As the COVID-19 pandemic has brought in major disruptions in the M&E business model, it is high time for the sector to forego holding on to old ways of thinking and working, and prepare to engage with the world with a new set of rules to propel growth, says the latest edition of FICCI-EY Report on Indian M&E sector
The COVID-19 global pandemic presented unprecedented challenges to the media and entertainment industry worldwide. Faced with isolation, consumers actively sought alternatives to keep themselves entertained. Thus, 2020 saw demand patterns shift with acceleration in digital media adoption aided by the growth of digital infrastructure. The supply side transformed, too, as M&E companies took the opportunity to reinvent.
“This altered the M&E sector as we knew it. Every segment – TV, radio, print, digital, etc. – had video, audio, textual and experiential products and had begun to redefine itself across those verticals. What didn’t change, however, was the compelling content created around news and escapism, and the passion to build some of India’s most powerful brands,” says Ashish Pherwani, M&E Sector Leader, EY India.
EY India in collaboration with Federation of Indian Chambers of Commerce & Industry, has come out with the 2021 edition of the FICCI-EY report on the Indian media and entertainment (M&E) sector—‘Playing by New Rules’—that seeks to capture transformation of the country’s M&E sector and offer useful insights into the new rules of the game.
According to Pherwani, appointment viewing on news television, gamification on e-commerce apps, circulation transformation in print companies, short video on OTT platforms, interactivity and brand solutions from radio companies were some of the many strategic shifts that were seen in 2020.
Saying that India’s diversity and scale will continue to fuel the growth of traditional media, Sanjay Gupta Chairman, FICCI Media and Entertainment Committee, highlights the new and big opportunities for M&E businesses.
“Today content creation and storytelling are much more diverse and come from all parts of the country. New distribution models and monetization strategies are evolving across both large and small screens. Learning content and gaming have emerged as very large new opportunities. These changes are driving a shift in monetization of content investments and this opportunity is global,” says Gupta.
The report points out that the Indian M&E sector fell by 24% to INR1.38 trillion (US$18.9 billion), in effect taking revenues back to 2017 levels. However, there were some silver linings as well. “Several digital trends accelerated their trajectory, fed by growth in broadband, personal devices and smart televisions, and the time and inclination to try online services,” observes Gupta.
“Digital and online gaming were the only segments which grew in 2020 adding an aggregate of INR26 billion and consequently, their contribution to the M&E sector increased from 16% in 2019 to 23% in 2020,” the report says.
Online gaming continues to be the fastest growing segment of the M&E sector for the fourth year in a row, the segment grew 18% helped by work from home, school from home and increased trial of online multi-player games during the lockdown.
Online gamers grew 20% to reach 360 million in 2020. Transactionbased game revenues grew 21%, despite adverse regulation in certain states, while casual gaming revenues grew 7%.
2020 also saw 28 million Indians (up from 10.5 million in 2019) paying for 53 million OTT subscriptions leading to a 49% growth in digital subscription revenues, thus clearly indicating that subscription fared better than advertising revenues.
“Growth was led largely by Disney+Hotstar which put the IPL behind a paywall during the year, increased content investments by Netflix and Amazon Prime Video and launch of several regional language products. In addition, 284 million Indians consumed content which came bundled with their data plans,” says the report.
According to the FICCI-EY report, online gaming will continue to grow and reach 500 million gamers by 2025 to become the third largest segment of the Indian M&E sector. The segment will grow across all its verticals viz, esports, fantasy sport, casual gaming and other games of skill, but revenue growth will be led by mobile-based real-money gaming applications across these verticals.
It continues to say that the pandemic disrupted the already fast evolving M&E sector and new rules have been set in place to drive success of the sector.
It lists out some strategic priorities for the Indian M&E sector including Identifying the audiences that matter, building a multi-media and multi-community strategy, addressing community needs apart from just news and entertainment, make end-customer data and insights the core of operating priorities, building customer acquisition efficiency, enhancing speed of product development and change, and reinventing ad sales.
The report points out that globally the M&E industry is under renovation. “The steps taken by media and entertainment companies to streamline the cost base and optimize the operating model for efficiency and effectiveness will remain on center stage as the entire industry plots a course through disruption,” it says.
It also adds that major business conferences, which moved to virtual gatherings in 2020, will continue to utilize digital platforms to extend reach and include remote participants who remain wary of business travel.
