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 The Walt Disney Co.’s purchase of UTV Software Communications Ltd’s Hindi language kids’ channel.
With a pick up in consolidation globally, India’s buoyant economy, resurgent advertising market and the roll-out of new technologies in broadcast and distribution augur well, said media research manager at Informa Telecoms & Media, Adam Thomas.
“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 23% in 2006—faster than any other market in the Asia-Pacificregion—and are likely to expand 18% in 2007 to $4.9 billion (Rs20,090 crore), Media Partners Asia (MPA) said.
“The opportunity to grow is enormous in India, given that consumer spending on entertainment is increasing and new technologies allow firms to monetize their investments better,” said Smita Jha, 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. The first movers included Zee Entertainment Enterprises and Sun TV, while News Corp.’s Star and Sony Entertainment Television also set up shop. The?pay-TV?market earned $4.2 billion in 2006 and is forecast to be the most lucrative market by 2015, estimates MPA.
The easing of foreign investment limits in segments such as FM radio and the roll-out of a long-delayed pay-TV system are boosting broadcasters’ revenues and attracting private equity firms such as the Blackstone Group and 3i. The adoption of direct-to-home satellite has also drawn many.
India’s movie business, the world’s most prolific, is cleaning up its act and 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,” said PWC’s Jha.
With traditional Indian media firms willing to diversify, global firms are keen on deals. Increasingly, these are in niche segments such as 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 MPA’s executive director, Vivek Couto. “The only way to get anywhere is to partner local companies.”
Incumbents such as 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’s no guaranteed happy ending: with 250 channels on air, viewership and revenue are already fragmented, with average revenue per user among Asia’s lowest. Seventy more channels have been lined up. “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.