Media for the masses

294 Pages·2017·15.19 MB·English

Media for
the masses:
The promise
unfolds
KPMG India—FICCI
Indian Media and Entertainment
Industry Report, 2017
March 2017
KPMG.com/in
#KPMGMediaOutlook
We would like to thank all those who have contributed
and shared their valuable domain insights in helping us
put this report together.
Image courtesy:
Assemblage Entertainment Red Chillies VFX
Big Animation Reliance Entertainment
Disney India Sony Pictures Networks Limited
Maya Digital Studios Star India Private Limited
Eros International Toonz Animation
Great Indian Nautanki Company Yash Raj Films
Green Gold Animation Zee Entertainment Enterprises
Limited
Inox Leisure
Zee Studios
NYVFXWaala
Prime Focus India
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Media for
the masses:
The promise
unfolds
KPMG India—FICCI
Indian Media and Entertainment
Industry Report, 2017
Introduction
Digital
57
consumption Television
‘Bharat’ beckons
Data dividends
171 Sports
New goals
© 2017 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Foreword
01
25
Theme Parks
241
On a roller
coaster
151 Radio
On a sound
footing
Deal volume and
259
value in 2016
09
89 117
Print
The digital debate
continues…
189 Animation VFX and 223 Live Events
post-production The show does
go on…
Storyboarding success!
Acknowledgments
271 Tax and regulatory
Key issues and
developments
© 2017 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Impact of Goods
and Services Tax
Demonetisation
19
Films
In slow motion…
Foreword
© 2017 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The year 2016 was a mixed bag for the Indian Media poor box offce performance of Bollywood and Tamil
and Entertainment (M&E) industry. While the digital flms. However, revenue streams are widening with the
ecosystem penetrated further into the citizens’ day-to-day expansion of overseas markets, increase in the depth in
lives and opened up new avenues of consumption and regional markets and a rise in acquisitions of digital content
revenue, it was time for introspection for many parts of the by Over-the-top (OTT) platforms.
industry.
However, some of the traditionally smaller sub-segments
A slow economic recovery in the U.S. and muted growth of the industry registered impressive growth in 2016, led
in China saw the global economy grow at a sluggish by digital, which promises to be the fag-bearer of growth
rate of 2.6 per cent, with Brexit, the U.S. election and in M&E for years to come.
the rise of protectionist and free trade rhetoric adding to
business uncertainty. The Indian economy, nevertheless, After 2004, when the Calling Party Pays (CPP) regime
is expected to outperform major economies with a was implemented, India probably saw its second-largest
projected Financial Year (FY) 2017 Gross Domestic Product telecom revolution with the wide launch of high-speed
(GDP) growth rate of 7.1 per cent, despite the speed bump 4G services by operators across the country. Rising
caused by demonetisation. internet and broadband penetration, declining data
charges, coupled with the proliferation of internet enabled
In 2016, the Indian M&E industry grew at 9.1 per cent mobile phones, led to data consumption levels increase
on the back of advertising growth of 11.2 per cent. This manifold, driven by offers by the new entrant, Reliance Jio;
was aided by strong fundamentals and a steady growth which were quickly followed by major competitors Idea,
in consumption, although demonetisation shaved off Vodafone and Airtel.
150 to 250 basis points in terms of growth across all sub
segments at the end the year. This phenomenon has led to a sustained advertiser
interest in digital, resulting in a strong performance by the
Television experienced slower growth due to a lackluster sub-segment in 2016. Digital has also positively impacted
year for subscription revenues, which have faced the relatively smaller sub-segments, such as gaming
headwinds owing to continued challenges around and music — which registered impressive growth too.
digitisation and its intended benefts fowing through the With OTT platforms continuing to see major traction,
value chain. Television advertising saw sunrise sectors, digital Video-on-Demand (VOD) and television could see
such as e-commerce, scaling back spends signifcantly harmonious co-existence for the near future, feeding off
and the event of demonetisation leading to an adverse each other’s strengths.
