The Newsreel
January 2011
In this edition:
Industry news 02
In-focus: Mobile VAS in India 05
Point of view: 09
Excerpts of an interview with
Neeraj Roy, MD and CEO,
Hungama Digital Media
Entertainment Pvt. Ltd.
Market monitor 12
A newsletter for the media and
entertainment sector
Happy New Year and welcome to the January 2011 edition of
The Newsreel, Ernst & Young’s newsletter on the media and
entertainment (M&E) industry.
This month saw the TV broadcasting industry continuing its
investments in niche and regional content. Companies such as
Astro-Turmeric, Real Global Broadcasting and Zee Entertainment
Enterprises have lined up their plans to launch lifestyle channels,
all beginning with food-based genres. In addition, broadcasters
such as Sun TV Network are evaluating their entry into the
regional television broadcasting space to tap new growth avenues.
Furthermore, in another sign of intensifying competition in the news broadcasting space,
international channels such as Al Jazeera and France 24 have received approval to launch
their channels in India.
In a major development in the sports segment, Venky’s has acquired the English
Premier League (EPL) team Blackburn Rovers. The acquisition comes on the back of
announcements by other EPL clubs, including Manchester United, Chelsea and Liverpool,
which are exploring partnerships to launch branded merchandize and stores in the
Indian market.
This month also saw announcements of the new partnerships M&E companies have
entered, including Discovery and Turner, to provide content on the internet and mobile
platforms. Opportunities in new media, particularly in the mobile VAS segment, are
gathering pace with the recent rollout of 3G services and the conclusion of the broadband
wireless spectrum (BWA) auctions. In light of this growing opportunity, this month’s
In-focus section analyses the emerging trends, challenges and the way forward for the
mobile VAS segment in India.
In the Point of view section, Neeraj Roy, MD and CEO, Hungama Digital Media
Entertainment Pvt. Ltd., shares his views on the mobile VAS segment in India.
I hope you enjoy reading this edition of The Newsreel and look forward to your
valuable feedback.
With kind regards,
Farokh T. Balsara
National Sector Leader — Media & Entertainment
Industry news
Regulatory news
IBF to form redressal body for TV content
The Indian Broadcasting Foundation (IBF) will
form a redressal committee, the Broadcasting
Content Complaints Council (BCCC), within three
months in a bid to put in place self-regulation
measures among the non-news channels in India.
The committee will function on similar lines to the
News Broadcasting Standards Authority (NBA)
and will be headed by a retired judge of the
Supreme Court.
The redressal mechanism will be a two-tier process.
At the first level, viewers can communicate their
grievances to the broadcaster or the channel,
while at the next level, they can complain to the
BCCC if they are not satisfied by the response
from the channel1.
GoI to permit only AIR news on FM radio
The Government of India (GoI) is expected to
allow private FM radio channels to relay only
unaltered news broadcast from All India Radio
(AIR) and abide by terms and conditions to be
declared by Prasar Bharati. The GoI is likely to
reject the Telecom Regulatory Authority of
India’s (TRAI’s) petition that news should be
accessed from various sources such as AIR,
Doordarshan, Press Trust of India, United News
of India, and any other authorized news agency
or television news channel2.
Strategic news
Al Jazeera and France 24 get MIB’s consent to
air their channels in India
The Information and Broadcasting Ministry (MIB)
has granted its downlink license to two English
language channels, Al Jazeera and France 24. Both
the channels were launched in the international
market in 2006. This launch is likely to intensify
competition in the already crowded television news
space in India3.
1 “IBF to form broadcasting council for non-news within three months,” Afaqs!, 15 December 2010, via Dow Jones Factiva, © 2010
Banyan Netfaqs Pvt. Ltd.
2 “Government to only permit AIR news to private FM channels,” Indiantelevision.com, 6 December 2010, via Dow Jones Factiva,
© 2010 Indiantelevision.com
3 “Al Jazeera, France 24 get I&B nod to beam in India,” Indiantelevision.com, 7 December 2010, via Dow Jones Factiva, © 2010
Indiantelevision.com
4 “NDTV channels move to Star Den,” Indiantelevision.com, 13 December 2010, via Dow Jones Factiva, © 2010 Indiantelevision.com
5 “Sun evaluating entry into Marathi, Bengali TV space,” Indiantelevision.com, 27 November 2010, via Dow Jones Factiva, © 2010
Indiantelevision.com
6 “Big CBS, Sony Pictures in one-year output deal,” Indiantelevision.com, 15 November 2010, via Dow Jones Factiva, © 2010
Indiantelevision.com
2 The Newsreel
Star Den to distribute NDTV channels
NDTV has signed a distribution agreement with
Star Den for four of its channels — NDTV 24X7,
NDTV Profit, NDTV India and NDTV Good Times.
Earlier, NDTV’s news channels were a part of MSM
Discovery’s The One Alliance, while its lifestyle
channel, NDTV Good Times, was distributed by
NDTV. However, NDTV will retain all the digital
distribution rights of its channels, including DTH.
The agreement has come as a reprieve for Star
Den, which had lost all its Network18 channels to
the newly formed Sun18 distribution alliance4.
Sun evaluating entry into Marathi and Bengali
TV space
The Sun TV network has announced its plans to
invest in regional language television content and
is assessing feasibility of entering the Marathi and
Bengali television space. The Marathi and Bengali
general entertainment channel (GEC) space
is witnessing the entry of new players such as
Viacom18, which plans to launch a Marathi GEC
within the next fiscal year5.
Big CBS and Sony Pictures finalize a one-year
output deal
Big CBS has entered a one-year movie content
deal with Sony Pictures Television (SPT). The
deal will allow Big CBS to access SPT’s library to
air movies on three of its channels, Big CBS Prime,
Big CBS Spark and Big CBS Love. Big CBS Prime,
which was launched in November 2010, plans to
air movies from SPT’s library on weekends during
its primetime band and content from CBS Studios
International during weekdays6.
Alva Brothers to launch lifestyle channels
After buying out Turner International’s stakes in
three local Joint Venture (JV) companies, Alva
Brothers is planning to launch a number of lifestyle
television channels through its newly launched Real
Lifestyle Network. The network’s first offering is
Food First, a channel dedicated to food and
food-related experiences, targeting the upwardly
mobile English speaking, male and female
audience. The HD-ready channel is scheduled for
launch in early 2011, followed by other channels in
the lifestyle space over the course of next year7.
upmarket bar restaurants under this agreement
and plans to open eight more such bars by March
2011. Liverpool has signed a regional marketing
partnership deal with Pernord Ricard to launch its
Seagram’s Fuel vodka brand for India10.

