As domestic flights resume operations and e-commerce portals declare that they will deliver non-essential goods, as some offices and facilities cautiously reopen with the relaxations allowed in Lockdown 4.0, we are set to witness some permanent changes, not only in the way our cities operate, look and feel, but in overall consumer behaviour and media consumption habits in the post COVID-19 world. As our battered economy prepares to do business after two months of COVID-19 lockdown-induced slumber, how do we expect the economy-dependent Media & Entertainment industry to crawl back to growth? What steps can the industry take in this direction?
According to Goldman Sachs, advertising revenue, which correlates strongly with economic growth, will take a hit as India’s gross domestic product (GDP) growth is expected to contract by 5% for this fiscal, owing to poor economic data released in March and April as well as the extended lockdown driven by the pandemic. Weak economic conditions had kept advertisement revenue muted even last fiscal. According to CRISIL Ratings, the ongoing economic slowdown, made worse by the COVID-19 pandemic, is set to cull the Indian media and entertainment industry’s revenue by 16% – or Rs 25,000 crore – to Rs 1.3 lakh crore this fiscal. Advertisement (ad) revenue, which accounts for ~45% of the pie, will see a sharper cut of 18%, while subscription revenue, which accounts for ~55%, will be relatively resilient with a likely decline of 14%. “Sans digital, the overall decline in traditional segments is likely to be ~25%,” says Sachin Gupta, Senior Director, CRISIL Ratings in the note.
A forecast report by Media Partners Asia (MPA) estimates the industry to contract by 24% this year. “Total advertising spends, across all mediums, will contract by 24% this year as widespread declines in demand compel advertisers to recalibrate advertising budgets. 2020’s “stay-at-home” economy will severely impact spends on Cinema, Radio and Outdoor mediums, expected to decline by 30-45%,” says Mihir Shah, Vice President, India, Media Partners Asia.
There is pent-up demand across all sectors, essential and non-essential. Once consumers are back with demand, so will advertisers come back with media spends. However, companies are likely to conserve cash and utilize it to strengthen their core business, supply chain and employee salaries. “As the economy starts to recover, some advertising will come back, but advertisers are going to be very careful with their spends and I think budgets will be significantly lower next year. Organisations will divert cash flows to operations, salaries and preserving core parts of the business. There will be some spending on brands to keep the brands alive and visible, but all the fat around advertising budgets will be cut,” says Jehil Thakkar, Partner and Head, Media and Entertainment, Deloitte India.
So what can media companies do and pivot themselves to walk the path of growth? “In order to get growth back, media companies will have to take the following steps: re-calibrate regional advertising packages to reflect unlocking of the country; build a subscription revenue model for long term stability; build direct to customer relationships as advertisers will want data to ensure that their advertising money is reaching the right audience and lastly start producing fresh content adhering to safety norms,” says Ashish Pherwani, Partner- Media and Entertainment, EY India.
A NEW PLATFORM FOR VIEWERS, ADVERTISERS
Advertising spends are largely dependent on easing of the lockdown restriction and both demand and supply getting back to normal. Content creation is critical for the revival of the industry. What is really required for the industry is a platform where brands and consumers come together. “Big sporting platforms like the Indian Premier League (IPL) and Olympics have been pushed out. So the need of the hour is to create an alternative platform, whether it is Bollywood or Cricket or both together, which will be attractive for both consumers and advertisers,” says Rohit Ohri, FCB Ulka’s Chairman & CEO. For example, ZEE recently created a 25-hour live music marathon across 10 States with celebrities and music stalwarts, giving brands a platform. According to Ohri, brands that don’t lose their voice in times of crisis actually are brands that emerge much stronger on the other side of the crisis. This has been noticed across different categories and multiple brands.
“Consumer behaviour is changing in a big way and from media and creative agencies’ perspective, we need to partner with clients on their transformation journeys including new supply chain management or customer life-cycle journeys, amongst others. We are working with them as their partners on setting new business, marketing goals, engagement ideas and planning future communications. Digital adoption is growing quite fast and that is where major marketing initiatives are being focused today,” says Anand Bhadkamkar, CEO, Dentsu Aegis Network India.
