MUMBAI: The Indian media and entertainment (M&E) industry is slated to grow at a CAGR of 12.5 per cent over the next five years to touch Rs 1052 billion in 2013 from Rs 584 billion in 2008.
The FICCI & KPMG report on the sector highlights that the market environment has become increasingly challenging for the sector, on the back of economic slowdown and the consequent slowdown in advertising revenues, especially in the last quarter of 2008. Sectors like TV, print, radio and outdoor, which depend on advertising revenues were largely affected and this is estimated to continue into the current year too.
Advertising spends grew at CAGR of 17.1 per cent in the past three years. Going forward, it is expected to exhibit a robust growth rate CAGR of 12.4 per cent over the next five years. Potential upsides could take this higher.
FICCI secretary general Dr. Amit Mitra said, “India is one of the few countries where economic growth will be led by domestic consumption. With a low advertising spend to GDP ratio of 0.47 per cent, a growing consumer class, and middle class, young population, low media penetration and increasing discretionary spending; India continues to be an attractive market for Media & Entertainment.”
KPMG India head information, communication & entertainment Rajesh Jain added, “Media companies are under pressure to change, innovate and re-examine their existing business models. Players need to draw upon new capabilities to survive in this environment. In the immediate future, media corporates are likely to focus more on operating margins, and assess opportunities for consolidation, while building on core strengths.”
The projected 12.5 per cent growth for the sector will be driven on the back of factors like favorable demographics, strong long term fundamentals of the Indian economy, expected rise in advertising to GDP ratio compared to developed economies and increasing media penetration.
Given the industry’s changing landscape and emerging challenges, the focus of industry players too is changing; with a strong emphasis on profitable growth in the current scenario. Hence, media companies are increasingly concentrating on strengthening existing operations and assessing options for growth through consolidation, while continuing to innovate. Factors like Narrowcasting, Regionalization, Internationalization, Organized Funding, Digitization and Deregulation have become the ‘buzzwords’ in the industry.
The filmed entertainment sector is estimated to have grown at a CAGR of 17.7 per cent over the past three years. The industry is clocked revenues of around Rs 109.3 billion in size in 2008, a growth of 13.4 per cent over 2007. Over the next five years, the industry is projected to grow at the CAGR of 9.1 per cent and reach the size of Rs 168.6 billion by 2013.
Growth drivers for the sector would include expansion of multiplex screens resulting in better realizations, increase in number of digital screens facilitating in wider film prints releases, enhanced penetration of home video segment, primarily in the sell through segment, increase in number of TV channels fuelling demand for film content, and hence resulting in higher C&S acquisition costs, improving collections from the overseas markets. Going forward the sector should focus on improving consumer connect by investing in new formats and content, more wide spread distribution of Home Video, e.g. at grocery stores etc., to facilitate easy access, take coordinated and proactive action to tackle piracy, promote and experiment with new talent and improve organizational ability to attract and retain talent.
The size of the Indian music industry was estimated at around Rs 7.3 billion in 2008, down from Rs 8.3 billion in 2005, implying a degrowth of 4.8 per cent during the period. One of the primary reasons for this degrowth has been the erosion of sales of physical formats, a trend which is expected to continue well into the future. Physical formats such as audio cassettes and compact discs, which accounted for approximately 87 per cent of industry revenues in 2005 currently account for just fewer than 60 per cent in 2008.
Going forward physical revenues are expected to decline at a CAGR of 9 per cent between 2008 and 2013. While the actual degrowth of formats such as audio cassettes is expected to be much higher, this is likely to be partially offset by initiatives taken by some leading music companies such as Sony BMG, T-Series and SaReGaMa to release MP3 music on compact discs at price points similar to that of the ubiquitous audio cassette. Overall the music industry is expected to grow at a CAGR of 8% over 2009-13 to reach Rs 10.7 billion.
At an estimated size of Rs 17.4 billion in 2008, the Indian animation industry is miniscule as compared to the global animation industry with estimated revenues in excess of Rs 1530 billion by 2010. However, the Indian animation industry has been growing rapidly with an estimated CAGR of 20.1 per cent in 2006-08. It is estimated to reach a size of about Rs 39 billion by 2013. Among the different segments of the animation industry, the animation production services segment is estimated to grow the fastest with a CAGR of 17.8 per cent in 2009-13.