Sanjeev Kapoor and Astro JV set to launch food
channel
The Malaysia-based Astro All Asia Networks
(Astro) and Sanjeev Kapoor’s television company,
Turmeric Vision (TVPL), will launch a food
channel FoodFood, in early 2011. The channel
will be available in the HD format and will feature
content in English and Hindi. The channel will also
be available online and on mobile platforms and
is aimed at a target audience of middle income
households in cities8.
OnMobile and Madison World to float mobile
marketing JV
OnMobile Global, a mobile VAS company, has
entered a JV with Madison World, a diversified
communications group, to float a mobile marketing
company in India. The JV proposes to offer direct
sales channels to marketers leveraging telecom
operator relationships of OnMobile as well as the
marketing capabilities and client base of Madison
World. The JV will offer a wide reach and access to
a growing mobile subscriber base to marketers11.

NBA partners with Ten Sports and Pix
The National Basketball Association (NBA) has
entered multi-year partnership agreements with
Taj Television and Multi Screen Media (MSM),
ending its relationship with ESPN Star Sports. Taj
Television, which operates the Ten-branded sports
channels, and MSM, which operates the English
movie channel Pix, will air live NBA matches
including NBA All-Star, the NBA Playoffs, NBA
Conference Finals and The Finals. The companies
will also air highlight coverage of these games9.
European football clubs explore partnerships
in India
Popular European football clubs Manchester
United, Chelsea and Liverpool are exploring
partnerships in India for their branded
merchandize and stores. Other clubs such as
Bayern Munich of Germany and Barcelona, and
Real Madrid of Spain are also in talks with various
Indian companies for merchandize retail, coffee
clubs and theme shops.
Manchester United launched its casual dining,
sports-themed cafes in India in 2009 under a
franchisee agreement. The club has opened three
Zapak to market Cartoon Network’s online
games in India
Turner International India entered into an
exclusive partnership with Zapak Digital
Entertainment to market and distribute Cartoon
Network’s (CN) popular multiplayer online
games (MOGs), including the launch of Ben 10
Omniverse: Rise of the Heroes and a new version
of the game, Toon Football. Zapak will launch
promotional activities, gaming tournaments and
customized retail marketing initiatives across
Zapak Gameplexes and private cafes across 35
cities. Zapak will also act as CN’s payment partner
with the launch of CN Coins game cards12.
UFO Moviez to digitize 1,500 theatres
UFO Moviez India Ltd. plans to invest INR1.5 billion
to digitize 1,500 theater screens in India by March
2012. The company also plans to digitize 750 to
1,000 theaters worldwide in countries such as
Russia, Malaysia, Indonesia, Singapore and
Sri Lanka. It will seek partnership agreements
where a local player will provide funding while it
will provide its technical knowhow. The company
already has a presence in Nepal13.

