M&E - Whitepaper For Assocham Draft v2

Media & Entertainment in India
Digital Road Ahead
September 2011
www.deloitte.com/in
2
Contents
Message from Deloitte Touche Tohmatsu India Pvt Ltd 4

Message from ASSOCHAM 6
Television 8
Television is the ‘King’ 8
Television – Revenue Streams 8
Television – Value Chain 13
Policy & Regulatory Framework 22
FDI limits for investments in Television Industry 23
Films 25
Indian film industry: Marching towards completion of 100 golden years
in 2013! 25
Key revenue streams 26
Segments 28
Distribution 28
Exhibition 28
Key challenges and opportunities 29
Way forward 31
Animation and Gaming 32
Animation 32
Gaming 32
Animation 32
Size, Growth & Segments 35
Recent Trends and Growth Indicators 35
Indian Animation Entertainment Industry: Overall Outlook 37
Gaming Industry 38
Size, Growth & Segments 40
Recent Trends and Growth Indicators 40
Online Gaming 41
Emerging Channels to promote gaming 41
Customisation and advanced gaming 41
Indian Animation & Gaming Industry: Future Outlook 42
Bibliography 43
Acknowledgements 44
Media & Entertainment: Digital Road Ahead 3

Message from Deloitte Touche
Tohmatsu India Pvt Ltd
The three focus segments of this paper: Television, Films conceptualization and production stages to distribution
and Animation& Gaming are set to ride the digital wave and exhibition of films across platforms in India as well
as digitalization starts showing profound impact on as abroad. Going forward, the film segment in India is
India’s Media and Entertainment industry. expected to further reap the benefits of going digital
with digital prints, digital cinemas and more sophisti-
Television in India is the most preferred entertainment
cated digital production techniques.
medium with the highest impact of advertising on the
audiences. India has the third largest TV households While the Indian animation industry is all set for an
globally, second to only China and the US. However, enhanced outsourcing pie from global players, it is also
the digital TV penetration in India is very low at 36% prepared to move up the value chain and play a larger
as compared to more than 90% in countries such as role in the overall animation and gaming ecosystem.
Finland, Spain, UK, Bahrain, Saudi Arabia. As a means Where earlier only post-production work used to be
to bring addressability into the system, the Ministry of outsourced from Hollywood studios, Indian studios are
Broadcasting recently accepted the recommendations now looking to create their own IP through innova-
made by Telecom Regulatory Authority of India (TRAI) tive business models. Also, with the popularity of 3D, a
on the sunset of analog transmission in India by 2014. large amount of 2D-to-3D conversion is being done by
Adherence to the sunset date would certainly have indigenous studios.
a positive impact on the media content distribution
The future of India’s media and entertainment
sector in India. Digitalization is not only expected to
landscape looks extremely promising with changes
help players in the television value chain to realize the
such as analogue cable sunset date by 2014, and
true potential of their content, but also to cater to the
players in the overall media value chain attempting to
unique and diverse needs of the viewer when it comes
provide improved content to viewers through effective
to entertainment.
marketing and delivery strategies.
Indian film industry is proudly marching towards
completion of 100 golden years. From the humble
Sachin Sondhi,
beginning through a silent film made in 1913 to Indian
Senior Director,
film-makers producing films in English, Indian film
Deloitte Touche Tomhatsu India Pvt Ltd
industry has truly come a long way. Impact of digi-
talization can be visibly seen in films right from the
4
The media and entertainment industry is at an inflexion industry. Significant advancement in media devices over
point with digital being the buzzword. Rightly so, every the last decade ensures that the same content can now
segment within the media and entertainment ecosystem be accessed on a variety of media platforms. This implies
is getting impacted by digitalization in a significant new business models and revenue streams not only
way. The Government’s push towards digitalization and for content providers, but for a variety of new players
addressability for cable television by 2014, is expected becoming a part of the new media ecosystem.
to provide an impetus to DTH and digital cable growth.
With increasing importance of new media along with
Similarly, more sophisticated digital production and post-
customers increasingly adapting their preferences to the
production techniques coupled with the factors such
new media devices and technologies, the media and
as foray of big corporate houses across the film value
entertainment sector certainly is marching towards new
chain, growth of digital distribution and exhibition,
horizons of growth.
primarily through increasing penetration of multiplexes
are increasingly influencing the film segment in India.
Sandip Biswas,
Additionally, convergence between entertainment,
Director,
information and telecommunication is increasingly
Deloitte Touche Tomhatsu India Pvt Ltd
impacting India’s overall media and entertainment

Message from ASSOCHAM
It gives me immense pleasure that ASSOCHAM has

made significant contribution for the development of
Media & Entertainment sector in India. For the past few
years, it has been very actively involved in creating an
interface among the Media & Entertainment industry,
the Government and the end users through timely
reports, summits and recommendations.
The recent recommendations of TRAI for the implemen-

tation of digital addressable cable system in India will
witness a paradigm shift in the broadcasting sector and
unlimited growth potential for the industry.
The report on the Media & Entertainment industry is a

move in the same direction. We hope this report will
help the Government, industry and other stakeholders
understand and tap the opportunities that exist in
digitalization.
D.S.Rawat
Secretary General,
ASSOCHAM
6
Digitalization is the inevitable path forward, to achieve boost, as the world's largest market transforms digital.
better quality viewing and transparency in revenue The whole advertising world would also go through
earning and sharing. A true digital environ to give super- a metamorphosis with addressability being a reality,
lative experience will call for digital content, riding on opening up unconventional revenue streams.
digital platform, viewed on a digital screen.
In effect digitalization will be a win-win-win for
Content protection that can easily be integrated into an customer-operator-government. Digital film is another
end-to-end digital system can curb piracy, which leads aspect of the Digitalization era. If tape-less is the path
to huge pilferage. Convergent billing system as a part of forward for broadcasters then celluloid-less is the way
the solution will give healthier bottom-lines, by making ahead for the film makers. India like China has seen
the system leak-proof. Digitalized value chain would an Intermediary phase of digital discs being physically
also enable both central and the state government to transferred, to save the cost of satellite distribution.
earn major taxes, while creating an encouraging growth This "Village Cinema" model, though is a step ahead of
environment through consumer friendly tariff regime. analogue cinema, but, is not a full-proof model.
Recognizing the limitations and inability of the tradi- Digital cinema with satellite distribution is the only
tional cable to keep pace with the growing demand of effective way to fight piracy. It brings down the cost
the industry; Ministry of Information and Broadcasting of multiple prints and logistics of physical delivery.
has accepted TRAI's recommendation of ‘sunset of Simultaneous release in multi-locations helps in recov-
analogue transmission on the cable’ by December ering cost within a short turn-around time, reducing the
2014. The TV distribution system would be digital- inherent risk exposure. India already has four operators
ized in a phased manner within the given time frame. in this space.
Digitalization is expected to bring addressability into the
The speedy migration to digital is what the industry is
system, superior viewing experience and value added
looking forward to. The Government has a huge role to
services (VAS) which in effect would have a positive
play by framing the right policies.
bearing on the ARPU, which today is one of the lowest
in the world. The caterpillar is soon to grow into a colorful butterfly....
The popularity of addressability is well established by the Let's go digital!

huge uptake of DTH services by the consumers, serviced
by six operators. The potential of the volume of this
Sujata Dev
business is huge in terms of service and hardware sale.
Co-chairperson,
In fact it will give the global hardware market a great
Media & Entertainment Committee, ASSOCHAM

Television
Television is the ‘King’ While the media & entertainment market (M&E) in India
Television (TV) plays a major role in the flow of infor- is relatively small when compared with other countries,
mation and is equipped with the power to influence India has the third largest television market, in terms of
people, their beliefs and their opinions. Being a visual number of viewers after China and the US. TV continues
medium, its impact transcends the social and educa- to dominate the M&E sector followed by print and
tional background of its viewers; more so, in a diverse filmed entertainment. The television sector in India has
country like India, where TV dominates the Media & grown at ~12%p.a. (2007-2010) and is estimated to
Entertainment landscape as the preferred choice of continue this strong growth, owing to healthy adver-
entertainment. tising spends and increased penetration in semi-urban
and rural areas, mainly by DTH. By the end of 2011, the
A global Deloitte study on ‘Media democracy’ in 2010
industry is estimated to reach US$ 7.1 billion, a growth
across over 2000 respondents confirms this domination
of ~14% over 2010.
and throws some interesting insights. Media consump-
tion habits of consumers in Metro & Tier 1 cities in India Figure 2: Size of TV Industry in India
closely resemble the sophistication to that of consumers 10
in developed markets, like the UK and the US. On the
other hand, media consumption habits of consumers 8 8.0
in Tier II cities and rural areas are less sophisticated. 7.1
%
12.2
USD billion
However, TV remains a favorite media source for most 6.2

6
5.4
consumers across age irrespective of domicile: 92% of 5.0
4.5
the respondents rank ‘watching TV’ as their top media 4
source while 94% respondents consider ‘advertising on
TV’ as the most influential media source to impact their 2
buying decisions.
0
Figure 1: Extract of Deloitte Media Democracy 2007 2008 2009 2010 2011 E 2012 E
Survey 2010 Source: IBEF, Industry estimates

100%
98%
96% Television – Revenue Streams
95%
95% 94% 94% 95% 95% In 2010, subscription revenues contributed around 63%
92% 92% 92% to the total television revenues and stood at US$ 3.9
% of respondents
92%
90%
billion; while advertising constituted 33% at US$ 2.1
billion. The television content constitutes approximately
85%
85% 4% to the total television market at US$ 260 million.
Despite one of the lowest average revenue per user
(ARPU) for paid television in the world, TV distribution
80%
All 14-29 20-25 26-42 43-61 62-69 dominated the total Television revenue pie and saw a
Age group of respondent strong growth of ~15% in 2010, largely on the back of
rapid DTH expansion. TV Advertising which has a high
TV : Top Media Source
High Impact of TV Advertising on buying decisions contribution towards broadcaster’s revenue grew at
13% in 2010.
8
Figure 3: TV Revenue Streams dated media buyers have significant power over the
fragmented sellers. Hindi and regional channels garner
Television market segments
Total = US$ 6.21 billion, 2010 majority of the advertising spends, followed by movies
3
and news.
2
Television
1
content Interestingly, 9 of the Top 10 advertisers on TV are from

