India’s M&E industry: Added sparkle

• HDFC
• 01 Sep 2018
• Knowledge Centre

HDFC, Tester

The Indian Media and Entertainment (M&E) industry is a sunrise sector in the Indian economy. Proving its resilience, the industry is on the cusp of a strong phase of growth, backed by rising consumer demand and improving advertising revenues.

 

According to a FICCI-EY report, the Indian M&E sector touched ~ Rs 1.5 lakh crore in 2017, a growth of around 13% over 2016. With its current trajectory, it is expected to cross Rs 2 lakh crore by 2020, at a CAGR of 11.6%. The digital segment witnessed growth, demonstrating that advertising budgets are in line with the changing content consumption patterns.

 

The report states that the M&E sector continues to grow at a rate faster than that of the country’s GDP led by stable economic growth and changing demographics.

 

Encouraging Prospects

 

Though subscription growth was higher than advertising growth in 2017, the latter is expected to continue to grow till 2020, led by digital advertising. The report makes an educated guess that ~ 0.15 crore consumers in India today opt for the digital platform, over traditional media platforms.

 

Mr. Farokh Balsara, Partner and M&E Leader, EY India, speaks about the thrust of the Indian M&E industry on the digital segment. He says, “The Indian M&E sector reached Rs 1.5 lakh crore in 2017, led by digital. With digital revenues expected to cross Rs 22,000 crore by 2020, has the Indian M&E industry reached its tipping point? We now need to re-imagine the future of the sector.”

 

It is expected that this customer base will to grow to ~0.4 crore by 2020, led by digital subscription revenues of ~ Rs 2,000 crore. Going forward micropayments, enabled through the Unified Payment Interface (UPI) and Bharat Interface for Money (BHIM) platforms, will further accelerate subscription revenues for entertainment content. These platforms have been developed by the National Payments Corporation of India.

 

These facts are reflected in the industry’s numbers.

 

• In 2017, digital media grew 29.4% (27.8% net of the impact of GST) on the back of a 28.8% growth in advertising and 50% in subscriptions.
• Subscriptions, which were just 3.3% of total digital revenues in 2016, are expected to grow to 9% by 2020. 25 crore people viewed videos online in 2017. This figure is expected to double to 50 crore by 2020. 
• Around 40% of total mobile traffic came from the consumption of video services in 2015, and this figure is expected to touch 72% by 2020.

 

The FICCI-EY report reveals that digital media has grown noticeably over the last few years, and continues to lead in the advertising space. Subscription revenues are emerging, and are expected to make their presence felt by 2020.

 

Print media accounts for the second-largest share of the Indian M&E sector, growing at 3% to reach Rs 30,300 crore in 2017. Print media is estimated to grow at an overall CAGR of ~7% till 2020.

 

M&E Deals

 

A relatively new trend in deal activity is now visible. Deals within emerging segments like gaming and digital are gaining momentum, while those in traditional media segments are decreasing. The slowdown can be partially attributed to challenges faced by the advertising segment owing to demonetization and GST.

 

Overall, the number of transactions in the M&E sector decreased from 56 deals in 2016 to 40 in 2017. Further, the total deal value was also lower at US$ 1,261 mn in 2017, as compared to US$ 2,863 mn in 2016.

 

The Indian Media and Entertainment industry is expected to touch US$ 34.8 bn by 2021, up from US$ 20 bn in 2016. It will grow at a CAGR of 11.8% between 2016-2021, said a report titled ‘Digital Inflection Point: Indian Media and Entertainment’, published by consulting firm EY. The Indian advertising industry is projected to be the second fastest-growing advertising market in Asia, after China. At present, advertising revenue accounts for around 0.38% of India’s gross domestic product.

 

Government Support

 

The Government has supported the M&E industry in the country by taking various measures. The measures include:

 

• Digitizing the cable distribution sector to attract greater institutional funding, 
• Increasing the FDI limit from 74% to 100% in the cable and DTH satellite platforms, and 
• Granting industry status to the film industry for easy access to institutional finance.