India's media & entertainment revenue to hit $25 bn by 2015: E&Y

Growing digitisation, media consumption, and improved demographics are the leading drivers for the industry growth.

The Indian media and entertainment (M&E) industry recorded revenues of $16.3 billion (Rs 81,500 crore) in 2010, and is expected to be in excess of $25 billion (Rs 1,25,000 crore) in the next four years, states the latest report from Ernst & Young (E&Y).

The report, titled Spotlight on India's Entertainment Economy, suggests that India's growing digital media consumption and favourable demographics are the key drivers for the media and entertainment industry's future growth.

According to the study, there has been a surge in investment by global media companies in India, enticed by economic liberalisation, near double-digit annual growth, a fast-growing middle class, and a huge volume of demand for leisure and entertainment.

The Indian media and entertainment industry now finds itself at a new turning point -- the digital media. A surge in mass broadband adoption is expected, led by the launch of 3G and 4G services.

According to E&Y, by 2015, 90 per cent of India's projected 187 million broadband subscribers will access the net through wireless devices. This, in turn, will present global M&E companies with opportunities to develop "anytime, anywhere" content that caters to a new generation of Indian digital consumers.

"The M&E industry in India has been, and will continue to be, one of the biggest beneficiaries of India's favourable demographics," says Farokh Balsara, Ernst & Young's media and entertainment leader for Europe, West Asia, India, and Africa.

"Having one of the world's youngest populations, high volumes of content consumption, a favourable regulatory framework and growing digital adoption makes India an attractive investment destination for global media and entertainment companies," says Balsara.

Key findings from the report

Broadcasting and cable television

The broadcasting and cable TV industry revenue for 2010 was estimated at $7.2 billion (Rs 36,000 crore), up 13.3 per cent from the previous year, mainly driven by a 19 per cent growth in advertising revenue. The industry is projected to grow at a CAGR of 12 per cent to reach $11.4 billion (Rs 57,000 crore) by 2014. The continued digitisation of distribution infrastructure, the demand for regional and niche content, and the possibility of growth in TV penetration will drive growth in this segment.

Television distribution

India is the second-largest pay-TV market in the world, with 108 million subscribers and 48 per cent reach to Indian households. The TV distribution industry is dominated by analog cable, which is highly fragmented and includes about 60,000 LCOs, and 1,000 multi-system operators (MSOs). However, fierce competition among DTH operators, as well as a recent government policy mandating the digitisation of cable TV, has driven the growth of digital TV.

Publishing

The Indian publishing industry revenue for 2010 was estimated at $4.7 billion (Rs 23,500 crore), and is projected to grow at a CAGR of 11 per cent to reach $7.1 billion (Rs 35,500 crore) by 2014. A low-readership penetration of 30 per cent compared with a literacy rate of 74 per cent underscores the potential for further growth for publishing in India.

Newspapers

While in a number of international markets, the newspaper industry is faced with a declining readership because of digital media, the print industry in India continues to grow, driven by an increase in advertising spends, a rise in literacy rates, and the growth of regional-language and specialty newspapers. The Indian newspaper industry is one of the largest in the world, with more than 74,000 newspapers in 22 languages, and a readership of 325 million. Fifty four newspapers are very popular with advertisers in India, accounting for 42 per cent of all advertising spends, the most for any medium.

Magazines

Magazines comprise around 19 per cent of the total publishing industry in India. They are viewed as a luxury product, and rely heavily on newsstand sales rather than subscription sales.

Films

The Indian film industry is the largest in the world, with more than 1,000 films produced every year, in more than 20 languages. With 3.3 billion tickets sold annually, India also has the highest number of theatre admissions. The Indian film market derives almost 90 per cent of its revenue from non-English language movies, largely dominated by Hindi films, followed by South Indian films and other regional films. The Indian film industry is projected to grow from $3.2 billion (Rs 16,000 crore) in 2010 to $5 billion (Rs 25,000 crore) by 2014 at a CAGR of 14.1 per cent.

Growth is expected from the expansion of multiplexes in smaller cities, investments by foreign studios in domestic and regional productions, the growing popularity of niche movies, and the emergence of digital and ancillary revenue streams.

Radio and music

The radio and music industries contribute just 2.4 per cent of the total Indian M&E industry revenues. Both segments, however, provide highly popular forms of entertainment; FM radio reaches out to 30 per cent Indians, while the Indian youth are the second largest audience for paid digital music globally. The radio and music industries together generate around $445 million in 2010, and are projected to grow at a CAGR of 17.3 per cent to reach $844 million (Rs 4220 crore) by 2014.

The third phase of radio license auctions, which is expected soon, will see radio networks expanding their reach to add around 700 radio stations across the country.

Sports

Cricket is the most popular spectator sport in India, and follows movies as the second-biggest form of entertainment. The Indian Premier League (IPL) is already one of the most valuable sporting brands in the world, currently valued at $3.7 billion(Rs 18,500 crore). Interest in other sports has increased since India hosted the 2010 Commonwealth Games, challenging the notion that it is a single-sport country. This momentum, combined with a young population and a rising propensity to spend on leisure, presents the sports industry with a number of growth opportunities.

According to the report, the two greatest challenges faced by media and entertainment companies doing business in India are low average revenues, with the Indian average revenue per user among the lowest in the world; and piracy, which is rampant in India and accounts for in excess of $4 billion (Rs 20,000 crore) per year.

"The growth strategies in most companies in the US and Western Europe are linked to India and other emerging markets," says John Nendick, global media and entertainment leader at Ernst & Young. "However, to succeed in India, global media and entertainment companies need to navigate unique challenges in the areas of content localisation, distribution and pricing, regulations and piracy," says Nendick.