Advertising Industry in India

Television

Current size: Rs 148 billion

Projected size by 2010: Rs 427 billion; CAGR: 24%

Subscription revenues are projected to be the key growth driver for the Indian television industry over the next five years.

Subscription revenues will increase both from the number of pay TV homes as well as increased subscription rates. The buoyancy of the Indian economy will drive the homes, both in rural and urban (second TV set homes) areas to buy televisions and subscribe for the pay services.

New distribution platforms like DTH and IPTV will only increase the subscriber base and push up the subscription revenues.


Filmed entertainment

Current size: Rs 68 billion

Projected size by 2010: Rs 153 billion; CAGR: 18%

Advancements in technology are helping the Indian film industry in all the spheres – film production, film exhibition and marketing. The industry is increasingly getting more corporatised.

Several film production, distribution and exhibition companies are coming out with public issues. More theatres across the country are getting upgraded to multiplexes. And, initiatives to set up more digital cinema halls in the country are already underway.

This will not only improve the quality of prints and thereby make film viewing a more pleasurable experience, but also reduce piracy of prints.

Print Media

Current size: Rs 109 billion

Projected size by 2010: Rs 195 billion; CAGR: 12%

A booming Indian economy, growing need for content and government initiatives that have opened up the sector to foreign investment are driving growth in the print media. With the literate population on the rise, more people in rural and urban areas are reading newspapers and magazines today.

Also, there is more interest in India amongst the global investor community. This leads to demand for more content from India. Foreign media too is evincing interest in investing in Indian publications. And the internet today offers a new avenue to generate more advertising revenue.


Radio

Current size: Rs 3 billion

Projected size by 2010: Rs 12 billion; CAGR: 32%.

The cheapest and oldest form of entertainment in the country, which was hitherto dominated by the All India Radio (AIR), is going to witness a sea-change very shortly.

In 2005, the government announced three key policy initiatives which will drive growth in this sector - migration to a revenue share regime, allowing foreign investment into the segment and opening of licenses to private players.

As many as 338 licenses are being given out by the Indian government for FM radio channels in 91 big and small towns and cities. This deluge of radio stations will result in rising need for content and professionals. New concepts like satellite, internet and community radio have also begun to hit the market. Increasingly, radio is making a comeback in the lifestyles of Indians.

Music

Current size: Rs 7,000 million crore

Projected size by 2010: Rs 7,400 million; CAGR: 1%.

The industry has been plagued by piracy and had been showing very sluggish growth in the physical format over the last few years, both in India and globally. However, 'mobile music' and 'licensed digital distribution' services are projected
to fuel the recovery of the music industry the world-over.

The pace of growth in mobile music reflects the fact that consumers increasingly view their wireless device as an entertainment medium, using those devices to play games and listen to music, while carriers are actively promoting ancillary services such as ring tones to boost average revenue per user.
Presently, ring tones (for cellular phone subscribers) constitute the dominant component of the mobile music market. Licensed digital distribution services are also contributing significantly to growth in all regions.


Live entertainment

Current size: Rs 8,000 million

Projected size by 2010: Rs 18,000 million; CAGR: 18%

This segment of the entertainment industry, also known as event management, is growing at a fast and steady rate.

While this industry is still evolving, Indian event managers have clearly demonstrated their capabilities in successfully managing several mega national and international events over the past few years.

In fact, event managers are also developing properties around events. The growing number of corporate awards, television and sports events is helping this sector.

With rising incomes, people are also spending more on wedding, parties and other personal functions. However, issues like high entertainment taxes in certain states, lack of world-class infrastructure and the unorganized nature of most event management companies continue to hinder growth of this industry.


Out-of-home Advertising

Current size: 9000 million

Projected size by 2010: 17,500 million; CAGR: 14%.

Outdoor media sites in India are predominantly owned or operated by small, local players and are typically, directly marketed by them to advertisers and advertising agencies.

However, this segment too is witnessing a sea-change with technological innovations. Growing billboard advertising is fuelled by technologies such as light-emitting diode (LED) video billboard.

This is a segment that is seeing interesting technological innovations across the world and is likely to evolve in India too in the short-term.


Internet Advertising

Current size: Rs 1.6 billion

Projected size by 2010: Rs 7.5 billion; CAGR: 50%.

