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Funds pour in as business booms for Bollywood, television networks

NEW DELHI (NewsRise) -- India's media and entertainment industry, known for its Bollywood movies and hundreds of entertainment and news channels, is set to double annual revenues to more than $40 billion in five years, as Prime Minister Narendra Modi's economic reforms attract overseas investments.

     The sector, led by companies such as billionaire Subhash Chandra's television news major Zee Entertainment Enterprises and media giant Bennett, Coleman and Co. that owns the Times of India and Economic Times newspapers, has entered the world's top five investment destinations for the first time, according to the 13th Ernst & Young Capital Confidence Barometer report.

     India's media and entertainment industry ranks fourth, behind the United States, the United Kingdom and China, but ahead of Germany, according to the report. EY's report credits government initiatives such as the digitalization of cable television, selling spectrum via auctions and raising caps on foreign investments as key drivers of growth in traditional media. Modi's Digital India initiative that seeks to improve online infrastructure and expand internet connectivity will also help drive growth.

     India has overtaken China as the fastest growing major economy, registering an expansion of 7.4% in the three months to September, while Asia's largest economy grew at 6.9% over the same period.

     "Even as the outlook for many emerging markets turns negative, investor sentiment toward India is seeing a significant recovery," EY said in its report. "With a triple-fold increase in GDP expected over the next 15 years, M&E industry revenues and their contribution to the GDP are expected to increase significantly."

     EY expects India's more than $20 billion M&E sector to more than double in the next five years, growing at 15% annually. The FICCI-KPMG Indian Media and Entertainment Industry report earlier this year estimated that the market will grow 14% annually to 1.96 trillion rupees ($30 billion) from 1.03 trillion rupees ($15 billion) in 2014.

     Zee Entertainment Enterprises, India's biggest listed media company, has outlined plans to expand in global markets, as founder Chandra aims to boost his network's viewership by five times to become one of the top global players by 2020. The Zee Group, known for its channels in Hindi and other regional languages, is also targeting India's urban English-speaking audience with a news channel. India's media industry has seen a string of deals in the past couple of years, including acquisition of MAA Television by Star India for $ 417 million, and buyout of Videocon d2h by Silver Eagle Acquisition Corp for $273.4 million. "The media and entertainment sector in India is poised for exciting times, powered by the growth in digital media consumption and the supporting environment created by regulatory reform," the FICCI-KPMG report said. "The momentum generated by regulatory reform needs to be underpinned by strong implementation on the ground and partnership across the value chain. And then a 'global superpower' may be a not too distant reality."

     Zee Entertainment shares have gained 4% so far this year, while India's largest multiplex PVR has gained more than 11%. The S&P BSE Sensex index has slumped nearly 9% since the start of the year.

     Media companies are also attempting to tap new avenues of growth. News Broadcaster New Delhi Television Ltd (NDTV) is entering the online wedding market, with $20 million in funding from venture capital firm CerraCap Ventures. In India, where most of the marriages are arranged by parents, the wedding business, which NDTV has pegged as a $40 billion market, remains highly disorganized.

     "The wedding business in India is growing at a huge 20% year-on-year," Smeeta Chakrabarti, president-revenue, NDTV Group, said in a statement. "There are 10 million weddings every year in India and this is a massive opportunity."

     Rising incomes, higher internet penetration and a young population are expected to drive growth in the media and entertainment industry. Moreover, an explosion in smartphone users and increased penetration of the internet are expected to drive growth for digital content.

     India's online advertising market is forecast to be a little more than $1 billion, while the forecast for China is in excess of $23 billion, EY said, underscoring the country's growth potential. Flush with foreign funds, e-commerce firms such as FlipKart and Snapdeal, are increasingly spending on advertising across media to boost sales.

     Media is also expected to benefit from the rollout of high-speed fourth-generation internet services in India, which is the largest internet market after China with over 300 million internet users, EY said. This has sparked a spate of investment by foreign firms, from Japan's Softbank Group to Taiwan's Foxconn, in Indian technology companies in recent months. Mukesh Ambani, India's richest man, has also been stepping up investment in the media industry, taking control of Network 18 Media & Investments that runs the CNBC-TV18, CNN-IBN and Colors channels.

     Chinese smartphone maker Vivo, which entered India last year, in October replaced beverage giant PepsiCo as the title sponsor for India's popular cricket tournament, the Indian Premier League, for the next two years. The IPL's success has spawned several other sporting events, such as the Indian Badminton League, Hockey India League and the recent Pro Kabbadi League, which had an estimated 66 million people tune in for its first game, according to FICCI-KPMG. These leagues create several investment opportunities for private companies ranging from advertising to player management, according to EY.

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