Indian Film Industry: Prospects in 2009

Indian multiplex operators are slashing ticket prices in an attempt to keep admissions steady during these delicate economic times. Several leading chains are reducing prices from 20%-50% with a variety of reduced rates based on location, day of the week and the timing of shows. Most of the reductions are for weekdays with cinemas retaining their weekend pricing in most cases, reported Screen Daily recently.

The economic meltdown can now be felt in Indian Entertainment Industry, indicates a joint FICCI-KPMG report. However, there are indications of long-term growth. Following years of rapid growth, the combined revenues of the Indian film industry are expected to remain flat in 2009 at around $2.2bn (Rs109.2bn), says the report.

Long-term prospects remain strong – the report also stated that the industry would grow at a compound annual growth rate of 9.1% to reach $3.4bn (Rs168.6bn) by 2013 – due to factors such as the expansion of multiplex screens, enhanced penetration of home video and an increase in the number of TV channels fuelling demand for film content.

The film industry also grew in 2008 by 13.4% to reach total revenues of $2.2bn (Rs109.3bn).

However, the coming year will be challenging for the industry due to
a smaller number of releases as producers struggle to raise fresh
capital; lower occupancy rates at multiplexes, and the declining value
of cable and satellite rights and other ancillary revenue streams.

The last quarter saw the release of blockbusters featuring
Bollywood's major stars such as Ghajini, with Aamir Khan, and Rab Ne
Bana Di Jodi, starring Shah Rukh Khan.

Says Dr. Amit Mitra, Secretary General, FICCI, “India is one of the
few countries where economic growth will be led by domestic
consumption. With a low advertising spend to GDP ratio of 0.47 percent,
a growing consumer class and middle class, young population, low media
penetration and increasing discretionary spending; India continues to
be an attractive market for Media & Entertainment”.

Commenting on the highlights of the report, Rajesh Jain, Head
Information, Communication & Entertainment, KPMG India said, “Media
companies are under pressure to change, innovate and re-examine their
existing business models. Players need to draw upon new capabilities to
survive in this environment. In the immediate future, media corporates
are likely to focus more on operating margins, and assess opportunities
for consolidation, while building on core strengths.”
Television:

Filmed Entertainment:

The filmed entertainment sector is estimated to have grown at a CAGR
of 17.7 percent over the past 3 years. The industry is clocked revenues
of around INR 109.3 billion in size in 2008, a growth of 13.4 percent
over 2007. Over the next 5 years, the industry is projected to grow at
the CAGR of 9.1 percent and reach the size of INR 168.6 billion by 2013.

Growth drivers for the sector would include expansion of multiplex
screens resulting in better realizations, increase in number of digital
screens facilitating in wider film prints releases, enhanced
penetration of home video segment, primarily in the sell through
segment, increase in number of TV channels fuelling demand for film
content, and hence resulting in higher C&S acquisition costs,
improving collections from the overseas markets.
Going forward the sector should focus on improving consumer connect by
investing in new formats and content, more wide spread distribution of
Home Video, e.g. at grocery stores etc., to facilitate easy access,
take coordinated and proactive action to tackle piracy, promote and
experiment with new talent and ialent and improve organizational
ability to attract and retain talent.

Print Media:

The Indian Print Media industry is estimated to have grown by 7.6
percent in 2008 and reaching around INR 172.6 billion in size. The
industry is projected to grow at a CAGR of 9 percent over the next five
years and reach around INR 266 billion in size by 2013.

Radio:

Radio ad spends account for about 4 percent of the total advertising
spends in India today, having grown from just 2 percent in 2004.
Consequently, the radio industry is estimated to have grown at an
impressive CAGR of 19.7 percent over 2006-08. It is estimated to have
reached a size of INR 8.4 billion by end of 2008, a growth rate of 13.5
percent over the previous year. It is expected to grow at a CAGR of
14.2 percent over 2009-13 and reach a size of INR 16.3 billion by 2013.

Increase in the number of radio stations – around 700 new licenses
expected to be issued to Private FM stations in Phase 3, expected
regulatory reforms that are likely to improve profitability and
stimulate foreign investments, emergence of robust audience measurement
tools which could further catalyze growth in radio ad spends and growth
in locally targeted advertising on radio are some of the growth drivers
for the radio industry in the country.

Music:

The size of the Indian music industry was estimated at around INR
7.3 billion in 2008, down from INR 8.3 billion in 2005, implying a
degrowth of 4.8 percent during the period. One of the primary reasons
for this degrowth has been the erosion of sales of physical formats, a
trend which is expected to continue well into the future. Physical
formats such as audio cassettes and compact discs, which accounted for
approximately 87 percent of industry revenues in 2005 currently account
for just fewer than 60 percent in 2008.