The big change in media & entertainment script: CRISIL Ratings

Before film and television (TV) crews resumed shooting outdoors and thin lines reappeared before theatres as the pandemic eased, some things had irrevocably changed for India’s media and entertainment (M&E) industry.

Bored of reruns on TV during the lockdowns, young and old alike had taken to digital streaming or over-the-top (OTT) platforms, by the hordes. A lot fewer Indians were reading physical newspapers. And online gaming had become all the rage.

So while the industry, stepping out of the shadows of Covid-19, made a strong comeback last fiscal and is expected to grow further by 12-14% to ~Rs 1.6 lakh crore in fiscal 2024, the plot will proceed very differently for each segment.

The M&E universe broadly comprises TV, newspapers, radio, films, outdoor and digital media. TV will continue to be dominant. But digital — OTT platforms, online gaming, e-commerce, e-learning, and online news platforms — will outshine the industry in terms of growth, rising 15-18% annually over the medium term. Digital has already become the second-largest segment after TV in terms of advertisement (ad) spends. Together, the two account for ~75% of ad revenue of the M&E industry, followed by print with 20% share.

Ad revenue makes up ~55% of the industry’s revenue. That is expected to grow 14% on-year this fiscal, given its strong correlation with economic activity. The general elections in mid-2024 will also fuel spends in the last quarter.

Digital will continue to hog a disproportionate share from hyperlocal media such as radio and outdoor advertising. So we expect these media to languish at below pre-pandemic levels. That said, increased commuting with rising infrastructure spends, and growth of micro, small and medium enterprises, should drive advertising in them over the medium term.

Recovery in ad yield across all segments, including TV and print, is still slow. As advertisers cut ad budgets for traditional platforms, M&E players are being forced to offer discounts on ad rates. Hence, ad volumes would drive growth in the near term and ad yields may reach the pre-pandemic level only by next fiscal.

Subscription revenue comprises the remaining ~45%. That is likely to grow at a moderate pace.

TV channels are finding it hard to retain subscriptions as subscribers, especially those in metros, are either opting for cord-cutting, or moving to free dish platforms, as seen at the bottom of pyramid. That said, implementation of the new tariff order effective February 2023 is expected to support growth as channel subscription rates have been revised upwards. The impact of the price increase would be realised in the next few quarters.

In the medium to long run, increasing digitalisation will necessitate accelerated integration of digital media into traditional TV and print segments to retain subscriptions.

Print media sits inside a mixed paradigm. On the one hand, monetisation of e-news or digital news continues to pose a challenge, as Indians still seek out physical copies of newspapers in fairly significant numbers. That said, print subscription is seen losing some share of late in metro cities, especially for English newspapers, which could lead to permanent loss of subscribers. The less impacted Hindi and other regional language newspapers, however, would continue to grow. 

Meanwhile, increased OTT consumption could impact theatrical collections of multiplexes as low budget movies are targeting OTT platforms more than theatres. The occupancy level of theatres has also been sluggish over the past six months due to various reasons. However, addition of screens and improving average ticket prices and spend per head have somewhat supported the top line. We expect the average occupancy level to normalise at 26-28% in the medium term compared with 31-33% in the pre-pandemic period. While the recent consolidation of two large multiplex players could change the dynamics in this space, content quality and occupancy levels would continue to be the key drivers of profits.

These trends corroborate that the pandemic has led to structural shifts in consumer behaviour and business models in the M&E industry, with their effects lasting far beyond the pandemic itself.