Media & entertainment industry in India to reach $24b by 2014, growing 13% per year

The media and entertainment (M&E) industry in India will be worth $24billion by 2014 (Rs 1,091 billion), growing at 13% per year over the next five years. The size of the industry was Rs 587 billion in 2009. This was announced as part of the report released by KPMG and FICCI, the oldest business association in India, during the FRAMES conference that started yesterday in Mumbai, India.

Compare this with the state of the U.S. media industry. According to a report released today by Kantor Media, the total advertising expenditure in the U.S. fell by 12.3% in 2009. The decline was across every single media sector except Internet display advertising, which grew by 7.3% (table below shows the breakdown).

This comparison is not exactly apples-to-apples because advertising represents only a part of the U.S. media industry, but it still highlights the broader trend I had discussed earlier, that India and other BRIC countries will be the main future growth drivers of the global media industry.

The FICCI FRAMES conference, held in Mumbai every year by FICCI, is the biggest conference for the media & entertainment industry in Asia. I spoke at FICCI FRAMES last year, but was unable to travel this year due to the recent birth of our daughter.

The KPMG-FICCI report, released during this conference every year, provides a comprehensive annual assessment of the Indian M&E industry, covering all of its segments and verticals. The report is widely considered as the most authentic referral document on the industry in India.

Here is a quick summary of the KPMG-FICCI report from the portal businessofcinema.com:

The M&E industry stood at Rs 587 billion in 2009, a growth of 1.4 percent over the previous year. In 2010, a growth of 11.2 per cent is expected.

The estimated 13 per cent growth rate per annum for the sector for next five years will be driven on the back of factors like favorable demographics, expected recovery in the GDP growth rate, strong long term fundamentals of the Indian economy, expected rise in advertising to GDP ratio compared to developed economies and increasing media penetration.

Factors like Digitisation, Regionalisation, Convergence of new media etc are some of the trends in the industry and are expected to drive growth going forward.

Television:
The industry is estimated to have reached a size of Rs 257 billion, a growth of 6.8 percent over 2008. The television industry is projected to grow at the rate of 15 per cent over 2010-14 to touch Rs 521 billion in 2014.

Filmed Entertainment:
The filmed entertainment sector saw a de-growth of 14 per cent to stand at Rs 89 billion in 2009. This was primarily due the three month impasse between the multiplexes and the producers last year coupled with poor content being churned out. The industry is expected to grow at a rate of nine per cent over the next five years, to stand at Rs 137 billion by 2014.

Print Media:
The Indian Print Media industry is estimated to have shown a very moderate growth of 2 percent in 2009 and reached around Rs 175 billion. Ad revenues saw a decline. The industry is projected to grow at a CAGR of 9 percent over the next five years and reach around Rs 269 billion in size by 2014.

Radio:
Radio industry is estimated to have grown at a CAGR of 9 percent over 2006-09. It is estimated to have reached a size of Rs 7.8 billion by end of 2009, a decline of 0.3 percent over the previous year. It is expected to grow at a CAGR of 16 percent over 2010-14 and reach a size of Rs 16.4 billion by 2014.

Music:
The size of the Indian music industry was estimated at around Rs 8.3 billion in 2009, up from Rs 7.3 billion in 2008, implying a growth of 14 percent during the period. Overall the music industry is expected to grow at a CAGR of 16% over 2010-14 to reach Rs 17.2 billion.

Out of Home (OOH):
OOH media has grown at a CAGR of 5 percent over the past 3 years, and is estimated to have reached Rs 13.7 billion in size in 2009, a de-growth of 15 percent over 2008. It is projected to grow at a compounded rate of 12 percent over the next 5 years and reach a size of around Rs 24.1 billion by 2014.

Animation:
The Animation & VFX segment in 2009 registered a growth of 13.6 percent over 2008. The industry is expected to grow at a CAGR of 18.7 percent in the coming years to reach Rs 46.6 billion by 2014. This growth will be triggered by the increased consumption of animated content, focus on IP creation and growth of 3D formats.

