2014 -will it bring us closer to the Digital tipping point?

As 2013 comes to a close, last few weeks as usual have seen a frenzy of images, reminding us of the important milestones we witnessed in the past 12 months. Besides the lukewarm fortunes on the economy, which were consistent alongwith a rather poor record of good governance , there were also images of the political churning against corruption as well as surprising voice of the ‘AamAadmi’ finally starting to come to the fore. One startling fact that everybody  recognised and noted was the advent of Social Media as the preferred choice as the carrier of the message. While the world may not have shifted away from other forms of  media, the digital interconnected highway of information is increasingly making its way as a very important medium of communication. In a country like India, where internet infrastructure and intelligent devices are not at par with the world , it was always considered that digital revolution was, a while away. The importance of the ‘Social Media’ has surprisingly also coincided with the increased use of the digital information highway for access to information and online purchases. The current valuation of some of the online properties bear out this fact. This therefore begs the questions – ‘Are we close to the digital tipping point? ‘  ‘What caused this change?’ and finally what are the likely implications for the E&M industry?

 

It is also customary at every start of the year to do a little crystal ball gazing as to what the future holds for us.  Before we do look at the crystal ball and imagine what is likely to happen in 2014 ,its important to understand what is causing us to reflect that we are at the cusp  of a major change . As per TRAI latest estimates, the internet users are likely to touch 200 million plus, making India the second largest  internet user after China. The user base has grown by 40 -60% in the urban/rural markets respectively over the last year. It is pertinent to note however that while the wireline access grew , the major growth as well as connectivity came through mobile. 60-70% usage is through mobile and growing at a faster clip than wirelineaccess . Facts now corroborate what one had predicted earlier that India’s digital growth will largely happen through a mobile platform.

 

Therefore, if the above is a fact then its good to crystal gaze and visualise how the business of Entertainment & Media will change. Also it may be the right time to estimate the pace of change and how far are we from the tipping point. People have an insatiable desire for  entertainment and one does not want to be caught on the wrong foot, if the medium of satisfaction of that desire changes  and changes rapidly.

 

Lets look at some of the pointers. The first is the growth in internet usage. The second is the demand for Smart Phones and Tablets which have outstripped the supply of fixed PC / laptops and are increasingly cannibalizing the TV screen. Prices of the   said smart devices are constantly  coming down making them affordable. Further with faster  4G speeds becoming a reality, we would be fooling ourselves if we do not fore see that the tipping point is closer than we think. Centre of this change is clearly the ‘Mobile’ device.

 

Therefore we need to reevaluate ourbusiness plans keeping distribution through wireless devices primarily the Smartphone in consideration. Content companies whether they are in news , current affairs, movies, documentaries, short films or TV serials need to resize their offerings based  on a new distribution medium. There is a need to rethink the economics and the value exchange.What could  be a loss of value can be made up by much faster growth. Its time to think of what ‘ Netflix’ ‘Redbox’ or ‘HuLu’ have on offer or for that matter what domestic companies like EROS, HUNGAMA and SHEMAROO have already started doing.Image

 

Market is in a transition mode. Its not that the traditional business of entertainment is going to finish. The companies need to defend these traditional offerings while trying to extend the new modes of delivery of content. There are still hurdles to delivery through Mobiles though.The payment gateway is still far from refined, the battery lives still not long enough, screen size is still small for total enjoyment of video and the prices of the devices remain high. Therefore, it’s a key question whether Mobile will be able to overcome all these issues to be relevant as we think it should be.  2014 could be a game changer should there be solutions to these hurdles. From all available facts the ‘Digital’ way of life does not seem very far away.

 

Advertisements

Where is the growth going to come from?

growthThere are two key generators of revenue for the E&M industry i.e. the Advertisement-spend and the second being the Consumer-spend.  The Advertisement-spend is approximately 35% of the total revenue of E&M Industry, which accrues to sectors like print, radio, TV, out-of-home media and internet to some extent. On the other hand Consumer-spend comes mainly in the form of cable subscription, internet subscription as well as ticketing revenues for films.

For India to get extraordinary growth one will have to think of expanding both of the key elements substantially. The assumption of 17-18% growth in the next seven years already takes into account most of the growth drivers like expansion on categories, better targeting, new channels, new screens, all are part of the strategy which has been considered. Where then are we likely to get growth, which presently is not envisioned?

In addition to this, the question is also of falling GDP growth, which is negatively impacting Advertisement growth in the country. Advertisement growth which was till last year envisioned to grow at around 12% on an average has taken a downturn and would perhaps grow lower than the GDP if the trends remain negative. Consumer spend too is affected though the silver lining in the current period is that the subscription fee will be better largely due to the success of the ongoing digitization process on the distribution side.  This would be largely revenue which will come under the accountable fold and hence be available for sharing to content providers & broadcasters. However, this may not mean an expansion of the market in real terms.

