eye on media blog

Media & Entertainment Industry in India is one of the fastest growing and one of the few well recognized across the world. From the current estimate of Industry size of US$ 20 billion it is expected to touch US$ 35 billion in F.Y 21. With its burgeoning growth potential, world recognition, as well as world class skill base, it somehow just has not got the government attention it deserves. A free and fair press is a key pillar of democracy like ours and any government whether the present one or the ones’ in the past will reaffirm that they have done their bit to keep it that way. They will also say that the Ministry of Information & Broadcasting ranks high on the importance levels in the government and hence gets the industry the attention needed.

This then begs the question: ‘What is the attention we seek from the government?’ And secondly ‘Why do we collectively feel that the government is not giving that attention?’ To answer these questions, a better understanding of the Media & Entertainment industry is needed.

The business of Media and Entertainment currently is in throes of a change across the world and India is also experiencing the change. Most of the M&E businesses have two key pillars i.e, Content and the Distribution, Providing engaging, good, and clean Content is a prerequisite and so is regulation (whether self -regulation or government controlled regulation) to monitor such content. Legacy systems though existing are striving to keep pace with how the content is being distributed and regulated.

Distribution, has seen the biggest change in the past decade or so largely fueled by innovative advances in information technology and the changing consumer preferences. The consumers are rapidly moving towards consuming content anytime as well as anywhere and going away from fixed time viewing, made possible by innovative technology in wireless. Wireless in the form of smart mobiles are now capable of accessing worldwide content with very few barriers.

Therefore, most of the M&E businesses are now complex businesses. Global availability of content on the worldwide web facilitated by ever expanding smart phone technology have rendered the traditional business models of these businesses very vulnerable. Many of the M&E businesses were models largely funded by advertisement and very little through subscription. Inability to control the content offering to defined audiences, going away from regular payment mechanisms as well as vulnerability to protect the brand or IPR’s promise are making the businesses very risky and in search for the new model of sustainance. Therefore the role of regulation as well as the government becomes important as well as meaningful in today’s context as always. The government through selective investment, regulation as well as oversight can help in the following:

• creating appropriate regulation to oversee distribution content in today’s term of technological possibilities
• bringing licensing regulation in such a manner that it supports revenue generation as well as restricts undesirable behaviour including conflict of interests.
• help in creating infrastructure and adopting newer technologies.
• help in regulation with respect to Intellectual Property Rights (IPR’s), the lifeblood of M&E enterprises.
• Appointing independent regulators for important parts of the industry such that the constituents behave as per law laid down and their problems are addressed.
• Rationalise the tax guidelines of the industry for the benefit of the constituents as well as the government.

Clearly, Government has a key role to play in helping shape the M&E businesses. Why then, collectively as an industry there is always a feeling that government does not always help?

The reasons are many. Some of the reasons are of Governments own violation while the others can be attributed to the other industry constituents. Some areas where the government needs to take note are as follows:

1. Just as the industry constituents it is difficult, for the government too to understand the rapid change in the business model of the industry. They need to understand the rapidly changing technology as well as its capability to deliver content not only in India but across the borders without any real hindrance. This learning is key to understanding what as well as how to regulate and thereafter how to protect as well as enhance government revenue through taxes.
2. In India like in many other countries, the government performs a dual function. It is a regulator/Licensor as well as a Industry constituent with ownership of a large media organisation. It needs to find ways to delineate the two responsibilities such that it can lead to a healthy growth of the industry as well as the government owned media enterprises. Media tends to be the most regulated of the industries world over due to the tendency of controlling information landscape for nationalist endeavours. Some countries have managed the delineation well, of which UK/US are prime examples.
3. Political masters and the government look at Media often from the prism of nationalist endeavours and therefore fail to recognise the impetus the industry can provide for the country. With its well – endowed skill base as well as a worldwide calling card of ‘Bollywood’, the government has faltered in not enabling the industry to world standards through forward looking laws , infrastructure as well as tax policies. Their positive action could enhance skill base, provide jobs and more importantly increase the tax base.

However it has not been fault of the government every time it has not acted. Its also the industry constituents who have not been able to provide the government enough material for them to act.  Very often the pitches to the government are biased, meant to benefit few rather than the industry as a whole. To be fair to the government, they did act when it understood that digital distribution of TV content was the way forward or what the issues were in Radio licensing.

