Project Report on Media Industry

Submitted To:

Submitted by: TANVI LAL ID: A1HP020

Dr. Archana Pillai

TABLE OF CONTENTS: 1. Introduction 2 .Previous Year Trend 3. Current trends 4. Future outlook 5. SWOT Analysis 4. Summary of Analysis

MEDIA INDUSTRY: INTRODUCTION: With astonishing speed, entertainment, media and publishing have evolved into a highly dynamic industry, interconnected by the global digital platform in a manner that few people could even have conceived of 20 years ago. From books and media printed on paper, music on CDs, movies rented on DVD at the local Blockbuster and TV networks that forced the viewer to be in front of the screen at a given hour in order to watch a given show, the industry has changed dramatically into an always on, easy to time-shift, always with you on mobile platforms, customizable stream of news, entertainment, movies and music. Entertainment and media, as a broad sector, are unique in that revenues are generated by multiple methods. Primarily, these methods are: 1) outright purchase, such as the download of an ebook or the purchase of a movie theater ticket; 2) subscription, such as cable TV fees or magazine subscriptions; and 3) advertising fees. Advertising revenues remain of vast importance to this industry, and the Internet has created a multitude of new outlets for such advertising. After difficult years during the financial crisis in 2008 and 2009, advertising revenue for global media firms has improved substantially. Global advertising media revenues were projected to be $495.0 billion in 2012, growing further to $510.3 billion in 2013, according to Magna Global, a unit of advertising agency leader Interpublic Group. Much of this growth is occurring in online media, and the fastest growing markets are in developing nations such as China, India and Brazil. Newspapers have been dramatically affected by online alternatives. With an approximately 44.4 million paid daily circulation in the U.S. as of 2011 (down from nearly 60 million in 2000), newspapers are finding it increasingly difficult to compete against Internet news and advertising rivals. Many of Americas leading newspapers have gone bankrupt, while others have downsized or become electronic only. Meanwhile, free daily or weekly newspapers and shopping guides have enjoyed substantial growth. Both newspapers and magazines are rapidly adopting new formats and new technologies with the goal of making themselves highly relevant and readable for Internet users on PCs, and for mobile users on smart phones, tablets, ebook readers and other digital devices. Some consumer magazine industry executives in the U.S. expect at least 25% of

their readership to be on digital devices by 2015. Recorded music sales on CD continue to drop while sales of digital music files gain market share. Traditional radio broadcasting is hurting, finding it increasingly difficult to gather listeners for advertising-based radio programming due to such alternatives as satellite radio (Sirius XM had 23.9 million paid subscribers at the end of 2012), Internet-based radio and digital music players. The burning issue affecting all sectors of the entertainment and media industry is maintaining control of content and audiences while taking advantage of myriad new electronic delivery venues. Competition in the entertainment sector is fierce.

Highly Concentrated The Media and Communications industry is Highly Concentrated. The production in this industry is dominated by a small amount of large firms that are able to shape the industrys direction and price levels. Primary Demand Drivers

Technological innovation Growth in business activity and advertising Consumer demographics Consumer leisure activity

Profitability Drivers

Effective marketing and advertising volume Marketibility of products Finding and keeping the right talent Programming mix Identifying new sources of financing Improving digital technology

Issues Related to Control of Entertainment and News Content:

1) Pricing for content (including free-of-charge access versus paid; illegal downloads versus authorized downloads; and full ownership of a paid download versus pay-per-view). 2) Portability (including the ability for a consumer to download once and then use a file on multiple platforms and devices, including tablets and smartphones, or the ability to share a download with friends). 3) Delayed viewing or listening (such as viewing TV programming at the consumers convenience via TiVo and similar digital video recorders).

Source: Plunkett Research, Ltd.

Previous Years trends: Financial Year 2012: Financial year 2012 was a tough year for the media industry. The slowdown in the economy resulted in companies spending less on advertisements. With dwindling ad budgets, the revenues of media companies declined substantially as they get a huge chunk of their revenues from this segment.

