M&E grows 12% to Rs 728 bn: Ficci-KPMG report

MUMBAI: Riding on strong consumption from smaller towns, India?s media and entertainment (M&E) industry has posted a double-digit growth in 2011 but is lower than earlier forecasts due to the global economic slowdown.

The sector grew 12 per cent to Rs 728 billon in 2011, according to a Ficci-KPMG report that is to be released on 14 March at the media trade event Ficci Frames 2012.

"2011 has been a challenging year not just for the Indian M&E industry, or even the Indian economy, but for the larger world economy. While India is still expected to grow at a healthy pace, growth is projected to be lower than earlier expectations," the report said, while forecasting a CAGR of 15 per cent.

What is triggering this double-digit growth is strong consumption in Tier 2 and 3 cities, continued growth of regional media and fast increasing new media business.

While television continues to be the dominant medium, sectors such as animation and VFX, digital advertising and gaming are fast increasing their share in the overall pie. Radio is expected to display a healthy growth rate after the advent of Phase 3.

Print, while witnessing a decline in growth rate, will still continue to be the second largest medium in the Indian M&E industry. Also, the film industry had reason to cheer with multiple movies crossing the 1 billion mark in domestic theatrical collections and 300 million mark in C&S rights.

Ad spends across all media accounted for Rs 300 billion in 2011, representing 41 per cent of the overall M&E industry revenues. Advertising revenues witnessed a growth of 13 per cent in 2011 compared to 17 per cent in 2010.

Said Ficci Entertainment Committee chairman Yash Chopra, "2011 was clearly the year where digital technologies began to deliver on their promise. Digital film distribution has helped wider film releases and helped control costs. In television, the digitisation of cable will transform business models of all stakeholders and offer consumers more choice and convenience. Even as digital generates new opportunities, it also brings with it challenges that the industry must solve more urgently than anticipated."

2011 proved to be a year with mixed results in terms of growth across different sub sectors. The traditional media businesses experienced a slowdown compared to the trailing year, especially in the second half of the year. However, the new media segments like Animation and VFX, Online and Gaming businesses witnessed phenomenal growth rates.

Print: The print industry grew by 8.4 per cent from Rs 193 billion in 2010 to Rs 209 billion in 2011, lower than the expectation of 9.5 per cent last year due to the challenging macroeconomic environment and reduced advertising spends.

Television: The overall television industry is estimated to be Rs 329 billion in 2011, and is expected to grow at a CAGR of 17 per cent over 2011-16, to reach Rs 735 billion in 2016.

The share of subscription to the total industry revenue is expected to increase from 65 per cent in 2011 to 69 per cent by 2016. The TV industry continues to have headroom for further growth as television penetration in India is still at approximately 60 per cent of total households.

Films: With several high budget Hindi releases lined up across the year, 2012 is expected to sustain the growth momentum witnessed in 2011. The Indian film industry is projected to grow at a CAGR of 10.1 per cent to touch Rs 150 billion in 2016. The industry is estimated to be Rs 93 billion in 2011, indicating a growth of 11.5 per cent vis-?-vis 2010.

Music: While 2010 was the year of structural shift from physical formats to digital ones, 2011 provided users viable options of music consumption through different digital platforms. The Indian music industry achieved revenues of Rs 9 billion in 2011, registering a growth of five per cent over 2010.

Radio: Overall, the industry grew 15 per cent in 2011 to reach Rs 11.5 billion, compared to Rs 10 billion in 2010. Volume increases in certain markets and rate increases for the leaders in metros drove growth.

New Media: Digital advertising is expected to grow at a CAGR of 30 per cent from 2011-16; digital adspend reached approximately 5 per cent of total M&E industry advertising revenue in 2011. Growth is largely driven by increase in internet penetration and proliferation of new devices.

Animation & VFX: Animation, VFX and Post Production industry achieved estimated revenues of Rs 31 billion in 2011, a robust growth of 31 per cent over 2010. Growth was achieved on the back of increased contract work, higher VFX content in movies, 2D/3D conversion projects.

Out of Home: The OOH sector was hit relatively harder by the global economic slowdown than other sectors of the Advertising industry. The sector registered a Y-o-Y growth of 7.6 per cent.

KPMG head of media and entertainment Jehil Thakkar said, ?The Media & Entertainment industry landscape is undergoing a significant shift. Cable digitisation, the promise of wireless broadband, increasing DTH penetration, digitisation of film distribution, growing Internet use are all prompting strategic shifts in the way companies work. Traditional business models are evolving for the better as a host of new opportunities emerge.?

Added KPMG head of markets Rajesh Jain, ?Media and Added Entertainment landscape is beginning to change with national cross media conglomerates emerging and consolidation and deal making finally picking up the pace?.

Key trends and industry drivers

Growth in digital content consumption across media: Digital technology continues to revolutionise media distribution ? be it the rapid growth of DTH and the promise of digital cable, or increased digitisation of film exhibition - and has enabled wider and cost effective reach across diverse and regional markets, and the development of targeted media content.

There has been increased proliferation and consumption of digital media content ? be it newspapers and magazines, digital film prints, and online video and music or entirely new categories such as social media. Accordingly, online advertising spends have seen a spurt in growth vis a vis spends on traditional media.

Rise of new age user devices: Smart phones, tablets, PCs, gaming devices, etc. all form the foundation of a new wave in media usage.This is gradually impacting the way content is being created and distributed as well. Multiple media including TV, films, news, radio, music etc are being impacted with this change.

New age consumers adapting themselves to the newer technologies: As Indian consumers evolve, there is a heightened need to engage them across platforms and experiences. There is a greater need for integration and innovation across traditional and new media, with changing media consumption habits and preferences for niche content. Media companies today have no choice but to provide more touch points to engage with audiences.

Regionalisation: Regional television and print continued its strong growth trajectory owing to growth in incomes and consumption in the regional markets. National advertisers are looking at these markets as the next consumption hubs and the local advertisers are learning the benefits of marketing their products aggressively.

An ad revenue dependant industry: The average revenue per user (ARPU) for television, average newspaper cost for print and average ticket price for films continue to be low on account of hyper competition in these industries. Segments like radio and a significant portion of online content are available free of cost to consumers. Owing to this, the Indian consumer is still not used to paying for content and, hence, the industry players are sensitive to the impact of the slowdown which affects the budgets of advertisers.

Awaited regulatory shifts: Apart from the shifts in consumer preferences, company strategies and business models, one big change awaited for the next growth wave is the implementation of recently enacted regulations on digitisation for cable, implementation of Phase 3 and copyright for radio and the roll out of 4G. These shifts are expected to be game changers in terms of how business is being done currently and what could be the path going forward.