PwC’s India Entertainment & Media Outlook, 2011 lists digitisation and going local as the key growth drivers for the entertainment and media industry in the next five years.
Digitisation and regionalisation are the key industry initiatives that PricewaterhouseCoopers India (PwC) has anticipated for the next five years in their Entertainment & Media Outlook 2011 report for India. The year 2010 did see good consolidation of regional media across sectors; however digitisation did not accelerate as anticipated. According to the report, infrastructure is the biggest challenge in growth of digital trends. “The Indian consumer is yet to reap the benefits of the enhanced digital experience seen in other markets where smart devices and enhanced bandwidth speed prevail. This is an issue highlighting the need for future infrastructure investment and affordability of devices,” said Marcel Fenez, Global Leader, Entertainment & Media practice, PwC.
According to the report, the Indian E&M industry recorded one of the highest growths in the world growing at 11.2 % in 2010 at Rs 646 billion as compared to Rs 580.8 billion in 2009. Contributing to this massive growth is the TV and Print industry segments which grew by 15.4 % and 10.7 % respectively while the negative growth of the film segment for a second year in the low brought the overall growth rate down.
The advertisement industry witnessed a growth of 14.3 % in 2010 as compared to the meagre 0.2 % growth in 2009, says the report. OOH and Print advertising recovered by 12 % and 13.5 % respectively from their negative performance in 2009. Internet advertising, with 28 % growth, remained the fastest-growing and Radio showed a healthy growth of 20 %. Television advertising grew by 14 %.
PwC expects the industry to continue to rely on advertising revenue for some time, at least till digitisation achieves momentum. “The buoyant advertisement spend will have to be supplemented with subscription growth for sustainable profitable growth in E&M revenues. Addressable digitisation in the broadcast space and focus on good content across sectors will go a long way in achieving this objective,” said Timmy S Khandari, Executive Director and National Leader, E&M, PwC India. The report expects the industry to grow by 13.8 % in 2011 and 13.2 % cumulatively over 2011-15 driven broadly by television industry, print and film segments.
Key Highlights
TELEVISION
Regionalisation grew in a big way with 25 more active channels being added in 2010. Approximately 42 new channels were launched in the year. According to the report, the distribution industry formed the largest part of television industry in 2010 and contributed to about 63% of its revenue. It grew by 16.4 % in 2010 aided by high growth rates of the DTH industry and advances in digitisation.
The television advertising industry formed a third of total television industry revenue and 41 % of the total advertising industry. PwC expects the industry to continue to rely on advertising revenue for some time, at least till digitization achieves momentum. Key challenges for the industry remain the slow pace of digitisation; content production costs; ARPUs that reduce payback time and measurement tools.
Increase in print penetration in Tier 2 and Tier 3 cities, supported by growth in literacy and purchasing power, aided growth in revenues of the newspaper industry by 11.7 % to Rs 159.5 billion in 2010 from a largely flat growth in 2009. According to the report, the magazine industry witnessed a marginal growth of 3.1 % in advertising and almost no change in circulation.
Although Hindi dailies continue to rule the roost with the highest growth in readership as compared to 2009, advertising revenues were skewed towards English dailies which grabbed 50% of ad revenues of various newspapers by language in 2010. However, PwC expects regional players to grow at a brisk pace.
FILM
It had a size of Rs 87.5 billion in 2010, after registering a negative growth of 7.9% over Rs 95 billion in 2009. “It was a mixed bag for different segments in the industry which are Box Office- domestic and overseas, Home Video and Ancillary Rights. While all major segments showed negative growth, ancillary revenues driven by cable and satellite rights showed an upward trend,” says the report. Due to enhanced competition in the GEC and film channel space, cost of film syndication has increased. Driven by this trend, the report expects ancillary revenues to grow from Rs 13.5 billion in 2010 to Rs 24 billion in 2015. The report lists key risks and challenges for the industry as shortage of infrastructure, lack of quality content, lack of new releases during cricket season, cannibalisation of theatrical revenues and piracy.
RADIO ADVERTISING
Advertiser interest in radio for Tier 2 and Tier 3 towns picked up in 2010, with some of these markets showing growth rates of 30% and more. The industry saw a growth of 20% in 2010 at Rs 10.8 billion. Radio, which still contributes only 4.4 % of the total advertising industry, is expected to steady at around 5.5% by 2015 by PwC. Key challenging areas for the industry remain lack of measurement and research, e-auction of phase III stations, differentiation of content and channel offerings and competition for talent.
MUSIC
The mobile VAS segment which grew by 109.5 % was the driving force behind the music industry’s growth of 25.7 % at INR 9.5 billion in 2010. PwC expects this segment is expected to be INR 15.5 billion in 2015 growing at a CAGR of 28.6%. Launch of 3G services, internet music hasn’t taken off and PwC does not expect this segment to show any major growth unless new means of content monetization are innovated. It is also not very optimistic about physical sales and estimates it to be a mere seven % in 2015, de-growing at a CAGR of 15.8%. Piracy continues to haunt the segment with 90 to 95 % of total music industry sales being illegal.
