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Rakesh Jariwala, partner and tax expert, Ernst & Young and one of the finest minds in determining the taxing truths for the Indian media and entertainment sector, presents his budget wishlist to MxMIndia

– High entertainment tax burden on industry that showcases Indian art and culture to the world is totally unjustified. Hence, the entertainment tax structure across the country should be rationalized by bringing down rates of entertainment taxes in important states like Maharashtra, Delhi, UP, West Bengal, Gujarat, Haryana and others.

– Film producer generates revenues from theatrical and non-theatrical rights both of which are liable to service tax. Separately, various State Governments classify ‘copyright’ as goods thereby levying Value Added Tax on transfer/ licensing of copyright on non theatrical streams. To prevent multiple taxation, the government should exempt ‘copyright in theatrical distribution of cinematograph films’ from service tax levy and continue this exemption in the negative list.

– The Government should take a cue from steps taken by federal/ state governments across the world such as Singapore, UK, Germany, South Africa, US and incentivise the film industry through a well defined plan, for both, content creation and infrastructure. This will help the industry parallel its western counterpart.

– The concessional rate of 10% on gross basis, as prevalent for non-resident sportsperson for participation in any sport in India should be extended for taxation of foreign artists, performers and entertainers.

– An alternate mechanism for obtaining Income-tax Clearance Certificate (‘TCC’) for clearance or a monetary threshold for triggering TCC provisions is provided as the current set up provisions and administrative burden discourages foreign talent to shoot in India.

– A clarification from the government that the payment for grant of distribution rights to foreign telecasting companies is not for the ‘copyright’ in the content and hence, is not in the nature of royalty thereby preventing protracted litigation.

– Entry into premises such as films, theaters, amusement parks could be liable to service tax under the negative list based service tax legislation. Since these activities are already liable to high entertainment taxes by states, entry into premise where entertainment is held should be excluded from service tax levy.

– The Government should grant relief from levy and collection of service tax on subscription charges received by cable operators and DTH operators since these charges are already subject to entertainment tax.

– Rakesh Jariwala is Partner and Tax Expert, Ernst & Young. Please log on to mxmindia.com on Saturday, March 17 for our budget special.

By Anil Thakraney

OKAY, so I have ‘upgraded’ to 94.3 Radio One and have chucked all my CDs into the Arabian Sea. Spending time in the car, despite Mumbai’s
horrendous traffic conditions, has become fun once again. And I must say the RJs don’t ramble much, and the music collection is superb. A good mix
of new stuff and retro. So far so good.

The only problem is the bloody ads. Most of them are sick, boring and nerve wrecking to hear. And each ad enjoys high frequency because radio is
an inexpensive medium. Imagine what a downer it is to listen to rubbish in the middle of Cold Play and U2. This is like a tapori waiter on duty at the
Zodiac Grille. Doesn’t work. So who’s at fault here, can we blame the radio station? Ideally, 94.3 should be picky about the sort of ads they
broadcast, so that the overall ambience of the station doesn’t get screwed. They cannot disown the ads completely. But private FM radio stations
are bleeding in India, so we really can’t blame them for lapping up whatever ads they can get their hands on. They have to survive, no? So I guess
the station can be forgiven.

What cannot be forgiven is the sad quality of the radio ads. I cannot understand why, after all these years, agency creative directors don’t get this
fantastic medium. At a very low cost, one can produce award winning work in this space. With no dependence on visuals, the listeners’ imagination
can be fired, they can be left to fit in their own images. And how very tantalizing that can be! I suspect the key reason radio advertising continues
to languish is that the entire attention of the ad agencies is focused on TV commercials. And perhaps radio spots are still being written by bored
copy trainees, who must be treating it as a chore rather than as a creative challenge.

Come on, dear Creative Directors. It’s a fab medium and a huge opportunity. Don’t waste it. And I would also appeal to the clients not to accept
garbage scripts. They must put pressure on their agencies to come up with sparkling radio spots. Even if the spots cost less, money is being spent
on them, so they better be paisa vasool. If the brand managers quietly accept mediocrity, then that’s what will be dished
out to them.

