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M&E growth may be flat in 2020 if the Covid-19 crisis ends in a month, says Ashish Pherwani of EY India

The Indian M&E sector reached Rs 1.82 trillion, a growth of 9% over 2018, according to Ficci-EY report 2020. It is expected to reach Rs 2.42 trillion by 2022 at a CAGR of 10%. An analysis before the countrywide lockdown predicted 7.8% growth in 2020

Amid the countrywide lockdown to contain the spread of the coronavirus, FICCI and EY India said that the growth of the M&E industry will depend on how soon the crisis ends.

“If the lockdown is over in a month, the year 2020 will witness a flat growth,” said Ashish Pherwani, Partner and Media & Entertainment Leader, EY India. “Any further lockdown may result in degrowth.”

An analysis before the countrywide lockdown predicted 7.8% growth in 2020. The industry grew by 9% in the previous year.

Sectorial break-up:

  2018 2019 2020E 2022E
Television 740 787 790 882 4%
Print 305 296 301 309 1%
Digital media 169 221 279 414 23%
Filmed entertainment 175 191 207 244 8%
Animation and VFX 79 95 112 156 18%
Live events 75 83 94 122 14%
Online gaming 46 65 91 187 43%
Out of Home media 37 39 41 46 5%
Radio 34 31 33 36 5%
Music 14 15 17 20 10%
Total 1,674 1,822 1,965 2,416 10%

*All figures are gross of taxes (INR in billion) for calendar years | EY estimates

Uday Shankar, Vice-President, FICCI and Chair, FICCI Media and Entertainment Division, said, “Riding the wave of exponential progress made towards digital accessibility and adoption, the M&E industry has been a forerunner of a dynamic and aspirational India. New products and business models are being imagined to capitalise on the rise in media consumption. Global players are recognising the need to build India-centric offerings. The coming years are likely to usher in greater innovation in content formats, means of dissemination and business models.”

Pherwani said, “The M&E sector witnessed a surge in content consumption as digital infrastructure, quantum of content produced and per-capita income increased in 2019.  Driven by the ability to create direct-to-customer relationships, the sector firmly pivoted towards a B2C operating model, changing the way it measured itself. As entertainment and information options grew and choice increased the era of consumer acquisition, retention and transaction (ART) redefined the media value chain, leading to the emergence of many new trends and strategies across content, distribution, consumption and monetisation.”

“The coronavirus outbreak will have a significant adverse impact on the sector. The situation is still evolving both in India and many parts of the world. The scale of the impact cannot be estimated immediately,” he said.
Key findings:
The TV industry grew from Rs 740 billion to Rs 788 billion in 2019, a growth of 6.5%. TV advertising grew 5% to Rs 320 billion while subscription grew 7% to Rs 468 billion. Regional channels benefited from the New Tariff Order as their consumption increased by over 20% in certain cases. General entertainment and movie channels led with 74% of viewership. On the back of several key announcements by the central and state governments such as Article 370, the Citizenship Amendment Act, and general election, the news genre witnessed a growth to almost 9% of total viewership, up from 7.3% in 2018. In sports, cricket emerged as the big winner in 2019 as it accounted for over 80% of the sports viewership, up from 70% last year, due to the ICC World Cup.
Key insights: Television will remain the largest earner of advertising revenues even in 2025, approaching Rs 570 billion. Viewership of regional language channels will continue to grow and reach 55% of total viewership in India as their content quality improves. Content viewed on smart TV sets will begin to reflect that consumed on mobile phones, providing a window for user generated content companies and other non-broadcasters to serve content on the connected television screen.
Despite 3% revenue degrowth at $296 billion, print continued to retain the second largest share of the Indian M&E sector. Circulation revenues increased by 2% to Rs 90 billion as newspaper companies tactically increased prices in certain markets. Advertising revenues fell 5% to Rs 206 billion in 2019 as AdEX volumes fell by 8%. Margins improved as newsprint cost measures were implemented and companies benefited from the reduction of newsprint prices.
Key insights: 2019 witnessed a significant growth in digital news consumers over 2018 when 300 million Indians consumed news online. Most large print companies had a defined digital business, with two companies crossing Rs 1 billion in digital revenues. Digital subscription, though nascent, has increased as several publications have put digital products behind a paywall.
Digital media:
In 2019, digital media grew 31% to reach Rs 221 billion and is expected to grow at 23% CAGR to reach Rs 414 billion by 2022. Digital advertising grew 24% to Rs 192 billion driven by increased consumption of content on digital platforms and marketeers’ preference to measure performance. SME and long tail advertisers increased their spends on digital media as well.  Pay digital subscribers crossed 10 million for the first time as sports and other premium content were put behind a paywall.  Consequently, subscription revenue grew 106% to Rs 29 billion. Digital consumption grew across platforms where video viewers increased by 16%, audio streamers by 33% and news consumers by 22%.
Key insights: By 2020, OTT subscription market will approximate 10% of the total TV subscription market (without, however, considering data charges).  We estimate over 40 million connected TVs by 2025, which will provide a huge opportunity for content creators to reach family consumers.  Better bandwidth will drive large screen consumption. By 2025, 750 million smart phone screens will also increase the demand for regional, UGC and short content, creating a short video ecosystem that can create significant employment.  The battle for content discovery will intensity and move to the unified interface.
The Indian film segment grew 10% in 2019 to reach Rs 191 billion driven by the growth in domestic theatrical revenues and both rates and volume of digital/ OTT rights sold. Domestic film revenues crossed Rs 115 billion with Gross Box Office collections for Hindi films at Rs 49.5 billion — the highest ever for Hindi theatricals. Overseas theatricals revenues fell 10% to Rs 27 billion despite more films being released abroad primarily as films with superstars didn’t perform as well in 2019. 108 Hollywood films were released in 2019 as compared to 98 in 2018. The gross box office collections of Hollywood films in India (inclusive of all their Indian language dubbed versions) grew 33% to reach Rs16 billion. As single screens continued to reduce, the total screen count decreased by 74 to 9,527.
Key insights: Digital rights continued to grow in 2019 with an increase in revenues from Rs 13.5 billion in 2018 to Rs 19 billion in 2019. Digital release windows shortened with some movies releasing on OTT platforms even before their release on television. In-cinema advertising grew marginally to Rs 7.7 billion in 2019 as multiplexes and advertising aggregators started signing long-term deals with brands. Seventeen Hindi films entered the coveted Rs 100-crore club in 2019, which is the highest ever. Interestingly, six movies made it to the Rs 200-crore club in 2019, as opposed to three in 2018. The future will be driven by immersive content (technology and VFX rich) experiences to drive theatrical footfalls and some genres of films could migrate to home viewership only.  We can expect to see creation of a segmented Hindi-mass product for the heartland at low ticket prices.
Mergers and acquisitions in M&E
While the number of deals increased to 64 in 2019 from 41 in 2018, the overall deal value was much lower at Rs 101 billion as compared to Rs 192 billion in the previous year. This was largely due to the absence of big-ticket deals with only four deals crossing the $100 million threshold. The highest amount of investment was made in television, followed by digital, radio and gaming. Deal activity was spearheaded by new media such as digital and gaming, which witnessed 54 of the 64 deals in 2019. However, in terms of deal value, the share of traditional media segments such as TV, radio and film exhibition was 63%.
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