Drab Hollywood brings top media firms to Bollywood

MUMBAI: An 18% annual growth in the media and entertainment industry and a 20% growth in advertising has encouraged global giants such as Walt Disney, NBC Universal, Time Warner, Viacom, Sony and News Corp to invest nearly $1.5 billion in India.

The latest to join the league is Warner Bros Pictures, which recently sealed a multi-picture, regional film production deal involving Soundarya, daughter of south Indian gigastar Rajnikanth.

Experts said the behemoths are plain bored with their growth numbers in the US.

“The US television industry is at saturation point. It’s growth is dismal at around 2%. Revenues from advertising are falling as the audience is moving online, where ad rates are drastically low compared with TV. But the markets in Europe and South-east Asia are showing much better growth numbers,” said one.

Jolanta Masojada and Venugopal Garre, analysts with Credit Suisse, in an insightful report on Monday said the maturity of the US media market, together with added cyclical and structural challenges, substantially increases the appeal of the fast-growing Indian market.

On the television front, analysts say a significant impact will happen on content.

“The success of US television, especially formats like American Idol, is being studied by international broadcast networks. Some are trying to emulate their business models of how they converged telecom, online and TV together and made enviable brands that are now being replicated through format shows. However, India doesn’t need to try too hard. The US expertise in content and programming will slowly reflect in their Indian investments. Consequently, standards of content will go up,” says a media analyst.

Niche channels are, therefore, expected to proliferate. With better programming standards and international affiliations, their Indian partners will be able to command higher ad-rates.

“Homegrown networks currently cannot command high ad rates. With better formats and content on board, they’ll enjoy better profile of audiences,” says the analyst.

Media planners, however, aren’t convinced that international networks will make money under the Indian sun, merely because they have the resources and formats.

Chandradeep Mitra, president, Mudra MAX, says, “An advertiser pays for the kind of audience he gets. At the end of day, the challenge is all about understanding Indian audiences —  consumer insights are going to be the key for US media conglomerates.”

The challenges don’t end there, though. Distribution bottlenecks will have to be overcome. The motivation is that DTH players will expand by the end of 2008 and digitisation of cable is expected to take place even more aggressively.

“To turn around the maxim of a famous media moghul - Content is King - in India, content is commodity, in our view, until distribution opens up meaningfully,” notes Masojada and Garre in their report.

“There is likely to be short-term pain for long-term gain, given that growth opportunities of Indian market remain attractive. Three established incumbents (News Corp, Sony, Disney) are in the strongest position to benefit respectively from scale, differentiated content (cricket) and brand.

NBC, Time Warner and Viacom face greater challenges as later entrants launching channels into a highly competitive general entertainment genre.”