Reveals the report on events and activation industry EEMA and Ernst & Young at EEMAGINE 2012
BestMediaInfo Bureau | Delhi | August 1, 2012
The organized portion of the Indian events and activation industry is estimated at around INR 2,800 crore in 2011-12. The industry has grown at over 20 percent during the last two years and is expected to grow to INR4,375 crore by 2013-14, according to the first ever report on events and activation industry released today by Event and Entertainment Management Association (EEMA) and Ernst & Young at EEMAGINE 2012. The report identifies the unorganized events and activation sector as well, which could be as large or even larger than the organized portion of the industry.
Brian Tellis (President – EEMA India) said, “I am extremely delighted with the launch of industry’s white paper. With this we have accomplished the much awaited development in the industry that will certainly facilitate the already established thought leadership in this field. The business has shown an unswerving growth pattern, with 20% increase during the last two years. And I look forward to a more strengthened position with the help from regulatory bodies.”
Ashish Pherwani, Partner & Segment Champion - events, Ernst & Young said, “It gives us great pleasure to be associated with EEMA for the first white paper to be written on the events and activation industry in India. Over the past few years, the industry has grown considerably and through this paper, we have endeavored to capture the trends and challenges that this dynamic industry faces. The industry's growth will be driven by development of IP, Sports properties, Digital activation and rural properties. The organized portion of this industry is poised to increase as advertisers increase their below-the-line spends over the next two years, build communities and amplify the customer experiences they create.”
Ekta Kapoor, Indian TV and Film Producer & Joint Managing Director and Creative Director of Balaji Telefilms said,“Itwas a pleasure attending such a fabulous seminar. Over the past years the entertainment industry has grown multifold. I appreciate the efforts done by EEMAby bringing together professionals and organizations operating in this space on the same platform.”
Ambika Soni (Minister-in-charge of Ministry of Information & Broadcasting), Farokh Balsara (Media & Entertainment Leader – Europe, Middle East, India & Africa (EMEIA), Ernst & Young), Brian Tellis (President - EEMA India) launched the White Paper at EEMAGINE.
Key findings from the white paper
With an average growth rate of more than 20% during the last two years, the organized events and activation sector has shown a consistent growth pattern due to increasing confidence being shown by marketers in events and activation for their business growth. There is practically no entry barrier to commencing operations as an event management service provider, and there are several unorganized players, i.e., service providers who are either individuals, do not have defined business processes and policies and/or have an annual turnover of less than INR5 crore. According to the estimates of the survey respondents, the organized sector accounts for around 40% of the total events industry.
Industry leaders are of the opinion that growth will be driven by development of IP around: (a) Sports, which is in a nascent stage in India; (b) Digital activation, which is becoming an integral part of all B2C properties, and (c) Properties which target rural audiences, following the increased spends marketers are undertaking in tier-II and tier-III cities.
Marketers plan to increase the proportion of their BTL spends from 17.8% today to 19.6% by 2013–14.
The total number of events delivered grew 24% in 2011–12 as compared to 2010–11 – and growth was noted across managed events, activation and IP. The number of IP doubled in terms of share of total events from 1% to 2%, while the main growth was noted in managed events, which increased its share from 65% to 70% of total events conducted.
The transactions opportunity
The events and activation industry in India has seen the lowest transactions activity among all segments of the media and entertainment sector, due to its small size, highly persondependent nature and absence of bankable IP. As companies grow and cross the INR100 crore size, bring about increased transparency, build niche capabilities and become more corporatized, this is set to change. While, in the near term, mergers and acquisitions (M&As) are likely to be funded
through internal accruals, private equity and strategic investors can be interested in the medium and long term.
Demonstrating return on investment (RoI)
Most marketers indicated that they are likely to increase their expenditure on events and activations if the return on their spends could be demonstrated to their CEOs in a standard manner. However, due to the unique nature of each event, there is no universally accepted standard today to measure return on events and activation spends. The industry needs to define standards to measure performance against key client expectations (for example, sales, trial, awareness, database creation, etc.) and implement the same uniformly to increase marketer confidence.
Regulatory wish list
There is a need to rationalize state taxes, mainly entertainment tax, to a uniform percentage. Entertainment tax rates are extremely high in some states, which make events financially unviable. Ticketed events have fared extremely poorly in India due to high taxes, and there is a need for a tax waiver/ holiday for five years to give a boost to the live entertainment segment of the industry. Growth in the live events segment can lead to economic growth, increased tourism and employment generation.
Most event companies perform some degree of risk management around properties executed by them, but many tend to rely on the experience of their teams. Formal risk assessments (around event objectives, attraction points and hygiene factors) are seldom performed due to the increased costs related to the same, which many sponsors and clients are not willing to bear, but the events and activation agency is required to manage.
All respondents were profitable
The financial summaries received from survey respondents indicated a sound and profitable business model, largely derisked through advances received from customers. Earnings before interest, depreciation, taxes and amortization (EBIDTA) figures show that the current profit margin, on average, stood at around 19% of total revenues. Debtors days stood at a healthy 59 days, as most events and activation companies only paid creditors and vendors from advances of collections made from customers. Most event management companies had job costingsystems in place, with the more evolved companies preparing both a pre-event profit and loss statement (or event budget) and a post-event budget-to-actual analysis.
The key strengths of the Indian events and activation industry are the ability to “get things done” under adverse circumstances, execution creativity, an efficient cost base and a strong vendor base across price points. Growth can be stimulated if certain issues such as onerous regulations around permissions, a plethora of taxes (particularly entertainment tax), inadequate events infrastructure, transparency of costs and the absence of a universal standard for demonstration for return of investment are addressed. The industry needs to own, in whole or in part, rights to intellectual properties to protect against economic downturns and maintain a stable top line.