Indian Entertainment and Media

Industry

The Indian entertainment and media (E&M) industry has out-performed the
Indian economy and is one of the fastest growing sectors in India. The E&M
industry 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. All these factors have given an impetus to the E&M industry and are
likely to contribute to the growth of this industry in the future.

Current status of the industry and its growth potential

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. This is because
the E&M industry is a cyclical industry that grows faster when the economy is
expanding. 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 income levels, and this also builds the
case for a strong bullish growth in the sector.

The reasons for high growth rate in the Indian media and entertainment industry
are –

A. Low media penetration in lower socio-economic classes (SEC)

Media penetration varies across socio-economic classes. 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.

B. Low ad spends Indian advertising spends as a percentage of gross

domestic product (GDP) – at 0.34 percent – is abysmally low, as opposed
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, the advertising
revenues would at least double the current advertising revenues,
estimated at about INR 132 billion, for 2005.
 C. Liberalising foreign investment regime Today, India has probably one
of the most liberal investment regimes amongst the emerging economies
with a conducive foreign direct investment (FDI) environment. The E&M
industry has significantly benefited from this liberal regime and most
segments of the E&M industry today allow foreign investment. Recently
FDI was permitted in the two important sectors – print media and radio.
Films, television and other segments are already open to foreign
investment.

Types of media

Media can be divided into –

• Television - In 2009, the industry generated estimated revenues of US$

5.68 billion (INR 272.7 billion). India is home to 134 million TV households,
of which 90 million are served by cable and satellite TV. As many as 500
TV channels were operational in 2009. The adoption of digital distribution
platforms —direct-to-home (DTH) and digital cable —is helping TV
distribution become more organised. From about two million digital TV
households in 2006, the platform currently caters to about 15 to 17 million
digital subscribers.

• Radio - The FM radio segment is one of the fastest-growing

entertainment segments in India. Revenues in this segment have
almost doubled since 2006. In 2009, the industry was estimated at US$
201 million (INR 9.7 billion). GoI-controlled All India Radio (AIR) and 37
private FM radio companies that operate close to 280 FM radio stations
in India cater to this segment.

• Music - Film-based music dominates music sales in India. As in most

global markets, digital sales of music are becoming the norm in India.
The music industry generated revenues of US$ 369 million (INR 17.7
billion) in 2009. Distribution via digital formats on the Internet and
through mobile phones is the emerging business model for music
companies. In fact Airtel has become the largest music company in the
country.

• Films - In 2009, the industry generated estimated revenues of US$

2.73 billion (INR 131.1 billion). The industry remains dependent on
domestic theatrical collections, which generate 70 to 80 per cent of a
film’s revenue. More than 1,000 films are produced annually in more
than 20 languages. In 2008, 3.3 billion tickets were sold for films
screened across 10,000 theatre screens. There are presently more
 than 800 multiplex screens in India, and this is estimated to grow to
1,500 screens in the next two to three years.

• New Media (Including Internet) - Increasing broadband penetration is

expected to attract more content online. As the second-largest mobile
telephony market in the world, India has provided a new platform for
content delivery. In India, the trend to access videos through the Internet
and mobile phones is fast gathering momentum. Almost every major M&E
player now has a strategy to host its content on new media platforms.
Consumers can now access entertainment content online or on their
mobile devices in the form of audio and video files and text-based content.

The entertainment industry in India generated about US$ 9.1 billion (INR 439.1
billion) in revenues in CY2009, which is expected to grow at a rate of 12.6 per
cent to reach revenues of US$ 10.3 billion (INR 494.3 billion) in 2010.

Major Players in the TV channels

market

Company Parent Channels

Viacom 18 A 50/50 joint venture Colors: Hindi GEC* (Number one
between Viacom Inc and GEC with 303 GRP* * between
the Network18 Group December 13 and December 19,
2009)
MTV —youth channel
Nick —kids channel
VH1—international music and
lifestyle channel

Star News Corporation Star Plus —Hindi GEC (Number

two GEC with 280 GRP between
December 13 and December 19,
2009)

Star World —English

entertainment

Star One —Hindi entertainment

channel

Channel V —Music channel

Star News —Hindi news channel

Zee Essel Group Zee TV—Hindi GEC (number

Entertainment three GEC with 271 GRP
Enterprise Ltd between December 13 and
(ZEEL) December 19, 2009)

Zee Cinema —Hindi movie

channel

Zee News —Hindi news channel

Zee Café —English channel

Sony Pictures Multi Screen Media Private Sony Entertainment Television:

