Project on Entertainment

8/3/2019 Project on Entertainment

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ACKNOWLEDGMENTAs we enter the 21st century with new hopes and new

expectations, it is imperative that we appreciate the world around

us is changing rapidly, throwing open great challenge and

innumerable opportunities. Survival and success depends on the

abilities to be creative, flexible and adaptable. And even in that

there are no defines models that can followed. The best course is to

simple trust your own instincts, set your own rules and embrace

challenges.

It gives an immense pleasure to present this project on MEDIAAND ENTERTAINMENT to our prof.Mr M.Ahmad and we are

thankful to him to give us with such a good topic and allowing us to

learn something new about the contribution of media and

entertainment in the growth of service sector in our country. As we

all know and are aware that service sector is growing at a rapid

speed and therefore it was a good experience to learn about the

subject topic i.e. MEDIA AND ENTERTAINMENT.

We hope that the research which we have done is up to mark.

And extremely sorry for any mistake which we have done while

preparing the topic.


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INDEXI. INTRODUCTION OF MEDIA AND ENTERTAINMENTII. TELEVISION

III. GROWTH OF CHANNELS IN INDIAIV. DTH SERVICEV. FILMED ENTERTAINMENT

VI. PRINT MEDIAVII. RADIO

VIII. FM RADIOIX. SATELLITE RADIOX. COMMUNITY RADIO

XI. MUSICXII. LIVE ENTERTAINMENT

XIII. OUT-OF-HOME ADVERTISINGXIV. INTERNET ADVERTISINGXV. POLICY FRAMEWORK

XVI.

INDUSTRY SIZE AND GROWTH POTENTIALXVII. ISSUES FACING THE INDUSTRY (KEY CHALLENGES)

XVIII. LACK OF A UNIFORM MEDIA POLICY FOR FOREIGNINVESTMENT

XIX. DIGITALIZATION OF TELEVISION NETWORKSXX. UNIFORM ENTERTAINMENT TAX ACROSS ALL STATES

XXI. CUSTOMS DUTYXXII. PIRACY

XXIII. EXPORT PROMOTIONXXIV. CO- PRODUCTION TREATIESXXV. EDUCATION AND TRAINING

XXVI. RATIONALISATION OF CUSTOMS TAREFFS FOR GAMINGINDUSTRY

XXVII. LOCALIZATION OF ANIMATION CONTENT


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XXVIII. KEY DEVELOPMENTSXXIX. FUTURE PROPECTS OF INDUSTRYXXX. CASE STUDY

XXXI. CONCLUSION


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INTRODUCTION OF MEDIA AND ENTERTAINMENTHistory of mass media can be traced back to the

early days of dramas that were performed in various cultures.

However, the term Mass Media originated with the print media that

was also its first example. The first newspaper was printed in China

868 A.D, but due to the high cost of paper and illiteracy amongst

people, it didnt prosper.

Regarding the origin of the Mass Media, Europe can boast to be the

primary source. It was Johannes Gutenberg, who for the first timeprinted a book in a printing press in 1453.

Gradually, during the period post-Second World War, radio,

television and video were introduced. The audio-visual facilities

became very popular as they provided information and

entertainment. Of late, it is the Internet which has become the

latest and most popular of the mass media. Here, information is

been generated through various websites and search engines. Onecan play games, listen to radio while working and chat with friends

and relatives, irrespective of location. It also gives information on

various topics such as literature, politics, science, sports, fashion,

movies, education, career, jobs etc. similar to other types of mass

media.

Thus, due to the progress of science and technology,

history of media has evolved and reached the present-day world of

internet, cellular phones, blogs, podcast
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KEY DRIVERS Economic growth of the country in general and rising

disposable income levels in particular.

Gradually liberalizing attitude of the government. Greater interface with international companies. Privatization and growth of the radio industry. Advancement in Technology. Favorable regulatory initiatives. Liberalized foreign investment regime.

The size of E&M in India is currently estimated at Rs.437 billion and is expected to grow at a compounded annual

growth rate of 18 percent over the next five years. In the last year,

the Industry has grown by 20 percent.

The Indian Entertainment and Media industry is

projected to grow from an estimated Rs. 437 billion to Rs. 1 trillion


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in 2011, translating into a cumulative growth of 18 percent over the

next five years. One of the key reasons for this high projected

growth is the fact that the Entertainment and Media industry is a

cyclical industry that grows faster when the economy is expanding.

The Indian economy continues to perform

strongly and one of the key sectors that benefits from this fast

economic growth is the E&M industry. It also grows faster than the

nominal GDP during all phases of economic activity due to its

income elasticity wherein when incomes rise, more resources get

spent on leisure and entertainment and less on necessities.

Further, consumption spending itself is increasing due to rising

disposable incomes on account of sustained growth in incomelevels, and this also builds the case for a strong bullish growth in

the sector.


