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Thursday, December 06, 2001

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The entertainment industry's new avatar

S. Gnana Haran

Three industries, information technology, communication and entertainment are widely expected to propel the future economies of most countries, including India. These three sectors are commonly clubbed together as the ICE sector representing the so-called new economy.

While the importance of information technology and communication has readily been accepted and acknowledged resulting in a spurt of entrepreneurial activities and policy initiatives, it took quite some time both for the industry players and the concerned Government Ministry to realise this industrys potential. The Government, on its part has recognised the entertainment business as an industrial activity, thereby making it eligible to get financial and other assistance like any other industry. The industry, spearheaded by the Confederation of Indian Industry (CII) has also woken up to face the changing realities. A proposal to promote a representative body for the industry as a whole on the lines of the software body, NASSCOM, is gaining ground. CII - Southern Region, not to be left behind, is also planning to take few initiatives aimed at strengthening the South Indian film industry.


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The converging industry

Two different forms of convergence are impacting and transforming the entertainment industry like never before. The first form of convergence is a supply-driven one. That is, products from different industries, such as IT, communications and entertainment are working better together than they do separately. The emergence of ICE is the result of such a convergence process. The second form of convergence is referred to as demand-driven. This is occurring in the entertainment industry with customers considering products offered by separate industries as interchangeable. Now, people want not just information, but information packed in an entertaining way. This has resulted in the marriage of the information industry with the entertainment industry, giving birth to a new, hybrid segment called infotainment. Interestingly, more and more people are now clamouring for even education to be imparted with a dosage of entertainment. This has given rise to yet another, hybrid concept called edutainment. As Management Guru, Gary Hamel says,Today consumers are not satisfied with an either \ or situation. They want products and services which offer and instead of an or. The effect of convergence on the entertainment industry in terms of creation of sub-segments is portrayed in the chart.

Contrary to the current mood of pessimism particularly in the film production and distribution segments of the entertainment industry, the changes taking place in the overall business environment point towards a promising future for the industry. Technologically, the convergence of information and communication technologies has redrawn and extended the traditional boundary lines of the entertainment industry. Socially, consumers increasing preference for information and education to be packed with the ingredients of entertainment has created a new market space within the industry. Also, the increasing urbanisation, and emerging new lifestyles has further strengthened the demand for a number of entertainment products and services.

Politically, the globalisation of the world economy has expanded the geographical boundaries of many industries including entertainment. Economically, the increasing affluence caused by rising discretionary incomes has led to a greater demand for a variety of entertainment services.

The adjacency factor

The net result of these changes is the dramatic redefinition of the concept of adjacency both in terms of geographic and industry space. For present and potential participants of the industry, it means two things:

*Opportunities as well as threats for the entertainment industry come from all over the world.

*Competition and business opportunities spring not only from ones own industry but other industries as well.

The above changes have led to the emergence of a variety of entertainment avenues - some offering superior entertainment experience and others promising an entirely different experience. But all of them compete with one another for customers attention and wallet. As a result, a major movie theatre operating let us say from Chennai faces competition not only from other movie theatres in the city but also from the following sources:

Television, cable and satellite channels beamed not only from Chennai but also from other locations - within and outside the country.

*The Internet, providing infotainment or edutainment or pure entertainment content.

*Radio programmes offering similar content.

*Amusement parks and theme parks located in Chennai.

*Restaurants, clubs and shopping malls located in Chennai.

*Other traditional avenues such as stage dramas and music programmes.

In terms of geography, the first three forms of entertainment mentioned above, operate at the global / national level. Though all of them cater to entertainment needs of society and compete with one another, their value proposition is different. For instance, in the case of a movie theatre, it is the excitement of a date or an evening outing. A movie theatre can also overwhelm the audience with its big screen and big sound, which the three other sources of entertainment mentioned above cannot match. At home, entertainment provides higher flexibility and informality while watching.

Moreover, TV entertainment becomes the most preferred one when one is tired, disinclined to dress up, or is wanting to be alone. The last three sources of entertainment avenues represent products or services that are location-specific but fall under different industries in conventional terms. A restaurants value proposition squares with that of a cinema theatre - both of them provide an opportunity to go out, see people and be seen by others. But eating at a restaurant is a treat to your stomach whereas watching a movie gives a treat to other senses.

Thus, a confluence of technological, economic and societal trends has not only made the industry robust and vibrant, but also an industry consisting of multiple streams of products and services defying the traditional definition of an industry.

Size of the industry

According to a recent study done by global consultancy firm, Arthur Anderson, the Indian entertainment industry is expected to almost triple in size by 2005 from the present level of Rs 9,600 crore. Today, the electronic media has gained popular acceptance with cable and satellite (C&S) TV emerging as a clear winner. With more than 45 channels being telecast in India, television software and content has become an exciting growth area. According to the study, the TV broadcasting segment is expected to touch Rs. 8,400 crore by 2005 and Rs 28,900 crore by 2010, from the current level of Rs 3,000 crore. As far as cable television segment is concerned, it is expected to grow to about Rs 7,000 crore by 2005 from the current level of Rs 2,400 crore. The proliferation of pay channels and the proposed entry of direct-to-home (DTH) TV in the country can be expected to pave the way for the emergence of a number of specialised niche channels, primarily in the areas of infotainment and edutainment.

The motion picture industry, which almost monopolised the entertainment industry for long, is currently facing fierce competition from all corners. According to the Film Exhibitors Association in Tamil Nadu, out of 2,400 cinema halls in the State, 600 have already been closed and of the remaining 1,800, 1,000 are said to be running unprofitably. Unlike the film production segment of the industry, which is able to get at least some additional revenue out of selling the broadcasting rights to TV channels, film exhibitors are suffering from a sizeable erosion in their daily collection owing to diversion of viewers patronage from movie theatres to at-home TV watching.

