What happened last year and what can we expect in the year to come? The PricewaterhouseCoopers’ Indian Entertainment and Media (E&M) Outlook has the answers
2009: THE YEAR AFTER THE STORM
With some notable exceptions, particularly in China and India, severe recession in most countries led to steep decline in advertising—the category most sensitive to the economy—and to reductions in consumer/end-user spending, globally. Global advertising fell by 11.8% and consumer/end-user spending decreased by 0.5%. As a whole, the global E&M market declined by 3.0% in 2009, a somewhat smaller decrease compared with the 3.9% drop we had projected.
However, India was one of the few countries not severely impacted by recession.
The E&M industry in 2009 stood at Rs. 580.8 billion registering a growth of 2.2% as compared to Rs. 568.5 billion in 2008. This was lower than our projected growth rate of 8.3% for last year. The reason for lower growth rate was largely because of lower than expected uptake in the advertisement dependent sectors like print, OOH and internet advertisement. The E&M industry continues to be dominated by TV, print and filmed entertainment.
Indian Advertising Industry
Due to the economic slowdown, the advertising industry was flat showing almost no growth in 2009.
This came close on the heels of 2008, a year when the performance of this industry slowed down as compared to the previous years. In 2009, the advertising industry remained at an estimated size of Rs. 216.5 billion as compared to Rs. 216 billion in 2008. In the last four years (2005- 2009), the industry recorded a cumulative growth of 13.5% on an overall basis.
The most impressive growth was from the smallest segment of the industry by size – internet advertising. Though, this segment grew by 20.0% in 2009, it was well below the growth of 85% in 2008 and our own projected growth of 50%. Print was primarily affected by the negative growth witnessed by the magazine publishing industry. Print advertising remained the largest segment in the advertising industry at 46% followed by television at 41%.
Theme 2009: Countering the economic slowdown through innovations in advertisement solutions
In a market affected by slowdown, advertisers had their marketing spends curtailed. During these times, advertisers were looking at more than just traditional ways of communication. Media players began to offer solutions and not just advertising avenues. While brands will continue to use traditional advertising platforms such as magazines, radio, and TV, they are now also actively seeking new ways to engage with consumers. For advertisers this will mean more effective use of their funds, as it will provide broadcasters with the opportunity to get some premium over the usual advertising rates.
Roadblock Strategy: Roadblock refers to buying all the advertisement spaces in a media vehicle for a day, thus blocking all other advertisers. This was a popular form of advertising in 2009 to gain visibility and getting value for money.
- Times of India and Volkswagen (Print): Volkswagen tied up with Times of India to make a Volkswagen edition on 11th November 2009. Advertisements of Volkswagen brands such as Beetle, Jetta and others dominated the complete newspaper from cover to cover for the day. The front page had a Volkswagen cutout in the form of a car. As per industry estimates, Volkswagen spent around Rs. 100 million for the one-day roadblock.
- HUL on Zee and Star (TV): HUL conducted a roadblock on 25 Zee channels on 24th September 2009 and across all the Star channels on 17th September and 29th October 2009. The estimated spending is in the range of Rs. 80-90 million for each of these roadblocks. Lifebouy and Lux were the two main brands promoted during these campaigns.
- Bingo and Cadbury on MTV (TV): Bingo and Cadbury had a roadblock on MTV on 1st April and 1st July 2009, respectively. MTV also created the content in these promos.
Theme-based creative and solutions:
- ENIL and Idea Cellular for saving paper (OOH): ENIL, in association with Idea Cellular, designed an outdoor campaign to promote its go green initiative. The initiative was branded ‘Use mobile, save paper’. ENIL and Idea encouraged users to use their mobile phones as tickets for Bandra-Worli sea link toll and also a movie show in PVR. The first few thousand people sending an sms ‘Idea sealink’ to 58888 to show interest in the initiative received an SMS enabling them to travel on the Bandra-Worli sea link on 25th February 2009 between 8 am to 12 noon. Another initiative was a free movie screening where 200 people who smsed ‘Idea movie’ to 58888 won free tickets to a screening of ‘Karthik Calling Karthik’ at PVR Cinemas on 25th February 2009. The same was repeated on DND flyover in Delhi.