7 “Alva Brothers unveils broadcasting plans,” Media Mughals, 31 October 2010, via Dow Jones Factiva © 2010 Media Mughals
8 “Sanjeev Kapoor, Astro JV set to launch FoodFood channel,” Indiantelevision.com, 29 November 2010, via Dow Jones Factiva, © 2010
Indiantelevision.com
9 “NBA leaves ESS, goes with Ten Sports & Pix,” Indiantelevision.com, 2 December 2010, via Dow Jones Factiva, © 2010 Indiantelevision.
com
10 “English, German, Spanish clubs scout for India partnerships,” The Economic Times, 29 November 2010, via Dow Jones Factiva ©2010 The
Times of India Group
11 “OnMobile, Madison World in JV for mobile marketing,” Business Standard, 8 December 2010, via Dow Jones Factiva © 2010 Business
Standard
12 “Turner, Zapak tie up to expand Cartoon Network’s online games in India,” Business Standard, 19 November 2010, via Dow Jones Factiva ©
2010 Business Standard
13 “UFO Moviez to digitise 1,500 cinema halls at INR150 cr,” Business Line (The Hindu), 2 December 2010, via Dow Jones Factiva © 2010
Hindu Business Line

The Newsreel 3
Discovery partners with Apalya for mobile
television
Discovery Networks has partnered with Apalya
Technologies, a mobile TV service provider, to
launch its five channels, Discovery Channel, TLC,
Animal Planet, Discovery Turbo and Discovery
Science, on the mobile platform. The paid mobile
TV service will be offered by telecom operators
such as Idea, Vodafone, Airtel, Aircel, Reliance,
Docomo, Tata Photon Plus, Virgin VFlash and
Reliance Net Connect. Customers will have the
choice of three packages — daily, weekly and
monthly, with prices ranging from INR7 per day to
INR150 per month14.
People movement
• Avinash Kaul has been appointed the CEO
of Zoom Entertainment Network, replacing
Suresh Bala, who has left the company after
a four-year stint with it15.
• Aloke Malik has been appointed the MD
of ESPN Star Sports. Aloke was previously
with Idea Cellular as the COO of its Eastern
operations16.
• Seventymm.com, India’s online movie
entertainment company, has appointed
Bhawna Agarwal, the founding member of
Yatra.com, as its COO17.
Deal tracker
Venky’s buys EPL team Blackburn Rovers
Venky’s London Ltd., a newly formed company
owned by Pune’s Rao family, has acquired the
English Premier League (EPL) team, Blackburn
Rovers. Venky’s, a poulty company, has bought a
99.9% stake in the team from BRFC Investments
Ltd. for a total consideration of INR3.8 billion
(£54 million). Venky’s plans to leverage the
popularity of the premier league club to promote
its brand globally18.
SEBI approves open offers for Fame India
The Securities Exchange Board of India (SEBI)
has cleared the open offers of Inox and Reliance
MediaWorks (RMW) for a controlling stake in the
multiplex chain, Fame India. In February 2010,
RMW made a hostile bid for a 62.08% stake at
INR83.40 a share, 63.5% higher than Inox’s open
offer of INR51 a share. RMW accused Fame of
rejecting its higher offer price in favor of Inox
and petitioned SEBI on this. The open offers were
originally scheduled to be launched on 1 April
2010, but faced a regulatory hurdle.
RMW holds a stake of around 16% in Fame India,
while Inox owns a 50.5% stake. The acquisition
of Fame offers an opportunity to Inox and RMW
to expand their multiplex business by around 95
screens across the country. Inox and RMW will
make their open offers from 16 December 2010 to
4 January 201119.

14 “Apalya to offer Discovery channels on mobile TV platform,” Telecom Tiger, 19 November 2010, via Dow Jones Factiva, © 2010 © AT
Data Process Pvt. Ltd.
15 “Zoom announces appointment of Avinash Kaul as CEO,” Indiantelevision.com, 22 November 2010, via Dow Jones Factiva, © 2010
Indiantelevision.com
16 “Aloke Malik is ESPN Star Sports MD,” Indiantelevision.com, 22 November 2010, via Dow Jones Factiva, © 2010 Indiantelevision.com
17 “Seventymm.com appoints Bhawna Agarwal as COO,” Indiantelevision.com, 7 December 2010, via Dow Jones Factiva, © 2010
Indiantelevision.com
18 “Venky’s becomes first Indian firm to own Premiere League team,” Indiantelevision.com, 20 November 2010, via Dow Jones Factiva, ©
2010 Indiantelevision.com
19 “SEBI clears open offers for Fame India,” Business Line (The Hindu), 8 December 2010, via Dow Jones Factiva © 2010 Hindu Business
Line; “Fame open offer to begin on Dec 16,” Business Line (The Hindu), 8 December 2010, via Dow Jones Factiva © 2010 Hindu
Business Line