impact across categories. However, strong long-term
Foreword fundamentals driven by domestic consumption augur well Volume improvements in smaller cities, the partial roll out
for the future. Growing access to rural audiences through of Batch 1 stations and some growth in effective ad rates
digitisation, coupled with content availability through led to a notable growth rate for radio in 2016. However,
increase in Free-to-Air (FTA) channels and deeper audience feeble uptake in Batch 2 of Phase 3 auctions and deferred
measurement will be a key catalyst to long-term growth, roll out of Batch 1 stations, coupled with an adverse effect
though this may have an adverse impact on distribution of demonetisation dampened the sentiments to an extent.
revenues. A solution to the tariff and interconnect orders
by the Telecom Regulatory Authority of India (TRAI), which Looking ahead, the future of M&E industry indeed
is acceptable to all stakeholders will be critical for the revolves around digital. The mobile phone, which today
successful completion of the digitisation exercise. reaches every nook and corner of the country, manifests
itself as a powerful medium to bridge the content
Print continued to experience a slowdown in growth rates, consumption divide across socio–economic classes and
as English language newspapers continued to be under categories. With the continued push by the government
pressure owing to rising users’ interest in digital content. around digital consumption and payments, mass adoption
The ‘Bharat’ story continued to play out well for the Print of technology is a foregone conclusion. However, this
segment, with language newspapers driving growth in brings with itself challenges for every sub-segment of
viewership and advertising. Demonetisation also adversely M&E industry to innovate, to align with this change, and
impacted advertisement growth in 4Q 2016, particularly evolve in terms of building sustainable business models.
the regional dailies. Whether existing industry stakeholders are able to
harness this potential dividend, or fnd themselves at the
Films had a disappointing year with a near fat performance wrong end of this divide, will be the big answer to watch
as the core revenue streams of domestic theatricals and out for in the future.
cable and satellite (C&S) rights declined, on the back of
Nitin Atroley Uday Shankar Ramesh Sippy
Partner and Head Chairman Co-Chairman
Sales and Markets FICCI Media and FICCI Media and
KPMG in India Entertainment Committee Entertainment Committee
© 2017 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
01
Introduction
The global economy has been sluggish in 2016 Strong economic fundamentals coupled with
with a growth rate of 2.6 per cent1, hampered by growth in domestic consumption has also aided
slow pick up in the U.S. economy and slowdown the Indian M&E industry to maintain a growth
in growth rates in China. Political uncertainties of 11.6 per cent over the last fve years. Though
and the rise in protectionist policies following demonetisation adversely impacted the Media
Brexit and the Republican win in the U.S. and Entertainment sector’s performance in Q3
Presidential elections further adversely impact and Q4 2016, especially advertising revenue, the
global economic momentum and business impact is likely to be short lived and normalcy
sentiment. is expected to return by Q2 2017. The long-term
factors driving the future growth are expected
In this uncertain global economic scenario, the
to remain positive, with growing rural demand,
Indian economy has been one of the brightest
increasing digital access and consumption, and
spots with an expected growth of 7.1 per cent
in FY172 despite the late impact on account of the expected culmination of the digitisation
process of television distribution over the next
demonetisation. Further, domestic consumption
two to three years.
has remained strong, accounting for around 70
per cent of the Gross Domestic Product (GDP) in
FY173. In FY18, the GDP is expected to continue
to grow above 7 per cent4, while in the long-
term both, demonetisation and the Goods and
Services Tax (GST) are likely to provide a boost to
the country’s GDP.
