Table Of ContentINFORMATION, COMMUNICATIONS & ENTERTAINMENT
Back in the Spotlight
FICCI-KPMG Indian Media & Entertainment Industry Report
KPMG IN INDIA
Back in the Spotlight
FICCI-KPMG Indian Media & Entertainment Industry Report
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
FOREWORD
Welcome to the 2010 annual edition of the Indian Media and The improved market sentiment in 2010 has set the tone for a
Entertainment (M&E) industry report. FICCI takes this opportunity to promising year ahead. The power to convert this sentiment into a
thank KPMG, our Knowledge Partner, for having devoted precious reality will rest with the industry players and their ability to attract
time and resources to prepare this report at our behest. greater media consumption.
Amidst the uncertain economic environment that was prevalent last FICCI acknowledges the valuable inputs provided by the Media &
year, the Indian M&E industry has weathered the storm and is Entertainment industry players who have graciously devoted time to
showing signs of accelerating its growth. share their views in helping KPMG put this report together.
The industry performance in 2009 was a consequence of not only
the slowdown, but also several internal factors that lowered the
pace of growth for the otherwise flourishing media and
entertainment business in India. The multiplex strike, lack of quality
content, delay in auctions for phase 3 FM radio and 3G mobile
telecom licenses were some of the unexpected events that further
impeded the development of this industry.
However, there were a several positives that brought in some cheer
to the industry. While “3 Idiots” and “Avatar” created history in India
through record breaking box office collections, the change in venue
to South Africa had little impact on the third season of IPL and saw Yash Chopra
substantial growth in advertising revenue for the broadcaster. Chairman
FICCI Entertainment Committee
The biggest highlight of 2009 was the lessons that the year
presented to those in the media and entertainment business. The
Karan Johar
pressure on margins and curtailed media spend by advertisers
Co-Chairman
brought a renewed focus on managing costs, innovation and
FICCI Entertainment Committee
creativity.
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
The year 2009 is likely to be remembered as an inflection point for capture the significance and potential impact of this change in
the India Media & Entertainment (M&E) industry. While subscription consumer behaviour against the backdrop of an ever evolving
revenues grew, advertising revenues were impacted in line with the industry.
challenging economic scenario. On one hand, industry players
revisited the basics and looked at sustainable cost optimization. On The analysis presented in this report has been put together after
the other, they sought means to better connect with their extensive discussions with senior stakeholders of the Indian M&E
customers. Leadership across segments was tested: some industry. KPMG is grateful to them and all others who have helped
emerged resilient while others renewed their focus on their core us put this report together.
business strategy.
On the whole, the year 2010 has been welcomed with a renewed
sense of hope and a fresh perspective replete with the learnings of
2009. The GDP forecast at is 6.75 percent and 8 percent for the
years 2009-10 and 2011-12 respectively looks promising. On the back
of several factors, the overall M&E market in India is expected to
grow at a compounded annual growth rate of 13 percent per annum
through 2014 to reach INR 1.1 trillion. The untapped potential for
growth in media reach, impact of digitisation and convergence,
better consumer understanding, sustained efforts in innovation, and
enhanced penetration of regional markets all augur well for the
industry.
The Indian M&E industry has evolved significantly over the last
decade and the pace of this evolution is only expected to increase
Rajesh Jain
going forward. With mobile phones becoming ubiquitous, rising
Executive Director
mobile and internet penetration and increased use of search engines
Head - Media and Entertainment
and social networking platforms, consumer patterns have witnessed
KPMG in India
a marked change in India. Throughout this report, we have sought to
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
T A B L E O F
C O N T E N T S
F I L M
O N T H E P A T H
T O R E S U R R E C T I O N
0 1
M E D I A A N D
E N T E R T A I N M E N T
I N D U S T R Y
I N 2 0 0 9
A N I N T R O D U C T I O N
1 1
A N I M A T I O N
& V F X
F R O M 2 D T O 3 D
A N D B E Y O N D
M U S I C
99 D I G I T I S A T I O N
S T R I K I N G 111
T H E R I G H T N O T E
165
159
147
K N O W Y O U R
D E A L
C O N S U M E R
A D V E R T I S I N G A C T I V I T Y I T ’ S A L L A B O U T
M O V I N G T O W A R D S A N D I N V E S T M E N T Y O U R C O N S U M E R
A B R A N D L E D S O C I E T Y T R E N D S
197
C O R P O R A T E
G O V E R N A N C E
P O S I T I O N I N G T H E I N D I A N
M & E I N D U S T R Y F O R
C O M P E T I T I V E A D V A N T A G E
209
TAX
AND REGULATORY
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
RADIO
HIGH POTENTIAL,
CHALLENGES REMAIN
39
PRINT
LOOKING TOWARDS 87
THE GAINS AFTER THE PAIN
TELEVISION
THE GROWTH STORY
69
IPL 2
FROM INNOVATION IN 2008...