Esports and video games will build on a fan and user base that multiplied in size during the pandemic, believes John Harrison, EY Americas Media & Entertainment Leader. “In 2021 and beyond, companies will be successful not because they are better at predicting the future but because they are better able to orchestrate a wideranging ecosystem of in-house talent and external partners, and pivot in a timely, confident manner,” says Harrison.
Although Indian television segment declined 13% in 2020, the report expects television advertising in 2021 to be close to 2019 levels, growing over 20% to reach INR304 billion. Digital segment, too, is expected to grow to INR424.5 billion by 2023 and digital advertising will outpace all other media with paid subscriptions doubling to over 100 million by 2023. According to Pherwani, in effect it will be the same game, but with totally new rules.
All hopes are not lost at a time when the world in general and M&E industry in particular is facing a tough time due to COVID-19. For, a future outlook, part of the FICCI-EY report of March 2021 titled ‘Playing By New Rules’, says the sector to rebound in 2021 and double to around Rs 2.68 trillion by 2025
Path To Recovery
The report said while it expects the M&E sector to rebound in 2021 and double to around Rs 2.68 trillion by 2025, the recovery of various segments will vary. “We expect that different segments will take different periods of time to regain their 2019 (pre-pandemic) revenue numbers.” Assuming no further setbacks, it will take one to two years for TV, film, music, two to three years for animation and VFX, events and beyond three years for print, radio, OOH.
Given that video, audio, text and experiences are available across almost all segments, the M&E sector is redefining itself across these 4 verticals: Video – TV, video OTT; Experiential – Online gaming, cinemas, events, OOH; Textual – print, online news; Audio – radio, music, audio OTT.
Premium consumers (comprising Digital only and tactical digital) will cross 100 million by 2023. The fastest growing segment will be the bundled digital consumer, growing to 399 million by 2023. The free consumer base will also grow as progress continues to spread amongst the 50 million homes today which do not have access to television.
Smart connected TVs will exceed 40 million by 2025, thereby ending the monopoly of broadcasters on the large screen and leading to around 30% of content consumed on large screens to be social, gaming, digital, etc.
Screen count will almost double to near a billion by 2025, of which around 220 million would be television screens and over 750 million would be smartphone screens. This could lead to a massive increase in content creation (news and entertainment) from the around 170,000 currently to over 250,000 hours, as personal consumption (as opposed to group consumption) increases to over 50% of total video time, across a wider set of genres and niche content types.
The share of regional content will increase to 60% of television consumption in 2025 from around 55%1 in 2020 and will increase to around 50% of OTT consumption from 30% in 2019. The need for dubbing, titling, formatting, etc. services to make content mobile will increase.
Online gaming will continue to grow and reach 500 million gamers by 2025 to become the third largest segment of the Indian M&E sector. The segment will grow across all its verticals viz, esports, fantasy sport, casual gaming and other games of skill, but revenue growth will be led by mobile-based real-money gaming applications across these verticals.
Split In Cinema Audience
While cinemas today largely cater to 100 million Indians, mostly top-end audiences, they will now begin to go deeper into India to cater to a wider audience base. Cinemas will continue to cater to top end multiplex audiences who watch movies for their spectacular experience and to enjoy an evening out with friends and family, comprising around over 100 million customers by 2025.
News Reach To Go Up
In 2020, Comscore data indicates that online news had a reach of 454 million as compared to 450 million for online entertainment.
Power of Newspaper
With the shift of premium customers to SVOD, print will increase in importance with respect to such audiences. Large news networks will focus on increasing the collection of regional news to create very strong regional products (print + digital) of extremely high relevance to audiences – news that national and large digital news aggregators may not be able to provide.
Reduced Ad Reliance
Cover price growth is critical for the print segment, in order to reduce the variable loss incurred on each newspaper printed by most print companies, and India could see a doubling of newspaper average cover prices by 2025.
More Focus On Margins
Continued focus on operating margins will be required and made possible by creating state-wide shared services across news gathering, production and distribution while print companies focus on their core capabilities of brand building, community management and editorial excellence.
Video & Audio
Content produced for the video OTT segment will begin to play a more important role in using and promoting music – akin to Bollywood’s link to music – and we could see a lot more music led innovation from this segment.
If YouTube continues to provide recent and video content-linked music for free, the paid OTT music sector will reach 5 million top-end users by 2023, and grow to INR2 billion in revenue, leading to consolidation in the music OTT segment; if not, paid subscribers could cross 50 million.
