According to PwC’s Global Entertainment & Media Outlook 2018-2022 (Outlook), India’s OTT video segment is going to enter the top 10 largest markets by 2022 with a growth of 22.6% CAGR. All of this, despite a lot of piracy in digital content. While OTT video revenue has grown rapidly in recent years and reached Rs 2,019 crore in 2017, the internet advertising market (sans OTT video) stands at Rs 6,513 crore in India in 2017.
Frank D’Souza, Partner and Leader, Entertainment and Media, PwC India, said that even if digital, OTT and video gaming will increase rapidly in the coming years, it will take over 10 years for the new media platforms to overtake the traditional ones like television and print. On one thing that can hinder the growth of digital, D’Souza said, “Regulation is one thing that will pose a hurdle in the growth of digital. If it is more susceptible to frauds, it is more susceptible to misuse and hence to regulation. These regulations have to happen on country basis.”
OTT video was measured separately from internet advertising, because subscription is a majority contribution on OTT, unlike any other digital platform.
Meanwhile, the Indian entertainment and media industry is expected to reach Rs 353,609 crore by 2022, growing at a compound annual growth rate (CAGR) of 11.6% between 2018 and 2022.
D’Souza said, “It is not surprising that India continues to be one of the fastest growing entertainment and media markets globally. However, what is encouraging is how non-linear media is expected to grow on the back of increase in device penetration, lower internet prices, consumer content demand and portability preferences. This will manifest in significant growth in OTT, e-sports and internet advertising.”
The report also mentioned that globally, it will be in the middle of 2019 when the number of smartphone connections will go beyond the number of fixed line connections. In India, this shift happened in 2016 and a lot of changes can be observed because of this. D’Souza explained, “If there are more mobile devices than fixed devices and you are carrying it with you. If you are carrying it with you, you start consuming on it and the time that you get to consume increases. As smartphone connections increase, it pushes up the number of hours available for consumption.”
In the more matured markets, this shift came much before but as D’Souza said, “The problem in those markets is about monetising. Free media, free sharing is very prevalent there.”
Key highlights of the report:
Cinema: Total cinema revenue is expected to rise at a 9.4% CAGR over the forecast period. Average admission prices in India will move up over the forecast period and are set to reach Rs 78 by 2022, up from Rs 55 in 2017 and representing an increase at a 6.9% CAGR. The number of screens in India is also expected to increase to 12,775 screens in 2022, up from 11,672 in 2017 at a 1.8% CAGR. The main area of growth in exhibition is in digital screens as the sector modernises. There are expected to be 5,532 digital screens in 2022, a significant addition to the 2017 figure of 3,524 and representing an increase at a 9.4% CAGR.
OTT (Over-The-Top) Video: Despite problems with piracy, OTT video revenue has grown rapidly in recent years and reached Rs 2,019 crore in 2017. Further strong growth at a 22.6% CAGR will see India move into the top 10 largest global OTT video markets in 2022 with revenue of Rs 5,595 crore. The growing competition among international and regional subscription on demand video (SVOD) platforms is evident with over 70% of revenue in 2017 attributable to subscription services. This trend will grow and by 2022, 79.4% of total market revenue is expected to be from SVOD.
Video gaming: Indian traditional gaming is growing relatively slowly at just a 4.0% CAGR, but the social/casual gaming category will represent 82.2% of all Indian consumer gaming revenue by 2022. The segment is expected to grow by a 55.9% CAGR over the forecast period from Rs 1,645 crore to Rs 14,772 crore by 2022 (surpassing the traditional market in 2018). India was relatively late to the social/casual boom, but over the next five years better connectivity, better telco offerings and a competitive handset market are expected to propel apps and games to the fore.
Internet advertising: Total internet advertising revenue hit Rs 6,513 crore in India in 2017, up a healthy 25.4% on 2016. Over the next five years, total revenue will be more than double to Rs 13,500 crore, driven by strong growth in mobile and paid search internet advertising. Mobile video advertising is the fastest-growing sub-segment of India’s internet advertising market, rising at a 32.8% CAGR to 2022, when revenue will total Rs 2,155 crore.
Drivers of the new ecosystem
Ubiquitous connectivity: The number of high-speed mobile internet connections will increase by 2.2 billion globally by 2022, vastly expanding the market for mobile content consumption at faster speeds. A symbolic tipping point will occur in 2020, when total global data consumption via smartphones overtakes fixed-broadband data consumption.
The mobile consumer: The worldwide explosion in mobile access is seeing the connected mobile device become consumers’ primary means of accessing content and services across virtually all markets. This makes mobile an increasingly important focus for advertisers. And again, a key tipping point underlines this shift: 2018 will be the first year in which global mobile internet advertising revenue will exceed its wired equivalent.
Need for new sources of revenue growth: E&M companies are looking to expand beyond traditional revenue sources, which in some cases are declining. At the same time, telecom companies are targeting entertainment and media content to revitalise their growth. As a result, every player in the ecosystem is racing to develop new revenue streams. Consider that OTT spending will grow at a CAGR of 10.1% through 2022, compared with just 2.3% for broadcast TV advertising.
Value shift to platforms: Social media and technology platforms are outpacing traditional content creators in capturing consumers’ attention and a rising share of their spending, trends that have fuelled the rise of super competitors. Now some traditional content companies are fighting back by developing their own platform-like businesses.
Personalisation: Today’s empowered consumers reject one-size-fits-all content experiences. As a result, it’s vital for companies, ranging from super competitors to fan-focused niche players, to use data analytics and AI to personalise their offerings. And the appeal of the live experience endures. For example, ticket sales for e-sports events will rise at a CAGR of 21.1% through 2022.
Winning – and then retaining – trust is vital
Across all the drivers and trends examined in the outlook, one overarching imperative emerges: the absolute need to earn and sustain the trust of consumers and ecosystem partners. We’re in an era in which trust in many industries is at historically low ebb and regulators are targeting media businesses’ use of data. As a result, a company’s ability to maintain trust is becoming a vital differentiator. This can be especially challenging for entertainment and media companies, because they must demonstrate their trustworthiness across many dimensions, including content, data, monetisation, social impact and the appropriateness of advertising content. When building trust, content and brand form the foundation; starting with delivering on the promise of quality.
Given the vision of the industry’s future presented in the outlook, how can companies position themselves for sustained success?
Christopher Vollmer, Global Advisory Leader for Entertainment and Media, PwC US, said, “To succeed in the future that’s taking shape, companies must revisit every aspect of what they do and how they do it. This means going ‘above and beyond’ in how they envision their business, generate revenues, create and organise their capabilities and build and retain trust. And given the pace and scale of change under way, speed is vital. For many companies, the models, assets, practices and capabilities that support their businesses today will simply not be enough in the future. Standing still is not an option.”