The next big money spinner

By Patrick Githinji

Is entertainment industry the next economy driver in Kenya?

This is the question that Financial Journal sought answers to - and business analysts reckon the industry could surprise many by the revenue and number of jobs it can generate.

For many years, the industry was perceived as a hobby, but now it is on the launch pad, ready to take off. In a few years it could be a major cash cow, like the information and communications technology (ICT) sector, especially the mobile telephony sub-sector.

Riding on the back of new technology, players in the industry can easily and cheaply produce content, which can be distributed globally through the Internet.

AlyKhan Satchu, an independent business analyst, said fast Internet connections are key drivers in the entertainment industry, adding that mobile Internet is a major and effective channel for content distribution.

"Mobile entertainment is offering deeper interaction with consumers," Satchu said.

"Statistics show in Kenya there are more phone handsets than toilets. Basing your argument on this premise, it is easy to conclude that the industry will grow phenomenally over the next decade," he said.

Satchu says the sector is now receiving Government support.

A year ago, the Finance ministry scrapped duty on filming equipment to encourage local productions and the Government is now contracting local pop artistes to perform during national events. Previously, the performances were mostly by choirs from schools and parastatals.

"Rarely, would you have seen the Government contracting pop artistes during national events," he says.

Information and Communication PS Bitange Ndemo said the Internet offers a global market for local content producers.

"Through the Internet local entertainment content can be accessed from any part of the globe. This means that the market has expanded and we must take advantage of this by offering our content to the global audience," said Dr Ndemo.

Local pop sensation Nameless in action. Local stars are a big attraction in the region. Photo: File/Standard

He noted that though there are no firm statistics, annual revenue generated by local productions — popularly referred to as Riverwood — may have surpassed the Sh1 billion mark, while the animations sub-sector could be about Sh500 million.

"Several local but internationally produced content is worth billions of dollars. And this is just the tip of the iceberg; we have not scratched the surface," he said.

Unlike the movie industry where local productions are booming, the music sub-sector is still in the doldrums.

A survey conducted by Synovate last year, found that Kenyan music sector is worth Sh150 million, Uganda Sh500 million while Tanzania’s is valued at about Sh300 million.

Among the State initiatives in place to spur the sector include migration to digital broadcasting, which is a converged platform to deliver content across the country.

The country is now linked to the global Internet backbone through undersea fibre optic cables, which enable consumers access fast internet.

"Entrepreneurs should take advantage of the enabling environment that the Government has provided," he said.

Already the media is reaping from the growth of the entertainment industry. Figures show in the first six months of this year, Sh20 billion was spent on advertising.

Advertising spend on radio, television and print media —excluding rate card discounts — were Sh20.4 billion in 2008, according to data from Synovate.

The growth in advertising spend is linked to rising optimism in business cycles that investment in brand visibility yields good return.

Statistics from Synovate show that there are more than 140 licensed radio and television stations, an 80 per cent increase from the year 2000.

Though the entertainment industry is viewed as potential driver of economic activity, piracy has continued to wreck havoc.

Wayne Jackson, the global leader of entertainment and media practice at PricewaterhouseCoopers, says the industry has "an extraordinary ability to reinvent itself’ and open new avenues for generating revenue through innovative offerings that barely existed five years ago.

These include online and wireless video games, online film rental and licensed digital distribution of music.

"The rapid take up of ring tones and mobile music downloads are becoming critical components of the industry and are driving significant revenues across all regions," said Jackson.

Jackson is confident that media and entertainment sectors in Sub Saharan Africa will grow fast for the next four years.

Local analysts are betting on entertainment industry as the next economy driver noting that in developed countries, technology and entertainment have been key revenue earners over the last decade and the same is likely to be the case for Kenya and the region.

A case in point is South Africa’s entertainment industry that has been on a upward trajectory over the last decade and is projected to further grow over the next four years and even outperform the growth of the global entertainment and media sector.

This positive prediction is contained the annual, Global Entertainment and Media Outlook: 2005-2010, prepared annually by PwC in association with economic forecasters Wilkofsky Gruen Associates.