Television Ltd Hindi GEC (Number four GEC
International with 179 GRP between
(SPTI) December 13 and December19,
2009)

MAX —movies and special

events

SAB —Hindi entertainment

channel

PIX —Hollywood movie channel

New Delhi Time Warner has acquired NDTV Imagine —Hindi GEC
Television Limited a 92 per cent stake in (number five GEC with 90 GRP
(NDTV) NDTV Imagine through its between December13 and
subsidiary, Turner December 19, 2009)
International.
NDTV 24x7 —English news
channel

NDTV India —Hindi news

channel

NDTV Good Times —lifestyle

channel

NDTV Lumiere —world movies

United Television Disney has a strategic UTV World Movies —

(UTV) Software stake in UTV Software international movie channel
Communications Communications Ltd
Ltd UTV Movies —Hindi movie
channel

UTV Bindass —youth channel

UTV Action —genre-specific

 movie channel

Key Economic Indicators

Policy and regulatory framework

TV

• In 2004, the Telecom Regulatory Authority of India (TRAI) was appointed as a

regulator for the TV industry.

• Up to100 per cent FDI is permitted in TV channels.

•The rollout of DTH TV licences and GoI-mandated digital conditional access

systems (CAS) initiated the digitisation process. The recently announced
Headend-in-the-Sky (HITS) policy and a concessional customs duty of 5 per cent
on importing digital headend equipment is expected to give further impetus to
the digitisation process.

Films

•In 2000, the GoI granted industry status to the Indian film industry and
permitted FDI of up to 100 per cent in film-related activities.

•Various state governments have also provided entertainment tax exemptions to

multiplexes.

Radio

•Following the opening of FM radio broadcasting to private players in March

2000, the rollout of the second phase of the FM radio licencing policy in 2005
provided a thrust to the sector.

•In radio companies, FDI is limited to 20 per cent of the company’s paid-up
equity capital.

Key growth drivers

Television

Subscription 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 of pay 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.
Filmed entertainment

Indians 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 is increasingly getting more corporatised. 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.

Print media

A 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 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 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.

Radio

The 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 opened up the sector to foreign investment – and 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.

Music

The 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.
Live entertainment

This 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 have clearly 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 unorganised
nature of most event management companies, continue to somewhat check the
potential growth in this segment of the industry.

Out-of-home advertising

Outdoor 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.

Internet advertising

An 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 approximately INR 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.

Television Eighteen (BSEId :

532299 NSE Id :TV-18)
TV18 owns and operates CNBC TV18 & CNBC Awaaz and is one of the
subsidiaries of Network18. In addition to the broadcasting operations, TV18 and
Network18 have investments in the internet business.

These investments have been done largely through its subsidiary Web18
Holdings Limited and E-18 Limited. Some of the well-known internet portals
include -
www.moneycontrol.com, www.commoditiescontrol.com, www.yatra.com, www.p
oweryourtrade.com, www.compareindia.com,www.cricketnext.com, www.tech2.c
om, www.easymf.com, www.indiaearnings.com, www.newswire18.com, www.ibnl
ive.com, www.indiwo.com, www.buzz18.com and www.bookmyshow.com.

It also owns and operates HomeShop18, a televised home shopping service

selling credible brands through interactive electronic media, primarily through
cable television and the internet.

Network18 is one of India's leading full play media conglomerates with interests
in television, print, internet, filmed entertainment, mobile content and allied
businesses.

CNBC-TV18 is India's No.1 business medium and the undisputed leader in

business news. The channel's coverage extends from corporate news, financial
markets coverage, expert perspective on investing and management to industry
verticals and beyond. India’s business audience consumes CNBC-TV18 for their
information & investing needs. This audience is highly diversified at one level
comprising of key groups such as business leaders, professionals, retail
investors, brokers and traders, intermediaries, self-employed professionals, High
Net Worth individuals, students and even homemakers but shares a distinct
commonality in terms of their spirit of enterprise.CNBC-TV18 is currently
available in over 30 million households in India.

CNBC AWAAZ is India's first business and consumer-focused Hindi channel.