4% FMCG, and account for over 45% of TV advertising
volumes. Players such as HUL, Reckitt Benckiser and
P&G intensely compete with each other on televi-
sion advertising. Many other leading FMCG players
have also joined the TV advertising battle; given that
Television TV broadcasting has historically been an effective
advertising advertising vehicle for consumer products. Apart
33% from FMCG, sectors such as telecom, automobile, and
Television consumer durables have also joined the TV advertising
subscription bandwagon. Currently, these four sectors have almost
63% 3/4th share in the TV advertising spend pie.
Figure 4: Leading Advertising Categories on TV
Category 2009 2010

Source: IBEF, Industry estimates
% share % share
FMCG (HH) 30.7 30.0
FMCG (Personal Care) 15.0 15.6
i. Television Advertising
Telecom/Internet/DTH 11.8 11.1
TV gets the highest of advertising spends amongst all
FMCG (Impulse) 9.9 8.9
the advertising mediums. Post the economic downturn,
Auto 6.7 6.7
the advertising spends on TV has rebounded to a
HH Durables 4.7 5.4
double digit growth. First half of 2011 hosted two
BFSI 5.7 5.2
mega events, the World Cup and fourth Indian Premier
League, on the most popular sport in the country– Clothing/Fashion/Jewellery 2.8 3.3
Cricket. This gave a further boost to TV advertising. Corporate 2.8 3.3
On back of this robust advertising spends in 2010 top Real Estate 2.8 3.3
broadcasters like Star, Zee and Sun have increased Others 3.9 3.2
their rack rates. The advertisement spends on TV are Education 1.5 1.6
expected to grow at around 12-14% in short to medium Travel & Tourism 0.9 1.5
term and further it is expected that TV will continue to Retail 0.6 0.8
be preferred to other media for advertising. Alcoholic Beverages 0.4 0.6
Media 0.1 0.2
Advertising revenue contributes almost 2/3rd to
Source: Pitch-Madison, Edelweiss
Broadcaster’s topline. Top five media buying agencies
control almost 3/4th of the advertising spend in the With increased digitalization of the distribution system,
country. With almost 600 channels operating, consoli- new and niche channels will provide increased inventory
10
and options to the advertisers to reach their target direct-to-home (DTH) operators. The industry is highly
market. However, this increase in inventory would put fragmented with top five MSOs accounting for less than
pressure on the rack rates affecting mostly the smaller 1/3rd of the revenue. Due to the high fragmentation
players. Major broadcasters, however, on back of large and dominance of non-addressable analogue cable,
and established viewer base should be able to continue the industry suffers from under-reporting of subscriber
commanding a premium. numbers by as much as 75% and low ARPU realization.
Till 1990, TV Households (HH) were dominated by

ii. Television Subscription handful of channels transmitted by Government owned
Television subscription is the amount collected from Doordarshan (DD) through free-to-air (FTA) terrestrial
pay TV households in the country. In a typical scenario, signals. Liberalization and live transmission of First Gulf
the subscription amount is collected either by the Local war by CNN in the country saw immergence of LCOs
Cable Operators (LCOs) or the Direct-to-Home (DTH) distributing satellite channels through analogue cable
players depending on the type of pay TV connection the to the subscribers. The cable & satellite (C&S) HH made
end user has subscribed to. The amount collected by further inroads on the back of private channels launched
LCOs is shared between multi-system-operators (MSOs), by ZEE and subsequently by STAR. Currently digital DTH
the broadcaster and the LCO. In case of DTH, the addressable system is the torchbearer of growth in C&S
amount is shared between the broadcaster and the DTH HH. Due to technological advantage over incumbent
player. As per industry estimates, the number of LCOs analogue cable, DTH has been able to connect
operating in the country is 50,000+ while number of semi-urban and rural areas to the world of Indian
multi system operators (MSOs) is 7,000+, along with six Television channels.
Figure 5: Evolution of the Indian Cable and Satellite (C&S) Industry
140 K Soaps
dominate the 131
market 125
121
120 117
Number of House Holds (HH) in million
112
KBC, Aaj Tak 110
make their debut 103
100
Zee TV enters the 90 86
86
cable market
80 79 76
73 72.2
1980: Color TV 68 68.6
64 60.6
60 launched by 59
54
Doordarshan, Asian 50 52
48 DTH is
Games hosted by 43
40 launched
India (’82). 35
31
27 28
25
20 18.9
20 13
11
3.6 6.8 9.3 5
0.6 0.6 1.6 3.2
0 0.3 0.4
1975 1980 1985 1991 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Gulf war ‘90 telecast by CNN, DTH C&S HH Television HH

Mahabharata (‘88-90)
Sources: ddindia.gov.in, NRS, Industry Estimates, Deloitte Analysis

Despite being the third largest pay TV subscribers iii. Television Content
market, India, in terms of pay TV revenues is a distant Most channels produce their own television content.
ninth behind North American and Western European Given the increasing demand for differentiated content,
countries. Under reporting by LCOs and high competi- a handful of quality content creators have emerged
tion between the DTH operators has ensured low ARPU who sell television content to channels. This contributed
in the country. about 4% of the overall television industry in 2010 at
US$ 260 million, a growth of 12% over 2009. Due
Recognizing the limitations of the traditional cable, The
to increased number of channels, there is a need for
Ministry of Information and Broadcasting has accepted
differentiated and niche content; TV content segment is
the Telecom Regulatory Authority of India (‘TRAI’)’s
expected to surge further.
recommendation of ‘sunset of analogue transmission
on the cable’ by December 2014. The TV distribu- The last few years witnessed a near explosion of the
tion system would be digitalized in a phased manner. number of television channels in India. From the black
Digitalization is expected to bring addressability into the and white television broadcasting on a single national
system, superior viewing experience and value added television channel (Doordarshan) in 1980s to almost 600
services (VAS) which in effect would have a positive channels operating in India with almost 1/3rd channels
effect on the ARPU. operating in GEC (General Entertainment Channels)
space – Indian television industry has truly come a
Currently, India is the third largest digital market on
long way.
basis of subscribers mainly due to increased DTH push.
However, in terms of overall digital penetration it
remains extremely low. This presents a compelling case
for digitalization.
Figure 6: Top digital countries and India at end-2010
China 109.5 Finland 100%
USA 99.8 Spain 99%
India 37.1 Bahrain 98%
Japan 33.6 Kuwait 95%
France Croatia 95%

25.0
Tunisia 94%
UK 24.7
France 94%
Germany 22.5
UK 94%
Italy 19.3
Puerto Rico 92%
Spain 16.6
Saudi Arabia 91%
Brazil 13.4
India 36%
0 50 100
Digital TV HH in millions 0% 50% 100%
Digital TV HH penetration in %
Source: Digital TV Research Ltd Source: Digital TV Research Ltd, Deloitte Analysis
12
Figure 7: Evolution of TV Channels in India
2010: Over 500

channels already 2015: Annual growth
1992: Five new 2003: Entry of in India and rate for the television
Doordarshan was
channels introduced authentic news another 100 industry is projected to
the single national
by Hong Kong based channels such as waiting to go live be 12% over the next
broadcaster 2006: Two
Star TV AajTak and Star News five years
million digital TV
households
1980s
Ramayan and 1996: More than 2002-03: More international 2009: 394 TV channels in 2009.
2010: Launch of HD
Mahabharat were the 50 channels channels such as Nickelodeon, Non-news & current affairs
channels, Food First,
popular shows with available to Indian Cartoon Network, VH1, Disney TV channels grew from 0 to
Movie Now; Launch of HD
record viewership viewers were launched in India. The 183; news & current affairs TV
feed of Star, Zee channels
number of channels increased channels grew to 211
to ~ 100
Source: Deloitte Analysis
This explosion of channels and intensive competi- and Bollywood content has also pushed up the overall
tion started the scramble for differentiated and niche content cost for a broadcaster.
content pushing up the content cost. As per industry
estimates, typically non – fiction shows cost ~Rs 8-10 Television – Value Chain
lakhs per episode with costs rising at 15-20% per year. TV value chain consists of three main players, content
Reality shows on the other hand can cost anywhere creators, broadcasters and distributors. Content creators
from Rs 40-70 lakhs per episode for medium budget produce the TV programming which is aggregated by
to Rs.2.25-3 crores per episode for shows with high broadcasters and aired to the end user through the pipe
celebrity quotient1. Growing reliance on non-fiction providers i.e. Cable, DTH.
Figure 8: TV Value Chain
Content Creators Broadcasters Distributors End Users
• Content providers • Further, content is • The distribution • End users get access
operating independ- distributed through companies, using to the content after
Role in the TV
ently or through audio and video signals various technologies, paying a subscription
Value Chain
broadcasters who to transmit programs make the content fee to the distributor
re-package content to an audience available to audience
• UTV • Star Plus • Digicable • Consumer

• Balaji • NDTV • Hathway
• Sony • DEN
• Sri Adhikari Brothers • Colors
Television Network Ltd. • Tata Sky
• Zee TV
Key players • Big TV
• Creative Eye Limited
• Bharti Airtel
• Increased number of • 3/4th of advertising • Almost 75% of the • Consumers are experi-
channels are driving spends under Top 5 revenue is garnered by menting and open
growth and content media buying agencies LCO due to domination to new technologies,
Challenges/ production costs • Measurement tool for of non-addressable content and offers
Consideration • High volume and impact on audience analogue subscriptions
1
http://www.livemint. cost considerations needs improvement
com/2011/06/13235546/ might effect quality of • High carriage fee to
Just-Dance-may-be- programming distributors
costliest-re.html?atype=tp

i. Television Value Chain – Broadcasters & Content i. GEC (General Entertainment Channels)
creators a. National GEC:
The Indian television broadcasting segment currently has
more than six genres. Niche and differentiated content Colors in 2009 disrupted the position of the incumbents
targeted towards specific needs and tastes of consumers STAR, ZEE and Sony with the right balance of innovative
have primarily driven the number of genres at national content and distribution. 2010 saw an interesting race
and regional levels. between the four channels for the top slot. STAR was
able to remain in the top slot of most part of the year
with ZEE and Colors fighting for the second spot. Sony,
Figure 9: Viewership across TV Genres in India (%) which remained in the sideline for most of the year,
100
2.9
6.4
6.5
90 7.9
6
5.5 2.8
80 1.9
2.8 2.5
2.4 3.6
1.7
3.7 3.8
70 3.4
3.4
4
12
60
11.7
50
24.2 22.9 Others

