Playing by new rules India's Media & Entertainment sector reboots in 2020 March 2021 Images credit: Ramji Ravi Conceptual Pictures Worldwide Pvt Ltd./ Adobebstock For stock images & footage license : www.imagefootage.com We played by new rules. And we played to win. 2020 was a challenging year for India. And for sports as well. We all learnt to live differently: wearing a mask, maintaining a distance of six feet, sanitising frequently, boosting our immunity. Playing a team sport, we lived in secure bio-bubbles and lived through quarantines. The silence in the stadiums was the worst thing one could hear. When the going got tough in Australia, it was important to stay positive and continue to play our brand of cricket and let each individual express themselves. Situations were tough but heroes emerged when the time demanded. We played to win and did not let the fear of losing overpower us. Ajinkya Rahane The Indian Media & Entertainment industry kept providing news, information and entertainment content to Indians when they most needed it without letting fear affect them. The virus could not take away the record viewership of IPL Season 13 nor the growing popularity of esports. It could not stop our sportspersons from making a mark in tennis, hockey, wrestling, boxing, and several other sports. They all reminded us that it is important to play the game in the right spirit without worrying about the consequences. I'm happy that we got an opportunity to play during these tough times and bring happiness to millions of viewers watching the sport. The creative economy is poised to double by 2025 2020 presented us with monumental challenges – as individuals, as businesses, as society. However, there were some silver linings as well. Several digital trends accelerated their trajectory, fed by growth in broadband, personal devices and smart televisions, and the time and inclination to try online services. Consequently, M&E businesses had to accelerate some of the changes that they had started and to relook at their customer engagement models as new demand-side patterns emerged. This new reality also placed increased importance on understanding consumer behavior to better engage with them. India’s diversity and scale will continue to fuel the growth of traditional media, but equally exciting is the fact that there are a number of new and big opportunities for M&E businesses. And we’re already seeing the Industry embrace these changes and chart a new growth path. Sanjay Gupta Today content creation and storytelling are much more diverse and Chairman, FICCI Media and come from all parts of the country. New distribution models and Entertainment Committee monetization strategies are evolving across both large and small screens. Learning content and gaming have emerged as very large new opportunities. These changes are driving a shift in monetization of content investments and this opportunity is global. 2020 has super-charged these changes and promises to propel the Indian creative economy to double in size by 2025 and drive a much larger contribution to India’s GDP goals. This is the time for the sector to forego holding on to old ways of thinking and working, and its sense of complacency about what’s possible in the future. The opportunity is discontinuous. The answer to what we can do is non- linear - we need to disrupt our old business models, our approach, our solutions, our marketing, and our distribution and collaborate more closely with the government to harness the true potential of M&E and arrive at the necessary impetus and support. I want to thank everyone who has worked hard to compile this rich and insightful report that captures the big shifts and opportunity for the media and entertainment sector. Same game. New rules. Welcome to the 2021 edition of the FICCI-EY report on the Indian media and entertainment (M&E) sector. 2020 saw demand patterns shift as consumers actively sought alternatives and had the time to try new things. Aided by the growth of digital infrastructure, digital media adoption accelerated. Consequently, consumption patterns shifted and increased across online news, gaming and entertainment. The supply side transformed as M&E companies took the opportunity to reinvent themselves. Appointment viewing on news television, gamification on e-commerce apps, circulation transformation in print companies, short video on OTT platforms, interactivity and brand solutions from radio companies were some of the many strategic shifts that were seen in 2020. This altered the M&E sector as we knew it. Every segment – TV, radio, print, digital, etc. – had video, audio, textual Ashish Pherwani and experiential products and had begun to redefine itself M&E Sector Leader across those verticals. What