In the print space, efforts are being seen towards consolidation of business rather than aggressive expansions. The fall of rupee during the year hurt the bottomline of the print media companies as the cost of imported newsprint went up.

Digitisation deadline was further postponed on low availability of set top boxes. It is now expected that the 4 metro cities of the country will be fully digitized before the end of the calendar year.

Current Trends: One of the trends affecting most companies is the convergence of technology. Communications equipment is being combined today with computer technologies and other consumer electronics applications to create multifunctional devices. The most obvious of which are cell phones. Currently there are more sales of cells phones with MP3 capability than MP3 players sold and more phones with cameras than cameras sold. Additionally, with the convergence of technology cell phones and other wireless devices are being used more and more for financial transactions, from checking a bank account, purchasing online, and swiping credit cards. Wireless communication is also increasingly popular; in the United States and other developed countries, many people choose not to get a landline at all, as all their telephone needs can be met wirelessly. In developing countries, wireless technology is very important since these countries often do not have the required capital to set up a wired infrastructure.

Consumers of todays media demand more control over their products. Consumers are no longer content to sit through a T.V. program with all of its commercials, they want to watch the program online when it best suits the consumer and with no commercials. In addition, consumers want the media products to be available on many platforms with just one purchase.

There is one major concern that has developed from this integration of media sources for many media companiesintellectual property, or copyright, patent, trade secrets and industrial design protection. Since the CD came out in the 1980s, people have been pirating what a certain legal body has already obtained rights to sell. The MP3 and DVD formats make the illegal copying of music and other materials that much easier. However, there are also people working to create new and more effective copyright protection.

The last major trend has been the major push towards entertainment with electronics and social media. One of the fastest growing markets has been that of mobile and social gaming, with games such as Angry Birds, and Farmville. The social gaming creates an environment for people to interact and help each other progress through the game. These games can be relatively simple but entertaining enough to diverge from the regular gaming market of 10-25 year old males to include people from all walks of life

Future Outlook:

Telecommunications and media industries feed each other. Additional services offered by service providers create a need for upgraded equipment, and equipment companies have created the means for consumers to take advantage of even more services. The constant innovation and invention found in this industry will keep consumers interest high as they will always want the new products. This industry has much potential growth left in it, as evidenced by miles of fiber optic cables, which can transport communications at high capacity and speed that are only used to about ten percent of their capacity; it is expected that consumer demand will catch up. In addition, as consumers receive higher disposable incomes, they will begin spending more money on entertainment and media. This is a cycle that leads to growth and a favorable outlook for the industry. The global E&M market will grow at a CAGR of 5.6% over the next five years, generating revenues in 2017 of US$2.2tn, up from US$1.6tn in 2012. Within this overall figure, all three subcategoriesadvertising, consumer spend on content, and accesswill continue to grow, but at varying rates. Indian media industry is expected to grow at an annual average growth rate of 15% to touch Rs 1457 bn by 2016. 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.

FURTURE PROSPECTS The fortunes of the media industry are linked to the growth in the economy. India is set to grow at a rate of at least 8% in years to come. Rising incomes in the hands of people encourage them to spend more on discretionary items like media and entertainment. However, the trend is shifting more towards the online medium. The demographic profile of India also favours higher spend 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 digitization will radically alter the ways in which consumers receive channels. The manadatory digitization in the four metros and the entire country will bring in more subscription revenues for the broadcasters as opposed to under reporting of numbers by cable operators at present. With metros already being saturated, regional markets provide ample scope for growth in the media sector. In print media, newspapers are being published in vernacular language, In television, newer channels are introduced in local languages. Tier II and Tier III cities and towns are set to drive the Indian consumption story in the next few years.