- Times of India and L’Oreal for go green campaign (Print): “Take Care, Take Charge” initiative was launched by L’Oreal and TOI to build awareness about a greener planet on World Earth Day, 22nd April 2009. For every idea received, TOI bought 10kg of used paper. On 5th June 2009, World Environment Day, TOI published its newspaper from completely recycled paper.
- Increasing mobile penetration, advent of 2G/3G and portable music players have given a boost to digital music; however physical sales continue to drop with piracy being the main culprit.
- There is a move by some players to utilise this opportunity of digital music and provide free music online which is also DRM free. One such case in point is Nokia’s Ovi store.
- Mobile VAS which contributed 28% to the music revenues in 2009 is expected to contribute 70% by 2014. Currently, it is dominated by CRBT downloads. With 3G auctions being completed recently, it is estimated that other forms of music usage, such as live streaming, will show increased demand.
- Music royalty issue is a major bone of contention between radio and music players. Successful resolution of this issue and rollout of phase III in radio will help music companies increase their revenues from radio players.
Towards 2014: En route to sustainable revenues
The E&M industry as a whole will continue to be dominated by TV, print and films by 2014. This is not very different from the present structure.
Digital Vs. Non-Digital Spend
Globally, digital spending is growing at a brisk pace. In 2009, digital spending accounted for 24% of the total global E&M spending and is expected to rise to 32-33% by 2014. It is expected that, globally, in the next five years, digital technology will progressively increase dominance across all the E&M segments and there are two key factors affecting this change:
- Advances in technology and infrastructure
- Consumer behaviour
However, India is a very different case in point. While most industry players have been talking about increasing digital spending, this still accounts for very little in the India scenario. Digital spending in India has not been growing at the same pace as that internationally. The primary reason for the same is the lack of adequate digital infrastructure and slow pace of growth in the same. While consumer behaviour is increasingly moving towards digital spending, the lack of digital infrastructure is hindering this growth. Given the current scenario, we expect that non-digital spending will continue to remain the key factor for growth of E&M players in India. It is vital to remember that legacy of off-line revenue streams are still significantly larger than digital revenues and will remain so throughout the five-year forecast period. This means that the industry needs to ensure it embraces digital not as a competitor to traditional analog services, but as a complement. E&M companies need to strike the right balance between old and new, by nurturing and sustaining their cash generative traditional offerings while embracing the digital revenue streams. The next five years will see the emergence of each of the Entertainment and Media segment along a few growth lines. We have segregated these into few key themes which we feel would be driving factors for the industry along “Consumer behaviour” and “Industry initiatives”. These themes are:
- Mobility: The rising power of mobility and devices
- Consumer Experience: Increasing engagement and readiness to pay for content…driven by improved consumption experiences and convenience industry initiatives
- Digitalisation: Bridging the digital divide
- Regionalisation: The next step towards growth
2014: India Outlook
The Indian E&M industry is estimated to grow from Rs. 580.8 billion in 2009, at a CAGR of 12.4% for the next 5 years to reach Rs. 1040.8 billion in 2014. Television industry is projected to continue to be the major contributor to the overall industry revenue pie and is estimated to grow at a healthy rate of 13.0% cumulatively over the next 5 years, from an estimated Rs. 265.5 billion in 2009. The overall television industry is projected to reach Rs. 488.0 billion by 2014. In the television pie, television distribution is projected to garner a share of 60% in 2014 while television advertising is expected to have 35% share and television Content industry have a 5% share. Of the advertising industry pie, television advertising industry is projected to command a share of 46.0% in 2014, from a present share of 41.0%. The Indian print media industry is projected to grow by 7.4% over the period 2010-14, reaching to Rs. 230.5 billion in 2014 from the present Rs. 161.5 billion in 2009. The relative shares of newspaper publishing and magazine publishing which showed a shift towards newspaper owing to poor performance in magazine industry is expected to shift back towards the original ratio and expected to remain the same at around 86-87% in favour of newspaper publishing. Magazine publishing is expected to grow at a higher rate of 11.5% as compared with newspaper publishing which is expected to grow at 6.8% for the next five years. This is due to the expected launch of a host of niche magazines who will command higher advertising premium.