Growth at a CAGR of 15.2% that will double the size of the Media & Entertainment sector in five years; ad spends expected to double by 2017 to Rs 630 billion; Print medium will thrive on cost-cutting and technology; unprecedented rise of regional and new media and much more...
As India took its first steps as an independent nation, Jawahar Lal Nehru delivered his famous ‘tryst with destiny speech’. Today, 65 years later, with the media & entertainment (M&E) industry looking to reach out to a billion-plus Indians, a conclave called ‘A Tryst with Destiny: Engaging a Billion Consumers’ called to attention good tidings in the sector with the release of the FICCI-KPMG Indian Media & Entertainment Industry Report 2013. The report, a reference card for the industry, looks at the future of the M&E industry in the next five years. We list out 10 trends from the report that would determine the roadmap for the M&E industry in India.
1. GOOD TIMES AHEAD – GROWTH AT A CAGR OF 15.2%
The FICCI-KPMG Media & Entertainment 2013 report states that the future looks optimistic as the industry will double in size within the next five years, reaching Rs 1661 billion by 2017, growing at healthy CAGR of 15.2%. According to Jehil Thakkar, Head of Media and Entertainment, KPMG India, “2012, though a challenging year for the M&E industry, was a year in which important foundations for future growth were laid.” However, with the economy slowing down and continued high inflation, forcing the central bank to keep interest rates high, consumer demand is weakening. This coupled with uncertainties in global economy has resulted in advertising spends being cut in the country. Advertising spends in 2012 grew by 9%, (lower than all forecasts) as against 13% in 2011 and 17% in 2010. As per Man Jit Singh, CEO, Multi Screen Media, “This year growth in ad market was muted. Leading players came into focus this year, with their large GRPs and reach.” Analysts, however expect the economic scenario, both in international and domestic markets, to improve in 2013. This in turn could also give the much needed boost to advertising spends. Though advertisers are expected to remain cautious with their ad spends in 2013, ad spends are expected to double by 2017 to Rs 630 billion, up from Rs 327 billion in 2012. News channels for one, are expected to see a huge uptick in advertisement revenues on account of the elections due in 2014.
2. TELEVISION: BETTING ON DIGITIZATION DESPITE DELAYS
The year 2012 was a game-changer for the television industry in India as the long delayed digitization process finally kicked off. Though only two of the four metros saw a near complete shift to digital cable, all eyes are now on Phase II of digitization which covers 38 cities on March 31. However, Phase II is expected to be more challenging due to the logistics and financial commitments required by the Multi System Operators (MSOs). This is expected to delay successful implementation across these cities by up to a year. Despite delays, digitization is seen to be beneficial for all stakeholders involved - greater ability to monetize content, higher transparency, equitable revenue share across the value chain and lower burden on account of carriage fees. Higher revenue stream ensures that broadcasters can then plough the money back to improve the quality of content and provide the consumer more choices in the form of differentiated content. In fact, some of the benefits of digitization can already be seen, as NP Singh, COO, Multi Screen Media says: “Early benefits of cable digitization were seen in the form of some increase in subscription revenue and some decrease in carriage in two major metros. However, real benefits will come in over the next two-three years as other towns get digitized.” Asheesh Chatterjee, Chief Financial Officer, Reliance Broadcast Network adds, “Indian consumers need to pay more for television content. ARPUs need to go up. Monthly ARPUs in developed markets are five to six times that of a single multiplex ticket, while in India that ratio is close to 1. This proves that television is undervalued as a medium by the consumers.”
3. PRINT: LONG TERM GROWTH STORY
Last year proved to be a tough year for the Print industry with advertisers tightening their purse strings on account of the prevailing macroeconomic conditions. Print houses shifted their focus on consolidating their position and launching new editions in core markets instead of venturing into newer markets. Other measures included focusing on the bottomline by managing operating costs. According to Vinay Mittal, Chief Financial Strategist, HT Media, “2012 started on a tough note for the Print industry, including HT Media. With strong headwinds on advertising revenues throughout the year, our focus was on rationalizing costs.” Adds DD Purkayastha, Group CEO, Anand Bazaar Patrika, “The Print industry will have to be innovative to design customized and integrated ad solutions to create value for advertisers, along with continuously tightening the grips on operational costs.” Looking ahead, the industry could adopt a differentiated pricing strategy where prices of established editions in mature markets are hiked while prices in new markets and Tier II & III areas are kept low. This could help the mature editions to lower their dependence on advertising. Says Mohit Jain, Director-Business and Commercial, The Times of India Group, “As advertising spends are being directed towards Tier II and III cities, the industry will witness a trend of existing players launching more local editions to attract retail advertisers. However, publishing houses will have to be pragmatic and balance the economics of launch with the market potential.” With English dailies having a tough year, the growth was mainly driven by regional and vernacular markets. Looking ahead, the growth story for the Print industry looks promising as companies adopt newer technology and implement cost control measures. Sunil Mutreja, Executive Director, Amar Ujala Publications, says, “Improving readership habits among youth in the age group of 15 to 20 and also aligning the presentation of news to meet their requirement is a challenge which Print media needs to address immediately.”