40 Cable
Kids
Sports
30 Music : Regional
Music : (general)
News : Regional
20
31.7 News : Hindi
26.2 Movies : Regional
10
Movies : Hindi
GEC : Regional
0
GEC : Hindi
2009 2010
Source: TAM
14
has very recently been able to grab the second spot on The major attraction for players in this space stems from
the strength of KBC and Bade acche lagte hai. Major factors like political ambition and driving public opinion
channels are trying innovative strategies like introduction besides profitability. English news channels command
of weekend and late night prime time bands to attract the highest advertising rates due to their connect with
advertisers2. Here are some key highlights of emerging male urban audiences, while Hindi news channel garner
changes in the Hindi GEC space in the last calendar year: major share of total advertising pie.
• Rebranding exercise by STAR followed by ZEE to

iii. Music
connect with younger audiences
Few years ago, there were 12 pure music channels.
• Emphasis on non-fiction and Bollywood content to Today, the genre is experimenting between pure music
garner more eye balls and youth centric reality content. Mastii, a new channel
launched by Sri Adhikari Brothers relies mostly on pure
• International expansion by top channels
music content, as traditional players like Channel V and
• Successful regional channels being remade for MTV are positioning themselves as youth channels.
National GEC This has led to blurring of lines as channels try to retain
audiences.
• Increased deals for new Bollywood content to garner
more eyeballs
iv. Sports
Sports channels in India have increased manifold over
b. Regional GECs:
the last few years, primarily on the back of Cricket.
Regional GECs have emerged as key focus areas for
Traditionally, Cricket had been the major driver for sports
most of the players due to its connect with Non-Hindi
channels; however, other sports like football and F1
Speaking Market audiences. The number of operational
have also started attracting loyal fans although still in a
regional GECs is four times of national GECs. Regional
nascent stage.
channels are attractive for advertisers due to lower cost
of connect with the right audience. For the broadcasters 2011 saw two major cricketing events, the Cricket
the attraction is due to lower cost of content and world cup and IPL 4. With India winning the World cup,
distribution costs coupled with increasing advertiser’s sports channels garnered huge TRPs and advertising
interest. Regionalization has caught the eyes of most revenue on the back of India’s performance. However,
established broadcasters, catering to specific interests of as per reports, IPL 4 did not perform as well as previous
the viewers: editions of the event. All together both the events
together garnered large share viewers and consequently
• Tamil, Malayalam, Telugu, Kannada, Bengali and
the advertising pie.
Marathi are the key languages in the regional GEC
space
• Sun TV Networks has been a leading TV broadcaster v. Kids

in the South Indian television market After GEC, Movies and news, Kids channels have the
largest share of viewership. The channels are responding
• Infotainment channels like National Geographic and
well by incorporating increasingly vivid, superior and
discovery launched Telegu and Tamil feeds
local content. The year 2010, saw regionalization in this
National broadcasters are increasing their presence genre with national channels starting Tamil & Telugu
in the regional market while the regional players are feeds, while SUN starting a dedicated kids channel in
increasing their penetration through niche channels. Tamil. This genre has tremendous potential to grow
given that the target audience for the ‘kids’ channels
2
http://www.livemint. ii. News channels is not only kids, but also some viewers from the adult
com/2011/01/24232333/Star-
India has one of the highest numbers of news channels segments.
builds-weekend-prime-time.
html?atype=tp in the world with almost 150 channels in the genre.

Emerging Trends & Opportunities Content Repurposing
Traditionally TV content is aired in predefined timeslots
Increasing HD Channels
on Television within a limited period. However, to
Increasing digitalization and need for differentiation
sustain in a highly competitive Indian television industry,
coupled with penetration of LCD and LED screens
the content owners have to identify new revenue
would propel more channels to launch HD feeds. 2010
sources from the existing content. One of the immedi-
saw launch of two HD specific channels Food Food, a
ately deployable solutions could be repurposing of the
food specific channel and Movies Now, English movie
existing content. Repurposing can be done through
channel. Other big launch was by BIG-CBS, a joint
the conventional television media or through emerging
venture between RBNL and CBS, which launched three
media like smart phones, internet access through
channels, BIG Prime, BIG Spark and BIG Love targeted
desktops and laptops, 3G/4G enabled handheld devices
specific at urban audiences. The competition amongst
etc. The final aim of repurposing is make the content
broadcasters is expected to increase further with
available through cataloging and categorizing it in such
Government approving 75 licenses for launch of new
a way that it would be able to reach the right audience
channels or re launch of existing channels in HD after a
at the time and through the medium of their choice.
two year freeze. The major players who are launching
new channels and HD channels are Discovery, UTV, Fox,
ZEE and STAR amongst others.
16
The competition amongst broadcasters is
expected to increase further with Government
approving 75 licenses for launch of new
channels or re launch of existing channels in
HD after a 2 year freeze. The major players
who are launching new channels and HD
channels are Discovery, UTV, Fox, ZEE and
STAR amongst others.

Figure 10: Content Repurposing with Demographic refinement
Current scenario:
Traditional
one-time content
broadcast
Teleporting Editing Raw Content Tagged content

repository
New episodes ü • Content catalog

Old classic episodes • Content revamping
ü Content • Content distribution
management • Master data maintenance
Best moments in the series
system • Content security (DRM)
--- ü • Content retirement
• …
• Content management can be enhanced
to tailor content to various demographic
viewer categories Demography
Internet `
Payment gateway
Push Pull
Web Analytics Opportunity:
for demography TV/Home Desktop/ 3G / 4G NEW MEDIA CONTENT
refinement Smartphone REPURPOSING
Entertainment Laptop devices
Most of content can be repurposed based on conditions Some of the advantages of content repurposing are:
like content relevance, customer demography, customer • Extra revenue from the existing contents, in effect
preferences and push methods available to reach the increasing its shelf life
customer. This can be easily achieved by digitalization of • Customer specific contents
the content. Other major component of content repur- • Demography based targeted ads
posing are: • Utilization of user data generated for developing
• Tagging the existing content and mapping it with a targeted content
metadata. • Digitalization and tagging will ease content
management
• Using robust content management system to upload,
• Availability of content in non-broadcasting countries
deliver, update, archive and retire the contents.
and areas
• Managing accurate demography details of the
customers in order to deliver preferred content in both ii. Television Value Chain- Distribution
pull and push modes. DD covers around 131 million households through 1000 3
India–Broadcasting &
• Capturing analytics for monitor and refining the transmitters3. The cable & DTH covers little more than 10 Digital Media - Paul Budde
content usage. million households, making India the third largest pay Communication Pty Ltd, 2011
18
TV market. There are multiple organized players that are 1. Analogue Choke and under declaration
providing satellite signals directly to the homes. New Cable television came into existence in India in 1983
digital mediums are emerging – DTH, Digital Cable and when Doordarshan started its services on cable
IPTV led by DTH which has been the epitome to growth networks in rural areas of Rajasthan. In 1989 few entre-
in C&S HH through 2010. There are approximately preneurs setup small Cable TV Networks and started
37 million digital homes – 28 million out of these are local video channels showing movies & music videos
on the DTH platform. DTH players have been rapidly catering to a small neighborhood. Satellite televi-
expanding in the rural areas, with addition in more sion was introduced in India during 1991 with the live
subscribers in than urban. coverage of the Gulf War by CNN and spread through
the launch of channels from Zee and STAR groups.4
Digitalization is expected to speed up both on account
of DTH and digital cable. The LCO model was sustainable in the beginning, since
the number of channels was limited. However, with the
• An industry report by Digital TV research Ltd.
increase in number of channels and subscription charges
estimates digital market in India to be the 5th largest
(due to both increase in subscription rate & number of
in the world in terms of revenue by the end of 2015.
pay channels), LCOs started facing operational problems
• Another industry report by IDFC suggests, four times in terms of increase in investment requirement and
growth in digital homes to 86 million by 2015. This fragmented negotiation power with broadcasters. This
would potentially address the ‘under-reporting’ of led to the advent of MSO as aggregator & provider of
revenues earned by local cable operators. DTH would channel feeds. The MSOs also represented the collective
constitute 48 million homes (28 million in 2010) and negotiating strength of the LCOs.
cable would be 38 million homes (as against 9 million
Owing to lack of early regulation, ease of set-up and
in 2010)
rapid growth in C&S households, the number of LCOs
This indicates digitalization is underway and the servicing the country has increased rapidly. Currently,
television distribution is moving towards being more 50,000+ LCOs service the Indian C&S market. Due
organized. to this fragmentation, the cable network today is
dominated by analog technology, which is characterized
The Ministry of Information and Broadcasting recently
by low channel carrying capacity and little addressability.
gave a shot in the arm of digitalization by accepting
These factors have resulted in power being concentrated
4
“Restructuring of Cable TV sunset date of December 2014 for the analogue trans-
with the LCO, giving him the ability to garner
Services”, TRAI, July 15, 2007 mission on the cable.
Figure 11: Digitalization Sunset Dates
I&B Proposed Revised timelines

TRAI initial
Schedule recommended Final schedule by
Phase Areas Suggested recommendation
(28th January by TRAI (22nd I&B Ministry
(5th August 2010)
2011) February 2011)
Four Metros of Delhi,

Phase I 31st March 2011 31st March 2012 31st December 2011 31st March 2012
Mumbai, Kolkata and Chennai
Cities with Population more

Phase II 31st December 2011 31st March 2013 31st December 2012 31st March 2013
than one million
All Urban Areas (Municipal 30th November 30th September

Phase III 31st December 2012 31st December 2013
Corporation / Municipalities) 2014 2014
Phase IV Rest of India 31st December 2013 31st March 2015 31st December 2013 31st December 2014
Source: TRAI, Ministry of Information & Broadcasting, IDFC

approximately 75% of the subscription revenue, rest 20105. Carriage fee outgo depends on the negotiating
25% being shared between the broadcaster, MSO and power of the broadcaster which is based on the genre
the regulator. and pull of a channel. In case of a new channel or
niche channel carriage fee can make the business
On an average, the last mile operator can carry 60-70
almost unviable.
channels on his analog network due to technological
constraints versus approximately 600 channels available 2. Digitalization as long term solution
in the country. This demand-supply mismatch has Digital platforms like Digital cable, DTH, IPTV will
fueled the inorganic growth in distribution cost for the overcome the technological challenges of analogue
broadcasters in terms of carriage and placement fees. with increased carrying capacity of the pipe to customer
The broadcasters paid an estimated amount of US$ 333 while being addressable.
million (INR 1,600 crores) as carriage & placement fee in
5
http://www.afaqs.com/news/
story.html?sid=30603_Behind
+the+smokescreen+called+car
riage+fees
Figure 12: Strengths and Weakness of various TV distribution channels
Strengths Weakness
• No further special infrastructure requirement • Limited capacity to carry channels

• Poor picture quality
Analogue Cable
• Lack of addressability
• No interactive services
• High capacity to carry channels • High cost of infrastructure

