- Overall industry brief
- Growth of the M&E industry and its segments
- Major supporting elements of this growth
Media and Entertainment (M&E) is a very wide industry and constitute segments like television, online gaming, animation and VFX, Out of Home (OOH), music, digital advertising, films, print and radio. It is a sunrise sector of the Indian economy as each of its segment is making high growth strides, with a combined CAGR of 10.9% (FY17-18) and is expected to grow at a much faster rate than the global average and is bound to prove its resilience to the other developed economies. M&E industry is also expected to generate INR 2,660 billion (US$39.68 billion) by FY 2023 from INR 1,436 billion (US$22.28 billion) in FY 2018, with a growth rate of 13.1% CAGR (Source: KPMG report – Media ecosystems, Sept. 2018). The sector’s growth is mainly driven by the digitalisation and immense usage of the internet over the last half decade backed by rising consumer demand and their changing lifestyles. The upcoming half decade is favourable to the industry's growth due to an increase in the use of digital technologies across the sector.
Television (TV), print and films combined together hold ~80% of the market share of the M&E industry in India. The nation is having the second largest television market in the Asia Pacific region in terms of subscribers and it is the largest contributing segment for the domestic M&E sector. In the FY 2018, it contributed 46%, which is almost half of the total market size in the industry. The launch of new regional language channels and digitalisation supported the segment and resulted in the growth of a number of television channels, which at present have crossed 800 mark. Broadcasters, channel owners, distributors and other media companies around the world have always been seeking investment opportunities in the Indian television industry, but due to the limits on the FDI has restricted some global players entry. But presently, after the relaxation in the limit and allowance of 100% FDI in all segments of the television industry except for news channels has opened more doors for growth. Though implementation of GST is likely to impact on the advertising revenue, a strong viewership backed by TV digitisation, Free to Air (FTA) and the free dish will support in continuation of the segment’s supremacy in the M&E industry in India. In the FY 2018, television market size increased to Rs 652 billion (US$10.11 billion) from Rs 434 billion (US$7.17 billion), FY 2014 (Source: KPMG). It has captured 197 million homes out of the total 298 million and still there lies the opportunity to cater to 100 million more homes (Source: IBEF).
Televisory believe, the subscriber base of cable connections will remain higher than the satellite subscribers (DTH) despite saturation levels, with an annual average decline in the cable connection subscription and it will continue to dominate the market over satellite television for next few years.
The second largest segment of the M&E in India is the print industry, which accounts for a share of 22% and is expected to reach INR 424 billion (US$6.34 billion) by the FY 2023 from INR 318.9 billion (US$4.95 billion), FY18 at a CAGR 5.9% (Source: IBEF). Although the growth rate was and will remain the lowest among all the segments of the M&E industry due to increasing pressure from digital platforms and a weak advertising demand owing to implementation of the GST, but unlike global markets, newspaper reading trend has increased in India across all age groups, demographics and mainly among the youths as it is necessary for students aspiring for government jobs to read such material. The newspaper readership in India has shown a notable growth by 40% to 407 million (2017) from 295 million ([2014], [Source: IBEF]). A wide category of political and lifestyle magazines in the market like India Today, Outlook, Vogue, Femina and Frontline, etc. are also attracting new readers to the segment due to the rich source of information.
Televisory believe that rising newspaper printing prices, the pressure from digital news with adverse impact on the ad revenue due to GST will impact the print industry and a muted growth is expected.
The Indian film industry was awarded an ‘industry’ status in 2001, this is now the third largest segment of the M&E in India and is the largest producer of films all across the globe, with 400 production and corporate houses involved in creating and production of films. India is expected to have more than 3,000 multiplex screens by 2019 (Source: IBEF). The Indian film industry is experiencing a resurgence in the last couple of years backed by growing overseas contributions and opportunities in Hollywood and China, an increasing digital rights revenue and grant of up to 100% FDI through the automatic route by the government. It has reached Rs 159 billion (US$2.47 Billion) in the FY18 and is further expected to generate INR 229 billion (US$3.41 billion) by the FY 2023 at CAGR 7.6% (Source: IBEF).
Televisory believe that the rising share of Hollywood and overseas content in the Indian film industry, growing regional film industries and the digital platform’s prominence will remain a major factor for the growth of this segment.
