Digital opportunity Indian media and entertainment 2017 - EY
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Digital opportunity Indian media and entertainment 2017
Contents
Foreword 04
Disruption = Opportunity2 06
The story so far 08
Section 1: Disruption 10
Penetration of smart devices 12
Changing demographics 13
Increase in internet speed and penetration 14
Digital Ad spend 15
Mobile micro payments/wallets 16
Section 2: Opportunity2 18
Digital video 20
Snackable content format 22
OTT and MCN 24
E-celebrities 27
Regional content propositions 28
Mobile gaming 30
Section 3: Innovation for monetization 32
Partnerships 34
Niche content and communities 37
Leveraging transactions and micro payments 39
Differentiate between urban english and vernacular propositions 40
Leverage India for the globe 41
Building India as the digital engine 42
Challenges and mitigating strategies 43
Conclusion 44
Glossary 46
Foreword 4 | Digital opportunity - Indian M&E
The Indian digital segment is set for disruption with growth expected
to cross INR 200 billion* (INR 20,000 crores) by 2020.
A growing Indian economy, poised to becoming the fourth largest
economy, coupled with an increasing per capita income, growing
middle class and working population, has seen a surge in the
domestic demand for leisure and entertainment services. As India
grows, the Eedia =ntertainment industry has Öourished. A sector
which has seen a huge spike within the M&E industry has been
digital with the demand for both traditional and digital content
surging
With more than 800 television channels, 100 million pay-TV Farokh T. Balsara
households, 70,000 newspapers and 1,000 Õlms produced Media & Entertainment
annually, India’s vibrant M&E Industry provides attractive growth Sector Leader - India
opportunities for global corporations. The Indian M&E sector is
poised to grow from INR 1,157 billion in 2015 to reach INR 2,260
billion by 2019, at a CAGR of 14.3%, a growth rate that is more
than thrice as compared to the global M&E industry which is
expected to grow at 4.4%. The Indian Digital sector is on the cusp
of a strong phase of growth. With mobile penetration in excess of
100% and traditional internet and TV subscription services below
world average, the Indian digital media market provides a unique
opportunity. The sector is poised to witness the entrance of newly
acquired internet users with internet using population expected to
reach approximately 746 million by 2020 and a large number of
consumers expected to get introduced to using digital platforms.
Backed by over a decade of macro-economic performance, a strong Ashish Pherwani
growth in smart device penetration, broadband penetration and the Media & Entertainment
uptake of 4G the Digital sector is expected to get a huge boost. Advisory Leader - India
The following pages highlight the emerging opportunities which exist
for digital and traditional M&E companies, as well as the challenges
they face in a dynamic country like India.
*includes digital advertising, video subscription, music subscription and
gaming revenues
Raghav Anand
Digital Media Segment
Champion - India
Digital opportunity - Indian M&E | 5
Disruption = Opportunity2
Disruptions
2nd largest smart phone
market by 20171
54% over the
Opportunity 2
age of 25 by 20182
High consumption of Opportunity for
Face of new digital India is expected digital media international studios and
to be far more diverse with strong especially video (450 content owners to
youth centric demographic million by 2020) showcase their content and
Source: EY Analysis garner additional revenues
High speed Broadband ‘Snackable’ content Opportunity for content
consumption driving
penetration to breach producers by focusing
the growth with user on short form or
53% by 20203 engagement being exclusive content
High speed broadband and driven through Apps
increased internet penetration
with development of infrastructure Opportunity for
OTT and MCN international studios and
platforms capturing content owners to
growth in video and showcase their content
Digital Ad Spend share music streaming and garner additional
of overall ad spend to consumption revenues
cross 20% by 20204
Partner to leverage their
Growth of e-celebs on digital following through
Allocation to digital ad spends to the digital platforms
increase dramatically within overall different content
advertising spend as it is close to the marketing approaches
lowest globally
Aggregating and
Growth of regional producing vernacular
15x increase in mobile and vernacular content may help capture
wallets in last Ôn] years5 content larger share of users in
Increased usage of payment India
wallet and operator billing A signiÕcant shift is
model to drive micro payments observed towards With in-app advertising
mobile gaming from and purchases, the
traditional formats mobile gaming space has
like console and PC witnessed a lot of