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TELEVISIONSubscription revenues are projected to be the key

growth driver for the Indian television industry over the next five

years. Subscription revenues will increase both from the number ofpay TV homes as well as increased subscription rates. The

buoyancy of the Indian economy will drive the homes, both in rural

and urban (second TV set homes) areas to buy televisions and

subscribe for the pay services. New distribution platforms like DTH

and IPTV will only increase the subscriber base and push up the

subscription revenues

GROWTH OF CHANNELS IN INDIAThe number of private satellite TV channels has grown

astronomically over the years, from 1 TV channel in 2000 to 273 TV

channels in 2007 (till 31.12.2007). The number of non-news &

current affairs TV channels has grown from 0 to 115 and that of

news & current affairs TV channels has grown from 1 to 158.


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DTH SERVICEDirect-To-Home (DTH) Service refers to distribution of

multi-channel TV programmes in Ku Band by using a satellite

system for providing TV signals direct to subscribers' premises.

DTH provides subscribers the advantage of geographical

mobility meaning thereby that once a customer purchases DTH

hardware, he/she can continue to use the same unit anywhere in

India. DD DIRECT+ is India's first and only Free To Air (FTA) Direct-

To-Home Service being provided by Prasar Bharati. Apart from

Prasar Bharati - a public service broadcaster, M/s Dish TV India

Ltd. M/s Tata Sky Ltd, and M/s Sun Direct TV Pvt. Ltd. M/sReliance Big TV Pvt. Ltd., M/s Bharti Telemedia Ltd.and M/s.

Bharat Business Channel Ltd. have also been granted license for

operating DTH service.

The eligibility conditions provide for total foreign equity

holding, including FDI/ NRI/ OCB/ FII, in the applicant company

not to exceed 49%, and within the foreign equity, the FDI

component not to exceed 20%. It also provides that ApplicantCompany must have Indian management control with the majority

representatives on the Board as well as Chief Executive of the

Company being resident Indians.


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FILMED ENTERTAINMENTIndians love to watch movies. And advancements in

technology are helping the Indian film industry in all the spheres

film production, film exhibition and marketing. The industry isincreasingly getting more corporatized. Several film production,

distribution and exhibition companies are coming out with public

issues. More theatres across the country are getting upgraded to

multiplexes and initiatives to set up more digital cinema halls in the

country are already underway. This will not only improve the

quality of prints and thereby make film viewing a more pleasurable

experience, but also reduce piracy of prints.


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PRINT MEDIAA booming Indian economy, growing need for content

and government initiatives that have opened up the sector to foreign

investment are driving growth in the print media. With the literatepopulation 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 demand for more Indian content from India. Foreign media too is

evincing interest in investing in Indian publications. And the

internet today offers a new avenue to generate more advertising

revenues


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RADIOThe cheapest and oldest form of entertainment in the

country, which was hitherto dominated by the AIR, is going to

witness a sea-change very shortly. In 2005, the government openedup the sector to foreign investmentand this is the key factor that

will drive growth in this sector. As many as 338 licences are being

given out by the Indian government for FM radio channels in 91 big

and small towns and cities. This deluge of radio stations will result

in rising need for content and professionals. New concepts like

satellite, internet and community radio have also begun to hit the

market. Increasingly, radio is making a comeback in the lifestyles of

Indians.

FM RADIODuring the year, the Cabinet approved the grant ofpermission to the FM broadcasting companies for creation of

subsidiaries, and merger/demerger/amalgamations of companies

by way of transfer of shares in partial modification of the policy on

expansion of FM Radio Broadcasting services through Private

Agencies (Phase-II). Total 241 private FM Channels are operational


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in 83 cities of the country. A total amount of Rs.1609 crores

received by way of licence fees from private FM Channels, including

Rs.40.5 crores during the current year. The Government has also

conveyed its views on FM Phase III policy to TRAI and sought for its

recommendation.

FM Policy Phase-II has been well accepted by all

stakeholders, which resulted in huge growth not only in FM radio

industry but also in employment opportunity and has also created a

demand for FM radio in other cities. Keeping this in mind and to

accelerate further growth of FM industry, the Government intends

to further expand FM radio to other cities through private agencies

under Phase-III.

SATELLITE RADIOAt present M/s Worldspace India Private Ltd, a wholly

owned subsidiary of M/s Worldspace Asia Pvt. Ltd. Singapore is

providing these services under an FIPB approval dated 7.12.1998.

World Space has been permitted to undertake the following

activities -

(i) For setting up of a 100% wholly owned subsidiary for carrying

out software programming activities in India in the fields of

educational, sports and entertainment software programs as under:

(a)Sourcing/commissioning/production of digital audio and

multimedia software programs for international and domesticmarket.

(b)Setting up state-of-art studios using latest equipment.

(c)Providing research, consultancy & other service in related areas.


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(ii) To import digital satellite receivers, data adaptors, PC-add-on

cards and accessories and sell the same to the distributors/ dealers

either as customs bonded warehouse sale or on a cash and carry

basis for introducing international standard, state-of-the-art audio

receivers in India to meet the growing requirement for use of Worldspace systems for different application including education, disaster

management and development communications.

(iii) To set up customer care centre in all the major centers.

(iv) To carry out various services to its parent/associates companies

in realizing the revenue opportunities arising out of education,

information and entertainment and other services of World spaceSystems like collection of revenue. Usage of revenue collected for

activities specified by World space in India.

(v) To establish a call centre and services.


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COMMUNITY RADIORadio as a communication medium plays an

important role in the nation's sociocultural, political and economic

development. Community radio, as distinct from public service

broadcasting, serves to bring small communities together, focuses

on the common man's day-to-day concerns and helps in realising

local aspirations. In a number of countries, community radio has

played an important role in informing and empowering people,

especially the poor and vulnerable groups and gives a voice to the

voiceless.

The Policy on Community Radio was liberalized during the year2008 to bring in the civil society and voluntary organizations

working not for profit also under its ambit. Only educational

institutions were earlier permitted to set a community radio. The

policy has been liberalized by the government with a view to allow

greater participation by the civil society on issues of development

and social change.

Presently, 29 Community Radio Stations are operational. Out ofthis, 28 institutions were granted permission under the old

guidelines and one Institution viz. Delhi University was given

permission.


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MUSICThe industry has been plagued by piracy and had been

showing very sluggish growth over the last few years, both in India

and globally. However, mobile music and licensed digital

distribution services are projected to fuel the recovery of the music

industry the world-over. The pace of growth in mobile music reflects

the fact that consumers increasingly view their wireless device as

an entertainment medium, using those devices to play games and

listen to music, while carriers are actively promoting ancillary

services such as ringtones to boost average revenue per user.

Ringtones currently constitute the dominant component of the

mobile music market. Licensed digital distribution services are also

contributing significantly to growth in all regions.


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LIVE ENTERTAINMENTThis segment of the entertainment industry, also

known as event management, is growing at a fast and steady rate.

While this industry is still evolving, Indian event managers haveclearly demonstrated their capabilities in successfully managing

several mega national and international events over the past few

years. In fact, event managers are also developing properties around

events. The growing number of corporate awards, television and

sports events are helping this sector. With rising incomes, people

are also spending more on wedding, parties and other personal

functions. However, issues like high entertainment taxes in certain

states, lack of world-class infrastructure and the unorganizednature of most event management companies, continue to

somewhat check the potential growth in this segment of the

industry.


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OUT-OF-HOME ADVERTISINGOutdoor media sites in India are predominantly owned

or operated by small, local players and are typically, directly

marketed by them to advertisers and advertising agencies. However,this segment too is witnessing a sea-change with technological

innovations. Growing billboard advertising is fuelled by technologies

such as light-emitting diode (LED) video billboard. This is a segment

that is seeing interesting technological innovations across the world

and is likely to evolve in India too in the short-term.


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INTERNET ADVERTISINGAn estimated 28 million Indians are currently

hooked on to the internet. And this rising number is leading to the

growth of internet advertising, which today stands at approximatelyINR 1 billion. The internet is being used for a variety of reasons,

besides work, such as chatting, leisure, doing transactions, writing

blogs etc. This offers a huge opportunity to marketers to sell their

products. And with broadband becoming increasingly popular, this

segment is expected to grow by leaps and bounds.


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POLICY FRAMEWORKa. FDI Policy

The government of India has put in place a liberal and

transparent investment policy. FDI up to 100 per cent is allowed

under the automatic route in most sectors/activities. FDI policy in

India is reckoned to be among the most liberal in emerging

economies.

The entertainment and media industry has also benefitted

considerably from the initiatives taken by the government over the

years. The FDI limits in the various segments of the entertainmentand media industry are highlighted below:

b. Film IndustryUnder automatic route up to 100 per cent FDI is permitted in film

industry (i.e. film financing, production, distribution, exhibition,and marketing and associated activities relating to film industry)

subject to the following:

Companies with an established track record in films, TV,music, finance, and insurance would be permitted

The company should have a minimum paid up capital of US$10 million if it is the single largest equity shareholder and at

least US$ 5 million in other cases

Minimum level of foreign equity investment would be US$ 2.5million for the single largest equity shareholder and US$ 1

million in other cases

Debt equity ratio of not more than 1:1, i.e., domesticborrowings shall not exceed equity.


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c. Radio IndustryUp to 20 per cent FDI is allowed in Radio Industry subject to an

approval from Foreign Investment Promotion Board (FIPB) in

addition to the guidelines notified by Ministry of Information andBroadcasting.

d. Print MediaThe regime of Foreign Investment in Indian entities

publishing newspapers and periodical is as follows: -

I. Foreign investment (including FDI) upto 74% in Indian entities

publishing scientific/technical and speciality magazines/

periodicals/journals.

Where only Indian editions of foreign

scientific/technical/ speciality journals etc. are being published

with no foreign investment (including FDI) being made, the Ministry

of Information and Broadcasting will give approvals on a case bycase basis subject to prescribed conditions.

II. FDI upto 26% in Indian entities publishing newspapers and

periodicals dealing in news and current affairs with suitable

safeguards like verification of antecedents of foreign investor,

keeping editorial and management control in the hands of resident

Indians and ensuring against dispersal of Indian equity.


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INDUSTRY SIZE AND GROWTH POTENTIALThe Indian Entertainment and Media industry, yet again,

continues to out-perform the Indian economy and, yet again, is one

of the fastest growing sectors in India. Entertainment and Mediaindustry generally tends to grow faster when the economy is

expanding. The Indian economy has been growing at a fast clip over

the last few years, and the income levels too have been experiencing

a high growth rate.

Above that, consumer spending is also on

the rise, due to a sustained increase in disposable incomes, brought

about by reduction in personal income tax over the last decade. Allthese factors have given an impetus to the E&M industry and are

likely to contribute to the growth of this industry in the future.

Besides these economic and personal income-linked factors, there

are other factors that are contributing to this high growth rate.

Some of these are enumerated below:


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ISSUES FACING THE INDUSTRY (KEY CHALLENGES)

Though the Entertainment and Media industry isgrowing in leaps and bounds, the full potential is yet to be tapped.

One of the ways of realizing the potential is not only the removal of

certain obstacles in the industry but also the provision of certain

incentives to key segments of the industry in order to fuel the

industry growth drivers further and thereby realize its full potential.

Some of the recommendations as provided by FICCI are as below:-

LACK OF A UNIFORM MEDIA POLICY FOR FOREIGNINVESTMENT

The sector currently lacks a consistent and uniform media

policy for foreign investment. Some of the inconsistencies include

different caps in foreign direct investment in various segments. This

is enumerated below:

Television distribution: DTH 49% (strategic FDI only 20%); cable49% (ownership can only be with India citizens).

Content (news): Television and print - 26%; radio - nil

Content (non-news): Television and print - 100%; radio 20% (only

portfolio)


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DIGITALIZATION OF TELEVISION NETWORKSIndia, today, does not have a national digital policy or plan.

Though the regulator TRAI came out with recommendations for

digitalization of cable networks, there are several more measuresthat are required to be taken in order for the industry to truly

benefit from Digitalisation: Conversion to digitalization should be

mandatory and not left on a completely voluntary basis

A clear time frame needs to be defined for transition to digital

including a launch date and a sunset date Licensing process for

allocation of spectrum should be made stringent to filter out non-

serious players e.g. net worth, proper declaration of subscriberbase, area of operation etc. Fiscal incentives such as waiver of

service and entertainment tax, income tax holiday, etc. to be

provided to operators for transition to digital.


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UNIFORM ENTERTAINMENT TAX ACROSS ALL STATESSince levy of entertainment tax and regulation of cinemas

is a State subject, the Centre presently has a limited role to play.

The long-standing demand of the film industry is to shiftEntertainment and Media from the State List to the Concurrent

List through a constitutional amendments. This will enable uniform

policies for Cinema Construction Bye-laws and Entertainment tax.

There is a need to implement uniform tax policies across the

country, to enable standardized growth. The recommendation is to

have a uniform Entertainment tax so as to stop reportage of short

box office collections resulting in a loss to the ex-chequer.

CUSTOMS DUTYCustoms duty is levied on import of equipment and

other hardware used in the production and post production of

filmed entertainment programs. At a time when India is trying toposition itself as a hub for production of entertainment and

competing in the International market on an equal footing, the

necessary infrastructure and equipment is of vital importance. To

provide impetus to the technological upgradation of facilities and

infrastructure, the necessary equipment and hardware must be

allowed to be imported without the additional burden of customs

duty.


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PIRACYAs India moves into knowledge based economy, a

strong Intellectual Property regime which provides adequate

safeguards to the holder of copyright becomes increasinglyimportant. The menace of piracy is rapidly eating away into the

foundations of the entertainment industry. The piracy issue should

be handled at three levels; Policy, Enforcement and Prosecution.

The Industry recommends allocation of specific funds to fight piracy

of entertainment content. This fund should be utilised in Advocacy

and awareness of the piracy issue and also enforcement & legal

matters.

EXPORT PROMOTIONTo promote Brand India, it is important that Indian

companies and producers participate in global festivals and

markets such as the Cannes & Berlin Film Festivals, MIPCOM,MIDEM, MIPTV, IBC, NATPE, NAB, Interbee, AFM and CASBAA

under a common India umbrella. The Ministry of Information and

Broadcasting has taken initiative by deciding to set up the task

force with the specific aim of export promotion. This council

supported by adequate funding will act as a catalyst for

exponential growth in exports of Indian Entertainment and Media

Industry.


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CO- PRODUCTION TREATIESSigning of Co-production Treaty with Canada, UK is

already being looked at by the Information and Broadcasting

Ministry. The Industry recommends that the Government takes onfurther initiatives to enter into more such treaties with many more

countries so as to provide a further boost to the Indian Film

industry.

EDUCATION AND TRAININGThe Entertainment and Media industry today faces an

acute shortage of professionals. It is recommended that suitable

incentives should be provided by the Government for setting up

polytechnics, institutes and film schools. It is recommended thatexisting universities should include Film, Broadcast, Event

Management and Digital technology in their curriculum. Similarly,

institutes of

Higher Learning like the IITs and the IIMs should be encouraged to

offer specialization in Media & Entertainment


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RATIONALISATION OF CUSTOMS TAREFFS FOR GAMINGINDUSTRY

Though the Global Gaming industry has been growing

in leaps and bounds across the world, advanced gaming consoles

are yet to penetrate the Indian market. One of the primary reasons

for the slow adoption is the high rate of customs tariff applicable on

the gaming consoles. The customs tariff of approximately 36.74%

translates to high prices for such consoles, which affect affordability

and therefore access. These high tariffs are also leading to the

growth of a grey market in such products. Rationalization of thetariff structures will therefore mean a more affordable pricing

structure that will enable greater

market access for such consoles.

LOCALIZATION OF ANIMATION CONTENT

Presently most of the animated content shown in

the networks is sourced from outside of India and generally from

the existing library at a discounted price. This is one of the serious

impediments on the growth of Indian Animation Industry.

Many countries like Canada, China, Korea, France,

UK etc have made varying levels of mandatory localization ofcontent. Hence, FICCI has proposed 10% mandatory local content

on the networks to begin with and to reach 30% over next three

years as more indigenous animation content gets prepared and

Available for domestic / export markets.


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KEY DEVELOPMENTSENTRY OF NEW PLAYERSThe year 2005 saw the entry of new players across all segments ofthe E&M industry. The most prominent entry was that of the

Reliance Group in the filmed entertainment and radio segment.

During 2005, Reliance Capital bought a majority stake in Adlabs

which enabled it to have a presence across the entire value chain of

the filmed entertainment segment ranging from film production,

exhibition and distribution. Through Adlabs, Reliance also made its

entry into the radio segment by bidding for over 50 FM radio

stations across the country with aggregate bids of over INR 1.5billion.

The other significant entry into the entertainment and media

segment was that of the Tata group, through its subsidiary Videsh

Sanchar Nigam Limited (VSNL). VSNL tied up with the Paris-based

Thomson Group in 2005 with the objective of identifying

opportunities in managing and delivering content for third parties,

including broadcasters and content providers. Thomson Group also

recently announced its partnership with Tata Sky Limited formanufacturing set-top-boxes and providing sales service and

support network for their DTH customers.


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FOREIGN INVESTMENTOwing to the strong impetus for growth from the economic and

demographic factors coupled with some regulatory corrections, the

sector also recently witnessed increasing foreign investment inflowsin most segments of the E&M industry, especially the print media.

Recent examples include foreign investment in English dailies such

as Hindustan Times and Business Standard by Henderson Global

and Financial Times respectively. Vernacular media too saw its

share of foreign investment with a strategic equity investment by

Independent News & Media in Dainik Jagran, a leading Hindi Daily.

In the broadcasting space, most channels beaming into India (such

as Walt Disney, ESPN Star Sports, Star, Discovery, BBC etc.) haveestablished foreign investment subsidiary companies for content

development and advertisement airtime sales.

In the television distribution space arena, foreign investment is

being drawn by the larger cable operators referred to as multi-

system operators (MSO)such as Hathway and Hindujas.

In the television content space, the recent investment in Nimbus

Communications by a foreign private equity player is seen as thestart of a significant trend of foreign investment inflows.


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FUTURE PROPECTS OF INDUSTRY

With the rapid advancement, in the next 5 to 10years, it is probable that todays leading media, distribution, and

advertising companies will continue to be significant purveyors of

branded content, services, and commercial messages.

The future of Media and Entertainment industry depends largely on

the growth of Indian economy. The Indian economy is growing at a

fast rate; thus, there is also a bright future in store for all thesegments of the media and the entertainment industry. With the

incomes of the people rising at a fast rate, people are spending more

on their entertainment and leisure activities. India is poised to enter

the period of immense growth in this sector.

The global entertainment industry is projected to reach

US$ 1.8 trillion by 2015. The Indian Media and Entertainment

industry is expected to grow at an annual growth rate of 19% toreach Rs 83,740 crore by 2010.

The expected CAGR of various segments of the Media And

Entertainment industry in India till the year 2010 is as follows:

The expected CAGR of various segments of the Media And

Entertainment industry in India till the year 2010 is as follows:

Radio - 32%

Music - 1%

Television - 24%


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Film Industry - 18%

Print Media - 12%

The projected size of the various segments of the Media AndEntertainment industry in India till the year 2010 is as follows:

Radio - Rs 1,200 crore

Music - Rs 740 crore

Television - Rs 42,700 crore

Film Industry - Rs 15,300 crore

Print Media - Rs 19,500 crore

Exciting new developments in the technologies used

in Media and Entertainment industry are taking place. Animations,

multiplexes, new distribution channels, the use of Internet, are

redefining the entertainment industry. All these factors will favour

the growth of Media and Entertainment industry in India.

