(19 December 2007 11:10 pm)

NEW DELHI: The Indian media and entertainment industry is set to grow at twice the rate of the country's GDP in the coming few years, driven largely by the emergence of regional players, technology and digitisation, the last being driven by DTH the latest industry conglomerate report suggests.

According to the report by Ernst & Young for ASSOCHAM, titled "India's Digital Revolution: Impact on Film and Television Sectors." the Indian cable market is growing at a phenomenal rate of CAGR of 38 per cent for the past 17 years.

Changes in consumption habits, coupled with regulatory pressures, have propelled India to start migrating to digital platforms, the report said, and emphasised that the growth area lies in going regional.

The study says that as Indian consumers become frequent users of digital platforms, media and entertainment business models are undergoing seismic shifts, changing the traditional dynamics of the Indian television and film industry.

Digitisation of both content and delivery platforms, in the audio visual entertainment space is leading to increasing reach to wider audiences within shorter span of time.

According to Farokh Balsara, National Sector Leader, Media & Entertainment, Ernst & Young, "The pay TV market in India has not been able to maximise its revenues due to restrictive regulations, an unorganised value chain and lack of addressability in the analogue platform.

"However, now with digitisation of the platforms more value will be created for each player across the value chain and the revenue shares will get redistributed amongst key stake holders creating a win-win situation for all."

Balsara predicts that DTH will emerge as the leader amongst the three platforms i.e. DTH, digital cable and IPTV, within next three years due to its ready to roll-out infrastructure, wider reach across the country with lower incremental infrastructure costs.

The report says that by 2010, in the digital cable scenario, from a current share of 78 per cent for Local Cable Operator (LCO), five per cent for Multi System Operator (MSO) and 17 per cent for the broadcasters, it is expected that the share would be redistributed and stabilise at 54 per cent for the LCO and 23 per cent for the MSO and broadcasters, each.

In the DTH scenario, while the industry is still at a very nascent stage ASSOCHAM expects the revenue share to stabilise in the range of 60 per cent - 70 per cent in favour of the DTH operator.

Wider access to Internet and change in consumer behaviour - with the latter migrating fast towards interactive platforms, will force the marketers also rethinking their strategy in terms of spending spots.

Earnst & Young estimates that though currently the online advertising revenue contributes a meager Rs 350 crores to a total of Rs 22,000 crore advertising market in India, advertising in the digital era is revolutionising the way brands connect with its consumers.

"To connect with these consumers, marketers are being forced to look beyond the traditional mass advertising model of 10-second spots and adopt interactive mechanisms to engage with them," the report says.

According to the study, currently in India 70 to 80 per cent of the broadcasters' revenues is ad-driven, but with DTH spreading, a balance between ad sales and subscription revenue would come about and reach a 50:50 ratio.

Currently, 43 per cent of the media budgets are spent towards television. Over the next three years television advertising market is expected to grow at the rate of 14 per cent year on year and will continue to maintain its market share in the total advertising pie.

The report says that in spite of the growing online advertising revenues, the share of television is expected to continue within the next three years.

Balsara said: "With decreasing cost of content and delivery we will see a rise of niche content and special programming. With increased options, consumers will tend to get more fragmented and less loyal to a particular channel.

"To capture these fragmented audiences, we believe that broadcasters will increase their bouquet of offerings which in turn will lead to a new breed of television advertisers thereby making up the share of television."

In the film segment, digitisation of the distribution business will bring down costs significantly.

This will allow filmmakers to reach out to wider theatrical markets, achieving more than 10 times the existing reach, on day one, thus maximizing film revenues within a short span of time.

The report says that this will further significantly reduce the release window for each platform and unlock value from ancillary revenues like home entertainment rights which are currently under-utilised due to an extended theatrical window.
He added: "We expect the home entertainment to constitute about 25 per cent of a film's revenue share within next 3 years from a current share of five per cent.

"This will be primarily attributed to increasing collapsing release windows, higher penetration of digital video players (DVD players), reducing prices of original DVDs and clamp down on optical disc and cable piracy."

The report also says that the growing telecom and internet density along with superior bandwidth availability is expected to increase consumption of entertainment content across these platforms over the next three years.

The mobile VAS revenues are estimated to grow to Rs 4,600 crore by the end of the year, while the revenue share of digital music downloads was Rs 1,000 crore at the end of 2006 and is consistently increasing.

For the first time the music industry has seen more digital sales than physical sales, especially through ringtones.

The mobile music sales, mainly from caller ring back tones, ring tunes and full music clips, which are currently at 56 per cent, are expected to account for 88 per cent of the Rs. 4,200 crore total music market in the country within two years.

On the other hand currently at Rs 350 crore, internet advertising is set to grow at 150 per cent over the next three years as more advertisers opt for it over magazines and classified newspaper advertising.

Influence of digital revolution is profound.

However it is not uniform across the value chain, the report says.

Balsara added "Companies have to gear up for this digital revolution with appropriate infrastructure, business models, financial considerations and type of technologies used."