Reed Elsevier Indusview Indian Media Market Overview

INDIA The World’s 2nd Fastest Growing Media Market Presentation to Reed Elsevier Plc Barcelona, Sept. 28th 2006

IndusView Advisors Pvt. Ltd www.indusview.com New Delhi, Mumbai, Boston, London September 2006

© Private and Confidential, IndusView 2006

TABLE OF CONTENTS

1.

The India Growth Story

2.

The Indian Media Industry – A Snapshot

3.

Print Media Market Overview

4.

Investor Interest in Media Sector

5.

Foreign Investment and Partnerships

© Private and Confidential, IndusView 2006

2

The India Growth Story The Indian Media Industry – A Snapshot The Print Media Market Overview Investor Interest in Media Sector Foreign Investment and Partnerships

© Private and Confidential, IndusView 2006

3

INDIA’S FAST GROWING ECONOMY

Growth Stats 8.4% $801 billion 4.2% $89.3 billion $128.4 billion $153.6 billion 1.1 billion 300 million

10% GDP Growth Rate (%)

GDP Growth GDP Inflation Exports Imports Foreign Reserves Population Consumer Class

India’s GDP Relative to Other Asian Economies

12% 9.9%

8.4% 8%

7.5%

7.3% 6.1%

5.6%

6%

5.5% 4.5%

4.1%

4%

Source: Economywatch © Private and Confidential, IndusView 2006

Taiwan

Thailand

Singapore

Philipines

Korea

India

Indonesia

0%

Hong Kong

Sources: Economist Intelligence Unit; National Statistics; Thomson Datastream; 2005-2006 Year Figures

China

2%

India - the fourth largest economy in terms of purchasing power parity 4

GROWTH FACTS

•

70% Population under 35 Years of Age

Projected $ GDP Development (Indexed*)

(International Herald Tribune, Jan. 26, 2006)

•

Fastest Growing Mobile Phone Market at 5.9 million new units in August 2006 (EMC and Telecom Regulatory Authority of India,Sep.14, 2006 )

•

Fastest Growing Aviation Market at 25% per year and a $31 billion order book (Aviation and Travel Industry News)

•

Top Remittance Market at $21.7 Billion (World Bank Global Economic Prospects Report 2006)

(KPMG India Media Report, 2006)

•

2nd Fastest Growing Economy with 9.3% GDP Growth for Quarter Ending Mar. ‘06 (Indian Government Central Statistical Organization)

2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035

Top Movie Maker - 1,200 films Grossing $1.5 Billion in 2005 2001 2003 2005 2007 2009 2011

•

India

China

G6

Source: Dreaming with BRICs: The Path to 2050, Goldman Sachs, Oct 2003; 2003 is Base Year (100)

(Deutsche Bank Report, 2005) © Private and Confidential, IndusView 2006

Poised to Be 3rd Largest Economy by 2032 from 12th Wealthiest in 2005 5

THE INDIA ADVANTAGE

• •

Expanding Indian Economy

Projected Growth Rate of the E&M Industry 30

Rising ad-spend – contributes 0.40% of

25

• • •

Literate population on the rise Strong job creation in new economy sector

20 15 10

Change in consumer mindset due to global 5

exposure

• •

Percentage

GDP, risen from 0.34% in 2004

Untapped rural potential Relaxation of foreign investment and foreign ownership limits

0 2007 China

2008 India

Asia Pecific

2009 USA

UK

Source: PwC’s Global Entertainment & Media Outlook 2005-09

Source: Times Of India, PwC

The world is waking up to the opportunity that is India

© Private and Confidential, IndusView 2006

6

The India Growth Story The Indian Media Industry – A Snapshot Print Media Market Overview Investor Interest in Media Sector Foreign Investment and Partnerships

© Private and Confidential, IndusView 2006

7

INDIA’S 6TH FASTEST GROWING SECTOR

•

• •

The Indian Entertainment and Media (E&M) Industry has out-performed the Indian economy and is one of the fastest growing sectors in India The industry is expected to more than double to $18.6 billion in 2010 from $7.8 billion in 2005 Rising consumer spending (increasing disposable incomes) on account of sustained growth in income levels and reduction of personal income tax over the last decade

Rising percentage age of young population

Increase in income levels

Changing spending patterns

Consumerisation of Urban India

Increase in number of working urban

Increase in spending powers

Rising aspiration levels

Consumption of Lifestyle Items

Source: FICCI and PwC

The entertainment and media industry in India is expected to grow faster than the country’s GDP (9.3%) growth © Private and Confidential, IndusView 2006