The industry is estimated to have reached a size of Rs 241 billion, a growth of 14.2 per cent over 2007. The television industry is projected to grow at the rate of 14.5 per cent over 2009-13 and reach a size of Rs 473 billion.
Some of the growth drivers for the sector would include rapid growth in the number of digitized households, steady increase in ARPUs realized through digital distribution platforms, growth in the number of channels, especially in niche and regional categories and growth in the number of TV and C&S households. To have addressability and reduce leakages, the report recommends pushing for government regulations for mandatory digitization of all TV distribution, development of alternate audience/viewership measurement systems, and rationalization of content production costs through discussions with stakeholders at all levels actors/technical staff, production houses and broadcasters. There is also need to create content for audiences in the Tier 2 and 3 towns from where the next wave of growth is likely to come.
Radio ad spends account for about 4 per cent of the total advertising spends in India today, having grown from just 2 per cent in 2004. Consequently, the radio industry is estimated to have grown at an impressive CAGR of 19.7 per cent over 2006-08. It is estimated to have reached a size of Rs 8.4 billion by end of 2008, a growth rate of 13.5 per cent over the previous year. It is expected to grow at a CAGR of 14.2 per cent over 2009-13 and reach a size of Rs 16.3 billion by 2013.
Increase in the number of radio stations – around 700 new licenses expected to be issued to Private FM stations in Phase 3, expected regulatory reforms that are likely to improve profitability and stimulate foreign investments, emergence of robust audience measurement tools which could further catalyze growth in radio ad spends and growth in locally targeted advertising on radio are some of the growth drivers for the radio industry in the country.
Console gaming is the largest money churner in the global market and is gaining prominence in India too. In 2008, the Indian console gaming segment registered total revenues of Rs 4.1 billion which is expected to go up to Rs 9.4 billion in 2013. Plagued by a number of issues such as content discovery and revenue leakages the Indian mobile gaming segment has not lived up to the potential and is estimated at Rs 1.4 billion in 2008 in terms of end user revenues. The PC gaming market has however, grown to Rs 978.6 million and expected to grow at a CAGR of over 36 per cent through 2013. The primary growth drivers for PC games in India are the growing broadband subscriber base, multifunctional nature of PCs, availability and price points of PC game titles.
Overall the gaming industry is expected to grow at a CAGR of 33% over 2009-13 to reach Rs 27.4 billion.
The Indian Print Media industry is estimated to have grown by 7.6 per cent in 2008 and reaching around Rs 172.6 billion in size. The industry is projected to grow at a CAGR of 9 per cent over the next five years and reach around Rs 266 billion in size by 2013.
Growth in the Print media industry is achievable through sustained growth in advertisement revenues due to increased advertising spends from emerging sectors such as Education, Organized Retail and Telecom, improving literacy levels in the country, optimization of cover prices leading to improved penetration and growth in sales volume, more launches in the niche segment, like newspaper supplements and specialty magazines, by players. The industry needs to invest in quality improvements, especially in regional media to attract advertisers; collective negotiations and bulk purchase of newsprint, constitute forums to encourage and promote regular reading habits among youth, adopting innovative practices like trading media space in publication platforms in return for equity and improve organizational ability to attract and retain talent.
Out of Home (OOH):
OOH media has grown at a CAGR of 17.3 per cent over the past 3 years, and is estimated to have reached Rs 16 billion in size in 2008, a growth of 14 per cent over 2007. The sector’s performance was affected in the second half of the year owing to the overall economic slowdown. It is projected to grow at a compounded rate of 12.8 per cent over the next 5 years and reach a size of around Rs 29.3 billion by 2013. Currently, the growth is centred largely in Tier 1 towns, with metros accounting for more than half of the total OOH market. Sectors spending the most on this medium include Telecom, Media & Entertainment and Financial Services companies.
One of the biggest challenges that the sector faces today is the lack of a central regulator governing OOH media. Rules and regulations vary from state to state, which inhibits standardizations across locations and leads to unregulated growth. Further the ongoing liquidity crunch has forced many real estate developers to go slow on construction activities, thus affecting the supply of retail space. This is likely to affect the spread of ambient media.