Although, TV has come to stay as a competing distributing channel for feature films, they cannot completely replace the film exhibition industry. They can co-exist and in developed markets, these channels perform complementary roles. Lobbying with the Government for protective measures will not guarantee an uninterrupted growth for the industry. A proper understanding of the market dynamics will clearly reveal that the solution lies elsewhere.

Evolution of the industry

If one looks at the evolution of the entertainment industry, all over the world, it will be very clear that the real solution for survival and success lies in constantly reinventing themselves. In our country, the entertainment industry started with street plays where very little technology was involved. Then came the second wave of innovation in the guise of stage dramas where some amount of technology started playing a role. But in the subsequent wave, motion pictures came into being with substantial technological sophistication. Thereafter, a number of incremental improvements took place within the motion picture industry. Some of the industry players were able to graduate into the next phase of industry evolution by reinventing themselves.

Actor Sivaji Ganesan started his career by acting only in dramas. But when the motion picture industry came into being, he graduated to become one of the most accomplished and durable actors on the silver screen. Also, some of them co-existed as niche players. Three outstanding examples are the drama companies in Tamil Nadu run by Cho Ramasamy, R.S. Manohar and S.Vee. Sekar. Each of them had occupied a niche position. While Cho had carved out a place for himself in political satirism, Manohar and Sekar specialised in epic-based themes and family-based comedies respectively.

The cinema exhibition business in the country is in the doldrums right now. With changes taking place in all aspects of the environment relating to the industry, these unorganised players, by and large, failed to upgrade their services because they were not responding appropriately to the changes taking place in the industry and its environment. In other countries, the film exhibition segment has seen changes both in technological sophistication and newer business concepts. They succeeded in differentiating their service offering by providing a completely different experience, which cannot be duplicated by the competing TV Channels.

Multiplexes have become popular all over the world. By bundling a range of entertainment services, they have been able to share a part of the industry pie despite the heavy competition from TV channels. In India also, multiplexes have started coming up in metropolitan cities. But what is going to click in the Indian situation is a local version of multiplexes, which can guarantee a different entertainment experience, at affordable costs so that it can attract the masses who are addicted to cinema. Since the entertainment industry continues to be fragmented and populated by small, unorganised players commanding little market clout, most of them are not able to migrate to the next stage of the industrys evolution. A new form invariably attracts new players.

Implications for the industry

The following four conclusions emerge from a detailed analysis of the broad industry trends:

*There is going to be an increasing demand for a variety of information and education-oriented programmes packed in an entertaining way. Pay channels and DTH can be expected to fill such gaps.

*Content providers will cater to the needs of a number of media streams such as TV, Internet and print. Many industry players will be able to migrate from one media to another with ease and felicity.

*Corporatisation of film production and exhibition segments will gain momentum. Only then, they will be able to respond appropriately to the changes taking place in the environment.

*Freelancing, which is already prevalent in the entertainment industry is expected to become a dominant form of employment generation in the industry.

All the above-mentioned trends are already evident. Till recently, many artists, particularly actors and actresses had compressed careers limited maybe to a decade or two. But now, with the invasion of TV channels, many of them have become successful content providers. Many artists who enjoy super-star effects are able to leverage their expertise in one area (say acting) to other activities in the entertainment value chain. For instance, leading content providing companies in Tamil include ventures started by popular actresses such as Radhika, Revathi, Kutti Padmini, and others. K. Balachander, the veteran director, who ruled the silver screen till recently by successfully portraying the urban middle class values and aspirations, has migrated to the small screen at the right juncture to scale even greater heights. Pioneering film producing companies such as AVM and Gemini have also started producing content for the small screen. As for as the print media is concerned, only Ananda Vikatan straddles both print and the TV media right now.

Shaping the Industry

India is home to two thriving entertainment clusters - Bollywood in Mumbai and Kollywood in Chennai. The size of the South Indian film industry is bigger than the Hindi film industry, in terms of number of films produced. A number of entertainment companies are springing up in Mumbai. Chennai, being the second biggest entertainment cluster, opportunities await for potential entrepreneurs to jump onto the bandwagon and reap the first-mover advantage in a number of segments - ranging from content creation to actual delivery of entertainment. While the attractiveness of content creation business lies in its ability to cater to the needs of a number of media and scale of their operations, the lure in the customer end of the value chain, namely multiplexes, amusement parks, theme restaurants and recreation clubs, is in the replicability of the business models. That is, a successful business model can be replicated all over the country in a number of urban centres.

Designating entertainment business as an industrial activity alone cannot transform the fortunes of the industry overnight. For that matter, even promoting a new representative body for the industry will not take the industry forward on its own. What is needed is strong determination from all stakeholders to create a new future for the industry. This, in turn, calls for a sound strategy for the industry as a whole, with definite time frame. Success requires committed action channelised towards achievement of the strategic objectives. Apart from the initiatives at the individual level of industry players, they have to work together in a number of areas, if the industry is to realise its true potential. Though lobbying will continue to be a major activity of the industry association, it is not its only responsibility. Lastly, there are areas, which demand collaborative action - that is, between the industry, Government agencies and other facilitators in the private sector.

(The author is a Consultant with the Centre for Entrepreneurship Development and teaches at the Department of Entrepreneurship Studies , Madurai Kamaraj University, Madurai.)

 
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