FICCI-KPMG Media and Entertainment Industry Report 2011 Predicts Major Growth

After the 2009 slowdown hitting all the industry sectors globally as well as in India, 2010 was the year of resurgence and complete action for the media and entertainment sector. The year 2010 also saw some key landmarks in terms of highest grossing Indian films, growth of DTH platforms, onset of 3G, and the regulatory push by the government towards digitization. Other factors such as the potential for penetration of different mediums, greater segmentation of audiences and catering to individual niches, growth expected from regional markets, increasing mobile and broadband penetration, and consolidation are pointing towards a very promising future for the whole industry.

The Year that Was...

Most sectors witnessed a double digit growth such as TV, radio, print, however the film industry witnessed a decline in revenues owing to content that failed to make a strong run at the box office. Television and print resumed their pace of growth as did radio and out of home media. Sectors such as gaming, digital advertising, and animation VFX also show tremendous potential in the coming years. By 2015, television is expected to account for almost half of the Indian M&E industry revenues, and more than twice the size of printthe second largest media sector. For the M&E industry in India, it was also a year that witnessed a shift in favor of digital technologies as DTH touched 28 mn net subscribers and digital music sales surpassed that of physical formats.

Another interesting trend in the M&E space is the growth of social media as an influencer. Social media has reached 84% of the online user base. Given the interactive ability of the medium to provide direct access to consumers, media companies and advertisers are expected to leverage this platform to understand consumer behavior and influences. Companies are also increasingly experimenting with various online marketing strategies as the global reach of social media is expanding. One of the biggest growth story in 2010 came from the DTH industry, which has reached a net base of 28 mn subscribers clocking a 75% growth over its subscriber base of 2009. Bigger metro markets grew specifically among the lower socio-economic segments as a result of subsidies offered such as reduced cost of set top boxes (STB), free installation of STB and free services. Key players in the segment include Tata Sky, Dish TV, Sun TV, Reliance Big TV, Airtel, Videocon, etc. Digitization, mostly driven by DTH till now, has been of great advantage to the players looking to enter the industry and those already present. It eases out bandwidth constraints to some extent, and enables more niche content being available in future using the same network or spectrum. Transparency in reporting is expected to increase subscription revenues for broadcasters.

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Last year, 2010 was a challenging year for the film industry, however technology as an enabler can play a major role in shaping up this particular industry. The Digital Entertainment Content Ecosystem (DECE), a cross-industry consortium dedicated to creating a consumer friendly open market for digital content distribution, indicated the launch of UltraViolet by the middle of 2011 in the USA. UltraViolet would allow consumers to purchase digital copies of movies that can be stored online or transferred between devices without an added cost. Initiatives like these are intended to alleviate one of the major impediments to the sales of digital copies of moviesthat files are typically limited to a single device and thus are less usable than a DVD. It is expected that mobile phones, video game consoles, tablets, and computers would soon start getting software upgrades to make them work with such platforms. To make this happen in India, there will be a requirement of improved broadband and EST infrastructure in the long term. In the short term, it could provide a unique opportunity for the Indian media companies to come on board, and be a part of this global platform.

Industry revenue growth for radio was driven largely by volumes (volumes accounted for over 70-80% of the growth). In the RAM markets, volumes increased by 39% during the year. Players looked at a price increase only in the second half of the year (in the range of 10-20%). However prices are still off the peak levels seen in the latter half of 2008. Utilization levels are now in the 60-80% range in the top 8 metros, and in the 40-60% range in key non-metros, leaving room for volume growth.

While there were approximately 7 Indian animated movies that were expected to be ready for release in 2010, less than half made it to the silver screen. Toonpur Ka Superhero, Luv KushThe Warrior Twins, and Ramayanathe Epic,all Indian releases of 2010 met with little theatrical success. The lack of distribution partners was primarily responsible for fewer number of Indian feature films releasing during the year. In 2010, the animation, VFX and post- production industry witnessed a growth of 17.5% over 2009 to reach `23.6 bn. This growth was largely led by the VFX and post-production segments which saw growth of 42% and 17%, respectively. Animation, on the other hand, grew by 10% in 2010 to touch `10 bn. As billing rates largely remained flat, the overall industry growth was led by the increase in the number of projects and scale of work undertaken by the Indian studios.

Growth Story Unfolds

The second decade of the millennium presents tremendous opportunity for the M&E sector. While at one end, new technologies enable performance enhancement, operational optimization, and revolutionize content delivery mechanisms, on the other end changing media consumption habits and market forces compel them to act fast before they are obligated to change themselves. Continued sustenance of players will depend on how quickly and homogenously the sector integrates factors impacting their business performance.

Extracts from the FICCI-KPMG Indian Media and Entertainment Industry Report 2011
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