4 The Newsreel
In-focus: mobile VAS in India20

Industry overview the current SMS to non-SMS revenue split

The mobile VAS (MVAS) market in India is
continuously evolving, from predominantly SMS
and ringtone- based services to truly converged
services including mobile video, internet browsing
and music downloads. The market is currently
at the cusp of its next wave of growth, with
telecom operators looking for compelling service
propositions to migrate customers to the 3G
environment, and content owners aiming to target
an attractive base of 650 million-plus mobile
subscribers to drive their revenue. The increased
bandwidth available with 3G will provide users with
an enhanced MVAS experience, which is expected
to drive customer adoption.
Telecom operators’ quest to put in place and grow
new revenue streams to offset declines in their
traditional voice and VAS revenues, coupled with
content owners’ attempts to monetize a huge
wireless subscriber base, is likely to bring higher
quality offerings to the market. The MVAS market
size has already grown by nearly five times over
the past four years, with an estimated annual
revenue of INR145 billion in 2010. The market is
however still relatively underpenetrated, which
indicates that it holds significant potential for
future growth.
Key trends
• Rising share of non-SMS VAS: VAS has
been transformed from a telecom service to
a lifestyle service. The market is currently
witnessing a gradual shift toward non-voice
revenues due to increasing customer uptake
of new offerings. The introduction of faster
data services, including 3G and broadband
wireless access (BWA), is expected to shift
from 50:50 to 33:67 by 2015. Moreover,
services such as SMS and caller ring-back
tones (CRBT) have witnessed declining
tariffs with increased commoditization.
The advent of new and differentiated
services should replace commoditized
traditional VAS and have a favorable impact
on the MVAS industry.
• Innovative and new services: The market
has witnessed the launch of innovative
offerings such as one-touch access to social
networking websites, free internet browsing
for a day as well as free access to specific
websites, to drive usage of VAS. Operators
have increased their spend on VAS marketing
to improve the take-up rates of their
services. Innovative offerings are expected
to continue driving customer adoption of
MVAS, and going forward, the market should
also witness the emergence of higher-end
services such as high-quality video on
mobile, video calling and video IVR services.
• International acquisitions/partnerships
for technology and content: Companies
in the MVAS space are expanding their
content offerings and bringing advanced
technologies to the market. For example,
in October 2010, OnMobile Global acquired
US-based Dilithium Networks, a 3G video
technology and mobile solutions developer
and owner of 175 video technology patents.
In December 2010, Planet41, another
MVAS player, partnered with Israel-based
Ethrix Limited to jointly develop, customize
and market 2G and 3G voice and video
applications. In August 2010, Mauj Mobile
acquired UK’s Mobango Ltd., the owner of

20 “Fragmented VAS Markets in SAME to compete on content instead of price; finds Frost & Sullivan,” Express Computer, 6 December
2010, via Dow Jones Factiva, © 2010 The Indian Express Limited; “VAS Co Techzone renews content deal for Viacom 18 channels,”
Radio & Music, 3 December 2010, via Dow Jones Factiva, © 2010 Radioandmusic.com; “App Stores,” PC Quest, 30 November 2010,
via Dow Jones Factiva, © 2010, CyberMedia; “Mobile VAS firms to cash in on 3G,” The Times of India, 9 April 2010, via Dow Jones
Factiva, © 2010 The Times of India Group; “Indian VAS Market is Resilient,” Communications Today, 15 February 2010, via Dow
Jones Factiva, © 2010 ADI Media Pvt. Ltd; “Focus now on personalized VAS,” Voice & Data, 5 August 2010, via ISI Emerging Markets;
“OnMobile Global Ltd,” Morgan Stanley, 2 September 2010, via Thomson Research; “Half of country’s mobile customers use internet,
data service on phones,” The Economic Times, 10 November 2010, via Dow Jones Factiva, © 2010, The Times of India Group; “Mobile
banking made easy,” Moneycontrol, 22 November 2010, via Dow Jones Factiva, © 2010 Moneycontrol.com; “Realizing Indias Dream,”
Dataquest, 2 November 2010, via Dow Jones Factiva, © 2010, CyberMedia; “INDIAN TELCO REGULATOR EXTENDS MOBILE BANKING
FEEDBACK DEADLINE,” Asia Pulse, 29 November 2010, via Dow Jones Factiva, © 2010, Asia Pulse Pty Limited

The Newsreel 5
 35,000 free mobile applications. Enhanced • ► Mobile as an entertainment device:
technology and content partnerships such Recently, various telecom players have
as these are likely to improve the quality aggressively marketed VAS to drive their
of MVAS offerings in India, thereby driving ARPU and profitability by positioning mobile
customer uptake. as an entertainment medium. Various market
players, including handset manufacturers,
• Growing subscriber base: The mobile
telecom operators and content aggregators,
subscriber base in India has more than
have launched entertainment-focused mobile
doubled in the last two years and is expected
applications in 2010. Airtel, Vodafone, Apple
to continue to grow in the near future.
and Nokia were among the prominent players
The majority of this future growth is likely
launching applications stores. In addition,
to be from rural areas as urban markets
content owners are partnering directly
and metros reach higher penetration rates.
with telecom operators to provide mobile-
In addition, the number of GPRS users is
based offerings. For example, UTV has
fast increasing. The number of customers
partnered with Idea Cellular to launch audio
accessing some form of internet service
movie services and Viacom18 witnessed an
from their mobiles rose to 70% over12
encouraging user response to downloads of
months to touch 214 million in June 2010,
mobisodes for its popular reality shows. This
and that number is estimated at 240 million
bodes well for players in the VAS ecosystem,
as of September 2010. This growth of
and indicates rising customer acceptance of
GPRS users is expected to provide an
entertainment-based value added services.
attractive target market for various
players in the VAS market.