In the free world, the accepted way of educating and propositioning the government is through the industry associations. They usually provide knowledge of best practices as well as provide collective lobbying service. In India, specially for the M&E industry, there is no single ‘Industry Association’ which represents the industry as a whole. There are many associations which represent the different areas of M&E industry and are pretty active too. However, they usually proposition the government separately, often with separate agenda’s and at cross purposes even when some issues are same industry wide. Trade institutions like FICCI as well as CII have tried to play a stellar role in bringing these associations together on a common platform but they still fall far short of what, for instance, ‘NASSCOM’ has been able to do for IT industry.

Therefore, there is a key role for the Government to play to help grow the M&E industry. However industry players too need to come together, pooling knowledge and lobbying to get greater attention of the Government largesse for identified common issues. The route for greater cooperation between the Government of the day and the Industry constituents is there. It just needs greater cohesion and trust in each other. We all hope that future will allow the Industry players as well as the Government to work together to realize the real potential of the Media & Entertainment  Industry not only in India but  for success across the world.

This question is probably the uppermost in the minds of the digital entertainment entrepreneurs both on the content as well as the platform side. It is also important to the legacy content and legacy platforms that are looking to change to digital. The fact which has stood out is the change in consumer choice as well as preferences, which are rapidly shifting towards digital platforms. The change has been quite sudden and swift, as was witnessed in Print as well as Music. The legacy business models, the brands, revenue streams like advertisement as well as subscriptions – are all under threat, though to varying degree based on the technological progress as well infrastructure of the country. Consumer preferences dictate the businesses to be ‘Digital’ but the businesses need ‘Profit’ to be sustainable as well as attractive to the investment community. While this paradigm shift takes place, how does the entertainment business change and also remain relevant?

As you peel down the layers, the core of the Entertainment business remains ‘CONTENT’ Engaging content is what draws in the customers and the revenue. This remains true today as it has been in the past and probably is not likely to change in the future. Therefore, engaging content is the first key to any profitable entertainment business, either digital or otherwise. Content is engaging if it caters to the right genre, has the right production values and in today’s time is capable of being appreciated cross border as well as presented across multiple screens. The writers today visualise cross border audiences as well as their sensibilities and the production technology is advanced enough to fit it across screens.

While Good ‘CONTENT’ remains as the heart of every potential profitable Entertainment business, it’s ‘Distribution’ and ‘Monetization’ is equally key for the business to be profitable. ‘Distribution’ is the area which has seen and is likely to see the maximum change. The change has largely been due to technology which has functionally changed the way the content is distributed and consumed. Some examples:-

• Physical print media to online media.
• Physical video tapes / films to online transfer as data.
• Content transfer through internet.
• Access to content through mobile devices.
• Change from fixed time viewing of content to ‘mytime’ viewing.
• Change from fixed place viewing to anytime/anywhere viewing of content.

With the abovementioned changes in consumer preferences largely enabled by technology, ‘Distribution’ has become complex. It has also changed the profile of the distribution players from being businesses having access to exhibition and linear platforms to being technology driven enterprises having large investments in technology enablers. The revenue lines for each of the constituent’s i.e. the content owner, the distributor, the exhibition platform have also blurred due to rapid change in technology, consumer choice and possibility of different forms of delivery. Therefore understanding ‘Distribution’ in its current as well as changing state is the key to getting the maximum value for your ‘Content’.

‘Monetization’ in the legacy business has rested on three pillars. The first one is ‘Advertisement’ which has been a key contributor to the revenue for Entertainment businesses. Advertisement follows engaging content and the good news is that on an overall basis, it is expected to grow 11 – 12% on a year on year basis for the foreseeable future in India. Digital advertising in recent times has seen a phenomenal growth even though legacy platforms continue to be major beneficiaries of the advertisement stream. Therefore the question remains as to what will be time frame of the switch of the advertisement revenue stream from legacy content and platform to digital. Though the advent of change is apparent, the velocity differs from market to market and is dependent on information, technology, rate of adoption, availability of digital content as well as the consumption devices. It is also apparent that in countries like India or even in some developed markets, advertisement revenue and growth is likely to be available for both legacy as well as the new digital platforms for the next few years.

