Digitization to benefit media & entertainment industry

NEW DELHI: The two day global summit on media and entertainment (M&E) titled Focus 2007 organised by ASSOCHAM kicked off in the capital this morning. Going digital was certainly the focus of the conclave.


 


As per the Ernst & Young (E&Y) report on the M&E industry that was released, digitization of both content and delivery platforms, in the audio visual entertainment space is leading to increasing reach out to wider audiences within shorter spans of time.


 


ASSOCHAM president and Videocon Industries chairman Venugopal Dhoot says, “The M&E industry business in India is one of the fastest growing segments of the economy. It is a Rs 440 billion (Rs 44,000 crores) industry growing at a CAGR of 18 per cent. Digital enabled services are making great progress. This in turn has led to reduction in cost of product, storing content and is at the same time increasing consumption of content thereby increasing its value.”


 


Throwing more light on the key drivers that are shaping the M&E industry growth, E&Y national sector leader Farokh Balsara adds, “Enabling regulations related to broadcasting, print, radio and mobile by the government, changing consumer habits, increasing advertising spends, digitization of content and delivery platforms, increase in competition are some of the forces that are the key growth drivers of this dynamic industry.”


 


THE TRANSFORMING TELEVISION MARKET IN INDIA


 


The E&Y report said that changes in consumption habits coupled with regulatory pressures, have propelled India – the third largest cable and satellite (C&S) market in the world, to start migrating to digital platforms.


 


The report added that the Indian C&S space has grown at a CAGR of 38 per cent, for the last 17 years. However, on account of certain restrictions, an unorganized value chain and lack of addressability, this industry has not been able to maximize revenues.


 


There is significant under-reporting ranging from 50 – 80 per cent in the television market. Due to piracy, the Indian broadcasting industry loses Rs 110 billion on account of under-declaration and advertising revenue loss.


 


Additionally, since rising costs of content production and distribution are supplemented by the loss of subscription and ad revenues, the broadcasters are forced to cater to the masses. Hence there is limited potential for niche content.


 


The report adds that while on the one hand digital platforms like mobile and internet, DTH and IPTV have started offering niche content at differential pricing options, inability of the analog medium to service the changing need of the consumers has made the transition to digital imperative.


 


Balsara added that digital platforms like DTH and IPTV were certainly going to the growth drivers in the coming years. “By 2010, there will be 90 million DTH subscribers in the country, where IPTV will have close to a million subscribers in three years,” he said. Pertinent to note here is that today Tata Sky has 1.5 million subscribers, whereas Dish TV has 2.6 million.


 


ADVERTISING REVENUES


 


Currently in India 70 – 80 per cent of the broadcasters’ revenues are ad-driven. With over Rs 227 billion spent in advertising in India, advertising is a cornerstone of the M&E industry. Currently 43 per cent of the media budgets are spent towards television and 48 per cent for print, five per cent for outdoor and the balance four per cent shared between internet, cinema and radio.


 


However, over the next three years, the TV ad market is expected to grow at the rate of 14 per cent YOY and will continue to maintain its 43 per cent market share in the ad pie.


 


FILMED ENTERTAINMENT SPACE


 


As far as the filmed entertainment space is concerned, digitisation of the distribution business will help in bringing down costs. As a result of this, producers will be able to reach out to more international markets for theatrical distribution, which in turn will maximize film revenues.


 


As per the report, this will further significantly shorten the release window for each platform and also reduce costs of DVDs.


 


Balsara said, “Low cost of DVDs will in turn increase penetration of DVD players and also help clamp piracy. With this, the home entertainment share, which today is five per cent of a film’s revenue, will increase to 25 per cent within the next three years.”


 


He said that the mobile value added services (VAS) revenues are estimated to grow to Rs 46 billion by the end of the year, which is a 60 per cent growth from 2006 revenues of Rs 28 billion, the share of WAP VAS applications, is also rising. Additionally, the revenue share of digital music downloads was Rs 10 billion at the end of 2006 and is consistently increasing.


 


Moreover, for the first time the music industry has seen more digital sales than physical sales, especially through ring tones. The mobile music sales, which currently account for 56 per cent of revenues, are expected to account for 88 per cent of the Rs 42 billion total music market in the country within the next two years.


 


Internet advertising, which is today pegged at Rs 350 crores, is set to grow at 150 per cent over the next three years as newer advertisers open up to the medium.


 


Balsara concluded the session by saying that companies have to gear up for the digital revolution with apt infrastructure, business models, financial considerations and technologies.

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