Most of us who work for 10 to 12 hours at a stretch for an entire week need some time to relax and have some time to ourselves. Entertainment being the big part of our lives makes us want to go out, visit some new places or simply visit a multiplex to watch movies on the weekends or on our days off.
The Indian media and entertainment industry has witnessed blistering growth in the past few years, and now, according to a Deloitte report titled ‘Media and entertainment industry – India tax landscape‘. The Media industry in India is known for growth at a faster rate. India is globally the fifth largest media arena. Penetration of smart-phones and the Digital India initiative have led to a spurt of activities in the digital sector. With a growth rate of 15.8% the Indian television industry alone has stood strong among the other major developed economies. The increasing digitization and high use of internet since last few years has also contributed to its growth. The Indian media and entertainment sector combined is growing with 14.3% CAGR while revenues from advertising are growing by 16% year on year.’
The Indian Media and Entertainment (M&E) industry is a sunrise sector for the economy and is making high growth strides. Proving its resilience to the world, the Indian M&E sector is on the cusp of a strong phase of growth, backed by rising consumer payments and advertising revenues across all sectors. The industry has been largely driven by increasing digitization and higher internet usage over the last decade. Internet has almost become a mainstream media for entertainment for most of the people. But challenges are still there. An industry valued at nearly Rs1.26 trillion and yet making up less than 1 percent of India’s gross domestic product (GDP), a country that churns out by far the largest number of films in the world annually and yet is valued less than the box office earnings of a single Hollywood blockbuster and an ecosystem that houses nearly 30 over-the-top (OTT) video streaming platforms but doesn’t have a sustainable revenue model—these were the few challenges attributed to the Indian media and entertainment industry at the opening ceremony of the annual Federation of Indian Chambers of Commerce and Industry (FICCI) event.
“The answer to such challenges lies in digital India and personalization of content,” said Union minister of information and broadcasting Smriti Irani in a question-and-answer session with filmmaker Karan Johar. There is no need for India, Irani said, to look towards countries like China who boast of far higher screen count and box office earnings. The greater opportunity lies in going beyond challenges of theatrical exhibition to create enhanced viewing experiences for the consumer on his/her mobile phone. Johar had emphasized that India has only eight screens per million people while the US boasts of 125.
While addressing the concerns raised by industry members, Irani said the government plans to build an umbrella organization to bring all shooting-related functionalities under one roof, create some sort of a single-window clearance across the country’s locations and lessen the distance between new emerging filmmakers and the corridors of power. Industry leaders like producer Siddharth Roy Kapur and Prasoon Joshi, chairman of the Central Board of Film Certification, have been invited to be part of the proposed organization.
“The film industry needs to come together to tell the government of say, the specific unexplored locations that are conducive from a shooting perspective so we can expand tourism opportunities and also invite foreign production houses to come and film,” Irani said pointing to the need for better and more conclusive data on things like the size of the industry and the number of people it employs.
To be sure, a lot of way forward is about going digital. Digital is about unleashing the power of new screens, better connectivity, low cost data and affordable smartphones. The ambition of every stakeholder (in the media and entertainment industry) needs to change, stories need to be reimagined and investments, business models and the way we use technology need to be rethought.
Digitization in the Media and Entertainment space
Every industry has been impacted in a positive manner by the use of digitization and the entertainment and media industry has been no exception to this. In the previous year, the M&E industry was taken by storm by the digital revolution and from the results we saw, 2016 is not going to be different. As predicted by experts, it is this digitization that will help in breaking new barriers and creating bigger grounds to play.
This impact has been further fuelled by the rise of the mobile technology along with the coming-of-age of internet too. This is akin to a revolution that this industry has never seen before has given this generation a great spectacle to witness. In earlier times, it was newspaper that bought in news the next day morning from around the world. Today, the job of reporting and analyzing is being done by social media platforms like Twitter and Facebook.
Since the advent of mobile technology, television, radio and newspaper have taken a backseat just like the internet has transformed the M&E industry. The “second screen” phenomenon has made sweeping changes to the way users watch television. The second screen is the laptop, mobile or tablet that is used in between programs or commercials by television viewers. The presence on this second screen is extremely critical and every industry is vying for space here.
Content that is available at the click of a button, yet is available from anywhere and can be shared is the need of the hour. Digitization will make sweeping changes in the way content, be it newspaper or television, is looked at and consumed. Large Media houses dealing with news on print have started looking at various avenues of reaching the audience and digitization helps them to do so.