It is certain, however, that their business models,

revenue streams, competitive dynamics, and core partnerships will

evolve in radically new ways. The path ahead is fraught with risk as

well as rewards. On the supply side, media providers, network

operators, advertisers, and measurement companies must contend

with the challenges and opportunities that stem from new ways of

working with one another. The demand side faces a similar set of

challenges and opportunities for consumer interaction.

In both cases, video content and delivery companies must

fully grasp that theirs is not a production challenge of porting

media content onto various devices, but rather an orchestration


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challenge for delivering a quality media experience that has

lifestyle-enhancing qualities.

As content owners, network operators,

advertisers, and measurement companies begin to deliver theirgoods and services through broadband, they become more reliant

on relatively immature technologies and on partnerships and

business relationships considered unthinkable just a few years ago.

These are early days for IP-based video services, and marketplace

participants must understand how convergence affects current

business processes. During this evolutionary period, many different

paths towards a converged media environment will be tried. There is

likely to be increased complexity, as well as economic inefficiencies,early on. However, as the different industry participants collaborate

on changing consumer activity and business models, the refinement

of the media marketplace approach will become possible.

After the buzz of convergence deal-making and

new product launches has subsided, general business principles

rather than novel features will start to differentiate companies. The

payment process for on-demand video content provides an example.

From an operational point of view, this payment for a single piece ofcontent could include one or more of the following: direct payment

to the content originator from a consumer; a portion of revenue to

the content originator, passed back by a distribution partner such

as a network provider; or payment by an advertiser for placing a

commercial message.


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As we believe that convergence will play a very crucial

role in the development of the Indian entertainment and media

industry where consumers will increasingly be calling the shots in a

converged media world.

The term convergence describes two trends: the

ability of different network platforms (broadcast, satellite, cable,

telecommunications) to carry similar kinds of services; and the

merging of consumer devices such as telephones, televisions or PCs.

From a technology perspective, the twin forces accelerating

convergence are increased broadband penetration and increased

standardization of networks and devices to use the Internet Protocol

(IP).Convergence collapses previously distinct media distribution

channels (for example, broadcast/cable television, radio, print,

online) into a single delivery chain. A converged infrastructure

supports a range of interaction modes between users and content.


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Convergence will thus require increased

collaboration between value chain partners to drive new products

and services to consumers. For content owners, conducting

researches to understand the needs of the Lifestyle Media

consumers will become crucial. They will need to develop strategiesfor owning social networks and capturing consumer activity

information and will need to develop convergence-native content

rather than concentrate solely on re-packaging existing content for

multiple platforms.

The Indian entertainment and media industry today

has everything going for it - be it regulations that allow foreign

investment, the impetus from the economy, the digital lifestyle andspending habits of the consumers and the opportunities thrown

open by the advancements in technology. All it has to do is to cash

in on the growth potential and the opportunities. The government,

on its part, needs to play a more active role in sorting out policy-

related impediments to growth. The industry needs to fight all

roadblocks- such as piracy- in a concerted manner, while churning

out high-quality, world class end products. The entertainment and

media industry has all that it takes to be a star performer of the

Indian economy.


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CASE STUDY

How Bollywood economy has changed over thepast decadeToss a zinger at UTV Motion Pictures' suave CEO Siddharth Roy

Kapoor, one of the poster boys of the 'corporates' in Bollywood:

"How much money did you lose on the high-profile turkey of the

season, Akshay Kumar-starrer Tees Maar Khan (TMK)?" The studio

executive calmly says, "Lose money? I made money on that movie."

Reacting to the doubt-ridden look, he adds, "At the time of itsrelease, don't forget, TMK was the third-biggest opening after

Dabbang and 3 Idiots." Corporate humbug is the first thought that

crosses the mind. But Kapoor reels out figures to support his claim.

In short, the co-produced movie cost UTV Rs 70 crore, including the

Rs 55-crore acquisition price and Rs 15-crore marketing spend, but

the revenues from the various licensing deals and box office added

up to Rs 81 crore. With a wicked smile, Kapoor adds: "Failure to live

up to audience expectations or being dissed by critics doesn't meanwe don't make money on movies that supposedly don't do well at

the box office."

To an outsider, Kapoor's confidence from a cropper like TMK, may

come as a shock, but for industry denizens its routine. "its part of

The Game," laughs Kamal Jain, Group CFO, Eros International,

India. What may have failed to ignite the box office, or wowed the

critics and got the fans excited can still be salvaged in the balancesheet. That is, in short, what the corporates have brought in the

decade since they have gained a foothold in the film industry. It is

also one of the main reasons why they still make films, in spite of

close to 90% failure rate.


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Make no bones about it, Bollywood remains a brutal business; one

that doesn't offer any chance for course correction, and where the

end for most movies often comes swiftly - over three days. Even

though India does make the largest number of films, every other

factor, when compared with the West, works against the industry,making it tougher to recover money.

Take the case of number of admissions, which is huge when

compared to the West, but the average ticket prices are 1/7th of the

US, 1/5th of China, and 1/3rd of Russia! "While volume-wise we

are the largest, in terms of value, we are still a third-world country,"

says Vikram Malhotra, CEO, and Viacom 18 Motion Pictures. The

fight was tough but 'The Game' changed and so did its rules.