Gaming:
Gaming is expected to be the fastest growing sector in the M&E industry. While the sector has shown a 22 percent growth in 2009, it is expected to grow at a CAGR of 32 percent in the next 5 years to reach Rs 32 billion by 2014.

Below is the ad spending in the U.S. in 2009 broken down by each media type/channel, as released by Kantar Media today. The total annual advertising spend last year reduced by 12.3% as all channels except Internet display advertising registered a decline, mainly due to the recession caused by the financial crisis in the country. This situation should improve as the U.S. economy comes out of recession in 2010 and beyond, however the macro trend of redistribution of ad dollars from old media to digital channels shall continue.

U.S. Ad Spending by Media
Percent Change in Measured Ad Spending1
MEDIA SECTOR -- Media Type (Sectors and types listed in rank order of spending)		Full Year 2009 vs 2008		4th Quarter 2009 vs 2008
TELEVISION MEDIA		-9.5%		-2.4%
-- Network TV		-7.6%		4.1%
-- Cable TV2		-1.4%		2.7%
-- Spot TV3		-23.7%		-13.9%
-- Spanish Language TV4		-8.9%		-4.7%
-- Syndication - National		-4.9%		-10.7%
MAGAZINE MEDIA5		-17.4%		-11.5%
-- Consumer Magazines		-16.6%		-11.1%
-- B-to-B Magazines		-26.2%		-22.7%
-- Sunday Magazines		-11.0%		3.6%
-- Local Magazines		-27.7%		-18.2%
-- Spanish Language Magazines		-21.6%		-12.8%
NEWSPAPER MEDIA6		-19.7%		-8.9%
-- Newspapers (Local)		-20.0%		-10.3%
-- National Newspapers		-17.8%		0.4%
-- Spanish Language Newspapers		-16.4%		-10.7%
INTERNET (display ads only)		7.3%		-2.1%
RADIO MEDIA		-20.3%		-12.5%
-- Local Radio7		-20.6%		-11.7%
-- National Spot Radio		-24.6%		-16.9%
-- Network Radio		-8.7%		-7.9%
OUTDOOR		-13.2%		-5.4%
FSIs8		3.0%		0.0%
TOTAL9		-12.3%		-6.0%

Source: Kantar Media

1. Figures are based on the Kantar Media Stradegy™ multimedia ad expenditure database across all measured media, including: Network TV (6 networks); Spot TV (123 DMAs); Cable TV (71 networks); Syndication TV; Hispanic Network TV (4 networks); Consumer Magazines (231 publications);,Sunday Magazines (7 publications); Local Magazines (19 publications); Hispanic Magazines (14 publications); Business-to-Business Magazines (260 publications); Local Newspapers (147 publications); National Newspapers (3 publications); Hispanic Newspapers (47 publications); Network Radio (5 networks); Spot Radio; Local Radio (32 markets); Internet; and Outdoor. Figures do not include public service announcement (PSA) data.

2. Cable TV figures do not include Hispanic cable networks.

3. Spot TV figures do not include Hispanic stations.

4. Spanish Language TV includes 4 Hispanic broadcast networks, 4 Hispanic cable network and 70 local Hispanic TV stations.

5. Magazine media includes Publishers Information Bureau (PIB) data and reflect print editions of publications.

6. Newspaper media figures reflect print editions of publications.

7. Local Radio includes expenditures for 32 markets in the U.S.

8. FSI data represents distribution costs only.

BRIC countries to drive the future growth of the global media industry

This week PricewaterhouseCoopers came out with a comprehensive report on the five-year outlook of the global media industry. The growth in the booming BRIC nations (Brazi, Russia, India and China) will outpace the growth in mature U.S. and Western European markets by more than 2x. PwC forecasts that media sector in the BRIC countries will grow at an average annual rate of 13.5% from 2008 through 2012, compared to just 4.8% in the U.S. and 5.5% in Western Europe.

In terms of the total size, the worldwide media industry will reach $2.2 trillion by 2012. The size of the industry in BRIC countries will grow to about $250 billion, while it’ll be $760B in the U.S., $630B in Western Europe, and $165B in Japan.

