MUMBAI: Films have always taken the lion's share of all the glitter, hype and glamour but when it comes to hard numbers, the small screen has outshone the big one and will continue to do so.

In fact, the Indian television industry has outdone all other segments of the Indian entertainment industry. It is television that contributed a major chunk of the industry revenues in 2003 accounting for a whopping 67.19 per cent of the revenue pie of the entire Indian entertainment industry.

These are the numbers thrown up by the Ernst and Young (E&Y) report on the emerging trends and opportunities in the Indian entertainment industry. The report was presented today at the global entertainment industry convention FICCI Frames 2004 at The Renaissance Hotel, Mumbai.

Kya scene hai - an overview of the present scenario

The 2003 revenues of the Indian entertainment industry have been pegged at Rs 19,200 crores (US$ 4,267 million), which translates into a 15 per cent annual growth as against the moderate six per cent growth in 2002. 

Here, it would be interesting to note that globally the total spend on entertainment amounts to half a trillion dollars. Then again, expenditure on entertainment is discretionary and largely dependent on the socio economic environment of the country.

What makes the going good for the Indian television industry is that India is the third largest television market in the world only behind China and the US. Out of the total 8.5 crore television households in India, at present about 4.4 crore households receive cable television services.

Out of the overall industry revenue figures for 2003, television takes the cream with a revenue share of Rs 12,900 crores followed by films with a revenue contribution of Rs 4,500 crores. In fact, the television sector is almost three times the size of the films segment. The rest of the revenue pie is shared by the music industry, radio and events in that order.

According to the report, the outstanding performance of the entertainment industry is largely driven by the increase in television viewership and by the improved realisations from television subscriptions and film exhibition. However, the report also mentions that the different segments within the industry are at varying stages of maturity and corporatisation and hence the growth rates for each of them vary accordingly.

2003 se 2008 tak - E&Y estimates for the industry.

The report estimates that the entertainment industry would grow at a year on year or compounded annual rate of 17 per cent to reach Rs 42,300 crores (US$ 9,400 million) by year 2008. 

A look at the segment wise revenue shares in 2003 vis-à-vis 2008 shows clearly that while the television sector is expected to retain around 68 per cent of the pie over the years, films and events are likely to eat into the share of the music industry. From a 23.44 per cent share in 2003, films will grow to carve out 23.88 per cent of the revenue pie in 2008. Radio stands to gain a 0.69 per cent of the total market over the years while events is likely to record a 0.4 per cent rise in revenue share. This will mean a 2.5 per cent cut for the music industry which will settle for 2.88 per cent of the pie in 2008 as against 5.42 per cent in 2003.

The king pin, television, is expected to retain its lion status over the next five years - the sector is estimated to grow at a compounded annual growth rate of 17 per cent to become a Rs 28,852 crore industry by 2008.

Within television, the primary revenue driver in 2003 was subscription. The Indian television industry's subscription revenues were fuelled largely by distribution that contributed 63 per cent to the Rs 12,900 crore industry. Next in the hierarchy is television and cable advertising with 33 per cent of the revenue share within television followed by software exports that contributed four per cent to the total television revenues in 2003.

This revenue breakup of the television industry is expected to undergo major changes between 2003 and 2008. The subscription revenues from distribution are likely to go up from 63 per cent in 2003 to 74 per cent in 2008 while advertising is estimated to give up its 33 per cent share in the television industry's revenues to settle at a humble three per cent. The dark horse would be the software exports that according to the report would jack up from a measly four per cent in 2003 to claim a huge 23 per cent by 2008.

According to the report, a significant portion of this growth is expected to come from the subscription stream but it would come about if the cable distribution network is strengthened and the uplinking norms relaxed. The report estimates that the emergence of multiple and new delivery platforms would provide choice to the consumer and maintain competitive pressure amongst service providers which would in turn promote differentiation of services and hence affordability to consumers. In developed markets like US, UK, France and Japan, multiplicity of delivery platforms has driven innovation in services and value maximisation. The fast growing animation industry is also being seen as a key growth driver for the television industry.

Films would be next with a revenue share of Rs 10,100 crores in 2008, which would not even be half the estimated revenues generated by the television industry. The film industry is expected to grow at a compounded annual growth rate of 18 per cent with the multiplex phenomenon, and the advent of digital technology propelling the segment's growth. Also driving the growth would be the branding of films through sponsorships, corporate tie ups and merchandising. However, the report expresses concern over critical issues that merit attention such as piracy which is cannibalising 60 per cent of the industry's revenues; entertainment tax, which is highest in the world; and institutional funding that forms only five per cent of the total industry size.

The Indian music industry remained stable at Rs 1040 crores in 2003 even as globally, the music industry shrunk nine per cent. The industry is estimated to grow to Rs 1,217 crores by 2008 and the key drivers would be the ability of the music companies to exploit non-physical formats, consolidation of distribution amongst organized players and changes in legislation to promote the music industry.

The radio segment which is in a nascent stage at present is expected to grow to Rs 689 crores once the number of players increase. As of now the segment occupies barely two per cent of the total ad spend in India. The live entertainment segment, which grew 60 per cent over 2002 is expected to sustain similar growth levels in the next five years. In absolute terms, the revenues from this segment are expected to double in size by 2008 to Rs 1443 crores.

Recommendations

The FICCI-E&Y report recommends rationalisation of the entertainment tax, extension of concessions offered to multiplexes, a common ticketing platform for film tickets and a re-look at the current licence fee regime for the FM radio players. The Report also calls for the government to empower a central body that would issue licences to cable operators, based on certain mandatory information such as entertainment duty registration, service tax and income tax registration and details of subscriber base. These licences could be free of cost to existing operators in the area and auctioned to new entrants. These details would be open to scrutiny by the independent body and the report sees it as a significant step to inducing organisation and transparency.

All in all, the E&Y report appears optimistic about the future of the Indian entertainment industry five years down the line. Along with an increased focus on innovative and organized delivery mechanisms, the report sees an across the segment and within the segment consolidation of activities and operations bringing in scalability, risk mitigation and global competitiveness to the Indian entertainment industry.