‘Indian media and entertainment industry at digital tipping point’: Report

The Indian media and entertainment industries reached Rs 1.5 trillion in 2017, witnessing a growth of almost 13% over 2016 and growing faster than the gross domestic product, according to the FICCI-Frames report for 2018.

“The overall increased need for escapism is enabling a situation where subscription revenues are not being impacted by economic shifts and slowdowns, as was seen in 2017,” declared the report. The growth in 2017 was led by digital, film, gaming and events sectors, it added.

The comprehensive study is an annual affair. The report is published by FICCI (or the Federation of Indian Chambers of Commerce and Industry) in association with an audit firm – this year it is Ernst and Young. This year’s report is titled Reimagining India’s M & E Sector.

‘The Indian economy remains healthy’

“The calendar year 2017 was a great year for the Indian economy,” declared the report. Even though most international agencies such as the International Monetary Fund, the World Bank and the Asian Development Bank lowered India’s GDP forecast because of the impact of demonetisation and the Goods and Services Tax, these forecasts will only have a temporary impact on the media and entertainment industries, the report claimed.

“Most multilateral agencies see India grow above 7% in the medium-term,” it said. “While the World Bank forecasts India to grow by 7.5% in both 2019 and 2020, IMF forecasts suggest the growth rate to be 7.4% in FY19 and further increase to 7.8% in FY201. The M&E sector grows with the economy albeit at a higher pace, and its medium- term outlook is bright.”

Where the money came from

The television industry grew from Rs 594 billion to Rs 660 billion in 2017, exhibiting a growth of 11.2%. The growth was backed by “digitisation of television homes, and tentpole properties like the IPL and non-fiction programming, particularly in regional languages”.

Despite an eventful 2017, advertisement volumes grew 10.1%. “In 2017, the number of advertisers on TV grew to 12,964 and ad volumes grew to 70 million insertions, as reported by BARC [Broadcast Audience Research Council],” the report said. “Ad volume growth was dependent on several factors such as cricket, elections in several large Indian states, penetration of regional channels, launch of new channels, and marquee non-action programming, which continued to attract advertisers, irrespective of the impact of demonetization or GST.”

Hindi channels took the lead on advertisement volumes – 30% of all ad volumes, while 17% were from Tamil, Telugu and Bangla.

The revenues grew from advertising as well – from Rs 243 billion to Rs 267 billion (an increase of 10%). “This was largely driven by volume growth as more channels were launched, particularly in the free to air genre,” the report said. “This could indicate that television continues to move towards its core of being an efficient mass medium. Premium properties viz. sports, prime time content, film premieres and reality TV also grew their advertising rates.”

Thank you, China

Meanwhile, the Indian film industry witnessed a growth of 27%, said the report. The contributing factors include a high growth in overseas theatrical releases, particularly in China, an uptick in satellite rights values, and domestic box office collections. However, the report clarified that the growth is “narrow”. “...it was due to select movies like Baahubali: The Conclusion and Dangal driving growth in both domestic and international markets.”

The growth in the film segment was also affected by India reaffirming its position as an efficient and high quality outsourcing destination which “led to corresponding growth for the animation, VFX and post production business”, the report claimed.

Who is watching what on TV

Out of the estimated 286 million households in India, TV penetration reached 64%, taking the total number of television viewing households to 183 million in 2017 – a 3.5 % growth over 2016. Rural television penetration crossed 50%.

Overall TV viewership has grown by 21% across all age groups and 77% of the viewership is driven by GEC and movies. The growth in viewership was also led by regional languages such as Punjabi, Oriya, Bhojpuri, Assamese and Gujarati – all of whom witnessed twice the rate of growth than Hindi, Tamil, Telugu.

What are children watching?

