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Media Sector Analysis Report 

[Key Points | Financial Year '19 | Prospects | Sector Do's and dont's]

Important: One stock to add to your portfolio asap

  • The Indian Media and Entertainment (M&E) industry is a sunrise sector for the economy and is making high growth strides. Proving its resilience to the world, the Indian M&E industry is on the cusp of a strong phase of growth, backed by rising consumer demand and improving advertising revenues.
  • The industry has been largely driven by increasing digitization and higher internet usage over the last decade. Internet has almost become a mainstream media for entertainment for most of the people.
  • 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 0.4% of India’s gross domestic product.
  • It also distinguished headwinds like the New Tariff Order (NTO) execution vulnerabilities, and early indications of economic slowdown, which have pulled down the overall development.
  • With no major obliging factors, digital is relied upon to be a dominant force going ahead and by FY23, it is probably going to be the second biggest section after TV and pull in the most elevated advertising spend among all media positions. In 2019, as digital behavior evolves, subscription models will have greater role in monetization of digital platforms.

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 '19

  • The media industry in India has reached a size of Rs 1,631 billion (US$ 23.4 billion) in FY19, posting a growth of 13%, clocking a CAGR of 11.5% over the period FY15-19. The M&E business grew 13% in FY19 on the back of quick development in advanced client base and utilization, combined with developing regional demand and monetization.
  • During the year, television increased its reach and engagement with the audience, retaining its position as the default entertainment medium for Indian consumers. During FY19, it reached 780 million viewers on a weekly basis with an average daily time-spent of 226 minutes per individual.
  • The movie industry surpassed all the previous box-office records on the back of strong performances in both domestic and international markets. Radio, in addition to entering new cities, is diversifying into new business offerings like concerts and activations.
  • India’s advertising spends grew by 13% in CY18 and it is expected to grow at a CAGR of 11.4% over the next 3 years.
  • The M&E business is expected to post a CAGR of 13.5% over FY19-24, to reach a size of US$ 43.9 billion in FY24. This will be on the back of a greater focus on monetization of emerging digital business model, strong regional opportunities and favorable regulatory and operating scenarios across traditional business.

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Prospects:

  • The Telecom Regulatory Authority of India (TRAI) is set to approach the Ministry of Information and Broadcasting, Government of India, with a request to fastrack the recommendations on broadcasting, to boost reforms in the broadcasting sector.
  • Advertising revenue in India is expected to grow 15.2% during 2018-2023, to reach US$ 18.4 billion in FY23 from US$ 9.4 billion in FY18. India's advertisement market is projected to grow 10.62% year-on-year to US$ 12.06 billion till 2021. Advertisement spending is projected to grow 15% year-on-year to reach US$ 10.3 billion in 2019.
  • The Government of India has supported Media and Entertainment industry’s growth by taking various initiatives such as digitizing the cable distribution sector to attract greater institutional funding, increasing FDI limit from 74% to 100% in cable and DTH satellite platforms, and granting industry status to the film industry for easy access to institutional finance.
  • With no major obliging factors, digital is relied upon to be a dominant force going ahead and in FY23, it is probably going to be the second biggest section after TV and pull in the most elevated advertising spend among all media positions.
  • The Government of India has agreed to set up the National Centre of Excellence for Animation, Gaming, Visual Effects and Comics industry in Mumbai. The Indian and Canadian Government have signed an audio-visual co-production deal to enable producers from both the countries exchange and explore their culture and creativity, respectively.
  • 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.
  • 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.

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

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