@Ficci Frames 2012: KPMG study says M&E sector is set for good times ahead

14 Mar,2012

By A Correspondent


HILE the effects of the economic downturn were felt across sectors and industries last year, it was a steady year for the Indian Media & Entertainment (M&E) industry that registered a growth of 12 percent over 2010, to reach INR 728 billon. According to the FICCI-KPMG report, the growth trajectory was backed by strong consumption in tier 2 and 3 cities, continued growth of regional media, and fast increasing new media business. Overall, the study predicts the industry to register a CAGR of 15 percent to touch INR 1,457 billion by 2016.


But despite the positive numbers recorded, the report agrees that 2011 has indeed been a challenging year not just for the Indian M&E industry, or even the Indian economy, but for the larger world economy. While India is still expected to grow at a healthy pace, growth is projected to be lower than expectations.


The report notes that television continues to be the dominant medium while sectors such as animation & VFX, digital advertising, and gaming are fast increasing their share in the overall pie. Radio is expected to display a healthy growth rate after the advent of Phase 3. Print, while witnessing a decline in growth rate, will continue to be the second largest medium in the Indian M&E industry. Also, the film industry had reason to cheer, with multiple movies crossing the INR 100 crore mark in domestic theatrical collections, and INR 30 crore mark in C&S rights.


Advertising spends across all media accounted for INR 300 billion in 2011, contributing to 41 percent of the overall M&E industry’s revenues. Advertising revenues witnessed a growth of 13 percent in 2011, as against 17 per cent observed in 2010. In terms of performance, 2011 proved to be a year with mixed results in terms of growth across different sub sectors. The traditional media businesses experienced a slowdown compared to last year, especially in the second half of the year. However, the new media segments like Animation and VFX, Online and Gaming businesses witnessed phenomenal growth rates.


Highlighting some visible trends spotted in the report, Dr. Rajiv Kumar, Secretary General, FICCI said, “The key highlights are rise in digital content consumption, launch of diverse content delivery platforms, strong consumption in tier 2 and 3 cities, rising footprint of the players in the regional media, rapidly increasing new media business and regulatory shifts.”


Putting forth a more pragmatic outlook, Jehil Thakkar, Head of Media and Entertainment, KPMG said, “The Media & Entertainment industry landscape is undergoing a significant shift. Cable digitization, the promise of wireless broadband, increasing DTH penetration, digitization of film distribution, growing internet use are all prompting strategic shifts in the way companies work. Traditional business models are evolving for the better as a host of new opportunities emerge.”


Key trends and industry drivers:

– Growth in digital content consumption across media


Key Highlights –

Print: The print industry grew by 8.3 percent from INR 193 billion in 2010 to INR 209 billion in 2011. The growth was slightly lower than our expectation of 9.5 percent last year due to the challenging macroeconomic environment and reduced advertising spends.


Television: The over-all television industry is estimated to be INR 329 billion in 2011, and is expected to grow at a CAGR of 17 percent over 2011-16, to reach INR 735 billion in 2016. The share of subscription to the total industry revenue is expected to increase from 65 percent in 2011 to 69 percent in 2016. The TV industry continues to have headroom for further growth as television penetration in India is still at approximately 60 percent of total households.


Films: With several high budget Hindi releases lined up across the year, 2012 is expected to sustain the growth momentum witnessed in 2011. The Indian film industry is projected to grow at a CAGR of 10.1 percent to touch INR 150 billion in 2016. The industry is estimated to be INR 93 billion in 2011 indicating a growth of 11.5 percent vis-à vis 2010.


Music: While 2010 was the year of structural shift from physical formats to digital ones, 2011 provided users viable options of music consumption through different digital platforms. The Indian music industry achieved revenues of INR 9 billion in 2011, registering a growth of 5 percent over 2010.
Radio: Overall, the industry grew 15 per cent in CY 2011 to reach INR 11.5 billion, compared to INR 10 billion in CY 2010. Volume increases in certain markets and rate increases for the leaders in metros drove growth.


New Media: Digital advertising is expected to grow at a CAGR of 30 per cent from 2011-16; digital adspend reached approximately 5 per cent of total M&E industry advertising revenue in 2011. Growth is largely driven by increase in internet penetration and proliferation of new devices.


Animation & VFX: Animation, VFX and Post Production industry achieved estimated revenues of INR 31 billion in 2011, a robust growth of 31 percent over 2010. Growth was achieved on the back of increased contract work, higher VFX content in movies, 2D/3D conversion projects.


Out of Home: The OOH sector was hit relatively harder by the global economic slowdown than other sectors of the Advertising industry. The sector registered a Y-o-Y growth of 7.6 percent.


Digital technology continues to revolutionize media distribution – be it the rapid growth of DTH and the promise of digital cable, or increased digitization of film exhibition – and has enabled wider and cost-effective reach across diverse and regional markets, and the development of targeted media content.


There has been increased proliferation and consumption of digital media content – be it newspapers and magazines, digital film prints, and online video and music or entirely new categories such as social media. Accordingly, online advertising spends have seen a spurt in growth vis-a-vis spends on traditional media.


– Rise of new age user devices

Smart phones, tablets, PCs, gaming devices, etc. all form the foundation of a new wave in media usage. This is gradually impacting the way content is being created and distributed as well. Multiple media including TV, films, news, radio, music etc are being impacted with this change.


– New age consumers adapting themselves to the newer technologies

As Indian consumers evolve, there is a heightened need to engage them across platforms and experiences. There is a greater need for integration and innovation across traditional and new media, with changing media consumption habits and preferences for niche content. Media companies today have no choice but to provide more touch points to engage with audiences.


– Regionalisation

Regional television and print continued its strong growth trajectory owing to growth in incomes and consumption in the regional markets. National advertisers are looking at these markets as the next consumption hubs and the local advertisers are learning the benefits of marketing their products aggressively.


– An advertising revenue dependant industry

The ARPU (Average Revenue Per User) for television, average newspaper cost for print and average ticket price for films continue to be low on account of hyper competition in these industries. Segments like Radio and a significant portion of online content are available free of cost to consumers. Owing to this, the Indian consumer is still not used to paying for content and hence the industry players are sensitive to the impact of the slowdown which affects the budgets of advertisers.


– Awaited regulatory shifts

Lastly, apart from the shifts in consumer preferences, company strategies and business models, one big change awaited for the next growth wave is the implementation of recently enacted and regulations on digitisation for cable, implementation of Phase 3 and copyright for Radio and the roll out of 4G. These shifts are expected to be game changers in terms of how business is being done currently and what could be the path going forward.


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