If there is one sector that punches much above its weight, it is Media & Entertainment (M&E). Its actors and anchors are household names. From featuring on billboards they have found their way to political parties. Television shows like ‘Big Boss’, and ‘Kaun Banega Crorepati?’ are the stuff of family debate and commuter gossip.
Yet the companies who produce the entertainment content, and bring us news and live sports, are struggling. As the way people consume entertainment and news changes, companies must quickly adjust or die away. The big multiplex companies of yore – PVR and INOX – are in their last gasp as families now prefer to eat their chips and watch movies on Netflix.
The reason for the slow growth of media and entertainment is because it is a ‘secondary’ industry. It is largely dependent on advertising revenue, which in turn is dependent on how much other industry sectors are willing to spend on advertising, which is not much. For the individual consumer, ‘entertainment’ is always an ‘optional’ spend depending on how much is left after buying essentials like food. The poor growth of entertainment revenue is a reflection of India’s slow consumption story.
Television shrinks
Every year the M&E Industry does a round of introspection. Hosted by FICCI and branded as ‘Frames’, the annual jamboree in its 24th year, convened in Mumbai once again this week. The attendance was low, the speakers middle-order and the mood tepid. Kevin Vaz, chairman of FICCI’s media & entertainment committee, did try to work up some froth claiming, “India’s entertainment industry was poised to captivate the world.”
Mrinalini Jain, Chief Development Officer at content company, Banijay Asia and Endemol, on the other hand said at one of the sessions that though Indiansoap opera captures the intricacies of human relations, it is struggling to find markets overseas. The movement is only one way – ‘The Good Wife’, ‘Big Boss’ and ‘Fear Factor’ – are all formats lifted from successful US shows.
As Vaz reminded us, India produces a staggering 200,000 hours of content annually. This includes over 1,700 films, 3,000 hours of premium OTT content, and 20,000 songs. But the revenue they generate is a pittance. Does it reflect on the quality of the products? Or is it a marketing failure? The jury is still out on these questions.
The highlight of the 3-day industry evaluation is the Ernst & Young status report. It had, as it does every year, an optimistic ring; but a careful read reveals how much the industry is struggling. If there is a ray of hope, it is digital media.
The E&Y report said the M&E sector grew at about 8% in calendar 2023, an expansion of about Rs 17,300 crore, to reach Rs 2.32 lakh crore. While overall this was 21% above the pre-pandemic years, the report conceded traditional media – television, print and radio – lagged behind 2019 levels.
The big slowdown in advertising in the first half of CY2023 took a toll, especially television, the largest of the entertainment segments. Ad revenue actually fell 6.5% due to a slowdown in spending by gaming and D2C brands. There was a marginal growth in subscription, but overall television revenues were down 2% to Rs 69,600 crore in 2023 from Rs 70,900 crore in the previous year.
Change in pecking order
Regulation and the tight control over broadcasting licenses is a big concern. From the earlier galloping growth of TV channels, there is now a downturn: the total number of channels on air declining from 906 in 2021 to 899 in 2023. On the ground too the number of MSOs, the last mile cable-wallahs, have sharply fallen from 1,702 in December 2020 to 998 in December 2023.
There has been a marginal growth in the traditional segments, but it is linear and single-digit. Films for instance showed revenue of Rs 19,700 crore, an increase of 14% over the previous year. But compare it to the pre-pandemic revenue of Rs 19,100 crore, and it’s crawling at 3%.
Expectedly, digital media was marked out as the hope for the future. Digital advertising grew 15% to reach Rs 57,600 crore, or 51% of total advertising revenues. There was a slowdown in digital subscription though with revenue of Rs 7,800 crore. E&Y expects digital media, as a segment, to overtake television by the end of 2024.
All this is reflecting in the new pecking order. The two Big Tech companies – Google and Meta (formerly Facebook) – are strides ahead of the biggest traditional M&E companies. Of the current estimated annual advertising revenue of Rs 1.2 lakh crore, just Google India and Meta garner Rs 43,308 crore, ahead of the combined ad revenue of Disney Star, Zee, Times and Sony.
Unfortunately ‘Ficci Frames’ failed to discuss the biggest contemporary shakeout roiling the industry – the coming merger of Reliance Industries (RIL), Viacom 18 and Disney Star. The new Rs 70,000 crore ($ 8.5 billion) giant will compete ruthlessly with the Big Tech companies Meta and Google India for ad revenue and eyeballs.
It will ultimately be a Reliance company. Disney Star which will hold 37% will be reduced to a minority, perhaps preceding a complete exit
from India. The merger raises big questions: Can an entity that will control 45% of the TV advertising market and about 34% of OTT sales pass our anti-monopoly laws? And will this suffocate creative content? But then that is another story.