USE OF TECHNOLOGY ASSUMES CENTRE-STAGE
While the setbacks are visible and expected, the industry will need to treat this adversity as an opportunity to revive and expand. The key will be to work extensively on accelerating growth by enhancing the use of technology and digitization.
“Once the lockdown ends, the entertainment world that will emerge will be very different from the one we see today. To create value in this new normal, organisations need to start preparing today, and the most important aspect of this will be the integration of technology in day-to-day functioning of companies. Tools such as remote working and collaboration, the efficient use of cloud and harnessing technologies such as AI and ML aren’t just going to be paper concepts, but essentials to operate in the new world,” explains Girish Menon, Partner and Head - Media and Entertainment, KPMG, India.
For example, Mathrubhumi is experimenting with AI journalism, templates, multi-media reporters, content analytics, stringer platforms, etc. “We are re-thinking to create-curate our news mix and streamlining current operations by divesting non-core assets,” says M V Shreyams Kumar, Joint Managing Director, Mathrubhumi Group. “Another focus is the role of technology in helping marketing teams cut costs and increasing efficiencies in the ad sales process and balancing budget allocations between marketing and editorial. A standalone approach for either Print or other mediums such as Radio, Television, Digital is not a viable option going forward; the need of the hour is to offer integrated solutions to potential new age advertisers,” he adds.
GEO-TARGETING WILL COME TO THE RESCUE
From an advertiser point of view, it will no longer be a mass national reach for now, but focus on reaching the green zones which is where local media will be much more important. For example, if Surat city has opened up, but Ahmedabad is still shut down, then an advertiser would want to start increasing spends to target people in Surat, but not spend that much in Ahmedabad. The ability of geo-targeting becomes very important in the current situation.
STRUCTURAL SHIFTS IN BUSINESS MODEL
“When people are conditioned to consume certain things in a new way for a prolonged period, it leads to structural shifts in consumer habits. With the exception of Digital and Television, advertising revenues on other mediums will take more than 24 months to come back to their 2019 levels. Recovery in traditional mediums like Radio and Print will be far more prolonged. Companies here will have to explore venturing into new avenues for future growth,” says Shah of Media Partners Asia.
Digital presence of Print publications has now become more critical and could translate into greater monetisation opportunities; for example, many publications are putting their papers behind a paywall to monetise content. FM Radio players are making themselves available on online music streaming platforms to sustain listernership. For example, Radio Mirchi is making its stations available on Gaana, Alexa and PDF tuner while Big FM and Radio City collaborated with Spotify for content partnership.
OTT players have been offering extended free periods to drive subscription pick-up through habit formation. Even production houses have skipped the theatrical window run for a few Indian movies and are releasing them directly on OTT platforms. For example, Amazon Prime Video announced that it has acquired global streaming rights for seven upcoming Indian movies in Hindi, Tamil, Telugu, Malayalam, Kannada, on its platform between May and August. It includes Gulabo Sitabo, Ponmagal Vandhaal, Penguin, Sufiyum Sujathayum, Law and French Biryani. Netflix announced premiering Anurag Kashyap’s directorial Choked: Paisa Bolta Hai while ZEE5 India premiered Nawazuddin Siddiqui-Anurag Kashyap starrer Ghoomketu on May 22.
OTT operators are deliberating on initiating the pay-per-view (PPV) model, but it hasn’t seen much success in India so far.
MOVE TO CONTENT PRODUCTION SOON
As we move towards normalcy, the companies that are able to create value resulting in shorter lead times on content creation and efficient distribution, will potentially recover faster than others. As TV and OTT consumption hits the roof, there is also a huge demand for fresh content; so whatever production houses churn out new content will get lapped up pretty quickly.
ROAD TO RECOVERY
Television, which saw a huge surge of viewership in the lockdown period, has been able to monetize only about 15-20% of its ad inventory. Revenues of broadcast companies have gone down by 50-70%, and ad rates have taken a massive hit. However, Navin Khemka, CEO, MediaCom South Asia feels ad prices will come back to normal levels post COVID-19. “In fact, in some global markets, ad prices have gone up due to high demand of inventory as all categories have come back on media to kick-start their business demand,” he explains.
