The Media and Entertainment industry is one of the most flourishing sectors in India. The planetary amusement industry is projected to make US $ 1.8 trillion by 2015. Asiatic part expected to play a cardinal function in it, with India poised to lend about US $ 200 billion i.e. a ample ball of the planetary industry.
Media spend in India as a per centum of GDP is 0.41 per centum. This ratio is about half of the universe ‘s norm of 0.80 per centum and is much lower compared to developed states like US and Japan. This indicates the potency for growing in spends as the industry in India matures. As we move towards a more brand-conscious society, this is likely to acquire reflected in the future growing rates.
The Indian amusement industry is turning at a really fast gait, the ground being that it is still at a nascent phase. Some symptoms of this changing world are turning corporatisation of the Mumbai movie industry, the fiscal musculus of the amusement Television concern, more joint ventures with international participants and other ambitious programs by the major manufacturers and exhibitioners. After some international success with A.R. Rahman and Resul Pokutty winning Oscars for their applaudable work in Slumdog Millionaire, the limelight has shifted towards India for the huge endowment and potency that lies in it.
M & A ; E Industry in 2009
Harmonizing to KPMG-FICCI Report, overall M & A ; E industry size grew from Rs. 579 billion in 2008 to Rs. 587 billion at a rate of 1.4 per centum. The growing rate is likely to increase to 11.2 % in 2010, as the industry is expected to witness a recovery.
The Accumulative Annual Growth Rate ( CAGR ) of last four old ages i.e. from 2006 to 2009 has remained at 10 % and the whole industry is expected to turn at a rate of 13 % in following five old ages.
Television and Print are the largest sectors of the industry lending for greater than 70 per centum of the grosss. Their laterality is expected to go on as we move frontward. Emerging sectors like Internet and Gaming have shown highest growing rates due to the little base consequence and increasing popularity, this tendency is expected to go on as impregnation point for these sectors seems excessively far. The part of Television Entertainment to the overall grosss of the M & A ; E industry has gone up well in 2009 as compared to 2006. On the other manus, part from sectors like Films, Print, Music and OOH has come down in 2009. The ground for this is that these markets are going mature and hence, merely large participants are able to prolong themselves in these markets. e.g.
In instance of production in movies, most of the successful movies are being made by large manufacturers. Last twelvemonth, all the four blockbusters were by top manufacturers, like Yash raj movies ( Love Aaj Kal, New York ) , vinod chopra movies ( 3 Idiots ) and A B Corp ( Paa ) .
Similarly, even in instance of movie exhibitioners, multiplexes are distributing so fast and they even have advantage over individual screen film as they get freedom in amusement revenue enhancement. In manifold industry besides there is a big entry for barrier as it is a really capital intensive industry.
Sing print industry, there are no new participants expected to come in. The ground for this being that about all the newspapers are traveling online and the incursion of telecasting and cyberspace has increased which has created new beginnings for people to acquire entree to intelligence.
Traveling frontward, it is expected that the part of Films and Print to entire gross from M & A ; E industry may come down farther in 2014, as the overall size of the industry continues to turn. Growth of Television is expected at the rate of 15 per centum over following five old ages which is much higher as compared to about 9 % growing in both the Films and Print sectors. Hence, telecasting industry is expected to lend about 48 per centum of the entire grosss of M & A ; E Industry in 2014.
Indian Film Industry
The Indian Film Industry enjoys aggregate entreaty in India and it besides acts as one of the most of import content feeder systems in the Music, Radio and Television sections.
The Indian Film industry is manner beyond Hollywood both in footings of figure of movies that are produced and theatrical admittances. The entire figure of one-year theatrical admittances in all Indian film is about 3 billion, as compared to 1.5 billion tickets sold yearly in the US, which is half of the graduated table of Indian Industry.
