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FICCI-KPMG projects Indian M&E industry at Rs 1,786 bn by 2018

The industry is expected to register a CAGR of 14.2% wherein digital advertising is expected to have the highest CAGR of 27.7% while all other sub-sectors are expected to grow at a CAGR in the range of 9-18% by 2018

BestMediaInfo Bureau | Mumbai | March 13, 2014

FICCI-Frames-2014-The-stage-is-set

The FICCI-KPMG report on the Indian Media & Entertainment (M&E) industry was released at the inaugural session of FICCI Frames 2014 yesterday. According to the report, the M&E industry is expected to register a CAGR of 14.2 per cent to touch Rs 1,785.8 billion by 2018 wherein digital advertising is expected to have the highest CAGR of 27.7 per cent while all other sub-sectors are expected to grow at a CAGR in the range of 9-18 per cent.

Industry size and projections

Overall industry size (Rs billion)

2012

2013

Growth in 2013 over 2012 2014p 2015p 2016p 2017p 2018p CAGR (2013-18)
TV

370.1

417.2

12.70%

478.9

567.4

672.4

771.9

885

16.20%

Print

224.1

243.1

8.50%

264

287

313

343

374

9.00%

Films

112.4

125.3

11.50%

138

158.3

181.3

200

219.8

11.90%

Radio

12.7

14.6

15.00%

16.6

19

23

27.8

33.6

18.10%

Music

10.6

9.6

-9.90%

10.1

11.3

13.2

15.1

17.8

13.20%

OOH

18.2

19.3

5.90%

21.2

23.1

25.2

27.5

30

9.20%

Animation and VFX

35.3

39.7

12.50%

45

51.7

60

70.2

82.9

15.90%

Gaming

15.3

19.2

25.50%

23.5

28

32.3

36.1

40.6

16.20%

Digital Advt.

21.7

30.1

38.70%

41.2

55.1

69.7

88.1

102.2

27.70%

Total

821

918

11.80%

1039

1201

1390

1580

1786

14.20%

Source: KPMG in India analysis

Highlighting the performance during the year gone by, the report said that the Indian M&E industry registered a growth of 11.8 per cent in 2013 over 2012 and touched Rs 918 billon. The overall growth rate remained muted, with a slow GDP growth and a weak rupee. Lower GDP meant lower demand from the consumer and this impacted advertising. At the same time, the industry began to see some benefits from the digitisation of media products and services, and growth of regional media. Gaming and digital advertising were the two prominent industry sub-sectors which recorded a strong growth in 2013 compared to the previous year, albeit on a smaller base.

The Indian M&E sector showed some resilience and began to grapple seriously with some structural issues it has long talked about but not engaged with. These include TV and Print industry measurement, advertising volumes, inventory and rates, actions to see digitisation through and reap its benefits, working out the MSO-LCO relationship, copyright laws and operational efficiency. Many of these remain alive and will take a few years to sort through. Others, like Phase III of Radio, are still pending regulatory action.

This year’s report also highlights opportunities that could come from tapping international markets with a special feature on opportunities in the Middle East and Africa region. The report also covers the live events market as well as the advertising market separately, along with an overview of the advertising services market in India.

Television: The size of the Television industry in India was estimated at Rs 417 billion in 2013, and is expected to grow at a CAGR of 16 per cent over 2013-18 to reach Rs 885 billion in 2018. Aided by digitisation and the consequent increase in Average Revenue Per User (ARPU), the share of subscription revenue to the total industry revenue is expected to increase from 67 per cent in 2013 to 71 per cent in 2018.

Paid C&S penetration of TV households: The number of TV households in India increased to 161 million in 2013, implying a TV penetration of 60 per cent. The number of Cable & Satellite (C&S) subscribers increased by 9 million in 2013, to reach 139 million. Excluding DD Direct, the number of paid C&S subscribers is estimated to be 130 million. This C&S subscriber base is expected to grow to 181 million by 2018, representing 95 per cent of TV households. Of this, paid C&S base is expected to be 171 million in 2013, representing 90 per cent of TV households.

Broadcasting: TRAI’s efforts to enforce the 12-minute ad cap regulation invited a divided response from the industry and contributed to the challenges of broadcasters, especially those with significant dependence on advertising revenues. At an aggregate level, the total TV advertising market is estimated to have grown around 9 per cent in 2013 to Rs 136 billion, lower than the 11 per cent projected in the report last year. Going forward, television advertising in India is expected to grow at a CAGR of 13 per cent over 2013-18, to reach Rs 220 billion.

Subscription revenue is expected to be the driver of growth for broadcasters, growing at an estimated CAGR of 26 per cent from 2013 to 2018. Increase in the declared subscriber base and higher revenue share is expected to drive up the share of subscription to total broadcaster revenue from 34 per cent in 2013 to 46 per cent in 2018.

broadcaster-industry-size

Print

Print media market

2011

2012

2013

2013Growth 2014p 2015p 2016p 2017p 2018p CAGR (2013-18)
Total advertising

139

150

163

8.70%

179

199

222

248

275

11.10%

Total circulation

69

75

81

8.10%

85

88

92

95

99

4.20%

Total print market

209

224

243

8.50%

264

287

313

343

374

9.00%

Total newspaper revenue

197

211

230

8.70%

250

273

300

329

361

9.50%

Total magazine revenue

12

13

14

4.50%

14

14

14

14

14

0.30%

Total print market

209

224

243

8.50%

264

287

313

343

374

9.00%

Print Media: Calendar 2013 saw the Print industry grow by 8.5 per cent from Rs 224 billion in 2012 to Rs 243 billion. The growth achieved was slightly better than KPMG’s estimate of 7.602 per cent last year. The long-term growth in the sector looks promising with industry players witnessing strong growth and a possible future demand in the regional market.

