India is seeing strong growth in the Media and Entertainment (M&E) sector. However, this is an atypical market, given its huge size and highly specific features at both national and regional level.
The Media and Entertainment industry in India is forecast to grow at a compound annual growth rate (CAGR) of 12% – a much faster rate than national economic growth – to reach a value of $25.8 billion by 2014, according to a report by multinational professional services firm Ernst & Young. India’s M&E industry is one of the fastest-developing in the country, driven by changing consumption patterns, the increasing number of middle-income households and the propensity of consumers to spend on leisure and entertainment. Digitisation of content and platforms, redefinition of prevalent business models, globalisation, easier access to capital and the emergence of multiple entertainment options are some of the key trends shaping the M&E industry in India highlighted by the report: ‘Spotlight on India’s entertainment economy – Seizing new growth opportunities’. According to Ernst & Young’s Media & Entertainment Leader, Farokh T. Balsara, “the M&E industry in India has been, and will continue to be, one of the biggest beneficiaries of India’s favourable demographics. Being one of the youngest nations in the world, with high volumes of content consumption, a vibrant indigenous content creation industry and a favourable regulatory framework, makes India an attractive investment destination for global M&E companies.”
Improving business environment but challenges remain
It is undeniable that considerable progress has been made towards a business-friendly regulatory environment, with some very positive policy changes. The Government has relaxed entry regulations and restrictions governing foreign companies in India and has raised the cap on foreign direct investment in the radio, TV, direct-to-home (satellite TV) and cable segments. However, fraud, corruption and piracy remain obstacles facing companies wishing to establish themselves in the market. In addition, Internet use in India – likely to be a key factor in the growth of the M&E sector – currently stands at 7%, very low compared with the other BRIC countries which have attained penetration of 31% (Brazil), 41% (Russia) and 34% (China). Moreover, only 1% of the population today have broadband Internet access. The special nature of India’s M&E market can be illustrated by the fact that this is the only country where newspapers are still thriving. Printed newspapers account for 42% of the total advertising spend in India, the most of any medium, driven by increasing literacy rates. However, the share of English-language newspapers in total print advertising has declined to just under a third, from 39% in 1999, as Hindi and regional-language newspapers have gained ground.
Strong regional features
In fact a key characteristic of the M&E sector in India is its diversity, each region constituting its own market, with its own preferences for content, based on distinct cultures and different languages, so specific local content is a must. As regards television, which reaches around 60% of all households in the country, there are more regional channels than national ones. Niche markets are also appearing. New, highly specialised channels have appeared, some focusing for example on science, others on tourism. This trend is also true of the print segment, where speciality magazines focusing on luxury, or aimed at a younger audience, have sprung up. In addition, the wide range of information on offer in India has an increasingly globalised feel. In sport, for instance, matches and events taking place abroad are now watched by a large audience, even when the sport in question is not widely played in the country. The best example is perhaps the English Premier (soccer) League, where the audience has grown by 18% in one year. This trend “has led European soccer clubs to increase their presence in India through licensing and partnerships, with some clubs introducing their own coffee chains and theme shops,” E&Y points out.