Despite these astonishing Numberss, Indian film trail Hollywood in footings of overall grosss generated. The two chief grounds that might be able to explicate this spread between figure of entries and the gross generated are
Cheaper admittance tickets ( the norm theatre ticket monetary value in the US is about 7-8 times of that in India )
Relatively low incursion of multiplexes
Some other grounds that have resulted in suboptimal gross are
Poor monetization of assorted gross watercourses
Inefficiencies across the value concatenation
Value Chain
There are three types of participants in Indian Film Industry:
Manufacturers
Distributors
Exhibitors
The different participants add value at different phases:
Producer – Content Creation
Distributor – Contented Distribution
Exhibitor – Screening of Content
The assorted gross watercourses for these participants are shown in the undermentioned diagram
The other beginnings of gross for the manufacturer can be divided into assorted parts. The undermentioned figure shows the other beginnings with their distribution in the gross of the manufacturer.
The distributers are merely a nexus between the movie manufacturers and the exhibitioners. The distributers assess the value of the movie and negociate the monetary value and districts where the movie will be released with the manufacturers. This normally takes topographic point on footing of three theoretical accounts:
Minimum Guarantee Model
In this theoretical account, the distributer is apt to pay a minimal sum for purchasing the distribution rights of the movie ab initio. If the movie performs good above a peculiar distinct bound, so the distributer has to 50 % of the income from the overflow sum with the manufacturer.
Commission
This theoretical account normally happens when the manufacturer is really confident about his film. In this theoretical account, distributer merely gets committee fee for the distribution. All the income is given to the manufacturer after cutting the 10-15 % of committee. Here the whole hazard of the movie ‘s concern is carried by the manufacturer.
Outright Sale
In this theoretical account, the whole hazard is carried by the distributer. In this instance, the distributer buys the rights of the film and so earns all the income generated by the film.
The Revenue collected from sale of tickets is distributed between the exhibitioner and the distributer on the footing of the new understanding that has been signed after the recent work stoppage in 2009. There are four theoretical accounts that are followed by distributers and exhibitioners but presently gross sharing theoretical account is followed as decided after the work stoppage.
Harmonizing to the gross sharing theoretical account, the gross generated by sale of tickets ( cyberspace of amusement revenue enhancement ) is divided between the distributer and the exhibitioner as per a pre-determined ratio. In this instance, the hazard of success of film at the Box-office is shared between both the distributer and the exhibitioner.
Role of Producer
The manufacturer is the 1 who decides to do a movie and so arranges for shot, redacting and nicknaming the movie and eventually, taking the movie to the audience.
The above flow chart summarizes the function of manufacturer in a movie industry. Producers get a minimal warrant fee from distributers before a movie is released in return of rights for administering a movie in a district or several districts within the state.
Manufacturers, who feel that their movies have the potency to make good in the international market, besides sell rights for the international distribution of their movies. If the movie does good and the distributer recovers his money, any extra influxs normally get divided between the two in conformity with pre-defined agreements.
Manufacturers finance their movies either through internal accumulations, bank finance, private moneymans, or the equity path. In some instances, the cost of the movie is raised by selling the rights upfront to distributers. Manufacturers can retrieve up to 30 % of the cost of the movie by pre-selling it to distributers.
Role of Distributor
Film distributers buy the theatrical distribution rights from a manufacturer for administering the movies in a district or several districts. Thereafter they sell the rights for testing the movie to the exhibitioner. The distribution rights are usually purchased for a period of 3 old ages. In return, they offer a minimal warrant fee to the manufacturer ; in some instances, they purchase the distribution rights good in progress of the release of the movie.
The flow chart below summarizes the function of a distributer in movie industry.
Backward Integration
Players like PVR film are traveling for backward integrating.
PVR Limited ventured into the concern of movie distribution and put up PVR Pictures. Presently, PVR Limited holds 60 % shareholding in the company with the balance 40 % interest held by JP Morgan Mauritius Holding Ltd and ICICI Venture in equal proportion ( 20 % each ) .
Reliance Mediaworks is already present in all the three countries of Value Chain. This non merely helps in cut downing the costs but besides helps in commanding the content and quality of the filme being released.
Advantages:
De-risking the concern theoretical account
Better Margin
Become a one-stop solution
Control over content and quality
Large Companies involved in Film Exhibition
The chief large listed companies that are involved in movie exhibition industry are:
BIG Cinemas
INOX Leisure
PVR Cinemas
Fame Cinemas
Cineplex
Comparison on the footing of figure of screens
Above information gives an thought of figure of screens each of the listed exhibitioner has. Reliance leads the count with 207 seats, but the job in instance of Big Cinemas is that their Gross per screen is far excessively low when compared to other film exhibitioners. This shows that being a leader and a largest multiplex in the state does n’t do it successful.