Where the money came from
Despite traditional broadcast models which still represent the largest share of the industry; digital channels are clearly on the rise. With video becoming a digital-first product, we’re about to witness a decline in old business and delivery models. Players from outside the traditional broadcast industry are using video to drive other revenue streams. Meanwhile, online video content is slowly changing consumers’ expectations regarding price and value, since they can oftentimes access it for free, without the need for a paid subscription.
The television industry grew from Rs 594 billion to Rs 660 billion in 2017, exhibiting a growth of 11.2%. The growth was backed by “digitization of television homes, and tentpole properties like the IPL and non-fiction programming, particularly in regional languages”.
Despite an eventful 2017, advertisement volumes grew 10.1%. “In 2017, the number of advertisers on TV grew to 12,964 and ad volumes grew to 70 million insertions, as reported by BARC [Broadcast Audience Research Council],” the report said. “Ad volume growth was dependent on several factors such as cricket, elections in several large Indian states, penetration of regional channels, launch of new channels, and marquee non-action programming, which continued to attract advertisers, irrespective of the impact of demonetization or GST.” Hindi channels took the lead on advertisement volumes – 30% of all ad volumes, while 17% were from Tamil, Telugu and Bangla.
The revenues grew from advertising as well – from Rs 243 billion to Rs 267 billion (an increase of 10%). “This was largely driven by volume growth as more channels were launched, particularly in the free to air genre,” the report said. “This could indicate that television continues to move towards its core of being an efficient mass medium. Premium properties viz. sports, prime time content, film premieres and reality TV also grew their advertising rates.”
The business of cinema
Hindi films contribute almost 40% of the net domestic box office collections annually, despite comprising only 17% of the films made, stated the report. “Films in 29 other Indian languages account for approximately 75% of the films released but they contribute approximately 50% to the annual domestic box office collections.” Hollywood and international films make up the rest.
The biggest grosser for 2017 was Baahubali 2: The Conclusion. But overall, “relatable and niche content” drove success at the box office, the report felt. It cited examples of Lipstick Under My Burkha and Newton to make its case: “The year also shifted focus from dreamy locations abroad to the hinterland to contextualize their stories in tier-2 and tier- 3 towns such as Varanasi, Lucknow and Bareilly, which added depth and familiarity to the script and characters.”
Life beyond Bollywood
Gujarati films registered a 44% increase over 2016 in terms of transactions on the site BookMyShow, followed by Malayalam films registering a 38% rise. The Telugu film section clocked a 47% growth. Its net domestic collection in 2017 was Rs 15.33 billion, up from Rs 10.42 billion in 2016. A big chunk of it, of course, came from Baahubali: The Conclusion.
The Tamil film segment saw a fall in collections – the net domestic box office fell by 5% from Rs 9.96 billion in 2016 to Rs 9.46 billion in 2017. For Tamil cinema, footfalls also dropped from 140 million in 2016 to 126 million in 2017.
In terms of Hollywood releases in India, the box office collections for films (including the ones dubbed in Indian languages) remained stagnant in 2017, the report concluded.
Trends and challenges
The Indian Media and Entertainment (M&E) sector is expected to cross the $40 billion mark by 2021 growing at compounded annual growth rate (CAGR) in excess of 10 per cent. M&E industry has started to witness transformation with growing importance on the digital media.
Traditional media i.e., print and television will continue to grow. Cinema is has a good future as it is recognized globally and animation and VFX is becoming an integral part. Localized reach of radio is catapulting the growth of radio industry. Future of OTT is very bright and original content along with regional content will be a key driver of OTT growth.
Here are the five trends and challenges in the media and entertainment industry:
Television industry will continue to grow at a CAGR exceeding 13%. Rapid advance in technology is expected and this will further stimulate growth as high-end content transmission will follow.
Even though the growth of the traditional media is increasing, changes in preferences, due to urbanization, may be a factor that would hamper the growth in a long run. These include consuming ‘television on the go.’
Print still has positive growth numbers even when the same are on the decline in developed economies. The growth area are more regional than national, as regional language publications, particularly newspapers, continue their slow but positive growth. Maybe the reason for newspapers to be where they are in the country is due to the reason that we Indians still love to read the newspaper with a morning cup of tea. The Indian newspaper industry will continue to grow and may cross Rs. 24k crore in 2021.
