India, the worlds largest democracy in terms of population (1.2 billion people), had real GDP on a purchasing power parity basis of approximately US $ 3.56 trillion as per the 2009 estimate. This makes it the fifth largest economy by GDP in the world after the European Union, the United States of America, China and Japan.

(Source: CIA World Fact book)

After experiencing a distinct moderation in growth to 6.7 per cent in 2008-09, the Indian economy recovered in 2009-10 with a growth of 7.2 per cent (as per Central Statistical Organisation (CSO) advance estimates).

Industrial output, which was affected by the cyclical slowdown and international commodity price shocks in 2007-08 and the global recession in 2008-09, recovered substantially in 2009-10. The Index of Industrial Production (IIP) registered double digit growth during October 2009 February 2010 (Chart I.3 and Table I.4a).

The headline inflation, which remained at 9.9 per cent in February-March 2010, has emerged as a major policy concern. In the recent weeks, while food inflation is showing signs of slowdown, inflation in fuel and manufactured products is causing more generalized inflationary pressures.

In sum, there is an overall improvement in business sentiments and economic activity, but concerns relating to elevated levels of inflation remain in the near term. It is likely that the growth impulses could further strengthen during 2010-11, and therefore, anchoring inflationary expectations without hurting the growth process continue to be the focus of monetary policy.

(Source: Macro Economic and Monetary developments in 2009-10 issued by the RBI on April 19, 2010)

Overview of the Indian Media & Entertainment Industry:

The Indian Media and Entertainment (M & E) industry is one of the fastest growing industries in the country. Its various segments Film, Television, Advertising, Print and Digital among others have witnessed tremendous growth in the last few years. In the last few years there has been an exponential growth in the number of television channels and also private FM radio operators.

The entertainment and media industry has demonstrated tremendous dynamism in the recent years. In the last financial year it witnessed a growth of 17% and the television industry is expected to grow annually at around 22% and the radio industry is set to grow at 200% over the next 5 years.

The entertainment and media industry reached an estimated size of Rs.513 billion and has grown cumulatively at 19% in the last 4 years.

According to the Planning Commission, one of the sectors which has consistently outperformed the GDP growth year after year is the Entertainment and Media Services Sector which is expected to grow at a CAGR of 18% till 2010 and beyond during the Eleventh Plan period. This sector comprises television having a CAGR of 22%, films having a CAGR of 16%, radio having a CAGR 28%, music having a CAGR of 4%, print media having a CAGR of 13% and Internet Advertising having the highest CAGR due to its smaller base of 43%.

t is one sector which responds extraordinary to GDP growth with a multiplier. When incomes rise, more resources get spent on leisure. The contribution of each media sub-sector to the overall revenues as in 2006 and as projected for 2011 clearly brings out growing preponderance of electronic media over print media.

Growth in infrastructure, technology, and institutional support for the information and broadcasting (I&B) sector was in consonance with overall national development perspective. Film, information, and broadcasting sectors of the economy have achieved formidable strength. The share of I&B sector in total employment, income, and investment has gone up significantly. Issues in the national scenario of this sector revolved around foreign investment, regulation, intellectual property rights, content enrichment, restructuring of Prasar Bharati, digitalization and maintaining archives of the entire spectrum of I&B media unit.

(Source: Planning Commission, Government of India 11th Five Year Plan)

The Indian Media & Entertainment industry can be categorized as follows:

Filmed Entertainment
Television
Music
Radio
Print (Primarily Newspapers & Magazines)
Live Entertainment

Technology has changed the face of entertainment today. The ongoing change in technology, products and distribution channels has created significant opportunities in the industry for growth and development. The revolution in the information technology has resulted in the emergence of cable wires, networks and most importantly the "Internet" which has revolutionized the Media And Entertainment industry.

The emergence of multiplexes and entertainment malls has redefined the entertainment industry. This booming sector in India has also encouraged and many foreign investors who are making efforts to tap the Indian market.

A. Filmed Entertainment

Next to Hollywood, Indian film industry is said to be the largest in the world. And it is the largest in terms of films produced & tickets sold.

