The M&E upsurge

Written by Sudipta Datta | Updated: Aug 3 2011, 07:50am hrs
The economy may be showing signs of impending slowdown, but the entertainment sector is optimistic about the future, and is projected to grow in double digits in 2011-12. If you take just three sectorsfilms, television and radiothey, together with print, comprise the largest pie of the entertainment sector. Experts, analysts and insiders tell us that though films had a dull beginning, business picked up remarkably in the months of June and July and the holiday releases, including Shah Rukh Khans Ra.One and Don 2, are on their way. As for television, there are whispers of ad spend slowing down, but TV is poised for 14-15% of ad growth this fiscal. Radio just got a booster dose with the announcement of FM phase III.

Films: Hollywood comes closer

Bollywood is celebrating July, the month that has seen the box office raking in R200 crore, riding on films like Delhi Belly, Murder 2 and Zindagi Na Milegi Dobara. In fact, June, too, did fairly good business with Ready and Double Dhamaal. This shot in the arm comes at perhaps the right time for the film industry, as it was going through a lull for four-five months with the cricket World Cup and IPL keeping big ticket releases at bay. Says Jehil Thakkar, head, media and entertainment practice, KPMG, The past four-five weeks have seen huge dividends at the box office and thats very good news for the industry, as at least 50-60% of revenues still come from the box office.

The glowing box office apart, news that Disney is willing to buy UTV for R2,000 crore excited analysts. It is very encouraging and reassuring that a global M&E company like Walt Disney is bullish on the prospects of the M&E industry in India. Retaining the Indian management team further helps to understand that the global major recognises the need and value of localisation and trusts the Indian talent for running an India business, says Rakesh Jariwala, partner, Ernst & Young. UTV CEO Ronnie Screwvala is slated to stay on in the company even after the Disney buyout.

After Sonys disastrous outing with Saawariya five years ago, foreign studios have been watching the Indian film market carefully and after Fox Stars Slumdog Millionaire success three years ago, slowly making their way back in. Today, both Fox Star and a refurbished Viacom 18 have a slate of Hindi releases, and studios like Warner are going in for co-production and so forth. Vikram Malhotra, COO, Viacom 18 Motion Pictures, says of the movies released so far under their bannerTanu Weds Manu, Shaitan and Buddha Hoga Tera Baaphave done well at the box office. The movies budgets were modest, but we marketed aggressively and this helped us monetise better, says Malhotra. Buddha... was targeted at Amitabh Bachchan fans, and it got us the returns, he adds. He points out that foreign studios are beginning to realise that India is an untapped, unexploited market.

So, how will the film industry perform this year Unlike TV and print, films are notoriously hard to predict, says Thakkar, but we see growth in the film industry coming from expansion of multiplexes, refurbishing of single screens and rise in average ticket prices. But both analysts and insiders caution that costs must be kept under control, and that star costs particularly need to be tempered.

What is going to help the industry reap the benefits is the fact that films are being monetised much better now. The dependence on the box office has reduced, and a film is recovering almost half the costs from pre-sale of satellite, music, overseas, gaming rights.

Says Kamal Jain, CFO, Eros, The film industry is poised for massive growth in the next five years. Foreign studios can sense that growth and some of them will see this as the right time to move in.

Television: Reach expanding

For television, the first four-five months were good, but industry sources admit that theres been a slowdown over the past four-six weeks. Thakkar says the industry feels that the demand slowdown is because of inflation, but points out that though there has been some tempering of growth, we still expect 14-15% of ad growth in TV. In 2010, the industry had grown to R29,700 crore.

The television space has seen a lot of movement, both in terms of channels and content; and regional continues to be a pocket of strength. For the first six months, one of the highlights have been the STAR-Zee distribution deal. Analysts say this coming together of staunch rivals to improve network and reach will help TV players drive down costs.

If the film industry performs well, it is good news for the television industry as well, because ours is a film content driven country... all mediums bet on films. Thakkar says that while the business of films (R8,300 crore in 2010) is the third-largest sector after TV and print, at least TV is heavily film-content driven. The channels are all competing for satellite rights for films. For instance, Star Plus, which is now hosting Hrithik Roshans dance reality show Just Dance, has also bought the rights for Hrithik starrer Zindagi Na Milegi Dobara. All the satellite rights for the expected top films of the year have been pre-sold, say industry sources.

With the home video market shrinking further, TV is now releasing films, sometimes within three-four weeks of theatrical release. As for other content than films, Thakkar says new reality formats will continue to come and there would be a unique blend of Indian and foreign formats. But dance and song routines will continue because it is so much a part of our culture, and TV will mirror that, he says. Talking about the ZEE-Star JV on distribution, Thakkar says it would help both build a stronger negotiating platform, especially with the exponential growth seen on the direct-to-home network.

Radio: Booster dose

Three years ago, when the financial meltdown hit the entertainment sector, radio was hit particularly hard. But the industry bounced back and is now pegged at R1,200-1,500 crore. Industry players say the governments decision to allow auctions for FM phase III will open up the sector to new towns and growth in double digits. While Tarun Katial, CEO, Reliance Broadcast Network, which runs BIG 92.7 FM, is optimistic of a 30% growth year-on-year after FM Phase III, analysts admit that though the potential is huge, there are inherent problems like content, costs and talent issues that need to be sorted out.

Thakkar of KPMG, for instance, says there needs to be more awareness so that advertising can use the medium of radio. The world over, radio is a local medium, but in India its still a national brand. The shift has to take place to local to realise its true potential, he points out.

The advertisement industry is still learning how to use the medium, say analysts. In ten years of private radio, the sector has moved from being a zero advertising entity to R1,200 crore now. Regional fronts are opening up, theres some experimentation going on with formats, radio needs to package itself as an entertainment unit with different programmes from music, news, talkshows and so forth, says Thakkar.

Almost all the analysts we spoke to say largely if GDP growth holds, the entertainment sector will live up to the predictions on double digit growth. But GDP targets have already been pared down...