New Players, New Plays

One of the biggest changes the corporates brought in was portfolio

management. The economy of one movie was replaced by the

economy of a portfolio of movies, making it a totally different

ballgame. For the big production houses - Eros, UTV, Reliance

Entertainment, Viacom 18 Motion Pictures, Balaji Telefilms, and, ofcourse, the unlisted Yashraj Film - the game changer was the

emergence of a robust A2A (Aggregator to Aggregator) model. That

lead to emergence of diversified revenue streams and so, naturally,

less dependence on the box office.

Simply put, the studios put together through acquisition,

production and co-production, a portfolio of movies and sliced and

diced the content to feed other fast-growing aggregators like cableand satellite, music, home video and new media that have a

voracious appetite for Bollywood content. "Between one-third and

one-fourth of all broadcasting content is Bollywood content," says

Rajesh Jain, head - media and entertainment, KPMG. "The

importance of Bollywood has gone up tremendously in the


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broadcasting ecosystem," adds Vijay Singh, CEO, Fox Star Studios.

Now the challenge for leading Bollywood production houses - who

between them cover 90% of Hindi movie releases - was how to

maximize revenues from the portfolio? With this change, good old'movies acquired a new nom de plume - IPR, the nifty word

Bollywood executives bandy about these days. "When you monetize

a catalogue of movies together with new movies, you command

additional revenue across revenue streams. With new devices, new

revenue streams, easier accessibility to legitimate content - the only

way to monetize content is to build IP and generate catalogue," says

Kapoor. A company that doesn't own its content is a poor company,

says Ritesh Sidhwani of Excel Entertainment.With different revenue streams from the IPR kicking in, 40-60% of a

movie's cost could be recovered by preselling licensing rights, and

the box office risk declined to just 60-40% of a movie's cost, varying

movie to movie.

IPR aggregation also has been in some sense a power shifter. No

longer can TV channels and music companies dictate terms to the

studios like the way they used to do when the industry wasfragmented. Such is the fight for good Bollywood content that

channels are renegotiating deals much before the present licensing

terms expire. "If the expiry is in 2014, they are approaching us now

saying that we need 20 movies in 2014," says Jain of Eros.

Apart from the portfolio approach, some of the Hollywood studios

carry the advantage of their global strengths, which also aid in

maximising revenues. Take Fox Star. which co-produced SRK-starrer My Name is Khan with Karan Johar and SRK. The studio

did an international cut and showcased the film in a phased

international launch. The movies released in South Korea just a few

months ago with 200 prints and in Taiwan even later in May, more

than a year after its release in India and the US! "The revenue tail


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for the international market is getting longer," explains Singh of Fox

Star.

New Players, New Codes

Making money on a portfolio that includes box office failures is a

fine balancing act for the corporates. And the big issues that keep

the suits like Messrs Singh, Kapoor, and Malhotra busy are two: the

portfolio mix conundrum and the budget mix quandary. The first

being: how many movies to be acquired (outright purchase from

independent producers), how many to be self produced, and how

many to be co-produced. And second: how many big-budget (Rs 45-

crore plus), medium -budget (Rs 15-25 crore) and small-budgetmovies (Rs 3-5 crore) to make? The portfolio needs to have an

optimum mix of movies to get maximum returns, mitigate financial

and performance risk and also have a healthy release 'slate' for

securing future revenues.

So, what is the magic formula to turn flops into hits? Eros, for

example, makes 20 Hindi movies in a year that rake in almost 85%

of it revenues. The ratio that works for Eros is producing 10%,acquiring 30% and co-producing 60% of the movies. It's a tricky

proposition: take on too many big movies and the financial and

performance risk shoots up, more money gets locked and volume-

wise, the slate is weak. Whereas, the lack of bigbudget movies

means the returns will be low and the slate will not have the weight

that a big star movie like Shahrukh Kahn's Ra.One or Salman's

Dabbang brings in terms of negotiation power with TV channels,

music companies and new media companies.

The key to cracking the budget mix quandary lies in understanding

the return and risk quotient of each category of films: big, medium

and small. Big-budget movies starring Aamir Khan, Salman Khan,

Shahrukh Khan, Akshay Kumar, Ranbir Kapoor, Hrithik Roshan,


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Shahid Kapoor, among others, manage to get up to 70-80% of the

costs covered just by licensing, so are the least risky.

And it's not a big-movie proposition alone, the smaller movies play a

crucial role in the portfolio play. For studios, a good bundled slateof big-budget and small-budget movies gives better negotiating

capability to the studios, in terms of both volume and value for

every IPR deal with aggregators. So Eros does seven big budget

movies (of Rs 45-crore plus), seven medium-sized movies (Rs 15-25

crore), and three small movies (Rs 5 crore) a year. Fox Star does 4-6

movies a year, a mix of 1-2 big budget movies, 2-3 middle-sized

movies, and 1-2 smaller movies a year. For UTV, the sweetspot is

12 movies a year, with four in each category.

