India can cater to international demand by creating an end-to-end production ecosystem. Production ecosystem will encourage foreign producers to create content in India, make India a major content exporter, boost ancillary industries; and hence, enable Indian content to reach audiences across the globe.
India continues its unique multimodal growth story, with digital video being the fastest growing media platform over the last 2 years. Not surprisingly, this trend is expected to continue for the foreseeable future led by the ever-increasing smartphone and data penetration on the demand side and improving consumer experience with high quality and wide variety of content, and innovative pricing models on the supply side.
During lockdown, both TV and smartphone video consumption surged as people spent more time at home. OTT continued its onward march, increasing its presence in Tier-II and Tier-IV cities. SVoD subscriptions continued to see strong growth rates on the back of high quality original and local content being created and marketed using free trial periods. COVID-19 accelerated the subscription trend as a result of OOH spending moving to in-home, and this is expected to be sticky due to the proliferation of platforms and content that is now available to consumers. Further, innovations in the form of India specific pricing have also helped make the proposition stronger and encouraged consumers to subscribe.
Advertising revenues saw a sharp decline as a result of the pandemic and are expected to be ~16 percent lower than in 2019, with ads on all media except digital expected to experience double-digit rates of decline in 2020. The recovery has been differential across sectors, compounded by a need to show higher RoI and control over advertising campaigns. This has led to higher allocations to digital media, which is expected to reach a share of ~15 percent in 2020, ahead of most pre-COVID projections. Though a cautious recovery seems to be underway and marquee events such as IPL have been able to grow over their 2019 levels, smaller events may continue to face pressure for some more time.
While the Indian M&E industry already has a significant impact on India’s economy, benchmarking with other countries indicates plenty of untapped potential. Most segments still have headroom for growth, while segments like OTT are growing at a steep rate and making a significant contribution. However, to achieve the industry’s true potential, there are a few areas where concerted effort needs to be made. These areas include creating more original and local language content to cater to diverse audiences, provide better data and flexibility to advertisers, create content to tap the global market, focus on up-skilling of existing talent and development of new-age talent, and investment in technology. Progress along these dimensions will ensure that, the effects of the pandemic notwithstanding, the 2020s will be extremely fruitful for the Indian M&E industry.
The Indian M&E industry in 2020
Consumption of M&E resilient during pandemic; COVID-19 accelerated trends toward subscriptions. Growth in India continues to be multi-modal. Per capita media consumption continues to grow simultaneously across all forms. Multi-modal growth story is expected to continue for the next few years. Digital video continues to be the fastest growing medium clocking 14.5 percent CAGR. Print and radio are expected to remain flat. COVID-19 led to a surge in consumption of both TV and OTT. TV consumption saw initial spike, now stabilized to pre-COVID levels. Non-prime time viewership is a major driver of growth. OTT saw strong growth across both rural and urban areas. SVoD adoption has spiked on account of trials; consumer survey shows 50 percent+ new users likely to stick post-COVID and that the growth rate of new users in Tier-II, Tier-III, and Tier-IV regions was 1.5x that of the growth rate in metro and Tier-I during COVID.
Advertising has seen a decline in 2020 driven by the pandemic. Ad spend took hit given COVID, whereas digital is still expected to grow in 2020. Green shoots visible and a strong bounce back is expected, given the high co-relation to GDP growth. Most sectors are already increasing ad volumes on TV. Signs of recovery emerge as ad volumes on TV rise steadily post lockdown. Latest monthly ad volumes for most sectors have exceeded pre-COVID levels. There is an increase in the number of advertisers across sectors post October. Recovery is led by increase in number of advertisers and entry of new-to-TV advertisers. Big-ticket marquee events have bounced back but smaller events may face continued pressure; there is a cautious optimism that ad spending on TV is expected to recover in 2H20. Advertising continues to lag consumption on digital, however gap is narrowing on account of improved RoI and targeting. COVID has accelerated shift to digital – share of digital is expected to grow to 15 percent almost 2 years ahead of earlier projections. With increasing budget constraints during COVID, advertisers are looking for high returns and low wastage.
Subscription models gain traction. SVoD subscriptions are growing as OOH spending moves to in-home, coupled with introduction of low-ticket size plans and enhanced ease of payment. There is a strong growth in SVoD revenues as number of subscriptions rise, however TV subscription revenues remains flat. Growth of SVoD will give fillip to overall OTT growth. Given lower realizations, AVoD successful only at large scale. Actual realization of ARPU is further driven down by bundling of services. Nealy 30 percent of OTT video subscriptions are coming from telco-bundled partnerships. Most telco players have OTT partners like Amazon, Netflix, Zee5, Disney+Hotstar, and alike, which helps drive their subscriber base. There is a marginal increase in TV subscription driven by increase in penetration of TV across households; however significant headroom for growth remains. TV subscription base growing as penetration of DTH increases and ARPU holds steady. DTH subscribers increased during the pandemic as people stayed indoors; ARPU remained flat. DTH subscribers surged initially in lockdown but over time consumers started optimizing channel subscriptions due to limited fresh content. DTH subscribers are expected to increase by 6-7 percent as fresh content has returned to TV and cable TV subscribers move to DTH. DTH ARPU will remain flat as players launched incentives like discounted bundles and free VAS to retain subscribers. Cable TV revenues are impacted due to COVID as a set of subscribers downgraded subscription packs. Cable subscriptions suffered due to migration of workforce outside metros and downgrading of subscription packs (FTA channels preferred). There is a muted growth in subscribers as competition from DTH intensifies.
