Media & Entertainment

Media, the fourth estate, when entwined with the entertainment component represents an
effective facet of consumers in India. Technology has played a key role in influencing the
entertainment industry, by redefining its products, cost structure and distribution.

The Indian Media and Entertainment (M&E) industry stood at US$ 12.9 billion in 2009
registering a 1.4 per cent growth over last year, according to a joint report by KPMG and
an industry chamber. Over the next five years, the industry is projected to grow at a
compound annual growth rate (CAGR) of 13 per cent to reach the size of US$ 24.04
billion by 2014, the report stated.

Similarly, PricewaterhouseCoopers (PwC) in its report titled ‘Indian Entertainment &

Media Outlook 2010’ predicts that the industry is poised to return to double digit growth
to touch US$ 22.28 billion growing cumulatively at a 12.4 per cent CAGR to 2014.

The Indian animation industry is expected to grow at 20 per cent to reach US$ 253
million by 2013 from the current US$ 122 million, according to a study by Deloitte and
an industry body. The Indian gaming market alone has been estimated at US$ 239 million
and is expected to grow at a compounded annual growth rate of over 50 per cent to reach
US$ 1.3 billion by 2013.

The information and broadcasting industry, including print media, witnessed FDI inflow
of US$ 2.04 billion during April 2000 and September 2010, according to the Department
of Industrial Policy & Promotion (DIPP).

Television

The television industry is projected to continue to be the major contributor to the overall
industry revenue pie and is estimated to grow at a rate of 12.9 per cent cumulatively over
the next five years, from an estimated US$ 5.69 billion in 2009 to US$ 10.45 billion by
2014, as per a report by PwC.

A report by research firm Media Partners Asia (MPA) stated that India is poised to
become the world's largest direct-to-home (DTH) satellite pay TV market with 36.1
million subscribers by 2012, overtaking the US. Furthermore, in its report titled 'Asia
Pacific Pay-TV and Broadband Markets 2010', MPA said India's DTH subscriber base
will increase from 17 million in 2009 to 45 million by 2014 and 58 million by 2020.

In a new survey of more than 50 organized pay-TV platforms in 16 Asia-Pacific (APAC)

markets, research from Media Partners Asia (MPA) shows that India’s six DTH pay-TV
platforms will reach close to 8.6 million net new subscribers in 2010, almost 50 per cent
year-on-year growth and representing more than a 55 per cent contribution to net new
additions across the APAC operator group in the survey.

Anil Dhirubhai Ambani Group's company, Reliance MediaWorks (RMW) has signed a
memorandum of understanding (MoU) with IMAGICA Corp of Japan for film processing
services. Under this alliance, RMW, on behalf of IMAGICA, would provide film
restoration, image processing and enhancement and high definition (HD) conversion
services to the Japanese clients. IMAGICA Corp would work with RMW's Los Angeles-
based subsidiary Lowry Digital, which has handled projects for leading studios like Walt
Disney, Paramount Pictures, MGM and 20th Century Fox. RMW would be doing the
processing job for IMAGICA either in India or in California in the US.

Music

Due to the tremendous uptake of the mobile value-added services (VAS) market, the
industry is projected to grow at a CAGR of 28.6 per cent over 2010-14, reaching US$
567.6 million in 2014, as per PwC. The key growth driver for the music industry over the
next five years will be digital music, and its share is expected to move from 29 per cent in
2009 to 75 per cent in 2014.

Radio

Radio is considered a mass medium. It ideally suits the Indian environment - leveraging
its twin advantages of wide coverage and cost effectiveness. Currently, the sector
generates annual revenues worth US$ 49.5 million and is growing at around 20 percent
annually, according to the joint report by KPMG and an industry chamber.

The radio advertising industry is projected to grow at a CAGR of 12.2 per cent over
2010-14, reaching US$ 342.7 million in 2014 from the present US$ 192.8 million in
2009, as per PwC.