gaming (87% CAGR traction, especially on the
during 2016 - 2020)6 freemium model
1 Morgan Stanley, http://indianexpress.com/article/technology/tech-news-tecnology/india-second -largest-smartphone-market-2017/
2 World Bank, Health Nutrition and Population Statistics: Population estimates and projections, December 2016
3 Ovum Telecom Forecast Service, December 2016
4 MAGNA Global Global Ad Forecast, December 2016
5 Hindu Business Line, http://www.thehindubusinessline.com/catalyst/the-future-of-mobile-wallets -in-india/article8332085.ece
6 "Mobile Gaming on the Rise in India," Nasscom, https://www.nextbigwhat.com/indian-mobile-gaming-market-to-see -1-1-billion-
revenue-by-2020-report-297/
6 | Digital opportunity - Indian M&E
Innovation for monetization
Use core strengths
Partnerships to
across partners to
drive and help the
build a compelling
OTT market customer offering and
evolve grow quicker
Build communities Creating niche content
and cater to their across untapped genres
speciÕc and
in the market
diverse needs
Leverage micro Build hybrid models of
payment payments to enable easy
infrastructure to transactions
enable transactions
1.33 Differentiate
between Urban
Cater to distinct category
of users (Media Dark,
Bn English and
Vernacular
Regional Vernacular,
Urban English) through
Population (2016)
Source: Propositions customized offerings
Oxford Economics
Cross synergies between
bringing global content to
Leverage India for India and taking Indian
4.1% the globe content to global Indian
diaspora
Internet related
contribution to GDP
Source: EY Estimates Leverage India’s demographic,
based on BCG and
IAMAI Analysis Building India as the technology and cost dividends
digital engine to operate digital innovation
and shared services out of India
7.5%
GDP Growth
Source:
Oxford Economics
Digital opportunity - Indian M&E | 7
The story so far
As media consumption over the world evolves inexorably towards digital,
media & entertainment (M&E) companies are increasingly seeking
markets that offer the potential for sizable digital earnings. India has
a large scale and millennial population – young, tech-savvy consumers
with rising earnings potential and disposable income. This demographic
has historically been and will continue to be, an early adopter of new
technology and new models of media consumption. India, therefore is a
market which is ripe for digital media investments. The demographics are
all stacked in India’s favour for digital consumption.
By end of 2016, India will have more than 300 million smartphones.
Cheap smartphones and the rollout of 3G and 4G broadband
infrastructure are rapidly coming together to leapfrog traditional
distribution and democratize online access.
Together, these factors are the foundations for accelerated digital media
adoption. Facebook’s Õrst four years in India netted it 50 million users,
the same amount of time it took to hit that milestone in the rest of the
world7.
The opportunity for M&E companies from this “new wave” of digital
growth is large, as is the cost of missing out. Reacting to the pace at
which opportunities in these markets present themselves requires agility.
M&E companies need to both anticipate the rewards as well as appreciate
the risks.
There are a few challenges that need to be overcome to fully gain the
beneÕts of the digital ecosystem in India. India faces inherent challenges
around rampant piracy, low broadband spends, high costs of broadband
connections vis-à-vis cable TV costs, and low level of monetization
of digital content. Therefore, such issues need to be targeted to fully
leverage the opportunity that the digital segment presents in India.
7. “Reaching 50 Million Users,” Visual.ly website, http://visual.ly/reaching-50-million-users,
accessed 20 May 2014; “Facebook user base soars to 50 mn in India,” Press Trust of India,
25 July 2014, via Factiva, © 2012 The Press Trust.
8 | Digital opportunity - Indian M&E
Indian economy and the digital sector
$ 8676.4 477
bn mn
Internet subscribers
GDP A young (2016)
Source: Source:
Oxford Economics nation with a EY Estimates,
TRAI
median age
of 27.6 years
4.1%
Source: CIA World Factbook
Internet related
1.33
contribution bn
Population (2016)
to GDP
Source: EY Estimates Source:
based on BCG and Oxford Economics
IAMAI Analysis
371 192.3
mn mn
Mobile Internet Broadband
users (2016) subscibers (2016)
Source: IAMAI June Source:
2016 Estimates TRAI Estimates
~300 174
mn mn
Smartphone users Wireless broadband
(2016) subscibers (2016)
Source: EY Estimates Source:
EY Estimates
The fastest
growing major
160 economy in the 18
mn world mn
Digital Video Wired broadband
Viewers (2016) subscibers (2016)
Source:
Source: EY Estimates
EY Estimates
Digital opportunity - Indian M&E | 9
India is undergoing disruption
on an unprecedented scale.
In this section, we discuss the
key forces reshaping media
consumption in India.
