry report, radio is expected to display a healthy growth rate in the years to come. After the advent of Phase 3, the industry will experience another growth wave after the implementation of awaited policies like copyright for radio and the roll out of 4G. Internet and Mobile Entertainment Internet has emerged as one of the strongest entertainment mediums owing to increasing internet penetration, higher awareness and changing demographics in the country. Not only for sending mails, watching videos and business related transactions, internet is also being used for intensive shopping by the Indian buyers. Emergence of internet retailing and e-commerce as a completely new space is driving the growth of number of online shoppers. As a result, the internet retailing companies are getting attracted towards Indian markets which are poised to grow leaps-and-bounds in the years to come. There are about 17 million online shoppers in India and the number is projected to grow over three times in the years ahead. According to a recent finding, 72 per cent of all mobile internet users in India use their cell-phones as their 'exclusive or primary' instrument to access the web. The mobile phone comes handy as compared to other media and hence emerged as the most preferred medium for variety of activities. These included entertainment (41 per cent on mobile compared to 26 per cent on television), information access (58 per cent on mobile compared to 20 per cent on television), communication (72 per cent on mobile compared to 16 per cent on desktop and laptops) and shopping or searching for products online (27 per cent on mobile compared to 19 per cent on desktop and laptops). Thus, 'internet on the go' is the new mantra for today's youth and the companies have clearly understood this as well and are making efforts to cater to this demand. Newspaper Rising literacy levels and low print media penetration offer significant potential for growth in Indian newspaper industry. Growing regional markets are driving the pace of print media that registered a growth of 10 per cent in 2010 and is expected to follow the similar pace till 2015. Current position of media sector Growth of the industry in 2006-10 | | | | | | | | | | | | | INR billion | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR |   |   |   |   |   |   |   | Television | 191.2 | 223.9 | 244.7 | 265.5 | 306.5 | 12.5% | % change |   | 17.1% | 9.3% | 8.5% | 15.4% |   | Film | 84.5 | 96 | 107 | 95 | 87.5 | 0.9% | % change |   | 13.6% | 11.5% | -11.2% | -7.9% |   | Print | 128 | 149 | 162 | 161.5 | 178.7 | 8.7% | % change |   | 16.4% | 8.7% | -0.3% | 10.7% |   | Radio | 5 | 6.9 | 8.3 | 9 | 10.8 | 21.2% | % change |   | 38.0% | 20.3% | 8.4% | 20.0% |   | Internet | 1.6 | 2.7 | 5 | 6 | 7.7 | 48.1% | % change |   | 68.8% | 85.2% | 20.0% | 28.3% |   | OOH | 10 | 12.5 | 15 | 12.5 | 14 | 8.8% | % change |   | 25.0% | 20.0% | -16.7% | 12.0% |   | Animation and Gaming | 12.6 | 15.7 | 19.6 | 23.8 | 31.3 | 25.5% | % change |   | 24.6% | 24.8% | 21.4% | 31.5% |   | Music | 7.3 | 7.6 | 6.9 | 7.5 | 9.5 | 6.8% | % change |   | 4.1% | -9.2% | 8.7% | 26.7% |   |   |   |   |   |   |   |   | Total | 440.2 | 514.3 | 568.5 | 580.8 | 646 | 10.1% | % change |   | 16.8% | 10.5% | 2.2% | 11.2% |   | India recorded one of the highest growths in the world growing at 11.2% in 2010. The negative growth in the film segment for a second year in a row was largely due to the lack of quality content and the closing-down of single-screen theatres. Growth of the Indian advertising industry in 2006-10 Growth of the Indian advertising industry in 2006-10 INR billion | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR |   |   |   |   |   |   |   | Television advertising | 66.2 | 78 | 84.2 | 89 | 101.5 | 11.3% | % change |   | 17.8% | 7.9% | 5.7% | 14.0% |   | Print advertising | 78 | 94 | 103.5 | 100 | 113.5 | 9.8% | % change |   | 20.5% | 10.1% | -3.4% | 13.5% |   | Radio advertising | 5 | 6.9 | 8.3 | 9 | 10.8 | 21.2% | % change |   | 38.0% | 20.3% | 8.4% | 20.0% |   | Internet advertising | 1.6 | 2.7 | 5 | 6 | 7.7 | 48.1% | % change |   | 68.8% | 85.2% | 20.0% | 28.3% |   | OOH | 10 | 12.5 | 15 | 12.5 | 14 | 8.8% | % change |   | 25.0% | 20.0% | -16.7% | 12.0% |   |   |   |   |   |   |   |   | Total | 160.8 | 194.1 | 216 | 216.5 | 247.5 | 11.4% | % change |   | 20.7% | 11.3% | 0.2% | 14.3% |   | In 2010, the advertisement industry rebounded well on account of improved economic conditions and showed a healthy growth. After showing almost flat growth in 2009, these were positive signs for the E&M industry which depends heavily on this revenue stream. In 2010, the advertising industry witnessed a 14.3% growth and stood at INR 247.5 billion as compared to INR 216.5 billion in 2009. In the last four years, the industry recorded an overall growth at a CAGR of 11.4%. All industry segments showed healthy growth in advertisement with print and OOH recovering well from the dip in 2009 to register a growth of 13.5% and 12% respectively. Internet advertising, with 28% growth, remained the fastest-growing segment as an increasing number of advertisers are looking to use the online platform to connect with the youth. Radio also showed a healthy growth of 20% and is fast catching up with OOH. Print advertising remained the largest segment in the advertising industry at 46% followed by television at 41%. Media markets of key countries (USD millions)   | 2006 | 2007 | 2008 | 2009 | 2010 | India | 9,782 | 11,429 | 12,633 | 12,907 | 14,355 | China | 47,583 | 58,020 | 68,992 | 75,085 | 85,543 | Germany | 81,733 | 85,129 | 86,131 | 85,106 | 87,296 | Japan | 164,687 | 174,732 | 178,279 | 172,768 | 174,036 | US | 455,520 | 469,713 | 461,737 | 429,912 | 443,144 | India remains a smallish contributor to the Asia-Pacific E&M industry. Japan at USD 174 billion is by far the dominant country, accounting for 44% of the total spending in Asia Pacific in 2010 and the second largest country in the world behind the US. While advertising is growing at a rate higher than GDP growth, it is estimated that advertisement as a percentage of the GDP will remain low as compared to other developed countries like the US and Japan. Television The industry witnessed healthy growth in 2010, driven by increasing advertising spends, rise in the number of television households, robust growth in DTH and expanding regional markets. Currently the industry is estimated at INR 306.5 billion in 2010 as compared to INR 265.5 billion in 2009, registering a growth of 15.4%. Television market segmentation 2006-2010 INR billion | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR |   |   |   |   |   |   |   | Television distribution | 117 | 136.5 | 150 | 165 | 192 | 13.20% | % change | | 16.70% | 9.90% | 10% | 16.40% |   | Television advertising | 66.2 | 78 | 84.2 | 89 | 101.5 | 11.30% | % change |   | 17.80% | 7.90% | 5.70% | 14% |   | Television content | 8 | 9.4 | 10.5 | 11.5 | 13 | 16.70% | % change |   | 17.50% | 11.70% | 9.50% | 13% |   |   |   |   |   |   |   |   | Total | 191.2 | 223.9 | 244.7 | 265.5 | 306.5 | 12.50% | Each of the segments in television registered robust growth in 2010: The distribution industry grew by 16.4% this year aided by high growth rates of the DTH industry and advances in digitisation. This sector is expected to maintain steady growth and keep adding to the overall television pie. The segment stood at an estimated INR 192 billion in 2010 up from INR 165 billion in 2009. The advertising industry has shown positive signs with strong recovery in advertising spend and growth in advertising volumes aided by the launch of many new channels in 2010. Sectors such as FMCG, telecom and financial services have led this growth. It stood at an estimated INR 101.5 billion in 2010, up from INR 89 billion in 2009 registering a growth of 14% this year. The content industry achieved a 13% growth rate, driven by the rise in non-fiction shows and growth in regional markets. Its share in the industry continued to stand at four per cent in 2010, as it reported nearly INR 13 billion of income as against INR 11.5 billion in 2009. The industry is well poised to not only grow but also increase its dominance within the entertainment and media industry. The move towards digitisation as well as addressability if implemented will further enhance revenue generation opportunities and put more balance between subscription and advertisement revenues. Television distribution The distribution industry consists of subscription revenue obtained from pay TV households in the country. This industry is highly fragmented in India with about 50,000+local cable operators (LCOs), 7,000+ multi system operators (MSOs) and six direct-to-home (DTH) operators. The top five MSOs account for less than 30% of the revenues of this industry. The industry is characterised by high underreporting of as much as 85% of the subscribers and low average revenue per user (ARPUs). Total subscription revenue, growth, projection The size of this industry was INR 192 billion in 2010, registering a growth of 16.4% over INR 165 billion in 2009. The distribution industry is the largest part of the television industry and contributes to about 63% of the television industry’s revenue. The distribution industry revenues are a function of pay TV households and ARPU generated for each pay TV household. Television households The total number of television households in India increased from 124 million in 2009 to 130 million in 2010, at a growth rate of five per cent. The penetration in India in terms of television households still remains low at 61% as compared to developed countries like the US and UK where the penetration is around 95% and 93% respectively. With changing economic conditions in India, we can expect the number of TV households to increase in India in the future. Pay TV households The pay TV households in India are divided into three categories: • Cable: Cable television provides television signals, transmitted via co-axial cables or optical fibres, to the consumer’s premises. LCOs control the last mile in cable TV. • DTH: DTH provides television signals to the consumer’s home directly via satellite. • IPTV: Internet protocol television (IPTV) provides live television over the internet. This segment is still nascent in India. Pay TV households increased to an average of 100 million in 2010, from 86 million in 2009, with a growth of 16%. This growth was largely led by the growth witnessed in DTH households in 2010. India’s place in the world Global TV subscription market for top countries 2010 Country | Subscription | Subscription | Subscription |   | TV households | TV households | license fee |   | (million) | penetration (%) | market |   |   |   | (MillionUSD) | USA | 101.2 | 88.3 | 75,366 | Canada | 11.5 | 88.5 | 8,029 | UK | 13.75 | 53.7 | 11,950 | China | 180.25 | 45.9 | 6,807 | India | 106 | 77.2 | 4,266 | While India is the second largest cable and satellite (C&S) homes market in the world, surpassed only by China, the industry earns just INR 192 billion in subscription revenue. This is much below the revenue earned in other geographies. This can be explained by the fact that ARPU in India is about INR 160 per month as compared to USD 45 to 60 in the US and UK, and USD 3 to 20 in comparable Asian markets. Average revenue per user (ARPU) ARPU is