Press Release

India’s digital edge

6 April 2015

?Investors are eyeing India’s digital media as explosive growth in consumption of news and entertainment on mobile devices prompts advertisers to spend more on Internet sites.

A report released on 25 March by the Federation of Indian Chambers of Commerce and Industry (Ficci) and KPMG forecast that the overall media and entertainment industry in India will grow at a compounded annual growth rate (CAGR) of 13.9% to touch Rs.1.96 trillion in 2019. Photo: Bloomberg
Rajesh Kamat, the Singapore-based group chief operating officer of media fund Chernin Asia Media (CA Media), has been frequenting India and other Asian markets, seeking media and entertainment firms to invest in. He’s tightlipped about disclosing information on?any?digital platforms he may be eyeing.
Yet, Kamat’s remark on the digital sector is telling. “It is going to be a golden age for the digital sector and it will continue to be an attractive sector for investment opportunities at least for the next couple of years,” he said.
Marcus Brauchli, founder and managing partner of North Base Media, a small US-based media fund, is also keenly exploring the Indian market for journalism-related media and technology companies in the digital space.
Brauchli, a former editor of The Washington Post and The Wall Street Journal, made no announcements on a recent visit, but made no secret of his interest in India. “I have set up a company to invest in media-related technology in growth markets around the world, and one of the places that we are interested in is India,” he said. It’s not hard to see why the two investors are interested in India’s digital media sector.
A report released on 25 March by the Federation of Indian Chambers of Commerce and Industry (Ficci) and KPMG forecast that the overall media and entertainment industry in India will grow at a compounded annual growth rate (CAGR) of 13.9% to touch Rs.1.96 trillion in 2019.
Other than digital, this includes television, print, radio, outdoor, gaming and animation.
Combined advertising on print, television, radio, outdoor and digital will touch Rs.47,400 crore in 2015 and Rs.81,600 crore in 2019, the report said.
The highlight of the report was the projected expansion of digital advertising. Digital in India grew substantially by 44.5% in 2014 over 2013, and at a much faster clip than all other media.
Advertising on digital media was valued at Rs.4,350 crore in 2014 and is projected to grow at a CAGR of 30.2% over the next five years to touch Rs.16,250 crore in 2019.
“Digital was the big story of the year. We expect the story to continue as digital will grow at a CAGR of over 30% for the next five years,” said Jehil Thakkar, head of the media and entertainment practice at KPMG.
One reason for the rapid inroads being made by digital media is the advent of the smartphone, on which much of the content on the Internet is being consumed.
According to the Ficci-KPMG report, India is the world’s fastest growing smartphone market. By the end of 2014, the country had around 116 million Internet-enabled smartphones and the number is expected to reach 435 million by 2019.
With eyeballs shifting from print and television to online media, the second screen phenomenon has become a reality.
“This growth presents a good opportunity for digital content aggregators, advertisers, app developers and online streaming companies to engage users through relevant mobile-led strategies,” the Ficci-KPMG report said.
Little surprise then that broadcaster Star India Pvt. Ltd in February launched Hotstar, an app that is available across all platforms including Android and iOS, or can be accessed through the Hotstar website free of cost.
Hotstar was launched by Star’s wholly owned subsidiary Novi Digital Entertainment Pvt. Ltd and offers more than 35,000 hours of content in seven languages. The company claims that the app has already seen 10 million downloads since its launch, with people spending an average of 24 minutes on it daily.
Hotstar came about as the ecosystem was ripe for the app, said Ajit Mohan, business head (digital media) at Star India. “Not only the smartphone ownership has gone up, at least 100 million people watch videos on mobiles,” he said.
According to Brauchli of North Base Media, people’s consumption of content rises dramatically when they get hold of smartphones. Mohan couldn’t agree more: Hotstar has expanded the viewership of Star’s content on mobile and viewers have not traded the big screen for the smaller one, he claimed.
“We have resolved content curation and streaming issues for mobiles even for consumers with low bandwidth problems,” Mohan added.
Several factors have driven the growth of the digital media; smartphone prices have dropped and telecom operators have made 3G pricing more realistic and affordable.
“Bandwidth is increasing, devices are becoming more powerful and content is getting more personalized. Eyeballs are moving towards mobile screens, evident in successful consumer adoption of services in music streaming and online videos,” Kamat of CA Media said.
Even so, Internet speeds and total Internet penetration remain a concern. Internet penetration in India is about 19%, low compared with international standards. Currently, the mobile phone subscriber base is almost nine times the installed base of personal computers in India.
While digital may have been the big theme of 2014, print and television media also grew on the back of the general election in the country and the enormous sums that e-commerce companies such as Snapdeal, Flipkart, Jabong and Quikr, among others, spent on advertising and promoting their brands.
Advertising revenues in 2014 grew 14.2% over 2013 to reach Rs.41,400 crore, of which print (43%) and television (37%) captured the lion’s share.
Projected at Rs.26,010 crore in another three years, television advertising revenue is expected to overtake print’s at Rs.25,520 crore.
Print grew at 8.3% in 2014 and remained fragmented at the national and regional levels. Circulation revenue rose 7.9% on the back of rising cover prices and subscriptions.
“Although the price rise was marginal, it is a big move for newspapers in India,” said Thakkar of KPMG.
In 2015, the share of advertising revenue for print is projected at Rs.19,260 crore.
“Digital will not cannibalize print. Newspapers in India are still priced very low, and are consumed in the morning. Reader relevance for print will stay,” Vinay Maheshwari, senior vice-president (sales and market development) at the Dainik Bhaskar Group, said at Ficci Frames, an annual media and entertainment industry event.
According to the Ficci-KPMG report, the newspaper industry derived its growth largely from tier II and tier III cities, with regional language editions outperforming the national editions and English dailies.
“There was a clear divergence of growth rate in English and regional newspapers. While English grew below 5%, regional grew in double digits,” said Thakkar. “While there still isn’t a US-style de-growth in English papers here, they need to get serious about their digital strategies.”
Thakkar also expected regional print media companies to become active and look for opportunities across mediums.
“You can also expect print media companies to look at broadcasting and radio with renewed interest as they realize, over a period of time, that long-term business models need to be tweaked. While print as a segment continues to remain big, companies will look to de-risk and go across media. That’s where you can expect to see a lot more deal activity as well,” he said.
Last year saw increased merger and acquisition activity in the media and entertainment sector. Deal value rose to $2.38 billion in 2014 across 61 transactions from $224 million in 2013 across 26 transactions.Source:
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