Disruption
10 | Digital opportunity - Indian M&ESection
1
Digital opportunity - Indian M&E | 111
Penetration of smart devices
The rapid up-take of connected devices, especially Device penetration in India (mn)
smartphones and tablets is instrumental in media 500
consumption shifting beyond traditional media formats
such as broadcast and cable TV towards digital mediums.
Increased digital consumption in India is expected to help
media conglomerates drive consumer aggregation. Along
with increasing connected device ownership and time
spent online, consumers’ media consumption habits are
182 210
also shifting. India has already become the second largest
market for social networking giants like Facebook (with
155
over 155 mn users) & LinkedIn (with over 37 mn users) 98
and is expected to surpass the USA to lead the global tally
13
of the largest Facebook user base on mobile devices by
20178.
2014 2015 2016 (E) 2017 (E) 2018 (E)
India has skipped the widespread PC internet usage
phase and has directly come to the mobile phase. The Smartphones TV Sets Tablets
number of smartphones in India grew at a staggering Source: Ovum Telecom Forecast
pace during 2016, crossing 300 million and has become
the second largest smartphone market. The number of Smartphone penetration in India
tablets also grew 1.8 times during 2016, reaching 45
million and is expected to continue to grow at a faster Year Smartphone penetration
rate compared to smartphones. Tablet users are expected
to reach over 128 million users by 20209. 2014 24%
2015 31%
2016e 41%
2017e 46%
2018e 51%
2019e 55%
8 Economic Times, http://economictimes.indiatimes.
com/tech/internet/india-growing-faster-than-us-for-us-facebook/ 2020e 59%
articleshow/54961630.cm
9 Ovum Telecom Forecast Service, December 2016 Source: Ovum Telecom Forecast and EY Estimates
12 | Digital opportunity - Indian M&E2
Changing demographics
With rapid digitalisation, the face of Digital India is primary and often only access point to the internet. The
expected to be far more diverse in the near future, preferred services will match day-to-day demands of a
moving away from the old, familiar Õgure of an diverse income household, regional language based and
urban, mid-aged, upper-middle class male. There is a more often outside a tier I city to include tier II & III cities.
predominant shift towards using the mobile phone as a
The changing face of the digital user
2003 2018
Older 40% over the age of 25 54% over the age of 25
Rural 29% rural audience 40% - 50% rural, semi-urban audience
Gender balanced 2.6 men for every woman 1.9 men for every woman among
18-24 year olds
Mobile 60% - 70% of the user base 70% - 80% of the user base
Vernacular 45% of the users consume regional 70% - 90% Indian do not speak English, less
language based content than 1% as a primary language
Per Capital Income USD 5418 USD 6700
(PPP)
Source: IAMAI
As the digital audience shifts from the familiar Many content creators are already trying to cater
persona, there will emerge an opportunity to create to this changing demography & psychography of the
target group speciÕc content for the new audience. audience and are producing content directed towards a
speciÕc target group.
Digital opportunity - Indian M&E | 133
Increase in internet speed and
penetration
The next wave of growth in Indian internet is expected As it rolls our further, 4G is expected to contribute around
from non-metro and rural areas, where wireless mobile 58% of the mobile data trafÕc in India by 2020. Digital
internet shall play a pivotal role. India Initiatives by the government are also expected to
be instrumental in driving the demand for 4G. One of
Even though the major proportion of wireless internet
these is an indicated investment to the tune of INR 70 bn
subscribers are 2G users, the adoption of 4G is gradually
for the rollout of 4G across India over the next 3 years.
increasing and now 3G/4G constitutes over 50% of the
In addition to the public sectors, Reliance Jio has also
overall wireless internet user base.
invested INR 700 bn for allocation of 4G spectrum where
their network would encompass 600,000 villages in India.
4G growth and market share
4G market in India (in millions) ,?egZad]\YlYljY^Õ[afAf\aY
% of total data trafÕc
346
58.4%
India will see a signiÕcant
spurt in 4G Wi-Fi hotspots
driven by Government
and private sector initiatives
4 4.2%
2015 2018 2015 2020
Source: CISCO Mobile VNI Source: CISCO Mobile VNI
14 | Digital opportunity - Indian M&E4
Digital Ad spend
India’s low levels of ad spending drastically contrast with 14% of the total ad spend in the country, which is higher
the population of the country. Even though the internet compared to only Mexico and Indonesia. However, by
penetration is comparatively low, digital ad spending on 2020, when approximately 20% of the ad spending will
a per-user basis is the lowest of anywhere in the world. be on digital, India would have crossed several other
Currently, digital media contributes to approximately countries including Spain, Sweden and the Netherlands10.