The Indian film industry is currently worth about US$ 1256 million and is expected to grow at a Compounded Annual Growth Rate of 18 per cent for the next 5 years. Nearly one thousand films are produced every year. The technology used and the special effects in movies are becoming increasingly sophisticated and animation is also finding a growth. The industry is currently witnessing the trend of more digital cinemas and growth of multiplexes. The Dubbing industry has grown at the rate of 25-30% over the last 4-5 years. Many international films are dubbed in local languages and shown in India. India has over 5 million home video and DVD users. The Indian film industry is also making its presence felt in the international market. The foreign investment in the Indian film industry is also increasing significantly. In fact, it witnessed the maximum flow of foreign investment in 2006.

Regional (especially southern) films command almost 60 per cent of the total Indian film market with the rest being commanded by Hindi films.

The film industry contracted 14 per cent in 2009. Over the next five years, the industry is projected to grow at a CAGR of 9 per cent and reach Rs 13,700 crore. Growth drivers for the sector would include expansion of multiplex screens resulting in better realizations, an increase in the number of digital screens facilitating wider releases, higher cable and satellite revenues, improving collections from the overseas markets and ancillary revenue streams like DTH, digital downloads, etc, which are expected to emerge in future.

(Source: IBEF / KPMG / PWC)

B. Television Industry

There has been a phenomenal increase in the number of channels beamed on the TV screen viewers in India. From 45 channels in 2001 the number of channels has increased to 439 in 2009. There has been rapid growth in the number of channels in news and other niche segments such as lifestyle, kids and infotainment apart from General Entertainment. The growth in the number of channels can be seen in the graph below. The number of Non-News & Current Affairs TV channels has grown to 203 and that of News & Current affairs TV channels has grown to 236 during the same period.

News & Current Affairs TV channels constitute 54% and Non-News & Current Affairs TV channels constitute 46 % of total permitted 439 TV channels under up linking guidelines. The year-wise growth of channels for up linking from India is depicted in the graph below. While average number of permissions granted per year for new Channels is about 40, it can be seen that there were as many as 111 Channels permitted in 2008 and 67 Channels permitted in 2009. This was due to heightened economic activity leading to a huge growth in the electronic media in India. Year 2009 saw a bit of a decline in the number of permissions as not many applicants came forward to apply for new Channels due to global recession.

(Source: Ministry of Information & Broadcasting, Government of India Annual Report 09-10)

C. Music Industry

he Indian entertainment industry is incomplete without music. Other segments such as remix, Indi-pop, mobile music have also gained popularity.

The Indian film industry is inseparable from music. Music contributes as much as 15 per cent of an individual film's earnings. The major problem that has become a risk to the existence of the music industry itself is piracy. Piracy has resulted in a sluggish growth of the worldwide music industry.

Ringtones are the dominant component of the mobile music market. For a long time, the Indian music industry was dominated by the film music but now a significant portion of the revenues are also contributed by music videos and private non-film albums. Indian music also has a large market overseas. There is also a demand for classical and devotional music. The new distribution channels like online music stores are gaining popularity. T-Series, Sony and Venus are some musical players in India.

The size of the Indian music industry was estimated at around Rs 830 crore, up from Rs 730 crore in 2008, implying a growth of 14 per cent during the reporting period. It is expected to grow at a CAGR of 16 per cent over 2010-14 to reach Rs 1,720 crore. Gaming is expected to be the fastest growing sector in the M&E industry. While the sector showed a 22 per cent growth in 2009, it is expected to grow at a CAGR of 32 per cent in the next five years to reach Rs 3,200 crore by 2014. (Source: IBEF)

D. Radio Industry

Radio has made a comeback in the lifestyles of Indians. Radio has the reputation of being the oldest and the cheapest medium of entertainment in India. The radio industry has been completely reshaped by the various private players that entered the sector after the government allowed foreign investment into the segment and opened the licenses to the private players. (Source: PWC/FICCI)

The Indian government has already given 338 licenses for FM radio channels in 91 big and small towns and cities. The current size of the radio market is India is Rs 300 crores and is expected to achieve the highest growth rate of 32 per cent in coming years. The quality of the sound and the music has improved significantly with the emergence and use of satellite radio. The audience profile has also shifted to the high-income group. Local advertising, lower amount of money spent by the companies to advertise on radio is an added attractiveness for the players. All India Radio (AIR) - the national service provider owned and operated by the Ministry of Information and Broadcasting under the Government of India - is the largest player in the industry.