• Rising smartphone penetration: Many new Key challenges

handset players entered the market with
• Low spectrum availability: Currently, the
low-cost smartphones in 2010 , leading to
growth of high-end MVAS, such as mobile
a decline in smartphone pricing. Intense
video, is likely to continue being constrained,
competition in the handset space will help
given the low 3G spectrum availability of
smartphone’s penetration among lower-end
5MHz, since a low spectrum does not support
customers, thereby expanding the target
high bandwidth applications.
market for VAS.
• Uneven revenue distribution: Mobile
• ► Emergence of mobile money: India’s huge
operators, who have direct control over
unbanked population, especially in rural
their customer touch points, garner around
areas, coupled with its 209 million rural
60–70% of VAS revenue from these, while
mobile phone subscriber base, represents
content owners and aggregators get a
an attractive potential for mobile money
relatively small percentage share. This low
services. Recently, mobile banking received
share of revenue in the VAS value chain is
a major boost after the National Payments
a disincentive for content owners who wish
Corporation of India (NPCI) launched
to invest in mobile-specific content. Going
a mobile payment system that allows
forward, telecom operators may have to cede
customers to transfer money across different
partial control over the VAS value chain and
bank accounts (free of cost) through their
allow content owners to offer differentiated
mobile phones. With the increased focus
offerings to telecom subscribers due to
of banks, regulators, service providers and
the intense pressure on them to retain
telecom operators on providing mobile
subscribers. In addition, intense competition
banking services, this segment is likely to
in the content aggregation space is expected
see strong growth over coming years. India’s
to lead to market consolidation and provide
active mobile banking user penetration is
aggregators with greater bargaining power,
forecasted to reach 2%, or 25 million, by
which is likely to earn them a higher revenue
2012, up from 0.2% at present.

6 The Newsreel
 share. This is expected to result in a more
equal distribution of revenue, and provide
incentives to develop innovative offerings for
all the players in the value chain.
• Low customer awareness: Consumer
awareness levels are low for the majority
of MVAS products. Continued investment
in marketing new and attractive VAS
applications will help to educate customers
and expand the market for MVAS. With more
than 50% of the subscribers belonging to
rural areas, building customer awareness is
even more critical to drive revenue growth.
• Lack of “killer application”: The MVAS
industry in India lacks a killer application for
mobile, like email on fixed internet, which
can drive a critical mass of users to adopt
value-added data services. Companies will
need to constantly innovate to discover this
killer application, like caller ring-back tones
in the 2G environment, to take full advantage
of 3G services in the country. Location-based
services or social networking applications
could emerge as potential game changers in
driving usage of mobile VAS in India.
• Lack of depth in content: The growth in the
VAS market is expected to be driven by the
relevance of content for different consumer
groups. Areas such as information and
transactional VAS, which provide enhanced
value to rural customers, continue to be
underpenetrated. Focusing on content such
as voice SMS, tracking services and local
information services is likely to expand
the market for new customer segments. In
addition, regional language entertainment
offerings should also bring in new customers.
• Lack of business intelligence (BI) and
segmentation of consumers: Segmentation
and targeting of customers is critical for
delivering relevant MVAS, especially in
view of the vast demographics of the
mobile subscriber base in India. Most MVAS
companies do not have effective BI tools or
customer information to segment customers
appropriately, which results in low adoption
of MVAS.
The Newsreel
The way forward
• Launching advanced and easy-to-use
services: The much-awaited 3G and BWA
auction was concluded in 2010. In the near
term, the operators will leverage newly
acquired bandwidth to offer advanced
services such as video calling, better quality
mobile television, full-track downloads
and mobile multiplayer gaming. The
successful launch of 3G services will require
all stakeholders, e.g., handset vendors,
technology/platform providers and mobile
network operators, to transition to the new
technology platform. In addition, adoption
of 3G is also expected to give a boost to the
launch of innovative and easy-to-use services
with intuitive interfaces such as video IVR.
• Expanding customer reach: Most new
mobile users in the last few years were from
rural areas, and primarily use mobiles for
voice calls. Usage of data services is low in
such areas. To capitalize on this gap, MVAS
players will need to create targeted services
and increase their marketing efforts to drive
customer adoption of this segment.
• Mobile advertising: A rapidly growing mobile
subscriber base has significant potential
for mobile advertising. Currently, the mobile
advertising industry is dominated by SMS-
based advertising, which commands a
one-third market share. An evolving set of
users and innovative content offerings will
open up new areas in mobile advertising,
e.g., display advertisements and location-
based advertisements. However, in a market
dominated by prepaid mobile subscribers,
the success of mobile advertising will
depend on the availability of accurate
customer data. Furthermore, the availability
of reliable customer information is likely to
attract a larger number of advertisers to
mobile media.
• Improving BI competencies to provide niche
services: Future MVAS growth will depend
on effectively tapping the needs of different
customer segments through relevant
7
 services. This requires strengthening of
the BI competencies of MVAS companies
to ensure the effective delivery of content
to customers. Various niche services
such as gaming, personalized content on
social networks, uploading photos/videos,
navigational services, mobile shopping,
mobile payments and mobile healthcare,
and education are likely to gain popularity
in the near future. To derive maximum value
from such myriad services, MVAS companies
will need to gain deeper insights into their
customers’ usage habits.►
• ► Bundling services with mobile devices:
Several companies are bundling their
services by purchasing new mobile devices
(e.g., Nokia’s free one-year subscription to
the Ovi Music store with a Nokia mobile).
Going forward, companies in the MVAS value
chain are likely to increasingly bundle their
services to differentiate their offerings, build
better user engagement and drive revenue
for different players across the value chain.
However, this will require greater cooperation
and innovative partnerships with various
participants including telecom operators,
VAS providers and content owners.
With the launch of 3G services, the MVAS market
is likely to witness significant transformation this
year, and presents a significant opportunity for
telecom operators and content companies.
Telecom operators will have the opportunity to
successfully counter the decline in voice ARPUs,
with increased data revenue driven by MVAS.
Furthermore, content owners will also have the
opportunity to monetize a huge and expanding
wireless subscriber base. To effectively avail of
this opportunity, it is critical for all the players in
the MVAS value chain to quickly adapt to the 3G
environment by forging partnerships, innovating
effective service delivery models, sharpening
segmentation and targeting techniques, and
thereby, evolving along with the technology.

