FICCI-KPMG expects Indian media and entertainment industry to touch $28 billion by 2015
Moneylife Digital Team 21 March 2011

The past decade marked the convergence of media and technology, of user-generated content, social media and new publishing models that have changed the pattern of media consumption

The Indian media and entertainment (M&E) industry is expected to grow at a compound annual growth rate (CAGR) of 14% to $28 billion by 2015, due to positive industry sentiment and growing media consumption, according to a report by FICCI and KPMG. The report, to be released at the inaugural session of FICCI Frames 2011 on 23rd March, states that in 2010 the Indian M&E industry gained 11% to Rs652 billion and that it is expected to grow by 13% in 2011.

Dr Amit Mitra, secretary general, FICCI, said, "The key industry highlights are the growing potential of the regional markets, increasing media penetration and per capita consumption, and increasing importance of new media, driven by changing media consumption patterns."

Overall, for the M&E industry, 2010 was a year of great dynamism, with growth across all sectors other than films. The report highlights a strong recovery in advertising spend as a key driver for growth.

Advertising spends grew by 17% to Rs266 billion and accounted for 41% of the overall industry size. While television and print continued to dominate the Indian M&E industry, sectors such as gaming, digital advertising, and animation VFX grew at a faster rate and show tremendous potential in the coming years.

Rajesh Jain, head of media and entertainment, KPMG, said, "The resurgence in advertising, growth in subscription revenues, the thrust on digitization, and emerging avenues for content monetization, were the key growth drivers for the Indian M&E industry in 2010. However, going forward, it will become imperative for media companies to reset their business models and build greater focus on profitability and changing consumer preferences."

According to the report, the number of TV households in India would reach about 156 million by 2015. The report expects, advertising and subscription revenues to touch Rs214 billion and Rs416 billion, respectively, over the next five years. FICCI-KPMG expect the print media to grow at a CAGR of 10% to Rs310 billion over the next five years, while it sees regional print media growing at a higher rate of 12% by 2015.

During 2010, social media gained significant popularity as a marketing and gaming platform. "Social media offers advertisers and content owners the ability to directly connect with their consumers/audiences. Businesses are now beginning to understand the power of this tool and integrating it into their core marketing plan to reach out to their target audience," said Jehil Thakkar, executive director, M&E, KPMG.

Following are some of the key highlights from the FICCI-KPMG report.

Digitization continues to be a key growth driver for the Indian M&E industry and this trend was even more pronounced in 2010. Film studios saw greater adoption of digital prints over physical and it was the first time in India that digital music sales surpassed that of physical unit sales.
DTH achieved robust growth of 75% in net subscriber base by adding 12 million subscribers in 2010. With the regulatory push on digitization, ongoing 3G rollouts, increasing mobile and broadband penetration, the market for digital distribution platforms is only expected to grow.

With increase in scale, expected changes in regulation from phase III and music royalty structure, the industry is expected to grow at 20% per annum and become profitable.

2010 was a challenging year for the industry. However, with better content, increase in multiplexes, investment in research and continued cost corrections, the industry is estimated to grow to Rs132 billion by 2015 from Rs83 billion at present.

With the economic resurgence, advertising on this medium bounced back with a growth of 21% in 2010 and it is expected to reach Rs29.6 billion in 2015.

Digital is here to stay! Spurred by environmental factors such as the growth in radio, a huge telecom subscriber base, live events and performances, device innovations in smartphones, tablets, notwithstanding the controversy over royalty, the industry is expected to register a healthy growth of 17% per annum, to cross Rs19 billion by 2015.

Animation and VFX
The growing demand for content, increasing investment in training talent, growing comfort of Indian production houses for VFX, continued growth in outsourced work, conversion of 2D to 3D formats and emerging digital platforms, are expected to help the industry grow at 18.5% per annum.

Backed by increasing purchasing power across tier-2 and tier-3 cities, regional media consumption is expected to continue to rise. In the print sector, revenues from Hindi and other language segments are expected to catch up with English, which has to date, enjoyed a majority share. Realizing the power of regional media, national and foreign players have ventured into regional markets and several others are likely to follow suit. Meanwhile, regional players have achieved scale and are now looking to go national and build a pan-India presence. Geographical expansion by existing players in television, print and radio is expected to intensify competition and leading to interesting times for these industries.

Growing importance of New Media
The past decade marked the convergence of media and technology; of user-generated content, social media and new publishing models that have changed the way of media consumption. These changes in the way media is consumed are being driven by factors such as content pull from telecom service providers due to the 3G launch, emerging gaming platforms and innovation in technological devices such as tablets.

Convergence of media, m-commerce and emergence of the app economy are trends likely to emerge. Availability of infrastructure and appropriately pricing content across these new media platforms are expected to be critical success factors for the Indian market.

Digital advertising and gaming are expected to witness the maximum growth and account for approximately Rs73.8 billion by 2015. This growth is expected to be driven by the 3Cs of consumer, connectivity and convergence.

Regulation to drive growth
The Government's thrust on digitization and addressability for cable television, is expected to increase the pace of digitization leading to tremendous growth in DTH and digital cable. The phase III auction of radio is expected to add about 700 licenses across tier-3 and few tier-2 towns. Moreover, TRAI has submitted recommendations to the government to increase the FDI limits across several broadcast and distribution platforms including radio, TV, DTH and cable. As the government, regulatory bodies and members of the industry actively work together, reforms that aid the development of Indian media companies will act as a catalyst to the growth of the sector.

Niche formats
Increasing audience segmentation is driving content and delivery. Television indicated this growing trend through the launch of several new niche channel genres such as food, action movies, etc. Similarly, movies targeted at specific segments of society that seem to capture the vibe of the local audience and their social issues appear to have found an audience. It has now become a business prerequisite to assess trends for continually changing customer preferences, lifestyle and media buying habits and incorporate the understanding in focused content, marketing and delivery strategies for each target audience segment.

Consumer understanding
With increasing fragmentation and intensity of competition, a deeper understanding of cultural and social references through focused study groups will enable players to target their consumers specifically and build loyalty.

It is becoming increasingly important for industry players to continuously innovate new formats and strategies in order to enable brand loyalty help expand the market.

Mature players are increasingly looking to build scale across the media value chain and explore cross-media synergies. In addition, existing foreign players are looking to expand their Indian portfolio and several others are expected to make an entry into India. Inorganic growth is likely to be a preferred route for many of these players. With increased digitization and accountability, Indian media companies are also expected to generate greater interest from private equity players.

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