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Fun time is boom time

What's common to Ally Mcbeal, South Africa versus England, V2K and Yahoo chat? All of them can be loosely termed entertainment options (even if Hussain takes 450 minutes to get to triple figures). And all of them are competing for a slice of your time. So are millions of other entertainment options, which is why entertainment is one of the biggest and highest-growth industries in the world.

India too is being gradually swept away by this global wave. This year has seen terrific performances by a whole range of what can loosely be called new-wave IT-dependent entertainment stocks. The star is Zee Telefilms, which is now the third highest valued company in the country. But a lot of other entertainment stocks like Shri Adhikari Brothers, Credence Sound & Vision, Gramophone Company of India, GV Films, Odyssey Video have actually out-performed the Big Brother of the entertainment industry. They started from far lower bases of course, but every one of them has produced ten-bagger returns since January. One could even stretch a point to include Pentafour Software, for the Chennai-based IT major is also one of the biggest multimedia players in the world.

Each of these companies does different things. Zee is spreading its wings into both print and Net entertainment and Credence and Pentafour sub-contract for Hollywood. Gramophone Company has an enormous library of priceless copyrighted music that it is now digitising. Most of these outfits are quite small by global standards and most showed strong growth this year. All are perceived to possess some sort of competitive advantage that will create sticky eyeballs in the long run.

Entertainment isn't an industry for the faint-hearted investor. Every big-name studio has skated on the brink of bankruptcy at some stage or the other. So have many TV companies and publishing houses. So undoubtedly will many of the new entertainment companies. The threats and opportunities of the new millennium will be different but I doubt that the basic paradigms of the entertainment industry will change.

These paradigms are based on human nature. It's tough to predict what the fickle mind of the viewer will consider entertaining and it's even more difficult to figure when the audience will change its tastes. Hum Apke Hain Kaun and Hum Saath Saath Hain have done well -- but would you like to bet on a third variation on the theme? Did anyone guess that TNT could live off old movies and make that its USP?

Because of the changing nature of human tastes, the entertainment industry has always, to use a cricket analogy , operated on a low strike rate. One in every eight book published makes money, just like one out of every ten movies, and one out of every 45 video-games. But the projects that do succeed reap extraordinary returns, as indeed they must, for the industry to continuously attract capital over decades.

But there will be some big changes in the entertainment industry over the next few years. First of all there is the trend of convergence in delivery systems - TV, set-top, dial-up. digital subscriber lines, wireless access, what-have you. The net effect is that the public will have the option of seeing what it wants, where it wants, on a variety of platforms.

Different frames of entertainment will borrow from each other. Entertainment will get more and more interactive as well, allowing viewers to become participants. Pokemon-or Ninja Turtle type phenomenon, which spawn popular video-games and interactive comics will become the norm. People will do their own personalised Karaoke versions of movies with their own personalised endings. For example, Lara Croft will sooner or later star in an Oscar-winning take on Tomb Raiders where somebody finally persuades her to take all her clothes off.

Another trend is that large chunks of the world population is becoming wealthier and now possesses a far shorter attention span than would have been previously considered normal. The "wealthier" tag has obvious implications - the world has a larger disposable income to indulge itself in its pursuit of pleasure. It also has less time to spend. Circa 2010, people will "play" entertainment in small slices during their coffee breaks at work or in-between ordering their groceries. This will be considered as normal as sneaking in a quick level of Prince of Persia or Doom between work periods is now.

Obviously it is impossible to predict consistent winners in such a peculiar industry. Some people have the knack of being entertaining. Other people have the ability to take huge intuitive risks. This newly evolving industry will end up being driven by such people just as the entertainment business is now. There will also be fortunes to be made in managing the new channels of distribution and generating ancillary revenues from ads etc.

In the purely Indian context, global entertainment paradigms will be modified by the nature of the domestic market. Right now cable access is around 70 million connections. Assume that by 2010, this will be more like 300 million connections. DTH, or some successor technology, will find its way in. Internet access and phone connectivity will grow even more sharply than cable penetration.

If you project the current trend of 6-7 per cent GDP growth and rapid urban expansion, then the sheer size of the potential market is mind-boggling. It is also such a heterogeneous market that 100-channel plus TV, multiple FM channels and high-speed Internet Access to entertainment will be utilised in desi ways that the American Mid-West cannot imagine.

India has always had a large domestic entertainment industry. Mollywood and Bollywood hold most of the Guinness Book of World Records for quantity (and I'm not referring merely to the amount of flesh on display!). But passive investing in the old-style film industry isn't easy. Investors are venture capitalists, quite often they are people who earn their money by dubious means. They are there for the glamour. The concept of transparent financial accounting has never existed in that industry.

All of a sudden, that has changed with the advent of the new-style entertainment firms. I'm not suggesting that listed entertainment companies don't use dubious accounting methods - quite often their accounting processes are very "creative". But the very fact of being joint-stock ventures imposes a certain basic discipline that gives the savvy investor a chance.

The bull-run in entertainment stocks will certainly continue. Look at the success of the TV-18 IPO if you don't believe me. Or maybe you wouldn't classify that as an entertainment stock? I would - because viewers will flip channels or hit the Net if they don't like the TV-18 programming. And that's the nature of the entertainment beast!

Devangshu Datta

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