Raghav Anand

Raghav Anand is a Manager in the Business Advisory Services (BAS) practice at

Ernst & Young. He has assisted both traditional and new media companies in market
entry strategy, feasibility studies, operational developments, technology design and
techno-commercial due diligences.

Raghav is the segment champion for gaming and mobile entertainment at

Ernst & Young.

Tel: + 91 22 4035 6364 Email: raghav.anand@in.ey.com

8 The Newsreel
Point of view
Excerpts of an interview with Neeraj Roy, MD
and CEO, Hungama Digital Media Entertainment
Pvt. Ltd.
1. Do you see the long anticipated launch of 3G
impacting the mobile VAS industry?
Starting 2011, I view the impact of 3G on the
MVAS ecosystem with cautious optimism. My
sense of cautiousness stems from the fact that
there is only 5MHz of spectrum available,
which is significantly less than required
for quality 3G services (such as live video
streaming) to be introduced. Nowhere in the
world have quality 3G services been introduced
on a spectrum of less than 15 MHz, and
certainly not in a market like ours, which has
significant network congestion.
Having said that, I do have a sense of
positivity and optimism on 3G’s impact, given
that the mobile VAS ecosystem in India has
predominantly been a voice-driven one.
When you consider that the global mobile
entertainment industry is worth USD45 billion,
principally driven by data services and with
over 70% of its revenue generated through an
off-portal environment, it is good that we finally
have the platform (3G), which is required for
data services in India.
2. What will be the game changer for the VAS
market?
It is currently very difficult to create a
sustainable VAS ecosystem — our crowded
telecom market has created an entire
community of consumers, who only have INR5
and INR6 of mobile balance, and utilization
of spectrum is very inefficient. If the telecom
operators do not encourage customers to
maintain higher balances, there will be no
sustainable VAS ecosystem — as an issue this
has to be addressed as a unified theme by the
telecom operators themselves.
The Newsreel
The real game changer, however, will be driven
by devices. From a consumer perspective, device
innovation, in terms of display capabilities,
computing and video power and better
compression technologies, will create a desire
for higher value data services. To elaborate,
take digital video which has been an almost
non-existent segment from the VAS perspective.
However, video consumption in India on
pure-play internet has been significant — India
is the fourth-largest contributor to YouTube
in terms of traffic. Although we have low
bandwidth issues on pure-play internet, the
Indian consumer is happy with the speed he
gets. He doesn’t know whether it should take
15 seconds or 45 seconds to download a video,
and is happy to download at both speeds.
Therefore, once we have mobile devices that
enable a similar experience to that of pure-play
internet, mobile video services will take off and
be a significant driver of VAS consumption.
Therefore, I think the big story for 2011 and the
next two years is not going to be about network
or speed, it is going to be about devices.
3. How do you see the adoption of advanced
devices taking hold in India?
All this while, we have fundamentally looked
to the networks to create the “pull” as content
providers. This will change with the huge
market innovation of mobile devices that has
come in. The introduction of the tablet and the
iPad is creating consumer demand for more
personalized entertainment and richer video
consumption as opposed to what is available
on conventional mobile phone screens. There
are now 133 manufacturers who are tapping
the market for tablet devices globally, and soon
devices will be available in the market, which will
9
 have screens of around 5–7 inches, with a price
point of USD150. The price points of these
devices will come down in India and their mass
adoption will drive the next inflexion point in
VAS consumption and 3G services.
4. Given where we are today, when will
VAS become sizeable revenue for media
companies?
By mid 2012, I expect to see VAS having
an impact on media companies, at around
5—10% of revenues. However, whether media
companies are able to generate meaningful
revenue will depend on their ability to put
an effective digital strategy in place today.
To elaborate, in the past two years, traffic to
portal sites (e.g., MSN, Yahoo and Google) has
been static. This is because till around three to
four years ago, your core reason for getting on
the internet was communication, i.e., email.
Today, the key driver of internet consumption
is social media and one of the key ingredients
of social media now is viewing and sharing
of videos. By mid 2012, my estimate is
that there will be around 150–175 million
internet consumer in India, among whom 60%
will consume some form of video content.
Furthermore, currently, 95% of the devices sold
by Indian manufacturers are GPRS-capable
ones, i.e., capable of accessing the internet.
Therefore, by mid 2012, once we reach this
critical mass of consumers, and factoring in the
increasingly affordable smartphones that will
be available in the next 18 months, there will
be an impact on media companies by default —
in particular broadcasters.
The challenge for media companies and
broadcasters is that they are still thinking
