Calendar year 2023 was a mixed bag for the media and entertainment (M&E) industry as linear TV reported below par growth (decline of 1-2 percent YoY – ex sports) due to i) lower spends by e-commerce/gaming companies ii) diversion of festive spends towards Cricket World Cup negatively impacting growth for other genres.
In terms of Box Office, it was a strong performance as occupancy levels/profitability breached pre COVID levels for the first time in the post COVID era, led by a strong comeback in large scale Hindi content.
Digital media saw disruption created due to JioCinema’s free IPL offering, which hurt competitors, as some ended up offering content free, while others could not raise prices in the price sensitive market. Due to free offerings, digital advertising for the video segment reported strong growth of more than 25 percent YoY for OTT platforms (ex. YouTube) in CY23.
Here are some megatrends to watch out for in CY24 for the M&E industry.
Consolidation-Big Becomes Bigger: With Zee/Sony merger coming towards its last leg and RIL/Disney in talks for a potential merger, the two giants could dominate the TV/OTT advertising space with a potential market share of 65 percent/45 percent in CY24.
We expect more consolidation to pan out in the OTT segment, as unit economics of the OTT platforms remain unfavourable, with largely all of them making hefty losses due to hefty content costs/customer acquisition cost. We continue to believe players with a strong last mile will have a big advantage on distribution of content — like Network18’s plan of bundling all offerings (TV, print and digital) under one umbrella.
Uncertainty Looms for Film Industry: Hindi Box Office has seen the best year in post COVID era, as Box Office collections have jumped more than 20 percent vs pre COVID levels towards INR 47 billion (net domestic), led by multiple marquee large budget films doing well.
However, we don’t expect this trend to persist in CY24, as i) OTT platforms may not buy movie content as aggressively as they did last year (more than 40 percent of monetisation for a producer is from digital rights) due to consolidation ii) number of large budget films released in Hindi/regional are much lesser in CY23 for now and iii) Writers Association strike to negatively impact Hollywood slate in CY24. We thereby believe that Hindi Box Office may potentially see a decline YoY in CY24
Cricket to Maintain Dominance: Cricket, which contributes more than 90 percent of India’s sports adex, will maintain its dominance helped by increased endorsement, sponsorship revenues and high value media rights that were renewed over the last one year for all marquee properties – IPL, ICC tournaments and bilateral series.
However, advertising growth rates for cricket will converge towards 8-9 percent YoY in CY24 as i) concerns remain on ad spends by gaming/new age verticals ii) free offering of cricket on OTT negatively impacting TV ad spends, which used to be the largest chunk of cricket advertising spends in India.
All platforms (Jio Cinema, Sony Liv, Disney), TV and digital, will continue to make losses for their cricket-based properties due to i) free offering on OTT ii) lower pay based revenues on TV/digital and iii) an uncertain advertising environment.
E-commerce Bundling -New Opportunity: E-commerce segment accounts for 8 percent of India’s digital adex today, and this could report the best growth (30-40 percent YoY) within digital advertising in India – much ahead of search/social/display due to favourable regulations like Data Protection Bill and consumers spending more time on e -commerce platforms vs search platforms.
We believe there could be a potential of e-commerce companies tying up with video-based platforms for a bundled offering, as the Indian consumer prefers more for less and is spoilt for choice in terms of variety within pure OTT/video content.
5G push -Big Disruption for Media Content: Launch of 5G wireless offerings will disrupt content consumption habits and solve the problem of low wired broadband penetration; expect TV to see the biggest negative impact of 5G wireless offerings. Further, building up a content ecosystem and use case of 5G will enable better penetration of the same in India.