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MEDIA INDUSTRY– A SNAPSHOT

CURRENT MARKET SIZE Press

Books

Press Readers in 2005 - 216 Million

Book Readers in 2005 - 600 Million

Magazines Market size in 2005 - $250 Million

Market size in 2005 - $685 Million

Newspapers Market size in 2005 - $2500 Million Recepient of 46% of Advertising-Spends in 2004 - Preferred source of Content in India - Demand rising with rising literacy

Fragmented Industry - 16,000 publishers - Rising literacy & education standards are increasing demand - Off-shoring of publishing is an emerging area

Online Internet Users in 2005 - 50 Million (5% of population) - Grew at 25% over 2004 Market size of Online Transactions in 2005 - $262 Million - Books & Magazines account for most online shopping Market size of Online Advertising - $24 Million

Broadcast Television Number of households covered - 100 Million (50%) Films Number of Films released in 2005 - 1200 - 3 Billion Tickets sold in 2004 Radio - Recently opened to Private Investment Receipient of 48% of Advertising Spends in 2004

Source: India Brand Equity Foundation

© Private and Confidential, IndusView 2006

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MEDIA INDUSTRY– GROWTH PROSPECTS

SCOPE FOR GROWTH Press Magazines Market to grow at 6% annually Newspapers Market estimated to grow at 6% annually for next 5 years Demand to increase with increasing literacy and need for information

Books

Online

Broadcast

Growth in this segment is expected to come from:

Growth is expected to come from:

Growth is expected to come from:

- Increasing readership with literacy and education

Online transactions which have been growing around 80% per annum

Television - Direct To Home - Increasing TV sales

Online advertising is expected to grow at 50% CAGR

Films Digitalization of Screens in Smaller cities

- Exports resulting from Off-shoring of publishing which is expected to gain a size of $1.1 Billion by 2009

Growth is expected to ride rising internet connectivity

Radio - Demand for regional and local content

Source: India Brand Equity Foundation

© Private and Confidential, IndusView 2006

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The India Growth Story The Indian Media Industry – A Snapshot Print Media Market Overview Investor Interest in Media Sector Foreign Investment and Partnerships

© Private and Confidential, IndusView 2006

11

GROWING NUMBER OF READERS

•

Readership-Newspaper and Magazine

Total readership grew by 7 million during the 250

last year to 222 million at the beginning of 2006 – a growth of almost 3% over 2005

204

191

The average urban adult spends 44 minutes per day reading dailies and magazines – an increase of 7% over last year

•

200

The literacy rate has risen to 71.1% from 69.9% the last year. The rate of growth has

# in million

•

222

215

150

100

75

68

2005

2006

50

been marginally more in rural areas (64.8% from 63.3%) than in urban areas (85.3% from 84.4%)

0

Newspaper

Magazine

Total Source: NRS 2006

With the literate population on the rise, more people in rural and urban areas are reading newspapers and magazines © Private and Confidential, IndusView 2006

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MAGAZINE SUBSCRIPTIONS EXPANDING

•

The magazine publishing market revenues are expected to grow at 6% compounded annually The relaxation of the Foreign Direct Investment limits for investment in the Indian print media market is opening a plethora of opportunities

Total Magazine Industy Revenue 350 300 250 US$ million

•

71

75

73

77

79

200 150 100

223

183

210

236

196

2005 E

2006 F

2007 F

2008 F

2009 F

50 0 Advertisements

Subscriptions

Source: Industry Estimates and PwC Analysis

Government now allows the printing of facsimile editions of international newspapers and journals in India © Private and Confidential, IndusView 2006

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NEWSPAPER CIRCULATION INCREASING

• •

The newspaper publishing market in India comprises of spending by advertisers and readers on daily print newspapers India's newspaper market is estimated to grow at a compound annual rate of 6% between 2005 and 2009 India’s growth rate in this segment is expected to be much higher than the average rate of growth in the Asia-Pacific region in the next four years

Total Newspaper Industry Revenue 3,500 3,000 US$ million

•

2,500 2,000 1,520

1,599

1,680

1,763

1,848

1,500 1,000 500

1,004

1,081

1,160

1,242

1,323

2005 E

2006 F

2007 F

2008 F

2009 F

0

Advertisements

Subscriptions Source: Industry Estimates and PwC

India - the 2nd largest market for newspaper circulation Source: World Press Trend 2006 © Private and Confidential, IndusView 2006

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PUBLICATION GENRE BREAKDOWN Magazines

