1. Indian Entertainment Industry

2. The Role of Music in Indian Films

3.

How is the Indian entertainment industry using mobile?

Mobile Squared Roadshow: Asia

6 May 2010

Presented by:

Jonathan Dotan

Monty Munford

1. Overview of the Indian Entertainment Industry

2. Role of Music in Indian Films

3. Ground Realities

4. The Future

1. Indian Entertainment Industry

THE INDIAN OPPORTUNITY

14.6

15.2

6.32.0 (1.2)

1.6 (2.4)

(10.9)

(91.3)

(101.1)

(3.3)

(5.5)

(55.1)

(106.0)

(74.1)

2005 2015 2025

2.6 (49.9)

(93.1)

(94.9)

(33.1)

(9.5)

3.8

3.8

Globals

Strivers

Seekers

Aspirers

Deprived

Aggregate Disposable Income, by annual income bracket

Middle Class

Source: McKinsey and Co. 2006

3/4 of India's consumer market in 2025 doesn’t exist today.

About $1.32 trillion-a-year in future purchases is up for grabs.

A Picture of India in 2025:

Continuing rise in personal incomes will spur a ten-fold increase, enlarging the middle class

to about 583 million people, or 41% of the population.

India's wealthiest citizens will total 24 million (larger than the current population of

Australia) and account 20% of national private consumption

Primary Figure: Aggregate Disposable Income, in trillion INR

Bracketed Figure: Number of Households, in millions

30.6

13.7

20.9

21.7

5.4

11.4

3.1

INDIAN DOMESTIC BOX OFFICE

Indian film goers account for half of the world’s ticket admissions,

but have some of the lowest ticket prices in the world.

Source: Goldman Sachs Research 2009

INDIAN FILM INDUSTRY

The most prolific filmmakers in the world and a large number of

screens across the country.

Source: Goldman Sachs Research 2009

INDIAN ENTERTAINMENT LANDSCAPE:

2006-2009e

In billions Rs 2006 2007 2008 2009e CARG

Domestic Theatrical 62.1 71.5 80.2 68.5 3.30%

Overseas Theatrical 5.7 8.7 9.8 6.8 6.20%

Home Video 2.9 3.3 3.8 4.3 13.10%

C&S Rights 5 6.2 7.1 6.3 7.90%

Ancillary Streams 2.5 2.9 3.5 3.5 12.90%

Total 78.2 92.6 104.4 89.4 4.60%

Source: KPMG-FICCI FRAMES REPORT 2010

INDIAN ENTERTAINMENT LANDSCAPE:

2006-2009e

USD 2009e

Domestic Theatrical 1,475m

Overseas Theatrical 144m

Home Video 91m

C&S Rights 134m

Ancillary Streams 74m

Total 1,893m

Source: KPMG-FICCI FRAMES REPORT 2010

INDIAN ENTERTAINMENT LANDSCAPE:2010p-2014p

In billions Rs 2010p 2011p 2012p 2013p 2014p CARG

Domestic Theatrical 73.3 79.3 85.8 93 100.8 8%

Overseas Theatrical 7.3 7.9 8.6 9.3 10.1 8%

Home Video 4.7 5.2 5.9 6.6 7.4 11%

C&S Rights 7 7.9 9 10.1 11.4 12%

Ancillary Streams 4.1 4.7 5.4 6.2 7.1 15%

Total 96.4 105 114.7 125.2 136.8 8.90%

Source: KPMG-FICCI FRAMES REPORT 2010

PRODUCER REVENUE STREAM

Domestic

Theatrical Sales

(50%)

Sale of

Overseas

Rights

(15%)

Other Sources

(35%)

Cable and Satellite

Rights

(16%)

Home Video Rights

(9%)

Physical Music

Rights

(5%)

Product Placement

/ Merch

(2%)

Digital Rights

(3%)

Source: Crisil, Nirmal Bang Research

2. Role of Music in Indian Films

KEY ROLE OF MUSIC IN

INDIAN FILMS

• 3-4 song and dance

numbers per film

• Music launch event first

exposure to film

• Music videos core of film

trailers

• Music videos cut into TV

promos

MUSIC PLATFORMS: INSTALL BASE

• At peak, cassette players 40 million

• At peak, CD players 40 million

• Current broadband connections: 16 million

VS

Source: Estimates from Sony BMG India

500 million+ mobile phone

subscribers(20m subs added in March 2010)

60 million mobile Internet-enabled handsets(Despite lack of 3G still 8-10% Y-Y growth)

THE RUB: REVENUE SHARING AGREEMENTS

Operator

Rationale:

• High Data Costs

• Marketing costs

• No sustainable

advertising revenue

• Not enough

spectrum

• Legacy of bad deals

30% 70%

TURNING POINT: AIRTEL - SAREGAMA

Rs million Q1-2009 Q2-2009 Q3-2009 Q4-2009

Saregama 288 305 286 Awaited

*Airtel Music Revenue

(40%)

4007 4385 4496 4813

Airtel Non-SMS VAS

Revenue

1602 1754 1798 1925

May 2009:

Airtel proclaims its has overtaken in revenue

India’s largest music company Saregama.

Source: Analysis by Medianama

PERCEIVED VS PRACTIVAL VALUE

MATRIX

ROLLOUT OF VAS FEATURES:

Source: Boston Analytics MVAS Report 2007

SNAPSHOT OF MOBILE MUSIC

FORMATS• Full-track downloads (FTDs) have yet to find a market:

• Slow mobile connection speeds

• Low penetration of music-capable handsets

• Piracy

• Whereas, piracy-free sales of RBTs have grown rapidly.

– In 2008 accounted for 70% of entertainment VAS revenue.

– 35% CAGR

– Market share for RBTs will shrink, but will continue to prosper:

• Easy consumer access to content 36 via shortcodes

• Premium SMS

• IVR portal servicesPopular with India rural population (40% illiterate)

3. Ground Realities

CONTENT OWNER: T-Series Music Label

Best relationships with filmmakers:

• Preemptively buys rights

• Pays big

• Contributes massive advertising

– Retains blocks of ad revenue on hand

– Cornered radio stations with MGs

– Gets TV networks to license songs to use in reality shows etc.

• Excellent distribution:

– Still 35% in physical packaged media sales

Founder Gulshan Kumar

DIGITAL AGGREGATOR: Bollywood

Hungama

• 2003: Signs back-to-back deal for all digital rights handling for T-Series.

• The advantage that Hungama provides:

– Hassle-free expertise

– International contacts

• Conflicting Interests?

– The carrier has to justify ROI per product

– Hungama is in a marketshare game.

– Content owners?

Founder Neeraj Roy

CBRT PLATFORM: OnMobile

• Right place, right time.

– Operators realize WAP investments hadn’t lived

up to expectations

– 85% to 93% of total subscriptions are pre-paid

– ARPU from peer-to-peer (P2P) SMS is expected

to dip in the medium term as voice becomes

relatively cheaper than SMS.

• Became default CRBT provider since 2004

4. The Future

• New technology providers:– Operators renegotiating contracts

– New nimble operators/MVNOs

• New formats:– IVR

– Text based premium packages

– Gaming

• New role of social media– 1.5m Twitter users

– 8mFacebook users

– 15m Orkut users