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Last Updated: Tuesday, 17 October 2006, 23:16 GMT 00:16 UK
Indian media growth well scripted
by Gavin Stamp
Business reporter, BBC News

Indian model tries on jewellery
Wealthier Indians want more media choices and are willing to pay

India's size poses many challenges to businesses but its geographic stature is one of the main reasons for its current hold on the imagination of foreign investors.

The media and entertainment industries are a case in point, with a market of 550 million consumers that is impossible to ignore.

It is no surprise then that, in investment circles, India is rather crowded now.

"Every private equity investor is camped out somewhere between Delhi and Mumbai," says Kunal Dasgupta, chief executive of Sony Entertainment Television India - a joint venture between US-based Sony Pictures Entertainment and Indian investors.

Along with much of India's media elite, Mr Dasgupta has just attended a conference in London organised by commercial body FICCI and the Commonwealth Business Council, aimed at channelling the rapid growth of the country's creative industries.

He radiates confidence about India's prospects in this area and, with good reason, since the sector is seeing an unprecedented gold rush.

Indian cricketers celebrate a wicket
Broadcasters are paying huge sums for cricket coverage

The television, radio, publishing, film, music and advertising industries are already worth an estimated 353bn rupees ($8bn).

Research published this year by PricewaterhouseCoopers forecasts that the industry will see compound annual growth of 24% over the next five years.

Should that be the case, then it will be worth a combined $19bn by 2010.

The industry's growth rate is expected to comfortably exceed that of the economy as a whole, an impressive feat given that India is hoping to clock up close to 10% annual growth in the next few years.

Consumer power

Of course, it is Indian's dynamic economy and growing international outlook that is fuelling the transformation of its media scene.

In terms of purchasing power, India has now become the world's fourth-largest economy.

With an estimated 30 million Indians joining the ranks of the middle class every year, it is little surprise their appetite for entertainment, desire for greater choice and willingness to pay for sport, films and other content is rapidly refiguring the marketplace.

The whole attitude of bureaucrats and government ministers is changing
Deepak Kapoor, PricewaterhouseCoopers

India's staggering demographic profile - in 2020 the average Indian will be 29 years old or younger - has also caught the attention of the world's largest media owners and the advertisers that fund much of their output.

At the moment, advertising expenditure as a percentage of economic output is very low, below that of China and most other Asian nations.

The media marketplace is also ripe for development.

There may be 12,000 cinemas in India but this only amounts to 12 for every million residents, compared with 117 per million in the US.

Even after the landmark deregulation of the radio industry last year - which saw the government award more than 300 new licences - India now has about 20 FM radio stations compared with 6,000 in the US.

All this amounts to huge possibilities for future growth.

"I believe the Indian media and entertainment industry is heading for exponential growth and all we need is to cash in on the growth potential and not let go of the opportunities," argues Deepak Kapoor, a PricewaterhouseCoopers partner specialising in the media sector.

Ownership issue

India's urban rich will undoubtedly be the focus of these efforts but, contrary to some experts who fear that the rural poor will be neglected, Mr Kapoor says there is huge potential for products aimed at them.

"It represents a huge opportunity, which has so far remained largely untapped due to reasons of accessibility and affordability," Mr Kapoor says of the estimated 128m people living in rural areas.

India's increasingly liberal policy on foreign investment is helping the industry develop, experts believe.

We have to shift our attitude from saying we are trying to recover our investment from the Bollywood circuit
Jyoti Deshpande, Eros International

Foreign firms can now own 49% of Indian TV distribution businesses, 26% of news-focused TV and print businesses and 20% of radio stations, and are able to own film companies outright.

Although there are some concerns about inconsistencies, most of the world's largest media firms are present in India and it is widely assumed the market will be liberalised further in the near future.

"They are approaching it in a gradual fashion," Mr Kapoor says of the government ministers' approach to an industry which is of vital cultural and political, as well as economic, importance.

"We want them to accelerate that but the whole attitude of bureaucrats and government ministers is changing."

India's media prospects look rosy but the shadow of China - which has far higher literacy rates and double the internet usage - hovers over it.

Indian Prime Minister Manmohan Singh
The Indian government has relaxed limits on foreign media ownership

"What fascinates me is the kind of success that China has achieved," says AP Parigi, chief executive of Entertainment Network, a subsidiary of the Times of India newspaper group

"We hope we will overtake China, at least in a few sectors, in the next 10 to 20 years."

But he adds an important caveat.

"If India does not maintain its current level of GDP growth and even improve it, we will be in trouble," he warns. "Nothing will be scaleable, sustainable or profitable."

Moving image

If India is to overtake rivals, then much will depend on the continued success of the national film industry, known universally as Bollywood.

As well as being an international phenomenon, Bollywood is a major industry, employing more than 6,000 staff and producing 1,000 films a year.

It is also evolving, increasingly driven by corporate consolidation and greater emphasis on marketing and international partnerships.

Dance troupe Bollywood Steps
Bollywood culture is hugely popular across Europe

"The film industry has often been accused of being unorganised but this is changing at a very fast pace," says PwC's Deepak Kapoor.

A good example of this is Eros International - one of the world's leading international distributors of Bollywood films - which floated on the UK's Alternative Investment Market this summer.

The firm owns the rights to 1,300 of Bollywood's most popular films that it is keen to exploit in various formats.

But after recently moving into film production, Eros envisages a wider market for Indian films than Bollywood has typically aimed at.

"Countries across Europe, from Scandinavia to Germany and Russia, are embracing Bollywood films very openly," says Jyoti Deshpande, the firm's chief executive.

But she believes producers must look to create more films with so-called "crossover appeal", of interest to a mainstream audience as well as the huge Asian diaspora in Europe and the US.

"It will take a different breed of movie, like Monsoon Wedding, Bend it like Beckham, or Bride and Prejudice, to have a wide appeal in the UK and the US.

"We have to shift our attitude from saying we are trying to recover our investment from the Bollywood circuit and whatever comes from that is great. We want to show films more widely."

Thinking like this may worry some Bollywood purists but it is a measure of India's increased international confidence.

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