TO A SUCCESSFUL
119 BRAND IN 2009
127
GAMING
GAME ON 137
OUT OF HOME
AT THE CUSP OF GROWTH
INNOVATION
THE DIFFERENCE BETWEEN
THE LEADER AND THE FOLLOWER
185
177
HUMAN
CAPITAL
MANAGEMENT
DRIVING BUSINESS
THROUGH PEOPLE
217
IMPACT
OF IFRS
ON MEDIA AND
ENTERTAINMENT
COMPANIES
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
C H A P T E R
M EDIA AND
ENTERTAINMENT
INDUSTRY IN 2009
01
AN INTRODUCTION
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
M EDIA AND
ENTERTAINMENT
INDUSTRY IN 2009
01
AN INTRODUCTION
The year 2009 was one of slow growth, owing M&E industry in India is indicating potential for
to recessionary pressure growth
Indian Media &Entertainment (M&E) industry went through a tough Media spend in India as a percent of GDP is 0.41 percent. This ratio
phase in last two years due to the economic slowdown which is almost half of the world’s average of 0.80 percent and is much
impacted businesses in the country. The industry which is lower compared to developed countries like US and Japan. This
dependent on advertising for almost 38 percent of its revenues, was indicates the potential for growth in spends as the industry in India
hit due to shrinking ad budgets of the corporate world. However, the matures. As we move towards a more brand-conscious society, this
industry as a whole registered a very modest growth of around 1.4 is likely to get reflected in the future growth rates.
percent in 2009 compared to 12 percent in 2008. It is poised for
recovery in 2010, riding on the back of improved economic growth.
Media spend as a % of GDP
The year 2009 was a year marked with innovation and a focus on
cost efficiencies across sectors, more as a necessity to combat the
1.20% 1.08%
pressures on bottom line. Newer content formats and strategies
1.00% 0.90%
adopted by the players in the industry helped ensure that customers 0.80%
0.78% 0.75% 0.80%
had more choices which led to the evolution of the industry. Cost
0.60%
efficiencies which came about last year proved to be a silver lining 0.41%
0.40%
for the industry in a bad year, and many of these measures are here 0.20%
to stay and could benefit companies in the long run. 0.00%
Some sectors were impacted more than the others like Films, Radio 2009 F
and Out of Home (OOH), registered a negative growth during the India UK US China Japan World
year. In 2010, they are expected to recover somewhat with a Source: Worldwide Media & marketing forecasts, Group M, Summer 2009
moderate growth rate. Print showed a flat trend and and music grew
moderately. TV industry showed a good growth rate, and Internet,
Gaming and Animation, brought reasons to cheer for the industry If we compare the contribution of India to the world in terms of
with their growth rates touching double digits, albeit on a smaller population, it is second only to China at 22 percent1. China’s media
base. spend ratio at 0.75 percent is much in line with the world average,
whereas India lags behind. This is largely due to some of the media
In spite of the economic slowdown, the industry witnessed a
platforms being in a relatively nascent stage. As penetration
recovery in the last quarter of the year that is expected to continue
increases and more audiences come in the fold of M&E industry, it
going forward. The year 2010 is expected to see the industry coming
is expected to see higher growth going forward.
out of the shackles of the slowdown and witness an increase in ad
spends. The current media spend per capita for India is very low at USD 4
compared to the other countries. Even though it is challenging to
reach the levels of countries like US, Japan and UK, due to a very
large population base and lower spending power per capita, there is
scope to follow China and enhance this ratio.
1. Worldwide Media & Marketing forecasts, Group M, 2009
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
grow steadily over the next five year period. The industry is looking
Media spend per capita
at reaching newer target segments, geographies and mediums,
600
while tapping the potential of the existing ones.
491
500
400
343 Estimates for the industry indicate robust growth
over next five years
300 251
The overall M&E industry size grew from INR 579 billion in 2008 to
200
INR 587 billion at a rate of 1.4 percent. The growth rate is expected
100
27 to increase to ~11.2 percent in 2010, as the industry witnesses a
4
0
recovery. The CAGR from 2006 to 2009 has remained at 10 percent
1
and the industry is expected to grow at a rate of 13 percent in next
India UK US China Japan
five years.
Source: Worldwide Media & marketing forecasts, Group M, Summer 2009
TV and Print are the largest sectors of the industry contributing to
greater than 70 percent of the revenues. Their dominance is
With revised growth estimates for GDP at 6.8 percent in 2009 by expected to continue going forward. Sectors like Gaming and
IMF, which is higher than the world average and the expected Internet have shown the highest growth rates due to the small base
recovery from the slow down, the M&E industry is expected to effect and the trend is expected to continue.
M&E Industry (INR CAGR CAGR
2006 2007 2008 2009 2010P 2011P 2012P 2013P 2014P
billion)* (2006-09) (2009-14)
Films 78 93 104 89 5% 96 105 115 125 137 9%
Television 183 211 241 257 12% 289 337 382 448 521 15%
Print 139 160 172 175 8% 190 206 225 246 269 9%
Radio 6 7 8 8 9% 9 10 12 14 16 16%
Music 8 7 7 8 2% 9 10 12 14 17 16%
Animation & VFX 12 14 17 20 18% 23 28 33 39 47 19%
Gaming 3 4 7 8 38% 10 14 20 26 32 32%
Internet 2 4 6 8 56% 11 15 18 23 29 30%
Outdoor 12 14 16 14 5% 15 17 19 21 24 12%
Total Size 443 516 579 587 10% 652 742 835 956 1091 13%
Source: KPMG Analysis, Industry Discussions
*Taken for Calendar Years
Note: Numbers have been rounded to the nearest decimal
© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
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