The digital advertising, animation and VFX (visual effects), gaming, OOH (Out Of Home) and radio are some of the emerging and fast-growing segments of the M&E industry in India. Although the share of the market size of all these five segments is only ~20% of the total market size of the industry (FY 2018), all these are moving with tremendous growth strides, especially the digital advertising which has grown rapidly with a strong CAGR of 37.5% (FY2014 to FY2018) and generated INR 116 billion (US$1.80 billion) in the FY2018 (Source: IBEF). The Indian digital advertising market has emerged as the 3rd largest advertising medium after TV and print advertising in India and is projected to touch INR 435 billion by FY2023, backed by immense growth of the internet penetration and data use due to smartphone growth, with the launch of 4G services and declining tariffs.
Animation and VFX players in India are moving up and are seeing a rise in the demand for animated content on the TV and film industry. The buzz of animated and 2D/3D movies, growing focus on the ‘kid genre’ with dedicated programs for this segment, a surge in animation and VFX in the advertising and gaming and allowance of 100% FDI in the entire sector via automatic route by government has led the animation and VFX industry to reach Rs 74 billion (US$1.15 billion) in the FY 2018, with a CAGR 15.9% during FY 2014 to FY 2018 (Source: IBEF).
Furthermore, a growing smartphone penetration has significantly widened the gaming users’ base and has resulted in more than doubling of the market size for the gaming segment in the last five years from INR 20 billion (FY2014) to INR 44 billion (FY2018), which is expected to reach INR 119 billion (FY 2023) at CAGR 22.1. The mobile gaming holds a major share (89% in FY 2018) of all the gaming revenue in India, with ~90% online gaming users’ base (Source: KPMG report, 2018).
Out of Home advertising and radio has shown sustainable growth in the past couple of years despite a low contribution to the total M&E industry and is expected to touch INR 50 billion and INR 42 billion market by the FY 2023, respectively. The supply of new FM radio stations due to phase three of e-auctions by the government and a surge in advertising expenses by the state and the central government for the upcoming election will support a near-term growth of radio and OOH segments, respectively. A growing listenership backed by digital music streaming platforms and roll out of 4G will boost the music industry’s growth, which is expected to reach INR 29.6 billion at CAGR 15.5% (FY 2023).
Growth elements
The rising disposable income, mainly among the middle class, spiralling urbanisation and changing lifestyle are increasing the demand for digital instruments and content and this has widened the consumer base. The per capita income in India has reached INR 112,835 (US$1,750) at a rate of 8.6% in the FY 2018 (Source: Press Trust of India [PTI]) and at the same time, the number of mobile subscribers has reached more than one billion. Additionally, self-dependency among new generation and a continued rise in the propensity to spend is also helping the M&E industry to grow. In the past couple of years, ubiquitous digital access and a rapid consumption of data aided by increasing smartphone penetration in India and falling data costs have resulted into a paradigm shift towards more democratised of digital use. This had a significant positive impact on all segments of the M&E industry and its direct impact can be seen on the digital advertising and gaming industry, both of which witnessed a growth rate of ~35% in the FY 2018. The digitalisation of the cable distribution sector has also attracted investments and has done greater value addition for its player.
Apart from digitalisation and rising income, government initiatives have also invigorated the growth of the industry. The initiatives like allowing 100 percent FDI in the industry, the national film policy, a process to set up National Centre of Excellence for Animation, gaming, visual effects and comics and granting it the 'industry' status in 2001 for easy access to institutional finance has supported the growth. This has invited major investments to the industry and resulted in a total of 63 M&A (mergers and acquisitions) deals executed in 2017 and the FDI inflows into the sector rose to more than US$7 billion up to June 2018 (Source: IBEF).
Conclusively, the M&E industry is striking in its growth phase and have wide room for future growth due to growing smartphones and subscribers’ base, TV penetration, strong advertising demand backed by domestic consumption. The demonetisation, roll out of the GST has held back advertising spending last year, but the availability of 4G with low tariffs strengthened the digital access and consumer base, which boosted the growth. It is because of the ability of customised advertising and wider geographies, social media and video advertising are growing faster. Further, another growth driver is the growing demand from untapped rural and local market, which is attracting both the content providers and advertisers.
Televisory is of the view that the M&E industry in India is set to grow in coming years with digital technologies influencing consumer behaviour and spending.
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