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Media Sector Analysis Report 

[Key Points | Financial Year '18 | Prospects | Sector Do's and dont's]

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  • The Indian media and entertainment industry comprise of print, electronic, radio, internet and outdoor segments. With the government aggressively pushing in for digitization of TV, Multi System Cable Operators (MSOs) are expected to lose 15-20% of their subscribers to DTH (direct-to-home) services. Digitization will facilitate increased number of channels and high-quality viewing. India is a fast digitizing market and the consumer shift towards digital services is exhibited through the expansion of digitized households. The digitization process in Phase I, Phase II, Phase III and Phase IV cities is a positive step for the industry.
  • The players in the electronic media can be classified into a three-link chain. First are the studios (including the animation studios), which comprise the hardware part of the industry, the second are the content providers and the third link comprises the distribution trolleys, which include the cable and satellite channels, multiplex theatres, MSOs and the DTH players.
  • In India, the ratio of advertising expenditure to GDP is less than 0.5%. This is substantially lower in comparison to the developed economies as well as other developing economies. Interestingly, Print and TV media contribute over 75% of the advertisement spend in a year. As the Indian economy continues to develop and the media reach increases, the advertising expenditure to GDP ratio is expected to increase over the next 5 years.
  • 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 per cent of India’s gross domestic product.

How to Research the Media Sector (Key Points)

  • Supply
  • Of the more than 70,000 newspapers printed in India, around 90% are published in Hindi and other vernacular languages. There are over 800 private satellite TV channels, permitted by the Information and Broadcasting Ministry.
  • Demand
  • The demand for regional print media is growing at a faster pace than that of English language print media. In the electronic media, the highly-fragmented viewership has led to an increasing preference for niche channels.
  • Barriers to entry
  • In the electronic media, entry barriers are high for broadcasting since it is very capital-intensive. It involves the cost of leasing the transponder, setting up up-linking facilities, setting up pre and post-production facilities. The barriers to entry are far lower for content providers. Besides, broadcasters themselves commission programmes and finance their production. Hence margins are lower. In spite of the high barriers to entry a slew of channels across languages and genres have been launched in the recent past.
  • Bargaining power of suppliers
  • In the print media, it is high for newsprint suppliers. It is medium to low for content providers in the electronic media. Terrestrial broadcasters such as Doordarshan and regional broadcasters such as Sun TV actually commission time slots to content providers.
  • Bargaining power of customers
  • Relatively high in both print and electronic media. The consumer finds a surfeit of players to choose from. Conditional access system (CAS) and DTH services now enable the consumer to choose the channels that he wishes to view; thereby increasing his bargaining power.
  • Competition
  • High in print media, especially in Hindi dailies. The print sector includes listed entities like Jagran Prakashan and HT Media. Regional print media too is seeing increasing competition. Competition is high amongst broadcasters especially for general entertainment channels. The space includes listed entities like Zee TV, TV 18, UTV, NDTV and Sun TV.

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Financial Year '18

  • The Media and Entertainment Industry is a key growth driver for the Indian economy. According to the FICCI-KPMG Report, the sector witnessed another year of all-round growth.
  • Indian media and entertainment (M&E) industry grew at a CAGR of 10.9% from FY17-18; and is expected to grow at a CAGR of 13.1% to touch Rs 2,660.2 billion (US$ 39.7 billion) by FY23 from Rs 1,436 billion (US$ 22.3 billion) in FY18.
  • The industry provides employment to 3.5-4 million people, including both direct and indirect employment in CY 2017. India’s advertising revenue is projected to reach Rs 1,232.7 billion (US$ 18.4 billion) in FY23 from Rs 608.3 billion (US$ 9.4 billion) in FY18.
  • Television grew at 8.5% primarily due to a lackluster year for subscription revenues and speed bumps in advertisement revenue growth primarily due to slower domestic consumption and the Broadcast Association Research Council (BARC) data recalibration. Print revenue grew at 7% as English language newspapers continued to be under stress. However Regional languages sustained their strong growth levels. Films had a disappointing year with mere 3% growth on the back of poor box office performance of Bollywood & Tamil films.
  • Animation and VFX industry in India reached Rs 73.9 billion (US$ 1.2 billion) in FY18 from Rs 62.3 billion (US$ 928.6 million) in FY17, growing at a CAGR of 18.6%.
  • During 2018-2023, the segment is expected to grow at a higher CAGR of 15.5%, largely led by the continued growth in outsourced services and the swelling use of animation and VFX services in the domestic television and film space, respectively.
  • FDI inflows into the Information and Broadcasting sector during April 2000 to June 2018 rose up to US$ 7.2 billion. Demand growth, supply advantages and policy support are the key drivers in attracting FDI.

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  • The Indian Media and Entertainment industry is on an impressive growth path. The industry is expected to grow at a much faster rate than the global average rate.
  • Growth is expected in retail advertisement, on the back of factors such as several players entering the food and beverages segment, e-commerce gaining more popularity in the country, and domestic companies testing out the waters. The rural region is also a potentially profitable target.
  • Apart from the impact of rising incomes, widening of the consumer base will also be aided by expansion of the middle class, increasing urbanisation and changing lifestyles.
  • The entertainment industry will also benefit from continued rise in the propensity to spend among individuals; empirical evidence points to the fact that decreasing dependency ratio leads to higher discretionary spending on entertainment.
  • With the effects of cable digitization yet to show impact, the subscription revenue is expected to grow to RS 1,266 billion by 2020 at a CAGR of 13.2% during 2015-2020.
  • New distribution technologies like DTH, Conditional Access System (CAS) and IPTV, hold the future of the media industry as increasing digitization will radically alter the ways in which consumers receive channels. The mandatory digitization all over India will bring in more subscription revenues for the broadcasters as opposed to under reporting of numbers by cable operators at present. Also, continued growth of regional media and growing strength of the filmed entertainment sector will also boost growth of the media industry.
  • The advent of digital platforms will require industry participants to invest in constant innovation in products and services. Thus, going forward, innovation will be the key to attract more consumers and deliver relevant content and services that are profitable too.

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Related Links for Media Sector
Quarterly Results | Sector Quote | Over The Years

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