A Report on

Attractiveness of Media & Entertainment

Industry in India (Porters Five Force Analysis)

Prepared by-

Chandra Bhushan Kasera

Symbiosis Institute of Business Management, Bengaluru
Barriers to Entry and Competition
The media and entertainment industry is high capital and technological intensive.
From an incumbents point of view, be it Zee Networks in Television sector, PVR in
film sector, D B Corp. In print media segment, etc. require a very high capital
investment in fixed assets and technology to deliver their products and services. And
thus their attractiveness is fairly high.

There are many laws that regulate the performance of media in India. Laws related
to the mass media have been there since the very beginning. Post-Independence,
Government has enacted many more media related laws. Media being a very
powerful influence on the society is regulated and controlled by various legislations
enacted from time to time. And thus Governments protection to new entrants in the
industry is highly attractive.

Access to channels of distribution is easy since the products and services of the
industry are easily accessible. One can easily get a copy of newspaper, or watch a
movie. And with growing digitalisation, mobile and internet penetration, it further
becomes easy for the industry to distribute its products and services. And thus the
attractiveness is very high.

The switching cost, however, is not lucrative from an incumbents point of view. Its
very cheap, easy and convenient for any consumer to switch from one channel to
other or newspaper or media house.

Product Differentiation or the ability to distinguish the services from other

competitors & Brand Identity are low because of presence of large number of
channels and the competition among the different types of channels (entertainment,
sports, music etc.) is also very high. Currently, there are 832 channels in India and
thus product differentiation scores low when viewed from an incumbents point of
view.

News & Current 403

Affairs Channels
Non News 429
channel
Total 832

The factor of economies of scale is also high because of the high capital investment
required and growth in the no. of viewers of particular channel. The industry requires
huge investment in technology and a mature company has significant advantage
over the companies which are new because of their ability to spread the cost of fixed
assets over a large viewers base. This fact can also be substantiated from the
amount of capital investment in fixed assets of two largest companies in this sector.

Zee Entertainment
Tangible Assets 266.1
Intangible Assets 27.4
Total 293.5

Sun TV Network
Tangible Assets 714.5
Intangible Assets 359.65
Total 1074.15
(All figures in crores)

Rivalry among Competitors

As stated before, the Indian media and entertainment industry is high competitive
with around 832 channels competing in the TV space. Thus, rivalry among the
competitors is very high and this makes the sector very unattractive from
incumbents point of view.

Market Share of Hindi News Channels

3.40% 3% 1.40%
Aaj Tak
4.30%
India Tv
4.50%
18.70%
Star News
Zee News
5.40%
IBN 7
7.30%
18.20% NDTV India

7.90% News 24
TEZ
10.20%
15.70% Samay
VOI

Indian Media and Entertainment industry is one of the most lucrative sectors in the
economy, having a size of $ 17 billion in 2014. The industry is further poised to grow
to $32.7 billion at a CAGR of 13.98% in 2019. The next five years will see digital
technologies increase their influence across the industry leading to a sea change in
consumer behaviour across all segments. Thus, the sector is highly attractive from
incumbents point of view.

35
Market Size (USD billion)
30

25

20

15

10

0
FY 13 FY 14 FY 15 P FY 16 P FY 17 P FY 18 P FY 19 P

TV penetration in India is 71%, much lower than in developed countries. Hence,

there is considerable amount of potential to increase the number of TV households
in India.

Jan. 2014 Jan. 2015

Total Households 234 234
TV owning households 153 167
Digital 78 84
(All figures in Millions)

There is a tremendous potential for the growth of media and entertainment sector
with the growing digitisation and growing Indian economy which would lead to
increase in the disposable income of the people. Thus, strategic stakes are very high
and attractive for the media industry.

Bargaining Power of Suppliers

The print media industry is highly dependent on paper and ink industry as suppliers.
India is one of the major producers of paper and thus number and availability of
paper suppliers is very high. The entertainment industry i.e. TV and film sectors are
highly dependent on content writers, actors, and other people with very specialized
skills. However, the content writers in the media and entertainment industry are
increasing and so is the number of actors and actresses. Thus overall, attractiveness
of the suppliers (number and availability) is high.
Suppliers threat of forward integration is low to moderate in the industry because in
the print media industry, along with paper you need to have an excellent human
capital and people with reporting skills and wide network of regional offices to
communicate news from different parts of the country. However, in the film industry
it is quite possible for the actors, writers etc. to collaborate and open a production
house.