Impact of the M&E industry on India
The Indian M&E industry is estimated at USD 26 billion showcasing 11 percent growth with a significant impact on India’s economy. However, there is a significant headroom for growth in direct contribution to economy when benchmarked with other economies. The Indian M&E industry creates multiple levels of impact through both tangible and intangible means: Direct – tangible impact through employment generation and contribution to GDP; intangible impact created through taking Indian culture to the world and connecting the Indian diaspora to the country. Indirect – tangible impact on upstream industries like advertising and equipment manufacturers.
Support needed to realize the potential of M&E
There are 5 key pillars to grow the impact of the Indian M&E industry:
Continued investment in content. Vernacular and original content will be the key differentiators as competition intensifies in the OTT space. Local content consumption is expected to grow further as rural internet users outgrow urban. Originals are the hero content on OTT driving exclusivity for platforms. Proliferation of platforms has intensified competition for eyeballs, however disproportionate share of viewership garnered by top three platforms. Major OTT players continue increasing investment in original and regional content to drive consumption. Niche players focused on few markets have also gained good traction. There is an increase in content partnerships among players as they diversify their offerings whilst managing costs. Benefits from partnerships are growth in subscriber/viewer base and decreased cost pressure.
Advertiser value creation. To re-imagine value proposition for advertisers and evolve selling models to build strategic partnerships – move from tactical inventory selling to participating in media planning phase with advertisers, drive N=1 marketing through Big Data and advanced analytics instead of Big Data and analytics, and provide real-time visibility to advertisers and media planners to fine tune their campaigns. The enablers for effective implementation are single currency for measurement across TV and OTT, standardizing measurement metrics across digital platforms, and leveraging ad-tech platforms. Challenges that are currently faced by advertisers are measuring combined RoI across platforms, removing duplication in cross-device measurement, and limited transparency on metrics and their definitions. The way forward for the Indian media industry is to develop consensus on standard measurement process, drive collaboration between players to create a unified currency for cross-platform advertising, and quick execution and adoption to facilitate growth of digital advertising.
Identifying new sources of revenue for the industry and country. Acceptance of Indian content among global audiences is increasing, including but not limited to Indian diaspora. Large Indian diaspora of 32+ million is spread across multiple countries and consuming Indian content. Additionally, countries with significant Indian language speaking population also consume Indian content like Bangladesh (Bengali), Mauritius (Bhojpuri), Nepal (Maithli & Bhojpuri), Singapore (Tamil), and Sri Lanka (Tamil), among others. Indian OTT apps are indicative of increasing popularity of Indian content. Globalization of Indian content is enabled by OTT platforms through their global reach and high-quality content. OTT platforms offering high-quality original content with international distribution are increasingly enabling local Indian content to reach global audiences. Additionally, globalization of content can create a trickle-down effect to boost the Indian tourism ecosystem as evidenced by the Netflix Effect. There is a high potential to take Indian content and culture to global audiences. India can cater to international demand by creating an end-to-end production ecosystem. Production ecosystem will encourage foreign producers to create content in India, make India a major content exporter, boost ancillary industries like tourism; and hence, enable Indian content to reach audiences across the globe.
Investment in skilling. The aim is to set up aided and specialized institutions with curated curriculum for technical skills, and tie up with tech enabled educational institutes and set up vocational training centers to broaden talent pools and upskill current workforce.
Investment in technology. There are multiple technology-driven use cases emerging basis the key imperatives fueling the need for investments in technology like continued investment in content, advertiser value creation, and building newer sources of revenue for the industry. Major players are investing in hyper-personalized content recommendations to increase engagement on OTT platforms. They are building advertising solutions at scale with N=1 marketing efficacy key to raising the bar on advertiser value proposition. There are endless opportunities for data collection to improve targeting with digital platforms.
Imperatives for media companies
- Support content diversity with personalized recommendations for consumers by leveraging advanced analytics.
- Create a unified viewing experience for consumers by aggregating share of consumption across TV and digital video platforms.
- Integrate different formats such as gaming, music, short-form video into one unified platform to drive engagement.
- Invest in strategic content partnerships to ease monetization pressure, drive content diversity.
- Engage with advertisers as strategic partners selling integrated solutions rather than just inventory selling.
- Enhance value proposition for advertisers through bundled selling across platforms, hyper-personalized user segmentation and real-time performance tracking.
- Invest in ad-tech to build data and analytics capabilities and automating ad-buying process.
Based on Lights, Camera, Action…The show goes on, A CII-BCG report.