The second pillar of ‘Monetization’ is ‘Subscription fee’ which also includes entry ticket fee for the films. This revenue stream remains pretty strong for legacy platform whether it is cable subscription for linear TV or ticket cost for film exhibition. The subscription model for E digital content is still not a settled system and will have to come of age if the entire entertainment business were to go digital. Presently while the consumer preference to consume content digitally is growing exponentially, the propensity to pay for the content is not there. Most people want this content for free. Digital ‘AD’ based models are still to convince the investment community of being able to give a good return over a reasonable period of time. Therefore a co-play between the legacy model and the emerging reach through digital could be an interim solution for a profitable Entertainment venture.

Third area of ‘Monetization’ for Entertainment contact is the ‘IPR’ (Intellectual Property Rights’). It is these rights which have provided a recurrent cash flow for the legacy Entertainment business. This model is under dire threat with the advent of technology. With all content being now available electronically, its ownership, its use, as well as collection of royalty are a huge issue to be tackled for the new businesses. Strengthening of the ‘IPR’ regime in India is the key as in some of the mediums like films, half of the revenue comes through exploitation of these rights.

Therefore while it is true that there is a rapid shift of consumer preference to the digital, the revenue line is far from settled. The content for the digital screens is still being repurposed, the measurement systems are still being evolved and most importantly much of the content is still available free. The systems and the attitudes will evolve but till the same happens, today’s digital entertainment business is likely to fail to generate profit in a sustained manner.

As we experience more it becomes more apparent that in the interim one does need to maximize legacy revenues, as we build digital businesses. With legacy demand as well as revenues still being robust and growing, there needs to be equal attention to be paid to legacy platforms. In the interim, there is merit in having both, the business as well as the brands (digital and legacy) as a focus. There will be a time when the digital revenue of businesses will settle and maybe that will be a time we can forego legacy platforms. However in the foreseeable future, ‘Digital’ is good but only with equal attention to legacy platforms for a predictable profitable future.

There has been a significant buzz in the media recently about the ‘Digital India’ launch by Prime Minister Modi. It was launched at a very impressive ceremony reminiscent of the ‘Vibrant Gujarat’ summit amongst a galaxy of India Inc stalwarts promising a significant investment to make this dream come true. Yes this is a ‘dream’ which all of us in India have dreamed will come true someday. Even if 50% of amounts of investment committed actually happens we would be very close to achieving the same.

I have always followed the process of digitization from the blinkered view of an Entertainment and Media analyst watching with interest how increasing broadband connectivity has changed and continues to change the very basic paradigm of content delivery and now content production. It has disrupted the settled business models and the new business models are still being developed. Change has been rapid in some markets but relatively slow in India. Pace in India has lagged the world not because of the consumer mindset, but the lack of infrastructure or investment in infrastructure at par with the world. The advent of ‘Mobile’ and ’Wireless broadband’ is finally helping us leapfrog some of our legacy infrastructure issues.

    
However a digitally empowered service capability has a far larger import for a country like India than just looking at Entertainment Sector. It can help make a substantive difference on how India provides information and services to its vast multitudes of population and turn this into a true demographic dividend. The potential in following sectors has been discussed extensively and come to the mind immediately i.e,

• Healthcare – both information and services
• Education – with ability to reach large distances in language of choice & without physical infrastructure
• Entertainment / Media – content production, distribution and consumption
• E Governance – key government information & services provided without human interface
• Agriculture Services – Information & Services
• Financial Services – payment platform
• E commerce – ability to transact without physical infrastructure

Clearly, the benefits are many and a digitally empowered India is a necessity rather than good to have. Therefore then the ‘Digital India’ dream needs to be fulfilled and the government’s might behind this dream is welcome.