The suppliers contribution to cost is very high because of the entire film and TV
industry is dependent on these actors and content writers and thus the
attractiveness is very low. Industrys importance to supplier is very high and thus it is
becomes very attractive from incumbents point of view.

Threat of Substitutes

With increasing interest of urban population in outdoor event such as theatres,

plays, music concerts, sporting events like world cup, and 20-20 tournaments,
cultural programmes and penetration of internet and mobile in the Indian
population, the threat of substitutes to the industry is growing at large. However,
these events happen once in a while and cannot replace the whole industry, thus
attractiveness in terms of availability of close substitutes is moderate - high.

Switching cost for the consumers to the substitutes is very low and the values of
substitutes services are low as they are one-time events. Thus, the attractiveness
from the market leaders point of view is high because the consumer gets the value
of the services but can experience it only once. Profitability of producer of the
substitutes product is also very high and this also reduces the attractiveness from
incumbents point of view.

Bargaining Power of Buyers

Given the penetration of TV in India and the potential of growth of TV in Indian

market and also the growth in disposable income of people (per capita income),
customer base of the Indian Media industry will grow significantly and the no. of
buyers. Thus, the industry is attractive from no. of buyers point of view.

Per Capita Income

2012 $4890
2013 $5240
2014 $5630
As discussed earlier, the no. of substitutes of the industry is very high, which makes it
very unattractive from the incumbents point of view. Attractiveness of contribution
to quality will be moderate because of the high no. of players and almost similar
services provided by all the players. Indian Media industry is a highly fragmented
industry that no single enterprise has large enough share to influence the entire
sector. Consumers loyalty towards one channel is less, as variety of alternative
sources of entertainment is available.

Conclusion

To conclude, we can say that the barriers to entry to the media industry is very high,
bargaining power of suppliers and customers is moderate and threat of substitute
products is also very low which makes it very attractive from the incumbents point
of view. However, with the availability of many competitors and the rivalry existing
among them makes it unattractive. Overall, we can say that the media and
entertainment industry is moderately to highly attractive from the investment point
of view. No wonder the industry is expected to grow at the CAGR of 14% to reach
revenues of US$ 32.7 billion.

Future Trends

Government of India has taken many steps to boost up the growth of Media
and Entertainment sector. First of all, the FDI limit has been raised from 74%
to 100% in cable and DTH satellite platforms to attract greater institutional
funding. The film industry has been granted the status of industry for easy
access to institutional finance.

The Govt. has given the go-ahead for licences to 45 new news and
entertainment channels in India. Among those who have secured the licenses
include established names such as Star, Sony, Viacom and Zee. Presently,
there are 350 broadcasters which cater to 780 channels.

The Union Cabinet chaired by the Prime Minister, Mr Narendra Modi, has
given its approval for entering into an Audio-Visual Co-Production Agreement
between India and the Republic of Korea and to complete internal ratification
procedure, to enable the agreement to come into force.

Television and film production company, Balaji Telefilms Limited has

announced that it is entering the American television market by signing an
American television series production deal with Indus Media. The deal will see
Balaji secure rights to the TV series Brown Nation, a satirical comedy based
on the lives of Indian Americans.
 Viacom, one of the leading American global mass media companies, has
acquired 50 per cent stake in Prism TV for Rs 940 crore (US$ 141.59 million).
Prism TV owns and operates regional entertainment channels under the
Colors umbrella.

Twitter Inc. (based in San Francisco) plans to set up a research and design
(R&D) centre in Bangalore to grow faster in emerging markets. This will be
Twitters first such facility outside the US.

Cinepolis India Private Limited, the Indian movie exhibition arm of Mexican
chain Cinepolis, has 200+ all across India (2015 end) and plans to take the
number to over 4000 screens by the end of 2017.