Convergence, the new multiplier for Indian M&E’s $100 bn vision: CII-BCG report

India, today, is one of the fastest growing economies in the world with a GDP growth rate of 7.6 per cent in 2015-16, up from 7.2 per cent a year ago. A significant contributor to this growth has been the Media and Entertainment industry, which accounts for 0.9 per cent of the GDP and provides direct and indirect employment to nearly 5 million individuals in India. In addition, it has a multiplier effect on sectors such as trade and tourism. The sector has grown at a steady CAGR of 10-12 per cent YoY, and is projected to reach a revenue base of Rs 130,000 crore by the end of 2016. India is one of the few economies where M&E industry continues to grow in double digits.

The true potential of the Indian M&E industry can be summed up by the fact that it represents an opportunity for 5x - 6x growth over the next 10 years.

Collaboration, convergence and co-ordination across stakeholders are seen as the key pillars driving exponential growth and expansion in the Indian M&E industry.

The Confederation of Indian Industry (CII) organised its 5^th edition of The Big Picture Summit today on the theme: ‘Convergence, the new multiplier for Media & Entertainment's $100 billion vision’, with The Boston Consulting Group (BCG) as the knowledge partner. On this occasion, CII-BCG released a report that talks about new vectors for growth and disruption being the only way to stay competitive.

BCG conducted a survey of ~20,000 consumers over two years to analyse media consumption trends. The analysis revealed three vectors along which the industry can create explosive growth are digital, rural and supply.

According to the findings of the report, with smartphones and mobile data becoming affordable, it can be estimated that the number of connected rural consumers will increase from about 120 million in 2015 to 300 million+ in 2020, growing over 30 per cent year-on-year. This is basis the current telecom infrastructure and can leapfrog further if connectivity becomes ubiquitously affordable. Once connected, rural consumers’ media time spent grows at a faster clip than urban counterparts. Unlocking pent up demand the rural consumer is willing to bridge the 30 per cent consumption gap vs. urban counterparts, once they have access. Estimates suggest that access growth within rural could open up ~200-400 million new consumers (across media).

Digital is an equally potent lever, with digital consumers sending ~1.5X the time on media vis-a-vis unconnected counterparts. No variable segments digital – as this consumption spike shows across demographic and income variables. The only driver for digital consumption is digital age with consumers that spend >2 years online showing an inflexion and significantly higher growth.

Last but not the least, supply begets demand. If the industry is able to create differentiated supply audiences will consume more – very often stretching time spent on media and moving to multiple screens. This is perhaps the primary driver for disparate media consumption across states – where states with large supply of relevant local language content have been able to capture higher time form audiences.

Of the various M&E sub-sectors, television is by far the largest component of the M&E industry, and has grown steadily at ~11 per cent annually over the past five years.

The print sector which is on a decline in global markets is continuing to show positive growth in the Indian context due to a steady increase in literacy and regional growth. Print circulation in Hindi and vernacular languages has grown at ~6 per cent over the past five years, with regional publications proving to be the most substantial drivers of this growth.

The digital medium now has the wherewithal to change the game for the industry and prove itself to be pivotal to future progress. Although the per capita consumption of traditional media continues to grow at 3 per cent, digital consumption has expanded at a much more exponential pace clocking up to 15 per cent annually. This points to a growing pool of new, albeit low volume users, who are rapidly being inducted into the existing consumer stream across the country. This growth is also proving to be additive rather than cannibalising traditional media consumption.

However, television impressions in China are 20x the cost of TV impressions in India, while print impressions are ~4x higher. While the M&E industry in India sees better price points on the digital video medium and is almost double its Chinese counterpart, it continues to lag behind in other forms of digital media such as display advertising etc.

If these gaps are successfully bridged, India can increase digital advertising to 2x-3x of the current revenue levels with relative ease, adding an additional Rs 8,000 crore – Rs 13,000 crore to current industry revenues. The industry can drive better targeting of advertisement spends, minimise wastage and provide better value through big data and analytics capabilities in their monetisation endeavours.

On organising this summit, Chandrajit Banerjee, Director General, Confederation of Indian Industry, said, “We are extremely thrilled to bring forth the fifth edition of our annual flagship event - The Big Picture Summit - for the Media and Entertainment sector. With this collaboration, CII and BCG together aim to bring out enlightening insights from the sector. The government, regulator, academia and civil society will join the discussion to suggest new ways to achieve the mark of a $100 billion M&E industry.”

Adding to that, Sudhanshu Vats, Chairman, CII National Committee on Media & Entertainment and Group CEO, Viacom18 Media, said, “The CII Big Picture in its 5^th edition will bring together bright minds of M&E leaders to navigate a successful path that would take our M&E sector to $100 billion. During the two days of this summit, M&E leaders will make bold predictions about the future of media and provide insights and diverse thinking on the new disruptions and new business models on the fast changing M&E environment.”

According to Kanchan Samtani, Partner, BCG, India, “Digital consumption of media represents a large database of consumption patterns, viewing habits and consumer content preferences. Leveraging this data intelligently can help content creators customise new content to consumer tastes and preferences to create targeted hits and subsequent success. With this, India’s rural growth story is sure to replicate China’s growth in rural consumption as observed in the past. As penetration and content supply for digital media increased in China, smartphones replaced TVs as the preferred viewing screen. Today, China's rural consumers spend more time consuming digital media when compared to other media forms.”

While these growth trends can be capitalised and some (for example, higher rural distribution) might even be secular the industry needs to find ways to monetise increasing time spent.

Analytics will be on the biggest unlocks moving from consumption to monetisation. Players need to move away from monetising broad audiences to creating the right segments with who they are targeting – “identify” and when they are targeting them – “context”. BCG’s global studies suggest that context and indentify can help content providers raise realisations from advertisers by as much as 2-5X. Analytics can also provide attribution – with clearly stated metrics on brand and sales uplift. Gone are the days when we do not know which half of advertising works for industry leaders are now in a position to track returns on every rupee spent. The advertising pie itself needs to grow with new advertisers having local and niche audiences coming into the fray. The M&E industry needs to create the right platforms to find, handhold and serve these new advertisers.

The industry also needs to come together to solve for key challenges like talent, redistribution of monies across value chains and working with the regulator to create a positive environment.

In summary, there is significant potential for the industry to grow consumption and monetise that growth. However, these are not secular trends and will face headwinds from time to time.