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Indian M&E industry to grow at 13.9% CAGR to Rs 1964 bn by 2019: FICCI KPMG report
MUMBAI: The Indian media and entertainment (M&E) industry is poised to grow at a CAGR of 13.9 per cent to Rs 1,964 billion by 2019, as per the KPMG report released here today during the annual media convention FICCI Frames.
Incidentally, in 2014 the industry crossed Rs 1,000 billion threshold and reached Rs 1,026 billion.
The report notes that advertising witnessed a healthy year largely on the back of heavy spending during the national and state elections, and a significant surge in spend by e-commerce companies.
As per the report, the television sector saw a healthy advertising growth owing to the general elections and the emergence of e-commerce as a significant spender across media in 2014.
The sector is expected to grow at a healthier rate of 15.5 per cent CAGR over the next five years to Rs 975.5 billion by 2019 from Rs 474.9 billion in 2014.
“Advertising will continue to show robust growth over the next five years as economic growth comes back and categories like e-commerce and telecom increase spending. However, the real pot of gold at the end of the rainbow is subscription revenue. If new pricing structures take hold within the industry, then average revenue per user [ARPU] will rise, benefiting the entire TV value chain,” KPMG India head of M&E Jehil Thakkar commented.
The report also notes that the ongoing digitisation of cable continued to progress. However, the promise of addressability, greater transparency and higher ARPU is yet to be realised. This was chiefly because of implementation challenges.
On the other hand, DTH operators continued to improve realisations by increasing penetration of HD channels, premium channels, and value-added services.
DAS rollout in Phases III and IV is expected to be more challenging due to the larger geographical spread, funding requirements and low potential for ARPU.
While 2014 was not a great year for the film sector, it is expected to grow at a CAGR of 10 per cent to touch Rs 204 billion by the end of 2019, from Rs 126.4 billion in 2014.
“2014 was a real wake-up call for the Hindi film industry. I think it is time for the industry to go back and revisit some business models, cost structures and content. The drivers of growth in previous years, multiplex expansion, rise in ticket prices, and theatre digitisation, all hit maturity levels. Cost structures and content will be paramount to ensure the health of the industry in the coming years,” added Thakkar.
During 2014, the gap between the top 10 films and the contribution of the rest of the industry further widened. Category A films with top actors continued to perform well at the box office. However, the same was not true for films that lacked both strong content and a top actor to attract audiences. Likewise, cable and satellite sales of most films also saw corrections in price and a drop in bulk deals.
The exhibition sector saw expansion, both organic (in particular in Tier II and III cities) and inorganic, with significant consolidation deals in 2014. This enabled both economies of scale for exhibitors and stimulated growth for the sector, including a rise in in-cinema advertising deals.
While the Indian print industry is one of the last growing markets across the world, in 2014 it experienced a growth of 8.3 per cent. In the next five years, it is expected to witness a slower growth of 8 per cent CAGR to touch Rs 386.8 billion, compared to Rs 263.4 billion in 2014.
Incidentally, Hindi and regional-language print publications will see a far greater growth than English print media. While the English print segment, constituting 36 per cent of the overall pie in the print sector, is expected to see a 5.2 per cent growth rate, Hindi and vernacular print segments are expected to grow at a 10.5 and 9.8 per cent respectively.
“Print still commands the largest share of advertising in India. While the English market may see some challenges from digital in the years ahead, regional print continues to grow in low double digits—a rate that is the envy of most of the print world,” added Thakkar.
The structure of the Indian print industry continues to be highly fragmented at a national and regional level. While advertisement revenue held a significant part in the total revenue pie and continues to be the growth driver for the industry, circulation revenue growth was higher than that of advertising revenue for Hindi and English markets last year.
The report expects the print industry to grow in the coming years on the back of growth in Tier II and III cities. Rising disposable income and literacy rate in these cities will provide a steady impetus to growth.
Digital media continued to show stupendous growth in 2014. India became the second-largest country in terms of number of internet users. The adoption of smartphones, healthy growth in number of 3G subscribers, continued adoption of 2G by masses in the hinterland, and concerted efforts by various digital ecosystem players under the ‘Digital India’ programme played a major role in making this possible.