SWOT ANALYSIS As plenty of media operations both large and small have found out in recent years, the media landscape changes constantly with significant effects on those who don't adapt. By conducting a SWOT on the media industry and analyzing its strengths, weaknesses, opportunities and threats, you're better equipped for the latest transition, whether your goal is to start your own media entity or simply to decide where to focus your marketing strategy. Strengths When media industries tout their strengths, they often mean their customers rather than the journalism awards sitting on the trophy shelf. They might note their total volume of customers, or their market dominance in demographics that business covets. For example-Brand names can also be a strength. Both customers and advertisers may want to be associated with media outlets considered elite news and entertainment sources. Weaknesses Every media outlet engages in a fierce competition for a larger share of audience. At any given time, ratings or circulation figures are a weakness for some industry sectors. Cost structure is a weakness in some traditional media industries, where a change in audience media preferences has left a solid brand, but a bloated workforce and narrowing customer base. New media can have a similar problem, with founders and investors pouring cash into their vision of the future that results in an unsustainable amount of red ink. Opportunities Traditional media industries are looking to monetize their offerings on the Internet, or turn their free social media outlets into effective sales pitches for their pay offerings. Theres also the timehonored opportunities presented by the expansion of markets. By Combining them both, and media outlets may find it profitable to specialize in niche content thats more popular outside of their traditional geographic footprint, and sell targeted Web advertisements to bring in the necessary revenue. The shifting consumer preferences, while often viewed as a negative, also

provides opportunities for media organizations to benefit. People using the Internet to get their news may lower the market for the physical newspaper, but create new opportunities to market its content, for example. Threats Disruptive technologies are a threat to media industries that havent been proactive in using them for their benefit. User-generated content, whether its a popular series of YouTube videos or the hottest social media site that everyones obsessing over, also takes eyeballs away from established media industries. Fragmentation is a further threat for those who depend on a high volume of customers, as broadcast TV networks, radio and newspapers in particular have found out. If you're a business looking to get the most comprehensive coverage possible in your advertising, doing it through the leading local radio station has less appeal if the ratings are far from what they once were.

SUMMARY OF ANALYSIS: KEY POINTS: Supply Of the more than 70,000 newspapers printed in India, around 90% are published in Hindi and other vernacular languages. There are a total of 825 private satellite TV channels as at the end of December 2011, permitted by the Information and Broadcasting Ministry, out of which 163 channels are pay. Demand 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. Barriers to entry In the electronic media, it is high for broadcasting since it is very capitalintensive. 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. Besides, broadcasters themselves commission programs and finance their production. Hence margins are lower. The broadcasters are finding it increasingly difficult to retain their key personnel. In spite of the high barriers to entry a slew of channels across languages and genres have been launched in the recent past. Bargaining power of suppliers In the print media, high for newsprint suppliers. It is 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. 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 CAS and DTH services will enable the consumer to choose the channels that he wishes to view increasing his bargaining power.

Competition

High in print media, especially in Hindi dailies. The print sector includes listed entities like Jagran Prakashan, HT Media and Deccan Chronicle. Regional print media too is seeing increasing competition. Competition is high amongst broadcasters especially for general entertainment channels. The space includes listed entities like Zee TV, TV 18, UTV, NDTV and Sun TV.

Each sector of the M&E industry faced its own advances and setbacks over the past five years. The cable operators and interactive media sectors performed well while electronic games and the music sector had lower EBITDA.

SEGMENT ANALYSIS: Electronic games The electronic game market will grow rapidly over the next few years. Changes to this market include:

Casual games: Casual games, played on social networks, have grown rapidly in recent years. Casual game players build their own virtual communities and characters that they use to interact with friends. Traditional game companies are accelerating their efforts in casual games space.

Micro transactions: Publishers use small purchases of virtual goods or services - or micro transactions - to earn revenue throughout a games lifecycle and to increase user loyalty.

Mobile games: The rise of smartphones help to spread the popularity of mobile games.

