Market Opportunity
India is the world’s largest single consumer of film entertainment in the world. Every year, 1100 films are released, and 3.5 billion tickets are sold. The Indian government granted the film business industry status in 2002. This is one of the few sectors which allows 100% FDI (foreign direct investment) in India.
It is also the world’s fastest growing film and entertainment industry. The industry has doubled in size in the last 4 years and is projected to double again by 2012. Multiplex and digital screens are projected to grow five-fold. Currently there are 2350 multiplex and digital screens. This number could well be over 10,000 by 2012. Add to this, the steady rise in ticket prices larger revenue figures. India has the most favourable demographics to support a growing entertainment industry with over 60% of the population under 35 years.
Good quality films deliver profits even before they are released. The growth of multiple revenue streams like television, music, mobile and internet film rights result in the minimization of risks for investors. As an asset class this sector has low correlation with traditional asset classes, thereby providing investor portfolio diversification. The market is rooted with strong domestic consumption with international markets contributing less than a fifth of most film revenue. Internationally Indian cinema reaches more than 30 countries and foreign audiences seem to be growing and adding to the consumption by the Indian diaspora. The business follows global trends and remains relatively unaffected during times of recession.
In the recent past transparency and corporatisation in film entertainment companies has resulted in attractive valuations. India is one of the single largest English speaking and has been a preferred destination for global and Indian corporates with over US$ 1.5 billion Foreign Direct Investment committed to the Indian market in the last 2007-08. All major international film studio’s like Sony, Warner, Universal, Disney, Viacom and Fox are in the process of setting up operations and entering the film production sector in India.
The key opportunity identified by Cinema Capital is to invest in an industry where almost 70% of the most successful companies in the sector are still privately held.