Advertising

A report by consultancy firm KPMG stated that the US$ 5.2 billion advertising industry
is set to grow at a compounded annual growth rate (CAGR) of 14 per cent in 2010, in
comparison to the last year. KPMG observed that online advertising will grow about 30
per cent per annum, establishing itself as the fastest growing advertising medium. While
elaborating further it stated that the growth in regional advertising is partly driven by new
sectors such as education, hospitality, jewellery and real estate which often have local
brands and therefore prefer to advertise through local channels.

Emphasising on the Internet advertising industry, KPMG said the US$ 185 million
industry would encourage both multinational companies and local brands to focus on
their marketing strategies. Meanwhile, Google India has seen a 96 per cent annual growth
in 2009-10 in the number of users of its search-linked advertising business, and hopes to
continue the momentum by targeting small and medium enterprises.

Cinema

Films Division has been motivating the broadest spectrum of the Indian public with a
view to enlisting their active participation in nation building activities.

According to PwC, The industry is projected to grow at a CAGR of 12.4 per cent,
reaching US$ 3.65 billion in 2014 from the present US$ 2.03 billion in 2009.

According to the joint report by KPMG and an industry chamber, the growth drivers for
the sector would include expansion of factors like an increase in the number of multiplex
screens, digital screens facilitating wider releases, higher cable and satellite revenues,
improving collections from the overseas markets and supplementary revenue streams like
DTH, digital downloads, etc, which are expected to emerge in future.

Print/Publishing

The print media industry is projected to grow at a CAGR of 9 per cent and targets to
reach around US$ 5.93 billion by 2014, according to the joint report by KPMG and an
industry chamber.

As per the Indian Readership Survey (IRS) for the third quarter of 2010, conducted
jointly by the Media Research Users Council (MRUC) along with research firm Hansa
Research Group Pvt. Ltd., Dainik Jagran, published by Jagran Prakashan Ltd, continues
to be the most read newspaper in the country. The average issue readership (AIR) of the
newspaper in the last quarter increased to 15.95 million from 15.925 million readers in
the last round of the survey.

Among English newspapers, Hindustan Times expanded its readership from 3.453
million nationally to 3.517 million. Readership of The Times of India, published by
Bennett, Coleman and Co. Ltd, has risen from 7.088 million to 7.254 million.

The leader in the business news space, The Economic Times, increased its readership
from 753,000 in the previous round to 798,000 readers.

Foreign investment, including foreign direct investments (FDI) and investment by non-
resident Indians (NRIs)/person of Indian origin (PIO)/foreign institutional investor (FII),
up to 26 per cent, is permitted for publishing of newspapers and periodicals dealing with
news and current affairs under the Government route.
FDI policy for publication of Indian editions of foreign magazines dealing with news and
current affairs is:

 Foreign investment, including FDI and investment by NRIs/PIOs/FII, up to 26 per

cent, is permitted under the Government route.
 'Magazine', for the purpose of these guidelines, will be defined as a periodical
publication, brought out on non-daily basis, containing public news or comments
on public news.
 Foreign investment would also be subject to the Guidelines for Publication of
Indian editions of foreign magazines dealing with news and current affairs issued
by the Ministry of Information and Broadcasting (I&B) on Publishing/printing of
Scientific and Technical Magazines/specialty journals/ periodicals 100 per cent
FDI is permitted under the Government route.

Publication of facsimile edition of foreign newspapers:

 FDI up to 100 per cent is permitted under Government route in publication of

facsimile edition of foreign newspapers provided the FDI is by the owner of the
original foreign newspapers whose facsimile edition is proposed to be brought out
in India.
 Publication of facsimile edition of foreign newspapers can be undertaken only by
an entity incorporated or registered in India under the provisions of the Companies
Act, 1956.
 Publication of facsimile edition of foreign newspaper would also be subject to the
Guidelines for publication of newspapers and periodicals dealing with news and
current affairs and publication of facsimile edition of foreign newspapers issued by
Ministry of Information & Broadcasting on 31.3.2006, as amended from time to
time.

Theatre

Mexico-based multiplex operator Cinepolis plans to set up 40 screens over the next 12
months in India, which could entail an investment of US$ 28 million.

Milan Saini, Head and Managing Director, Cinepolis India Country stated that "India is a
huge opportunity for us as the market is under-penetrated. We plan to set up 40 screens
over the next 12 months across seven properties in cities like Mumbai, Bangalore,
Chennai and Hyderabad."

Digital Media

The digital technologies and their innovative applications have changed the entertainment
sector considerably, especially the content production and its quality. Internet has also
emerged as the latest revenue stream and has become one of the fastest growing
advertising medium and has made a significant impression on the entertainment industry.

Officials in the Information and Broadcasting Ministry have planned a roadmap for
making broadcasting operations completely digital. The Telecom Regulatory Authority of
India (TRAI) has suggested a three-stage process for digitisation, wherein tier one cities
would be covered by 2013, tier two cities by 2014 and tier three cities by 2017. They
further stated that the digital transmission helps in enhancing the audio and picture
quality.

Government Initiatives

The Government has initiated the following measures:

 The government has allotted US$ 50.13 million in the current Five-Year Plan
(2007-2012) for various development projects for the film industry. The funds will
be utilised to set up a centre for excellence in animation, gaming and visual effects
 To offer better audio quality and sharper picture to millions of its viewers, public
broadcaster Doordarshan plans to go completely digital by 2017

According to the Consolidated Foreign Direct Investment (FDI) Policy document

released by the Department of Industrial Policy and Promotion (DIPP), Ministry of
Commerce and Industry, Government of India, foreign investment, including foreign
direct investments (FDI) and investment by non-resident Indians (NRIs)/person of Indian
origin (PIO)/foreign institutional investor (FII), up to 26 per cent, is permitted for
publishing of newspapers and periodicals dealing with news and current affairs under the
Government route.

The Consolidated FDI Policy document brings forth the following guidelines for the
M&E industry:

 Terrestrial Broadcasting FM (FM Radio): Foreign investment, including FDI, NRI

and PIO investments and portfolio investments are permitted up to 20 per cent
equity for FM Radio's Broadcasting Services with prior approval of the
Government subject to such terms and conditions as specified from time to time
by Ministry of Information and Broadcasting for grant of permission for setting up
of FM radio stations
 Cable Network: Foreign investment, including FDI, NRI and PIO investments and
portfolio investments are permitted up to 49 per cent for cable networks under
Government route subject to Cable Television Network Rules, 1994 and other
conditions as specified from time to time by Ministry of Information and
Broadcasting (I&B)
 Direct–to-Home: Foreign investment, including FDI, NRI and PIO investments
and portfolio investments are permitted up to 49 per cent for Direct to Home under
Government route. Within the limit of 49 per cent, FDI will not exceed 20 per
cent. This will be subject to such guidelines/terms and conditions as specified
from time to time by Ministry of Information and Broadcasting (I&B)
 The total direct and indirect foreign investment including portfolio and foreign
direct investment in Headend-In-The-Sky (HITS) Broadcasting Service shall not
exceed 74 per cent. FDI upto 49 per cent would be on automatic route and beyond
that under government route. This will be subject to such guidelines/terms and
conditions as specified from time to time by Ministry of Information and
Broadcasting (I&B)
 FDI policy in the Up-linking of TV Channels is as under:
o Foreign investment of FDI and FII up to 49 per cent would be permitted
under the Government route for setting up Up-linking HUB/ Teleports;
o FDI up to 100 per cent would be allowed under the Government route for
Up linking a Non-News & Current Affairs TV Channel;
o Foreign investment of FDI and FII up to 26 per cent would be permitted
under the Government route for Up-linking a News & Current Affairs TV
Channel subject to the condition that 48 the portfolio investment from FII/
NRI shall not be "persons acting in concert" with FDI investors, as defined
in the SEBI(Substantial Acquisition of Shares and Takeovers) Regulations,
1997;