However, 60% of TV’s ad inventory in India comes from FMCG players and other Digital platforms which remain relatively more resilient. The recovery in Television will be seen when fresh programming starts to come in, particularly with the come-back of live sports. According to the MPA forecast, 2021 will see a sharp recovery for Television, with ad spends growing by 22%.
“Moving forward, ad revenues will peak as greater eyeballs are attracted, considering TV viewership has touched an unprecedented high. In the post-COVID period, categories which are generally high-spenders on news channels such as durables, automobiles, telecom, retail, education, tourism, and entertainment will make a noticeable come-back, with an aim to revive their brands, that had to cut back due to the existing situation,” says Avinash Pandey, CEO, ABP News Network.
The lockdown has adversely impacted circulation of newspapers and magazines. Moreover, major Print media advertiser categories like Real Estate and Automobile are likely to remain weak, pulling down Print media AdEx by 33%, according to the Media Partners Asia forecast.
However, Print companies feel they are poised to get off the block faster once the economic activity opens up. “The print medium is in a slightly advantageous position as far as recovery is concerned. There is huge pent-up demand from the readers themselves and a significant part of these readers are reading our news websites more as they are wary of fake news. Secondly, as and when we get back to normalcy, there would be a need for brands to build opinion and create impact as they have been absent for over two months. And Print is always better poised for that. Thirdly, recovery is likely to happen from places where there is more economic activity, which are urban and semi-urban areas, and that is where Print has the maximum impact,” says Partha Sinha, President, Response, BCCL.
Meanwhile, Shailesh Gupta, Director, Jagran Prakashan Limited, feels Tier II and Tier III markets would recover faster than the metros, and that would help push growth across their markets. “The ad prices will remain muted for some time, and so would the marketing spends. This would be true for several sectors. However, there are some sectors that will show a quicker recovery. The demand for personal mobility, hygiene products, and some FMCG products is likely to be high, and these will also probably be the first few sectors to recover. The travel, hospitality and entertainment sectors might take a while to show recovery. So, the effect is going to be dependent on how the particular sector revives. However, most importantly, much will depend on consumer confidence. Already, we’re seeing a massive financial stimulus package being announced by the Government. There’s a lot being done for the MSME sectors, the Agriculture sector and the migrant labour. An uptick in consumer confidence will help boost demand and hasten the recovery. This would largely be true for all media rather than just Print,” he says.
In the past couple of months, most of the industry’s marketing spends have been moving to Digital. Most of these spends are allocated towards performance-based advertising while brand spends have declined. According to MPA, overall digital AdEx will be down by 9.8%, but will bounce back next year with a sharp 29% growth. If we specifically look at the online video market, it will grow back to 43% in 2021 from a decline of 4% in 2020.
KEY STEPS TO GET GROWTH BACK
- Streamline current operations by divesting non-core assets
- Value creation with the use technology for operations, content creation and increasing efficiencies
- Create new platforms for viewers and advertisers
- Recalibrate advertising packages to reflect stages of unlocking of the country
- Develop a sustainable subscription model
- Value realisation by shorter lead times on content creation and efficient distribution
- To know consumers and acquire data, use Artificial Intelligence and Machine Learning across processes
- Increase use of technology by bringing in templates, multi-media reportage, content analytics
- Start fresh content production adhering to safety norms
IN STORE FOR THE M&E SECTOR...
- Ad-spend pressures to linger on the back of weak economy and lower domestic consumption
- At-home entertainment options (digital, TV, gaming) to see an upswing as ‘lockdown behaviour’ results in habit formation
- Longer time lag to return to normalcy for weaker economic sections of the populations
- Outdoor entertainment (films, events, theme parks) particularly in COVID-19 hotspots to see lingering risk aversion even in the medium term. ‘Pent-up’ demand behaviour among some sections of population may provide some respite
- Digital consumption to see rapid incremental growth with India’s ‘digital billion’ trajectory likely to accelerate materially
- Delayed expansion plans though digital businesses aggressively target market opportunity
‘High spenders on news channels will be back’
Responsible reporting, constant innovation and a viewer-driven approach will be essential in augmenting growth and transitioning to the new normal in the post-COVID-19 era. In the post-COVID period, categories which are generally high spenders on news channels will make a noticeable come-back, with an aim to revive their brands, that had to cut back due to the existing situation.