4. RADIO: BUDGET BOOST AND CLIENT INNOVATIONS
The year 2012 was a muted year for the Radio industry as the growth was largely driven by volume improvements as prices stayed stagnant. However, revenues from nonmetros grew faster than metros due to inventory utilization improvement and increased focus on local advertisers. With the key business still under pressure, radio players are looking at innovations to drive listenership and increase engagement with advertisers. Prashant Pandey, CEO, ENIL, says, “Clients are becoming more demanding and seeking advertising solutions rather than plain vanilla advertising. Going forward, as long as the market conditions remain challenging and the core Radio business remains under pressure, the winners will be those who invest in client innovations.” But, the game-changer for the Radio industry is expected to be the Phase III expansion which is likely to take place in FY 2014. The long delay in Phase III implementation has limited the ability of Radio players to reach out to a large chunk of the population who do not live in Tier I and II cities and have no access to private FM. The expansion will also help the industry attract advertisers, especially local, whose spends are now diverted to other mediums. According to Apurva Purohit, CEO, Radio City, “With the advent of Phase III where FM will become available across nearly 300 more cities, its reach will only go up exponentially. As advertisers look beyond the metros and mini metros for growth, the availability of FM in Tier II and III towns will provide a cost effective choice to them to reach out to potential consumers in these cities.” Multiple frequencies in a city and networking content across categories, part of Phase III, is likely to help players rationalize their cost economies. But the high reserve price for some cities, no clarity on migration fees are some of the major concerns for the Radio industry. Higher frequencies would bring in differentiated and niche content, but only allowing broadcast of AIR news acts as a curb for differentiated content.
5. INTEGRATION OF OOH ADVT WITH OTHER MEDIA
Out-of-Home (OOH) makes up approximately 5-6% of the total advertising pie and though many more brands experimented in this space in 2012 and managed to grab eyeballs, the overall economic environment (with ad cuts) meant that the OOH industry grew by only 2.4% (YoY). KPMG estimates that the biggest markets remain Mumbai and Delhi which consume 50-60% of the total budgets. There is a shift to Tier II and III cities as the spends of the top 10-12 markets has reduced from 80% to 60%. The other positive news was the fact that while in 2011, 76% of OOH media consumption was done by four industry sectors, 2012 saw other sectors such as auto, retail, realty and white goods increasing their contribution. While billboards remain the preferred choice, airport modernization and metros have helped the transit exponential business grow rapidly. But, newer channels like bus shelters, LED billboards and street furniture have still not taken off due to lack of infrastructure and security. N Subramanian, Group CFO, Entertainment Network, says, “The transit segment continued to make strides. Digital OOH is paving the way for integration of mobile and outdoor advertising. The holistic development of the medium is attracting new categories of advertisers and augurs well for the future of outdoor advertising.”While OOH enjoys exemption from 12% service tax, the poor macro environment, heavy license fees, permission from various civic agencies and no clarity on regulation curbs the growth of the OOH industry. Looking ahead, the recent announcement of FDI in retail should provide a boost to OOH and integration of OOH advertising with other media formats should help OOH grab a larger share of the advertising pie. Adds Sanjay Pareek, CEO, Percept Out of Home, “The OOH industry will move up the value chain and will no longer be seen as a residual or commodity media. Creative bespoke for Outdoor, planning and strategy will become an important cornerstone and will replace excel planning for outdoor campaigns, as clients will demand more from Outdoor agencies.”
6. NEW MEDIA: CROSSING NEW FRONTIERS
KPMG estimates that with cheaper smartphones and laptops, these devices will account for 67% of all devices by 2017. However, this segment remains under-monetized due to low ad rates and inadequate investment in distribution platforms, which allow consumers to pay for content effectively. With more and more Indians spending more time on their smartphones and laptops, these devices are increasingly being used to access content and as an entertainment device. But, monetization in this space is still heavily dependent on advertising revenues. According to Aakrit Vaish, Managing Director, Flurry India, “India will become the third biggest mobile app market by 2014, but the challenges are distribution, app discovery and payments. Android should own over 60% of the market by then, which will make it even harder to distribute and monetize apps, given the fragmented Android ecosystem.”