Newspapers

2%

Others

Information Technology

6% 9%

Business

Information Technology

0.04%

Business

Women's Magazine

9%

21% 35%

General Interest 0%

•

0.03%

5%

Film

•

Youth

5%

10%

15%

20%

25%

30%

35%

General Interest

40%

91%

0%

20%

40%

60%

80%

100%

‘General Interest’ genre played a major role in Print advertising during the 1st half of 2006 with 91% share in Newspapers and 35% in Magazines Business Newspapers were in second place with 9% share, while Women’s Magazines carried 21% share followed by 9% share of Business Magazines Source: AdEx India

Diverse interests of people boosting sales of magazines and newspapers © Private and Confidential, IndusView 2006

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ROBUST BOOK MARKET

• • • • • •

India ranks 3rd in the publication of English books after the USA and the UK More than 77,000 new titles are published each year, of which 30,000 are in English There are approximately 600 million readers of books in India India is the only country in the world, which publishes books in 30 languages There are approximately 16,000 publishers in the country Indian book publishing industry is estimated to be worth $685 million Source: Indiaguest

Indian book market growing global

© Private and Confidential, IndusView 2006

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E-COMMERCE FUELED BY ONLINE BOOK SALES

Avg. Number of Transactions Per Month

Transaction Value

600

900,000 511

795,000

800,000

500

700,000 US$ million

400

600,000

300

500,000

262

440,000

400,000 200

300,000 207,000

127

200,000

100

57

100,000

0

0 2003-04

2004-05

2005-06

2006-07E

2003-04

2004-05

Source: IAMAI

• •

2005-06 Source: IOAI

Average transaction value for the year 2005-06 was $25 Average number of transactions grew by 80% in 2004-05 and nearly quadrupled in 2003-04

Books account for 41% of total online shopping Magazines account for 19% of total online shopping © Private and Confidential, IndusView 2006

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INTERNET TO LOG THE FASTEST GROWTH BY 2010

Online Advertising Market In India

60.0

48

US$ million

40.0

36

30.0 24 20.0 10.0

9.3

0.0

5%

50 Internet Users (Millions)

50.0

Internet Growth in India

60

4%

40 3% 30 2% 20 1%

10 0

2004

2005 E

2006 F

2007 F

0% 1998

1999

2000

2001

Internet Users

2002

2003

2004

2005

Percentage Penetration

Source: IAMAI

Source: ITU, C.I. Almanac

• Out of the media segments, internet advertising will grow at a robust CAGR of 50% • Revenue of internet advertising is expected to grow to $167 million by 2010 Source: FICCI

Online media open to 100% foreign ownership © Private and Confidential, IndusView 2006

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PRINT MEDIA ON A GROWTH PATH

•

The Indian Print Media segment primarily comprises of Newspaper and Magazine publishing Print media revenues are expected to grow to $4.3 billion by 2010 - a CAGR of 12% Source: FICCI and PwC

Total Print Media Industry Revenue

4,000 3,500 3,000 US$ million

•

2,500

254

269

285

315

300

2,000 3,005

2,524

2,840

3,171

2,680

2005 E

2006 F

2007 F

2008 F

2009 F

1,500 1,000 500 0

Newspaper

Magazine Source: Industry Estimates and PwC Analysis

A booming Indian economy, growing need for content and government initiatives that have opened up the sector to foreign investment are driving growth in the print media © Private and Confidential, IndusView 2006

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PRINT MEDIA ATTRACTS 2ND HIGHEST AD-SPEND

• • • •

Print contributed 35% to overall advertising volume in 1st half of 2006 Print ad-volume grew by 18% in Jan-Jun 2006 over Jan-Jun 2005 ‘Education’ emerged as the Top super category in Print advertising in Jan –Jun ’06 ‘Services’ got the 2nd position and it includes Properties/Real Estate, Internet/SMS services, Travel & Tourism, Airlines, Courier Services, etc. Top 10 Categories In Print Advertising In The 1st Half of 2006 Rank

Categories

Rank

Categories

1

Education

6

Corporate/Brand Image

2

Services

7

Retail

3

Banking/Finance/Investment

8

Telecom/Internet Service Providers

4

Auto

9

Computers

5

Durables

10

Personal Accessories

India is emerging as a promising market for new publications given its growing role in international business © Private and Confidential, IndusView 2006

Source: AdEx India

21

EXPANDING OFF-SHORE BUSINESS

•

An emerging area in the Indian publishing industry is the off-shore production of books, magazines and digital content

•

Revenues from off-shoring of publishing vertical estimated to reach $1.1 billion by 2010 from $107 million in 2005

