Budget has strong focus on digital push
The digital and allied sectors have long sought legitimacy in India's media and entertainment industry. The development of an animation, visual effects, gaming, and comic (AVGC) task group was announced by Finance Minister Nirmala Sitharaman in her Budget address for the fiscal year 2022-2023. She believes the industry has a lot of room for young people to work in it. In her address, she announced the formation of an AVGC promotion task group comprised of all stakeholders to suggest strategies to achieve this and increase local capacity to serve our markets and worldwide demand.
Karan Taurani, Senior Vice President, Research Analyst (Media, Consumer Discretionary & Internet), Elara Capital, analysing the Budget 2022 impact on digital media, explained, "The Union Budget 2022 had a strong focus on digital push and digital consumption; there were multiple factors which augurs well for boosting growth in digital media."
Some of them are enclosed below
1) Encourage rural broadband connectivity
India has always lagged other developed nations as wired broadband penetration in India stands to be at mere 16% as compared to mobile internet penetration which is at almost 70-80%. Push towards affordable and high speed fixed broadband internet will boost 1) digital content consumption 2) smart tv penetration 3) lead to shift of eyeballs from TV to digital at a much rapid pace in smaller towns too, just like it has happened in metros.
2) Set up an Animation, Visual Effects, Gaming and Comics (AVGC) promotion task force
This we believe will be an important driver for gaming industry in India. India’s gaming industry has lagged behind developed nations in terms of penetration. This move will enable and attract new talent in the industry, which will propel innovation in the gaming and animation industry; this in turn will help Indian games go global
3) 5G auctions to be conducted in 2022
This will have a big implication on the new age tech like Metaverse, AR/VR, gaming etc; it will increase consumption of new age tech as social media too will innovate into a new form under Web 3.0 world. This will augur well for video content consumption too to a certain extent due to faster connectivity. We believe this move will help a lot of new age companies to advertise heavily across all segments of media, with a higher bias towards digital advertising (15% of ad spends for comes from e-comm vertical)
4) Affordable mobile internet in rural areas/tier -2 and tier -3 cities
Penetration into rural and smaller towns has been one of the key growth divers for any internet company. This will help enable strong user and consumption growth for the B2C led internet and new age companies (Zomato, Nykaa , Paytm, CarTrade, Hotstar , Netflix , Amazon etc) , which in turn will lead to rapid shift from traditional to digital. We believe this too will have a positive impact on overall advertising , as internet companies now account for a sizeable share of ad spends in India.
Challenges for traditional media persists as the there was no announcement made to protect their interests despite a big negative impact for COVID, as the pandemic led to trends accelerating towards digital in a big way. There was no 1) relaxation on the license fees or royalty for radio industry 2) no financial grant or tax benefit for the traditional media which has seen a sharp decline over last two years and still struggles to get back to pre Covid levels 3) no reduction in GST for cinema ticket prices , despite cinema being one of the most impacted medium during the pandemic
We continue to believe that TV and cinema remain to be the preferred forms of traditional medium in the entertainment sector which will co exist in the near term and continue to grow at a healthy rate even after breaching pre Covid levels; growth for TV media companies can be even stronger if they are able to execute well on digital strategy whereas growth in cinema will be driven by expansion of new screens and large scale cinematic content . Other traditional mediums like print and radio will need reinvent their business models or push hard in terms of transition to digital ad media consumption on digital remains to be on the rise.