Jun 15, 2006|
Media: The sunrise sector
The Entertainment and Media (E&M) sector is one of the fastest growing in India. As per KSA Technopak, of the total consumer spending, more than 50% is towards food-related items. But as income grows, we expect the share of foods to reduce (not in absolute terms) and spending on leisure and entertainment to increase at a robust pace. Here is our take on the sectors growth prospects over the long term.
The size of E&M in India is currently estimated at Rs 353 bn and is expected to grow at a CAGR of 19% over the next five years. The sector consists of different segments, which includes television, filmed entertainment, print media, radio, music, live entertainment, out-of-home advertising and Internet advertising. Television continues to dominate the E&M industry, accounting for a lion's share of revenues (42%). This is expected to expand by 9% in the next three to five years.
Key growth drivers:
Television: The penetration levels of television in India are among the lowest in the world, even lagging other Asian economies. With competition increasing over the years, prices have tumbled, thus improving affordability. Going forward, we expect the penetration levels to improve significantly with the advent of cable television.
As is known, the broadcasters derive revenues from advertisement and subscriptions. We expect subscription revenues to drive revenue growth over the next five years. The Indian television subscription market is currently estimated at about US$ 1.6 bn. Subscription revenues will increase both from the number of pay TV homes as well as increased subscription rates. With the coming of new distribution platforms like Direct-to-home (DTH) and Internet protocol television (IPTV), prospects are promising. As far as advertisement revenues are concerned, growing consumerism in the country will give a boost to adspend over the next five years. Television currently has the highest reach amongst the primary media delivery channels as highlighted below.
Source NDTV Prospectus
Radio: In FY05, the government opened up the sector for foreign investment. As many as 338 licences have been sold across 91 towns and cities. In FY04, size of the Indian radio industry was Rs 2,400 m, which has increased to Rs 3,700 m by the CY06. In our view, based on our interaction with radio companies, around 25% growth in revenues is a possibility over the next three to five years.
Print media: Growing need for content and government initiatives have been driving growth in the print media. With literacy rate improving, the readership base is expected to expand (both in rural and urban areas), which will benefit the print media. However, we expect this sector to continue to lose share in the total E&M adspend (like in the past). In FY04, print media's market size was estimated at Rs 97,800 m (as per Pricewaterhouse) and is growing at a healthy 20% per annum.
Conclusion: India, as one of the fastest growing economies in the world, has recognized the need to open the media sector (at the broader level) for more competition. With clear policies and regulatory framework, the sector has the potential to grow at a faster clip going forward.
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