Creativity and Transformation to propel new economics of Indian Film industry

The CII-A.T. Kearney study reports an annual growth rate of 25%+ for the next four years

(New Delhi, November 22, 2007) -- The Indian Film industry is around US$ 1.8 billion in 2006 and expected to grow at 25%+ per annum in value terms for the next four years to reach US$ 4.5-5.1 billion by 2011. These are the findings of the CII - AT Kearney study "The new economics of the Indian film industry: creativity and transformation" that was released at CII’s "India - The Big Picture" conference in Goa today.

According to the CII-A.T. Kearney study, Films are the genesis of an entire economic chain dedicated to bringing entertainment to an audience. They have the highest inter-linkages with other mainstream M&E segments, such as TV and Music, and hence the focus of the study. The study aims at focusing on a crucial aspect of the creative industry, a cornerstone of the M&E sector - films - and explores the emerging business models for the Indian film industry.

"The Indian film industry is on the threshold of a transformation driven by digitization and changing customer preferences which will have a significant impact on business models - both within and across the media and entertainment value chains. Digitization will lead to expansion of large scale exhibition networks and expansions of multiplexes and large exhibition chains into tier II and III cities. This is going to alter the balance of power with large production houses and force the production houses to embrace corporatization, and move towards bigger budget movies," said Saurine Doshi, Partner, and A.T. Kearney India.

"We expect non-box office revenues to increase three to four times in the next five years driven by multiple customer touch points. Box office revenues are expected to decrease to nearly 75% by 2010 and further to 60 percent by 2020 from 84 percent in 2006. This is due to the emergence of new channels and increasing touch points to access film content, penetration of home video, internet media and mobile. Our study showed that more than 70 percent of urban and more than 30 percent of tier II/III population access film content on their mobiles," he added.

The CII - AT Kearney report also highlights the key issues that need to be addressed if the film industry needs to grow and transform significantly. Some of the issues are: Curbing piracy, protecting IP rights, nurturing a talent pool and globalization of Indian content.

Potential Business Models in the Indian Film Industry

According to the study, entertainment majors spanning content creation, aggregation and distribution would emerge (a model not encouraged elsewhere by law to avoid restrictive trade practices). Therefore, there would be integration between film production, distribution and exhibition across production houses, organized theatre chains and cable network operators. The study indicates that the industry has already started mirroring some of these business models.

This transformation will impact the entire value chain of the film industry. The study highlights the various opportunities for exhibitors, traditional distributors, production houses, home video aggregators, satellite broadcasters, cable TV distributors and music publishers.

The study also highlights the change that the new media like mobile, Internet and IPTV can possibly bring over the next few years.

Source : Equity Bulls

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