An estimated 38.5 million Indians are currently hooked on to the Internet. And this rising number is leading to the growth of internet advertising, which today stands at approximately Rs 1.6 billion.

The internet is being used for a variety of reasons, besides work, such as chatting, leisure, doing transactions and writing blogs.

This offers a huge opportunity to marketers to sell their products. And, with broadband becoming increasingly popular, this segment is expected to grow by leaps and bounds.

Facts on Mobile Industry in India July 2006

Mobile Voice calls: 3c/min (avg); SMS: 2c/message

GPRS-enabled phone costs: $80+

GPRS Tariff: $8+/month for 100 MB download (plans vary across operators)

Mobile VAS: Rs. 5 Billion; growing at 40%

Mobile ARPU: $8.50 [Split: Voice: 70%; Rentals: 20%; VAS: 10%]

Mobile VAS Split: Person-to-Person SMS, Caller Line Identification, Roaming: 70%; Content: 30%.

Content: Ringtones, Ringback Tones, Games, Wallpapers, Interactive Voice Response, Person-to-App SMS Content Providers get about 10-30% of revenue for their content.

India has one of the lowest spectrum allocation per GSM operator in the world, about 6 Mhz against, over 25 in the UK or over 20 in China.

Just 15-20% of the phones in India have colour screens and/or cameras.

111.23 mn mobile subscribers as on 31st July 2006. (TRAI)

Statistics show the same - the proportion of the population accessing value-added-features (VAS) at least once a week - has grown from 1.1 percent last year to 2.7 percent — translating to nearly 22 million individuals.

VAS contributes 10% to the overall revenue generated by the mobile service providers.

The VAS market is estimated to grow at an annual rate of 30-40 percent. But, SMS still contributes a significant part of non-voice service revenue (around 65 percent -- the highest in the world), while caller-line identification (CLIP) accounts for 8 percent of VAS revenue. The remaining 27 percent are from services such as games, ring tones, mobile entertainment and multimedia messaging.

Out of the total GSM users, only 2 million are GPRS users.

Internet in India 2006

INTERNET BUSINESS SURVEY
20th February 2006

Internet Industry Comes of Age


Forget dotcoms. The Internet today is about real business. And real companies.


The first steam engine, invented in 1705, was a simple vertical piston and cylinder at the end of the pump handle. In 1873, a dynamo was created to produce electricity, allowing steam engines to be ‘always on’. Soon, the railways emerged, allowing ‘communities’ to do ‘commerce’.

Just in case you were wondering why we took you through this ‘industrial revolution’ crash course, the point is that several inter-connected innovations had to happen for 300 years for you to sit at your desktop and click ‘buy’. The parallels between the industrial revolution and the Internet one are strong. The Internet began as an idea in research labs in the mid-1960s. The mainframe, PC, the Internet and then the browser all came within a span of 30 years. What started out as a US military experiment has been plugged in irrevocably into our daily lives. The dots connecting reality to sci-fi flicks (remember Minority Report?) are falling into place as we live digitally. Three hundred years down, the steam engine story sounds very similar to the search engine one.

Our last cover story on the Indian Internet saga was way back in 2001 (see ‘They Survived!’, BW, 14 May 2001) in the aftermath of the hysteria over the 5,000-odd Indian ‘dotcoms’ that got on and off the headlines just as quickly. While the bust was totally warranted, it was evident even then that there was nothing fundamentally wrong with the Internet. Its power transcended 5,000 failures. Fifty-six months later, we’ve put the Internet back on the cover once again. Our guess is that you are going to hear more about it from now on. And there is a difference this time: You are not hearing it as much as you’re living it.

The total Internet business is big — worth over Rs 2,200 crore. About Rs 500 crore comes from advertising, ecommerce (not including billings) and other revenues. Add in access charges at a minimum of Rs 200 per month, and multiply it with the 7 million-odd subscriber base. What you get is over Rs 1,700 crore being spent just to get on to the Internet. The revenues for the four big classified sites is Rs 200 crore. But nobody has an inkling about the numbers for several other categories such as mobile content or broking.

And it is even bigger if we add what the business-to-business (B2B) companies make. According to investors, they remain among the most profitable Internet companies. However, this survey will focus more on business-to-consumer (B2C) companies, since the numbers for B2B companies are almost impossible to access.