• Voice and Data Carrying Capability • Placement of CPE
Digital Cable
• Possibility of Interactivity • High cost of laying new cable/fiber to reach
• Good picture quality subscriber (if required)
• Enhanced picture quality • Lack of return path

• Bypass the constraints of terrestrial transmission • High Cost of start up infrastructure
DTH
• Last mile connectivity directly to the home of the • Placement of CPE
subscriber through satellite • Effect of weather on transmission
Source: Deloitte analysis
On an average, the last mile operator can carry

60-70 channels on his analog network due to
technological constraints versus approximately 600
channels available in the country.
20
Digitalization of the cable network, which was perceived 3. Consolidation – the game changer?
as a long-term solution, has not taken off due to • Currently, the broadcasters are reeling from the effect
high cost of network upgrades & STBs, low consumer of high carriage fee and low subscription
education on the benefits and the failure of Conditional realization from dominant analogue distribution
Access System. Currently, most of the investment in this system. Although digital platforms like DTH have
sector goes towards buying the subscriber base from the partially been able to address the realization of
LCO, with little left for network upgrade. subscription revenue, they have also started charging
carriage fee due to transponder crunch. Recently
even Doordarshan has introduced carriage fee on its
Figure 13: Flow in Analogue and Digital systems
DTH platform6.
1 2 Teleport 3 Satellite
Content
Broadcaster
VPN Link
Encrypted signal
Encrypted signal
Non-addressable
analog Decrypted Signal
6 5 4
Receiver satellite and head-end
Consumer Local Cable
Operator
Home/ Subscriber Multi-system Operator
Encrypted Digital Addressable Digital

Signal Encrypted Signal
Current analog system Digital system
• To reduce their dependency on advertising revenue

• Despite the high cost of STBs, it is the DTH which
and address the effects of the current distribution
has made the highest impact in digitalization due to
6
http://www.livemint. system on the margins, STAR and ZEE have recently
com/2011/06/23015950/DD- quicker go to market, entry of organized players with announced merger of their distribution arms. This
introduces-carriage-fees-on. deep pockets and lower incremental infrastructure would have a profound impact on the industry due
html?atype=tp
costs than digital cable. However, the transponder to collective bargaining power of the top two GECs
7
http://www.livemint. crunch and high taxation can, in short to medium led channel bouquets. Already, TV 18 and Sony
com/2011/07/11002347/ term hamper the growth of DTH. have initiated talks to merge their distribution arms7.
OneAlliance-Sun18-in-talks-on. To counter the growing influence of broadcasters,
html • To realize the goal of December 2014 as sunset date, four big MSOs have also initiated merger talks8. The
the regulator would need to incentivize the digital coming year will be interesting to watch the results
8
http://www.livemint.
com/2011/07/15233349/Four-
platforms with tax rationalization and ease of and impact of these alliances on the TV distribution
leading-cable-firms-in-me.html foreign funding. landscape.

Figure 14: STAR and Zee content distribution deal
In the month of May, STAR and ZEE announced the merger of their distribution arms STARDEN
What did STAR & ZEE do? media services and Zee Turner into a new company Media Pro Enterprise. The new company would
distribute all the channels in STAR and ZEE bouquet consisting more than 70 channels.
• Due to increased bargaining power, the new alliance would be able to realize
Benefit of the alliance for - better subscription revenues from the cable operators
STAR & ZEE - reduce carriage fee for the channels in its bouquet
• Cost savings through synergies in distribution
• Aid rapid digitalization which would curb piracy, and introduce transparency in the value chain
• Carriage fee for other broadcasters not part of the alliance might go up
Potential impact of the • Force consolidation between other broadcasters’ distribution arms. As per industry reports, Sony
alliance on the industry: and TV 18 are in talks to merge their distribution arms The One Alliance and Sun18
• Force distributors to consolidate. As per industry reports, four big MSOs, Digicable, DEN networks,
Hathaway and Incable are in talks to form an alliance
Policy & Regulatory Framework

Improvements in the current taxation regime and increased FDI limits could aid the goal of digitalization in India.
Current Taxation Regime for Digital distribution players

Currently, the Digital Cable and DTH sectors is reeling under multiple taxation structure. The taxation applicable on
Cable and DTH, currently are as follows:
Figure 15: Taxation on Cable and DTH sectors
Taxation on Cable & DTH service
Service Tax: 10.3% of the subscription amount

Entertainment Tax On average 30% of the subscription amount
Cumulative tax burden Up to 40.53%
Taxes on Customer Premise Equipment (‘CPE’)
Customs Duty on Set Top Boxes (‘STB’) 5% of the Assessable value
Excise/CVD 8.24%
(i) VAT on Sale 12.5%
(ii) VAT on Rental of CPE (Right to Use) 12.5%
Entry/Octroi Up to 12.5%
Cumulative tax burden Up to 33.24%
Source: Industry Estimates, ASSOCHAM
22
Cable TV and DTH Services (which is essentially the shows only Rs.75 crores of service tax as being collected
transmission of programme (images, audio, video, etc. from the analogue cable sector whereas the 6 DTH
through radio frequency) is effectively being taxed thrice operators together are paying much more than Rs. 75
crores in service tax alone.
• As ‘Services’ by the Central Government
We believe a balanced approach is required to achieve
• As ‘Entertainment Services’ by the State Governments,
the goal of digitalization and incentivizing local
and
manufacturing.
• Also being taxed as a local service tax by assigning a
different nomenclature i.e. entertainment tax,
FDI limits for investments in Television Industry
thus making the cumulative tax as high as 40.53% India’s Television industry experienced a remarkable
upturn with the initial FDI flow in broadcasting in early
Similarly, cumulative tax on Customer Premise
1990s. Today, as the industry looks forward to embark
Equipment (CPE), 80% of which is imported and is
on the journey towards digitalization, the role of FDI
expected to stay that way is very high. This has made
remains as important as during the initial wave.
the entry cost very high for the consumers.
Figure 16: FDI limits in Television sector
Set Top Box (STB), one of the most important
Content Production
components for digitalization, is currently being
largely imported. As per the industry experts, local Content Production 100% (FIPB)
sourcing in short to medium term is not possible as
Broadcasting
there are no sufficient manufacturing capabilities in
India due to following reasons: Up-linking a Non-news
100% (FIPB) (for their
& Current Affairs TV
• No manufacturing capability & lack of Entertainment content)
Channel
readiness: Local manufacturing is in a nascent
stage and have limited designing and manufac- Up-linking a News
26% (FIPB) (FDI+FII) (for
turing capability for STBs especially for develop- & Current Affairs TV
their news channel)
ment of software which is the most important Channel
part of STB. With the present capability nearly Down linking of TV
100% (FIPB)
85% of components and chips will have to be channel
imported from outside India.
TV Distribution
• Import Duty: Government to incentivize local 49% (FIPB) (FDI+FII) (FDI
manufacturing has levied a Customs Duty of 5%, DTH
will not exceed 20%)
which is currently being absorbed by the sector as
Cable 49% (FIPB) (FDI+FII)
part of subsidy to the end consumer.
HITS 74% (FIPB) (FDI+FII)
The digital distribution sector which is already Source: Industry Estimates, Deloitte Analysis
subsidizing the STB for new customers, to provide their
As digitalization requires capital expenditure, FDI ceilings
services at competitive rates is facing longer payback
would need to be rationalized to meet the sunset dates
periods. Further, the high cumulative tax burden on
for digitalization. Ministry of Information & Broadcasting
services and equipment has become a major stumbling
9
http://techcircle.vccircle. has recently validated TRAIs recommendation on
com/500/ib-ministry-agrees- block for rapid Digitalization of the industry.
to-74-per-cent-fdi-limit-for- increase in FDI for DTH & IPTV sectors to 74%9. The
dth-iptv/ As an example of effect of addressable Ministry has send proposal to the cabinet to hike FDI
digitalization, uptake of DTH services by the consumers in MSO to 74%10. These recommendations are positive
“Govt moots hiking FDI in
10
has resulted in a clean and transparent revenue steps towards the objective of digitalization.
MSOs going fully digital to
74%”, Cable Quest magazine, generation medium for the government. By way of an
August 2011 example, last publicly available CBEC report in 2005-06

Way forward across the value chain, to be digitally adept to fully
garner these opportunities.
Television industry in India is on a transformation path.
Multiple channels in each genre competing with each • Consolidation in TV distribution: First half of 2011
other for TRP, increasing pay TV penetration, expanding saw two of the biggest names in TV (SUN & ZEE),
yet fragmented local as well as overseas viewership come together to deal with current anomalies in
of Indian channels, demand for more specific content the distribution system. This has led to a flurry of
– clearly set the stage for the next level of growth activities amongst other players in the value chain to
and transition for players across the television value consolidate. Second half of 2011 and 2012 will be an
chain. Content creators and broadcasters need to be interesting period to watch the effect of this alliance.
cognizant of the ever increasing demand for differenti-
• Need for improved measurement tools: An effective
ated content. While on one hand, new digital content
measurement system is the backbone of advertising
distribution platforms are emerging; on the other hand,
dependent industry. it has been well recognized
new formats of entertainment - computers, mobiles
that the current measurement system needs to be
and other handheld devices are gaining importance.
overhauled. Recently, a government committee has
Monetization of content through these new opportuni-
suggested increasing the sample size from the current
ties in existing platforms and new media platforms are
8,000 to 30,000 in next three years in both urban and
going to be key focus areas for the content owners.
rural areas.11
Some key trends and challenges that lie ahead are:
• Evolving viewer interests: The viewer today is not
• Digitalization of the TV distribution: DTH is leading the
only looking for new-fangled content but is also very
race for digitalization of the distribution system. The
quality conscious. From new movie broadcasts to
government’s announcement on sunset date coupled
reality shows with more and more celebrity appear-
with the right set of incentives and regulation, has the
ances, from IPL to EPL – the need for differentiated
potential to change the distribution landscape in the
and fresh content is on an all time high. Regional
county. Digitalization is not only expected to help the
viewers, both in India and overseas, are also gaining
players in the value chain to realize the true potential
importance
of their content, but also to cater to the unique
and diverse needs of the viewer when it comes to Players across the television value chain need a sound
entertainment. action plan to address some of these challenges and
harness the opportunities in a growing and high
• HD and 3D TV: LED and LCD Televisions are outselling
potential sector. While there isn’t any one-size-fits-all
the conventional televisions. Some broadcasters have
approach to realize the true potential of this sector,
sieged this opportunity to provide the subscribers with
there are some areas that the players may need to
high quality viewing experience. This year will also see
focus more on and prioritize. It would be important, for
an increase in number of HD channels as broadcasters
instance, to address the demand for regional content;
vie for larger share of viewers time spend on TV
to work closely with the regulator in developing trans-
entertainment. 3D although an exciting and popular
parent and more accurate techniques to measure view-
technology, thanks to Avatar, is still in a very nascent
ership; to influence the regulator for incentives to value
stage in evolution on TV.
chain players for digitalization; to influence stakeholders
• Technology led new opportunities: New platforms for across the value chain for controlling production costs;
reaching consumers and new technologies in content to evolve new content management system to increase 11
management are providing unique opportunities to the ubiquity of current content and to enhance value com/2011/01/10163541/Panel-
on-TRP-suggests-increasi.html
increase the shelf life of the content. To meet the delivered to the end-customer both in terms of varied
need of the right consumer at the right time through content experience (by content creators / broadcasters)
the medium of his choice, it is imperative for players and effective customer-service (by distributors).
24
Films
Indian film industry: Marching towards comple- box office. The industry is expected to grow by ~9%
tion of 100 golden years in 2013! p.a. till 2015 and reach nearly US$2.8 billion. This is
expected to be fuelled by the multiplex chains’ renewed
Indian film industry has come a long way – from the first
focus on expansion, increase in average ticket prices
motion pictures brought to India by Lumiere Brothers in
and expected higher quality content, as evident by the
the form of soundless short films in 1896, to India’s first
recent releases, namely ‘Ready’, ‘Singham’ ,’ Zindagi Naa
silent feature film King Harishchandra in 1913; to Indian
Milegi Dobara’, ‘Delhi Belly’ etc.,(These movies
filmmakers making films in English such as Delhi Belly.
have grossed > INR 80 Cr. as box office collections on
Rightly so, in 2013 Indian cinema completes 100 years!
an average)
Figure 17: Journey of Film Industry in India

