FICCI Frames: Media industry to touch Rs 1.05 trillion in 2013

Televisionpoint.com Correspondent | Mumbai
The media and entertainment growth story in India is not over. The business sector, which grew 12.3 per cent over 2007 to Rs 58,400 crore in 2008, will grow 7 per cent in 2009, and in 2010, it will grow 10 per cent, according to a report by KPMG and FICCI, which was released at the annual FICCI Frames conference in Mumbai.

According to the report, the rate of expansion will accelerate over the next five years to 2013 by which time the business will be worth Rs 1.05 trillion. That translates into a compounded average growth rate of 12.5 per cent over the five years. This rate of expansion, is slower than the 15 per cent CAGR at which the business grew in the five years to 2008.

The report's definition of media and entertainment encompasses television, print media, OOH, radio, films, music, animation and gaming.

"India is one of the few countries where economic growth will be led by domestic consumption. With a low advertising spend to-GDP (gross domestic product) ratio of 0.47 per cent, a growing consumer class and middle class, young population, low media penetration and increasing discretionary spending, India continues to be an attractive market for media and entertainment." Amit Mitra, secretary general, FICCI, said.

"Media companies are under pressure to change, innovate and re-examine their existing business models. Players need to draw upon new capabilities to survive in this environment," said Rajesh Jain, head, information, communication and entertainment, KPMG India.

"Newspaper and television companies will work towards increase revenues from subscription by moving from an advertising-led business model to a subscription-led business," says Farokh Balsara, partner and head, media and entertainment, Ernst and Young India.

The economic slowdown has also necessitated media companies in India to innovate to succeed in troubled times. "They are under pressure to change, innovate and re-examine their existing business models. Players need to draw upon new capabilities to survive in this environment," said Jain.

The report cites the Indian Premiere League (IPL) as a bright example of innovation and suggests that sports marketing is expected to grow rapidly as broadcasters, encouraged by the success of IPL, will start looking at selling cricket and other sports entertainment packages very aggressively.

Television
The television industry is estimated to have reached a size of Rs 241 billion, a growth of 14.2 per cent over 2007. The industry is projected to grow at the rate of 14.5 per cent over 2009-13 and reach a size of Rs 473 billion.

Some of the growth drivers for the sector will include rapid growth in the number of digitised households, steady increase in average revenue per user (ARPU) realised through digital distribution platforms, growth in the number of channels, especially in niche and regional categories and growth in the number of TV and C&S households.

To increase addressability and reduce leakages, the report recommends pushing for government regulations for mandatory digitisation of all TV distribution; development of alternate audience/viewership measurement systems; and rationalisation of content production costs through discussions with stakeholders at all levels -- actors/technical staff, production houses and broadcasters.

Print Media
The Indian print media industry is estimated to have grown by 7.6 per cent in 2008, reaching around Rs 172.6 billion in size. The industry is projected to grow at a CAGR of 9 per cent over the next five years and reach around Rs 266 billion in size by 2013.

Growth in this industry is achievable through sustained growth in advertisement revenues, due to increased advertising spends from emerging sectors, such as education, organised retail and telecom; improving literacy levels in the country; optimisation of cover prices, leading to improved penetration and growth in sales volume; and more launches in the niche segment, such as newspaper supplements and specialty magazines.

The report says that the industry needs to invest in quality improvements, especially in regional media, to attract advertisers; consider collective negotiations and bulk purchase of newsprint; constitute forums to encourage and promote regular reading habits among youth; adopt innovative practices, such as trading media space in publication platforms in return for equity; and improve the ability to attract and retain talent.

Out of Home (OOH)
OOH media has grown at a CAGR of 17.3 per cent over the past the years, and is estimated to have reached Rs 16 billion in size in 2008, a growth of 14 per cent over 2007. The sector's performance was affected in the second half of the year, owing to the overall economic slowdown. It is projected to grow at a compounded rate of 12.8 per cent over the next five years and reach a size of around Rs 29.3 billion by 2013.

Currently, the growth is centred largely in Tier 1 towns, with metros accounting for more than half of the total OOH market. Sectors spending the most on this medium include telecom, media and entertainment and financial services companies.