Recently, INOX has acquired 66 % portion in celebrity film which takes its screen count to 171 ( 97+74 ) and makes it the 2nd largest operator in state. INOX ‘s gross per screen is better than trust.
PVR is besides be aftering to open around 60 screens this twelvemonth which will assist it to take its run to around 168. Besides, sing that their grosss per screen are highest among all listed exhibitioners, it will go one of the largest exhibitioners in footings of gross. Recent failure of its trade with DT film, a film concatenation owned by DLF, has been a reverse. Had that trade taken topographic point, PVR would be basking more than 70 % market portion in NCR go forthing behind all major participants.
Comparison of movie exhibitioners on the footing of gross coevals theoretical account
The Revenue Model of Exhibitors consists fundamentally of 4 beginnings:
Sale of Tickets
Food and Beverages
Ad
Other Income from other installations like parking, bet oning etc. at the multiplex
The above figure shows how the grosss are distributed for the house. PVR has lowest part of income from sale of tickets in its entire gross, which implies that when people go to PVR they non merely travel and watch a film but besides grab bites and bask other installations.
Another thing to observe about PVR is its grosss from advertisement, which are highest when compared to other ironss. The portion of income from nutrient and drinks in entire gross is highest for celebrity film whereas that of income from other beginnings like parking and other installations provided at the film hall is maximal for Large Cinemas.
Cinemax, inspite of holding a gambling installation at their multiplexes, has non been able to bring forth grosss through other beginnings. The grosss from beginnings other than gross revenues of tickets are of import as the company needs to better its efficiency by increasing the mean disbursement done by each individual at the multiplex.
Comparison of movie exhibitioners on footing of Revenue Generated per screen
As can be seen in the figure above PVR is one of the best in bring forthing grosss per screen when compared to its rivals. This can be attributed to
The locations at which PVR Cinemas is present are largely metropolitan metropoliss or countries around these metropoliss. Besides, most of their screens are in promenades where the per capita income of clients is rather high and therefore, the gross generated per screen is high for them. This, when compared with Big Cinemas who have maximal figure of screens among all the major participants in the industry, shows that non merely holding screens affairs but there location is besides really of import.
The service theoretical account of PVR is much more superior when compared to other multiplexes. As mentioned in PVR ‘s one-year study 2008-2009, “ At PVR confect saloon, frequenters were offered greater value jazz band that really increased the spend per caput. F & A ; B communicating was designed in such a manner, that the work stoppage rate per show really went up even in the face of lower footstep. Different value bundles were continually re-devised to maintain the public imaginativeness refreshed and engaged. ” As seen earlier the part of F & A ; B in entire gross of PVR was maximal when compared to other film exhibitioners.
Tendencies across last 5 old ages
No. of Screens
As we analyse the tendencies of last 5 old ages, the above image summarizes how the exhibitioners have been bullish in last 5 old ages taking entire figure of screens from 150 to 560 between them, which shows an addition of more than 375 % . Players like Reliance have been bullish to such an extent that their screen count has become 5 times and it has emerged as the largest Cineplex with maximal screens in India.
Entire figure of manifold screens has increased to 850 screens, whereas the same figure for individual screens is at 11000. But as Ram Vidhani, President of Cinema Owners and Exhibitors association, puts it, “ Single screen theater proprietors are combating a high revenue enhancement government and need timely governmental intercession without which their endurance is hard ” . Multiplexes acquire freedom from Entertainment cost etc. in some metropoliss giving them an inducement to spread out, but individual screen proprietors have no inducement and have to vie with these multiplexes.
E-Tax Exemption Trend
E-Tax Exemption
City
Year1
Year2
Year3
Year4
Year5
Bombay
100
100
100
75
75
Rest of Maharashtra
100
100
100
75
75
Punjab
100
100
100
100
100
Calcuttas
100
100
100
100
A NA
Rajasthan
100
100
90
80
70
Bhopal/Indore/Jabalpur
100
100
100
75
50
Above Table presents the informations for e-tax freedom that is received by multiplex proprietors. Some provinces like Punjab have even offered the same inducement to individual screen participants if they convert their halls to multiplexes.