To exploit the true potential of this sector, frequency modulation (FM) radio needs to step up its penetration to at least 300 stations in 100 cities, which would further attract an investment of US$ 899,160 per radio station frequency, the total additional investment required has been estimated at US$ 247.3 million, according to industry sources.

Radio, like other sectors, was affected by the recession too. However, it is expected to grow at a CAGR of 16 per cent over 2010-14 and reach a size of Rs 1, 640 crore by 2014.

(Source: PWC/FICCI)

E. Print (Primarily Newspaper and Magazine)

India offers a promising market for the print media industry. The expected CAGR of 12 per cent up to 2010 is a result of the increasing rate of literacy and thus the increase in the number of people reading newspapers and magazines. Also, the demand for the latest events in the country and the world is driving the newspaper industry growth. In 2010, the print media is expected to reach Rs 19,500 crore from its present value of Rs 10,900 crore. (Source: KPMG)

Digital printing, new ways of promotion and distribution are the latest trends and content being the focus of the print media industry. A few leaders in India in this segment are: Times of India Group, Dainik Jagran, Lok satta, The Hindustan Times and The Hindu.

In the last year, the Print Media Industry showed a very moderate growth of 2 per cent as there was a decline in advertisement revenues, which was partly offset by the growth in circulation revenues. The industry is projected to grow at a CAGR of 9 per cent and reach around Rs 26,900 crore by 2014.

(Source: KPMG)

F. Live Entertainment Industry

Live entertainment is a huge source of revenue for the global Media And Entertainment industry. Live entertainment - sometimes also called event management- is growing at a fast and steady rate. The number of corporate awards, Television, Films, Sports events is increasing rapidly, helping the sector grow at a fast rate. The current live entertainment segment of the Media & Entertainment Industry comprises a small number of large event management companies and a large number of smaller companies.

Various types of live entertainment events are:

Award shows
Celebrity appearances
Music concerts
Variety entertainment shows
Fashion shows/beauty contests
Branded Events (promotion and management of brands)
Televised Events (Events specially created for television channels)
(Source: PWC/IBEF)

Government Initiatives and Support

The Government has initiated the following measures:

The government has allotted US$ 50.13 million in the current Five-Year Plan (2007-2012) for various development projects for the film industry. The funds will be utilized to set up a centre for excellence in animation, gaming and visual effects To offer better audio quality and sharper picture to millions of its viewers, public broadcaster Doordarshan plans to go completely digital by 2017

The Consolidated FDI Policy document brings forth the following guidelines for the M&E industry:

Terrestrial Broadcasting FM (FM Radio): Foreign investment, including FDI, NRI and PIO investments and portfolio investments are permitted up to 20 per cent equity for FM Radio's Broadcasting Services with prior approval of the Government subject to such terms and conditions as specified from time to time by Ministry of Information and Broadcasting for grant of permission for setting up of FM radio stations

Cable Network: Foreign investment, including FDI, NRI and PIO investments and portfolio investments are permitted up to 49 per cent for cable networks under Government route subject to Cable Television Network Rules, 1994 and other conditions as specified from time to time by Ministry of Information and Broadcasting (I&B)

Direct-to-Home: Foreign investment, including FDI, NRI and PIO investments and portfolio investments are permitted up to 49 per cent for Direct to Home under Government route. Within the limit of 49 per cent, FDI will not exceed 20 per cent.This will be subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting (I&B)

The total direct and indirect foreign investment including portfolio and foreign direct investment in Headend-In-The-Sky (HITS) Broadcasting Service shall not exceed 74 per cent. FDI upto 49 per cent would be on automatic route and beyond that under government route. This will be subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting (I&B)

FDI policy in the Up-linking of TV Channels is as under: Foreign investment of FDI and FII up to 49 per cent would be permitted under the Government route for setting up Up-linking HUB/ Teleports;
FDI up to 100 per cent would be allowed under the Government route for Up linking a Non-News & Current Affairs TV Channel;
Foreign investment of FDI and FII up to 26 per cent would be permitted under the Government route for Up-linking a News & Current Affairs TV Channel subject to the condition that 48 of the portfolio investment from FII/ NRI shall not be "persons acting in concert" with FDI investors, as defined in the SEBI(Substantial Acquisition of Shares and Takeovers) Regulations, 1997

(Source: IBEF/FICCI)