the second determinant of total pay TV revenues, the other being pay TV subscribers. The current pay TV ARPU is INR 160 per month across pay TV homes (both DTH and cable). While cable has the problem of under-reporting both in the number of subscribers as well as the fees paid by each subscriber, DTH ARPU is limited by competition, subsidisation of set-top boxes (STBs) and lack of exclusive content. This has led pay TV ARPUs to be lower than the cost of a multiplex movie ticket, and among the lowest as compared to global counterparts. Cable TV Cable TV forms the backbone of the distribution industry. It is well-penetrated and boasts of almost 74 million subscribers. The industry comprises MSOs and LCOs. There are thousands of LCOs spread across the country and a number of MSOs with a few larger ones. The cable industry is still dominated by analogue distribution with pockets of digitisation which have not been a success. The cable TV household figures are as follows: Cable TV households in India Million | 2006 | 2007 | 2008 | 2009 | 2010 |   |   |   |   |   |   | Cable TV households | 68 | 70 | 71 | 72 | 74 | (yearly – average) |   |   |   |   |   | % change | | 3 | 1 | 1 | 2.8 | Key MSOs Major MSOs subscriber base Player | Area of Operation | Hathway | 13 major cities | DEN | Over 50 cities across India | WWIL | 54 cities | Digicable | 46 cities | Riddled with rampant under-reporting and limitations of carriage under analogue distribution, the cable TV industry, though large, remains unprofitable. Most of the large MSOs are relying more on ‘carriage fee’ revenues than the regular subscription revenue. With more than 500 channels vying to be carried and a carriage capacity of only 100 channels, ‘carriage fee’ is becoming an attractive revenue stream. It is here to stay in the foreseeable future until the cable infrastructure shifts to digital format completely. Breakdown of this revenue chain due to subscription and scarcity of carriage is possibly the factor hindering the growth of the pay TV industry. This in turn affects broadcasters and finally content-owners. The answer to this problem is ‘digitisation’ and ‘addressable digitisation’. The whole industry is aware of this issue and it is believed that regulation to address this anomaly will soon be in place. This hopefully will enhance profitable growth and ensure investments. DTH industry The Indian DTH market is rapidly becoming a key player in the distribution marketplace. It grew at 75% in 2010 over 2009, a growth which is the highest in the world. With present prediction, it is likely to overtake the US in terms of the largest DTH market in the world, by 2012. There are on an average of 26 million DTH households in 2010. These estimates are gross connectivity numbers not considering churn. Presently, there are six DTH players, apart from the state-run DD Direct by Doordarshan, up from a single player in 2003. While the growth in DTH numbers has attracted new players in the industry, it is also well-recognised that most of the players including the larger ones are unprofitable and it is likely to be a while before the cash flows turn positive. Positives of the DTH market There are many positives that DTH has brought to the TV distribution marketplace. Its growth pattern in the Indian scenario has been a little different than seen in the rest of world. Its development here is seen as a rival to the dominant cable industry, while elsewhere it is a niche platform with higher ARPUs and exclusive content. Here, the definition has changed somewhat, due to regulation as well as difficulties of reporting of subscribers in the cable industry. Some of the positives are as follows: • It is digital and addressable unlike the analogue cable industry. • Though it is presently only 15 to 20% of the total pay TV market, it contributes 50% of the broadcaster’s subscription revenues. • It is capable of carrying additional channels than the present capability of analogue cable. • Most of the larger players have invested heavily in marketing and advertising to gain higher customer recall. In many cases, they have a separate brand. • DTH remains the premier way to access rural audiences vis-à-vis cable due to the reach of the satellite. In fact, a growth of 64% in the rural sector came primarily through DTH. • DTH is capable of and is providing interactive and HD content like ‘pay-per-view’ leading to differential revenue streams. Concerns of the DTH market While there are many positives, there are areas of concerns for the future of the DTH business. Some of these are asfollows: • Carriage of channels though higher than analogue, is roughly limited to 200 to 220 channels due to limited transponder capacity. This is likely to be a disadvantage in the future vis-à-vis digital cable which will be able to carry 500 channels or more. • Interactivity is limited to one way while digital cable can and will have two-way interactivity leading to better customer experience. • It is widely believed that there is a churn of an average 20 to 25% of the subscriber base in the form of inactive customers. This churn can be to cable operators or to other DTH operators. • STB costs continue to be subsidised even though present costs have reduced to INR 2500 to 3000. • Cable with its low ARPUs continues to set a benchmark for DTH ARPUs. With no exclusive content and the additional burden of STB boxes and increased marketing costs, the ARPU continues to be limited by cable as buyers do not see a differentiation. • Transponder space has limitations in terms of availability, costs and direction. It is now being recognised as a very critical input for the survival of DTH businesses in the future. Digital TV growth in India driven by rural market The digital TV service in India involves reception of TV signals through STB either via DTH or cable. The growth in India in digitalTV has been boosted by the growth in the rural segment which has almost doubled the share of pay-DTH. The growth of the digital segment in the rural sector was 34% in 2008, 49% in 2009 and 64% in 2010. This growth has primarily come from the growth in the DTH segment, while cable STB has remained stable. This growth is reasonable considering the fact that rural towns in India face 10 to 12 hours of power outage. Moreover, due to increased fragmentation and a large number of channels available for consumers and the limitations of cable service providers, customers are moving towards DTH and cable TV services. Carriage fees in DTH A small pie of carriage fees goes to DTH players. Though it was widely expected that DTH would be a cure for carriage fees, a shortage in transponders is driving up the carriage fees. Some new channels with limited budgets or doing trial runs have started to launch only on DTH. For example, Discovery launched ‘Discovery Turbo’ on Tata Sky. While some industry experts believe that the carriage fees market will go down, it does not seem to be happening anytime soon. With delays in digitisation and shortage of transponders, carriage fees are here to stay. IPTV IPTV is facing the same issues as last year. Though broadband connectivity has improved and the number of broadband users has also increased, the connection speed is still not up to the level desired for seamless viewing. IPTV connections provided by government-run organisations such as BSNL and MTNL seem to be growing. However, industry estimates suggest that there will be less than one million IPTV users across India, which is negligible when compared with the reach of television. Mobile TV Mobile TV is defined as television content viewed on handheld mobile devices. Now, with the arrival of 3G, some mobile players have started to offer mobile TV on 3G. Reliance and Idea are offering mobile TV on their respective networks. Though the tariff plans seem attractive, bandwidth remains an issue. Television content requires larger bandwidth than normal data service. If mobile TV is successful, it can substantially increase the reach of television. However, Indian viewers are used to watching TV on a bigger screen. It therefore remains to be seen how telecom players change this mindset. TRAI recommendations on mobile TV • In the first phase of mobile TV licensing, every applicant and its related entities should be allowed to bid for only one licence per service area, in order to prevent monopolies. • As the number of licences per licence area will be limited, no entity can hold more than 25% of the total number of permissions given in the country, to prevent monopolisation at the national level, for the first phase. • Wherever a mobile television service provider has installed its own infrastructure, it should be made available for sharing with other such service providers. • Including FDI, the composite foreign investment limit recommended for mobile television service is 74%. • The regulator has also proposed that the licence fee be decided between four per cent of the gross revenue or five per centof one-time entry fee (OTEF). Television advertising Television advertising is one of the largest segments in the total advertising pie in India. With the economic turnaround, it bounced back to double-digit growth in line with the growth of the total advertisement market. Television advertisement consists of revenue from advertisers spending on terrestrial, satellite as well as mobile TV. Mobile TV advertising though is still nascent in India. In 2010, the TV advertisement industry grew to INR 101.5 billion registering a growth of 14% over INR 89 billion in 2009. The comparative past growth figures are as follows: Television advertising growth for 2006-10 INR billion | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR |   |   |   |   |   |   |   | Television advertising | 66.2 | 78 | 84.2 | 89 | 101.5 | 11.3% | % change |   | 17.8% | 7.9% | 5.7% | 14.0% |   | % of total television industry | 35 | 35 | 34 | 34 | 33 |   | % of total advertising industry | 41 | 40 | 39 | 41 | 41 |   | The television advertising industry is a third of total television industry revenue and 41% of the total advertising industry. With buoyant revenues expected in future, it is likely to consolidate its position going forward. India’s place in the world Television advertising market in different countries is as follows: Global television advertisement market 2010 Country | Television advertising market (USD million) | USA | 70,693 | Canada | 3558 | UK | 5541 | China | 9115 | India | 2255 | India, at USD 2.2 billion was the fourth-largest television advertising market in Asia. Globally, the share of television in total advertising spends has remained around 35% as compared to 41% in India. Regional channels, increased advertisement rates Some regional channels like Sun TV Network increased their advertisement rates for their Malayalam and Kannada language channels. For the Malayalam market channels, Sun TV Network increased the rates from six to 33%. The advertisement rates for the Kannada channels, meanwhile, were increased from five to 13%. Earlier, Sun TV had announced a hike in advertisement rates for its Tamil and Telugu channels. The overall effective advertisement rate hike across the four markets will be in the region of 13 to 15%. Sun enjoys near-supremacy in the south India market. This has helped it increase its advertisement