Looking ahead, the industry is expected to grow at a whopping rate of 32% (CAGR 2012- 2017), which is the highest rate of growth across all media domains and the Indian digital advertising market is seen to be amongst the fastest growing digital markets in the world. As per Dippak Khurana, CEO and co-founder, VServ.mobi, “Given that mobile media offers unprecedented target reach, intuitive interactivity, personalized engagement and ROI-driven pricing, we are certain that it will bloom as the seventh and most powerful mass media in the years ahead.”
7. REGIONAL IS THE WAY TO GO
Be it Television or Print, the mantra for media players is to explore the local regional space, as this is an area which has shown strong growth. Media players are also eyeing this space due to better opportunities in revenue growth from advertising. According to Subramanyam K, Vice President, National Head, Ad Sales and Marketing, ETV Network, “Regional markets continue to outpace the national market in terms of growth. Despite a slower growth in 2012, some regional markets have shown an impressive upward trend. This is on account of FMCG clients which account for 60% of total spending.” Regional channels’ share of the advertising pie is about 27%, which is equivalent to their viewership with Tamil and Telugu markets cornering 50% of the total regional viewership. Punit Goenka, MD & CEO, ZEEL says, “Regional genres are showing phenomenal growth in terms of viewership. Advertisers are yet to tap into the large potential of retail consumers in these markets and local advertisers would be willing to pay a premium for the audience.”
REGIONAL MARKET SIZE
Advertisement market Size (Rs million)
Tamil - 13,500
Telugu - 9,000
Bangla - 7,000
Kannada - 6,200
Malayalam - 6,600
Marathi - 4,100
8. SHARP SEGMENTATION & TARGETING
For consumers, digitization will ensure segmentation and more targeted content for niche audiences. According to Goenka, “Fragmentation is going to be the order of the day and if we don’t lead the fragmentation, the consumer is going to move away. We have to stop calling ourselves broadcasters, we are now content creators and content aggregators. We are no longer broadcasters as at the end, we have got customized content.” Adds Sudhanshu Vats, Group CEO, Viacom 18 Media, “Moving forward, we will be able to sharply segment and target as your ability to reach the consumer and customize is only going to grow, aided by technology. Digitization is going to make it easier to deliver focused content at lower cost. I am a firm proponent that we are already on the journey of being able to segment and deliver to 1.2 billion Indians.” Digitization has already brought about this segmentation in diverse genres, for example the highly competitive kids genre saw new launches targeting viewers based on age (pre-school, age 4-11, teens, etc) leading to subsegmentation in the genre. Even the music genre has seen segmentation in the form of channels for different genres/specialized forms of music. Uday Shankar, CEO, Star India says, “Post digitization, we see more targeted offerings coming in. For instance, Gujarat, Maharashtra and UP can all be called HSM, but they are all culturally very different in today’s analogue world, they are all served one spectrum of content created in Mumbai.” Even in Radio, players expect new stations to play alternate and niche content targeting various listeners post Phase III.
9. REGULATION AND POLICY SUPPORT
While regulation and policy support are mandatory for any growth, as seen during the digitization process, in some cases excessive regulation has also been seen as a deterrent, as in the case of capped pricing for channels. Viacom 18 Media’s Vats says, “The M&E industry is like a consumer industry, but unfortunately the business model, the revenue models are B2B and not B2C. They are impediments on what you can charge and it’s not marketing and consumers deciding content pricing as we need differentiated pricing for differentiated offering.” Rahul Johri, Senior VP & GM India -Discovery Networks Asia-Pacific adds, “We have a slew of specialized channels which have a limited interest, but I don’t think audiences here will see that because we can’t price them accordingly for the small specialized audiences that watch the channels. So regulatory impediment in pricing cuts both ways in formats.” However, with digitization, Phase III licensing for Radio and 4G rollout still on the anvil, regulation and policy support will play a key role to ensure timely implementation.
10. DEMAND FOR TALENT SET TO GET HIGHER
The M&E industry is an employment generator sector, which is also skill specific and the demand for talent is set to get higher due to a talent crunch across sectors. High growth and new areas require additional skillsets, but the shortage of skilled manpower could prove to be a dampener. According to Star India’s Shankar, “There is a lack of recognition of the scale of the problem and we are complacent as the sector is different. We are convinced that creativity gives license to chaos.” Shankar also highlights the problem that despite phenomenal growth in the sector and content produced in the last decade, there has been no increase in training institutions and there is also a lack of management institutes offering courses in media.
Feedback: simran.sabherwal@exchange4media.com
