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Media and entertainment industry: hindsight 2018, foresight 2019

Digital video witnessed an explosion in terms of consumption

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MUMBAI: The Indian media and entertainment industry continued to be robust in 2018, aided by the domestic consumption story remaining strong, as well as the impact of one-time events such as demonetisation and GST progressively fading away. The sharp increase in digital access and consumption, with continued investments by telecom operators on 4G and content, was a major growth driver in the sector. Digital video has seen an explosion in terms of consumption, with 250 million online video viewers out of 450 million broadband users in FY18, and platforms already looking at adding the next 250-300 million online video viewers in the next three to four years. However, despite the rapid growth of digital media, India remains one of the unique markets in the world where traditional media continues to grow.

TMT Convergence – the rise of ecosystems

The media and entertainment industry in India started witnessing a structural shift in FY18 with convergence across telecom, media and technology (TMT) companies beginning to take shape. While the telecom and technology companies are building competencies to offer content directly to consumers through acquisitions and partnerships, traditional broadcasters and media companies have started building platforms to reach the end consumers directly. One of the recent examples in this space includes the acquisition of two traditional cable companies by a major telecom player. 

In addition the competition, the industry has also been witnessing collaboration within the TMT ecosystem. Effective bundling of content by telecom players has ensured that the distribution ceases to be a challenge, allowing standalone content players to focus heavily on original content. 

The advent of 4G and the rise of TMT ecosystems has resulted in the surge in online video consumption with the number of video and entertainment app downloads witnessing a 5x increase from September 2016 to June 2018 and the data usage on these apps increasing by 25x during the same period.

Despite the industry seeing rapid growth in the consumption of digital media, monetization has lagged behind till now, with AVOD models still dominant and SVOD not seeing significant traction. Introduction of third-party digital measurement, compelling content across languages and an effective micropayments infrastructure are factors which could help monetization in the near future.

The growing emphasis on rural and regional markets

With the viewership of regional language (non-Hindi and non-English) content on television close to 40-45 per cent of the overall consumption, the industry is increasingly looking at rural and regional language markets as the key to success. Additionally, while the rural internet penetration stands at less than 20 per cent (as of June 2018), it presents a considerable upside to organizations who have already started developing local language digital content. 

Key focus areas for the regional and rural markets in the past year have included – continued digitization across phase 3 and 4, increased focus of broadcasters through the launch of language sports channels and adaption of popular reality shows into local languages, inclusion of rural into measurement metrics through BARC and a focus on digital regional content. 

Data Analytics – moving from ‘good to have’ to ‘must have’

Increasing digital consumption is resulting in the availability of large consumer data sets which the industry is trying to collect, integrate, analyze and derive value from. Organizations across the value chain are investing heavily in data analytics around areas such as content creation, customer acquisition, pricing, distribution, and content management.

Implementation of the TRAI tariff order – a game changer

With TRAI’s tariff order getting the green light from the Hon’ble Supreme Court (effective 29 December 2018), broadcasters have started to publish Reference Interconnect Offers (RIO) and MRPs of their individual channels. The tariff order is expected to bring in the much-needed transparency ensuring equitable distribution of revenue across the players in the value chain. 

However, the pricing strategies are at an early stage with some leading broadcasters having priced their flagship channels closer to the cap of INR 19 while some of the niche channel broadcasters are seeing a reduction in MRPs and bouquet prices. Further, the outcome of the ongoing litigation over the 15 per cent discount condition on bouquets may also fundamentally impact the strategies of the stakeholders. With only a few days to go for the implementation deadline, consumer education is expected to be a major challenge for distributors. 

Looking ahead, the media and entertainment sector is expected to continue seeing growth on the back of growing digital access and consumption, strong domestic (particularly rural) demand supported by GDP growth and growing penetration into non-urban and regional user base across media sectors.

The author is partner and head (media and entertainment) for KPMG in India

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