rates. However, new channels, regional as well as national, could not command the same advertising rates leading to the averaging-out of advertising rates over the year. Since the economy has improved, leading channels in their segments and regions may be expected to hike advertising rates in the near future. During 2010, regional channels exceeded national channels in terms of advertisement volume. National and regional channels shared TV advertisement volumes in the ratio of 47:53. The key motivators for advertisers towards regional markets are the relatively low media penetration and rise in incomes in smaller towns. Also, the cost of reaching the audience is much lower compared to national media due to lower advertising rates. Television advertisement break-up Future trends in TV advertising • New channels to drive growth With over 250 licences pending for approval and the government lifting the ban on the application for new channel licences, we expect to see a spurt in new TV channels. This also means larger advertising slots leading to an increase in advertising volumes. However this would also mean that average advertising rates may take a hit and reduce. Larger players will continue to command a premium but new channels may charge lower rates to fill up their inventory. What would also determine the increase in volumes, is the extent of digitisation and the ability of the distribution platform to carry new channels. • Second TV set in a household Increasingly, there is a growing trend in urban India of having two TV sets in a household to cater to different viewing preferences. This is an interesting trend as it allows increasing viewership even while the number of TV households may show marginal growth. Television content Television content is the smallest part of the industry accounting for 4.2% of the total industry revenues. However, these figures largely represent content sold by independent producers to channels and does not contain the content produced by broadcasters. This is usually shown as a cost, while advertising and subscription are recognised as revenue. The revenue from content grew by 13% from INR 11.5 billion in 2009 to INR 13 billion in 2010. The figures are as follows: Television content market for 2006-10 INR billion | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR |   |   |   |   |   |   |   | Television Content | 8 | 9.4 | 10.5 | 11.5 | 13 | 13.20% | % change |   | 17.50% | 11.70% | 9.50% | 13% |   | % of total television industry | 4.2 | 4.2 | 4.3 | 4.3 | 4.2 |   | The growth was basically led by a significant growth in new channels, demand for niche content and the ability to showcase it on different platforms. TV channels The television space in India saw much activity in 2010. There were approximately 42 new channels launched in the year, and along with an increase in advertisement (both volume and rates), the demand for content was positively impacted. The year started with Discovery launching two out of its proposed three channels in the form of Discovery Science and Discovery Turbo. Next, ADAG group tied up with global media house CBS Studios and launched three new channels in the English GEC space - Big-CBS Prime for upwardly mobile customers, Spark targeted towards the youth, and Love catering to women, thus entering niche content space. Al Jazeera also got a nod from the Information and Broadcasting Ministry for its news channel. Also, Zee launched a first-of-itskind 24-hour food channel Zee Khana Khazana. A number of new regional channels were also launched with 9X Media launching two new bengali and south-based music channels and applying for many more licences. The year ended with the launch of Movies NOW from the Times Group trying to find a gap in the existing English film offerings to the Indian audience. It was launched in the HD format to capture the growing need for better experience. Regional GECs, for the second year running, showed the biggest increase in the number of new channels with 25 more active channels being added in 2010. There are in all more than 264 new TV channels’ licences pending with the Ministry and with TRAI recommending no upper cap on the number of new TV channels, this number is bound to increase. However, with distribution anomalies not being addressed, many of the new offerings will find it difficult to attract revenues. This will further increase carriage fees. Print Media Unlike the global print industry, which is moving towards digitisation and showing a negative growth year on year, the Indian print media industry is going strong and is expected to continue similarly. The print industry in India, with over 90 million copies in circulation daily, is one of the largest in the world, second only to China (130 million copies). It is not to say that there has been no effort towards digitization and conversion to online readership, but there has not been much progress. Most newspapers have an online presence and a growing view count on their portals, but hard copy still remains the preferred mode to access news. The print industry saw good growth last year, on the back of a recovering advertising market and reduction in the gap between a ‘can read’ and ‘currently reading’ population. Increase in print penetration in Tier 2 and Tier 3 cities, supported by growth in literacy and purchasing power, aided growth in revenues. Circulation revenues showed marginal growth as many newspapers expanded in newer geographies but lowered cover price to gain readership. The newspaper industry, which had remained largely flat in 2009, was back on the growth track with 11.7% growth taking this industry segment to INR 159.5 billion in 2010 and increasing its share in the print industry to 89.3%. It was a poor year for the magazine industry with marginal growth in advertising and almost no change in circulation. The size of the magazine publishing industry was estimated at INR 19.2 billion in 2010 as compared to INR 18.6 billion in 2009, registering a growth of 3.1%. The marginal growth was attributed to the consumer magazine segment. While the growth estimates for the magazines look modest, some titles and publishers have experienced double-digit growth while others have lagged behind. Overall, the size of this industry was INR 178.7 billion in 2010, registering a growth of 10.7% over INR 161.5 billion in 2009. Growth of the print media industry in 2006-10 INR billion | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR |   |   |   |   |   |   |   | Newspaper | 112.1 | 131.5 | 140.7 | 142.8 | 159.5 | 9.20% | % change |   | 17.3 | 7 | 1.5 | 11.7 |   |   |   |   |   |   |   |   | Magazine | 16.5 | 19 | 21 | 18.6 | 19.2 | 3.80% | % change |   | 14.9 | 10.6 | -11.5 | 3.1 |   |   |   |   |   |   |   |   | Total | 128 | 149 | 162 | 161.5 | 178.7 | 8.60% | % change |   | 16.4 | 8.7 | -0.3 | 10.7 |   | The print advertising, which constitutes 63% of revenuefor the segment, registered a growth of 13.5% in 2010 over 2009 and stood at an estimated INR 113.5 billion in 2010. Circulation revenues for print grew by 6.2% in 2010 over 2009 and stood at an estimated INR 65.2 billion in 2010. The growth in circulation was largely contributed by players expanding into newer geographies. Growth of the print media industry in 2006-10 INR billion | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR |   |   |   |   |   |   |   | Advertisement | 78 | 94 | 103.5 | 100 | 113.5 | 9.80% | % change |   | 20.5 | 10.1 | -3 | 13.5 |   |   |   |   |   |   |   |   | Circulation | 50.7 | 56.5 | 58.3 | 61.5 | 65.2 | 6.50% | % change |   | 12 | 3 | 5 | 6.2 |   |   |   |   |   |   |   |   | Total | 128 | 149 | 162 | 161.5 | 178.7 | 9.60% | % change |   | 16.4 | 8.7 | -0.3 | 10.7 |   | India’s place in the world India is the second largest newspaper market in the world, after China. While globally the print industry is on a decline, the Indian print media is showing steady growth. The global newspaper market fell by 0.3% in 2010 as declines in North America offset gains in other regions. Global print advertising fell by 1.3% in 2010 and is expected to decline further by an additional 0.5% in 2011. Newspaper publishing market USD Million | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR | US | 59,897 | 55,740 | 48,045 | 37,771 | 35,570 | -12% | UK | 10,402 | 11,340 | 10,695 | 9,333 | 9,592 | -2% | China | 9,892 | 10,347 | 11,020 | 11,318 | 12,105 | 5% | India | 2,491 | 2,922 | 3,126 | 3,173 | 3,544 | 9% | Daily newspaper print unit circulation USD Million | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR | US | 54,829 | 53,492 | 51,497 | 48,025 | 44,800 | -5% | UK | 16,650 | 16,074 | 15,500 | 14,900 | 14,340 | -4% | China | 98,700 | 102,500 | 107,000 | 117,815 | 134,190 | 8% | India | 79,000 | 83,000 | 85,000 | 88,000 | 91,000 | 4% | Key developments in Print advertising Growth in advertising but with more dilution in sectors With an economic revival, India’s advertising industry too revived. On the back of favourable macro-economic factors, print advertising bounced back and grew by 13.5% in 2010. Print volumes grew by 31% over 2009. While education was the top advertiser last year, this year it shifted to third position and services moved to the top position. The education sector was the top performer in the first half of 2010 but other sectors caught up in the second half. The top five sectors contributed 45% to the total pie as compared to 49% in 2009 leading to other sectors contributing more to the growth of print advertising. BFSI also increased its share in 2010 as compared to 2009. • Print ad volumes of the services sector grew by 43% during 2010 as compared to 2009. • Print ad volumes of the BFSI sector grew by 50% during 2010 compared to 2009. • Print ad volumes of the education sector grew by six percent during 2010 compared to 2009. Sector-wise share in print advertising during 2010 Top sectors | Share % | Services | 12 | Banking / Finance / Investment | 11 | Education | 10 | Auto | 7 | Retail | 5 | Personal Accessories | 4 | Durables | 4 | Personal Healthcare | 3 | Corporate / Brand Image | 3 | Media | 2 | Educational institutions, social advertisements and properties were the top three categories in print advertising during 2010. The top 10 categories constituted 39% share of overall print ad pie during 2010, indicating that there was a wider distribution of advertising spends across categories. Share of top categories in print advertising during 2010 Top categories | Share % | Educational Institutions | 9 | Social Advertisements | 7 | Properties / Real Estates | 4 | Independent Retailers | 4 | Cars / Jeeps | 3 | Corporate / Brand Image | 3 | Hospital / Clinics | 2 | Events | 2 | Cellular Phones | 2 | Coaching Centre / Competitive Exam | 2 | AIR share of different dailies (English, Hindi and vernacular) Break-up of advertisement revenues of various newspapers by language in 2010 In the readership scenario across India, English dailies account for only nine per cent of the average issue readership (AIR) in the country but command about 50% of the advertising revenues. Hindi dailies on the other hand, have 35% of the AIR but command around 26% of the advertising revenues. The scenario is even more skewed for other language dailies. However, as national advertisers look to target populations in smaller towns and local retail ad