Print industry would certainly grow in the near term however, digital consumption of news will be a disruptor in a few years to come.
Film entertainment sector is expected to register a good growth, with box office revenue estimated to rise from about Rs 11k crore in 2016 to about Rs 18k crore in 2021, at a CAGR of around 10%. Content will continue to be king and drive growth in this sector. VFX and animations is slowly becoming integral part of Indian film making. A recent trend includes mid and small-budget movies getting viewership in overseas markets, particularly the Middle East.
Online piracy of film and television content in India is rampant and investments in preventive technology need to be significant if this needs to be checked.
Success of radio is attributed to its localized reach. Radio has witnessed increase in numbers in metros, as listeners prefer mobile and on-the-go (car radio) devices. The first lot of the Phase III license roll-out resulted in 96 channels out of 135 channels being allotted in 56 cities. Consolidation in the industry is a key trend. Expansion in Tier 2 and 3 cities, though slow will happen over the next few years.
Radio listeners will continue to have more choices to consume content – music, news, entertainment etc. by tuning into web radios, podcasts, audio-on-demand, etc. It is also important to note that high-end smartphones have done away with FM tuners altogether.
OTT (Over the Top)
Original content will be a key driver of OTT growth and regional content library is expected to increase its share on OTT platform. OTT is witnessing 35% growth year on year. Currently there are about 30 OTT players in India. Many media companies have begun offering OTT video on demand (VoD). It is expected that here will be an increase in the amount of time spent on digital platforms through mobile devices. Changing tech trends in digital advertising will be the key to success for revenue models in the platform.
OTT faces challenges around fragmentation. The majority of Indian audiences are still stuck to the free or ad-supported model as of now. OTT heavily relies on broadband connectivity which is yet at a development stage in the country.
The Government is taking various initiatives that support the M&E industry’s growth such as increase in FDI limit from 74 per cent to 100 per cent in cable and DTH satellite platforms, digitizing the cable industry to get more institutional funding, and granting industry status to the film industry. Further, single window clearances are planned for approvals for outdoor events, e.g. film shooting etc. Incentive based models are being worked out to attract overseas production houses to shoot in India including ease in direct and indirect taxes.
Media, entertainment industry to hit $40 billion by 2020: PwC
India currently rules the roost as the largest cinema market in the world, and is expected to remain so till 2020, says PwC report. The industry is expected to exceed $40 billion by 2020, growing at an average annual rate of 10.3% between 2016 and 2020, said the report.
“Given India’s overall growth in GDP (gross domestic product) and PCI (per capita income), it is not surprising that India is amongst the top 10 markets for growth in the sector. Although, in India, traditional media like newspaper publishing and cinema has always shown strong growth, we expect that even in terms of absolute total spend, it should get into the top 10 in the early part of the next decade,” said Frank D’Souza, partner and leader, entertainment and media, PwC India. “What would be more interesting, however, is how rapidly India would catch up with global trends, where traditional media is finding it hard to remain relevant, and the digital sector is leading the growth trajectory and consequently bringing in continuous disruptions. That will all depend on how quickly the Indian digital/broadband ecosystem matures, and how the Indian players adapt and drive business models in what would be a rapidly changing environment for consumption of data/content fashioned largely by India’s under-35 population,” he added.
As far as the Indian print industry is concerned, it managed to buck the global trend. Globally, magazine, book and newspaper publishing combined registered a near flat or negative growth. However, Indian publishing remained one of the fastest growing publishing sectors in the world, on the back of factors such as demographics, increasing literacy rates, educational needs and a strong desire to consume news and content in local languages, combined with nascent digital/broadband penetration. These factors were expected to fuel growth and keep it relevant over the 2016-20 period.
Content will continue to be king and drive growth in this sector. While it is easy to assume that content is becoming more globally homogeneous, with the launch and adoption of services such as Netflix, experts maintain that the reality is that content is being redefined by consumers who also want local content. Moreover, globally, the ability of consumers to design and curate their own media diet has been one of the most powerful trends to emerge in the industry. But the bundle is far from dead, with video and cable incumbents—initially slow off the mark—now fighting back by offering their content on an integrated omni-channel basis, on TV, laptops, tablets, and smartphones, said D’Souza.