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M&E sector to grow at 14% CAGR to touch Rs 2,419 bn by 2021: FICCI–KPMG report

MUMBAI: The Indian media and entertainment industry, which received a jolt in the exit quarter of 2016 due to demonetisation of high-value currency notes, will recover by mid-2017 and grow faster at a compounded annual growth rate (CAGR) of 13.9% to touch Rs 2,419.4 billion by 2021.

Advertising revenue is expected to grow at a CAGR of 15.3% during the same period to reach Rs 1,078.1 billion, according to the annual forecast by consulting firm KPMG and FICCI.

In 2016, the M&E sector grew at 9.1% over the earlier year to touch Rs 1,262.10 billion. Advertising grew at 11.2%, says the 2017 FICCI–KPMG Media and Entertainment industry report. The year’s growth was aided by strong fundamentals and a steady growth in consumption, although demonetisation shaved off 150–250 basis points in terms of growth across all sub-segments at the end the year.

In 2017, advertising revenues are expected to grow at a marginally slower rate of 13.1% due to the lingering effects of demonetisation and initial volatilities arising from GST implementation.

Television

Television witnessed slower growth in 2016 at 8.5%, primarily due to a lacklustre year for subscription revenues and a speed bump in advertisement revenue growth. Though the advertisement revenue growth at 11% was steady, it was lower than last year’s estimates primarily due to slower than expected domestic consumption, Broadcast Association Research Council (BARC) data recalibration and impact of demonetisation.

However, strong performance of sports properties, increased marketing spends by telecom operators on the launch of 4G services and strong performance of free-to-air (FTA) channels helped alleviate the pull-down factors to an extent. The tepid growth in subscription revenues at 7% was on the back of the stagnation in the digitisation process and the resurgence of DD Freedish as an alternative platform to pay TV.

Television advertising saw sunrise sectors, such as e-commerce, scaling back spends significantly and the event of demonetisation leading to an adverse impact across categories. However, strong long-term fundamentals driven by domestic consumption augur well for the future. Growing access to rural audiences through digitisation, coupled with content availability through increase in FTA channels and deeper audience measurement will be a key catalyst to long-term growth, though this may have an adverse impact on distribution revenues.

A solution to the tariff and interconnect orders by the Telecom Regulatory Authority of India (TRAI), which is acceptable to all stakeholders will be critical for the successful completion of the digitisation exercise. This sector is projected to reach Rs 1,165.6 billion in 2021.

Television is expected to grow at a CAGR of 14.7% over the next five years as both advertisement and subscription revenues are projected to exhibit strong growth at 14.4% and 14.8%, respectively.

“The long-term forecast for the television segment remains robust due to strong economic fundamentals and rising domestic consumption coupled with the delayed, but inevitable, completion of digitisation. The rising share of FTA channels may, however, partially pull down the long-term subscription revenue forecasts,” the report said.

Print

The print sector continued to experience a slowdown in growth rates, as English language newspapers remained under pressure owing to rising users’ interest in digital content.

The ‘Bharat’ story continued to play out well for the print segment, with language newspapers driving growth in viewership and advertising. Demonetisation also adversely impacted advertisement growth in 4Q 2016, particularly the regional dailies. Growth in 2016 was 7% and it touched Rs 303.3 billion.

Over five years, print is projected to continue its growth at 7.3%, largely on the back of continued readership growth in vernacular markets and advertisers’ confidence in the medium, especially in the tier II and tier-III cities. However, rising digital content consumption is perceived to be a long-term risk to the industry.

Films

The film sector had a disappointing year and saw a growth rate of just 3% to reach Rs 142.3 billion. It was a near flat performance as the core revenue streams of domestic theatricals and cable and satellite (C&S) rights declined, on the back of poor box office performance of Bollywood and Tamil films. However, revenue streams are widening with the expansion of overseas markets, increase in the depth in regional markets and a rise in acquisitions of digital content by over-the-top (OTT) platforms.

The film sector is expected to bounce back and is forecast to grow at a CAGR of 7.7%, as the revenue streams broaden, driven by the growing depth of regional content, expansion in overseas markets and higher contribution of digital revenue streams. However, slow growth in screen count, along with inconsistency in content quality would act as the primary limiting factors.

The Indian M&E industry Size ficci 2017
Radio

Volume improvements in smaller cities, the partial rollout of Batch 1 stations and some growth in effective ad rates led to a notable growth rate for radio in 2016. However, feeble uptake in Batch 2 of Phase III auctions and deferred rollout of Batch 1 stations, coupled with an adverse effect of demonetisation dampened the sentiments to an extent.

Radio registered a 14.6% growth led by volume enhancements in smaller cities, partial rollout of Batch 1 stations and a marginal increase in effective ad rates.

However, weak uptake in Batch 2 auctions of Phase III and delays in the rollout of majority of Batch 1 stations, coupled with adverse impact of demonetisation, dampened the overall sentiment.

Digital

Some of the traditionally smaller sub-segments of the industry registered impressive growth in 2016, led by digital, which promises to be the flag-bearer of growth in M&E for years to come. After 2004, when the Calling Party Pays (CPP) regime was implemented, India probably saw its second-largest telecom revolution with the wide launch of high-speed 4G services by operators across the country. Rising internet and broadband penetration, declining data charges, coupled with the proliferation of internet enabled mobile phones, led to data consumption levels increase manifold, driven by offers by the new entrant, Reliance Jio, which were quickly followed by major competitors Idea,
Vodafone and Airtel.

This phenomenon has led to a sustained advertiser interest in digital, resulting in a strong performance by the sub-segment in 2016. Digital has also positively impacted the relatively smaller sub-segments, such as gaming and music, which registered impressive growth too. With OTT platforms continuing to see major traction, digital video-on-demand (VOD) and television could see harmonious co-existence for the near future, feeding off each other’s strengths.

Looking ahead, the future of M&E industry indeed revolves around digital. The mobile phone, which today reaches every nook and corner of the country, manifests itself as a powerful medium to bridge the content consumption divide across socio-economic classes and categories. With the continued push by the government around digital consumption and payments, mass adoption of technology is a foregone conclusion. However, this brings with itself challenges for every sub-segment of M&E industry to innovate, to align with this change, and evolve in terms of building sustainable business models.

Digital advertising continued its high growth trajectory with a 28% growth in 2016 to reach 15% share in the overall advertising revenues, though there was a marginal impact due to demonetisation. Advertisers’ interest has been captured by the continuing shift in consumption towards digital media on the back of rapid growth in internet penetration, mobile devices and falling data costs, with the launch of Reliance Jio providing an added impetus. This trend is also positively impacting the performance of gaming and music segments.

Advertising revenues Size ficci 2017

Animation

The animation and visual effects (VFX) industry showcased a growth of 16.4%, largely led by a 31% growth in VFX industry, which grew on the back of an increase in outsourcing work and the growing use of VFX in domestic film productions.

Further, the animation services and production space was also buoyed up by commissioning of new projects and focus on domestic IPs.

OOH

The out of home (OOH) segment registered a 7% slowdown in the growth rate, primarily due to the impact of demonetisation though long-term indicators remain positive, especially in the airport, transit and ambient segments. Although billboards continue to account for the largest revenue pie, new metro lines, malls, corporate parks and the leading airports are providing a much-needed boost to the overall sector.

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