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Media & entertainment post-COVID: A careful course correction

The media and entertainment industry has been split wide open as a result of the pandemic. Gaming, digital and OTT have shown a positive growth in consumer mindshare as well as advertising revenues. However, outdoor and touch-driven segments like print, movies and theme parks are staring at huge losses. Going forward, gaming could in fact emerge as a mode for social virtual interaction, while movies and OTT projects could get smaller and more economically driven.

How did the COVID-19 pandemic impact the media and entertainment industry? The answer really depends on which side of the divide you are on. Cinema halls, print, theme parks, adventure sports and other such outdoor-oriented businesses suffered tremendous losses and high uncertainty. On the other hand, it has proved to be a blessing in disguise for TV, online gaming and OTT.

The media and entertainment sector witnessed a growth of 7% in overall revenue in FY’21. As per KPMG’s Media & Entertainment Report 2020, growth in overall revenue has been driven by gaming (45%); OTT and digital consumption (26%); music (15%) and TV (9%). The film segment witnessed flat growth, whereas radio, out-of-home (OOH) and print witnessed a decline during the fiscal year 2020. The television segment also witnesses a decent growth of 9%.

TPCI_Media_entertainment_graph1

Source: Media & Entertainment report, 2020, KPMG, figures in %

In 2020, advertising revenues of most segments in the industry have seen a significant decline. In particular, growth in advertising revenues of films, print, OOH and radio has been negative. However, digital and OTT segments have witnessed a positive growth of 24% in FY ’20 (ending June), while TV has witnessed a positive growth of 4%.

TPCI_Media_entertainment_graph2

Source: Media & Entertainment report, 2020, KPMG, figures show YoY growth for FY ’20 (year ending June)

Growth in digital and OTT segments has been possible due to growth in digital infrastructure and increase in content supply. In the report named Digital Infrastructure – Backbone of an economy by Confederation of Indian Industry (CII), India is among the fastest growing markets with 687.6 million internet subscribers and 1.19 billion telecom subscribers as of September 2020. OTT players such as Zee5, Hotstar, VOOT and Netflix are producing content in almost all regional languages in India.

The TV sector has seen positive growth in overall revenue in FY ’20, which was majorly driven by an increase in subscription post National Tariff Order 1.0 (NTO 1.0). However, advertising revenue of the television sector was  moderated as a result of the COVID pandemic and already slowing economy.

A significant factor responsible for de-growth in overall and advertisement revenue of the print industry is a fall in advertisement volumes, a trend that was also seen in 2018 and 2019. Films saw growth as a result of a rise in digital revenues. However, advertisers moved away from OOH spending due to the World Cup and elections. Casual gaming also witnessed positive growth in FY’20 along with in-app monetisation, which resulted in growing revenues. Radio witnessed a drop in revenue, majorly due to subdued government spending after elections. The music industry continued to grow, partly led by the rising adoption of digital platforms.

Game for growth

The gaming industry outperformed all other sectors in revenue growth, with customer base crossing 300 million. Total time spent on the e-gaming grew by 21% during the lockdown. Paytm First Games saw a 200% increase in users in the month of March alone. The surge in market growth has made the segment attractive for investments. Recently, Lumikai announced a venture fund, which will provide support to 20 early stage investments. The fund is backed by technology and gaming companies from US, South Korea, Finland and Japan.

By 2021, the gaming industry in India is expected to grow to a size of US$ 1 billion. The key factors responsible for the boom in this industry are a young population, high internet penetration and entertainment seeking behaviour. TV viewership also witnessed a rise amid the lockdown as the population of India was confined at home. Growth rate was at 40% in the fifth week of the lockdown, led by viewership of news channels and kids’ channels.

During the lockdown, content supply ceased with the shutting down of production houses. Events and movie theatres were shut. Advertising spends also declined as businesses faced challenges. However, OTT platforms experienced an increase in viewership. Zee5 saw an 80% rise in subscribers, while Disney+ Hotstar witnessed a total of 625,000 new additions in India between April-June, 2020.