This e-tax freedom gives benefits to cinema exhibitioners to open more multiplexes in countries where they feel that there will non be adequate market to provide.
Box Office Collections
*The informations is rising prices adjusted ( on footing of mean ticket monetary value )
The above figure shows rising prices adjusted informations for 2005-2009. As can be clearly seen there are two unusual old ages in the information
In 2006, the box-office aggregation has all of a sudden shot up by 40 % . The chief ground for this is release of around 5-6 blockbuster during this period. These included films like Dhoom 2, Krrish, Rang De Basanti, Lage Raho Munnabhai, Fanaa, Don, Kabhi Alvida Na Kehna etc. So, the content during twelvemonth 2006 was merely good plenty to bring such high box office aggregations.
Last twelvemonth, i.e. in 2009, there has been a sudden diminution of 5-6 % in box office aggregation, which is rather good sing the factors and fortunes through which industry went through during the last twelvemonth. Some of the grounds for bead in gross are:
2-month Stand-off between exhibitioner and distributoe
IPL 2
Swine-flu panic
The ground for recovery of box office is the release of films like ‘Ajab Prem ki Gajab Kahani ‘ and ‘3 Idiots ‘ during the terminal of the twelvemonth which fetched around 30 % of the entire box-office aggregation of the twelvemonth.
Analysis of Box-Office Collections
The above graph shows the per centum of entire box office aggregation that top 10 films on the box-office history for.
This data clearly shows that around 40 % of the movie industry ‘s aggregations are accounted for by top 10 films at the box office. This shows that consumer is ready to pay monetary value and travel to cinema if he gets a good content film.
These top 10 films are normally by top manufacturers in the industry like yash raj movies, Dharma Productions, Red Chillies Entertainment etc.
Another thing to analyse is that these films help exhibitioners generate gross and cover up for their loses as by and large the exhibitioners remain same ( specially the large participants ) , but what about those producers/distributors for whom films do n’t execute good at box-office. Where do they bring forth gross? This is the ground for new avenues of support like IPOs, pool finance, funding films through Bankss. This reduces their cost of capital and allows them to bring forth films even with some bad content.
Some New Financing Models
During 2008, India ‘s first movie fund was created in India by Vistaar Religare Film Fund and Manmohan Shetty ‘s Walkwater Media. Vistaar Religare Film Fund invested over $ 1 million ( Rs 5 crores ) – in Walkwater Media ‘s movie ‘Victory ‘ – and shared the top of this trade.
Nomad Film Fund is another new fund formed with a principal of Rs 250 crore ( $ 50 million ) , 10 % of which will come from the boosters and $ 25- $ 30 million from foreign institutional investors and $ 15- $ 20 million from the retail investors. The fund plans to lasso in a top histrion and fortis direction squad and it will hold a life of around five old ages and is presently in the procedure of acquiring a SEBI blessing.
Initial public offering
Many Film Exhibitors and Manufacturers have gone for IPOs so as to raise money from public. Some of them are:
Exhibitors: Big Cinemas, PVR Cinemas, Cinemax India, Fame ( earlier shringar ) Cinemas, INOX
Manufacturers: K Sera Sera, Prime Focus Ltd. , Eros International, Sri Ashtavinayak Films etc.
Consortium Finance
Consortium finance, a well-established construct in the corporate universe, has now entered the universe of movies. In a first of its sort trade, Exim Bank and Indian Overseas Bank ( IOB ) have come together to co-finance the Akshay Kumar-Katrina Kaif starrer De Dhana Dhan. The rate of involvement is reported to be about 12.5 to 13 % with the period being till the movie ‘s release, the lone collateral being the negative of the movie. Produced by Venus Records and directed by Priyadarshan, the movie released in the 3rd one-fourth of 2009. The movie has been a hit at the box office ( Harmonizing to boxofficeindia.com ) . Some earlier fundss done by Bankss are as follows:
Exim Bank forayed into the movie finance four old ages ago and has, so far, disbursed close to Rs 33 crore. It has seen a good ratio of success with films like Dhoom and Veer Zaara.