CNBC AWAAZ is a part of the Network18 bouquet. In less than a year and half of
its launch, CNBC AWAAZ was being watched by more than 43% of India's
decision makers. These decision makers choose CNBC AWAAZ ahead of
established news channels like Star News, NDTV India and Zee News, second
only to Aaj Tak
Quarterly Results

Quarterly Results ------------------- in Rs. Cr. -------------------

Jun '09 Sep '09 Dec '09 Mar '10 Jun '10

Sales Turnover 58.23 63.73 69.41 85.82 64.73

Other Income 8.91 10.02 11.62 32.26 22.92

Total Income 67.14 73.75 81.03 118.08 87.65

Total Expenses 55.12 63.01 60.80 62.14 48.58

Operating Profit 3.11 0.72 8.61 23.68 16.15

Profit On Sale Of Assets -- -- -- -- --

Profit On Sale Of
-- -- -- -- --
Investments

Gain/Loss On Foreign
-- -- -- -- --
Exchange

VRS Adjustment -- -- -- -- --

Other Extraordinary
-- -- -- -- --
Income/Expenses

Total Extraordinary
-- -0.83 -- 0.83 --
Income/Expenses

Tax On Extraordinary Items -- -- -- -- --

Net Extra Ordinary

-- -- -- -- --
Income/Expenses

Gross Profit 12.02 10.74 20.23 55.94 39.07

Interest 28.36 28.85 27.81 24.16 22.61

PBDT -16.34 -18.95 -7.58 32.64 16.46

Depreciation 4.64 4.64 4.20 3.71 3.71

Depreciation On
-- -- -- -- --
Revaluation Of Assets
PBT -20.98 -23.59 -11.78 28.93 12.75

Tax 1.43 2.67 0.88 0.08 1.96

Net Profit -22.41 -26.26 -12.66 28.85 10.79

Prior Years
-- -- -- 0.02 --
Income/Expenses

Depreciation for Previous

Years Written Back/ -- -- -- -- --
Provided

Dividend -- -- -- -- --

Dividend Tax -- -- -- -- --

Dividend (%) -- -- -- -- --

Earnings Per Share -- -- -- 1.60 0.60

Book Value -- -- -- -- --

Equity 60.01 60.01 67.51 90.08 90.38

Reserves 442.17 -- -- 891.05 --

Face Value 5.00 5.00 5.00 5.00 5.00

Conclusion
With rapid advancements in technology, 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.
Broadband access and Internet Protocol (IP) will be the technology enablers that
will evolve this new breed of consumers.

In the converged world of tomorrow, content and access will no longer be in

short supply. Opportunities for consumers to access and manipulate content and
services will not only be abundant, but overflowing. However, consumer time and
attention will be limited. Thus, established approaches of pushing exclusive
content through non-linear-channels or networks to mass or segmented
audiences will no longer guarantee competitive advantage.

Thus, following are the challenges and opportunities that convergence will bring
to the industry:

• Consumer needs are expanding beyond the mass media and segmented media
to ‘Lifestyle Media’, a new approach that will help consumers maximise their
limited time and attention to create a rich, personalised and social media
environment. This approach presents many opportunities for the industry to
create new avenues to generate revenue.

• Knowledge of ‘consumer activity’ rather than exclusive ownership of content or

distribution assets will become the basis for competition. Businesses that
capture ‘consumer activity’ data and use it to inform business and advertising
models will be positioned to succeed.

• Media marketplace will provide a structure to capitalise on the Lifestyle Media

opportunity. Pull-oriented media consumption models, such as a media
marketplace, in which the consumer is furnished with robust search, research,
customisation, configuration and scheduling tools will capture the opportunity
associated with Lifestyle Media better than minor modifications to existing
business practices. Participants in media market place must collaborate on this
transformation.

• Early movers in establishing media marketplaces will have a significant

advantage over late entrants because of network effects, whereby the value of
the market place increases as the number of participants increase.

• Media market places will be economically viable only if operational efficiencies

can be realised through consumer activity measurement capabilities and
supporting systems.

• Significant advancements in audience measurement technology will be needed

to capture, analyse and standardise consumer activity data across platforms.

The Indian Entertainment and Media Industry - Unravelling the potential 18

• Though convergence will bring uncertainty, the ability to gather rich data on
consumer activity will also lower the risks and costs associated with testing new
revenue or advertising models.

• Both content providers and advertisers will need to be more accountable for
their performance because it will now be measurable.

• While technology will make it easier to collect detailed consumer information,

privacy concerns will rise amongst consumers, regulators and privacy advocates.

Convergence requires 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 strategies for 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. They will need to understand the
complexities of content security and controls and incorporate them into the
system and processes. In addition to the above, advertising agencies will need to
invest in advertising ROI technology and processes that will lead to the creation
of new viewing experiences that provide advertising opportunities beyond the
traditional 30-second spot.