linearly. VAS and video on mobile will be a
fundamentally different way of consuming
content on a different medium. Furthermore,
the potential for revenue realization is
significant — we should not undermine the
advent of advertisement-funded mobile
entertainment and off—portal consumption
(i.e., off of the carriers’ web domains). Media
companies and broadcasters need to respond
quickly, otherwise there will be other players
10 The Newsreel
taking over this space. At a recent forum with
major telcom operators, almost everyone
agreed that there will be around 50 million
active 3G users, generating INR1500 to 2000
crores worth of advertising, by December
2011. This is a significant opportunity for
media companies.
5. What about the revenue-sharing
mechanism? Does this need to change
as well?
For those VAS companies that have established
their size and scale, I think they are already
there in terms of the revenue-sharing model.
In my opinion, there has been an amount of
unjustified negativity surrounding revenue-
sharing. The past 12 months have been very
hard for telecom operators, whose ARPUs
have been hit very badly and their margins
squeezed. As a result, a number of VAS
companies will say that the environment
is worse than what it was before, because
they have been subjected to commercial
negotiations with telcom operators and they
have succumbed. However, on the whole,
where value is being provided, carriers will lean
toward fair revenue sharing.
6. N
ow that 3G has been launched, do you
expect data-driven services to compete with
voice-driven ones?
There is a silver lining to the delayed rollout of
3G in India. This silver lining is that as a country
we been pushed to innovate on services, which
are as basic as voice, and which were never
thought of as VAS-driven. We have developed
voice-driven applications and platforms where
there is revenue and significant traction. I
firmly believe that the innovation we have
made on voice is not a reversible trend. It will
continue because all the stakeholders have
tasted some success and there will continue to
be consumer traction toward it. So, to answer
your question, the key will be how the data-
driven experience and pricing compares with
the voice-driven experience and pricing, and
whether these two categories compete with
each other. I believe they will coexist and grow,
 and sometimes synergistically. For example, we
have recently developed an application around
e-education and nano education, which uses
both voice and data as a delivery mechanism.
Furthermore, I believe that there are at least
three to four new sectors that will carve a
niche as data-driven services apart, from pure
entertainment. Sports, as a category, could
be a possible entrant. Healthcare could be one
of the new entrants, since it is largely device-
driven, and education has the potential to also
develop into a significant opportunity.
7. At what rate will mobile VAS grow over the
next three years?
I feel that we are bound to comfortably
see a 25–30% y-o-y growth. This will be
driven by two factors. The first is that after
INR11,000-13,000 crores of investments in
the 3G spectrum, carriers’ raison d’être will be
3G-enabled VAS, and they will promote VAS
services heavily through advertising, creating
awareness, educating users, and thereby,
generating demand. The second driver will be
consumer-led — the demands that consumers
have based on their devices and the low price
points at which 3G services will be offered.
The Newsreel
8. During the coming year, what do the various
players in the VAS ecosystem need to do to
fully exploit 3G?
Teecom operators are doing whatever
needs to be done by virtue of the investments
they have made. Content companies, be
they broadcasters or print companies, need
to start taking the digital space seriously,
despite the fact that revenues are currently
very small. Media companies need to have a
digital strategy and follow their consumers
and their migration to digital by creating a
digital offering.
The value that media companies will see will
not initially be driven by revenue, but by way
of eyeballs, whereby they will be able to offer
their advertisers a thriving mobile community
in addition to their conventional distribution
platforms — this will also allow media companies
to remain independent of the telecom system
because their returns will be advertisement-
funded. Going forward, media companies
should also explore how to enable their services
directly into the telecom environment.
11
Market monitor
EYMEX is the Ernst & Young index of 28 listed M&E companies on India’s stock exchanges. Exhibit 1 provides
a snapshot of the M&E industry’s performance as compared to the overall market.

Exhibit 1: EYMEX and BSE200

115

110

105

100

95

90

85
10

10

10

10

10

10
0

0
01

01

01
20

20

20

20

20

20
/2

/2

/2
3/

0/

7/

0/

7/

4/
/3

/1

/8
/1

/2

/2

/1

/1

/2
11

12

12
10

11

10

11

11

11
BSE200 EYMEX

Source: ThomsonONE Banker, accessed 15 December 2010; Ernst & Young research.

Note: EYMEX and BSE200 are indexed by taking 100 as the base of the value on the first of the two-month period.
Any changes at a later date are shown as relative to the base.

The global indices — S&P 500 Index, Dow Jones 600 Super Sector Index and the FTSE 350
Index — indicate the stock market’s performance of M&E companies listed in the US and the
European Union.

