Digital media makes inroads in India: KPMG

While the overall Indian media and entertainment industry witnessed muted growth of 11.8 per cent in 2013, digital advertising and gaming recorded stellar growth rates of close to 40 per cent. "Digital grew upon a much larger base than last year," said Jehil Thakkar, Head (Media & Entertainment Practice), KPMG, during the release of the FICCI-KPMG Indian Media and Entertainment Industry Report 2014. Digital advertising last year comprised eight per cent of the overall advertising pie in 2013 compared to five per cent last year. In a conversation with Ajita Shashidhar, Thakkar discusses trends the Indian media and entertainment industry witnessed in the past year.

Q. What has been the one big trend in the Indian media industry?

A. It has definitely been the increasing appetite to consume content on the digital platforms. This growth has also come on the back of telecom operators realising that the contribution of voice to their profitability is tapering down. All of them are focused on getting Internet consumers by taking steps such as reducing 3G rates. Earlier content guys used to get the short end of the stick of the telecom operators. The importance of content is increasing by the day and that's great news.

Q. Most broadcasters are stepping up their focus on the digital platform. Some of them are even creating exclusive content. Do you see 2014 as a year when most of them will effectively monetize their digital presence?

A. Broadcasters are no doubt stepping up their digital presence, but this is more an attempt to hold on to their viewers. Monetizing these platforms is still some time away. Indian consumers are still not ready to pay for content.

Last year has been a difficult year for the TV industry, with not just advertising revenue being modest due to the economic environment, but also the regulator issues the industry had to deal with

You are right, last year was a year of flux for the TV industry. Going forward, the 12 min per hour ad cap will have a massive impact. Ad inventory led growth will be restricted. Larger players since they have raised their ad rates will not feel the pinch as much, but the smaller and niche channels will struggle.

Q. Which genres will be the most impacted?
 
A. News, kids and general entertainment channels which are down the pecking order. Once the elections are over news channels will begin to feel the pinch. The ad cap along with the TV ratings confusion will also lead to lot of big advertisers moving to market leaders. In an environment when there is no measurement currency, most advertisers tend to gravitate towards the market leaders as they find it a safer bet.

Q. Your report says that though digitisation has led to a 15 to 20 per cent reduction in carriage fees, the average revenue per user (ARPUs) of broadcasters hasn't gone up significantly. What is the challenge there?

A. The fruits of digitisation are yet to be accessed. The ARPU increase has happened only in smaller pockets, where the multi service operators (MSOs) have introduced packages. The problem is that the MSOs are still learning to be consumer focused. They are used to the one-price model for all the channels and unless that mindset changes ARPUs of broadcasters won't increase.

Q. In 2012, the Indian film industry grew by a whopping 22 per cent. However the growth last year was modest at 11.5 per cent, despite blockbusters such as Bhaag Milkha Bhaag and Chennai Express. What could be the reason for this?

A. With 95 per cent of films being released digitally, distributors are able to release a film on the first day even in smaller towns, but the issue is that the number of screens are abysmally low in India. Our country has just eight or nine screens for every one million people, while UK 60 screens and US has 130 screens.