spending in Tier 2 cities increases, we expect this disparity to reduce. English dailies will, however, continue to command a premium over regional dailies in the foreseeable future. Print circulation revenues Cover price accounts for 15 to 25% of the revenues of newspaper players. Magazines look to earn more from the cover price and the price of niche magazines can go up to as much as INR 250. In 2010, there was a growth of six per cent in circulation revenues. While many newspapers expanded geographically to increase their reach and readership, many others also reduced their cover price to tackle competition. Players expanding geographically launched a number of subscription schemes thus limiting the increase in circulation revenues. In the next two to three years, as these schemes are withdrawn, we may see even better circulation revenues. Newspaper publishing The newspaper publishing industry boasts of more than 180 million readers (AIR) in 2010 as compared to 173 million (AIR) in 2009, registering a growth of five per cent. Hindi dailies alone have 57 million readers followed by Marathi and Malayalam dailies at 18.3 and 17.2 million readers, respectively. Hindi dailies continue to lead The top three slots have been occupied by Hindi dailies, with The Times of India, being the only English daily to make it in the top 10 list. Dainik Jagran and Dainik Bhaskar remained the most-read newspapers in India. While the top five remained the same, there was some change in the bottom five, with Rajasthan Patrika gaining readership numbers due to its expansion in Madhya Pradesh and registering a growth of 14% in readership. Hindustan too gained good numbers in 2010, with its expansion in UP going at full pace and was the fastest-growing daily in India registering a growth of 16%. It is fast catching up with the leaders and it won’t be too long before Hindustan vies for the top position. Leaders strengthen hold in key markets In most Hindi-speaking markets, the leaders strengthened their position while in some, they also reduced their grip. While the overall readership numbers of the leaders have not reduced, competitors have gained share by capturing the slot of the second newspaper in the household. Hindustan gained share in UP and strengthened its position in Jharkhand. Rajasthan Patrika, which goes by the name of Patrika in Madhya Pradesh, also gained on the back of sustained efforts to expand. It also strengthened its position in Rajasthan further. Regional newspapers Advertisers have tended to focus on urban geographies with English-speaking populations. Advertising spends are therefore concentrated on English newspapers that cater primarily to SEC A/B households. As a result, historically, while vernacular language papers command higher readership than English dailies, advertising revenues have always been skewed towards English dailies. This trend was no different in 2010. Gradually, as the purchasing power of consumers in Tier 2 and Tier 3 cities increases, advertisers will begin to see greater value in these markets and ad spend on vernacular newspapers will increase. Recent changes in the socio-economic classification (SEC) system used by the IRS, now focusing more on product ownership/usage, are likely to benefit leading non-English dailies. We expect the gap between the ad spends of English and vernacular language newspapers to gradually reduce. English dailies The Times of India (TOI) leads the list of English dailies in India with a readership of over seven million, followed by Hindustan Times. Interestingly, TOI is the only English daily in the top 10 dailies in India and is gaining ground on some of the regional dailies. Hindustan Times (HT) is also fighting hard to reduce the gap with TOI and it is aggressively trying to expand in Mumbai by wooing subscribers with attractive subscription schemes and gift offers. HT has continued with its subscription scheme of INR 199 for the second year running in 2011 to gain market share in Mumbai. Top five English newspapers Million Readers | IRS 2009 R2 | IRS 2010 R4 | The Times of India | 7.1 | 7.4 | Hindustan Times | 3.3 | 3.6 | The Hindu | 2.2 | 2.1 | The Telegraph | 1.2 | 1.2 | Deccan Chronicle | 1.2 | 1.1 | Key developments in the newspaper publishing market Growing trend of hyper localization Regional papers give advertisers access to localized population and their niche target audience, difficult to do via national broadcast media. Newspapers are now realizing value in going a step further and launching area-specific editions of newspapers. These cater to local population and are mostly launched in metros with SEC A consumers, to derive maximum advertising spends. For example, TOI has launched South Mumbai and Navi Mumbai editions. Unbundling of products to increase profitability During the recession of 2008-09, several national newspapers bundled their offerings for consumers as well as advertisers to pre-sell inventory in bulk. They offered heavy discounts on bundled products. While newspapers such as TOI still offer bundled products to consumers to increase cover prices and push their less-popular publications, they along with other national players such as HT have unbundled their rate cards for advertisers. This is done to increase profit margins and take advantage of the local reach of each of the publications. Increasing consumption of imported newsprint Many regional newspapers are moving towards coloured editions (in part or full) to hold on to their customer base and thwart competition. However, this also means that these publications are moving from domestic newsprint, considered of lower quality, to imported newsprint generally used by English newspapers. While the move towards coloured newspapers is good news for customers, it also exposes newspaper publishers to price and currency fluctuations associated with imported newsprint. New entrants expanding the market As we saw in 2009 and 2010, newspaper publishers continue to enter newer geographies and expand into the adjoining region. While this increases the competition in the region, it also benefits customers. Also, it was observed that competition in a region actually increases overall readership there. Madhya Pradesh’s Hindi daily readership increased by 27% in 2010 with the expansion of Rajasthan Patrika and Nai Dunia. Magazines publishing The magazine industry continued to lose readership for the second consecutive year. The readership of the top 10 magazines (by AIR) dipped by around nine per cent losing almost 1.5 million readers. Non-English magazines made the top order in magazine readership. While Malayalam magazine Vanitha emerged as the clear winner, Pratiyogita Darpan was the only magazine which showed growth in 2010 replacing Saras Salil to take the second spot on the back of its growing young audience. Key developments in the magazine industry Business magazines show growth Though readership of most magazines declined in 2010, the average issue readership of most business magazines showed healthy growth. Business Today is the most-read businessmagazine in the country showing maximum growth over the previous year’s figures. Readership (AIR) of top five business magazines Sr. No. | Magazine | IRS 2009 R2 | IRS 2010 R4 | Growth | 1 | Business Today | 2.7 | 3.7 | 37.04% | 2 | Business India | 2.16 | 2.16 | 0.00% | 3 | Outlook Business | 1.81 | 1.95 | 7.73% | 4 | Business World | 1.59 | 1.83 | 15.09% | 5 | Outlook Money | 1.05 | 1.14 | 8.57% | Mushrooming niche and special interest magazine category A number of new international magazines were launched in 2010. Worldwide Media launched Lonely Planet in the first half in 2010 and BBC Knowledge and Home Trends in the second half. Network 18 launched ForbesLife and Conde Nast Traveler. All these magazines are priced in the range of INR 100 to 250 focussing on the upper middle-class and relying less on advertising as compared to other Indian magazines. Some of these magazines have shown good growth albeit from small numbers. Niche magazines Niche magazines have made their presence felt in India and will continue to grow. While segments such as travel, auto, lifestyle and education are already established, we expect new segments to emerge and grow this space. In the past year as well, a few niche magazines have shown very healthy growth. For example, Autocar, India Today Travel Plus and Outlook Traveler. Film After a tough year in 2009, the industry faced with another difficult year in 2010. Despite the economy rebounding and consumers starting to throng the theatres again, the industry did not quite perform to expected levels. An industry which thrives on content and the support of its players such as exhibitors and distributors did not show the expected revival, after the industry picked pace in the second half of 2009 with several good films. There were 215 Hindi releases in 2010 as compared to 235 in 2009 and 1059 regional releases (Tamil, Telugu, Kannada, etc) in 2010 as compared to 1053 in 2009, ensuring a reasonably constant flow of films in both years. Overview The industry showed negative growth for the second consecutive year. The size of INR 87.5 billion in 2010 registered a negative growth of 7.9% over INR 95 billion in 2009. It is now expected to grow to INR 136.5 billion by 2015 at a CAGR of 9.3%. The growth of the industry in 2006-10 INR billion | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR |   |   |   |   |   |   |   | Box Office - Domestic | 64 | 71.5 | 81.3 | 70 | 61.1 | -1.20% | % change |   | 11.7 | 13.6 | -13.8 | -12.7 |   |   |   |   |   |   |   |   | Box Office - Overseas | 7 | 8.5 | 10 | 8 | 7.7 | 2.40% | % change |   | 21.4 | 17.6 | -20 | -3.8 |   |   |   |   |   |   |   |   | Home Video | 6.4 | 7.4 | 5.9 | 6.5 | 5.2 | -5.30% | % change |   | 15.3 | -20.9 | 11.3 | -16.1 |   |   |   |   |   |   |   |   | Ancillary Rights | 7 | 8.5 | 10 | 10.5 | 13.5 | 17.80% | % change |   | 21.4 | 17.6 | 5 | 28.6 |   |   |   |   |   |   |   |   | Total | 84.4 | 95.9 | 107.1 | 95 | 87.5 | 0.90% | It was a mixed bag for the different segments in the industry. While all major segments showed negative growth, ancillary revenues driven by cable and satellite rights showed an upward trend. India’s place in the world As the table below illustrates, India has the highest number of admissions as compared to most other countries. However, the average ticket price (ATP) is less than a dollar. This reduces the overall size of the market. There is therefore a need to extract more value from film-goers. Average ticket price and admissions across the world Country (millions) | Average ticket price (USD) | Admissions | US | 7.89 | 1345 | Canada | 8.19 | 120 | UK | 8.96 | 166 | China | 4.34 | 345 | India | 0.69 | 2000 | Moreover, research shows that the Indian consumer is highly underserved with only 12 screens per million as compared to 77 screens per million in France and 117 screens per million in the US. According to a United Nation’s research study, a country with India’s population should have at least 100,000 screens as compared to around 10,000 currently present. Key revenue streams The industry is slowly moving from being only star cast dependent to content-dependent. In 2010, although there were a number of films with a big star cast, not all of them were successful in recouping their costs or in