One of the biggest challenges for the sector is the lack of a central regulator governing OOH media. Rules and regulations vary from state to state, which inhibits standardisation across locations and leads to unregulated growth. Further, the ongoing liquidity crunch has forced many real estate developers to go slow on construction activities, thus affecting the supply of retail space. This is likely to affect the spread of ambient media.

Radio
Radio ad spends account for about 4 per cent of the total advertising spends in India, having grown from 2 per cent in 2004. Consequently, the radio industry is estimated to have grown at an impressive CAGR of 19.7 per cent over 2006-08. It is estimated to have reached a size of Rs 8.4 billion by the end of 2008, a growth rate of 13.5 per cent over the previous year. It is expected to grow at a CAGR of 14.2 per cent over the next five years and reach a size of Rs 16.3 billion by 2013.

Increase in the number of radio stations – around 700 new licenses are expected to be issued to private FM stations in Phase 3; expected regulatory reforms that are likely to improve profitability and stimulate foreign investments; the emergence of robust audience measurement tools that could further catalyse growth in radio ad spends; and growth in locally targeted advertising on radio are some of the growth drivers for the industry.

Filmed Entertainment
The filmed entertainment sector is estimated to have grown at a CAGR of 17.7 per cent in the past three years. The industry has clocked revenues of around Rs 109.3 billion in 2008, a growth of 13.4 per cent over 2007. Over the next five years, the industry is projected to grow at a CAGR of 9.1 per cent and reach Rs 168.6 billion by 2013.

Growth drivers for the sector will include expansion of multiplex screens, resulting in better realizations; increase in the number of digital screens, facilitating wider film prints releases; enhanced penetration of home video segment, primarily in the sell through segment; increase in the number of TV channels fueling the demand for film content, and hence, resulting in higher C&S acquisition costs; and improving collections from the overseas markets.

Going forward, the sector should focus on improving consumer connect by investing in new formats and content; more widespread distribution of home video – for instance, at grocery stores, to facilitate easy access; coordinated and proactive action to tackle piracy; promotion of and experimentation with new talent; and improvements in organisational ability to attract and retain talent.

Music
The size of the Indian music industry was estimated at around Rs 7.3 billion in 2008, down from Rs 8.3 billion in 2005, implying a reverse growth of 4.8 per cent during the period. Overall, the music industry is expected to grow at a CAGR of 8 per cent over 2009-13 to reach Rs 10.7 billion.

One of the primary reasons for this has been the erosion of sales of physical formats, a trend which is expected to continue well into the future. Physical formats, such as audio cassettes and compact discs, which accounted for approximately 87 per cent of industry revenues in 2005, accounted for less than 60 per cent in 2008.

Going forward, physical revenues are expected to decline at a CAGR of 9 per cent between 2008 and 2013. While the actual de-growth of formats such as audio cassettes is expected to be much higher, this is likely to be partially offset by initiatives taken by some leading music companies, such as Sony BMG, T-Series and Sa Re Ga Ma, to release MP3 music on compact discs at price points similar to that of the ubiquitous audio cassette.

Animation
At an estimated size of Rs 17.4 billion in 2008, the Indian animation industry is miniscule, as compared to the global animation industry, which is estimated to have revenues in excess of Rs 1,530 billion by 2010.

However, the Indian animation industry has been growing rapidly, at an estimated CAGR of 20.1 per cent in 2006-08. It is estimated to reach a size of about Rs 39 billion by 2013. Among the different segments of the animation industry, the animation production services segment is estimated to grow the fastest, with a CAGR of 17.8 per cent in 2009-13.

Gaming
Console gaming is the largest money churner in the global market and is gaining prominence in India too. In 2008, the Indian console gaming segment registered total revenues of Rs 4.1 billion, which is expected to go up to Rs 9.4 billion in 2013.

Plagued by a number of issues, such as content discovery and revenue leakages, the Indian mobile gaming segment has not lived up to the potential. It is estimated at Rs 1.4 billion in 2008 in terms of end user revenues.

The PC gaming market has, however, grown to Rs 978.6 million and is expected to grow at a CAGR of over 36 per cent through 2013. The primary growth drivers for PC games in India are the growing broadband subscriber base; multifunctional nature of PCs; and the availability and price points of PC game titles. Overall, the gaming industry is expected to grow at a CAGR of 33 per cent over 2009-13 to reach Rs 27.4 billion.