A reforming media sector is attracting more deals

The two big drivers of investment in M&E were digitisation in films and TV and consolidation

It has been a good year for the business of media and entertainment (M&E) in India. Private equity deals went up 40 per cent while mergers and acquisitions (M&As) jumped 27 per cent in 2012, on 2011. This marks the second successive year of good deal flow. The sector did much better than the troubled telecoms one, but did not fare as well as information technology, according to data by VCCircle.

The two big drivers of investment in M&E were digitisation in films and TV and consolidation. Providence Equity Partners and Macquarie's joint buy of over 17 per cent stake in Hathway Cable for $72.6 million was the biggest private-equity deal. Earlier, in 2011, Providence invested $58 million for an undisclosed stake in UFO Moviez, India's largest provider of digital cinema solutions.

These deals emphasise the good business sense digitisation makes across the value chain in TV, films and every other media. In TV, it would increase bandwidth by ten times and bring transparency in revenues collected and shared, leading to immediate gains for broadcasters and cable companies. (DEAL FLOW PERKS UP)

The $390-million Network18-Eenadu merger, funded by Mukesh Ambani, was the largest M&A deal. Sony Pictures' buyout of the over 30 per cent stake that promoters held in its Indian arm, Multi-Screen Media, was the second biggest at $273 million.

In a year of slowing ad growth, the improved investor numbers are a silver lining. The faster the industry digitises and consolidates, the more profitable it is likely to be. Now, except for print, a majority of the $17-billion Indian M&E sector has poor profitability numbers.