CEO, ABP News Network
‘Q3 will see growth in advertising revenue’
Growth in advertising revenue will be mostly experienced in Q3, where sectors like FMCG, e-commerce, financial services will show improvement. Also, with the festive season coming up, brands will certainly increase their advertising budgets to attract consumers.
MV Shreyams Kumar
Joint Managing Director, Mathrubhumi Group
‘Tier II, Tier III markets will recover fast, push growth’
A large part of the Tier II and Tier III markets would recover faster than the metros, and that would help push growth across our markets. At the industry level, we’ve come together and made a representation to the Government for the total removal of 5% customs duty on newsprint, two-year tax holiday for newspaper establishments, 50% increase in advertisement rate of Bureau of Outreach and Communication (BOC) and 200% increase in budget spend for Print media and immediate settlement of payment towards all outstanding bills of advertising from BOC. Alongside, there are several cost optimization measures that most newspapers have been implementing.
Director, Jagran Prakashan Limited
‘Print needs to engage more with readers’
Print has increased its credibility immensely during the COVID-19 period. Post COVID, they need to engage more with readers and increase readership. Moreover, it would provide opportunity for increasing cover price, which is long overdue.
D D Purkayastha
MD & CEO, ABP Pvt. Ltd
‘Print is in a slightly advantageous position’
The Print medium is in a slightly advantageous position. There is huge pent-up demand from readers and a significant part of these readers are reading our news websites more as they are wary of fake news. Secondly, brands will need to build opinion and create impact as they have been absent for over two months. Thirdly, recovery is likely to happen from urban and semi urban areas, and that is where Print has the maximum impact.
President, Response, BCCL
‘Digital adoption is growing quite fast’
Consumer behaviour is changing in a big way. We are working with clients as their partners on setting new business and marketing goals, engagement ideas and planning future communications. Digital adoption is growing quite fast and that is where major marketing initiatives are being focused today.
CEO, Dentsu Aegis Network India
‘Create an alternative platform for advertisers’
Big sporting platforms like the IPL and Olympics have been pushed out. So the need of the hour is to create an alternative platform -whether it is Bollywood or cricket or both together - which will be attractive for both consumers and advertisers.
Chairman and CEO, FCB Ulka
‘By Sept 2020, I expect a 100% normal scenario’
The current quarter has been very tough. We have seen the AdEx drop by almost 80% in the month of April 2020, as compared to 2019. If all goes well, the Media industry should be back to 2019 levels from July 2020 and the content sector by end of August 2020.
From September 2020, we should see a 100% normal scenario across the M&E industry.
CEO, MediaCom South Asia
‘Create, distribute content fast to recover fast’
In-home consumption, especially Digital and TV, has been on the rise during the lockdown. Companies who are able to put in place aspects on value creation, resulting in shorter lead times on content creation and efficient distribution, will potentially recover faster than others, and realise value from the monetization that is likely to bounce back.
Partner and Head-Media and Entertainment, KPMG, India
‘Venture into new avenues for growth’
When people are conditioned to consume certain things in a new way for a prolonged period, it leads to structural shifts in consumer habits. With the exception of Digital and Television, advertising revenues on other mediums will take more than 24 months to recover back to their 2019 levels. Recovery in traditional mediums like Radio and Print will be far more prolonged. Companies will have to explore venturing into new avenues for future growth.
Vice President, India, Media Partners Asia
‘All the fat around ad budgets will be cut’
Some advertising will come back, but advertisers are going to be very careful with their spends and budgets will be significantly lower next year. Organisations will divert cash flows to operations, salaries and preserving core parts of the business. There will be some spending on brands to keep the brands alive and visible, but all the fat around advertising budgets will be cut.
Partner and Head, Media & Entertainment, Deloitte India
‘Re-calibrate regional advertising packages’
In order to get growth back, media companies will have to take the following steps: re-calibrate regional advertising packages to reflect unlocking of the country; build a subscription revenue model for long term stability; build direct to customer relationships as advertisers will want data to ensure that their advertising money is reaching the right audience and lastly start producing fresh content adhering to safety norms.
Partner-Media and Entertainment, EY India