The Indian film industry, a subset of the Indian media and entertainment industry, is the largest in the world in terms of the total movies released. According to a 2010 report by Investec Securities, the Indian film industry releases over 1,000 movies. By comparison, the U.S. film industry released over 525 movies in the U.S. in 2010 according to boxofficemojo.com. Of the overall Indian media and entertainment industry's $13.3 billion in revenues in 2010, film entertainment constituted 13.0%, or $1.7 billion, and is projected to grow to $2.7 billion by 2015, reflecting a 9.7% CAGR, according to the FICCI Report 2011.

Additional new multiplex screens, which are typically located in urban areas and generally sell tickets at higher average ticket prices than single screen theaters, have supported and are projected to continue to support film industry growth. From 2005 to 2010, the number of multiplex screens in India grew at a CAGR of 25%. Despite this historic growth, India's film industry, when compared with film industries in more developed economies, is a relatively underserved market that presents substantial opportunities for additional growth. For example, in 2010, the industry saw significant expansion plans reported by multiplex chains such as PVR, who reportedly is planning to add 80 to 100 screens by fiscal 2012, Inox Leisure and Cinema and new entrants, such as Cinepolis, who is reportedly adding 500 screens in 50 cities across India by 2016. India's film exhibition industry, which currently has approximately 1,000 multiplex screens, is projected to double its screen count over the next five years, according to the FICCI Report 2011.

Participants in the Indian film entertainment industry are also investing in newer technologies such as digital theatrical distribution. Film companies are increasingly adopting digital prints instead of physical prints, which in turn is increasing the number of available prints. According to the FICCI Report 2011, from 2009 to 2010, the typical number of prints for domestic theatrical release increased from 800 to 1,200 for big budget films and 400 to 600 for mid budget films. Digital prints, as a percentage of total prints, were as high as 70% for some films, and averaged approximately 50% of total prints for 2010. Digital technology enables Indian film distributors to increase their distribution efficiency.

India's diverse regional cultures also present growth opportunities for regional content. According to the FICCI Report 2011, the number of regional films increased from 2008 to 2010, and is projected to further increase. In 2010, non-Hindi films represented 83% of the total number of films distributed in India, but accounted for a minority of total Indian box office revenues. Recent industry growth drivers such as increased multiplex penetration, digitization of single screen theaters and focus on marketing, as well as improvement in production quality, suggest market opportunities for quality film entertainment targeted at regional sub-markets in various languages.

With a limited number of screens and a large number of films entering the market each year, a film's opening weekend performance is a crucial factor in determining a film's economic success. Based on information from BoxOfficeIndia.com, opening week box office revenue for the top five films as a percentage of such films' total theatrical revenue increased from 47.8% in 2007 to 63.9% in 2010. This trend indicates that the window to generate theatrical revenue is shortening. This has intensified competition between film entertainment industry participants to position films on key release weekends.

Indian Theatrical Distribution.

We distribute our content in all of the circuits through our internal distribution offices in Mumbai, Delhi and Punjab and in Tamil Nadu through either the distribution office of our majority owned subsidiary Ayngaran. Our significant internal distribution network allows us greater control, transparency and flexibility over the core regions in which we distribute our films, and allows us to retain a greater portion of revenues per picture as a result of direct exploitation instead of using sub-distributors, which requires the payment of additional fees or commissions.

The broad theatrical distribution during the first week after initial release of a film requires that a significant number of prints be made available at the outset of the theatrical run. As the Indian film industry is moving towards digital film distribution, we are increasing our focus on this opportunity. In India, the cost of distributing a digital film print is lower than the cost of distributing a digital film print in the United States. The cost of producing a digital film print is lower than the cost of producing a physical film print. Utilization of digital film media also provides additional protection against unauthorized copying, which enables us to capture incremental revenue that we believe are at risk of loss through content piracy.

Theatrical Distribution Outside India.

Outside India, we distribute our films theatrically through our offices in Dubai, Singapore, the U.S., the United Kingdom, Australia and Fiji and through sub-distributors. In our international markets we select a smaller number of theaters that play films targeted at the expatriate South Asian population or the growing international audiences for Indian films. We generally theatrically release subtitled versions of our films internationally on the release date.