From Research Desk:

Pyrotechnics could soon be seen in the Media Sector as the Indian Economy gathers steam: Just Sit back and Enjoy the Media Gold Rush!!

The Billboards are hard to miss!! Mumbai (Bombay) has been plastered with some few thousand in-your-face ads featuring all manner of ordinary citizens -- young, old, hip, conservative -- speaking out on everything from global politics to local Corruption to Sex.

However, this is not the scene is Mumbai alone, the commercial capital of India but the story of whole of India. The giant has woken up from long slumber, after both the Islamic and British rules broke its bones. 
India is going from a developing economy into a developed one, and the media is leading that change--this is the ultimate bottomline.

This new mega trend or "next wave verticals" is now the new age mantra. India's boom in the real economy once again, has unleashed a wave of new advertisers. Cellular operators, banks, insurers, and makers of cars, scooters, and TVs are all looking to sell to the country's one billion plus, population.
India has a vibrant economy and a vibrant media market that's still nascent, which everyone wants to tap....so the mad rush for advertisement revenue would gain pace in the near future.

There's also plenty of new investment money sloshing around. Some years back, New Delhi changed rules, allowing foreign companies, for the first time to hold up to 26% of Indian news media companies. That has led to a wave of investment in the media sector in the recent years.
Moreover, the Indian Version of Capitalism is expected to harness more erratic winds from the media sector and push it down to its sails to tap the advertising revenue--the bread and butter of the sector.....

It is to be noted that, behind this bullishness on Indian media companies, is the growing middle class and increasing literacy rates. 
As retail chains develop, the middle class grows and becomes more mobile, the media industry will grow to deliver news and advertising via radio, TV and newspapers. 

It is a fact that Indian Retailers' advertising budgets are only one third of what Western Retailers budget, on a percentage-of-sales basis. 

So the growth of media and entertainment companies will be phenomenal in the Indian context, that is for sure--the demand is far outstripping supply. In the near term, three to five years, the returns in that industry will far outweigh other industries. It is now a fact that India continues to be in the throes of an entertainment revolution spawned by economic liberalisation.
The industry comprises of print, electronic, radio, internet and outdoor segments. The size of the print segment is about Rs.173 bn, while the radio and internet segments are about Rs.8.4 bn and Rs.6.2 bn respectively. Advertising revenue will continue to be the industry's growth driver. For the FY09, the Indian media and entertainment industry recorded a growth of around 12% over the previous year. With this, the industry in India reached an estimated size of Rs.584 bn, up from Rs.520 bn a year ago. The growth rates of the different segments of the industry during the year were 8% for print advertising, 18% for TV advertising and 59% for online advertising. The Indian Media And Entertainment industry is expected to grow at an annual rate of 12-15% till the year 2010.

There are over 12 Cr television households, and over 8 Cr cable and satellite connections in India. The DTH segment comprises of 1.5 Cr homes. It is expected that there will be 14.9 Cr television households in India by 2013, out of which 12.7 Cr are expected to have cable and satellite connections. The players in the electronic media can be classified into a three-link chain. First are the studios (including the animation studios), which comprise the hardware part of the industry, the second are the content providers and the third link comprises the distribution trolleys, which include the cable and satellite channels, multiplex theatres, MSOs and the DTH players.

In India, the ratio of advertising expenditure to GDP is about 0.4%. This is substantially lower in comparison to the developed economies as well as developing economies. As the Indian economy continues to develop and the media reach increases, the advertising expenditure to GDP ratio is expected to increase over the next 5 years.

Highlights:

(i) Indian has more than 600 English dailies and 7,400 Indian language dailies. In the electronic media, the total number of channels presently available to viewers in India stands at close to 500.

(ii) The demand for regional print media is growing at a faster pace than that of English language print media. In the electronic media, the highly fragmented viewership has led to an increasing preference for niche channels.

(iii) Barriers to entry: In the electronic media, it is high for broadcasting since it is very capital-intensive. It involves the cost of leasing the transponder, setting up up-linking facilities, setting up pre and post-production facilities. The barriers to entry are far lower for content providers. Inspite of the high barriers to entry a slew of channels across languages and genres have been launched in the recent past. That is why the shares of Broadcasting Channels or Broadcasters, like TV Today, Zee TV, Sun TV, etc. command higher valuation as compared to content companies like Balaji Television Ltd or Mukta Arts LTd.

(iv) Bargaining power of suppliers: In the print media, high for newsprint suppliers. Medium to low for content providers in the electronic media. Terrestrial broadcasters such as Doordarshan and regional broadcasters such as Sun TV actually commission time slots to content providers.

(v) Bargaining power of customers Relatively high in both print and electronic media. The consumer finds a surfeit of players to choose from. The rollout of DTH services has already enabled the consumer to choose the channels that he wishes to view increasing his bargaining power.

(vi) However, the competition High in print media, especially in Hindi dailies. The print sector includes listed entities like Jagran Prakashan, HT Media and Deccan Chronicle. Also high amongst broadcasters especially for general entertainment channels. The space includes listed entities like Zee TV, TV 18, UTV, NDTV and Sun TV.

As per the Pitch-Madison Survey, print accounted for the largest share of ad-spend in calendar year 2008 with 47.4%, followed by television 40.2%, outdoor advertising 6.8%, radio 3.2%, Internet 1.7% and cinema advertising 0.6%. The total ad-spend in calendar year 2008 was estimated to be Rs 207 bn, a 17% increase compared with 2007. Print media ad-spend increased by 16% as against 17% increase in television ad-spend in calendar year 2008.

Prospects:

The future of the entertainment industry will be decided by the interplay of a number of reasons like consumerism, advertising spend, content, pricing, technology and regulation. Internet advertising is expected to be the fastest growing segment over the next 5 years at compounded annual growth rate (CAGR) of 28%, followed by radio advertising at 14.2%, television advertising at 13.5% and print advertising by 10%. Taken together, the Indian media industry is set to grow at a CAGR of 12.5% per annum in the next 5 years.

That is why the prospects of Northgate Technologies Ltd which is now a turnaround story (in the internet advertising space), looks good, apart from Kohinoor Broadcasting Corporation Ltd which is also on the leage to become a leading broadcaster, having already spent millions to develop its infrastructure. The demographic profile of India also favours higher spends on entertainment, with the consuming class forming a sizeable chunk of the country's total households. Thus, this could lead to the emergence of a huge consumer base for the various products and services (including entertainment). New distribution technologies like DTH, Conditional Access System (CAS) and IPTV, hold the future of the media industry as increasing digitalisation will radically alter the ways in which consumers receive channels. Also, these distribution platforms will give broadcasters direct access to consumers providing not just routine content but also customized value added services (like video on demand). As a result of this, the average revenue per user will increase significantly.

Moreover, broadcasters are also expected to rake in larger advertisement revenues, as ad spend is likely to go up on the back of the robust economic growth. Therefore, as the action unfolds in coming months, the media channels blaring our 24x7 programmes, would be hubs for the collection of advertising revenues. The intense dog-eat-dog competition will also give the necessary edge suck out advertising revenues from the companies' wallets. (With inputs from the Internet)