The Great Churning of the Media Cauldron

05 Oct,2020

 

By Indrani Sen

 

Last week, KPMG published its M&E Industry Report 2020, six months after the FICCI EY Report on M&E Industry 2019 was published on March 27, 2020. KPMG had ample time to study the effect of Covid-19 on the M&E sector during the lockdown and the unlocking period before coming up with its final report by FY20 and its predictions for the next two years FY21 and FY 22.

 

As we all have realised by now, 2020 is a milestone year in Indian M&E Industry, with digital and OOT emerging as the number 2 in the share of the overall industry size as well as in the share of advertising revenue. The KPMG report confirms the same and springs a surprise by predicting that in FY21 and FY22 Digital and OTT will become #1 in terms of share in advertising revenue, overtaking TV. As per the trends seen in western countries, this seismic shift was written on the cards, but we were definitely not expecting this shift to happen so soon. The pandemic COVID19 seems to have acted as a catalyst accelerating the process of change.  As a result, the KPMG Report 2020 predicts a great churning of the media cauldron over the next two financial years.

 

 

As far as the overall industry size is concerned, TV is by far ahead of Digital & OTT as shown in the next chart, though the growth rate of TV is much lower than Digital & OTT. The absolute size (769 INR BN) of the TV industry in FY22 will be slightly below their size (778 INR BN) in FY20, while Digital & OTT will be growing year on year in their overall size. Print will take a big hit in FY21 with 39% de-growth and will recover hugely in FY22. However, like TV their overall size (296 INR BN) in FY 22 will be slightly below their size (306 INR BN) in FY20. Similar trends are reflected in case of Films, OOH, Radio and Music while Gaming shows a huge gain in size (143 INR BN) in FY22 from (90 INR BN) in FY20. Animation, VFX and post-production is the only sector which in FY22 (77 INR BN) will be much below the size in FY20 (101 INR BN), in spite of the recovery of the Film industry.

 

 

The chart showing the share in advertising revenue represents a different picture with Digital & OTT predicted to overtake TV in FY21 and continuing in the #1 position in FY22. Print which had neck-and-neck share with Digital & OTT in FY20, is predicted to go down to the #3 position in FY21 and FY22. In FY21, the size of Print advertising (107 INR BN) will be less than half of the size of Digital & OTT advertising (223 INR BN). In spite of a growth of 73% in FY22 over FY21, Print advertising will be 106 INR BN less than Digital & OTT advertising in FY22. As per KPMG’s predictions, Films, OOH and Radio will also not be able to regain in FY22 the size of advertising revenue which they had in FY20, with Radio being the worst affected among the three media.

 

 

All is not well for Digital & OTT as a comparison of the total industry size and the share of advertising revenue in the same both in FY21 and FY22 reflects a lack of growth in subscription revenue and an unhealthy dependence on advertising. In FY21 and FY22 the share of advertising revenue will be respectively 87% and 86% in Digital& OTT, which does not reflect the trend of growth in subscription. This is also contradictory to the findings of FICCI EY M&E Industry Report 2019 which showed that growth rate of subscription outpaced the growth rate of advertising led by digital media. The pandemic should have boosted the subscription growth which however is not getting reflected in the KPMG report.

 

It is very difficult to compare the two reports on M&E Industry as FICCCI EY reports are based on calendar years and KPMG reports are based on financial years. However, at the time of the release of their report in Mach 2020, FICCI EY promised to review and revise their estimates for future. As and when the revised report of FICCI EY is released, we would be able to assess if similar shifts in the share of the advertising pie is also reflected there reconfirming the predictions made by KPMG and the churning of the media cauldron.

 

 

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