Indian film industry will not grow in 2009: FICCI & KPMG

Mumbai- Finally, the international recession has hit the Indian Entertainment Industry, indicates a joint FICCI-KPMG report. However, there are indications of long-term growth. Following years of rapid growth, the combined revenues of the Indian film industry are expected to remain flat in 2009 at around $2.2bn (Rs109.2bn), says the report.

Film Executives, policymakers and entertainers descended on Indian film industry's capital, Mumbai for the three-day event 'FRAMES' hosted by FICCI, the Federation of India Chambers of Commerce and Industry.

The star power included actor Danny Glover of Lethal Weapon fame, Lord of the Rings producer Barrie Osborne, Indian film producer Yash Chopra, 'Elizabeth' fame director Shekhar Kapur, Indian actor Amitabh Bachchan, former United Nations ambassador Andrew Young and others.

Long-term prospects remain strong – the report also stated that the industry would grow at a compound annual growth rate of 9.1% to reach $3.4bn (Rs168.6bn) by 2013 – due to factors such as the expansion of multiplex screens, enhanced penetration of home video and an increase in the number of TV channels fuelling demand for film content.

The film industry also grew in 2008 by 13.4% to reach total revenues of $2.2bn (Rs109.3bn).

However, the coming year will be challenging for the industry due to a smaller number of releases as producers struggle to raise fresh capital; lower occupancy rates at multiplexes, and the declining value of cable and satellite rights and other ancillary revenue streams.

The last quarter saw the release of blockbusters featuring Bollywood's major stars such as Ghajini, with Aamir Khan, and Rab Ne Bana Di Jodi, starring Shah Rukh Khan.

Says Dr. Amit Mitra, Secretary General, FICCI, “India is one of the few countries where economic growth will be led by domestic consumption. With a low advertising spend to GDP ratio of 0.47 percent, a growing consumer class and middle class, young population, low media penetration and increasing discretionary spending; India continues to be an attractive market for Media & Entertainment”.

Commenting on the highlights of the report, Rajesh Jain, Head Information, Communication & Entertainment, KPMG India said, “Media companies are under pressure to change, innovate and re-examine their existing business models. Players need to draw upon new capabilities to survive in this environment. In the immediate future, media corporates are likely to focus more on operating margins, and assess opportunities for consolidation, while building on core strengths.”
Television:

Filmed Entertainment:

The filmed entertainment sector is estimated to have grown at a CAGR of 17.7 percent over the past 3 years. The industry is clocked revenues of around INR 109.3 billion in size in 2008, a growth of 13.4 percent over 2007. Over the next 5 years, the industry is projected to grow at the CAGR of 9.1 percent and reach the size of INR 168.6 billion by 2013.

Growth drivers for the sector would include expansion of multiplex screens resulting in better realizations, increase in number of digital screens facilitating in wider film prints releases, enhanced penetration of home video segment, primarily in the sell through segment, increase in number of TV channels fuelling demand for film content, and hence resulting in higher C&S acquisition costs, improving collections from the overseas markets.
Going forward the sector should focus on improving consumer connect by investing in new formats and content, more wide spread distribution of Home Video, e.g. at grocery stores etc., to facilitate easy access, take coordinated and proactive action to tackle piracy, promote and experiment with new talent and ialent and improve organizational ability to attract and retain talent.

Print Media:

The Indian Print Media industry is estimated to have grown by 7.6 percent in 2008 and reaching around INR 172.6 billion in size. The industry is projected to grow at a CAGR of 9 percent over the next five years and reach around INR 266 billion in size by 2013.

Radio:

Radio ad spends account for about 4 percent of the total advertising spends in India today, having grown from just 2 percent in 2004. Consequently, the radio industry is estimated to have grown at an impressive CAGR of 19.7 percent over 2006-08. It is estimated to have reached a size of INR 8.4 billion by end of 2008, a growth rate of 13.5 percent over the previous year. It is expected to grow at a CAGR of 14.2 percent over 2009-13 and reach a size of INR 16.3 billion by 2013.

Increase in the number of radio stations – around 700 new licenses expected to be issued to Private FM stations in Phase 3, expected regulatory reforms that are likely to improve profitability and stimulate foreign investments, emergence of robust audience measurement tools which could further catalyze growth in radio ad spends and growth in locally targeted advertising on radio are some of the growth drivers for the radio industry in the country.

Music:

The size of the Indian music industry was estimated at around INR 7.3 billion in 2008, down from INR 8.3 billion in 2005, implying a degrowth of 4.8 percent during the period. One of the primary reasons for this degrowth has been the erosion of sales of physical formats, a trend which is expected to continue well into the future. Physical formats such as audio cassettes and compact discs, which accounted for approximately 87 percent of industry revenues in 2005 currently account for just fewer than 60 percent in 2008.