Second Coming

The 1995 Netscape IPO kicked off Web 1.0, creating billion-dollar startups in the West. It sowed the seeds of the madness that followed. In 1999, the madness reached India . Back then, Indian entrepreneurs were a bunch of get-rich-quick wannabes trying to join the bandwagon.

The same madness then created rock-star companies like Google, Yahoo!, Amazon and eBay, which have a collective market capitalisation of $227 billion (as on 8 February 2006). The 2004 listing of Google, six years after its launch, showed the pace at which one of the world’s most valuable ‘media’ companies could be created. That set the tone for Web 2.0. And now, Web 2.0 is showing its first traces in India.

In the next few pages, you will get a peek at the quiet revolution that has been brewing behind the scenes in India for the last 6-12 months. ‘Quiet’ is the operative word here. Notice that nobody uses the word ‘dotcom’ any more. These are online businesses or Internet companies. Several get a chunk of their revenues from a hybrid of online and offline products and services. Rediff, Indiatimes or Indiabulls are all referred to as matter-of-factly as ITC or HLL. They are just Indian companies that happen to be online. Even the approach of investors who did not touch Indian Internet companies earlier, such as Kleiner Perkins Caufield & Byers, has not created any frenzy or hype. Almost every major Internet company globally from Yahoo! to Google, has stated that China and India is where they will be making their next round of bets. Yet, sedate is what describes the Internet industry here even now.

Two things have changed. One, our size and look, and two, our connect with the rest of the world.

First, a look at the market. Five years ago, ISPs (Internet service providers) had just taken off. There was no usage, no broadband, no content. People were simply trying to re-create successful online businesses of the West. We were at 38.5 million users (54 per cent growth last year) in June 2005, according to IAMAI (Internet and Mobile Association of India). More importantly, the linkages of the Internet with the offline world are much clearer. It offers utilitarian services that people use in their everyday lives — mail, information, news, shopping, telephony, etc.

Global investors and Internet giants have India on their radar because they know that 65 per cent of Indians will be 15-35 years of age a decade from now. The youngest population translates into the largest Web space (research shows that younger people are more likely to be online). That India has the lowest broadband prices worldwide ($4-$5 monthly) and is seeing one of the world’s fastest growing mobile revolutions tells them that the ‘always on Indian’ is inevitable. They have seen that happening to China. Over the next 3-5 years, they expect to see it in India.

It’s not about just the Internet or India, though. It’s about every consumer-facing business in Asia. China, with 100 million Internet users, has been the biggest success story outside the US. The venture capital interest we see in India right now shadows what the Chinese Internet already saw 3-5 years back.

Two, Indians are innovating to keep pace with the digital wave that’s sweeping the world. For instance, there aren’t enough PCs (18 million). But that’s all right. We have enough mobile phones (80 million, increasing by 5 million monthly), so we will adapt to the mobile Internet as the Chinese have done so successfully. Then, there aren’t enough credit cards (12 million). No problem. We’ll create alternative digital payment systems like mobile micro-payments. Both mobile Internet and online payment systems are just two of the areas where the entrepreneurial attitude of not submitting to infrastructure bottlenecks is alive.

This entrepreneurial attitude will surely come in handy to deal with the challenges ahead.

The Challenges

One, there is no vernacular content, so all the 40 million users are English-speaking. That brings us dangerously close to saturating the universe of Indians speaking English. To add the next 40 million users, the Internet has to turn vernacular. “Until that happens, the industry will grow depending on the rate at which we learn English,” jokes Sanjeev Bikhchandani, Naukri’s founder-CEO. Last week, Jeevansaathi, a matrimony portal also owned by Bikhchandani, launched its Hindi version, hoping to work around precisely this.

Two, Indians still live in the all-information-is-free world. We log on for information and entertainment, but aren’t ready to pay for it. Converting information-seeking into monetisable revenues will be the key challenge. Part of the problem is that currently the Internet largely offers commodity services. So, there isn’t much difference between the mobile ringtones that you download from Indiatimes or Rediff. There may be some difference in the quality of information and news, but by and large the Internet is synonymous with free or cheap information. The magic will happen when people start going to the Net for premium content. That is when they will pay to access a website.

To be fair, the Internet business has blended very well with the mainstream economy. It is as much a part of everyday lives now as the PC. It is simply a matter of time before it capitalises on this. The Industrial Revolution took about a century before we realised how much it had changed our lives. This one is just over a decade old