2019: The Turning Point for Indian M&E?

Indian M&E sector has potential, but needs regulatory support for growth

Growth trends of last decade show that Indian M&E can act as an important contributor to India’s economic growth, but the sector continues to be a dwarf compared to its global peers. Can 2019 prove to be a point of inflection and kick-start next decade of explosive growth?

The year was 2009 when Indian media and entertainment (“M&E”) industry was frenetically trying to predict its future in the coming decade.

In a world which was busy trying to contain the effects of global financial crisis, most predictions seemed far – fetched and “time will tell” sentiments greeted any industry pundit’s guesstimates.

However, one glance at hard data proves that in the last decade or so, Indian M&E has in fact come of age and grown 2.5 to 3 times.

What’s more important is to look between the lines, where one finds that apart from traditional heavyweights like TV and Bollywood, it is sectors like digital, VFX and animation that have multiplied 6 times – from mere INR 3,000 crores in 2010 to INR 19,000 crores in 2018.

In a world where the prospects of staying relevant in future are haunting global majors, Indian M&E seems to have built a good base to adapt to disruptive tech.

Even print, which is a segment being shunned around the world, has grown 50% in India in the last decade on the back of rising literacy, reach and disposable incomes.

These numbers acquire even greater relevance for Indian economy when one digs deeper into fundamentals.

India has made the leap from the 2G to 4G mobile data services in this decade and in this process, it has displaced US as the second largest smartphone market in the world with around 33 crore smartphone users.

The overall internet consumption has grown 14 times to reach 4 billion gigabytes per month, with video viewing accounting for much of that time spent on smartphones and on other screens.

However, the per capita/day media consumption at 5 hrs. lags far behind China and US who are at 7 hrs. and 12 hrs. respectively.

Despite having achieved mega size of INR 1.6 lac crore, Indian M&E still contributes less than >1% to India’s GDP, whereas, in China M&E contributes around 2% and in the US this number goes up to around 4%.

It should be kept in mind that China’s GDP is 4 times that of India and US is 6 times larger – therefore M&E sector in these countries is much bigger than its Indian counterpart when absolute numbers are considered.

Thus, for Indian M&E to be taken seriously as an important lever of growth, it must multiply in size fast and take its GDP contribution to around 3-4%.

Though this may sound too tall a call, but stars seemed to have aligned in its favor as the following factors can ensure smooth transition of Indian M&E to its destined goal:

  • Rising GDP, incomes and movement to cities: The World Economic Forum (“WEF”) has oft repeated that India is due to take over US as the second largest economy by 2030. Its middle class will swell to around 60 – 80% of its total population, with more than 50% population living in urban areas and average incomes will multiply 2 to 3 times.
  • Beating global trend on smartphone penetration: Major smartphone makers such as Samsung and Apple have reported decline in global smartphone sales as the market gets saturated. However, India is a sweet spot in this regard as smartphone penetration is expected to reach 50 crore users in next five years. Most of this growth is expected to happen at the US$ 150 – US$200 per device price point – which has come as a welcome news to Chinese majors like Xiaomi, Huawei and Vivo and has forced strategy rethink amongst global majors like Samsung and Apple.
  • Next gen internet will spur non – smartphone device sales: Govt. of India has set its sight on becoming a 5G nation by 2020. If 4G era is anything to go by then 5G would also see the same cutthroat competition between Jio and its counterparts like Airtel and Vodafone-Idea which is expected to drive down per gigabyte price for Indian consumers. Given the low pricing and the incredible carriage capacity of 5G networks in the Gigabit range, the AR/VR entertainment, smart home and autonomous vehicle ecosystem in India can be expected to take off in a big way.
  • Indian digital content ecosystem has built strong base: The story of Silicon Valley majors taking over Indian search and social media segments has not been repeated in the case of digital streaming apps. Homegrown apps like Hotstar, Zee5, Voot and SonyLiv have out battled the competition and presently account for anywhere between 80 – 90% of non-user generated content streaming market in India. Netflix and Amazon Prime Video are fighting hard but it’s unlikely that they’ll achieve the level of dominance like their domestic comrades unless they change their pricing and product strategies.
  • Strengthening global grip of Indian storytelling: Entry of global content giants like Netflix and Prime has ensured that Indian storytellers receive the kind of funds and reach required to take local stories global. It should come as no surprise that former’s “Sacred Games” set in Mumbai’s slums reached 6th spot on most popular TV series in the world with every third viewer from outside India. Indian streaming apps are also looking to replicate the trend and are launching hard-hitting “originals” dime a dozen. Bollywood is not untouched by this phenomenon and its global box – office is on a steady rise. Amir Khan 2017 co – production Dangal raked in INR 1300 crore from China alone and its total international box office stood at a massive INR 2000 crore. Even India’s so-called regional film industries have replicated this trend, especially Tamil and Telegu movies – 2.0 and Baahubali series being cases in point respectively.
  • Growing digital payments ecosystem: Indian digital payments ecosystem came to a life of its own in 2018 with the domestically engineered platform like NPCI’s “Unified Payments Interface” (“UPI”) crossing the INR 1 lac crore mark for gross total value in transactions in December 2018. This success has captured attention around the world and Google, Facebook and Amazon are rushing to adopt this desi technology. However, early Chinese entrants like Alibaba’s Ant Financial – which holds stake in PayTM – have an edge here. Movement away from cash is expected to help platforms, apps and brands capture the spending data of their users, of course based on user consent, and allow them to offer products and services at the relevant price point.

The initial euphoria aside, the above factors will be able to materialize only if the competition dynamics within the sector are reflected in policy making.

Today, Indian TV, print, digital and films industries are one of the most competitive in the world.

However, despite offering wider selection of entertainment to consumers at multiple price points on varied platforms, economic regulation continues to be enforced on TV channels and some states have indulged in capping movie ticket prices.

Particularly in case of price regulation of TV channels by TRAI, the latest tariff regime has turned all stakeholders in the value chain – viz, broadcasters, distributors and local cable operators – each other’s enemies, while consumers grapple to get clarity on the future.

There’s also the threat of imposition of “local body entertainment taxes” by municipalities in states like Madhya Pradesh among others over and above the applicable GST on entertainment services – which till recently was in the highest slab of 28% until the GST council moved it to the 18% bracket.

Another challenge is the Damocles’ sword of censorship. Depending on the change in CBFC’s leadership and the political will, Indian film industry has either had it better or worse. Now there is threat to digital media as well. If one is to go by assurances given by the Government to extend selfregulation to this medium, then things should remain fine.

Thus, Indian M&E industry has time and again ticked all the right boxes when it comes to economic benchmarks.

Now, it’s upon the policy makers and the regulators to unshackle this sector and let it become one of the beacons of investment and job growth in India in the coming decade. If appropriate policy responses based on consultations with the industry are implemented in 2019, then it has the potential to be remembered as the year that transformed the prospects of Indian M&E forever.

The author is a veteran of the media & entertainment industry in India