FICCI-KPMG report projects Indian M&E industry at INR 2260 billion by 2020, digital advertising continues to grow at a robust pace
• Media and entertainment sector grew by 12.8 per cent from INR1026 billion in 2014 to INR1157 billion in 2015
• Overall advertising grew by 14.7 per cent from INR414 billion in 2014 to INR475 billion in 2015
• Bollywood continues to face challenges in terms of low screen density and intense competition from Hollywood and regional content
• Digital advertising continues its growth trajectory of over 30 per cent per year
Mumbai, 30 March 2016: The media and entertainment (M&E) industry in India is poised to grow at a CAGR of 14.3 per cent to INR 2260 billion by 2020, led by advertising revenue which is expected to grow to INR994 billion at a CAGR of 15.9 per cent. Digital advertising continued its strong run with 38.2 per cent growth over 2014 as a mounting Internet user base and data usage were supplemented by increased spend allocation by marketers. These projections are part of the FICCI - KPMG Media and Entertainment industry report 2016.
The report suggests that by 2020 the digital advertising market is likely to scale up to INR255 billion and contribute to 25.7 per cent of total advertising revenues. Increased share of mobile and video advertising as part of digital media is one of the things to look forward to as well.
Speaking at the inaugural session of FICCI Frames 2016, Dr. A. Didar Singh, Secretary General, FICCI said, “We are going through a phase of rapid and sustained technological innovation which will permanently change the way consumers will access and consume content. The theme of this year’s FICCI conference is ‘Change or Perish: The Year of the Digital’ aptly captures the pitfalls that Media and Entertainment (M&E) organisations face. Changing user habits will disrupt existing business models as content providers and brands will need to match consumer expectations. While this will pose multiple challenges, we believe that there are significant opportunities for M&E companies to leverage the new digital ecosystem.”
Key highlights of the year 2015 include implementation of a viewership measurement system by Broadcast Audience Research Council (BARC) with the impact on budget allocations for advertising among channels only just starting to change.The e-commerce industry is expected to continue to advertise across mediums, moving from its earlier focus on digital platforms with an increased focus on regional markets.
“Print saw a slower growth in the past year but TV and digital advertising have exceeded expectations. With the wide rollout of 4G finally underway, coupled with the ‘Digital India’ initiative, the future of digital advertising is very bright. The film sector also returned to growth in 2015 but led by Hollywood and regional rather than Hindi” says Jehil Thakkar, Partner and Head of Media and Entertainment, KPMG in India .
As per the report, the television sector witnessed strong advertising-led growth at 17 per cent with increase in e-commerce spends. Growth in subscription revenue was slower at 12.8 per cent due to the delay in Phase 3 digitisation and further delays in securing on-ground benefits of Phase 1 and 2. “In a year of transition, when a new ratings mechanism was rolled out, the television sector has done really well on advertising. Any growth in subscription will really add to the strength of this sector.” adds Jehil Thakkar.
Coming off a flat year in 2014, the film industry returned to a healthy growth of 9.3 per cent in 2015. Bollywood is constrained by the slow pace of screen growth and also has been facing increased competition from Hollywood and regional content. As per the report, wider reach in distribution expansion to non-DCI compliant screens has opened up a significant portion of the audience to Hollywood content. Also, increase in the number of franchise films helped expand the market. Better performance at the box office by regional films has also resulted in increased budgets and marketing spends. Jehil Thakkar says, “A real surprise this year was the strong growth in regional, both in terms of quality and box office performance. I think audience expectations are now higher for regional films and they will continue to perform well, going forward.”
As per the report, at 7.6 per cent, the print industry witnessed a marginal slowdown in 2015 compared to 2014 – an election year. For English language publications, e-commerce stood out as a category in a year of muted growth. While the growth rate for regional print dipped from the previous year as well due to subdued advertising, some publications were able to raise cover prices to keep circulation revenue healthy. The regional market continues to have a bright future – especially with the government’s recent rural-friendly Budget and newer categories like e-commerce finally likely to help publications in tier II and tier III markets. “As was the case in 2014, Hindi and regional publications outperformed English ones in terms of growth rate in 2015 even though it was a slower year. The impact of digital in 2016 and 2017 will be interesting to watch as the use of social media and Internet spreads in these markets’, says Jehil Thakkar.
Projections with reference to the radio industry are driven by the implementation of Phase 3 of licensing. As per the report, the industry grew at 15.3 per cent in 2015, and is projected to grow at over 16 per cent for the next few years. As Phase 3 stations become operational, radio may very well become a ‘reach’ medium from a ‘coverage’ medium. However, Phase 3 auctions raise concerns over small cities not being included in the auction amid fears of high reserve prices, and weak market potential. This dilutes the interest levels on the second Phase 3 auction dates, which are yet to be announced by the government. Jehil Thakkar adds, “The implementation of Phase 3 finally began and it would be beneficial to the industry if the government concludes Stage 2 of the auctions as well as pending regulatory matters as soon as possible.”
The 4G rollout, ‘Digital India’ initiative and private initiatives for broadband Wi-Fi availability at public places is likely to be a significant catalyst for the growth of Over The Top (OTT) services – several of which were launched in 2015. These digital infrastructure improvements, coupled with the rapid expansion of smartphone penetration, are critical to the ramp up of OTT. The report says that at present there are concerns around bandwidth constraints, high cost of customer acquisition, dependence on advertisement-led models and high cost of data access. “The year 2015 saw a number of OTT services being launched, and we expect this trend to continue in 2016 as well. However, this industry is yet to find a sustainable business model in India, which is likely to emerge in the next 12 to 24 months.” says Jehil Thakkar.
The report confirms that in 2015 cricket continued to be the primary brand puller with prime properties such as IPL and World Cup witnessing an increase in ad rates and sponsorship. However, various sporting leagues such as Kabaddi, Football, and Tennis managed to create a buzz in the Indian market. It was also observed that PKL continued its successful run in particular. Brands in India are starting to invest in other sporting activities, which requires a long-term vision and strategy to attract viewers’ sustained interest. “It is tremendous that alternatives to cricket are being established in India’s sports ecosystem. The rise of the ‘second screen’ has now created a sustainable business model for a variety of sports across India.’ says Jehil Thakkar.