1967, The first 1982, Doordarshan 2010, India ranks
1896, Lumière Brothers' 1951, First 70mm wide begins colour broadcast first in terms of
Chinematographe 1931, first talkie screen film is with Satyajit Ray’s
International Film 1960, K. Asif’s Mughal-e- films produced
unveiled six soundless made in India, shown in India Sadgati and
Festival held in Azam, the most expensive annually
short films Alam Ara Shatranj ke Khiladi
Bombay feature film in Indian film
history
1913, first feature 1940, Film Advisory 1959, The Film and 1961, Film Finance 1971, India becomes 1992, The government
film (silent), "King Board is set up by Television Institute Corporation setup to the largest producer of greatly liberalized the
Harishchandra" the Government of of India was estab- provide active support films in the world with requirements resulting 2013, Indian cinema
released India lished at Pune to parallel cinema 433 films in a significant increase completes 100 years
of foreign films released
Source: http://library.thinkquest.org/11372/data/film.htm in India
Film segment revenues in India comprise ticket Figure 18: Size of Film Industry in India
collection at the box office (both domestic and
overseas), home video (CDs and DVDs sale and on 2.8
3.0 ~ 9%
rent) and ancillary revenues that includes broadcast 2.2
2.6
1.9 2.1 2.3
2.0
syndication rights, mobile VAS and other film related 1.8 1.9
2.0
sales through new media. The film industry stood at
US$ billion
nearly US$2.0 billion in 2007. It grew by ~12% to reach

1.0
US$2.2 billion in 2008 but has been registering negative
growth over the last two consecutive years and stood
-
at around US$ 1.8 billion in 2010. The falling revenues
E
E
E
E
09
E
10
08
07
12
15
11
13
14
20
of the film industry in 2009 and 2010 can be attributed

20
20
20
20
20
20
20
20
to average performance of most films at the box office Source: Industry estimates
12
Source:http://articles. and closing down of single-screen theatres. In the first
timesofindia.indiatimes. half of 2011, fewer films were released due to the
com/2011-03-01/box- India has the world’s largest film industry in terms of
office/28643124_1_films- World Cup and IPL 4; though light-hearted comedies
number of films produced and the ticket size. In India,
release-world-cup like Tanu weds Manu12 managed to do well at the
there is a huge viewership for films. In fact, Bollywood

and cricket are considered to be two major religions for From the demand side, increasing mobile and internet
viewers in India. Over 1000 films are produced every penetration is significantly changing the consumption
year in more than 20 languages. Regional cinema – pattern of viewers in India as well as Indian diaspora
Tamil, Telugu, Malayalam and Kannada constitutes a spread outside India. A blockbuster like 3 Idiots was
large chunk of these. Fourteen million Indians go to the legally available on Youtube within 12 weeks of its
movies on a daily basis (about 1.4% of the population of theatrical release as a move to curb piracy.
1 billion) and pay the equivalent to the average Indian’s
day’s wages (US$ 1-3) for watching a film13.
Key revenue streams
A key recent policy initiative by the government has Figure 19: Film Revenue Streams
been granting ‘industry’ status to the entertainment
Total 2010 = US$ 1.8 billion
segment as a whole in 2001; allowing sector access to
institutional finance for new projects. The technology
of film-making in India is among the best in developing Total = US$ 1.4 billion
countries. Indian film industry provides employment 100% Overseas
Ancillary 11%
to nearly 6 million people. The industry is witnessing
considerable advancements in areas like technology, revenues 15%
marketing, exhibition with rampant digitalization
across the value chain, resulting in enhanced reach and Home video
6% Domestic
access to high quality content. As the number of digital 1
50%2 89%
theatres are surging, the future of Indian cinema looks
promising! Viewership of Indian cinema abroad has Box office collection 3
consistently been on an upswing, especially in countries 79%

such as Japan, Malaysia, Singapore and Middle East.
In fact concerted efforts have been seen to ensure
presence of Indian films in global film festivals
and markets. 0%
Box office collection
Though the impact of digitalization can be seen across
the film value chain, the level of impact varies at Source: Industry estimates
different stages of the value chain. Digital revolution
is visibly impacting the distribution and exhibition of The main revenue stream for new films released in
films in India. Production and post-production can also India is the box office collection, contributing about
leverage the digital wave by incorporating sophisticated 80% of the revenues. Home video segment, with a low
tools and techniques right from the concept stage till contribution to the overall revenues is getting further
the management of post-production pipeline. impacted by a combination of factors. Firstly, avail-
ability of pirated versions of music and films significantly
Increasing disposable income, growing popularity
impacts the CD / DVD sales. Secondly, most leading
of alternate delivery mediums, digitalization of film
general entertainment broadcasters have started
distribution and value added services like movie on
showing television premieres for most of the recent
demand through pay television are set to open up
releases within 4-5 weeks of their release. Technological
new revenue streams and business models for the film
advancements such as digitalization, onset of the
industry. Emergence of multiplexes has already improved
next-generation networks and availability of more
revenue reportage and average ticket price. Digital print
sophisticated devices to access media, are contributing
duplication costs about one-twelfth (nearly Rs. 5000)
to a growing chunk of ancillary revenues that comprise 13
http://geography.about.
as compared to the celluloid prints at Rs. 60,000. In
around 15% of the total film revenues in India. This com/od/culturalgeography/a/
addition to providing enhanced reach, digital prints also
includes broadcast syndication, internet, mobile and bollywood.htm
help in curbing piracy. Going forward, digital cinema
other new media revenue streams.
would enable worldwide release of films on the day one
like television broadcast, and shorten the
theatrical window.
26
Increasing disposable income, growing popularity of
alternate delivery mediums, digitalization of film
distribution and value added services like movie on
demand through pay television are set to open up new
revenue streams and business models for the film
industry. Emergence of multiplexes has already
improved revenue reportage and average ticket price.

Segments aging the same content across various platforms such
The value chain within the film segment comprises as home video, internet and mobile along with other
production, distribution and exhibition. Indian film conventional theatrical platforms.
industry experiences high level of fragmentation across Lately, digital TV distribution has picked up through
the entire value chain. A handful of players, such as Yash digital cable, DTH, IPTV. Also, film prints and music
Raj Films are only present across couple of parts of the libraries have gone digital. Digitalization across the
value chain. However, only very few players, such as distribution value chain has benefitted the industry in
Reliance Mediaworks are present throughout the multiple ways. It has enabled content repurposing across
value chain. platforms, making distribution of niche content feasible.
Also, the end viewer gets access to improved picture
and sound quality. Moreover, distribution of revenues
Figure 20: Value Chain of Films Ecosystem
across the value chain has become more transparent.
Production Distribution Exhibition
Indian film sector is known for producing the highest

