Alokananda Chakraborty

KPMG pegs growth of Indian entertainment sector at a moderate 6.4 per cent

The much-awaited Entertainment Industry Status Report by KPMG identifies the potential areas of growth and the way ahead for the business

The year 2002 in many respects was a mixed bag for the Indian entertainment industry. If blockbuster Lagaan brought international fame and glory to the sub-continental giant, a crippling loss of Rs 3 billion on gross revenues of Rs 39 billion paralysed the film industry at the same time. If the landmark CAS Bill was passed in Parliament, media fragmentation as well as the viewership of news channels reached a new high. If crossover cinema dominated the headlines for the better part of the year, branding and marketing were critical issues dogging the industry at the same time.

Amid such contradictory developments, KPMG, the knowledge partner of FICCI (Federation of Indian Chambers of Commerce & Industry) released its much-awaited Entertainment Industry Status Report on the first day of Frames 2003 in Mumbai.

The highlight of the report was the moderate growth registered by the sector in 2002. The figure, according to KPMG, stood at 6.4 per cent with gross revenues of Rs 166 billion. Interestingly, the industry is expected to grow at a compounded annual growth rate or CAGR of 20 per cent, touching a figure of Rs 419 billion by 2007.

Television retained its position as the dominant medium in terms of growth with a CAGR of 21 per cent and total revenue of Rs 111 billion. The sector, according to the professional services and consulting firm, is expected to maintain this growth rate and touch a figure of Rs 292 billion by 2007, while the market size for radio, the most cost-effective of all media, was pegged at Rs 1.6 billion last year and is expected to grow to Rs 6.2 billion in the next four years. Nonetheless, question marks remain about the viability of this medium, which along with print is the oldest in the country, and received a new lease of life two years ago with the privatisation of radio and the mushrooming of FM stations across the country.

The sector that suffered most with multiple problems of piracy and the "stripping of music" by radio stations was undoubtedly the music industry, which saw a drop in revenues from Rs 12.6 billion to Rs 10.4 billion. Legitimate revenue to music companies was Rs 6.2 billion or 60 per cent of the total amount, highlighted the report.

The study also threw light on the business of live entertainment, which it claimed was "evolving" with event managers demonstrating their capabilities in successfully managing national and international events over the last few years. "However, issues like high entertainment taxes in certain states, lack of world class infrastructure and the unorganised nature of most event management firms continue to hinder growth in this segment," stated the report.

Emerging sectors, according to KPMG, include entertainments parks (such as the Fun Republic chain of family entertainment centres promoted by the Essel Group) and the visual effects business, which is poised to contribute significantly to the entertainment industry in the future.

Apart from these buoyant predictions, the report touched upon the need for rationalisation of licence fees in radio, a meaningful interpretation of CAS in television and a level playing field for music companies to combat piracy, which could reduce friction and push the growth of the entertainment industry as a whole. © 2003 agencyfaqs!

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