Radio, the most affordable of all media for consumers, will continue to exist and serve large portions of India through smart phone FM receivers, and play a vital role in retail advertising.
COVID 19 has been actively contributing to the physical isolation of people, especially the younger generation in our country. However, to this ghastly downside there has been an upside in the proliferation of e-Sports which are turning out to be big public gaming events, where thousands of people play, and millions watch them through online streams.
According to the FICCI-EY ‘Playing by New Rules’ report 2021 that focuses on the Indian media and entertainment (M&E) sector, e-Sports grew in the country by 12% in 2020. The report highlights that there was a 90% increase in the number of people playing e-Sports compared to 2019. Also, e-sports in India saw viewership double to 17 million in 2020 as it became available across 14 broadcast platforms.
“Global gaming firms, such as Activision, Garena and Supercell, which publish Call of Duty, Free Fire and Clash of Clans, are lining up to invest in India’s e-Sports ecosystem after PUBG Mobile had to exit late last year due to the Indian government’s clampdown on Chinese or China associated apps,” says the report.
The most attractive thing for e-Sports players today is the multiplayer facility of playing and the possibility of social interactions between the players in a virtual environment. The participants in e-Sports are striving to fill the void in their lives, fulfilling the social need of belonging to a group. Through e-Sports it is being satisfied through communication with or belonging to a team with other players of similar orientation and aspiration. Thus, online games bring people together virtually and provide them a shared purpose.
The virtual presence of spectators caters to the need for socialization and social networking. Even though in physical isolation, it also provides enjoyment, or more precisely the ability to immerse oneself in the content of the game.
Not only are they fulfilling their social need of belonging but as players they are also trying to measure and compare their abilities with other players in the sports oriented competitive spirit. Therefore, it is not surprising to see India ambling it way in its 2020 global ranking and occupying the 16th spot in the e-Sports industry with a total revenue of Rs. 8,000 crores (approximately $1.17 billion).
The e-Sports industry is not just about players playing video games and millions of users choosing to spend their time watching others play video games through live internet broadcasts, referred to as streams. Attached to these streams are streamers.
Streamers are e-Sports enthusiasts serving viewers with daily streams on Twitch or YouTube. Streaming platforms are also acquiring large number of streamers. As there is tremendous growth in e-Sports streaming, many streamers are leaving their day jobs and becoming full-time streamers.
These developments have been facilitated by mobile phone-based gaming and watching games through affordable handsets and data costs. BARC and Nielson report clearly indicates an upsurge in smartphone-based game users during the COVID lockdown and the aggregate revenue reported by e-Sports companies in India was $68 million in 2020 projected to grow at the CAGR of thirty six percent in the next three years. The audience has reportedly grown to 17 million in 2020.
The employment scenario has also been positively impacted. There are opportunities to work as data handlers who manage the latency and connectivity related issues present in a game or as a game developer for writing codes for AI integration into a game, or an in-game commentator who can do voice-overs for different characters present inside a game.
There could be growing opportunities in the hospitality industry .One way of further developing the community, especially In India, could be opening food/beverage serving facilities with social distancing on the theme of e-sports or video games belonging to e-Sports. This would allow e-sports enthusiasts to have a place where they can gather information, share it and watch e-sports, or even organize something on their own. An established e-sports enthusiast base represents the target market.
There are also nearly 100 gaming cafes and less than 1000 non-exclusive cafes. Today, more Indians in the age group of 18 to 24 play video games than go to the movies and global revenues were an estimated $67 billion for console and portable hardware and software.
Recent reports indicate 2.5X surge in traffic post the lockdown, with 150K new users a month. Higher player engagement in most platforms could potentially boost e-Sports value chain, as most sponsors who would usually partner other sports events such as cricket or other major sporting events are considering e-Sports to promote their products.
E-Sport entrepreneurs must consider using platforms like TwitchTV, Microsoft’s Mixer or You Tube– more precisely to stream personal e-Sports related content and to use already popular and proven successful monetization model in the form of subscriptions for access to additional content, as well as donations and digital marketing.
The focus to create and manage e-Sports-related programs, particularly focused on the target market, whose viewers, even though they are familiar with English as a language of communication may prefer vernacular or local language to follow programs. Needless to say, that e-Sports is at an inflection point of breaking out from a niche category opportunity to a blockbuster.