didn’t change, however, was Ernst & Young LLP the compelling content created around news and escapism, and the passion to build some of India’s most powerful brands. It was the same game, sure, but with totally new rules. I hope you enjoy reading this report as much as we enjoyed putting it together for you. We are certain you would find this report to be insightful. M&E sector overview 08 M&E Sector 2020: Key trends 18 Playing by new rules 26 The global perspective on M&E Segmental trends 34 Television 172 Live events 64 Digital media 184 Out of Home media 104 Print 194 Radio 122 Online gaming 208 Music 142 Filmed entertainment 216 Sports 158 Animation and VFX 226 Advertising Operating environment 240 Indian economy and its impact on M&E 252 M&A activity 260 Tax environment 276 Regulatory update 302 Data privacy in the M&E sector 310 Global M&E megatrends About this report 320 Glossary 326 Acknowledgements 328 EY’s M&E leadership team M&E Sector 2020: Key trends Media and entertainment Indian M&E sector fell 24% in 2020 to INR1.38 trillion 2019 2020 2021E 2023E CAGR 2020-23 Television 787 685 760 847 7% Digital media 221 235 291 425 22% Print 296 190 237 258 11% Online gaming 65 76 99 155 27% Filmed entertainment 191 72 153 244 50% Animation and VFX 95 53 74 129 35% Live events 83 27 53 95 52% Out of Home media 39 16 22 32 27% Radio 31 14 23 27 24% Music 15 15 18 23 15% Total 1,822 1,383 1,729 2,234 17% All figures are gross of taxes (INR in billion) for calendar years | EY estimates ► The Indian M&E sector fell by 24% to INR1.38 Analyzing the INR439 billion fall trillion (US$18.9 billion), in effect taking revenues back to 2017 levels ► Digital and online gaming were the only ► The last quarter of 2020 showed a marked segments which grew in 2020 adding an improvement in revenues for most segments aggregate of INR26 billion and consequently, and we expect the M&E sector to recover 25% in their contribution to the M&E sector increased 2021 to reach INR1.73 trillion (US$23.7 billion) from 16% in 2019 to 23% in 2020 and then to grow at a CAGR of 13.7% to reach ► Other segments fell by an aggregate of INR465 INR2.23 trillion (US$30.6 billion) by 2023 billion ► While television remained the largest segment, ► Largest absolute contributors to the fall were digital media overtook print, and online gaming the filmed entertainment segment (INR119 overtook a disrupted filmed entertainment billion), print (INR106 billion) and television segment in 2020 (INR102 billion) ► The share of traditional media (television, print, filmed entertainment, OOH, radio, music) stood at 72% of M&E sector revenues in 2020 11 ► Digital subscription – 28 million Indians (up Key trends in 2020 from 10.5 million in 2019) paid for 53 million OTT subscriptions in 2020 leading to a 49% Digital and online gaming were the growth in digital subscription revenues. Growth only segments which grew was led largely by Disney+ Hotstar which put the IPL behind a paywall during the year, increased Segment growth 2020 vs. 2019 content investments by Netflix and Amazon Prime Video and launch of several regional Digital subscription 49% language products. In addition, 284 million Indians consumed content which came bundled Online gaming 18% with their data plans. ► Print – Print’s revenue declines were led Digital advertising 0% by a 41% fall in advertising and a 24% fall 0% Music in circulation revenues. English language newspapers were hit harder and struggled to - 13% Television get back their circulation post the pandemic, particularly in metros, while regional language - 24% M&E sector overall newspapers recovered a larger portion of their lost circulation. The segment saw the -36% Print establishment of a new lower-cost operating benchmark, with most print companies reducing - 44% Animation & VFX costs by over 25%. - 54% Radio ► Online gaming – Continuing as the fastest growing segment of the M&E sector for the - 60% Out of Home media fourth year in a row, the segment grew 18% helped by work from home, school from home - Filmed entertainment 62% and increased trial of online multi-player games - 68% Live events during the lockdown. Online gamers grew 20% to reach 360 million in 2020. Transaction-based game revenues grew 21%, despite adverse EY estimates regulation in certain states, while casual gaming revenues grew 7%. ► Television – The largest segment saw a 22% ► Film – While theatrical revenues plummeted fall in advertising revenues on account of to less than a quarter of their 2019 levels, a highly discounted ad rates during the lockdown portion of this loss was made up through higher months – though ad volumes reduced only digital rights revenues which almost doubled 3%. In addition, it also witnessed a 7% fall during 2020 to INR35 billion.