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Indian media and entertainment sector – an analysis

1. The growth of media industry in brief

Indian media and entertainment (M&E) industry grew at a CAGR of 10.90 per cent
from FY17-18; and is expected to grow at a CAGR of 13.10 per cent to touch Rs
2,660.20 billion (US$ 39.68 billion) by FY23 from Rs 1,436.00 billion (US$ 22.28
billion) in FY18. India's media consumption has grown at a CAGR of 9 per cent
during 2012-18, almost nine times that of US and two times that of China. The
industry provides employment to 3.5-4 million people, including both direct and
indirect employment in CY 2017.

India's online gaming industry is expected to grow at a CAGR of 22 per cent between
FY18-23 to reach Rs 11,900 crore (US$ 1.68 billion) in FY23

India’s advertising revenue is projected to reach Rs 1,232.70 billion (US$ 18.39

billion) in FY23 from Rs 608.30 billion (US$ 9.44 billion) in FY18.
The Indian Media and Entertainment (M&E) industry is a sunrise sector for the
economy and is making high growth strides. Proving its resilience to the world, the
Indian M&E industry is on the cusp of a strong phase of growth, backed by rising
consumer demand and improving advertising revenues. The industry has been largely
driven by increasing digitisation and higher internet usage over the last decade.
Internet has almost become a mainstream media for entertainment for most of the
people.

The Indian advertising industry is projected to be the second fastest growing

advertising market in Asia after China. At present, advertising revenue accounts for
around 0.38 per cent of India’s gross domestic product.

2. Reasons for the growth of the entertainment sector of India.

The media and entertainment industry in India has reached a size of Rs 1,63,100 crore
in FY’19, posting a growth of 13 per cent, as well as clocking a CAGR of 11.5 per
cent over the period FY15-FY19, stated KPMG India’s 11th edition of its Media and
Entertainment (M&E) report. Titled ‘India’s Digital Future: Mass of Niches’, the
report also said that the digital market is poised to become the second largest segment
in India after TV, and also attract the maximum advertising spend by FY’22.

The M&E industry grew 13 per cent in FY19 on the back of rapid growth in digital
user base and consumption, coupled with growing regional demand and monetisation,
the report said.
The M&E industry is expected to post a CAGR of 13.5 per cent over FY19-FY24, to
reach a size of Rs 3,07,000 crore in FY’24, the report stated. This will be on the back
of a greater focus on monetisation of emerging digital business models, strong
regional opportunities and favourable regulatory and operating scenarios across
traditional business, it said.
However, it also identified headwinds like the New Tariff Order (NTO)
implementation uncertainties, and early signs of economic slowdown, which have
pulled down the overall growth.

“With no major constraining factors, digital is expected to be a dominant force going

forward and in FY’23, it is likely to be the second largest segment after TV and attract
the highest marketing spend among all media formats. In 2019, as digital behaviour
evolves, subscription models will have a greater role in monetisation of digital
platforms. Further, evolving technologies are also presenting opportunities for
companies in the media and entertainment industry to achieve greater operational
efficiencies,” said Girish Menon, Partner & Head Media & Entertainment, KPMG in
India.

Smartphone penetration and low data costs, as well as investments in original and
regional digital content, were identified as favourable factors for digital access and
content supply respectively, and these factors will continue to drive up online
consumption.

The report drew attention to the “growing importance of regional language markets”
in India. “With the digital migration of English speaking audiences almost complete,
most new users coming online – and there are expected to be 500 million of them by
2030 – will access the internet in a local language,” it said.

Satya Easwaran, Partner & Head Technology, Media and Telecom, KPMG in India,
said that the “digital disruption” has forced a pivot of business models in media and
entertainment from a B2B2C model to a D2C one, and that segmentation and
demographic, psychographic and behavioural profiling will become increasingly
important.

“In the coming years, it will be hard to ignore the pessimistic signals emerging from
global economies but they will not have long term impacts and are unlikely to alter
the strong fundamentals and momentum of M&E consumption, especially digital, in
India. As an industry, we will remain upbeat on the prospects for both,” said Menon.

3. Statistics about internet penetration in India.

This statistic provides information on the number of internet users in India from 2015
to 2023. In 2018, India had 483 million internet users. This figure is projected to grow
to 666.4 million internet users in 2023. Despite the untapped potential, India already
is the second-largest online market worldwide. The majority of India's internet users
are mobile phone internet users, who take advantage of cheap alternatives to
expensive landline connections that require desktop PCs and infrastructure. As of
2016, India had 320.57 million mobile phone internet users and forecasts estimate
492.68 million Indian mobile phone internet users by 2022.