The Indian media and entertainment industries has been growing by 11.6% over the last five years; the impact of demonetisation will level off by mid-2017; digital consumption, especially of video content, is set for an uptick. These are some of the highlights of the FICCI-Frames report for 2017.
The comprehensive study is brought out every year by FICCI (or the Federation of Indian Chambers of Commerce and Industry) and the audit firm KPMG, and is released to coincide with the industry event FICCI-Frames. This year’s report is titled “Media for the masses: The promise unfolds.” According to the report, demonetisation affected advertising revenue in the last two financial quarters of 2016, but the clouds will lift by mid-2017. The growth areas: “growing rural demand, increasing digital access and consumption, and the expected culmination of the digitisation process of television distribution over the next two to three years”.
Here are some of the highlights.
Show me the money
Here is how some of the major sectors stack up in terms of monetary value. Television grew 8.5% from Rs 542.2 billion to Rs 588.3 billion in 2016. Cinema grew 3%,from Rs 138.2 billion to Rs 142.3 billion.
Television remained the strongest sector for advertisers despite depressed economic conditions, stated the report: “Though the advertisement revenue growth at 11 per cent was steady, it was lower than last year’s estimates primarily due to slower than expected domestic consumption, Broadcast Research Association Council data recalibiration and demonetisation.” Subscription revenues grew at a “tepid 7 per cent”.
The news was worse for the movie trade across the country, whose 3% growth rate “masks a decline in core revenue streams of domestic theatricals and satellite rights, on the back of poor box office performance of Bollywood and Tamil films”, the report added.
A whole chapter is dedicated to the short-term impact of demonetisation (adverse) to the possible long-term gains (“largely positive”). Advertising revenues, which comprise 66% of overall earnings for the broadcast section and 80% of the print, were badly hit. “According to industry discussions, the estimated loss of advertisement revenues on account of demonetisation for Calendar Year 2016 is in the range of INR 15 to 17 billion”. Consumer goods companies were hammered the most. Live events (such as music concerts and festival-related celebrations) were also severely hit.
The movie business faced ongoing funding obstacles as well as demonetisation-specific challenges. Single screen cinemas were the most badly hit by the government’s decision to remove Rs 500 and Rs 1,000 notes from circulation.
The future is in your palm
Some number crunching: the average broadband speed in India is 4.1 MBPS, which is a 62% rise from the previous year. South Korea, however, leads the global chart at 26.3 MBPS.
The number of wireless users is “likely to cross 389 million in 2016 to reach 969 million in 2021”. In 2016, 3G and 4G connections were 25% of all connections; this figure is likely to rise to 80% by 2021.
Average data usage per subscriber rose by “76 per cent in nine months from December 2015 to September 2016, rising from 137 MB/month, to 240 MB/month”. Mobile data traffic grew 1.7 times in 2016. The number of internet-enabled cellphones crossed 300 million in 2016 and is likely to touch 700 million by 2021. Mobile video traffic is likely to grow 11.5 times until 2021.
“Video is expected to represent 60 per cent of the overall data traffic and is expected to grow 78 per cent by 2021,” said the report. This growth will be made possible by the rise in video-capable devices, which is estimated to grow 2.2-fold until 2021, reaching 800 million. “The share of video in overall mobile internet traffic is expected to rise from 49 per cent in 2016 to 75 per cent by 2021,” states the report. “Online video is part of lives of 85 per cent of mobile data consumers in India who watch them at least once a week.”
OTT but not what you think
A major disruptor is the rise of mobile internet usage and smartphones. Advertising spending on digital platforms is estimated to rise at a compound annual growth rate of 30.8% until 2021; several video-on-demand platforms have been launched, including global brands like Netflix and Amazon Prime and local players like VOOT and OZee; there is greater consumption of music on digital platforms.
The report struck a cautionary note: “However, monetisation models are limited and economic models are still evolving.”
Over-the-top content, a term used in the technology and media industries to refer to media that is directly relayed to consumers over the internet (for instance, audio and video), is undergoing a cross-fertilisation of energies and resources. Such OTT platforms as Hotstar and VOOT are offering shows previously reserved for television to their subscribers. There are stand-alone OTT providers such as Amazon Prime Video and Netflix. Then there are film and television production companies such as Eros and Balaji that are bankrolling original content. Finally, telecom companies such as Reliance’s Jio and Airtel’s Wynk are acquiring original content to distribute through their platforms.