INTERNET ADVERTISING
The size of this industry was Rs 7.7 billion in 2010, registering a growth of 28.3% over Rs 6 billion in 2009. “Online ads have evolved from a Cost Per Impression (CPI) or cost per mille -1,000 impressions (CPM) to cost per click (CPC) to cost per acquisition (CPA). Advertisers such as BFSI, auto and travel are gradually moving towards CPA advertising,” says the report. Advertisements on social media showed a growth of 54 % in 2010-11. It estimates the industry to grow from Rs 7.7 billion in 2010 to Rs 24 billion in 2015, showing a CAGR of 25.5 % over the next five years.
OOH
Digital billboards, upgraded street furniture and improvements in railway networks are enabling new advertising platforms available to the OOH industry. The OOH market in India was Rs 14 billion in 2010 as compared to Rs 12.5 billion in 2009, showing a growth of 12% over the previous year with Telecom, BFSI, E&M and FMCG being among the top advertisers for 2010. The industry continues to be crippled by lack of the right measurement mechanism and its highly unorganised nature. PwC expects infrastructure growth supporting growth of OOH in Tier 2 and Tier 3 cities.
ANIMATION, GAMING AND VISUAL EFFECTS (VFX)
The Indian animation and gaming industry marked a positive growth of 31.4% from Rs 23.8 billion in 2009 with gaming registering a growth of 56.2 % and animation 24.3 %. The growth in animation and VFX was on the back of growth in the global animation industry and the subsequent work outsourced to Indian firms. However, many Indian animation movies failed to meet viewer expectations. According to the report, TV channels are driving demand for animation content.
Growth of gaming industry was driven by mobile and online gaming with social networking being a boon for the industry. PwC expects console and mobile gaming to reach new levels. However, it fears high 3G pricing will mean that it will not be a mass public tool.
LOOKING FORWARD
The report highlights three industry-wide dynamics as the route to success in this emerging collaborative digital environment – digital, demand and data. It urges industry participants to focus on the empowered customer, involved advertiser and business organisation by transferring into collaborative digital enterprise in order to succeed.
‘Growth depends on infrastructure’
From the report we see, television is projected to form 50% of the entire industry by 2015 and print 24%. How to do you see the ratio of TV and print advertising shifting in this space?
TV advertising is going to gain. Today, print is the largest receiver in the advertisement space. It gets around 46% and 41% comes to TV. The ratio could be more like 43%-43%. We can see part of that advertising going to TV. So print is on the losing streak as TV gains.
On one hand we see slow proliferation of change due to lack of digital infrastructure, and on the other, consumer behaviour is at par with the rest of the world. What influence will this have on growth of the digital industry?
The way things are in India, it is a bit different from the rest of the world. In India, growth is there but it is too small mainly because we don’t have access. Whether it’s wireless or wiredaccess, we need access to the digital and that has been lacking for some time. Unless that improves, we won’t get too much growth. Having said that, there would be a few game-changing areas, since consumer preference has already shifted to digital. If access can be made available through broadband or some other means, we do see a possibility of people taking to the digital media. Another fact that is true and very important for India is affordability. It not only has to be available, but affordable too. So, both of these going together will make a difference. At present, the way the industry is structured, we don’t see much of that happening but it can be different.
You are forecasting maximum growth figures for the industry in 2011, what are the reasons?
When you look at the period going forward, there is a certain time when the industry grows and as it becomes substantially bigger, the growth rate comes down, unless we see something totally different. These are just forecasts and traditionally how a forecast is built is on the ground factors today, next two years, how they plan to move forward and so on. So some sectors may see a little bit of a decline. But the decline is not because these sectors are not growing. It may be because the base is growing bigger, so the percentage of growth is becoming less.
Even for radio you project a 25% and a 22.5% growth in the next two yrs. So what factors will decline its growth after that?
Growth will come very fast once the Phase III auctions happen. It will be substantial in the first two years and then slow down over a period of time. By the time they start taking shape, start expanding... the next phase of growth will be a few years hence.
Again, if you see internet advertising growing by 29.9 per cent in 2011, why do you think the growth will come down by 4% in 2012?
It should be growing faster... but the thing is we cannot predict the growth of infrastructure. If broadband wireless happens and other infrastructure is put in place, growth should be much faster. But at this point, we cannot say that it will happen and that it will be affordable too. Clearly, a number of questions still need answers.
What factors will lead to growth in OOH in the next five years?
The biggest factor is that advertisement spend has come back quite substantially. If the ad spend sustains itself and if OOH takes into account the measurement system, and can convince clients that the systems are right and can provide benefit, this area should go up. Secondly, the government is trying to open up many avenues for OOH like street furniture, etc., that will provide great opportunity. New airports and facilities are coming up, even railway stations... that provide a huge opportunity for OOH players to expand themselves. Also, it allows them to go digital... no reason why India should not go substantially digital like China and other countries. So there can be high growth in OOH.