number of films globally. Till a few years back Indian Digitalization is helping film-makers reach out to a wider
cinema was known for churning out low budget films audience. Availability of digital prints has significantly
(average investment of half a million dollars), being reduced the release window for each delivery platform.
very self-sufficient, with no co-productions and rela- It not only helps reduce the time to reach tier 2 and tier
tively lower number of international films coming to 3 cities through theatrical release but also helps realize
screens in India. Also financial transparency was not an higher value from ancillary revenue mediums such as
evident feature of Indian cinema till few years back. By home entertainment, internet and mobile.
2000, with the onset of big corporate houses entering
film production, organized multiplexes taking off, the Exhibition
theatrical segment in India is gradually moving from Figure 21: No. of Screens per million population
being fragmented to more and more organized. The film
industry has grown from half a billion dollars in 2000 to
nearly US$2 billion in 201014. India 12
There are over 400 production houses in India. Nearly United Kingdom 30
30 corporate houses are involved in the film produc-
tion business. There are three leading studios in Belgium 43
India – Eros, UTV Productions and Yash Raj Films that
together released 138 films in 2010, however they only Germany 45
contribute ~10% of industry’s total revenues. Indian
film segment is known to make too many films in a year Spain 46
as compared to Hollywood studios where four leading
Italy 52
studios released around 50 films in 2010 and accounted
for 70% of Hollywood’s revenues. Making the most 53
Ireland
out of a film released in India is seen as a challenge
due to a variety of reasons – lesser number of screens, 61
Denmark
low frequency of film viewing, and even too many films
produced in a year14! France 77
14
http://www.business-
Distribution United States 117 standard.com/india/news/
Digital distribution of content is enabling distribution vanita-kohli-khandekarcase-
across many platforms and ensuring new revenue for-making-fewer-films-
Source: Research on India /436522/
models. In fact, content is gradually becoming platform
[or screen] agnostic. Digitalization is helping in lever-
28
Indian cinema is undergoing remarkable changes from Indian films at international platforms such as Oscars are
where it began. The aggressive expansion of multi- concerns that need significant attention. These chal-
plexes, access to organized funding, foray of leading lenges also showcase opportunities that exist before
corporate houses into film production and exhibition, India’s film industry that completes 100 years in 2013.
popularity of digital cinema prints have been some
remarkable changes seen in the Indian film segment The Perennial Piracy Problem
over the last decade. Even though the number of Piracy is not a new challenge for the industry. Piracy in
multiplexes is on the rise, the average number of screens the form of physical CD sale and online download is
is extremely low in India at 12 screens per million as estimated to be around 40% to 50% of the film trade
compared to 117 screens per million in United States. and the film industry is losing Rs.300 to Rs.400 crore a
year due to piracy. Often pirated DVDs are seen much
Over the last decade, some phenomenal improvements
before film prints. India is among the top five countries
were made in the theatre infrastructure in India – state
in terms of piracy. Steps taken to curb piracy include
of the art studios, world class post-production facilities
setting up of formal alliances and associations such
and multiplexes across the country. Currently, there are
as Motion Pictures Distributor’s Association of India,
around 12,000 theatre screens in India15, out of which
Alliance Against Copyright Theft (AACT). Though these
approximately 1000 screens are multiplex. Multiplex
initiatives have taken concerted steps to curb piracy and
phenomena started in India in 2002, which in a span
spread awareness, government intervention is required
of the next 5-6 years improved box-office collections by
to set up targeted anti-piracy measures that help
3.5 times. Moreover, average ticket prices have gone up
effective enforcement.
twice and revenue leakages have improved especially in
the metros as a result of the multiplexes. Since theatrical
revenue forms major chunk of a film’s overall revenue, Lack of high-quality content
multiplexes have clearly been a boon to the film While film-makers in India attempt to provide something
producers. And this is not all. Theatre chains are also new and refreshing to viewers, the quality of content
investing to further strengthen their pan-India presence. produced in 2010 has not been successful in attracting
Cinemax plans to invest up to US$ 21 million in opening viewers. With viewer expectations in terms of quality
and acquiring more digital screens by 2013. PVR and variety and quality of content growing further, it
Pictures also plans to invest US$ 21 million by 2012 for becomes an imperative for Indian film makers to be
distribution and production of films. Based on this, the cognizant of not only attracting viewers in India and
multiplex screens in India are expected to nearly double outside India but also make Indian cinema globally
by 2015. Increasing popularity of digital prints (about competitive at international film festivals.
50% on an average for a new release as compared to
about 10% some years back) is another advantage for
Lack of quality infrastructure as well as training
the film producers, both in terms of cost per print as
institutes
well as the flexibility and control over number of
Big corporate houses such as Reliance Mediaworks are
prints required.
spending on setting up of state-of-the-art film studios,
but with the old studios getting demolished, the film
Key challenges and opportunities infrastructure in India is far from adequate. At the same
The sector faces some significant challenges. The time, there is a shortage of world class institutions to
problem of piracy has been a pain-point for years provide training in film and media.
leaving players across the value chain with low realiza-
tion per print. There is a shortage of overall support
Low screen penetration
infrastructure – lack of adequate and world-class
According to a recent study on cinema in India, there is
production facilities, trained manpower, training insti-
a requirement of more than 20,000 screens as against
15
http://www.business- tutes to meet the skill gap. From the demand side,
standard.com/india/news/
the current figure of about 12000. The multiplex
viewers face shortage of high-quality content being
vanita-kohli-khandekar-walt- revolution has started and with government’s move to
disney-utvthe-quest-for-size- produced by Indian film-makers. Also, challenges such
allow 100% FDI on the automatic approval route, the
/444515/ as low screen penetration and average performance of
multiplex penetration is expected to improve further.

30
Growing viewer base outside India, but lack luster Way forward
appeal at international film festivals The film segment in India saw declining revenues for
Indian diaspora spread globally helps Indian films two consecutive years, but is expected to recover the
succeed in international markets. However, it has been growth over the next five years to reach ~$3 billion
observed that most of the films that have performed at a growth rate of around 9%p.a. Today, multiple
exceptionally well are limited to films with leading star factors are redefining the Indian film industry with every
cast or are based on Indian culture showcasing Indian single function and activity related to the film domain
festivals and customs. Films like Dilwale Dulhaniya Le becoming more sophisticated and well-defined. Digital is
Jayenge, Raja Hindustani, Jodhaa Akbar and My Name is rightly the buzzword for the coming decade.
Khan have been received very well by the international
While on one hand, there is a need for the Indian film
audience. Though such films have successfully fetched
industry to embrace digitalization to reap the opportuni-
the global audience, performance of Indian films at
ties created by advancing technologies; on the other
international films festivals has not been competitive to
hand, the changes being seen in the industry are not
global cinema.
only in terms of better visual effects, newer distribution
channels or use of the internet, but also the viewer’s
Shift to alternate distribution mediums appetite for improved content itself with better story
With the growing popularity of cable and satellite lines and screenplays. The viewers of Indian cinema
syndication and other new media platforms, small to today transcend much beyond the Indian sub-conti-
medium budget films are expected to increasingly shift nent. Films like Ra.One are all set to target audiences
towards these mediums as opposed to conventional abroad. Indian film-makers need to leverage the global
theatrical release that entails huge marketing and audiences to make Indian films far more appealing
distribution expenditure. Moreover, social networking to the international market as well as gain higher
sites are also emerging as an effective marketing and mindshare at the international film festivals.
promotion tool for films, enabling high level of involve-
ment and interaction with the viewer.
With the growing popularity of cable and satellite

syndication and other new media platforms, small to
medium budget films are expected to increasingly shift
towards these mediums as opposed to conventional
theatrical release that entails huge marketing and
distribution expenditure.

Animation and Gaming
Animation, briefly described, is rapid display of time Online Games: Games played over the internet. The
sequenced frames to create an illusion of continuous platform can be through PC, Mobile or Console.
movement. The sub-segments within Animation and
Gaming may be defined as follows: Animation
Indian animation entertainment industry is a highly frag-
mented industry. Indian players are primarily involved
Animation
in the labour-intensive production and post-production
Animation Entertainment: Custom animation develop-
activities, as a ‘Service Provider’ (Refer Fig. 23), working
ment for television, movies, or DVD.
on the revenue model of ‘Work-For-Hire’. This means
Visual Effects (VFX): Special effects development used that most skill sets are at the lower end of the value
mainly in movies and ad productions. chain. Though there are a few firms offering world-class
capabilities for India to emerge as a global animation
Custom Content Development: Development of
hub, there is a need to upscale these capabilities across
custom content catering to multiple segments, including
a wider section of the industry by focusing on owning
Corporate, Higher Education etc.
the IP.
Content development and pre-production activities

Figure 22: Animation & Gaming Industry Segments
are nascent in India, both for the domestic and the
Animation and Gaming

Industry
Animation Gaming
Animation Visual Effects Custom Content

PC Mobile Console Online
Entertainment (VFX) Development
Gaming
outsourcing market. However, this is expected to see
PC Games: Games played on the personal computer;
some momentum owing largely to corporate
can be single-player or multi-player.
e-learning programs.
Mobile Games: Games played exclusively on the mobile
Content requirement for corporate e-Learning is
handset. Currently consists of mostly single-player short
expected to grow at 11% per annum (2009-13). This
games.
requirement for content, added to the inclination of
Console Games: Games played on dedicated gaming corporate in the US to outsource custom content devel-
consoles. These boast of better graphics, and controllers opment is likely to be a future opportunity for custom
than other types of games. content development companies in India.
32
The Indian Animation
industry was worth US$ 511
million in 2010 and is
expected to grow at CAGR of
23% to reach US$ 961
million by 2013.

Figure 23: Animation Entertainment Value Chain
IPR and Marketing

Pre Post
Content Production Distribution and
Production Production
Development Exhibition
• Identification of • Preparation • Development • Final sound • Promotion,

an existing IP or of the script, of specifica- recording, color distribution
generation of a character tions regarding editing, testing video DVD
new idea the character,
Activities • Involves asset design, story- background and special release and
procurement, board layout paint, inking and sound effects cinema and TV
fund scheduling, development painting and screening
and integration visual effects
of resources
Percentage ---
5% 10% 45% 30%
Effort
Outsourcing Emerging Emerging High Medium ---
Domestic ---
Emerging Medium High High
Source: Nasscom Industry Report 2009, Deloitte Understanding
Figure 24: Animation Entertainment Service Models
IPR and Marketing

Pre Post
Content Production Distribution
Production Production
Development and Exhibition
Content Creation Service Provider
Integrated Studio – Offshore Facility
Co-Production
Integrated Studio Owned Content
Source: Animation & Gaming Report, Secondary Research
34
Size, Growth & Segments Table 1). This trend is expected to continue, which
Figure 25: Animation Industry Size, Growth & Seg- bodes well for the animation entertainment industry
mental Split in India.
Indian Animation Market (USD Mn) Animation Industry : Split across segments
961
23%
631 16% Animation VFX
511
Animation
24% 20% Entertainment
64%
177
Custom content
development
2005 2010 E 2011 P 2013 P
Source: Nasscom Industry Report ,Deloitte Analysis Source:Industry Research

3
2
1
The Indian Animation industry was worth US$ 511 Figure 26: TV channels dedicated to animation
million in 2010 and is expected to grow at CAGR of and kids
23% to reach US$ 961 million by 2013. No. of TV
Year Channels Name of channels
Recent Trends and Growth Indicators Launched
The Animation Entertainment Industry in India is 1995 1 Cartoon Network
expected to be shaped by trends and growth drivers 1999 1 Nick
in both domestic (Contribution: 25% in 2009) and Hungama, Pogo, Toon
Outsourcing (Contribution: 75% in 2009). 2004 5 Disney (Jetix), Disney
Channel, Animax
Animation gradually comes of age 2007 1 Chutti TV
For animation to achieve the same level of success in Spacetoon, Khushi TV,
2009 3
India, as in the west it requires an audience appeal not Chintu TV
just restricted to kids. Animation has gradually come of Chitram TV, Baby TV16,
2010 3
age from its perception of being only for kids. Increasing Discovery kids17 (expected)
viewership of animation content among adults as a
Moreover, the share of kids’ genre in overall TV viewer-
percentage viewership of kids’ channels indicates,
ship has been rising significantly, which indicates the
substantial increase in viewership for the 14+ age group
growing demand for animation content in India.
category. Increasing popularity of animation content
16
http://articles.economictimes. among adults is expected to be a key propeller for the
indiatimes.com/2010-06-30/
news/27598242_1_new- domestic animation entertainment industry. Global channels cater to original Indian content
channels-entertainment- The demand for original Indian content has been
channel-general-entertainment increasing over the years. Channels such as Turner
Growing Focus on Kids’ Genre
network that hold a substantial market share in Kids’
17
http://www.business- In 2010, 2 channels for kids were launched. The number
standard.com/india/news/ channels have forayed into the live action original
of TV channels dedicated to animation and kids has
discovery-to-launch-5-more- productions space in India with iconic shows like M.A.D
channels/435315/ been steadily increasing in India (Refer Figure 26).
and the animation series such as Kumbh Karan.