In recognizing this need to be digital, one must also recognize the difficulties one may encounter to get to a reasonable level of service delivery capability. In our euphoria of announcements, we must not get ahead of our ability to deliver. India as a country is far behind other countries in fixed line broadband & PC penetration.  Therefore our big thrust for connectivity is most likely through wireless and primarily on mobile devices. Some key areas which will need address before we can contemplate a hassle free digital connectivity are the following:

• Spectrum – Availability of Spectrum and management of its use is critical in providing wireless connectivity. The current availability of spectrum is woefully less, providing for speeds which are substantially lower than in digitally advanced countries. As data usage increases spectrum availability, cost and its management will play a crucial role in how digitally empowered we are. Without spectrum, large investments in services are not likely to fructify inspite of promises made.
• Devices – Provision of digital services & information is likely to be received through mobile and mobile handheld devices. Therefore, cost of such smart devices is the key to accessing digital services. Indian consumers are cost conscious and it is crucial at what prices these devices are available to them. The telecommunication revolution in this country was made possible through cheap devices. Therefore the ability to keep these costs down will determine the success of our digital drive.
• Infrastructure – If mobile is the device of choice, then the attendant infrastructure in terms of mobile towers needs to be in place. Provision of environmentally beneficial power for telecom towers as well as equipment is a critical component in our quest for being a digital power.
• Net Neutrality – To achieve the breakthrough and creative impact of digital connectivity, the government needs to ensure net neutrality or open internet with free & equal access to all consumers. Restricted access would hamper full digital creativity.
• Privacy Laws – As we get digital, privacy of personal information assumes significant importance. We need policy and implementation of policy at the highest level to protect against unauthorized use of such information. In a country like India, it is all the more important as sometimes you can buy almost anything including private information for a price. This would be a recipe for chaos and needs to be addressed as a critical piece in our journey on the digital ladder.

No journey is without its pitfalls, but that does not mean we do not embark on the same. A start has been made. We look with interest as to how the journey unfolds and how it integrates into the very fibre of our lives. Its time for the government not to let down its constituents who have already accepted this disruptive change in their lives.

25 million video views on a digital platform for the Indo Pak match, 4 million downloads of the digital entertainment app ‘Hotstar’ from STAR within a fortnight, the burgeoning valuation of e-tailing online platforms, the growing acceptance of public service delivery though online intervention as well as digital being seen as viable tool to curb corruption are the news which have hogged our headlines since the start of 2015. Individually, these are no doubt significant events which demand attention but looking at them collectively it is a huge ‘Tsunami’ which is about to engulf us in many ways we imagined but never experienced. Our lives are about to change mostly for the better, but also in many ways  where we still do not have full understanding. Probably it is the tipping point or very near the tipping point that we all have been discussing about. All this change or ‘Tsunami’ as I call it has happened due to a revolutionary device called the ‘MOBILE PHONE’.

No change in Indian subcontinent has been as disruptive as ‘Mobile Telephony’. Ever since it was introduced in 1995, it has virtually changed the way we communicate, exchange information and do business. It has been an inalienable part of you for the past 20 years encouraged by its ability to bridge distances through low rates and devices. With its smart phone possibilities, internet service highways and large connected population it now promises to change your life again if the present news is any indication. In this new world order of which India is a part what can we expect?

As a consumer of content and services the following:

• Ability to consume past and present content whether it is informative, entertainment oriented or specialist content at the place, time as well as on the device of your choice.
• Ability to consume services whether public or otherwise with least intervention, least cost and at the time of your liking.
• Ability to consume goods with widest choice, best bargains and delivered to the place of your choice with payment option to your liking.

As a businessman, provider of services and goods it opens the whole world as a market without any boundaries and without the present infrastructure costs with key supply partnerships in different parts of the world.

However ‘Utopia’ is still not at hand and many adjustments – legal , technology related as well as market related need to be made before we reach the full potential of the change which is at hand and that we will encounter to its full extent going forward. Some of those adjustments are technology as well as infrastructure related, which will require time to build and the roll up can be different in different markets. Other adjustments  – like a sudden overhaul of your business model, for example the change from fixed screen to multiple screens for entertainment content, change in subscription and adfunded models for content can be painful. Consumer preference usually predates the change in business models and that change will be painful and maybe a little drawn out. New avenues of revenue will need to fulfil this loss of revenue in present models either through enhanced coverage or better charging services. Another area which will evolve would be the IPR regime and the IPR protection of brands in an increasingly accessible world.

Welcome to the world of uncertainty!

Welcome to the Digital World!