BY A CORRESPONDENT

WHILE the effects of the economic downturn were felt across sectors and industries last year, it was a steady year for the Indian Media &  Entertainment (M&E) industry that registered a growth of 12 percent over 2010, to reach INR 728 billon. According to the FICCI-KPMG report, the growth trajectory was backed by strong consumption in tier 2 and 3 cities, continued growth of regional media, and fast increasing new media business. Overall, the study predicts the industry to register a CAGR of 15 percent to touch INR 1,457 billion by 2016.

But despite the positive numbers recorded, the report agrees that 2011 has indeed been a challenging year not just for the Indian M&E industry, or even the Indian economy, but for the larger world economy. While India is still expected to grow at a healthy pace, growth is projected to be lower than expectations.

The report notes that television continues to be the dominant medium while sectors such as animation & VFX, digital advertising, and gaming are fast increasing their share in the overall pie. Radio is expected to display a healthy growth rate after the advent of Phase 3. Print, while witnessing a decline in growth rate, will continue to be the second largest medium in the Indian M&E industry. Also, the film industry had reason to cheer, with multiple movies crossing the INR 100 crore mark in domestic theatrical collections, and INR 30 crore mark in C&S rights.

Advertising spends across all media accounted for INR 300 billion in 2011, contributing to 41 percent of the overall M&E industry’s revenues. Advertising revenues witnessed a growth of 13 percent in 2011, as against 17 per cent observed in 2010.

In terms of performance, 2011 proved to be a year with mixed results in terms of growth across different sub sectors. The traditional media businesses experienced a slowdown compared to last year, especially in the second half of the year. However, the new media segments like Animation and VFX, Online and Gaming businesses witnessed phenomenal growth rates.

Highlighting some visible trends spotted in the report, Dr. Rajiv Kumar, Secretary General, FICCI said, “The key highlights are rise in digital content consumption, launch of diverse content delivery platforms, strong consumption in tier 2 and 3 cities, rising footprint of the players in the regional media, rapidly increasing new media business and regulatory shifts.”

Putting forth a more pragmatic outlook, Jehil Thakkar, Head of Media and Entertainment, KPMG said, “The Media & Entertainment industry  landscape is undergoing a significant shift. Cable digitization, the promise of wireless broadband, increasing DTH penetration, digitization of film distribution, growing internet use are all prompting strategic shifts in the way companies work. Traditional business models are evolving for the better as a host of new opportunities emerge.”

Key trends and industry drivers:

– Growth in digital content consumption across media

Digital technology continues to revolutionize media distribution – be it the rapid growth of DTH and the promise of digital cable, or increased digitization of film exhibition – and has enabled wider and cost-effective reach across diverse and regional markets, and the development of
targeted media content.

There has been increased proliferation and consumption of digital media content – be it newspapers and magazines, digital film prints, and online video and music or entirely new categories such as social media. Accordingly, online advertising spends have seen a spurt in growth vis-a-vis spends on traditional media.

– Rise of new age user devices

Smart phones, tablets, PCs, gaming devices, etc. all form the foundation of a new wave in media usage. This is gradually impacting the way content is being created and distributed as well. Multiple media including TV, films, news, radio, music etc are being impacted with this change.

– New age consumers adapting themselves to the newer technologies

As Indian consumers evolve, there is a heightened need to engage them across platforms and experiences. There is a greater need for integration and innovation across traditional and new media, with changing media consumption habits and preferences for niche content. Media companies today have no choice but to provide more touch points to engage with audiences.

– Regionalisation

Regional television and print continued its strong growth trajectory owing to growth in incomes and consumption in the regional markets. National advertisers are looking at these markets as the next consumption hubs and the local advertisers are learning the benefits of marketing their products aggressively.

– An advertising revenue dependant industry

The ARPU (Average Revenue Per User) for television, average newspaper cost for print and average ticket price for films continue to be low on account of hyper competition in these industries. Segments like Radio and a significant portion of online content are available free of cost to consumers. Owing to this, the Indian consumer is still not used to paying for content and hence the industry players are sensitive to the impact of  the slowdown which affects the budgets of advertisers.

– Awaited regulatory shifts

Lastly, apart from the shifts in consumer preferences, company strategies and business models, one big change awaited for the next growth wave is the implementation of recently enacted and regulations on digitisation for cable, implementation of Phase 3 and copyright for Radio and the roll out of 4G. These shifts are expected to be game changers in terms of how business is being done currently and what could be the path going forward.