21-Jan-2019

Media and Entertainment Sector in India: Seizing New Opportunities

From an outside-in perspective, global M&E companies view India as a highly attractive market today with huge potential going forward based on demographic and economic factors. With growing middle class, young demographic, uptake on digital and a rise in the consumer’s income, the propensity to spend on media and entertainment is growing faster than the economy itself. India’s conducive regulatory environment and high volume of content consumption hold significant potential for foreign investments in the M&E sector. Many global M&E conglomerates have been present in India for more than a decade, and others continue to make forays.
At the same time, a vibrant domestic entrepreneurial community is powering the development of content and technology.

The opportunity for global M&E companies to ride this “emerging wave” of growth in India is significant, as is the cost of missing out. Reacting to the speed at which opportunities in India present themselves requires agility. M&E companies need to both anticipate the rewards as well as appreciate the risks.

While there are many opportunities to tap, there are also unique differences and challenges to operating in India compared to other media markets around the world.
Diverse content preferences, a very low price point and the distinct regional sub-markets across the country are some of the critical dynamics that global M&E companies need to assess when entering the Indian market. Rampant piracy is also a factor. Companies that understand and adapt to the economic and social fabric of the Indian operating environment and that invest in tailored content and services are likely to maximize their success.

Ultimately, M&E companies considering India must determine the optimal market entry strategy and the path to scale and compare the necessary investment requirements to other capital allocation priorities and growth opportunities available around the world.

All media sub-sectors are currently growing in India. In fact, media sectors regarded as “sunset” industries in mature markets are flourishing in India. For example, the newspaper sector, which is facing declining readership in many international markets because of competition from digital media, continues to thrive in India, driven by increasing literacy rates, consumer spending and the growth of regional markets.

Global M&E companies have an exciting opportunity to leverage the India growth story. Amidst this, there are pockets that are seeing increasing interest from foreign players.

OTT

  • By 2020, India is expected to become the second largest online video viewing audience globally. Driven by the exponential growth of video consumption over digital media, video OTT platforms have been a key focus area for the leading media conglomerates and start-ups alike. The market is also observing the entry of large global digital video players. At present, India has over 30 OTT players, including many global players. The OTT segment in India spans companies from across the media ecosystem including broadcasters, studios, DTH operators, telcos and content aggregators.
  • To gain a foothold in India’s highly competitive OTT segment, global players are increasingly signing content licensing deals with local players to expand their content library. They are investing in original short-form content to meet audience demand, especially from consumers of regional content (most Indian OTT users consume content in their native language).

Sports

  • The sports sub-sector in India is slowly changing from being cricket-focused to supporting multiple professional sports leagues. On the back of the Indian Premier League (IPL), the country witnessed the emergence of over 10 leagues such as the Hockey India League (HIL), the Pro Kabaddi League (PKL), the Indian Super League (ISL) and the Premier Badminton League (PBL). Sports viewership has also undergone a transformation, with sports other than cricket contributing to viewership growth.
  • Simultaneously, growing digital consumption and viewership of sports on various platforms such as OTT and social networks is further increasing the overall sports audience. Over 50 million Indians are actively consuming sports content on digital.
  • Global companies clearly recognize India’s potential and have been investing in various initiatives such as launching premium sports channels and acquiring broadcasting rights of sports leagues. The 2017 auction of IPL digital media rights likely set a new normal in terms of digital rights acquisition in the country. The auction saw interest from several global players, with bids for digital media rights as high as US$600 million. Correspondingly, sports sponsorship is increasing, too, generating interests from global players. Global leagues, federations, clubs and sports companies are also setting up their office in India to leverage the growing sports opportunities.

Film co-production and distribution

  • India is witnessing a rise in collaborations between Indian production houses and foreign studios. International studios are spending heavily in their effort to gain a foothold in Bollywood and have established their domestic divisions in collaboration with small production houses. Further, to give impetus to co-productions and collaboration between Indian and overseas filmmakers, the Indian Government has entered into co-production treaties with various countries such as China, Canada, France, Germany, Brazil, Italy, New Zealand and the UK.

Offshoring

  • Globally, players are leveraging India’s demographics, technology and low-cost dividends to offshore elements of their core business as well as back-office operations to India. Media conglomerates have already made it big in the Indian market by leveraging the country’s talent pool for animation/VFX, gaming, publishing and media advertising measurement.

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Growing digital infrastructure presents immense opportunities for M&E sector

While there are many opportunities to tap, there are also unique challenges in the areas of pricing, piracy and ease of doing business

Piracy

M&E sector is plagued by a serious piracy problem. Film sub-sector alone, annually looses US$2.8 billion of its total revenue to piracy. Also, the movie theatre business model is threatened by a rise in digital downloads by consumers and easy availability of inexpensive rental options.

Digital media sub-sector in India has not been able to fully monetize their content due to rampant piracy in India. Weak IP regulations and ineffective enforcement has been a deterrent to produce original content and IP. Also, with the growing global reach of Indian M&E industry and the growth of Indian diaspora abroad, international piracy of Indian content has also emerged as a key challenge.

Low price point

Indian market is highly price sensitive and is majorly advertising driven. Sectors such as Print, Digital , Television and Radio get revenues from advertising.

Average subscription cost for Cable/VoD in India is $1-3 and average film ticket price is around ~$2. Currently, only 1-2of the consumers pay for media content online.

Ease of doing business

India’s ease of doing business 2018 ranking improved 30 spots to reach #100. The country is recognized as one of the top 10 improvers, however, it still lags in areas such as starting a business, enforcing contracts, and dealing with construction permits.

In fact, the time taken to enforce the contract is longer today, at 1,445 days than it was 15 years ago (1,420 days), placing the country in #164 on the indicator.

Source: https://www.ey.com/Publication/vwLUAssets/ey-re-imagining-indias-me-sector-march-2018/%24File/ey-re-imagining-indias-me-sector-march-2018.pdf



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