Even though Print media has shown steady growth in the last calendar year, the macroeconomic environment continues to be challenging. The Indian economy has witnessed a slowdown, clocking an average GDP growth rate of only 4.9 per cent in FY 2013-14.

Contrary to the prevailing trends in the global print media, where there is intense competition from digital media, the print sector in India is showing a strong upsurge. The print industry is expected to grow at a CAGR of 9 per cent for 2013-18, as against estimated 8.7 per cent expected last year.

Much of this growth can be attributed to print media’s advertising revenues and the faith shown by advertisers in this medium. Most advertisers have shunned their cautious approach, backing the extensive reach and localisation benefits that print offers. Some of the big spending sectors such as FMCG, Retail and Real Estate have increased their media spend on print this year. Print has also witnessed a boost in advertising revenues due to the elections in several states last year. Advertising spends by political parties are expected to benefit the print media this calendar year as well

The print industry continued to derive most (94.4 per cent) of its revenues from the newspaper category. The Rs 14 billion magazine segment had a roller coaster ride this year. Some prominent publishing houses discontinued their magazines this year. On the other hand, specific niche magazines witnessed high growth with their well-defined readership and advertiser base. However, the magazine space in India continues to face growth challenges. The growth in the magazine industry is expected to decline over the next 5 years and may constitute 3.6 per cent of the total print industry.

New Media: Digital ad-spend and the landscape Digital advertising in India grew by approximately 38.7 per cent to touch Rs 30.1 billion in 2013. Indian mobile advertising is expected to grow at 50 per cent and reach Rs 5.1 billion by end- 2014. Digital marketers are recognising this trend and are now considering to or are already on their way to execute ‘Mobile-first’ branding and customer engagement strategies. The ad spend in digital media is set to grow at 37 per cent to reach Rs 41.2 billion in 2014. Google and Facebook account for close to half of the online advertising revenue in Asia, and the dominance can be attributed to their massive user base.

digital-advertising

Radio: Like in 2013, the FM radio industry is expected to outpace the growth of overall advertising revenues in the coming years. With a forecast CAGR of 18.1 per cent till 2018, industry revenues are expected to more than double by 2018. Phase III is also now looking a reality – there is an expectation that the auctions should commence before FY14 is over. Phase III rollout is vital for the FM radio industry’s growth.

The other segments of the media industry have all grown by leaps and bounds. More and more TV channels continue to get launched every year, and today there are 750 plus channels available. Newspaper groups have launched several new editions of existing titles as well as new titles across the country.  With more transport infrastructure projects (airports, highways, etc.) getting completed, the Out Of Home (OOH) industry has also got a boost.  And, of course, the internet knows no bounds. Therefore, Radio must continue to remain competitive. It has had to rely on increasing the utilisation of available advertising inventory, but now with inventories almost fully exhausted, the only way left to grow further is to have more channels and increase rates. Phase III is expected to provide the requisite growth impetus.

Advertising: The advertising industry faced a rough year in 2012 and there were expectations of a better performance in 2013. But the continued economic slowdown, depreciation of the rupee and low GDP growth resulted in persistent negative sentiment leading to a muted growth rate for the industry in 2013.

Advertising spends were relatively healthy in the first half of the year backed by strong spending from the FMCG sector, state assembly elections and better performance of IPL6 compared to the last two seasons. Post July, there was a sudden slowdown due to depreciation of rupee and other macro-economic factors due to which advertisers held back their money.

A minor blip was observed towards the end of the year due to elections and rupee getting stabilised with the industry reporting an overall growth rate of 10.9 per cent2. 2014 is expected to be a promising year due to the impending national elections and high expectations from sectors like FMCG, automobile (multiple new launches planned) and financial services, with an overall growth of the advertising market projected at 13.1 per cent.

Overall industry size (INR billion)

2012

2013

Growth in 2013 over 2012 2014p 2015p 2016p 2017p 2018p CAGR (2013-2018)
TV

124.8

135.9

8.90%

152

172

195

221

253

13.20%

Print

149.6

162.6

8.70%

179

199

222

248

275

11.10%

Radio

12.7

14.6

15.00%

16.6

19

23

27.8

33.6

18.10%

OOH

18.2

19.3

6.00%

21.2

23.1

25.2

27.5

30

9.20%

Digital advertising

21.7

30.1

38.70%

41.2

55.1

69.7

88.1

102.2

27.70%

Total

327

363

10.90%

410

468

535

613

694

13.90%

The market share of TV (37.5 per cent), Print (44.9 per cent) and OOH (5.3 per cent) reduced compared to 2012 which was substituted by digital (8.3 per cent) and Radio (4 per cent). Overall, the advertising market is expected to reach Rs 694 billion in 2018 at a compounded annual growth rate (CAGR) of 13.9 per cent.

2014 is expected to perform better than 2013 with an expected advertising revenue growth rate of 13.1 per cent. Significant amount of growth in ADEx is expected to come from General Elections alone. Other areas to look for would be automobiles as the sector is lined up with couple of new launches this year and BFSI which is expected to grow in the second half due to expected change in policies post election.

Digital media is expected to continue its growth trajectory with projected growth rate of 36.9 per cent in 2014. TV, Print, Radio and OOH are also expected to perform better in 2014 with projected growth rate of 11.9 per cent, 10.1 per cent, 13.7 per cent and 10 per cent respectively. ATL: BTL ratio is expected to reach 50:50 by 2015, as companies are expected to spend on marketing activities in rural areas (dominated by BTL activities) to push their sales.

Info@BestMediaInfo.com

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