This focus on originally produced content has been growing popularity of animated characters is expected
witnessed across kids’ channels in India. to boost the industry. The reasons can be attributed to
making cost effective commercials or doing away with
the clutter of celebrity overkill. Animation commercials
Comics’ Players: Increasing scope for character
cost far lower compared to advertisements with celebri-
licensing
ties and establish connect with children and adults alike.
The rising number of TV channels, greater accessibility
They relate to audiences irrespective of language and
to Internet, proliferation of mobile devices that leads
cultural barriers. Further, in some cases animations are
to the popularity of video and gaming content is set to
also used to increase the visual appeal of the advertise-
offer a huge potential for the animation and character
ment or as a part of the concept of a commercial.
licensing in India. Hence, Comics’ players are looking
to monetize their content libraries through other new
media mediums in addition to TV and Film. Recently, Figure 28: Examples of animation used in Indian TV
Diamond comics joined hands with License India, a advertising
licensing solution provider to market its famous charac-
ters to be used in animation films marketing campaigns.
Indian publishers like Diamond, Raj, Vimanika and

Chandamama have announced plans to enter the movie
space with their famous comic characters. Some of key
events in this area were:
Figure 27: Increasing influence of comics’ players in

the animation industry
Diamond Comics considers the launch of a TV

channel with shows based on some of its popular
characters in animated versions, including Chacha
Chaudhary.May also look at promoting and selling
them on other digital platforms like Internet, televi-
sion, Direct-to-Home (DTH) and mobiles
Large production houses are also buying rights from

these publishers to produce animated TV series - Big
Animation Pvt. Ltd has bought rights from publishers Animation Movies for Theatres
of Chandamama to produce an animated TV series The release of ‘Avatar’, a movie that is a hybrid of live
action and computer generated animated characters
In Oct 2008, Toonz Animation entered into a part- became the largest grosser in India indicating that
nership with Chandamama India to produce a Indian audiences are interested in high quality animated
full-length animated feature film based on a prime content. The animation film industry sighted the trend
property from the library of Chandamama and a number of animation films were made and
released to capitalise on this interest. However, Indian
The dog-masked popular superhero from Raj Comics
animation films did not live up to the expectations set
is set to be developed into a movie by film maker
by their Hollywood counterparts.
Anurag Kashyap.
As the country moves out of recession and Indian
audience matures, animation movies in the pipeline are
Animation in TV Advertising
expected to see execution. (Refer figure 29 for major
The Indian TV advertisement industry size is expected to
movies released in 2010 and 2011)
increase to US$ 3.3 billion by 2013. This, coupled with
36
Figure 29: Animation movies released in 2010 a post-production company that offers visual effects
Release services, has worked in globally acclaimed films such as
Movie Name Produced by The King’s Speech18.
year
Toonpur Ka Kumar Mangat, Growth in e-learning to drive custom content devel-

2010
Superhero Krishika Lulla opment
Growth in e-learning market has been rapid in the
Kanipakam
Luv Kush – The past few years and is expected to continue going
2010 creations, RVML
Warrior Twins forward. However, the market is now expected to be
Animations
more mature and stable. Major markets for e-learning
Maya globally are the US and western European nations across
Ramayana the Epic 2010 Entertainment both educational institutions and Corporate Sector
limited for training purposes. Currently, e-learning initiatives
amongst mid-sized firms and SMEs are low. However, a
Kuchi Kuchi Hota Hai 2011 Karan Johar
large number of these small and mid-sized companies
are expected to show willingness to adopt e-learning,
Alpha and Omega 2011 Crest Animation
the main drivers being cost savings and wider reach. As
Soundarya the corporate sector expands its distribution and adopts
Sultan 2011* IT increasingly, demand for custom content develop-
Rajnikanth
ment is expected to increase. Most of the increased
* Under Production demand is expected to come from the small and
medium enterprises (SMEs).
Increased usage of VFX in domestic movies
There is a rising demand for visual effects in most Indian Animation Entertainment Industry:
mainstream films in India today. VFX has been used in Overall Outlook
live action films to increase the visual content in the The Indian animation industry which set out as an
screen. Films such as Patiala House, Tees Maar Khan, No outsourcing hub to global companies is poised to
One Killed Jessica, and My Name is Khan etc. have used witness a significant growth, both in terms of revenue
VFX to improve shots. The use of VFX in live action films and up scaling in the value chain. Increasingly, players
has seen a steady and significant growth over the years. are developing original characters, lines and voices.
Many live action films today include a VFX sequence and
Further, Indian production houses are also slowly
the sheer duration of these screen shots has also risen
moving up the value chain. Where earlier only post-
substantially. Further, owing to its large domestic film
production work outsourced from Hollywood studios
industry India is bound to find increasing opportunities
used to be sent to India, Indian studios are now looking
to use VFX in the domestic market.
to create their own IP through innovative business
models. Also, with the popularity of 3D, a large amount
Cost advantages drive increased domestic and out- of 2D-to-3D conversion is being done by indigenous
sourced VFX studios.
Usage of VFX in broadcast helps in significant reduction
As the industry gains expertise and tries to move up the
of costs. Its usage brings down the set creation costs
value chain, it faces a few daunting challenges, which
for a broadcast by almost 60-65%, particularly for
it needs to overcome to come close to realizing its
mythological shows. It also helps in costs savings of
potential:
30-40% for commercials. The whopping success of VFX
extensive movies at the box office overseas is expected
to drive the VFX usage in other movies as well. This Skilled Manpower
coupled with the cost savings is expected to lead to A large English-speaking talent pool with a wide base
18
http://www.telegraphindia. greater outsourcing. Indian studios are increasingly of technical skills is the need of the hour. Similar to IT
com/1110605/jsp/7days/
receiving work for quality western productions. Pixion, Services, skilled manpower is the basic requirement for
story_14073237.jsp

producing quality animated content. As per Nasscom Gaming Industry
Industry Report 2009, manpower requirement for Indian Gaming Industry Overview
animation in India is expected to grow from to 29,500 The Indian gaming market is worth approximately ~ US$
by 2012. However, lack of employable resources poses a 198 million in 2010 and expected to grow to ~ US$ 467
large constraint, which is primarily due to low awareness million by 2012, at CAGR of ~53%.
of animation as a career and non-existence of a
standardized and quality curriculum across the handful Figure 30: Indian Gaming Consumer and Services
of institutes in India. Market (USD Mn)
Limited focus on original content 53%

The industry at present is focused on being specialists in
delivery. Typically, pre-production (including concepts,
123
designs, and pre-visualization) and post-production 25%
(music, sound mixing, and final editing) are considered 53
to require “global cultural sensibilities,” and are either 343
29 145
handled in-house or outsourced to firms in Western 35
markets. However, as the industry continues to gain 2005 2010 E 2012 P
experience and expertise along with doing outsourced
Consumer Services
work, it should also focus on creating its own content.
This could be spread across formats such as television Source: Nasscom Industry Report 2006, 2009
series, direct-to-DVD or full-length films both for the
domestic as well as the global market. Increased focus Gaming consumer market in India comprises revenues
on the domestic market will help develop skill sets from:
required for original content development. • PC Gaming: Sale of CD-based gaming software
• Mobile Gaming: Sale of software through mobile
downloads
Low Domestic consumption • Console Gaming: Sale of hardware e.g. gaming
Domestic demand for animation is restricted to select consoles
animation movies that have achieved box office success • Online Gaming: Advertising and subscription of online
and find use in advertising. Given the immense competi- games
tion in the global markets it is important that companies
set their sights on the domestic media. Certain Gaming services market in India comprises:
companies such as the Toonz group in addition to being • Outsourcing development services
involved in projects set for the global stage are taking • Ancillary services such as voice and email BPO support,
steps in this direction by making efforts to develop porting, testing, etc
local original content. They have made efforts to cater Gaming industry in India is a fragmented industry, with
to the Indian Diaspora and Bollywood fans around the several players present across the value chain. It is the
world by casting Bollywood actors in animated formats. development and post development activities (Refer
TV channels are not far behind and are increasingly Fig.31) which are usually outsourced. Concept creation,
focusing on indigenous content both at the national feasibility testing and pre-production are still limited to
and regional levels. However, what needs to be seen only the online and mobile platforms in India, that too
is the sustained increase in domestic consumption in done only by a handful of players.
the medium term to inspire content creators towards
original content for the domestic market.
38
Figure 31: Gaming Value Chain
Concept Pre Gold

Post Production Final testing/ Consumer
creation & Production Development release
& testing porting
feasibility testing
• Involves concept • Creation of story • Programming • Involves finalsound • The final build is • Game made
creation board 3-D Pre - • 3-D Art Asset recording, color delivered to the compatible with
• Publisher validates the production, Character Building: This testing and special publisher various graphic cards
concept and identifies drawing includes character sound effects / mobile handsets (for
the market opportunity • Game engine decision modeling, set mobile games)
(for console, PC and design & modeling,
online) texturing
Source: Nasscom Industry Report 2009
Figure 32: Presence of Indian Gaming Players across the Value Chain
Concept Pre Post Production

Final testing/
creation & Production Development &
porting
feasibility testing testing
Console
Mobile
PC
Online
Note: For Mobile, PC, and Online Games, concept creation and
feasibility testing and pre-production are done only for domestic clients Limited Presence
while the other steps are done for both domestic and overseas clients.
For Console Games, all stages except content creation are done only for
Moderate Presence
overseas clients
Source: Nasscom Industry Report 2009