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 and spending 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.
Latest announcements
Network18 Group & Sun Network Form Strategic Alliance To create one
of India’s biggest Distribution Ventures

Mumbai | July 13th 2010

Network18 Group, India's largest News Network and leading full-play media
conglomerate and Sun Network, India's largest media conglomerate, today
announced their strategic alliance to launch one of India’s biggest distribution
entities. The new entity, to be called Sun18, will be the first truly pan-India
distribution company and aims to become one of the dominant players in the
approx Rs. 16,000 crore pay-tv subscription market, over the next 2 years. This
alliance also marks the entry of Network18 Group into the Indian television
distribution space.

As part of the agreement, to begin with, Sun18 will distribute a total of 33

channels across all platforms in India via all networks including cable, DTH, IPTV,
HITS and MMDS from :

- Network18 - India’s largest News Network, comprising CNN-IBN, CNBC-TV18,

CNBC-Awaaz, IBN-7 and IBN-Lokmat
- Viacom18 - India’s fastest growing entertainment network, comprising COLORS,
MTV, Nick and Vh1
- Sun Network – India’s largest multilingual network comprising SUN TV, KTV, Sun
News, Sun Music, Chutti TV, Adithya, Gemini TV, Teja TV, Gemini News, Gemini
Music, Navvulu TV, Kushi TV, Surya TV, Kiran TV, Udaya TV, Udaya Movies, U2,
Udaya Varthegalu, Ushe TV and Chintu TV
- Disney India Network – one of India’s leading kids network, comprising The
Disney Channel, Disney XD and Hungama TV

Infomedia18 divests Glyph International

Mumbai | May 5, 2010

Infomedia18 Limited (Infomedia), a controlled subsidiary of Television Eighteen
India Limited (a Network18 group company) and India’s premier directories,
search, special interest publishing and printing company and Cenveo Inc, one of
the world’s leading providers of content management and print production
services, today announced signing of a definitive agreement, whereby Infomedia
has divested 100% stake in Glyph International, its publishing content services
business to Cenveo Inc’s subsidiaries.

As part of the agreement, Infomedia will transfer all its holdings in the Glyph
subsidiaries, namely Glyph International Limited, Glyph International US LLC,
Glyph International UK Limited and CEPHA Imaging Private Limited to Cenveo’s
subsidiaries in India and US. Necessary approvals for the transaction will be
sought. This divestment is part of Infomedia’s strategy to exit non-core
businesses and deploy resources to focus on core media segments, search,
internet and directories services.

Segmentation, Targeting, and

Positioning (STP)

Television 18 uses the following segmentation, targeting, and positioning (STP) strategy.

Segmentation – The market for television audiences in general and television news in
particular can be divided on the basis of language. The Indian airwaves have three types of
channels – English, Hindi and regional language. The same division is present in the case of
both news channels and general entertainment channels (GECs). In the case of news
channels, the division is also on the basis of the type of news. There are two broad categories
– general news and business news. Television 18 covers all these segments with its bouquet
of channels.

Targeting – Television 18 has a bouquet of channels in its stables and each of them is
targeted towards very specific audiences. Apart from Colors which is a Hindi GEC, most of
the offerings by Television 18 are in the sphere of news channels. Through their tie-up with
CNBC, TV 18 offers two business news channels, CNBC TV18 (English) and CNBC
AWAAZ (Hindi). It also offers the general news channels CNN IBN (English), IBN7 (Hindi)
and IBN Lokmat (Marathi). AWAAZ was the first Hindi business news channel and both the
business news channels are market leaders in their fields today. TV 18 also has a number of
websites under Web 18 that targets niches such as yatra.com (travel booking),
bookmyshow.com (ticket booking), www.tech2.com (tech reviews and news) and
cricketnext.com (cricket news and info). It also covers the whole gamut of business websites
with such sites as www.moneycontrol.com, www.commoditiescontrol.com,
www.poweryourtrade.com, www.easymf.com, www.indiaearnings.com.
Positioning – The business that TV 18 is in is a volume business. This means that it has to
appeal to a large section of the market. Along with this, as the company is involved in a
business that needs to have an underlying strain of integrity running through it, the products
form its stables are positioned keeping this in mind. TV 18 targets almost the whole gamut of
TV viewing public with its large number of TV channels. In fact, its GEC Colors has become
the market leader in its segment and so are its business news channels CNBC TV 18 and
CNBC AWAAZ. As far as integrity is concerned, it has largely been taken care of by hiring
Rajdeep Sardesai. He comes with impeccable credentials and has helped in instilling trust in
the audience of TV 18.