MUMBAI: Radio is expected to grow at a Compound Annual Growth Rate (CAGR) of 16.6 per cent over the period 2012-2017 post the rollout of FM Phase III licensing, according to the Federation of Indian Chambers of Commerce and Industry (Ficci)-KPMG Media & Entertainment 2013 report.

The radio industry grew 10.4 per cent in 2012 over 2011 to reach a size of Rs 12.7 billion. Post the FM phase III auction, the industry is expected to touch around Rs 27.4 billion by 2017 growing at a CAGR of 16.6 per cent.

Music sector grew by 18.1 per cent in 2012 to Rs 10.6 billion, and are further expected to rise by a CAGR of 16.2 per cent to reach Rs 22.5 billion in 2017.

There were signs of improvement with the Indian Media and Entertainment Industry witnessing an overall growth of 12.6 per cent from Rs 728 billion in 2011 to Rs 820 billion in 2012.

As per the report, there is some improvement likely in the global economy in 2013 with India’s real GDP expected to be in the region of 6.1-6.7 per cent, due to which the future of the Industry looks better going forward.

Given the impetus introduced by digitization, continued growth of regional media, upcoming elections, continued strength in the film sector and fast increasing new media businesses, the industry is estimated to achieve a growth of 11.8 per cent in 2013 to touch Rs 917 billion in 2013. Going forward, the sector is projected to grow at a healthy CAGR of 15.2 per cent to reach Rs 1661 billion by 2017.

KPMG India head of Media and Entertainment Jehil Thakkar said, “2012 though a challenging year for the M&E industry, was a year in which important foundations for future growth were laid. The advertising environment went through one of the toughest years in the last decade. However, the implementation of digitization, the stellar performance of the film industry backed by excellent content and digital distribution, the continued growth in regional print and the momentum in new media and the announcement of Phase 3 radio implementation has all finally provided the needed platform to boost the Indian Media & Entertainment industry.”

While television continues to be the dominant segment, the report records strong growth posted by new media sectors, animation/ VFX and a comeback in the films and music sector on the back of strong content and the benefits of digitization.

The total advertising spend across media was Rs 327.4 billion in 2012. The economic slowdown affected advertising revenues which saw a growth of 9 percent in 2012 as against 13 percent in 2011 and 17 percent in 2010. Print continues to be the largest beneficiary, accounting for 46 per cent of the advertising pie at Rs 150 billion.

Ficci M&E committee chairman Uday Shankar said, “2012 has been one of the toughest years in recent times. But it has also been a landmark year for the media and entertainment sector with significant progress in all verticals: the signs are already evident that digitalization will fundamentally change broadcasting, films have scaled-up their ambitions, and radio and print continue to defy global trends. If anything, 2013 promises to be even more disruptive. I am certain that the insights and findings from this report will provide a comprehensive and useful lens for all of us in the industry.”

Key trends and themes for growth

Moving ahead, there is stated to be a rapid growth in new media forms with the mobile and wireless connections continuing to drive the growth of internet penetration in India. With better access, through cheaper and smarter devices, audiences especially the youth are consuming more content and are getting increasingly engaged.

Key beneficiaries are emerging new media segments, which include internet advertising, online classifieds and gaming, all of which are on a rapid growth path. Going forward, better uptake of 3G connections and the beginnings of the 4G rollout are expected to spur growth further.

Inspite of that, India remains a growth market for traditional media evidenced by the growth last year in TV audiences, radio listenership and footfalls in theatres. Traditional media is also increasingly offered on new media platforms. The need of the hour is the development of models for broader reach and monetization of audiences for traditional media content on these new media platforms.

Phase III licensing and anticipated provisions for permitting multiple frequencies in a city, would encourage investments in differentiated content for the radio sector. Internet and mobile platforms are a cost effective enabler to reach diverse audience segments with tailored content. The Indian audiences could look forward to more targeted and engaging content in the medium term.

Advertisers continue to see higher growth in consumption from key regional markets. Hence regional media continues on a strong growth trajectory especially in the print and television sectors. Key media players are focusing on cherry picking acquisitions and expanding their presence in regional markets based on higher rates of advertising revenue growth, and better insulation from the slowdown than in metros, which may be close to saturation in many cases.

With changing lifestyles, there is an increase in media consumed out of home. Brands are also increasingly keen to connect with consumers via 'experiences' to ensure greater recall and amplification of brand values. Activations/events are now increasingly a key facet of radio and print media solutions.

Live music events/festivals have been successful in attracting widespread audiences and engaging youth across key cities. Increased consumption of music/radio/video on-the-go via mobile and in cars provides opportunity for real time mobile geo-location advertising. The Out of Home (OOH) advertising sector has also seen higher rates of growth in transit advertising.

There is hence, an increased need to provide 360 degree solutions to advertisers and provide multiple platforms to reach out to consumers, wherever they are.

M&E is still an advertising dependent industry in India. Hence, it remains sensitive to the impact of the economic slowdown. While the print sector saw some increases in circulation revenues, and increases in cover price in some areas, cover prices are still significantly lower than global counterparts. In the TV sector, digitization has potential to increase ARPUs and improve the share of subscription revenues to the broadcasters.

Regulatory interventions have been a key enabler of growth for the sector. Anticipated events in 2013, such as continued cable DAS rollout, Phase III licensing for Radio and 4G rollout, will spur growth from the medium term. There is a need for measures to aid curtailment of piracy and encourage investments to support further growth. Co-production treaties, rationalization of entertainment tax, government support to encourage formal skill development and training and incentives for animation/VFX and gaming are important areas of policy and regulation that need attention.

The media and entertainment sector could be a noteworthy employer across creative, technical and business areas. With potential mushrooming of TV and Radio broadcast channels and growth in skill intensive sectors of film, animation, gaming, VFX, this is only set to escalate. In the talent driven media sector, companies could potentially differentiate based on ability to attract and retain the right people.

The vision set out for the sector, of engaging communities, entails reaching out and understanding multiple segments, creating greater connect, and leveraging this connect to influence for the greater social good. At the same time, it remains sensitive to the economic situation and a lot will depend on its ability to manage the risks of continued shortage of skilled manpower and the ability to spur end-user pricing across segments. It is a time for introspection and a time for innovation to see how companies can harness the powers of new technologies and convergence to realize its vision, summarizes the report.