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The Indian entertainment and media industry is one of the fastest growing sectors in India. The Indian economy has been growing at a fast clip over the last few years, and income levels and consumer spending is also on the rise. Besides these economic and personal income-linked factors, there are other, that are contributing to this high growth rate.

The Economic Impetus: Over the past 10 years, India has registered the fastest growth among major democracies, having grown at over 7% in four years in the 1990s. It represents the fourth largest economy in terms of ''purchasing power parity''. The E&M industry is expected to significantly benefit from this fast economic growth.

The Demographic Impetus: Over the years, spending power has steadily increased in India. The consumption expenditure is rising due to increasing disposable incomes on account of sustained growth in income levels and reduction in personal income tax over the last decade. Lifestyle changes brought about by changes in economic activity are also spurring growth of the Indian E&M industry. In urban areas of India, the consumer mindset is changing due to increased exposure to global influences via media, and other interactions leading to higher aspirations. The Indian rural market with its vast size of nearly three times of urban India, also offers a huge opportunity that has remained largely untapped due to reasons of accessibility and affordability.

Liberalizing Foreign Investment:Today, India has probably one of the most liberal investment regimes amongst the emerging economies with a conducive FDI environment. The E&M industry has significantly benefited from this liberal regime. In 2005, FDI was permitted in two important sectors-print media and radio. Films, television and other segments are already open to foreign investment. In the print media segment, 100% FDI is now allowed for non-news publications and 26% FDI is allowed for news publications. Printing of facsimile editions of foreign journals are now also allowed in India. This policy is helping foreign journals save on the cost of distribution while servicing the Indian market audiences more effectively. The FM radio sector too was opened for foreign investment recently with 20% FDI being allowed.

Low Media Penetration in Lower SECs: Though media penetration is poor in lower socio-economic classes, the absolute numbers are much higher for these classes. Hence, efforts to increase the penetration even slightly in these lower socio-economic classes are likely to deliver much higher results, simply due to the higher base.

Low Ad Spends: Indian advertising spends 0.34% of GDP, which is abysmally low as compared to other developed and developing countries. Advertising revenues are vital for the growth of this industry. While today the low ad spends may seem like a challenge before the E&M industry, it also throws open immense potential for growth. This potential can be estimated by the fact that even if India was to reach the global average, advertising revenues would at least double the current revenues, estimated at about Rs 16,300 crore for 2006.

The size of E&M in India is currently estimated at Rs 43,700 crore and is expected to grow at a compounded annual growth rate of 18% over the next five years. In the last year, the industry has grown by 20%, according to FICCI PricewaterhouseCoopers' annual report.

Television Industry
Amongst the segments of the industry, the television industry will continue to contribute the largest share as in the last three years. The television industry revenues are expected to grow from the present size of Rs 19,100 crore to Rs 51,900 crore by 2011, implying a 22% cumulative annual growth over the next five years. Subscription revenues are projected to be the key growth driver over the next five years, and will increase both from the number of pay TV homes as well as increased subscription rates. New distribution platforms like DTH and IPTV will only increase the subscriber base and push up subscription revenues.

Print Media Industry
The print media industry, comprising of newspaper and magazine publishing, is projected to grow from the present size of Rs 12,800 crore to Rs 23,200 crore by 2011, implying a 13% cumulative annual growth over the next five years. A booming Indian economy, growing need for content and government initiatives that have opened up the sector to foreign investment are driving growth in print media. With the literate population on the rise, more people in rural and urban areas are reading newspapers and magazines today. Also, there is more interest in India amongst the global investor community. This leads to the demand for more Indian content from India.

Film Entertainment
The Indian film entertainment industry is projected to grow from the present size of Rs 8,400 crore to Rs 17,500 crore by 2011, implying a 16% cumulative annual growth over the next five years, according to FICCI PricewaterhouseCoopers' annual report. Indians love to watch movies. Advancements in technology are helping the Indian film industry in all the spheres-film production, film exhibition and marketing. The industry is getting increasingly corporatized.

Radio
The radio industry, fuelled by the positive FM-II Radio Policy, is projected to grow from the present size of Rs 500 crore to Rs 1,700 crore by 2011, implying a 28% cumulative annual growth over the next five years. In 2005, the government opened up the sector to foreign investment along with migration to a revenue-share scheme. These factors along with privatization of a large number of frequencies as part of the FM II Radio Policy will drive growth. As many as 338 licenses were given out by the Indian government for FM radio channels in 91 big and small towns and cities. This deluge of radio stations results in opportunities for content and trained talent. New concepts like satellite radio, visual radio and community radio have also begun to hit the market.

Music
While physical sales in the music industry continue to be hampered by piracy and falling prices, digital music has witnessed a surge that will propel this industry in the next five years. The total music industry is currently estimated to be worth around Rs 720 crore and is expected to grow at a CAGR of 4% in the next five years propelling it to Rs 870 crore by 2011 on an overall basis. The growth in digital music is expected to be 25% to Rs 180 crore by 2011.

Others
Amongst the other segments, the animation and gaming industry is expected to show the maximum growth, albeit from a small base. The animation and gaming industry is projected to grow from the present size of Rs 11 bn to Rs 29 bn by 2011, implying a 22% cumulative annual growth over the next five years. Other growth segments include online advertising-fuelled by the increased uptake of Internet and broadband services, out-of-home advertising, music and live entertainment.

Sandeep Budki
sandeepb@cybermedia.co.in