Then where do we look for the forecasted growth as well as the extra growth that the industry is looking for?

The macro factors will play their part and it may not be within industry’s capability to control them. Thus, what the industry can do is to do better with the elements it has in-hand. There is a widely held belief in the E&M Industry worldwide, which is relevant for India, that ‘Content’ is King and ‘Distribution’ is God. I believe that there is merit in looking at both of these concepts very closely for a likely solution not only to get growth but also for sustainable growth.

If we look at the content in India today, whatever is produced is produced for Indian audiences in India or abroad. There definitely needs to be a disruptive thought process to improve content that will appeal to worldwide audiences. Larger reach with different delivery formats will bring larger budgets as well as significantly disproportionate increase in revenue. What will also be significant will be the measure that will improve the monetization of that content across markets over a period of time. This can happen through rational IPR policies and their strict application.

Lets stay with ‘Content’ for the time being and explore ways where we can produce and monetize content to achieve the abovementioned.

More on that in the next installment… 

logo-pic.jpg


eye on media blog


Entertainment & Media industry with revenue of USD 17 billion has always been in the news, whether it is for the glamour quotient, myriad controversies, its growth in the past or the future potential of the same. Although, there are enough forums and tabloids that cover the glamour as well as the controversy part of this huge industry, not much has been written about the growth and the future aspects of the same.

Through this blog, my endeavour is to provide a two-way platform to discuss the future growth potential as well as the business model of an industry that is in the throes of a big change worldwide. The other reason for this blog is more personal as I want to remain connected with an industry sector where I have worked very closely with the constituents in the past seven years as head of the PwC Entertainment & Media…

View original post 566 more words

Hi, Welcome to my blog!


Entertainment & Media industry with revenue of USD 17 billion has always been in the news, whether it is for the glamour quotient, myriad controversies, its growth in the past or the future potential of the same. Although, there are enough forums and tabloids that cover the glamour as well as the controversy part of this huge industry, not much has been written about the growth and the future aspects of the same.

Through this blog, my endeavour is to provide a two-way platform to discuss the future growth potential as well as the business model of an industry that is in the throes of a big change worldwide. The other reason for this blog is more personal as I want to remain connected with an industry sector where I have worked very closely with the constituents in the past seven years as head of the PwC Entertainment & Media team in India. After an early retirement from PwC earlier this year, I have started my firm Sapphire Professional Services. This blog will hopefully keep me connected and become a platform for discussion on the future of the Industry.

logo-pic.jpg

Fortunately, with the kind of change taking place throughout the world with digital becoming the new normal, myriad of different businesses under the E&M umbrella growing differently, we probably will have no dearth of discussion topics in the short-term. However, to kick-start the conversation let us look at the future growth potential of the E&M Industry in India in general. This was also the subject of discussion at a recent industry event held in the capital with most of the industry captains and the Government in attendance.

We in India, for the past few years have got accustomed to seeing double-digit growth in most of the sectors and anything less is not exciting enough or lets say not news-worthy. Maybe this reaction is because it feels good to be on top of the table of the parameter that is most searched for at that moment even if you perform very poorly in most of the other parameters.  Therefore, despite having a growth of almost 17-18 % (we are the highest in the world), there is a thought process that India is not growing at its full potential in the E&M sector. USD 100 billion in 2020 is what many believe and estimate that the industry should grow to. Can this be achieved? Where is the growth going to come from? Do we know all the variables? Probably not. Can we add to the confusion? Yes, we can.
first blog picture

To start the discussion, I would like to put forth my thought process on a macro level and share it with you. The India E&M Industry as per recently released PwC report is a USD 17 billion revenue industry.  In India this industry is largely driven by non-digital elements unlike elsewhere in the world where digital streams are showing the highest growth rate. Again, quoting from the PwC report, this sector is likely to grow at a CAGR of 17-18 % over the next five years making the industry more than double its present size at USD 38 billion in the year 2016. If one was to take the linear progression and assume that the industry will continue to grow at the same rate up to 2020, the industry size will be approx. USD 70 billion. Therefore, it seems that India will have to do a few things very differently to achieve an additional USD 30 billion. Few facts need to be kept in mind as we look to suggest solution for the extra growth: –

  • The current revenue of the industry is largely from non-digital platforms as TV, Print and Film account for almost 85% of the industry.

  • Shift from non-digital to digital could decrease the value in the short-term.

  • Advertising spend and Consumer spend are the two key contributors to the revenue with advertising contributing at over 35% of the total revenue pie.

Before I put forth my views on finding a way to the extra growth, I would like to welcome thoughts from you. Whether any other thoughts need to be kept in mind and what we should be doing differently?  Please log your comments below, as then hopefully a discussion can develop.

Advertisements
%d bloggers like this: