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Media Economics |

Sahil Avi Kapoor; 20140121

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Introduction
The rapid growth in the Indian Media and Entertainment economy has the world
talking. Boasting of the worlds youngest population, besides being home to a
massive demographic footprint of more than 1.2 Billion, India is the haven for new
technologies, consumer media and expansion in communication. Complimenting
these numbers is the growing propensity to spend among the population that
doesnt shy away from pouring in the moolah for entertainment consumption.
Enamored by this promise of exponential growth and demand, global media houses
have already locked India into their growth and investment cycles for the near
future. The growing middle class has ensured that foreign investment in the media
industry is consistent as well sustainable.
As is around the world, the Indian media today is facing a brand new inflection
point, an opportunity to adapt and expand as well as a challenge to stay relevant
the growth and growth of Digital Media. Going only by the humungous scale of the
Indian mobile phone user base more than 750 million and that too further
injected with the mass adoption of 3G and 4G, the potential in digital content
creation, packaging and distribution in the country is massive. Thus, avoiding or
ignoring the new face of multi-platform media networks is only bound to be suicidal
for any big or small media provider. And this is exactly where the more than
substantial amount of positive network externality kicks in to supplement this
transition. With increasing number of people consuming news, entertainment as
well as educational media through digital and mobile platforms, the value to
advertisers and subsequently media houses to move towards more robust and
responsive, digital mass media is growing at an exponential pace. Thus, to say the
least the transcend of digital content and platforms has radically redefined the
desirable business models and has spurred and thrown the Indian M&E players into
a lookout for global partners, be it for technology upgradation, knowledge and
content sharing or foreign investments.
Looking at the key drivers for the growth in the sector, we cannot ignore the large
pool of opportunities available for media businesses stemming from the low media
penetration in the country at the moment. An Ernst & Young report published in
2010 shows an 11% increase in household income in the Top 20 largest cities of the
nation in the 2004 2008 period. This growth is unprecedented shall certainly drive
advertising spends in India, that are currently substantially low when pitted against
the world average Indias advertising spend to GDP ratio stands at 0.34% as
compared to a world average of 0.75% (2011).
Business strategies are also bound to change with the ever increasing internet
penetration in India. As is the case with media penetration, internet penetration in
India is also extremely low 7% compared to 34% in China and 31% in Brazil. Thus,
the media houses and conglomerates that can capitalize on this growth of internet
penetration are the ones that will be able to sustain media businesses. This

penetration will be supplemented by networks such as wireless broadband, smart


devices as well as digital content that will spike with increase in network externality
of higher bandwidth.
What shall be vital to incorporate into media business strategies would be the
revenue potential from Tier 2 and Tier 3 Indian cities that account for 73% of the
media consumption in urban areas. It will be these regional markets that shall allow
media houses to piggy back on them towards growth equipped with regional
language TV, print and advertising. Apart from regional content, niche content holds
another key for media maturation in India. The ever modifying lifestyles and
growing incomes hold large incentives for advertisers to target the wealthy
residents in urban areas. Hence, home shopping, travel, lifestyle, crime shows,
cooking shows as well as intellectual reality shows are the ones that shall gain most
revenue from this segment of consumers.
Another driver that cannot be ignored is the digitization in distribution which greatly
contributes to the spur in revenue of the Indian media industry. Moreover with
Indian films being rolled out in digital formats, piracy has been substantially
countered, while number of screens where the movies release have been increasing
in reach as well as scale. Its no surprise thereof that 60% of revenues today are
gathered in the very first week of the movies release.
I shall now like to highlight sector wise shift in business growth strategies that we
are seeing around us. Beginning with broadcasting and television, theres no major
surprise that it is digitization that is driving exceptional increase in revenue from
subscription. Although broadcasters still earn more than two thirds of their revenue
from advertisers, yet this plugging of leakage in broadcast has largely helped them.
Moreover premium charge for services such as HD has given broadcasters another
revenue stream. We also see a large growth in the number of new channels owing
to the increasing fragmentation of audiences and virtually nonexistent barriers to
new entrants. Moreover, to counter bandwidth constraints we are seeing
broadcasters forming alliances and pooling in resources in a shift from earlier
business practices. As aforementioned, the increase in niche and regional TV
content is another driver to television growth.
Moving onto publishing, we observe a large scale diversification of newspaper
houses into multi-platform domains such as news channels, education, events, as
well as radio and OOH. As is with TV, the growth in regional language content has
also seen wide spectrum growth. Newspaper companies have also massively
streamlined their processes to decrease cost and improve profitability. Magazines on
the other hand have seen inflow of foreign investments and the India launch of
global magazines. This has been possible due to the growth in the niche segment of
the rich and wealthy.
The spill of digitization and media globalization can be most explicitly seen in the
Indian film and music industries where the rise of multiplexes has greatly
accelerated and penetrated smaller towns. At the same time, Indian producers are
adapting the new revenue streams through internet streaming, pay per view,
gaming, merchandising and licensing. The pre-sale of satellite and home

broadcasting rights has further boosted the film revenues. This has further been
supplemented by the large scale funding and investments in the film industry from
global media houses, as well as the rise in outsourcing of movie production by
Indian filmmakers to improve content and reduce setup and talent costs.

Conclusion
The growing middle class, high incomes and increasing consumption of content
holds unprecedented potential for media businesses. Adoption of digital thus, offers
both challenges to adapt as well as opportunities for those who are ready to
embrace the change. Thus, the only way to succeed for Indian as well as global
media players in India would be to understand and adapt to this dynamic but
wonderful ecosystem that is India. Theres fraud, corruption, inconsistencies,
politics as well as unpredictability that surrounds the industry today, but the fruit
that lies exposed to the ones that are convinced and determined to grow their
businesses here, is sweeter than any other part of the world today.

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