9 minute read 10 Jul 2019
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How a billion screens can turn India into an M&E powerhouse

By

John Harrison

EY Global Media & Entertainment Sector Leader

Transformative leader with a passion for media and entertainment. Identifying the opportunities afforded by convergence and disruption. Executing strategies to succeed in a fast moving market.

9 minute read 10 Jul 2019

With a population of more than 1.3 billion, India represents a prime destination for M&E companies looking to expand.

India is one of the most diverse and vibrant media markets in the world. For media and entertainment (M&E) companies looking to expand geographically, opportunities for growth in India are extensive and exciting.

The M&E market has enormous room for growth in several areas

India’s M&E market is strategically interesting to global players seeking to monetize content and capture growth, either as a participant via licensing or other commercial arrangements, or as an outright owner through an in-bound acquisition or organic investment approach.

While there are positive growth trends across a number of M&E subsectors, these are some areas that are seeing strong interest from global players:

Television

India has the second largest pay-TV market in the world in terms of subscribers after China, with 197 million TV households growing at 7.5% YoY. Pay-TV penetration in India has more than doubled from 32% in 2001 to 66% in 2018 (by comparison, in 2018 pay-TV penetration was 78% in the US and over 90% in China).

While the size of the Indian pay-TV market in terms of revenue is smaller than its peers, the runway for growth provides exciting opportunities for global players. Regional pay-TV markets continue to be attractive, as they outpace the national market in terms of advertising. We expect global broadcasters to expand their presence in these markets by acquiring or partnering with local broadcasters.

Filmed entertainment

The rise in digital video consumption is powering growth for major international film studios, many of which have already established domestic divisions or are collaborating with local studios. Non-theatrical releases are becoming more commonplace, with Indian filmmakers increasingly open to making movies for exclusive digital release.

At the same time, Hollywood movies are also seeing strong growth at the Indian box office. Collections for the top 10 Hollywood films in India reached over INR7.5b in 2018 from INR4.8b in 2017.

Digital media

India has the world’s second highest number of internet users after China, with around 570 million internet subscribers, growing at a rate of 13% annually. The impressive scale of the market and a liberal foreign investment environment are attributes that appeal to global streaming platforms looking to capitalize on the country’s fast-growing digital consumption.

The increased availability of competitively priced 4G services enables companies to reach a broader set of Indian consumers in diverse regional markets and smaller towns. Localization and differentiated content are crucial to engaging the attention of these audiences.

As such, there has been a strong focus by global streaming platforms in the last year to invest in local content and originals, as they look to gain scale. This is a favorable backdrop for content creators, who are seeing both global and local streaming services invest in greater volumes of content with larger budgets.

Online gaming

India is among the top five markets in the world based on the number of users for online and mobile gaming, which is now being recognized as mainstream entertainment in India. Smartphones have emerged as the primary device preferred for online gaming with more than 90% of millennials preferring smartphones over gaming PCs and other devices in India.

Unlike console gaming, smartphones have brought affordable gaming to users without the burden of owning expensive hardware and game titles. Eighty-nine percent of all game revenues in India were generated on mobile games.

With more affordable smartphones, internet connectivity and localized language games, rural India will likely lead the growth of the gaming industry in the next few years.

Globalization is critical to M&E companies looking to build scale, open new markets and remain competitive. Those looking to seize the upside of growth should set their sights on India. With more than a billion people, India offers a massive M&E opportunity across almost every type of media.
John Harrison
Global Media & Entertainment Sector Leader

A growing economy, combined with a positive M&A environment, make India an attractive destination for M&E investment — but there are risks

Economically, over the last five years India has been the growth leader among major economies, including emerging markets and developing economies. It surpassed China in terms of real GDP growth in 2014 and has remained higher since.

Per capita nominal GDP grew 10.6% in 2018, and according to the latest International Monetary Fund World Economic Outlook, India is projected to become the fifth largest economy in 2019 and the third largest on the basis of purchasing power parity (PPP).

India’s M&E sector is ripe for consolidation

The M&E sector witnessed an interesting mix of deal activity in 2018, both on the traditional as well as the new media front. It’s a sector ripe for consolidation. Digital media, multiplex, radio and TV distribution segments will continue acquiring strong business verticals to expand and complement their existing businesses. This is a trend likely to continue going forward as large media companies look to further strengthen their positions in this fast-growing sector.

Investors need to balance the opportunities with the risks

India offers global M&E investors enormous opportunities for growth. However, there also are several persistent challenges to consider before making the leap.

Increasing use of digital media has accelerated video consumption, but it also has increased the piracy threat. In fact, growing piracy is likely to restrict full monetization of content, as well as large-scale acceptance of subscription video on demand (SVoD) in India.

The Indian market is highly price sensitive and is majorly advertising-driven. Sectors such as print, digital, television and radio get revenues from advertising. The average subscription cost for newspapers is about USD2 for a month, cable/VoD in India is USD1-USD4 per month and average film ticket prices are around USD2.

While India’s ease of doing business 2019 ranking improved 23 spots to reach No. 77, its position worsened on “paying taxes” and “resolving insolvency.”

There are a billion screens of opportunity for companies looking to expand in a fast-growing market

With a billion screens of opportunity, India is a prime destination for M&E companies looking to expand into a fast-growing market — as long as they are comfortable assuming the inherent risks that such opportunities bring with them.

Summary

With a population of more than 1.3 billion, India offers one of the most diverse and vibrant media markets in the world. As long as they are mindful of some of the persistent challenges, M&E companies looking to expand will find extensive opportunities for growth in India.

About this article

By

John Harrison

EY Global Media & Entertainment Sector Leader

Transformative leader with a passion for media and entertainment. Identifying the opportunities afforded by convergence and disruption. Executing strategies to succeed in a fast moving market.