Reliance AMC mutual fund banks on media sector growth

BANGALORE: With a view to tapping the highly 'untapped" entertainment markets in the world, Reliance has launched a media and entertainment, a first of it's kind by any Asset Management Company in India. The Initial Offer Period is 16 - 27 September 2004.



The company estimates that with an estimated middle class population of 300 mn, India spends less than 1/10th the amount spent in the developed countries on entertainment. With a TV penetration of less than 10 per cent and 0.44 per cent advertising to GDP ratio, the potential is huge and the growth opportunities look strong and sustainable.

Corporatisation, entry of large players, consolidation or closure of smaller players, the entry of a number of players into capital markets have made the industry more visible, transparent, credible and accountable and hence of more interest to investors the AMC feels.

Global Marketing, with a focus over the large ethnic and NRI population, with companies having has opened up manifold opportunities for the local players to leverage their existing content to generate additional revenues set up their own overseas distribution network while others have tied up with the likes of BskyB and others to telecast and market their content.



Over the past one year Government has taken various steps to address the accountability issue in the industry. While DTH operations have finally kicked off, gradual CAS implementation too is on the cards. This will help in plugging the leakage in the revenue chain and provide a substantial boost to the broadcasters, which in turn benefit the end consumers. We will see the tangible benefits of these regulatory changes in the coming years, says a company note.

Convergence and cross selling talks have become a reality now, along with the technology upgrades which present an exciting and challenging for the industry players.

Broadly the Indian media and entertainment industry consists of the following segments: films, print, television, music, live events and radio. Multiplexes are a recent addition to this as per a note from the AMC.



The AMC sees a good Media Sector Potential because, as mentioned earlier:

(1) TV penetration in India is currently at less than 10% and of this too only half of the households have cable connection. Inspite of the low penetration we are the third largest television market in the world, next only to US and China.

(2) India currently has the highest number of youth in the world. Globalisation along with higher disposable income is leading to rapid changes in lifestyle and this argues well for the media and advertising industry.

(3) Another contention by the AMC is that currently less that 20 per cent of the subscription revenues collected reaches the broadcaster against the norm of 75-80 per cent. As India moves towards a better regulatory regime revenues to broadcasters are slated to improve without any corresponding cost escalation.

(4) The AMC feels that Consolidation phase is almost complete and leaders have emerged in various centers. The leaders will now drive the growth.

(5) Another factor that the AMC believes is that the media business model has a strong and predictable revenue stream and at the same time it is highly scalable. With a favorable economic outlook and low penetration Reliance AMC sees immense potential for the players to expand both locally and overseas.

(6) Adding to this is India's changing demographics and the increasing disposable income with the youth. Stocks currently listed in India broadly cover all the business segments of the industry and provide multiple investment opportunities.

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