IOB has before financed a few movies of AVM Productions in the South, such as the Rajnikanth starrer, Sivaji.
Indian companies traveling international
Impact of Slumdog Millionaire
‘Slumdog Millionaire ‘ , a rags-to-riches narrative of a immature slum-dweller in India, received planetary acknowledgment and awards after its release. The movie finally went on to win eight of the 10 Academy Awards it was nominated for.
While Slumdog Millionaire was non an “ Indian ” movie in the sense that it was internationally produced, directed and distributed, it has had a important impact on the Indian movie industry.
Recognition of Indian endowment: The film won multiple Oscars including best original mark ( A.R Rahman ) , best original path ( A.R Rahman and Gulzar ) , and Best Sound Mixing ( Resul Pookutty ) thereby reflecting the limelight on Indian originative and proficient endowment.
Mainstream credence of India-themed content: The movie reached such a degree of popularity that words such as “ Jai Ho ” were catapulted into the international vocabulary. Wall Street Journal critic Joe Morgenstern referred to Slumdog Millionaire as, “ the movie universe ‘s first globalised chef-d’oeuvre. ” The deduction that a market for crossing over movies exists in the Western universe was noted by Indian film makers.
Increased credence of Hollywood dubbed versions: The dubbed version of the film was one of the top grosser in India last twelvemonth and strengthened the credence of dubbed Hollywood films
Advanced distribution: The movie became one of the first films to be released on DTH merely a few yearss after its India release, monetizing a fast turning distribution platform.
The planetary credence of Indian endowment is encouraging and may show in a new epoch where coactions with international productions, increased credence of Indian subjects and topics may drive greater audience range and profitableness for Indian movies.
Percept Pictures is negociating a trade with Shoaib Mansoor, the Pakistani manager, manufacturer and author behind Khuda Ke Liye, to do a film starring both Indian and Pakistani histrions for coincident release in both states. It is besides set to co-finance ‘Racing the Monsoon ‘ , a subsequence to Michael Douglas ‘ 1984 movie ‘Romancing the Stone ‘ .
Vidhu Vinod Chopra is set tp direct a Hollywood undertaking ‘Broken Horses ‘ .
Sanraa Media signed a MoU with US-based WSG Films to organize a joint venture company. The joint venture company may look stop the Indian Studio in Hollywood and USA to work on planetary co-production trades for life and VFX undertakings.
Reliance MediaWorks partnered with In-Three for 2D to stereo 3D transition.
Reliance Big Pictures ‘ forayed into Hollywood through a joint venture with manager Steven Spielberg with an initial support of USD 825 million.
Overseas Revenues and Releases across last 5 old ages
The above figure clearly shows that exposure of Indian films is increasing twelvemonth on twelvemonth. In 2004 when there were merely 6 movies that were released overseas, the figure had gone upto 19 in 2007. Even the gross generated by these movies has increased fast. The lone thing that is negative is that all the movies traveling for world-wide release are from large streamers like, Dharma Productions, Aamir Khan Productions, Yash Raj Films, etc. There are really few movies from little streamers that go for worldwide releases.
Abroad Revenue collected by films. The top 4 films in the list of all clip abroad grossers are Sharukh Khan starrer films, Kabhi Alvida Na Kehna ( 2006 ) , Kabhi Khushi Kabhi Gham ( 2001 ) , Om Shanti Om ( 2007 ) , and Veer-Zaara ( 2004 ) ( figures are non rising prices adjusted ) . This shows the popularity of Sharukh Khan in abroad market.
Even the recent release ‘My Name is Khan ‘ received a great response in abroad market. It would hold been declared a floating-point operation traveling by Indian Box-office aggregations, but aggregations from abroad market were phenomenal. The same tendency was followed by Karan Johar ‘s ‘Kabhi Alvida Na Kehna. This shows that some manufacturers are eyeing the planetary market and non merely the Indian market.