making any kind of mark in the box office. There are four key revenue streams for the industry: • Box office collection: Domestic • Box office collection: Overseas • Home video: Domestic and overseas • Ancillary revenues Box office collection: Domestic Domestic box office revenues comprise theatrical revenues from multiplexes and single-screen theatres. As of 2010, there are approximately 9000 single-screen theatres along with 200 to 250 multiplexes having around 950 to 1000 screens across India . Domestic box office revenues dipped by 12.7% this year. This was largely due to lack of engaging content, though the closure of many single-screen theatres, smaller release windows and the IPL season did play their part. The IPL season 3 in particular was visibly more successful over the previous editions, thus impacting exhibitors during the two month period. The segment stood at an estimated INR 61.1 billion in 2010 down from INR 70.0 billion in 2009. However, what helped the domestic box office and is also likely to do so in the future is the digital distribution of films. With satellite distribution, it was easier to reach larger audiences cost-effectively with the short release window. UFO is the largest company in this segment and now has 2,500 screens to its credit with other competitors like Real Image as well as Big Movies some way behind. The domestic box office constitutes on an average 70% of the total film revenues across languages with Hindi drawing an average of 50 to 55% and regional films showing a higher percentage due to market differences. The de-growth in this sector seems to be largely due to the paucity of quality content and other structural issues. The future however continues to look much better than the past few years. Multiplex growth drives box office revenues Multiplexes have flourished in India. In 2010, despite the lack of good quality content in films, multiplexes registered double-digit growth partly because of new properties across the country. Multiplexes are also trying to increase their occupancy rates while adding new properties. It is estimated that occupancy in multiplexes has taken a slight dip from 30% in 2009 to 28% in 2010. This reduction may be attributed to the addition of new properties. Multiplexes are expected to increase their capacity over the next five years to form contribute significant revenues to the industry. Newer players are also entering the market such a Cinepolis, a Mexican multiplex chain which announced its entry in 2009 and has expansion plans in India. Multiplexes are also experimenting with offers and schemes to increase footfall and occupancy. Those that charge INR 200 to 250 for a prime time ticket have introduced early morning shows at INR 80 to 100 a ticket. They have also tied up with credit card companies to provide attractive discounts and offers. Despite these offers, not many players have been able to increase their average ticket prices significantly over the last year. All factors combined have led to significant growth in multiplex revenues and this is expected to continue for the next five years. Box office collection: Overseas This segment has shown promise over the years especially with successes like My Name is Khan. However, as per industry views, the content that is acceptable overseas is either star driven or the traditional Indian family drama. And with the multiplex culture driving a change in content in India and limiting star-driven films, this revenue stream has shown a de-growth even though new markets are continuing to open everyday. My Name is Khan is estimated to have grossed INR 900 million in the overseas market. Its rights were bought by Fox STAR for a deal estimated to be INR 1000 million. Another reason for a dip in overseas revenues was that international releases require a large overseas distribution network for a wide reach which is not available to every production house in India. Smaller budget films without the backing of a large production house could not sell their overseas distribution rights and further refrained from going overseas. Home video The home video business saw a decline in 2010, with most releases either not releasing on home video or not being profitable. Lack of quality content and retention of home video rights of big studio releases were the main reasons for this decline. Moreover, the inherent issues of piracy still remain, eating into the major part of the revenues of home video companies, making recovery difficult. The industry also has new competition in the form of ‘pay per view’ from the DTH stable. Users who want to watch films at their own convenience (one of the main reasons for the growth of the home video industry), can now pay their DTH players and watch the latest releases at home without even having to walk to a DVD rental. Crashing the timeframe to showcase films on television has created further problems for the home video industry. The home video segment was estimated to be worth INR 5.2 billion in 2010 as compared to INR 6.2 billion in 2009 recording a decline of 16.1%. The trend is similar to that being seen across the world accentuated by piracy as well as new modes of delivery. High costs have restrained industry players from buying the rights to new releases. Hence, in most cases, CDs and DVD are distributed by the production house itself. Hollywood releases remain the key revenue-earning opportunity for the home video industry. More players are moving towards the vintage home video collection (classics such as Sholay, Golmal, Chupke Chupke, etc.) to packaging films through a popular star (such as Kishore Kumar). Ancillary revenues Ancillary revenues include revenue from cable and satellite syndication (broadcast syndication), mobile, online and other new-age media avenues. Broadcast syndication emerges as the major segment in this revenue stream. Broadcast syndication Cost of film syndication increased due to enhanced competition in the general entertainment channels (GEC) and film channels space. Syndicated films first release on a GEC and subsequently on film channels. The news of Colors launching a new film channel and acquiring new content started a scramble for good film content. The prices for acquiring films rose steeply. Shahrukh Khan’s upcoming release Ra One is estimated to have been sold for INR 400 million (cable and satellite rights). It is also rumoured that the rights for virtually all key releases slated for 2012 have already been sold out including those that are yet to go on the floors. The decision to buy these films is based on the star-cast as well as the acceptability as likely content for TV. In this scenario, some companies, like SET Max, have been very selective in their choice of films. SET Max’s recent acquisitions are Robot, Crook, Rakthacharitra, We Are Family and Hisss. The year also saw a shift in the model for acquiring films–from syndication to outright acquisition. The industry has realised that with syndication, the value of content was being diluted by over-exposure. For example, Jab We Met could be seen across 10 channels last year. Gradually viewers lost interest in the film and the novelty of the content was lost. Hence, this year, channels refrained from reselling good content and held on to their rights. SET Max has acquired the rights of 2009’s biggest blockbuster, 3 Idiots and has aired it selectively, with good results. They are expected to follow the same strategy with Robot. A majority of films in the libraries of the top broadcasters–Zee TV, Star TV and SET Max–are exclusive. Radio Advertising The radio advertising industry The industry showed healthy growth in 2010, on the back of substantial increase in advertisement volumes and marginal increase in rates. However, the advertising rates are still not at the same levels as those seen in 2008. While an increasing number of cars on roads is driving FM penetration on the road, the real boost in FM penetration has come from an increased number of FM-enabled mobile phones. At the end of 2010, there were 245 operational radio stations in India as compared to 248 in 2009. While 2010 was a good year for radio, advertisers focused on innovative promotions to reach target audiences. With Phase III looming large in 2011-12, we can expect substantial growth in 2012 and 2013 with the arrival of new radio stations. However, the success of Phase III will depend on the kind of returns players see in new stations and the favourable resolution of issues awaiting resolution. Overview Radio advertising saw healthy growth in 2010. However, the market continued to be dominated by the top few players. Overall, the size of this industry was INR 10.8 billion in 2010. Radio advertising currently constitutes about 4.4% of the total advertising industry. Growth of the radio industry in 2006-10 INR billion | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR |   |   |   |   |   |   |   | Radio advertising | 5 | 6.9 | 8.3 | 9 | 10.8 | 21.20% | % change |   | 38 | 20.3 | 8.4 | 20 |   |   |   |   |   |   |   |   | Radio share in | 3.10% | 3.60% | 3.80% | 4.20% | 4.40% |   | ad pie |   |   |   |   |   |   | India’s place in the world India’s radio advertising market is still very small as compared to many developed countries. China’s radio market is estimated to be the second largest in the Asia-Pacific region. The US remains the biggest radio market across the globe. Radio penetration in China is growing primarily due to the increasing number of cars on the road. Global radio advertising market in 2010 Country | Radio Market (INR billion) | US | 687.7 | Canada | 68 | UK | 33.3 | China | 62.8 | Japan | 66.4 | India | 10.8 | Key developments Telecom players and handset manufacturers increasing their spend on radio Property/real estate was the top advertiser category on radio. However, an absence of any major player in the top 10 list indicates that property advertisements have largely been local. The year 2010 also saw a host of new handset manufacturers vying for listener attention. This is visible from the cellular phone manufacturers’ entry into the top 10 radio advertiser category. In 2010, Vodafone was the top advertiser as telecom players increased their spend in radio. This was also evident from the entry of Idea Cellular in the top 10. HLL, the top advertiser in 2009, reduced its spend on radio and focused on television and dropped to 10th place. Increase in TV channel promotions was evident with Star TV at the third place. Star TV was also rebranding itself and hence increased their promotions on radio. FM-enabled mobile phones driving radio business India is the fastest growing mobile market in the world. This has had its effect on radio too. Radio penetration has increased from 59% in 2007 to 77% in 2011 in the four metros. FM listenership in the four metros where RAM is available has crossed 60%. The four cities covered are Mumbai, Delhi, Bangalore and Kolkata. Delhi has observed the greatest increase in FM penetration among RAM markets. FM penetration 2007 vs. 2011, RAM markets City | 2007 | 2011 | Mumbai | 51% | 70% | Delhi | 59% | 88% | Bangalore | 71% | 87% | Kolkata | 63% | 64% | Overall | 59% | 77% | The main reason for this increase in penetration can be attributed to a change in listener habits. With an increasing number of FM-enabled mobile phones