Strength in numbers was the focus of this year’s FRAMES conference, an annual event focusing on India’s media and entertainment (M&E) sector. Panelists at the conference, held in Mumbai and organized by the Federation of Indian Chambers of Commerce and Industry (FICCI), noted that as the second most populous country in the world, India boasts a potential audience for projects behind only China in terms of size. But amid the salivating over the market’s potential, there was also talk of other trends — such as the entry of big business into the media sector and the growing importance of the vernacular in print — that could have significant impact.

India achieved the “billion eyeball” mark a few years ago in terms of population — though not necessarily in terms of audience. So why did the media and entertainment industry opt to highlight it at this year’s conference? An FICCI-KPMG report, a comprehensive document published in conjunction with the meeting, asks the question, but fails to give definitive answers: “Why is this the relevant year to articulate this theme? While 2012 was a challenging year for the industry as a whole, it was also a year of significant changes [which] will position the Indian M&E industry on a stronger footing for the future.” (The report also notes that India is not expected to deliver audience figures in the billions for entertainment and media properties until 2017.)

Media includes Bollywood — India’s Hollywood. The country’s film industry had a particularly good year in 2012, with a 21% growth rate over 2011. But the M&E industry as a whole is undergoing considerable restructuring, the final contours of which are not evident yet. Will radio take off? Will the Internet leapfrog primitive infrastructure in many regions of the country and reach its full potential audience on the mobile phone? (According to a McKinsey report, India will overtake the U.S. in the number of Internet users by 2015. But nearly 75% of the 330-370 million Internet-using consumers in the country will be accessing the medium through mobile devices.)

The big achievement of 2012 came in the form of considerable progress in the area of digitization. “Digital technology is expected to drive the M&E sector’s growth in a challenging macro environment by spurring end-user spending and transparency,” the KPMG report noted. In the film industry, 77% of movies are now produced in digital format, which are easier to distribute and offer the potential of higher profits; analog prints are expected to be fully phased out in two years. Television has transitioned from analog to digital in India’s four major metro areas (Delhi, Mumbai, Kolkata and Chennai), completing the first phase of a project with mandatory deadlines established by the government. “Digitization is a superb example of a successful and a powerful alignment,” said Uday Shankar, chairman of the FICCI M&E committee and CEO of Star India. “With the first phase of digitization underway, we now have more than 10 million cable homes that support digital. In the next few months, another 80 million homes will be digitized. This will be the fastest digital transition anywhere in the world.”

While full digitization seems like an eventuality in India, Shankar proposed a benchmark for the film industry that appears more unlikely, at least in the near future: He wants Bollywood to achieve a Rs. 1,000 crore (US$185 million) blockbuster. To put this in perspective, in 2012, only nine Indian films crossed the Rs. 100 crore net collections mark.

But Bollywood as an industry is only expected to continue its growth trajectory; Indians are hungry for entertainment and the sector is perhaps the one place where the country has an edge over China. “For every hour of programming needed in China, there are only six minutes available,” media commentator Vanita Kohli-Khandekar wrote in Business Standard. “Since China is not a democracy, its ability to generate enough content to monetize its superior media infrastructure remains hobbled. We, on the other hand, have loads of content trying to make money [using] terrible infrastructure.” The hope of the industry is that digitization will help ease those challenges in the future.

The Future of Print

The real changes that are taking place in the M&E sector, however, are happening more slowly and in its traditional bastion — print. “We are the only country where print is growing,” Ronnie Screwvala, managing director of Disney UTV, told the audience at FICCI-FRAMES. But that’s only because it has been rescued by vernacular media, or outlets published in and serving speakers of India’s numerous regional languages and dialects.

“Regional media continues on a strong growth trajectory,” according to the KPMG report. “Tier II is the next buzzword in the Indian economy. The reasons are many, primary being the fact that India’s smaller cities have delivered robust economic growth over the past 15 years.” These cities account for around 150 million of the overall urban population and 50% of urban GDP.

The growth of vernacular media isn’t limited to print. National TV channels including Zee, Star and Sony have been launching avatars in different languages with advertising focused on those consumers.Star has launched Pravah in Marathi, Jalsa in Bengali, a joint venture with Kerala’s Asianet for Asianet Plus in Malayalam, Suvarna in Kannada and Sitara in Telugu. Discovery India has spun off a Tamil Channel, in addition to multiple language feeds. “This allows greater eyeballs for their shows and offers a better business proposition for their marketers,” the KPMG report noted. “We will see significant additions in mass media offerings for the rural customer also.”

While the television wars have commenced, the battle in English language print media seems almost over. Over the past few years, publications such as The Times of India and the Hindustan Times have been trying to go national, with varying degrees of success. Now the papers are going back to more focused coverage areas as advertising revenues slow down. The challenge for English language newspapers is that there are so many of them: A city like Mumbai boasts at least a half dozen mainline dailies plus six financial dailies. Many of these publications had their birth in pre-Independence days. Later, a grateful post-colonial government encouraged them with subsidized real estate. The papers are now surviving on rental income, from letting out the extra space to others.

“When we hold a national-level press conference, we send out at least 100 invitations to journalists,” says B.N. Kumar, executive director of Concept Public Relations. “And that’s just for one city — Mumbai.”

But it’s the uneven economics of the print media that has allowed such large numbers of publications to proliferate despite the existence of news agencies — both domestic and international. Daily newspapers in India sell at around four U.S. cents. What with monthly special offers and discounts from purchases of more than one newspaper from the same publishing house, the effective cost comes to close to one U.S. cent. Each paper costs more to print than its cover price and there is a resulting over-dependence on advertising revenues. When advertising moves to other media (like television), there is no way to make profits. The case for general and business magazines is exactly the same. Indian publications have not yet worked out a revenue model for the Internet: All newspapers and magazines are currently available for free online.

Consolidation Continues

All this has furthered a round of consolidation that began a few years ago. A new factor that has emerged is that big business has started picking up stakes. The Aditya Birla Group has taken a holding in Living Media, which has properties such as leading newsmagazine India Today. Mukesh Ambani is in the process of completing a complicated deal to acquire control of Network18. Ambani has a 4G telecom license and will need all the content he can lay his hands on in order to use it. Brother Anil Ambani, meanwhile, is adding bits and pieces to his own media empire.

Deal activity in the M&E sector witnessed a significant uptrend, with 35 transactions with a reported value in excess of US$1.5 billion versus 42 transactions valued at US$1 billion in 2011 and 27 transactions valued at US$693 million in 2010,” the KPMG report concluded. “We expect deals to be driven by expansion and consolidation plans, specifically to tap the latent potential in the fast-growing regional markets.”