• •

India exports books and journals worth $102 million to more than 80 countries Recent legislative changes have opened up new opportunities in the publishing industry for foreign companies. 100% Foreign ownership is permitted in the non-news sector and in trading companies engaged in publishing industry Source: Indiaguest

The Indian publishers are looking to expand their market though both organic and inorganic routes © Private and Confidential, IndusView 2006

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KEY PLAYERS READERSHIP

MAINLINES 1.1 Dainik Jagran (Hindi)

21.2 million

1.2 Dainik Bhaskar (Hindi)

21.0 million

1.3 Times Of India

7.4 million

1.4 The Hindu

4.5 million

1.5 Hindustan Times

3.85 million

BUSINESS DAILIES

READERSHIP

2.1 The Economic Times

0.86 million

2.2 Hindu Business Line

0.17 million

2.3 Financial Express

0.09 million

BUSINESS MAGAZINES

READERSHIP

3.1 India Today (English)

5.15 million

3.2 Business World

0.68 million

3.3 Business Today

0.71 million

3.4 Business India

0.52 million Source: NRS

There are a large number of players in this segment, spanning various genres, regions and languages © Private and Confidential, IndusView 2006

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The India Growth Story The Indian Media Industry – A Snapshot Print Media Market Overview Investor Interest in Media Sector Foreign Investment and Partnerships

© Private and Confidential, IndusView 2006

24

TOP PUBLICLY LISTED MEDIA FIRMS Revenue Firms

Net Profit Margin

($ Million)

(%)

Market Cap

P/E

($ Million)

Ratio

Reported Results for the Quarter Ending June 2006

Magazines and Newspapers 1. HT Media Ltd.

51.98

12.80%

595.00

32.04

2. Deccan Chronicle Holdings Ltd.

23.83

21.20%

445.00

29.98

3. Jagran Prakashan Ltd.

29.71

16.70%

324.00

46.53

Books 1. MacMillan India Ltd.

8.57

21.40%

143.00

15.30

2. Navneet Publications Ltd.

37.76

19.60%

140.00

N/A

Broadcast 1. Zee Telefilms Ltd.

50.03

6.70%

2896.00

171.89

2. Sun TV Ltd.

19.44

47.20%

1949.00

66.36

3. New Delhi Television Ltd.

11.83

0.84%

280.00

N/A

4. Television Eighteen India Ltd. 5. Balaji Telefilms Ltd. 6. UTV Software Ltd.

6.97 15.99 9.36

69.00% 23.90% 0.00%

270.00 194.00 78.00

64.81 15.07 120.00

7. Adlab Films Ltd.

11.10

23.60%

332.00

55.59

Source: www.icicidirect.com

Media stocks trade at much higher P/E multiples than the broader market (P/E~18), which represents considerable investor interest and risk appetite for the sector. © Private and Confidential, IndusView 2006

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The India Growth Story The Indian Media Industry – A Snapshot Print Media Market Overview Investor Interest in Media Sector Foreign Investment and Partnerships

© Private and Confidential, IndusView 2006

26

FOREIGN DIRECT INVESTMENT POLICY

•

As much as 100% is permitted in the publishing and printing of scientific and technical magazines, periodicals and journals

•

In the news and current affairs category, for instance newspapers, Foreign Direct Investment has been allowed upto 26% subject to certain conditions: o The largest shareholder must hold at least 51% equity o Three-fourth (3/4) of directors and all executive and editorial staff have to be resident Indians Source: PricewaterhouseCoopers research

The Government of India has been constantly easing the foreign direct investment norms thereby making entry of foreign players easier and more welcome in this sector © Private and Confidential, IndusView 2006

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MORE FOREIGN COLLABORATIONS WITH INDIAN MEDIA Some of the important collaborations: Indian Entity

Foreign Entity

Business Standard

Financial Times (Pearson Group)

Jagran Prakashan

Independent News and Media, UK

Mid Day Multimedia

T Rowe Price International

HT Media

AMP Hendersen, UK

Tata

McGraw Hill, New York

Times Of India

BBC Worldwide,UK

CyberMedia

SX2 Media Labs LLC, New York McGraw Hill, New York Kaleidoscope Entertainment

Infomedia India Limited

Wisden Group, UK Ringier Trade Publishing, China Vogel Group, Germany

Foreign Publishers are entering the Indian market via Investments, Joint Ventures and Alliances © Private and Confidential, IndusView 2006

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CONTACT DETAILS

Bundeep Singh Rangar Chairman, IndusView UK Tel +44 20 7724 0777 Fax +44 7092 007 100 [email protected]

Thank You

© Private and Confidential, IndusView 2006

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