No Presence

Integrated companies that have presence in the in urban areas and is expected to continue its growth,
complete gaming value-chain – from conceiving a given the large scope for further penetration in rural-
gaming idea, publishing it, developing the complete India. Further, about 15% of Internet users in India
game and distributing it across geographies are again access the internet through their mobile handsets. As
limited to a few companies, that too only for mobile exposure to mobile phones increase, higher downloads
gaming. using these are expected. In addition, the introduction
of 3G is likely to make the consumer demand more
gaming content given the superior user experience.
Size, Growth & Segments
3G subscriber numbers are projected to cross 10720
Among the various segments consoles are the largest
million by 2015. Such a demand would help building
contributor to gaming consumer revenues, while Mobile
an ecosystem for the development of mobile games.
and Online Gaming are the largest contributor to
Also, higher demand for smartphones is driving the
gaming service revenues.
demand for mobile games as well. Further, leading
However, one needs to note that a large % of the Indian gaming companies, such as Zapak, ibibo,
consumer revenues is shared with international players and Indiagames are launching mobile based gaming
viz. Sony, Nintendo, Microsoft, Electronic Arts, etc. platforms to provide users access to multiple games in
Moreover, the margins involved in this distribution addition to incorporating social networking functionali-
business are very low. This high revenue share model ties with gaming.
applies to PC and Online Gaming as well, where Indian
presence in creating games is limited.
Telecom operators: Declining ARPU and Need for
Differentiation
Figure 33: Consumer and Services revenues across It can be observed that India has considerably low
type of games in 2010 (US$ Million) non voice revenues as a percentage of overall mobile
revenues. Further, the increase in competitiveness
6 19
between operators as well as handset manufacturers com/2011/02/23223924/
has resulted in a greater need to differentiate them- Internet-penetration-expected.
selves from their competitors through mobile value html
19
82 added applications and services. Moreover, as the ARPUs 20
http://www.business-
41 of telecom operators have been declining Telcos are standard.com/india/
14 news/3g-users-expected-to-
15 looking forward to mobile value added services as an
14 8 cross-107-mn-mark-by-2015-
alternate revenue source. Mobile gaming is one of the pwc/105642/on
Console Mobile PC Online important categories in the non SMS services space.
Consumer Services Figure 34: Non –Voice Revenue (% of Overall

Mobile Revenues)
Recent Trends and Growth Indicators
Distribution business (low revenue share, low margins)
is not a significant contributor to growth of gaming USA 30
industry in India. Hence, in this report, trends related
to consumer business of consoles or distribution of China 27
games of foreign players has not been considered. Both
Japan 27
domestic and outsourcing trends and growth drivers
have been analysed to understand the future of gaming UK 21
market in India:
Germany 21
Mobile Gaming: Growing mobile subscribers & Intro-
duction of 3G-enabled handsets Average 23
In the end of 2010 while there were only 10
India
80 million19 Internet users, there were 752 million cell
phone subscribers. Mobile phone is widely owned today Source : Deloitte Analysis ; Deloitte ASSOCHAM MVAS paper
40
Mobile gaming is expected to significantly grow on ac- among the three, not only in India but worldwide as
count of this supply driver: mobile entertainment being well. Growing MMORGs is expected to boost the online
considered as a means to differentiate and a channel for gaming in India.
increased revenues per user.
Emerging Channels to promote gaming

Online Gaming Social networking sites are likely to increase online
Increasing internet penetration in India, introduction of gaming. It is estimated that globally, Zynga, the leading
Broadband Wireless Access, growth in Massive Multi- game developer for social networking sites has over 230
player Online Role Playing Games (MMORGs), are the million21 monthly active users playing its games through
emerging channels to promote gaming and increased social networking sites. These games include FarmVille,
customisation are expected to grow the online gaming Treasure Isle, Zynga Poker, Mafia Wars, YoVille, Café
market in India significantly. World, FishVille and PetVille. Zynga games are available
on Facebook, MySpace and the iPhone. Further, DTH
service providers are also offering games to their
Increased internet penetration and Broadband Wire-
subscribers.
less Access Introduction
At the end of 2010 there were 80 million Internet
users and 11 million broadband users in the country. Customisation and advanced gaming
The introduction of Broadband Wireless Access (BWA), Gaming in India is gaining market owing to content
would lead to increased broadband penetration and localization. T20fever.com launched by Indiagames and
facilitate playing of online games in India. ICC World Cup 2011 game launched by Zapak are such
examples.
Growing trend of MMORGs

All types of games in India can be broadly classified into: Indian Gaming Industry: Outlook
Single Player Single Session Games, Multi Player Single Indian Gaming industry is expected to witness large
Session Games and Multi-Player Online Role Playing changes, primarily in the domestic market. Introduction
Games. Multi-player games are expected to repeat their of 3G and telco’s focus on value added services are
success of other developing economies such as China in expected to lead to exponential growth for mobile
countries like India. There is greater stickiness amongst gaming in India. This will also lead to the Indian gaming
consumers in the case of MMORPG games, as they players moving up the value chain and getting involved
attach to the characters and also due to the community in end-to-end game development and publishing. As
that develops around such games.Currently in India, the Indian market matures and gains expertise, Indian
21
http://www.siliconindia.com/ single player games dominate the market with 80% of players will gain the confidence of their foreign counter-
shownews/Success_of_social_ the active Internet using gamers playing such games. In parts and attract a greater share of the outsourcing pie
networking_games_inspires_
game_developers-nid-66641-
2009, only 27% of Indian online gaming populace was and co-publishing deals.
cid-2.html playing MMORGs. However, it is the fastest growing

However, realizing the potential of the Indian gaming testimony to the growth of the industry from strength
industry is constrained by factors below: to strength there is an increase in the number of
co-production deals, an increased focus on development
of original content and own IPs, rise in the setting up
Lack of Skilled Manpower and Budget:
overseas offices and greater recent investments from
Lack of employable manpower, primarily arising out of
Private Equity / other funds. These factors emphasize
the lack of high quality institutes coupled with limited
on the industry’s commitment to move up the value
budgets impedes the development of PC / console
chain. However, some short term and long term chal-
games in India.
lenges remain. Regular availability of employable talent
needs to be ensured for the industry’s potential to be
Infrastructure: realized in the long term. Telecommunication infra-
The existing infrastructure in India in terms of limited structure needs to be strengthened and data penetra-
bandwidth limits the ‘in-home’ playing of these games. tion increased to sustainably tap the growing market
However, the advent of 3G and later BWA is expected to within India. These coupled with Government incentives
overcome this shortcoming. to boost this industry will help it take wings from its
existing nascent status.
Grey Market:
The presence of a strong grey market selling pirated
games is impacting the console gaming market in India.
The pirated gaming market is thriving on the back drop
of high duties on imported games which make the
purchase of original versions unaffordable for
Indian consumers.
FDI Policy Framework

The animation and gaming sector, which is part of the
entertainment industry, enjoys a liberal FDI regime which
allows 100% FDI in the sector through the automatic
route, provided it is in compliance with RBI guidelines.
Hence, this has and is expected to result in continued
investment in the Indian animation and gaming space
by foreign investors, either in the form of partnerships,
strategic investments or private equity/ venture capital
funding.
With a favourable FDI regime, the deal activity is bound

to increase in future as India moves towards tapping
further indigenous opportunities in this segment.
Indian Animation & Gaming Industry:

Future Outlook
As global companies are betting big on the India’s

animation, VFX and gaming industries , India is
taking steady steps to live up to this expectation. As a
42
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Acknowledgements
Deloitte Assocham
Sachin Sondhi D S Rawat

Senior Director and Leader Secretary General
Strategy & Operations Consulting ASSOCHAM
Mobile: +91 96195 98972 Email: d.s.rawat@assocham.com
Email: sacsondhi@deloitte.com
Sujata Dev
Sandip Biswas
Co-chairperson
Director
Media and Entertainment Committee, ASSOCHAM
Strategy & Operations Consulting
Mobile: +91 98923 31499
Mobile: +91 99300 09225
Email: sujataiptv@gmail.com
Email: sandipbiswas@deloitte.com
Gunjan Gupta
Manager
Mobile: +91 99200 31190
Email: gunjangupta@deloitte.com
Nishant Jalan
Manager
Mobile: +91 98197 01976
Email: nijalan@deloitte.com
Anupriya Nayyar
Senior Consultant
Mobile: +91 98208 25275
Email: anayyar@deloitte.com
Giridhar Athmanathan
Consultant
Mobile: +91 96206 77796
Email: giridhara@deloitte.com
44
Notes
46
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M&E - Whitepaper For Assocham Draft v2

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Media & Entertainment in India

Digital Road Ahead

Message from Deloitte Touche Tohmatsu India Pvt Ltd 4

Media & Entertainment: Digital Road Ahead 3

Media & Entertainment: Digital Road Ahead 5

It gives me immense pleasure that ASSOCHAM has

The recent recommendations of TRAI for the implemen-

The report on the Media & Entertainment industry is a

The popularity of addressability is well established by the Let's go digital!

Media & Entertainment: Digital Road Ahead 7

However, TV remains a favorite media source for most 6.2

Survey 2010 Source: IBEF, Industry estimates

content Interestingly, 9 of the Top 10 advertisers on TV are from

Figure 4: Leading Advertising Categories on TV

Category 2009 2010

Till 1990, TV Households (HH) were dominated by

Figure 5: Evolution of the Indian Cable and Satellite (C&S) Industry

Gulf war ‘90 telecast by CNN, DTH C&S HH Television HH

Media & Entertainment: Digital Road Ahead 11

Figure 6: Top digital countries and India at end-2010

China 109.5 Finland 100%

USA 99.8 Spain 99%

India 37.1 Bahrain 98%

Japan 33.6 Kuwait 95%

France Croatia 95%

2010: Over 500

Figure 8: TV Value Chain

Content Creators Broadcasters Distributors End Users

• UTV • Star Plus • Digicable • Consumer

Source: Deloitte Analysis

Media & Entertainment: Digital Road Ahead 13

24.2 22.9 Others

• Rebranding exercise by STAR followed by ZEE to

• Sun TV Networks has been a leading TV broadcaster v. Kids

Media & Entertainment: Digital Road Ahead 15

Media & Entertainment: Digital Road Ahead 17

Teleporting Editing Raw Content Tagged content

New episodes ü • Content catalog

Source: Deloitte Analysis

Figure 11: Digitalization Sunset Dates

I&B Proposed Revised timelines

Four Metros of Delhi,

Cities with Population more

All Urban Areas (Municipal 30th November 30th September

Source: TRAI, Ministry of Information & Broadcasting, IDFC

Media & Entertainment: Digital Road Ahead 19

• No further special infrastructure requirement • Limited capacity to carry channels

• High capacity to carry channels • High cost of infrastructure

• Enhanced picture quality • Lack of return path

Source: Deloitte analysis

On an average, the last mile operator can carry

Encrypted Digital Addressable Digital

Current analog system Digital system

Source: Deloitte Analysis

• To reduce their dependency on advertising revenue

Media & Entertainment: Digital Road Ahead 21

• Cost savings through synergies in distribution

Policy & Regulatory Framework

Current Taxation Regime for Digital distribution players

Figure 15: Taxation on Cable and DTH sectors

Taxation on Cable & DTH service

Service Tax: 10.3% of the subscription amount

Cumulative tax burden Up to 40.53%