in the affordable price range, users in metros are switching from traditional radio sets to mobile phones as their primary modes of radio-listening. This trend is quite clear for Delhi, Bangalore and Kolkata. Growth driven by advertising volumes, particularly in smaller towns Growth, in 2010, was driven by higher volumes, rather than increased prices. Many broadcasters, particularly those in the larger cities, increased advertising inventory by cutting down on music/talk time. This enabled them to substantially grow revenues without significant increases in advertising rates. Advertiser interest in Tier 2 and Tier 3 towns also picked up in 2010, with some of these markets showing growth rates of 30% and more. This is a healthy sign for the industry and is likely to result in greater interest in Phase III. Phase III: Crucial for the next stage of growth The last few hurdles are cleared for the Phase III auction. The union cabinet approved the FM Phase III privatization. The key issue of music royalty is still looming large but the government is showing great intent in tackling it speedily. Phase III auctions will see 839 new stations in 294 cities in all. Post Phase III, FM radio will cover around 85% of the country making it a huge opportunity for the advertisers. There will be around 227 new cities with radio stations for the first time. These are smaller Tier 2 and Tier 3 towns. In addition to this, All India Radio (AIR) is expected to launch 320 new radio stations. Internet Advertising The online advertising industry Bolstered by the growth in the economy, the rise in internet users and growth in mobile internet and advertising, the industry has witnessed exponential growth. The internet provides advertisers with the option of controlling their advertising run-time depending on the response. Their decisions to continue or change advertising cost little. Online advertising remains a low-cost, yet important medium for targeting customers. During the economic downturn a couple of years ago, companies increased their online ad-spend to test-market new products. They continued doing so when the economy picked up. The downturn provided them with an opportunity to test the online medium for advertising potential. The size of this industry was INR 7.7 billion in 2010, registering a growth of 28.3% over INR 6 billion in 2009. Growth of the industry in 2006-10 INR billion | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR |   |   |   |   |   |   |   | Internet advertising | 1.6 | 2.7 | 5 | 6 | 7.7 | 48.10% | % change |   | 68.8 | 85.2 | 20 | 28.3 |   | Online advertising is divided into two types: • Display advertising: Banner advertising, pictures with links, etc • Text advertising: Found in side panels of search engines in text As in 2009, travel, banking and the financial services industry (BFSI), auto and telecom sectors remained the largest advertisers in 2010, making up 50% of the total display advertisement market. As for text advertising, BFSI, travel and online publishers were the dominant sectors, constituting 60% of the market. Online ads have evolved from a Cost Per Impression (CPI) or cost per mille -1000 impressions (CPM) to cost per click (CPC) to cost per acquisition (CPA). Advertisers such as BFSI, auto, and travel are gradually moving towards CPA advertising. India’s place in the world The Asia-Pacific market of online advertising is dominated by Japan, China and Australia. India, as of now, has a very small share in this market. Though one of the fastest growing markets in the region, it is nowhere close to the size of those in the US and the UK as well as other major countries in Asia Pacific. With growing internet penetration, the arrival of 3G and fresh BWA auctions by the government, it is likely that the market will expand as well as grow but how fast remains to be seen. The market size of key global players (USD million) Country | Market Size | US | 25,190 | UK | 5,799 | China | 3,428 | Japan | 8,795 | Australia | 2,085 | India | 171 | Key developments Cricket craze led to manifold growth in web traffic The World Cup in 2011 was a good time for most cricket websites. In India, the volume of traffic on cricket sites was as no surprise. This also meant that advertising on these portals grew manifold during this period. Social media showed promising signs Active users of social media can spend hours on their favourite portals accessing any information coming their way. In India social networking sites have shown a remarkable growth of 43% in total unique visitors over 2009. Social media is not limited only to social networking sites such as Facebook and Orkut. They also extend to blogs, Twitter and much more. Yet another piece of evidence of the impact of social media sites in India is the growth in advertising on social media. Advertising on social media has shown a growth of 54% in 2010-11. Product promotions on social networking sites are on the rise. Companies are enticing users with teasers on Twitter. Some are even willing to provide discounts to customers if they ’like’ their product on a website or join a community started by the company. Going forward, we expect this trend to grow stronger and more advertisers to go the social media way. Mobile internet India is the second largest mobile subscription market in the world with 750 million subscribers in December 2010 and is set to be the largest market by 2013, according to the London-based Informa Telecoms and Media’s latest forecast. Mobile internet users in India are pegged to number 11 million by the end of 2009 and estimated to almost double by the end of 2010. There are additional reasons for growth in mobile internet. Firstly, the prices of internet-(low-cost GPRS) enabled handsets are reducing drastically. While the base price of a GPRS-enabled handset was in the range INR 5,000 to 6,000 last year, this year the same is around INR 2,500. Smartphones which were priced at over INR 12,000 last year have reduced to under INR 7,000. This has aided internet access at very low costs to users. Secondly, the growing trend of social networking among the youth has increased the demand for smartphones and GPRS-enabled phones. Internet-enabled mobile phones are easily available with pre-loaded applications for Facebook, Twitter, etc. Telecom players are also reducing GPRS rates to enable the proliferation of mobile internet. Packages at reasonable costs for data services on mobile phones are now available. Travel sites push ecommerce growth on fast track Travel sites reached 37% of the online population in India in April 2010, an increase of over 50% over the previous year. This reflects the growing trend of consumers researching travel costs on comparable sites before making their travel arrangements. On an average, online users spent about 38.4 minutes on travel sites in a month and visited the sites about four times a month. While online travel is the major component of net commerce, etailing also comprises buying consumer items such as cameras, computers, home and kitchen appliances, flowers, toys and gifts online. Indian shoppers are still wary of buying online Cash-on-delivery mechanisms were introduced by playersto promote online shopping. Such provisions have been provided by players such as Bagittoday, Flipkart, Infibeam, etc. However, this mode of payment has not yet caught on with users. This could be due to low awareness. Mobile payments are also a very small size of the market, though this mode should grow as awareness of online shopping increases. There are now many companies in this space like Paymate, Smartpay, Atom Technologies, ngpay, etc. that provide mobile payment solutions. Out-of-home advertising After witnessing a double-digit decline in 2009, the OOH sector saw a revival in 2010 on the back of a growing economy, change in the lifestyle of consumers and increasing media fragmentation. Digital billboards replacing traditional billboards as well as the growing number of digital networks are affecting the OOH industry. Upgraded street furniture as part of city beautification projects and renovated airports in Delhi and Mumbai have provided advertisers with new locations and better quality sites. Additionally, improvements in railway networks are enabling new advertising platforms enhancing opportunities for advertisers. The government is expected to aid the industry by establishing specific guidelines and eliminating unauthorised signs. However, it is yet to achieve the growth rates seen prior to 2009. The OOH market in India was INR 14 billion in 2010 as compared to INR 12.5 billion in 2009 showing a growth of 12% over the previous year. Growth of the Indian OOH industry in 2006 -10 INR billion | 2006 | 2007 | 2008 | 2009 | 2010 | CAGR |   |   |   |   |   |   |   | OOH advertising | 10 | 12.5 | 15 | 12.5 | 14 | 8.80% | % change |   | 25 | 20 | -16.7 | 12 |   |   |   |   |   |   |   |   | OOH share in | 6.2 | 6.4 | 6.9 | 5.8 | 5.7 |   | ad pie (%) |   |   |   |   |   |   | India’s place in the world India is still quite low on the OOH advertising market as compared to the rest of the developed world. Digital OOH in China has over 70,000 screens in Shanghai alone which is more than the total digital screens in India combined. OOH market in other countries Country | 2009 | 2010 | Growth % | US | 5,900 | 6,140 | 4.1 | UK | 1,208 | 1,359 | 12.5 | Japan | 5,982 | 5,702 | -4.7 | China | 1,740 | 2,005 | 15.2 | India | 272 | 311 | 12.2 | Focus is shifting from the number of screens to the quality and quantity of audience. The currency of outdoor media is shifting from the number of screens to the potential and size of the audience. As per industry sources, the OOH audience primarily belongs to SECA. Advertisers are beginning to realise this and are willing to pay a premium for quality and quantity of audiences, but are unwilling to pay per screen. Digital OOH is the next growth medium for the industry. Though digital OOH in India has grown, it is still not on par with other developing countries, our industry discussions revealed that the share of digital OOH in India has gone up from approximately one per cent to five to six per cent over the last four years. However, this is significantly lower than the global average of approximately 20%. The growth in digital OOH through LEDs has been slow. One of the main reasons is that advertisers are not customizing content for this medium and are instead recycling TV advertisements. On account of this, the medium is unable to attract sufficient eyeballs. Also, hosting moving pictures on digital media in public places such as roads, etc raises concern among authorities in terms of distraction for drivers. Also, advertisements on LCDs have not kept pace with their inherent potential, since there are only limited properties that allow for concentrated and captive audiences to justify the investment. In addition, digital OOH players have in the past used poor procurement strategy such as overbidding for properties for lower term periods without proper market research. However, though users are slowly realising the advantages of digital OOH, the medium still needs to be sold. Digital OOH is expected to grow at the rate of 30 to 35% in the next few years. Some examples of recent growth in digital OOH are as follows: • Municipal Corporation of Delhi (MCD) installed 25 LED screens across Delhi for the Commonwealth Games and Kashrey Media Innoventures Pvt. Ltd. launched LED video screens in Gurgaon. • RC&M won the rights to operate a digital network in the stations of the Delhi Metro Rail Corporation. The main stations, which see footfalls of more than 200,000 people daily, will each have 10 46-inch screens displaying passenger information as well as advertising. • Hype Integrated Communications is installing thousands of screens in Mumbai’s local trains. • Peacock Media introduced LCD screens in buses in Tamil Nadu. Innovation and customisation is the key to OOH growth in India. Advertisers today are demanding from OOH players, the ability to customise their offerings for select audiences. OOH media is trying to increase their reach at places that have captive audiences. These include bus shelters, lifts and waiting areas, airport transfers, cabs, etc. One such successful example is digital advertising in Meru Cabs. While the company has been offering non-digital advertising to users, this is the first time it will offer digital advertising. The company plans to install digital screens in its fleet of cabs. With around one million passengers spending an average 45 minutes in a cab, these cabs offer a captive SEC A audience to advertisers. Moreover, the non-digital advertising offered by Meru is also quite effective as the cab acts as a moving advertisement covering the length and breadth of the city. Also, for digital OOH to attract audiences and address the authorities’ concerns, the advertisers need to customise their offerings for that medium and not re-use content prepared for other media. OOH properties are increasing Infrastructure growth in India has opened up many new spaces for OOH media including Tier 2 and Tier 3 cities. Times OOH won the advertising contract at Terminal 3 (T3) at Delhi’s Indira Gandhi International Airport for 20 years while Laqshya won the promotional rights at T3. The Commonwealth Games also brought in new infrastructure facilities in New Delhi which provided new avenues for outdoor advertising. OOH players focus on ROI than on increasing the number of properties. After facing the brunt in 2009, OOH players have turned smarter and have started to focus on properties that will maximise returns in less time. OOH players are no longer over-bidding for prime properties. There has also been rationalisation in the bid prices. Moreover, the focus is also on the type of audience of the OOH property and how to use that rather than just increase the number of properties and reach. OOH, unlike print and television, is not a mass medium for advertising. It is a niche medium with focus on geography, audience, type of property, location of property and various other parameters. Government Regulations and Initiatives The media industry has witnessed positive growth in the past years. In order to further propel the pace of growth and in the light of changing market trends and technologies, the government of India, through its various regulatory bodies, over the years, has been endeavouring to bring about regulatory changes to allow foreign direct investments, etc. within diverse sectors of this industry. On the tax front, there have been significant developments in terms of amendments in existing tax laws, new laws like the Direct Taxes Code or the proposed Good and Services Tax (GST), landmark judgements, notifications, etc., impacting the industry at large. Some of the key tax and regulatory developments for major sectors of the industry are highlighted below: Deductibility of expenditure incurred for acquiring telecasting rights in films/ programmes Generally, telecasting rights in films/programmes are acquired by the telecasting companies either on an outright basis or for a limited number of airings over a period of time. Where the rights are acquired on an outright basis or for limited airings that may span over different financial years, the issue is whether the cost of acquiring such rights can be claimed as deduction in the year of acquisition, or would the cost have to be claimed over the license period. In the case of television programmes, one view is that significant value of the programmes is derived at the time of the first airing itself, after which there is hardly any residual value of the programme. Accordingly, the entire expenditure on acquisition of rights relating to such programmes should be allowed as deduction in the year of the first airing itself. In the case of film rights acquired for a limited period or for limited airings, the view is that the expenditure should be allowed over a period of time/number of airings. The contrary view is that the expenditure on the acquisition of rights should be treated as incurred on the acquisition of capital asset, i.e. for acquiring of ‘copyright’/‘licence’ specifically covered as intangible asset eligible for depreciation at a specified rate. This issue continues to be a bone of contention between the telecasting companies and the tax authorities. Recent reports suggested that the comptroller and auditor-general of India (CAG) have recommended the contrary view. Payments for production of television programmes Television channels generally acquire programmes from the television programme producers for broadcasting or telecasting through their channels. Indian tax authorities have been contending that since programme producers qualify as professional/technical persons, payments made by television channels to such programme producers are liable to withholding tax provisions under Section 194J. However, television channels have been contending that such payments are made towards a contract concerning broadcasting and telecasting including production of programmes for such broadcasting or telecasting and hence should be covered under provisions of Section 194C. The Delhi High Court in one of its decisions on this controversy has accepted the television channel’s contention. Payments for purchase of on-air time slots from channel companies Generally, media-buying agencies buy on-air time slots on various channels on behalf of advertisers. Indian tax authorities have been contending that consideration for purchase of air-time slots are liable to withholding tax. Recent reports suggest that the CAG has recommended that such payments made by the advertiser/ media agencies for buying slots on television should be subject to withholding tax at 10%. Deduction of expenditure on film production and acquisition of distribution rights Rule 9A/9B of the IT Rules provides for the manner of claiming deduction with respect to the expenditure incurred in connection with the production of a film/acquisition of distribution rights. These expenses are allowed as deduction based on release of film or when the distribution rights to the films are exploited. Based on the facts of the case, the expenditure is allowed as deduction either in the first year or over a period of two years. One of the principles of jurisprudence is that ‘rules’ under the ‘statute’ cannot over-ride the ‘statute’ itself. Accordingly, the debate is whether Rule 9A/9B over-rides all other provisions of the IT Act (E.g. capital expenditure vs. revenue expenditure, cash system of accounting vs. accrual system of accounting, disallowance of statutory payments not made within the due date of filing of tax return, etc.) or the income needs to be computed based on the provisions of the IT Act (without recourse to the Rule 9A/9B). The issue has generated significant debate, but the jury is still out on the subject. Payment of royalty for sale and distribution of cinematographic films on DVD and VCD Indian distributors entering into licence agreements with foreign companies for sale and distribution of cinematographic films on DVD and VCD make periodical payments to them depending upon the sales of DVDs and VCDs often described as royalty in the agreements. Indian tax authorities have been contending that such payment constitutes royalty chargeable to income tax in India and therefore Indian distributors are liable to withhold tax on such periodical payments made to foreign companies which hold the copyright of the films. The Mumbai tax tribunal has held that although royalty has been paid as per the agreement, such periodical payments for sale and distribution of cinematographic films are expressly excluded from the ambit of royalty as defined in the Indian Income Tax Act. Therefore Indian distributors are not liable to withhold tax from such payments. Deduction of licence fees Radio broadcasters are required to pay licence fees, viz. onetime entry fee and recurring annual fees, to the government as per the terms of the licence. The issue that arises is whether such fees are in the nature of revenue expenditure to be claimed as deduction in the year in which they are incurred or is in the nature of capital expenditure entitled to depreciation at specified rate. One view is that, since the annual licence fee is payable for each year of operation, the expenditure is a period cost necessary for conduct of business and hence should be allowed as revenue expenditure. Further, the one-time entry fee should be allowable as deduction over the period of licence. However, another view is that the payment could be treated as incurred on capital asset, i.e. for acquiring of ‘licence’ specifically covered as intangible asset eligible for depreciation at specified rates. Characterisation of expenditure as revenue or capital expenditure has always been a matter of intense controversy between tax payers and tax authorities and is expected to be resolved only at a higher appellate level. Government Initiatives Further integrating the brands – 'Cinemas of India' and 'Incredible India', the Ministry of Information and Broadcasting (MIB) and Ministry of Tourism have signed a memorandum of understanding (MoU) to further enhance film tourism. The MoU, which aims to endorse India as a filming destination for domestic and foreign film makers, will facilitate budgetary support for identified film festivals and provide a single window clearance for film shooting permissions. Eventually, it is expected that world tourist arrivals in India would rise from 0.06 per cent to 1 per cent by the end of the 12th Five-Year Plan (2012-17). A government committee has proposed that FM radio frequencies should be auctioned by the department of telecommunications (DoT) after being separated from the broadcast licence by the MIB. The recommendation aims at accelerating the third phase of expansion in the FM radio industry by bringing about greater clarity in the roles and assets of the two ministries. The government had given its nod in July 2011 for e-auctioning 839 new private radio stations under the third phase of expansion of FM radio. MIB has revealed that all the licences would be awarded by 2015 and the auction is anticipated to earn revenues of about Rs 1,733 crore (US$ 347.26 million) for the government. Key issues and trends for each sector Television Trends • Advertising revenue growth propels the television industry. • DTH leads growth in distribution segment. • Regional channels are increasing their share in TV advertising. • Broadcasters are rebranding themselves to establish greater connect with younger audiences. • Regional players