Expectedly, as eyeballs shifted to the digital world, media spend followed suit. The digital advertising industry grew from Rs 30.1 billion in 2013 to Rs 43.5 billion in 2014, registering a whopping 44.5 per cent jump, driven by a steady growth in ad spend across most digital platforms.
“Digital media surpassed our earlier projections. With internet on mobile finding broader adoption than previously anticipated, driven by cheaper smartphones and data plans, this sector will continue to power ahead. Mobile will be the defining medium for digital media with 435 million smartphones expected to be in use by 2019,” Thakkar added.
KPMG has forecast the sector to grow at a CAGR of 30.2 per cent over the next five years to touch Rs 162.5 billion.
In the music sector alone, the revenue from distribution of music through digital channels today accounts for nearly 50 to 60 per cent of the overall size of the music industry.
The radio industry showed one of the highest growth rates among other traditional media segments despite further delays in the Phase III auctions. The industry grew at a 17.6 per cent in 2014 to Rs 17.2 billion, and is expected to grow at 18.1 per cent CAGR to Rs 39.5 billion by the end of 2019.
The report said that advertisers increasingly view the medium less as an add-on and more as an integral part of their media plans. At the same time, challenges continued to hound the industry, with smaller and standalone stations feeling the pressure of rising cost structures, measurement, royalty fee issues and the growing threat of the digital medium.
“The much-anticipated Phase III of radio is finally upon us. Apart from additional radio licences that will give the industry the ability to offer wide reach to match other media, Phase III will also introduce a host of regulations to enable a better business environment for the industry. The ability to own more than one station in a market and to be able to network nationally will be key to radio companies becoming more competitive,” added Thakkar.
The Indian outdoor advertising (OOH) industry saw a robust 14 per cent growth in 2014, primarily on the back of election spending, and growth of e-commerce and transit media.
The OOH sector is expected to grow at a CAGR of 9.8 per cent to Rs 35.1 billion by 2019.
“Measurability continues to be the bete noire for the industry. As such, the industry’s effort to address this gap by creating a methodology through a third party is a welcome move. In terms of growth, transit media will continue to expand, with the government making large investments in transport infrastructure,” said Thakkar.
Metros continue to dominate and enjoy more than 50 per cent of the OOH market share. Inventory utilisation has improved but prices have not seen any significant change. Tier II and III cities continue to grow, largely because of development of better infrastructure such as malls, airports, roads, etc. in these cities.
Billboards continue to dominate the OOH landscape. However, airport and other transit media have been consistently growing over the past couple of years. A major factor for this growth has been the rapid infrastructure development. With the new government’s focus on development of infrastructure, this is expected to continue to boost the outdoor industry in the coming years.
Technological advancements and exploration of new avenues for advertising will likely increase in 2015, proving critical for growth of the OOH sector. Digitisation of OOH media in India has been long overdue and industry leaders expect that 2015 would see the necessary technological upgrades to the OOH display units.
Consumption of sports in India is driven by a large young population and increasing disposable income. An increase in consumption demand is supplemented by a rise in television and media penetration, and coverage of domestic and global sporting events by dedicated sports channels. The number of sporting leagues in India has also increased in recent years.
A key trend in 2014 was the growth of non-cricket sports in India. The success of hosting international sporting events such as the Indian Premier League (IPL), Commonwealth Games and Indian Formula One Grand Prix has placed India in the list of countries that are witnessing fast growth in sports business.
The success seen by the IPL, which was estimated to have ad revenue of Rs 8 billion in 2014, has led to the creation of several other league-format sporting events, such as the Indian Badminton League, Hockey India League and the recently launched Pro-Kabaddi League. The inaugural season of football’s Indian Super League has been quite successful as well.
Newer business models, exploration of diverse revenue streams, and new financing structures all bode well for better economics for players in this sector.
“The acceptance of sports other than cricket by viewers is a welcome development. The reception that Kabaddi received surpassed all expectations and created a sports vehicle that has broad national reach. As TV develops viewership for several sports, we will see greater sophistication and traction come to all sports,” Thakkar concluded.