“87% kids in 2-14 age group watch non-kids channels while only 13% watch kids channels, according to a research report by BARC India titled ‘A Peek into Kids Viewership’,” the report said. “According to BARC, the massive viewership of non-Kids channels could be due to co-viewing. The report stated that children in the age-group of 2-14 years account for 20% of total TV impressions, which is the highest share across all age cuts. GEC and movie channels account for 80% of kids viewership on non-kids channels.

What’s driving television news?

Evening prime time contributes to more than 40% of news viewership, the report stated. In terms of the news channels, the key change in 2017 is an “increase in the time spent on studio-based content which shows anchors and guests in conversation and debate”.

Rural weightage

The previous year saw the full impact of BARC’s enhanced rural panel weightage, with genres such as infotainment, English news and English entertainment seeing a reduction in their viewership, said the report. “The increase in weightage to rural India had a positive impact on the kids genre which saw a jump in absolute terms of viewership numbers compared to the previous year.”

The business of cinema

Hindi films contribute almost 40% of the net domestic box office collections annually, despite comprising only 17% of the films made, stated the report. “Films in 29 other Indian languages account for approximately 75% of the films released but they contribute approximately 50% to the annual domestic box office collections.” Hollywood and international films make up the rest.

The biggest grosser for 2017 was Baahubali 2: The Conclusion. But overall, “relatable and niche content” drove success at the box office, the report felt. It cited examples of Lipstick Under My Burkha and Newton to make its case: “The year also shifted focus from dreamy locations abroad to the hinterland to contextualise their stories in tier-2 and tier- 3 towns such as Varanasi, Lucknow and Bareilly, which added depth and familiarity to the script and characters.”

Life beyond Bollywood

Gujarati films registered a 44% increase over 2016 in terms of transactions on the site BookMyShow, followed by Malayalam films registering a 38% rise. The Telugu film section clocked a 47% growth. Its net domestic collection in 2017 was Rs 15.33 billion, up from Rs 10.42 billion in 2016. A big chunk of it, of course, came from Baahubali: The Conclusion.

The Tamil film segment saw a fall in collections – the net domestic box office fell by 5% from Rs 9.96 billion in 2016 to Rs 9.46 billion in 2017. For Tamil cinema, footfalls also dropped from 140 million in 2016 to 126 million in 2017.

In terms of Hollywood releases in India, the box office collections for films (including the ones dubbed in Indian languages) remained stagnant in 2017, the report concluded.

Screen count

India stands as one of the “most highly underpenetrated” markets in terms of screen count, the report said. “Single-screen cinemas have reduced from 9,710 screens with 91% share of total screens in India in 2009 to less than 71% share in 2017 with 6,780 screens,” it stated. “At the same time, multiplexes have grown at a steady rate of over 10% over last three years due to rising urbanisation resulting in higher footfalls, higher propensity to consume films with rising per-ticket realisation, operational synergies and a shift to ‘experiential-led’ film-watching by the Indian audiences.”

The Indian film exhibition segment in terms of the number of screens is less than 1/5th in size as compared to developed markets such as China and the USA, it added. The ratio is likely to deteriorate with numerous single screens shutting down. What the report recommends is infrastructure support in tier 2 and tier 3 markets, a need for a “single window clearance” for opening of multiplexes and tax rate rationalisation.

OTT and only going to get better

India will be the second largest online video viewing audience in the world by 2020, the report predicted. This is corroborated by an increase in smartphone penetration, which reached around 33% in 2017.

Digital media grew 29.4% on the back of a 28.8% growth in advertising and a 50% growth in subscription. “Subscription, which was just 3.3% of total digital revenues in 2016, is expected to grow to 9% by 2020.”

Piracy, the old enemy

Piracy continues to pose a serious challenge to the media and entertainment industries. “Film sub-sector alone, annually loses US$2.8 billion of its total revenue to piracy,” the report stated. “Also, the movie theatre business model is threatened by a rise in digital downloads by consumers and easy availability of inexpensive rental options.” Piracy has also hindered the potential of digital media to monetise content.