Indian M&E industry to achieve growth of 11.8 per cent in 2013: FICCI-KPMG Report

Going forward, the sector is projected to grow at a healthy CAGR of 15.2 per cent to reach Rs 1,661 billion by 2017, the report forecasts.

While 2012 has been a challenging year for the Indian M&E industry, the latest FICCI-KPMG Media & Entertainment Report for 2013 predicts an aggressive growth for the year ahead.

Given the impetus introduced by digitisation, continued growth of regional media, upcoming elections, continued strength in the film sector and fast increasing new media businesses, the Indian M&E industry is estimated to achieve a growth of 11.8 per cent in 2013, thereby touching Rs 917 billion.

Also, going forward, the sector is projected to grow at a healthy CAGR of 15.2 per cent to reach Rs 1,661 billion by 2017, the report forecasts.

According to KPMG, with the global economy likely to witness some improvement in 2013 and India's real GDP expected to be in the region of 6.1-6.7 per cent, the prognosis for the industry looks much better going forward.

For the record, the industry grew from Rs 728 billion in 2011 to Rs 820 billion in 2012, registering an overall growth of 12.6 per cent. Total advertising spend across media was Rs 327.4 billion in 2012. In the light of continued economic slowdown, advertising revenues saw a growth of 9 per cent in 2012, as against 13 per cent in 2011 and 17 per cent in 2010.

Print continues to be the largest beneficiary, accounting for 46 per cent of the advertising pie at Rs 150 billion.

While television continues to be the dominant segment, the report records strong growth posted by new media sectors, animation/ VFX and a comeback in the films and music sectors on the back of strong content and the benefits of digitisation. Radio is anticipated to see a spurt in growth at a CAGR of 16.6 per cent over 2012-17, post the rollout of Phase 3 licensing.

According to Jehil Thakkar, head of media and entertainment, KPMG (India), "The year 2012, though a challenging year for the M&E industry, was a year in which important foundations for future growth were laid. The advertising environment went through one of the toughest years in the last decade. However, the implementation of digitisation, the stellar performance of the film industry backed by excellent content and digital distribution, the continued growth in regional print and the momentum in new media and the announcement of Phase 3 radio implementation have all finally provided the needed platform to boost the Indian media & entertainment industry."

The key trends and themes for growth revealed by the report are as follows:

Growth in new media

The rapid increase in mobile and wireless connections continues to drive the growth of internet penetration in India. With better access, through cheaper and smarter devices, audiences (especially the youth) are consuming more content and are getting increasingly engaged.

The key beneficiaries are emerging new media segments, which include internet advertising, online classifieds and gaming, all of which are on a rapid growth path. Going forward, better uptake of 3G connections and the beginnings of the 4G rollout are expected to spur growth further.

Traditional media still going strong

India remains a growth market for traditional media, evidenced by the growth last year in TV audiences, radio listenership and footfalls in theatres. India is a country where print is still a growth market. There is growing overseas demand for quality Indian animation/VFX work at affordable pricing.

Traditional media is also increasingly offered on new media platforms. The need of the hour, of course, is the development of models for broader reach and monetisation of audiences for traditional media content on these new media platforms.

Greater sophistication of and segmentation in content

TV digitisation is likely to be a great catalyst for greater diversity and niche television programming. Digitisation is expected to improve broadcast economics significantly, which in turn could drive more investments in production quality, niche and targeted genres of content/packaging in the medium term.

Phase 3 licensing and anticipated provisions permitting multiple frequencies in a city will encourage investments in differentiated content for the radio sector. Internet and mobile platforms are a cost effective enabler to reach diverse audience segments with tailored content. The Indian audiences could look forward to more targeted and engaging content in the medium term.

Regional markets remain key centres of growth

Advertisers continue to see higher growth in consumption from key regional markets. Hence regional media continues on a strong growth trajectory, especially in the print and television sectors. Key media players are focusing on cherry picking acquisitions and expanding their presence in regional markets based on higher rates of advertising revenue growth, and better insulation from the slowdown than in metros, which may be close to saturation in many cases.

Examples in print include the launch of Ei Shomoy - a Bengali paper by Bennett, Coleman & Co. and the acquisition of NaiDuniya by the Jagran Group.

Many film studios are building a regional films pipeline. Reliance Big Pictures, Disney UTV Motion Pictures and Eros International are increasingly investing in the regional space. Hollywood films are expanding revenue potential by dubbing across regional languages such as Tamil and Telugu.

Coming live

With changing lifestyles, there is an increase in media consumed out of home. Brands are also increasingly keen to connect with consumers via 'experiences' to ensure greater recall and amplification of brand values. Activations/events are now increasingly a key facet of radio and print media solutions.

Live music events/festivals have been successful in attracting widespread audiences and engaging youth across key cities. Increased consumption of music/radio/video on-the-go via mobile and in cars provides opportunity for real time mobile geo-location advertising. The out of home (OOH) advertising sector has also seen higher rates of growth in transit advertising.

There is, hence, an increased need to provide 360 degree solutions to advertisers and provide multiple platforms to reach out to consumers, wherever they are.

Revenue models still advertising-dependent but subscription grows for TV

M&E is still an advertising-dependent industry in India. Hence, it remains sensitive to the impact of the economic slowdown.

While the print sector saw some increase in circulation revenues and increase in cover price in some areas, cover prices are still significantly lower than global counterparts. In the TV sector, digitisation has the potential to increase ARPU (average revenue per user) and improve the share of subscription revenues to the broadcasters. Increasing subscription revenue is key to the long term stability of the broadcasting sector.

Regulatory and policy support

Regulatory interventions have been a key enabler of growth for the sector. Anticipated events in 2013, such as continued cable DAS rollout, Phase 3 licensing for radio and 4G rollout will spur growth in the medium term.

There is a need for measures to aid curtailment of piracy and encourage investments to support further growth. Co-production treaties, rationalisation of entertainment tax, government support to encourage formal skill development and training and incentives for animation/VFX and gaming are important areas of policy and regulation that need attention.

Gaps in availability of skilled media and entertainment professionals

The media and entertainment sector could be a noteworthy employer across creative, technical and business areas. With potential mushrooming of TV and radio broadcast channels and growth in skill intensive sectors of film, animation, gaming and VFX, this is only set to escalate. In the talent driven media sector, companies could potentially differentiate based on ability to attract and retain the right people.

The vision

The vision set out for the sector, of engaging communities, entails reaching out and understanding multiple segments, creating greater connect, and leveraging this connect to influence for the greater social good. At the same time, it remains sensitive to the economic situation and a lot will depend on its ability to manage the risks of continued shortage of skilled manpower and the ability to spur end-user pricing across segments. It is a time for introspection and a time for innovation to see how companies can harness the powers of new technologies and convergence to realise their vision, summarises the report.