Theatre revenue and earnings from cable and satellite deals were both down for the movie industries across India. In 2016, “the Indian film industry grew by a mere 3 per cent over the previous year to reach INR 142.3 billion”. The situation is likely to improve in 2017 – there are likely to be between 150 and 200 additional multiplex screens; single screen cinemas are estimated to recover from demonetisation; the market for digital rights of films will sustain for at least two years; acquisition of cable and satellite rights will probably resume. The Indian film industry is likely to grow at 7.7% till 2021 and be worth Rs 206.2 billion.
The beating heart of the Indian film industry remains the movie theatre. The share of theatrical revenue to the overall pie is 70%, and while it has shrunk by 4% over the last three years due to flops in Hindi and Tamil.
The total gross box office collection from Bollywood was at Rs 37 billion. Of the 225 movies that were released in 2016, 50 titles contributed to 96% of the net box office share. “Only 26 movies were able to garner more than INR 300 million (net) each and contributed around 80 per cent of the overall net box office collection. These films include Sultan and Dangal. “Differentiated, strong, message-based quality content” was popular in 2016 – another way of saying that well-packaged movies with convincing scripts and storylines worked in the previous year.
While marquee names continued to drive footfalls in Bollywood, movies with first-time directors and a non-starry cast scored in Telugu cinema, such as Pellichoopulu and Kshanam. In the Tamil film industry, only 20 of the 200-odd films that were released in 2016 were successful. The good news story from the south came from Kerala, where the “total domestic box office collection from top 10 movies increased by around 25 per cent in 2016 as compared to 2015”, says the report.
Hollywood gets closer home
The success of the Disney production The Jungle Book, which earned Rs 2.5 billion, exemplified the Hollywood story in India in 2016. Hollywood titles are more profit-making than before, contributing 10% to the revenue pie. The practice of dubbing English films in Indian languages was largely responsible, as were greater marketing and promotion and an increase in the number of multiplex screens.
NRIs to the rescue
At least eight per cent of the overall theatrical revenue for Indian films came from overseas territories. The main driver is southern cinema, whose “contribution has increased by around ten per cent over the previous year to reach 62 per cent of the overseas theatricals in 2016”, the report notes.
Bollywood didn’t improve on 2015: the total gross box office collection was Rs 37 billion. Seventy-five per cent of overseas revenues come from three major markets for Hindi films: the United States of America (30%), the United Kingdom (20%) and the Middle East (25%). Tamil cinema played catch-up, reaching Rs 3.5 billion, second only to Bollywood.
Ticket sales contribute 70% of the Indian film industry’s total revenue share. Does India have enough screens to boost the fortunes of its filmmakers? The FICCI Frames report estimates that there are 6,000 multiplex screens and 2,500 single screen theatres in India. Four multiplex companies contribute 70% of the business – PVR Cinemas, Inox Leisure, Cinepolis India and Carnival.
India has what is considered a low density of screens – only eight per one million Indians. Single screen theatres still account for more than 70 percent of total screens in India, but with the regular closure of such cinemas or their conversion to duplexes and multiplexes, the picture is set to change.
Piracy remains a major threat to theatrical revenues, according to the report, causing losses of Rs 180 billion each year.
Television: Who’s watching, and where
The Indian television industry’s worth is at Rs 588.3 billion in 2016 and estimated to reach Rs 1,165.6 billion by 2021. The spread of television in urban areas is stagnating. It is rural India (fondly referred to as “Bharat” in the M&E space) that is likely to witness fireworks. The urban-rural split has changed from 49:51 to 46:54. The rural television audience comprises largely people in the age group of 15-30, whereas in urban centres, the demographic is between 22-40. “An explanation for this difference could be the exposure of urban audiences to various devices and media…” speculates the report. Free-to-air TV channels are driving the growth in the news, cinema, music and devotional genres.
The viewership share of the general entertainment genre, which includes dramas, reality shows and talent hunt contests, stands at 55%-60% in 2016, and hasn’t moved much beyond 58% in 2015. Fictional shows are the most watched, and account for 8 out of the 10 top spots.
Movie channels collectively comprise 22-25% of viewership share in 2016, a marginal improvement from 20% in 2015. Hindi movie channels remain the most popular.
News channels had an 8%-10% viewership share in 2016, with the major slice of the pie belonging to regional channels. Children’s content channels have stayed at 4%-6%.
Regional channels registered an uptick in fortunes. “The four southern language markets account for nearly 2/3 of the regional viewership in 2016”, with Tamil and Telugu channels accounting for the strongest growth.
The number of viewers of English language channels is 220 million, out of which 60% belongs to six metros.
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