are increasingly focusing on the kids channel market. • Sports channels boosted by IPL 4 and other cricketing events, are clocking good advertising revenues. Issues • Completely addressable digitisation still a distant dream for stakeholders. • High cost of content production. • Low ARPUs to increase payback time. • Need to improve measurement tools for measuring viewership. Conclusions • The industry was estimated to be INR 306.5 billion in 2010 showing a growth of 15.4% over 2009. • Digitisation and addressable digitisation are emerging as key to success of the industry. • The growth of advertisement volumes drives television advertising to double-digit growth. • DTH was the major growth driver for the industry with the addition of 12 million subscribers. • HDTV is gaining ground due to successful World Cup & growing viewer interest for quality content. Print Trends • Hindi dailies grab the top three spots and continue to strengthen their position. • There is a growing trend of hyper localisation in the print media. • Industry players are unbundling products to increase profitability. • New entrants are expanding readership in respective markets. • Niche and business magazines show robust growth. Issues • Fluctuating newsprint costs. • Ad-edit ratio up on account of profitability pressures. • Subscription schemes increasing dependence on advertising revenues. • New media yet to pose a threat to print industry. Conclusions • The industry was estimated to be INR 178.7 billion in 2010 showing a growth of 10.7% over 2009 numbers. • Hindi dailies continue to rule the roost with the highest growth in readership (AIR) as compared to 2009. It grew at the rate of nine per cent in 2010 as compared to three per cent in 2009. • Magazines continue to suffer from lack of measurement tools. • Regional players are expected to grow at a brisk pace, both in terms of advertising revenue as well as market expansion. • Newsprint prices are a major concern for the industry and players will need to guard themselves against major price fluctuations. Film Trends • Multiplexes look at alternate sources of revenue. • Single-screen theatres showed poor performance and many of them shut shop. • Small-budget films with innovative content take on big-budget films. • The pay-per-view market is set to grow. • Social networks are becoming key to film marketing. • The regional film industry produced the biggest hit of the year, Endhiran (Robot). Issues • Shortage of infrastructure. • Lack of quality content. • Lack of new releases during the cricket season. • Cannibalisation of theatrical revenues • Piracy. Conclusions • The industry was estimated to be INR 87.5 billion in 2010 showing a decline of 7.9% over 2009. • The industry’s performance has dipped for the second year in a row due to lack of quality content and the closure of many single-screen theatres. • Multiplex owners continue to grow, with big plans for the next five years. We expect multiplex screens to double in number in that time. • The market for Hollywood content is on a growth path as Hollywood collections in India increase by 30%. Radio Trends • Telecom players and handset manufacturers are increasing their spend on radio. • Improvement in margins is expected with favourable legislation. • Innovation will drive the industry as the competition is set to increase. • Increasing FM-enabled mobile phones are driving radio growth in India. Issues • Lack of measurement and research. • E-auction methodology for Phase III auction . • Differentiation of content and channel offerings. • Royalty payment between music companies and radio industry. Conclusions • The industry was estimated to be INR 10.8 billion in 2010 showing a growth of 20.0% over 2009. • Phase III is expected to extend radio’s reach to 294 towns and 839 stations. It will help boost the regional growth of radio stations. • Content innovation is key for the success of radio post-Phase III. Internet advertising Trends • Cricket craze led to multifold growth in web traffic. • Social media is showing promising signs for online advertising. • 3G has arrived, but is yet to make an impact in mobile advertising and the internet market. • Internet users in rural India have grown. • Travel sites push e-commerce growth on the fast track. • Online ad-sales have been outsourcing to specialised agencies. Issues • Indian wariness of online shopping. • Need for effective means to monetize content. • Lack of trust in online medium and effective measurement tools. Conclusions • The industry was estimated to be INR 7.7 billion in 2009 showing a growth of 28.3% over 2008. • The Indian internet advertising market is one of the fastest-growing segments in the E&M industry. • Increasing broadband penetration, successful BWA spectrum auction and the arrival of 3G will boost the means to access the internet and will in turn lead to growth in internet advertising. • Social media will be an important form of online advertising. Out-of-home Trends • Telecom, BFSI, E&M and FMCG were among the top advertisers for 2010. • Focus is shifting from the number of screens to the quality and quantity of audience. • Digital OOH is the next growth medium for the industry. • OOH players are offering innovative and customised solutions to advertisers for specific target audiences. • OOH players are focusing on ROI rather than on increasing the number of properties. Issues • Measurement mechanism • Highly unorganised industry • Lack of quality properties Conclusions • The industry was estimated to be INR 14 billion in 2010 showing a growth of 12.0% over 2009. • Infrastructure growth led to growth in OOH media in 2010. • Innovation and customisation are key to OOH growth in India. • Measurement mechanism remains a challenge, holding back advertisers from increasing their spend in OOH. • Digital OOH is expected to grow by leaps and bounds in the next few years. Porter’s 5-force Model Barriers to entry In the electronic media, it is high for broadcasting since it is very capital-intensive. It involves the cost of leasing the transponder, setting up up-linking facilities, setting up pre and post-production facilities. The barriers to entry are far lower for content providers. Besides, broadcasters themselves commission programmes and finance their production. Hence margins are lower. The broadcasters are finding it increasingly difficult to retain their key personnel. In spite of the high barriers to entry a slew of channels across languages and genres have been launched in the recent past. Threat of Substitutes To all of the media types, it is very high as all the types vie for the same source of revenue i.e advertising and every media type have overlapping functionalities like news and entertainment for radio, TV, Internet and Print media. Bargaining power of suppliers In the print media, high for newsprint suppliers. It is medium to low for content providers in the electronic media. Terrestrial broadcasters such as Doordarshan and regional broadcasters such as Sun TV actually commission time slots to content providers. Bargaining power of customers Relatively high in both print and electronic media. The consumer finds a surfeit of players to choose from. The rollout of CAS and DTH services will enable the consumer to choose the channels that he wishes to view increasing his bargaining power. Competition High in print media, especially in Hindi dailies. The print sector includes listed entities like Jagran Prakashan, HT Media and Deccan Chronicle. Regional print media too is seeing increasing competition. Competition is high amongst broadcasters especially for general entertainment channels. The space includes listed entities like Zee TV, TV 18, UTV, NDTV and Sun TV. Relative Comparison For the study of Media sector, and to judge the relative performance of the companies under this industry, following companies are chosen, namely; 1. Zee Entertainment Enterprises Ltd. 2. Sun TV Network Ltd. 3. TV18 Broadcast Ltd. 4. TV Today Network Ltd. The data available for the last five years was taken into consideration and then tabulated in a specific format of Balance Sheet and Profit and Loss Account Later for the purpose of judging the company’s position with respect to other the data was analyzed and put into the sheet prepared for relative comparison. The parameters on the basis of which the comparison has taken place are as follows: i. Sales, EBITDA, EBITDA margins and Net Profit Margins. ii. Return on Capital Employed and Return on Equity. iii. Market Parameters like Market Capitalisation, P/E Ratios, Price to Book Value ratio of the coverage companies. Sales, EBITDA, EBITDA margins and Net Profit Margins. Companies | Sales (in Crores) | EBITDA (in Crores) | EBITDA % | NET PROFIT (in Crores) | NET MARGIN % | Zee | 3,013.56 | 833.73 | 27.7% | 603.08 | 20.0% | Sun TV | 2,013.46 | 1,975.74 | 98.1% | 769.76 | 38.2% | TV18 | 799.81 | 46.14 | 5.8% | (18.72) | -2.3% | TV Today | 293.26 | 25.85 | 8.8% | 12.42 | 4.2% | | RoCE & RoE of Coverage Companies:   | 2010-11 | 2009-10 |   | RoE % (2010-11) | RoCE % (2010-11) | RoE % (2009-10) | RoCE % (2009-10) | Zee | 17.42% | 20.07% | 16.77% | 15.78% | Sun TV | 37.19% | 51.34% | 28.99% | 39.10% | TV18 | -3.58% | 4.02% | -34.41% | -6.56% | TV Today | 4.03% | 3.96% | 8.39% | 9.62% | Peer Comparison: Companies | CMP | Market Cap | MP | Market Cap | P/E Ratio | P/BV Ratio |   | (as on 31st Mar.11) | (in Rs. Crores) | (as on 31st Mar.10) | (in Rs. Crores) | 2010-11 | 2009-10 | 2010-11 | 2009-10 | Zee | 123.15 | 12,045.01 | 260.57 | 11,308.92 | 19.27 | 18.34 | 3.89 | 2.95 | Sun TV | 426 | 16,788.02 | 413.15 | 16,281.62 | 22.07 | 32.51 | 7.45 | 8.63 | TV18 | 93.95 | 2,234.76 | 95.95 | 1,742.94 | NA | NA | 3.26 | 4.84 | TV Today | 61.96 | 368.40 | 107.77 | 622.82 | 29.65 | 20.18 | 1.18 | 2.05 | Future Outlook and Conclusion The Indian entertainment industry is on a high growth path. Domestic majors are finding better earnings potential in the huge overseas markets. At the same time, corporatization is finally starting to emerge in this highly unorganized industry. This is likely to instill a greater discipline in the functioning of the industry and lead to greater consolidation in the future. The domestic consumer will opt for more sophisticated technology in the near future. Consequently, domestic majors will have to redefine their product offerings. With literacy levels forecasted to increase in the future, the publishing industry will continue to witness growth. Advent of new technologies such as e-book etc will take a longer time to have an impact on the domestic market when compared to the global markets. While piracy levels are declining slowly, better copyright laws and the rapid implementation of the same are imperative to preserve the creative talent in this industry. The government needs to implement the same in order to facilitate the high growth in this industry. There is increased penetration in Indian markets, which is expected to even intensify further, owing to a revolution brought in by digital technology. Wireless broadband, growing internet usage, cable digitisation and higher DTH adoption would drive Indian M&E industry. It is also noted that smart phones, tablets, gaming devices have laid the foundation of a new wave in the industry. 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