In fact, some like Malhotra are deliberately focusing on evolving a

cost-conscious model: new stars, new concepts, and launching a

tight, well-researched product. The last few movies for Viacom 18

like Tanu weds Manu, Pyar Ka Punchnama, and Shaitan were all

small movies. "I am backing my movies and it comes from the

security that you don't need 4/5 stars to make successful movies,"

says Malhotra.

New Players, New Rules

Apart from mastering the revenue capture, the smart set in the

industry is also managing the other side of the equation well: cost.

"Cash entrapment is critical in the movie business," says Jain. The

portfolio approach also helps studios free up cash and the capital

can be revolved faster, leading to better returns. The production

houses are shortening their working capital cycles.

First, the payments are broken up and spread over different stages

of filmmaking and then the licensing payments kick in, leading to

faster turnaround of capital. "The raw material for my company is


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cash. The average working capital cycle for us has come down to

just 90 days," says Jain. The freed up cash helps fund additional

movies, especially the smaller ones.

Budgets are now sacrosanct. YRF movie budgets don't fluctuatebeyond 5%. UTV has a 5% contingency budget and overflows

cannot exceed 7-10%. "In the business of movies making, no scripts

are wrong, it's the budgets that go wrong," says Rafiq Gangjee, vice-

president, marketing and communications, YRF. "The budgets also

decide who will star in the movie," adds Kapoor.

Revenue leakages, once the way of life in the industry, are history.

For Dum Maro Dum, Ramesh Sippy and Fox Star put inaccountants to check accounts daily. Additionally, the international

studio insists on a daily update of shooting and a weekly analysis of

the costs and it won't release next week's money till the time they

don't get a cost analysis. "Three years ago, it was like going to

Vegas," says Singh. UTV has a process in place to monitor even the

time of the shot, and call time of the cast. At Eros, a three-way

matching takes place between the cost accountant, the executive

producer who is on the set, and the director's person.

The big battle comes when dealing with content. Bad content, agree

all, remains the single biggest reason for the high failure rate of

movies. "There is a glut in the market of terrible films, and we all

contribute towards it," says Gangjee of YRF. So the studios are not

just content playing the financier but also adding value to the script

process, considered by some experts as the weakest link in Indian

filmmaking.

Fox Star sends its scripts to 'script doctors' in LA to check if the

narrative and logic is right. YRF actively plays the role of a creative

mentor. And some best practices are being adopted across the

industry, like seeking pre-release and post release feedback. Fox


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Star researched Stanley Ka Dabba and Dum Maro Dum for

likeability and comprehension, and even researched portions across

groups to get an idea of the TG. "We research every film. Period,"

says Singh of Fox Star. Ditto for Kapoor and Malhotra.

Even after taking all the measure, if the accumulative portfolio

numbers show losses, the accountants are always there to help you

amortise the losses over a period to make your numbers look good.

Is there any proof that 'The Game' change has been good for

Bollywood? Well, after 2009, at least four movies have grossed more

than Rs 200 crore - 3 Idiots, Dabbang, Golmaal 3 and Ready.

"Bollywood is an industry in transition. A sensible Bollywood willemerge out of the churn," ends a confident Singh.

Questions:-

1. What does mr.kapoor has to say on his flim TMK..?

2. Enlighten us with the latest portfolio trend in the flim businessworld..?And their use to earn more profits..?

3. Is bollywood really earning profits ?


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CONCLUSIONThose that fail to reach the ultimate destination of sustainable

profitability are likely to face extinction. But for those that win thisrace, the prize is bigger than ever before.

However, M&E companies know their industry remains in a state of

flux that will continue for the foreseeable future. To keep pace amid

this ongoing and sweeping change, while also building sustainable

and profitable businesses for the future, companies need

unprecedented operational agility. Yet many are still less than half-

way along their transformation journey.

Media & Entertainment Industry is big in India spearheaded by the

Largest Film Industry in the worldThe Bollywood. Although last

couple of years have not been good due to recession,

Fueled by rapidly rising consumption and rebounding capital

markets, the past year has seen Media and Entertainment

companies worldwide accelerate their change programs across

several dimensions, in response to the pervasive impact of digital

disruption. At the same time, they have gained renewed confidenceas their focus shifts from survival to competition and growth.
http://trak.in/Tags/Business/indian-entertainment-industry/http://trak.in/Tags/Business/indian-entertainment-industry/


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BIBLIOGRAPHY

JOURNAL: - The Brand Reporter

WEBSITE: -www.imf.org

www.ibef.org

www.ficci.com

www.indiainbusiness.nic.in

www.economictimes.com
http://www.imf.org/http://www.imf.org/http://www.imf.org/http://www.ibef.org/http://www.ibef.org/http://www.ficci.com/http://www.indiainbusiness.nic.in/http://www.indiainbusiness.nic.in/http://www.indiainbusiness.nic.in/http://www.economistmes.com/http://www.economistmes.com/http://www.economistmes.com/http://www.indiainbusiness.nic.in/http://www.ficci.com/http://www.ibef.org/http://www.imf.org/

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