Digital media will be the fastest growing segment within the media industry. Worldwide consumer spending on online and mobile is expected to reach $234 billion by 2012, growing at a huge rate of 21.8% annually. In the U.S., digital media spending will grow at an impressive 16.1% annual rate, reaching $75 billion by 2012. India and China will provide the best opportunities for Internet and mobile growth because people in these countries would use phones as a primary source of entertainment. Media companies will benefit from the proliferation of smartphones (iPhone, BlackBerry, etc.), which are essentially mini-computers. Already, a big portion of current traffic on most major digital properties (Facebook, Google, Yahoo, etc.) comes from emerging markets. As business models developed in mature U.S. and Western European markets get implemented in emerging markets, and new local models emerge, dollars in emerging markets will follow the eyeballs.

I believe traditional media firms stand a good chance of winning the digital media led future world too, but there will be pain during the transition phase. And they will need to do three things right:

1. First, as discussed before, traditional media firms need to accept the reality that their total revenue will decline during the transition phase, because online and mobile advertising will not fully compensate for declines in traditional advertising (broadcast, print, etc). Numbers over the past couple of years already reflect this harsh reality.

2. Second, they will need to continue their investment in the future, and experiment with new technologies and business models during the transition phase. This is not easy for most traditional media firms, as being public enterprises, they are under constant pressure from Wall Street to perform quarter after quarter, and have to keep their costs in check to protect margins as their revenue flattens/declines.

3. And third, their attitude towards technology, arguably the most important component of the digital future of the media industry, will need to change drastically. Building more bridges between Hollywood and Silicon Valley on an equal footing, and greater appreciation by each party for the value the other brings to the table will be paramount. Both come from very different cultures, but despite their traditional differences, they need each other more than ever before. Some early partnerships that I’ve seen between Hollywood and Silicon Valley bode well for the future, but the pace of change is still slow in my opinion.

Now a word about the BRIC nations in general. The term was coined in 2003 by Jim O'Neill, the global economist at Goldman Sachs, when he laid out his future world view. He believed that BRIC countries possessed the potential to become the world's four most dominant economies by 2050, and together could be larger than the combined economy of the U.S. and Western Europe. Considered until recently as the developing countries of the Third World, Brazil, Russia, India and China have quickly become the most dominant emerging economies of the next world. These are four markets with unique characteristics. They are tied together by their inherent economic potential resulting from positive changes in their political systems which unleashed the untapped demand from their huge domestic consumer market, constituting 43% of the world's population.

An interesting yardstick would be to check out the growing wealth in these countries. Last year, India and China showed the highest global growth rate in their population of millionaires. The number of millionaires in India rose by 22.7% to 123,000 people, the fastest growth in the world. Meanwhile, China grew at 20.7% in 2007 to end with 415,000 millionaires - it displaced France as the home of the fifth largest millionaire population in the world. Already, five of the world’s top ten cities, which can be classified as the centers of wealth generation for consumers climbing the economic ladder, are located in the burgeoning BRIC countries.

Finally, let’s evaluate BRIC from a leading marketer’s perspective, given that growth in demand for new products & services and resulting expenditure on advertising is a key indicator for an economy's growth. Sir Martin Sorrell, the CEO of the WPP Group, one of the largest media agencies in the world, identified the potential of BRIC markets even before the term BRIC was coined. WPP agencies are now at the top of the agency food chain in the BRIC countries. They command the lion's share of media buying in populous giants India and China. Today, continental Europe, U.K. and U.S. generate 82% of WPP's total global revenue, and rest of the world contributes the remaining 18%. The company believes that by 2015, 40% of its global revenue will come from Asia alone .

BRIC countries to drive global growth of the media industry

This week PricewaterhouseCoopers came out with a comprehensive report on the five-year outlook of the global media industry. The growth in the booming BRIC nations (Brazi, Russia, India and China) will outpace the growth in mature U.S. and Western European markets by more than 2x. PwC forecasts that media sector in the BRIC countries will grow at an average annual rate of 13.5% from 2008 through 2012, compared to just 4.8% in the U.S. and 5.5% in Western Europe.