Development of Film Industry – from ‘DDLJ ‘ to ‘3 Idiots ‘
Over the last decennary, graduated table of Indian movies has changed dramatically and new gross benchmarks are being set each and every twelvemonth. When we compare the boulder clay day of the month grosss of ‘Dilwale Dulhaniya Le Jayenge ‘ ( one of India ‘s longest running movies ) to that of ‘3 Idiots ‘ in its gap hebdomad, it is found that the first wek aggregation of 3 Idiots is 12.20 chromium. which is 13 hundred thousand more than that of ‘Dilwale Dulhaniya Le Jayenge ‘ . It is illustrated by the figure below.
Of late, it has been noticed that viewing audiences are willing to pay a premium for top quality content, For case, there was an addition in mean ticket monetary value of ‘3 Idiots ‘ by about Rs.30 in multiplexes. Willingness to pay higher for the audience for quality content should move as a lever for the industry to concentrate more on content. Film manufacturers should concentrate more on quality and non on measure as its merely the quality that works.
Additionally, sing the high potency of international markets, Indian film makers are taking for a bigger release of their movies across assorted states. For case, ‘3 Idiots ‘ was released overseas with about 400 prints worldwide of which 210 were in the US entirely. Indian exhibitioners like Big Cinemas who are spread outing internationally are assisting this cause by doing it easier for release. e.g. in instance of ‘3 Idiots ‘ which released 210 prints in US, most of them were in coaction with Big Cinemas. Big Cinemas, with around 165 screens across US, histories for 30-35 % of Hindi Box office aggregation and 70 % of Tamil Box-office aggregation from US.
Even, overseas telegram and orbiter rights have shown above norm returns for movies that have performed good at the domestic box office. However, physical and on-line buccaneering continues to be a challenge and has impacted both theatrical and place picture grosss.
Decision
In last few old ages, after launch of Adlabs, many participants like PVR have tried to spread out in assorted countries of value ironss so as to cut down committee charges and other costs and consequence in an addition in bottom line.
Reliance has been spread outing locally every bit good as internationally really quickly. Its screen count is largest in India. It account for major portion for regional movies released outside India. But, for trust, Revenue generated per screen is lowest. The chief ground for this can be attributed to the fact that most screens of Reliance are present in Tier -II and Tier – III metropoliss. As e-tax freedom is given in some provinces, trust is taking advantage of this fact and spread outing by bear downing lower monetary values.
Gross coevals theoretical account is besides an of import facet. Exhibitors need to take attention that the client who visits the film hall should besides pass on ‘Candy Bar ‘ as these gross beginnings have 100 % portion of exhibitioner as comparison to merely 40- 50 % in instance of gross revenues of tickets. PVR has been done good in this facet as ‘Candy Bar ‘ provides for largest sum of portion when compared with its rivals.
If we see Box-office aggregation tendencies in last 5 old ages, we find out that in twelvemonth 2000 the aggregation was upper limit after which it fell. The ground for this is content. Content is something which is deriving a batch of importance now. Peoples have easy entree to Hollywood films which are better in content, way and about all other facet than many Indian films. This is the ground that aggregation for Indian movies has fallen late. Peoples are willing to pay premium monetary values if content of movie is good like in instance of ‘3 Idiots ‘ , so manufacturers need to look and concentrate on quality more than measure of movies to gain net incomes.
Consumer is traveling to theatre for a good content film. This can be seen by the fact that top 10 films of any twelvemonth contribute around 35-40 % of entire box office aggregation. This shows the importance of content in movie industry
Manufacturers are looking for new funding theoretical accounts to cut down their cost of capital. Some hits in an twelvemonth aid exhibitioners to get the better of their loses but for manufacturer, he has to give another hit. This is the ground why manufacturers are looking for new funding theoretical accounts from where they can finance 5-10 films a twelvemonth out of which if one or two are successful, the manufacturer is able to retrieve his money.
There has been enlargement of Indian participants in international sphere. Exhibitors like Big films have helped Indian films to let go of films abroad and make to the Indian crowd shacking outside the state. ‘3 Idiots ‘ was released across the universe with 1550 prints out of which 200 were released in US.
Industry has evolved in last 15 old ages. There are new gross watercourses that manufacturers have to sell the film which provide them a safety even if a film does n’t execute good at box office. There are satellite releases, releases on channels, DTH-pay per position, etc. which have ensured that manufacturer recovers his money
