Mumbai: Global media and entertainment firms are racing for a piece of the fast-growing Indian market and the pace will quicken because of new technologies in India and tougher restrictions in China.
Recent deals include Viacom Inc.’s venture with India’s TV18 Group, News Corp.’s regional content deal with Balaji Telefilms and Disney’s purchase of UTV Software’s Hindi-language childrens’ channel.
With a pick-up in consolidation globally, India’s buoyant economy, resurgent advertising market and the rollout of new technologies in broadcast and distribution augur well, said Adam Thomas, media research manager at Informa Telecoms & Media.
“With China perceived as increasingly inaccessible to media companies, global giants looking to enter a big market full of potential are instead turning to India,” he said.
China last year tightened restrictions on foreign control.
While there are limits on foreign investment in India, too, its advertising revenues grew by 23% in 2006 -- faster than any other market in Asia-Pacific -- and are likely to expand by 18% in 2007 to about $4.9 billion, Media Partners Asia said.
“The opportunity to grow is enormous in India, given that consumer spending on entertainment is increasing and new technologies allow firms to monetise their investments better,” said Smita Jha, a principal consultant at PWC.
Since the market opened to foreign broadcasters in 1991, India has become the world’s third-largest cable TV market, with 71 million cable homes, or 59% of all TV homes.
The first movers included Zee Entertainment Enterprises and Sun TV, while News Corp.’s Star and Sony Entertainment Television also set up shop.
India’s pay-TV market earned $4.2 billion in 2006 and is forecast to be the most lucrative market by 2015, MPA estimates.
The easing of foreign investment limits in segments like FM radio and the rollout of a long-delayed pay-television system are boosting broadcasters’ revenues and attracting private equity firms such as Blackstone Group and 3i.
The adoption of direct-to-home satellite has drawn the likes of News Corp. and Malaysia’s Astro Networks.
India’s movie business, the world’s most prolific, is cleaning up its act, while the print media, which is stagnant or declining in most western markets, is likely to grow at 13% annually over the next five years, PWC estimates.
“With higher broadband and mobile penetration, new platforms like Internet and gaming have opened up and content is very important here. That’s where local firms score,” Jha said.
With traditional Indian media firms willing to diversify, global firms are keen for deals. Increasingly, these are also in niche segments like regional language content and gaming.
Sony Pictures has film co-production deals with Indian firms, while UTV has signed up with Fox, Sony and Disney. Virgin Group’s Virgin Comics has a deal with Television Eighteen’s Studio 18 for TV, film, games and comic books for teenagers.
“International firms cannot come in and say, “distribute our content” anymore,” said Vivek Couto, MPA’s executive director.
“The only way to get anywhere is to partner local companies.”
Incumbents like Sony, Disney, Time Warner, News Corp. and Astro will step up the pace in India, Couto estimates, with private equity firms also looking to do more deals.
But there is no guaranteed happy ending: with about 250 TV channels on air, viewership and revenue are already fragmented, with average revenue per user, at about $3.50 a month, among Asia’s lowest. Another 70 channels have been lined up this year.
Plus, foreign ownership limits are still restrictive.
“If you add piracy, subscriber under-reporting, low monthly subscriptions, inadequate legislation and a convoluted industry structure into the mix, it is clear that, while attractive, there are also many challenges to overcome,” Thomas said.