In terms of the total size, the worldwide media industry will reach $2.2 trillion by 2012. The size of the industry in BRIC countries will grow to about $250 billion, while it’ll be $760 billion in the U.S., $630 billion in Western Europe, and $165 billion in Japan.

Digital media will be the fastest growing segment within the media industry. Consumer spending on both online and by mobile phones worldwide is expected to grow to $234 billion by 2012, at an monumental rate of 21.8% annually. In the U.S., digital media spending will grow at an impressive 16.1% annual rate, reaching $75 billion by 2012. India and China will provide the best opportunities for Internet and mobile entertainment growth because people in these countries would use phones as a primary source of entertainment. Media companies will benefit from the proliferation of smartphones (iPhone, BlackBerry, etc.), which are essentially mini-computers. Already, a big portion of today’s traffic at most leading digital media firms (Facebook, Google, Yahoo, etc.) comes from emerging markets. As business models evolved in the relatively more mature U.S. and Western Europe markets reach emerging markets, and new local models emerge, dollars in emerging markets will follow the eyeballs.

I believe traditional media firms stand a good chance of winning the digital media led future world too, but there will be pain during the transition phase, and they will need to do three things right:

1. First, as discussed before, traditional media firms need to accept the reality that their total revenue will decline during the transition phase, because online and mobile advertising would not fully compensate for declines in traditional advertising (broadcast, print, etc). Numbers over the past couple of years already reflect this trend.

2. Second, they will need to continually invest in the future and experiment with new technologies and business models during the transition phase. This is not easy for most traditional media firms which are public enterprises, and hence face Wall Street's pressure quarter after quarter to keep their costs in check to protect margins as their revenue flattens/declines.

3. And third, their attitude towards technology, arguably the most important component of the digital future of the media industry, will need to change drastically. Building more bridges between Hollywood and Silicon Valley on an equal footing and with an appreciation for the value each brings to the table will be paramount. Both come from very different cultures, but despite their traditional differences, they need each other more than anytime before in the history of the media industry. Some early partnerships that I’ve seen bode well for the future, but the pace of change is still slow in my opinion.

Now a word about the BRIC nations in general. The term was coined in 2003 by Jim O'Neill, the global economist at Goldman Sachs, when he laid out his future world view. He believed that BRIC possessed the potential to become the world's four most dominant economies by 2050, which could be larger than the combined economy of the U.S. and Western Europe. Considered until recently as the developing countries of the Third World, Brazil, Russia, India and China are quickly becoming the emerging economies of the next world. These are four markets with unique characteristics, and are tied together by the potential created after changes in their political systems unleashed the consumer demand of 43% of the world's population.

A relevant and interesting yardstick would be to check out the growing wealth in these countries. Last year, India and China showed the highest global growth rate in their population of millionaires. The number of millionaires in India rose by 22.7% to 123,000 people, the fastest growth in the world. Meanwhile, China grew at 20.7% in 2007 to end with 415,000 millionaires - it displaced France as the home of the fifth largest millionaire population in the world. Already, five of the world’s top ten cities, which can be classified as the centers of wealth generation for consumers climbing the economic ladder, are located in the burgeoning BRIC.

Finally, let’s evaluate BRIC from a leading marketer’s perspective, given that growth in demand for new products & services and resulting advertising spend is a key indicator for an economy's growth. Sir Martin Sorrell, the CEO of the WPP Group, one of the largest media agencies in the world, identified the potential of BRIC markets even before the term BRIC was coined. WPP agencies are now at the top of the agency food chain in the BRIC countries. They command the lion's share of media buying in populous giants India and China. Today, continental Europe, U.K. and U.S. generate 82% of WPP's total global revenue, and rest of the world contributes the remaining 18%. The company believes that by 2015, 40% of its global revenue will come from Asia alone - a strong vote of confidence for the region from a global leader.