As per Hammerkopf consumer survey, OTT consumption increased by 3 hours a day with the new prime time of 7 pm onwards. Between March and June 2020, major OTT players were Netflix and Amazon followed by other players such as Disney+ Hotstar, Jio Cinema and a few others.

TPCI_Media_entertainment_graph3

Source: JustWatch, figures for India in Q2, 2020

Mike Hopkins, SVP, Prime Video and Amazon Studios, considers India as the company’s priority market in the near future, while Amazon’s OTT platform plans to release more originals. Players have also devised new strategies to align with the current situation. Netflix launched a plan with free access to Android users in India for shows like Bird Box, Grace and Frankie and Stranger Things in September. Furthermore, to widen its consumer base, the OTT platform tested a Mobile+ plan worth Rs. 349 per month, apart from its game changing Rs 199/- per month mobile only plan. OTT platforms also experienced a major boost when Bollywood films including Gulabo Sitabo, Gunjan Saxena: The Kargil Girl, Shakuntla Devi and Ludo were released online, hence skipping the silver screens.

Holding their horses

The media & entertainment industry across the globe has been similarly affected. Almost two third of the population is watching news with half of the population focusing on video streaming services. Furthermore, amid the lockdown, music streaming services and social media also were in demand. Creators also switched online amid the pandemic. For example, episodes of the drama All Rise, have been filmed virtually and NBC Universal introduced the campaign The More You Know.

Focusing on gaming, the industry has seen a positive year over year growth with people finding it a compelling distraction while sitting at home. The market for video games across the globe is expected to be at US$ 159 billion in 2020. As per revenue share, the biggest market is Asia-Pacific, with a share of 50%.

Advertising revenue across the globe has seen a significant drop. As per Ad Spend channels, YOY growth in H1, 2020, has been at -6% for Display, -21% for TV, -8% for Search, -19% for OOH and 4% for digital video. Advertisers have adjusted according to the new demand with viewership trending towards digital media and TV at the cost of OOH and cinema.

TPCI_Media_entertainment_graph4

Source: World Economic Forum, YoY growth in H1, 2020

Small is the new big?

The future of the industry is expected to be bright for digital, OTT and gaming segments with prospects of accelerated growth. But overall, the industry is expected to decline in terms of revenue by 20% in FY’21. Films, print and TV face a possibly strong decline. However, if the industry learns to adjust to the new normal, then FY 2022 would be a rebound for the industry with a projected positive growth of 33% in overall revenues.

Segment size – Overall Revenues FY ’20 FY ’21 FY ’22 FY ’21 Growth FY ’22 Growth
Digital and OTT 218 254 338 17% 33%
TV 778 708 769 -9% 9%
Print 306 188 296 -38% 57%
Films 183 61 181 -67% 196%
Animation, VFX and post- production 101 49 77 -51% 56%
Gaming 90 99 143 10% 45%
Out of home 31 16 28 -49% 77%
Radio 25 12 17 -50% 40%
Music 19 14 17 -25% 16%
Total 1,751 1,402 1,866 -20% 33%

Source: Media & Entertainment report, 2020, KPMG; figures in Rs billion

Among all segments, advertising revenue is projected to be positive for Digital and OTT only in FY ’21. In case the industry is able to adjust, advertising revenue could also revive with a projected growth of 36% in FY 22.

Segment Size – Advertising Revenues FY 20 FY 21 FY 22 FY 21 Growth FY 22 Growth
Digital and OTT 199 223 292 12% 31%
TV 262 217 258 -17% 19%
Print 198 107 186 -46% 73%
Films 11 4 7 -65% 100%
Out of Home 31 16 28 -49% 77%
Radio 25 12 17 -50% 40%
Total 726 579 789 -20% 36%

Source: Media & Entertainment report, 2020, KPMG; figures in Rs billion

In the long term, it will be necessary for businesses to adjust to the low touch economy and act on new opportunities arising through change in consumer behaviour. It is expected that TV viewership would be back to pre-COVID levels. The print industry, in the long term, would require to reduce its dependence on advertising revenue. For films and OTT releases smaller budget projects would be economically driven. Cinemas would require to adjust to social distancing. Gaming, on the other hand, could leverage in-app monetisation purchases and possibly evolve as a medium for social virtual interaction.

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