Exhibit 2: Global M&E indices

115

110

105

100

95

90

85
10

10

10

10

10

10
0

0
01

01

01
20

20

20

20

20

20
/2

/2

/2
3/

0/

7/

0/

7/

4/
/3

/1

/8
/1

/2

/2

/1

/1

/2
11

12

12
10

10

10

11

11

11

FTSE 350 Dow Jones 600 S&P 500

Source: ThomsonONE Banker, accessed 15 December 2010; Ernst & Young research

Note: FTSE350, Dow Jones 600, S&P 500 are indexed by taking 100 as the base of the value as on the first of
the two-month period. Any changes at a later date are shown as relative to the base.

12 The Newsreel
Our M&E publications
For more information, please contact Raghav Mani — Markets, Media & Entertainment, at
raghav.mani@in.ey.com or + 91 124 464 4454.

The Indian magazine segment: Monetizing digital media Creating value

Navigating new growth avenues consumers will buy
Provides an in-depth analysis of the Indian This report offers perspective on how media
Magazine segment. Released at the Indian and entertainment companies can take the
Magazine Congress in 2010. monetization of digital media to the next
level by creating premium product and service
bundles that can increase future revenue
and profitability.

The new market shehers: Tapping Poised for digital growth: Preserving
potential beyond metros profitability in today’s digital world
A sequel to our earlier report “The Dhoni This report contains insights from seventy
Effect: Rise of small town India”, this five media and entertainment company CFOs
report provides an analysis of the growing on the digital landscape and how changing
consumption in non-metro urban markets business models are shaping the future of
and how marketeers are taking advantage the industry.
of this new urban consumer.

India...get, set, go...

India...get, set, go... Tune in to emerging
entertainment markets
The evolving sports ecosystem in India

This report examines the potential of the

March 2010

Indian sports industry. Released at the This report focuses on the media and
India International Sports Summit in 2010. entertainment industry in the emerging
Tune in to emerging
entertainment markets
Spotlight on Brazil, Russia, India and China
economies of Brazil, Russia, India
and China.

Indian entertainment down South Will widgets work: Web-enabled TV in

Provides an in-depth analysis of the search of a killer app
South Indian film industry. Released at This publication looks at the history of
FICCI M&E Business Conclave in Chennai interactive TV applications, introduces TV
in November 2009. widgets and describes the critical success
factors necessary for companies to
succeed in a TV widget-enabled world.

The animation and gaming industry Mobile television and its impact on
in India business: The big picture on small
This publication was authored on behalf of screen opportunities
NASSCOM. It gives a detailed analysis of This publication provides a look at the
the industry along with recommendations drivers of consumer adoption of mobile TV,
to the government and the industry. the latest related market trends in
the US and its implications for media
content companies.

13 The Newsreel
Our M&E practice
Industry is the cornerstone of Ernst & Young’s approach to
professional services. M&E is one such significant focus area.
The firm’s M&E practice has more than 2,000 professionals
across more than 100 countries, who focus on various issues
and challenges the industry faces. Globally, Ernst & Young leads
the audit market share in the overall M&E industry on the 2008
Fortune 100 list. The firm is also the leader among the Big Four
in the overall M&E space on the 2007 Russell 3000® Index.
Whether it is the traditional press and broadcast media or the
multitude of new media options, audiences now have more
choice than ever before. For M&E companies, integration and
adaptability are becoming critical success factors.
Ernst & Young’s Global Media & Entertainment Center brings
together a global team of professionals with in-depth technical
experience in assurance, tax, transaction and advisory services
to help you achieve your potential.
The center works to anticipate market trends, identify the
implications and develop points of view on relevant industry
issues. Ultimately, it enables us to help you meet your goals and
compete more effectively. This is how we make a difference.
Ernst & Young India has a dedicated M&E practice of more than
160 professionals across 15 key segments of the industry.
We provide services to many of the country’s leading M&E
companies as well as to global media giants operating in the
country. We have developed a wide range of services, such
as entry strategy, private equity placement, due diligence,
IT security review, organization structure, performance
improvement and tax structuring, to name a few. This has
enabled us to establish a strong presence in each segment
of the industry.
As your advisors, we can help you respond quickly and
effectively to the challenges the entertainment industry
faces today.

For further information on Ernst & Young’s services for the media and entertainment industry, please contact:

Farokh T. Balsara
National Sector Leader —
Media & Entertainment
Ernst & Young Private Limited
18th Floor, Express Towers,
Nariman Point, Mumbai — 400 021
Ashok Rajgopal : TV broadcasting
Devendra Parulekar : TV distribution
Rakesh Jariwala : Filmed entertainment
Shunali Nagarkatti : Home entertainment; Marketing agencies

Tel: + 91 22 6665 5000 (Board) Bharat Kapoor : TV content production

+ 91 22 4035 6550 (Direct) Ashish Pherwani : Print; Radio; Out-of-home; Events
Email: farokh.balsara@in.ey.com Chanpreet Arora : Sports; Animation; Post-production; VFX
Raghav Anand : Internet; Gaming; Mobile entertainment

The Newsreel 14
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