It’s starting to change….

Welcome to the new paradigm..!

Last few years have been momentous in the Entertainment and Media industry. Not only has the character of the business changed but now the change on the category as well as the form of players that will be key and dominate is starting to take shape. This change is true across the world and India as it grows to stature of a key market. It is and will most likely be affected by these changes in the world order. Had written about the change on August 9 in one of my earlier blogs and it continues to be a reality. Latest instalment is the just announced merger of the Indian entertainment behemoth ZEE with SONY business in India. This will, if consummated,create the largest network of channels in India both entertainment as well as sports, main line as well as regional with substantial inroads in the streaming space. If the prism is the India Entertainment scene then this is a major event which will change the way industry invests as well as functions in probably the largest upcoming market in the world.

The change has been largely dictated by the changing world which world over is moving away from Cable network business into OTT or the streaming business. Netflix is probably the pioneer of this business being the largest and having a market cap of almost USD 280 billion and having the largest subscriber base of over 200 million paying customers. With mobile as well as internet as the primary distribution medium, it has changed the very shape of the entertainment industry. OTT has changed the funding mix with subscription now being an important component rather than just being substantially advertisement led. It has also enabled different content from across the world to be seen, accessible through subtitles, dubbing and adaption of formats more suitable for the market it is accessed in. Not looking at content through an ad related vision also means better content that engenders a democratic choice, a paradigm shift from the menu driven choice earlier and probably the norm in the foreseeable future. Future also means the digitisation of the entertainment medium, death of some older methods of distribution and a massive jump in the outlay in both quality as well as quantity in content production which now will be made for worldwide audiences. With the revenue partly tied to subscriber base and not only advertisement, the linkage between subscriber as well as the content not being direct, the outlays huge with outcomes uncertain, substantially raises the risk of managing a platform for smaller networks. Therefore the likely content spend, the changing distribution parameters may be some of the core ideas behind the likely combination of ZEE and SONY.

However the change to my mind does not stop here. Combination of two large TV content and distribution networks is certainly a step in the logical direction but perhaps is not the end. My view is that with the tech giants like Apple, Google, Facebook, or for that matter Amazon having wide capabilities of reaching the actual consumer, slowly getting the the majority of the advertisement kitty and having massive other cash resources, their propensity’s to spend for good content far exceeds anybody else at present. While they do consume as well as produce content today too but largely procured through entertainment networks. What stops them from taking over the full activity of production of content too? Entertainment content and other content is a logical addition as a front end activity for the big tech companies. It’s a matter of time before big global networks like Disney, HBO or even Netflix could be looked at as a welcome addition or adjunct to achieve the likely tech led dominance of the Entertainment and Media sector. India also then would have to follow suit and not look very different.

Change therefore is something that one needs to expect in this ever changing world. Every big network whether in India or the world needs to look at this probable eventuality as they move forward. Entertainment and content in particular is still king but depends which throne will it climb..!! Something to think about…

Published by eyeonmediablog

Professional Chartered Accountant and presently the founder and chairman of Sapphire Professional Services Pvt Ltd - a boutique advisory firm in M&A,Strategy and Structuring ( www.sapphire-pro.co.in ). Previously a senior partner with PwC and leader of the Entertainment & Media industry in India for 7 years.

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