However, the downturn hurt the electronic games industry because consumers view games as nonessential and have cut back on buying them. Even before the economic downturn, electronic games EBITDA dollar growth had weakened, falling by 7% in 2008, then by a further 16% in 2009. But the future looks bright. Over the 2006-2010E period, the electronic games sector is expected to have the second-highest EBITDA dollar growth rate of all the M&E sectors. Cable operators Cable operators are losing basic subscribers, but making more money from subscribers buying advanced services, such as internet access, high-definition television and digital video recorders (DVRs). These companies didnt fare well in the downturn, but are focused on entering new growth areas such as the small- and medium-sized business market. Challenges to this sector include:

Continued competition from satellite and telecom providers Customers dropping cable to watch programs on the internet Higher retransmission fees paid to broadcasters Higher programming costs More spending on marketing to stay competitive

Due to these challenge and others, EBITDA dollar growth will be 4% in 2010, compared with 9% in 2009, according to analysts. However, during the 2006-2010E period, cable operators are expected to have the highest estimated EBITDA margins in the M&E group. Satellite television Satellite television has seen growth in subscribers and in average revenue per user (ARPU). This is because of advanced services such as high-definition television and digital video recorders (DVRs). However, these areas of growth declined during the downturn, but are expected to return. Another challenge is that these companies cant provide a triple-play bundle - the service combination of voice, data and video. This makes them vulnerable to both cable and telecoms which can. To overcome this challenge, satellite providers create a bundle by relying on a telecom provider to provide phone and internet services. Satellite providers growing ARPUs and maintained subscriber base will positively affect EBITDA in 2010. Television broadcasting Television broadcasting has simultaneously suffered from economic difficulties and from its customers migrating to cable programming, the internet and other entertainment choices. The good news is that more people are watching TV online and via mobile devices. This allows networks to use existing investments to create new advertising revenues. Another new profit source for local television stations are retransmission fees from cable

companies. These fees go straight to the bottom line, giving a boost to long-term EBITDA dollars and margins .Yet, these recent growth spurts havent done much to affect the big picture. Over the 2006-2010E period, TV broadcasting is expected to see EBITDA dollars contract by a CAGR of 4% - the second-greatest decline among the M&E sectors. On the positive side, TV station ad revenue improved in 2010, led by improvements in the auto and financial services segments and robust political advertising. Film and television production Owners of both films and TV shows are making content available through a growing number of distribution platforms - including video on demand, mobile devices, game consoles and other online content aggregators. Yet traditional distribution tracks arent doing as well. DVD sales continue to decline, causing companies to look for other sources of revenue. Studios hope that the success of 3-D will help offset DVD declines. They also think that 3-D can help stem movie piracy, since counterfeiters cant replicate the 3D effect of films with a camcorder. During the period between 2006 and 2010E, the sectors estimated EBITDA dollar growth (7%) landed it near the middle of the M&E group. However, its EBITDA margins are among the lowest of the sectors. In 2010, analysts expect film and TV production EBITDA dollar growth to see a sharp rebound, while EBITDA margins are expected to rise slightly. Publishing Declines in advertising revenues have hit the publishing sector hard. However, advertising dollars are recovering some now that the downturn is easing. In the BRIC (Brazil, Russia, India, and China) countries, the newspaper industry continues to expand due to increasing literacy and the growth of the middle class. Additionally, new e-reader platforms offer publishing companies more profits. This isnt just a

developed country phenomenon: E-readers are expected to boost publishing sales globally, especially in China. By 2015, China will outpace the US to become the biggest e-book market in the world. Nevertheless, the publishing industry is still adjusting to the digital revolution. Between 20062010E, EBITDA dollars are expected to contract by a CAGR of 1%. Music The music industry has been delivering content digitally longer than other M&E industries. Still, digital sales arent making up for the loss of CD sales. To increase profits, the music industry is focused on aggressive cost-cutting via digital distribution and new revenue opportunities. These opportunities include:

Ad-supported music Licensing music to music-themed video games Licensing content to mobile operators "360 degree business model" (e.g., labels gather revenue from live performances, merchandising and sponsorships)