01. Economic Snapshot for the Major Economies, Focus Economics, 1 March 2017 04. Indian economy to grow over 7% in FY18: Shaktikanta Das, Economic Times, 4 February 2017
02. Indian economy to grow 7.1% in this fscal; Dec quarter GDP numbers surprising: Fitch, Economic
Times, 7 March 2017
03. Quarterly estimates of gross domestic product for the third quarter (Q3) of 2016-17, Central
Statistics Offce, 28 February 2017
© 2017 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
02
The Indian M&E industry: Size
Growth
Overall industry
in 2016
size (INR billion) 2011 2012 2013 2014 2015 2016
over
(For calendar years)
2015
TV 329.0 370.1 417.2 474.9 542.2 588.3 8.5%
Print 208.8 224.1 243.2 263.4 283.4 303.3 7.0%
Films 92.9 112.4 125.3 126.4 138.2 142.3 3.0%
Digital advertising 15.4 21.7 30.1 43.5 60.1 76.9 28.0%
Animation and VFX 31.0 35.3 39.7 44.9 51.1 59.5 16.4%
Gaming 13.0 15.3 19.2 23.5 26.5 30.8 16.2%
OOH 17.8 18.2 19.3 22.0 24.4 26.1 7.0%
Radio 11.5 12.7 14.6 17.2 19.8 22.7 14.6%
Music 9.0 10.6 9.6 9.8 10.8 12.2 13.0%
Total 728.4 821.0 918.1 1025.5 1156.5 1262.1 9.1%
Source: KPMG in India’s analysis and estimates, 2016–17
Advertising revenues: Size
Overall industry size Growth in
(INR billion) 2011 2012 2013 2014 2015 2016 2016 over
(For calendar years) 2015
TV 116.0 124.8 135.9 154.9 181.3 201.2 11.0%
Print 139.4 149.6 162.6 176.4 189.3 201.3 6.3%
Digital advertising 15.4 21.7 30.1 43.5 60.1 76.9 28.0%
OOH 17.8 18.2 19.3 22.0 24.4 26.1 7.0%
Radio 11.5 12.7 14.6 17.2 19.8 22.7 14.6%
Total 300.1 327.0 362.5 414.0 474.9 528.2 11.2%
Source: KPMG in India’s analysis and estimates, 2016–17
• Television witnessed slower growth in 2016 increased marketing spends by telecom
at 8.5 per cent, primarily due to a lacklustre operators on the launch of 4G services and
year for subscription revenues and a strong performance of Free-to-Air (FTA)
speed bump in advertisement revenue channels helped alleviate the pull down
growth. Though the advertisement revenue factors to an extent. The tepid growth in
growth at 11 per cent was steady, it was subscription revenues at 7 per cent was on
lower than last year’s estimates primarily the back of the stagnation in the digitisation
due to slower than expected domestic process and the resurgence of DD FreeDish
consumption, Broadcast Association as an alternative platform to pay TV.
Research Council (BARC) data recalibration
and impact of demonetisation. However,
strong performance of sports properties,
© 2017 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
03
• Print revenue growth rates continued Jio providing an added impetus. This trend is
to register a slowdown, clocking a 7 per also positively impacting the performance of
cent growth in 2016 as English language gaming and music segments.
newspapers continued to be under pressure.
• The animation and Visual Effects (VFX)
Regional language newspapers though
industry showcased a growth of 16.4 per
continued to show strong growth. Additionally,
cent, largely led by a 31 per cent growth in
the demonetisation move also adversely
VFX industry, which grew on the back of an
impacted advertisement growth in the last
increase in outsourcing work and the growing
quarter of the year, particularly for regional
use of VFX in domestic flm productions.
language publications given their greater
Further, the animation services and production
dependence on local advertisers.
space was also buoyed up by commissioning
• Films had a disappointing year with the of new projects and focus on domestic IPs.
growth down to a mere 3 per cent, which
• The Out of Home (OOH) segment registered
actually masks a decline in core revenue
a slowdown in growth rate at 7 per cent
streams of domestic theatricals and satellite
primarily due to the impact of demonetisation
(C&S) rights, on the back of poor box offce
though long-term indicators remain positive,
performance of Bollywood and Tamil flms.
especially in the airport, transit and ambient
The expansion of overseas markets, increase
segments. Although billboards continue to
in the depth in regional content and rise in
account for the largest revenue pie, new
acquisitions of digital content by Over-the-Top
metro lines, malls, corporate parks and the
(OTT) platforms are offsetting this decline and
leading airports are providing a much-needed
expected to drive growth in the future.
boost to the overall sector.
• Digital advertising continued its high growth
• Radio registered a 14.6 per cent growth
trajectory with a 28 per cent growth in 2016
led by volume enhancements in smaller
to reach 15 per cent share in the overall
cities, partial roll out of Batch 1 stations and
advertising revenues, though there was
a marginal increase in effective ad rates.
a marginal impact due to demonetisation.
However, weak uptake in Batch 2 auctions of
Advertisers’ interest has been captured by
Phase 3 and delays in the roll out of majority of
the continuing shift in consumption towards
Batch 1 stations coupled with adverse impact
digital media on the back of rapid growth
of demonetisation post November 2016
in internet penetration, mobile devices and
dampened the overall sentiment.
falling data costs, with the launch of Reliance
© 2017 KPMG, an Indian Registered Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.