10 Source: MAGNA Global Ad Forecast, December 2016
Figures in INR billion 2016 2020
Total media spending 560 924
Digital Ad spending 81 185
Source: EY analysis
Digital opportunity - Indian M&E | 155
Mobile micro payments/wallets
Subscription revenue is constrained by low credit card Daily packs and transaction based models are also
penetration, payment gateway failures and other factors gaining market traction.
that hamper online payments. Currently, only 1-2% of
The growth of e-commerce sales has been a catalyst for
the consumers pay for media content online. Most of the
growth in mobile payment in India. Approximately 41%
payments in India are still cash based with approximately
of sales from Indian e-commerce are expected to accrue
95% of the total debit card usage focused on ATM based
from mobile payments in the future.
transactions. However, this is expected to change with
rapid developments in the mobile payment infrastructure. The pre-paid recharge payment market is expected to be
Mobile payments grew from US$ 480 mn in FY14 to the fastest area of growth (~40%) for mobile payments,
US$3.12 bn in FY16 at a CAGR of 155%11. However, followed by domestic remittances. A majority of the
different entities in the mobile / online ecosystem are mobile recharge market is driven by mobile wallet
building mobile centric wallets to overcome payment companies.
issues and have seen an uptake in various digital services.
Mobile payments through Prepaid Mobile payments: By payment
Payment Instruments (INR bn) type 2014
Money
Online transfers
488 shopping 38%
and Ticket
reservations
31%
81
2014 2016
Source: RBI, Payment System Indicators; https://rbi.org.in/scripts/BS_ViewBulletin. Recharge and
aspx?Id=16609; https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=15330 utility bill 31%
Overall, the major Indian payment wallet companies Semi-Urban and rural regions are expected to fuel the
have raised capital for investments in technology / data growth of mobile wallet payment players, where more
analytics, brand building and growing the network of than 50% of PayTM users are from Tier II and Tier III
users and merchants. PayTM grew at 1.6x over the last towns and is expected to cross 70% in the near future13.
year to reach 160 mn users, whereas MobiKwik has
around 45 mn users12.
11 Hindu Business Line, http://www.thehindubusinessline.com/catalyst/the-future-of-mobile-wallets-in-india/article8332085.ece
12 Indian Express, The Hindustan Times, http://indianexpress.com/article/technology/tech-news-technology/mobikwik-sees-400-rise-in-
transactions-post-demonetisation/; http://www.hindustantimes.com/business-news/paytm-transactions-exceed-combined-usage-of-credit-
debit-cards-in-india/story-4yiLcdQnpDM50dtM2dwiSN.html http://www.medianama.com/2015/08/223-paytm-hits-100-million-users/
13 The New Indian Express, http://www.newindianexpress.com/business/2016/nov/15/paytm-unveils-its-multilingual-interface-with-10-regional
-languages-1538849.html
16 | Digital opportunity - Indian M&EDigital opportunity - Indian M&E | 17
The unprecedented disruption
which India is currently
undergoing, has posed many
opportunities for companies.
In this section, we discuss the
opportunities which exist for
digital and traditional M&E
companies.
Total Digital Media Market 2016 2020
(In INR crores) (In INR crores)
OTT and digital advertising 8,100 18,500
Video OTT subscription 170 1,230
Music OTT subscription 115 1,030
Gaming (In App/ Paid 105 770
Subscription)
Total 8,490 21,530
2
Opportunity
18 | Digital opportunity - Indian M&ESection
2
Digital opportunity - Indian M&E | 191
Digital video
The next stage of digital consumption after travel and grow signiÕcantly in the near future at a compounded
ecommerce is expected to come from digital media, annual growth rate (CAGR) of over 13%14. With the
especially video. Trends in online searches in India increasing growth in video audience and consumption,
suggest that entertainment is becoming the largest the Indian market provides an opportunity for
sought after category contributing to 31% of all searches. international studios and content owners to showcase
Videos and music currently represent the highest their content and garner additional revenues.
proportion of the consumer preferences within the
By 2020, India is expected to become the second largest
entertainment category, collectively aggregating over
video viewing audience globally15.
90%. The video viewing audience in India is expected to
Online video audience in India (in mn)
450
380
310
250
160
2016 (E) 2017 (E) 2018 (E) 2019 (E) 2020 (E)
Source: EY Future of TV Report, Statista
663
Comparison of online video audience (in mn)
530
450
215 236
160
87 101
2016 2020 (E)
Brazil US India China
Source: EY Future of TV Report, Statista
14 Digital Video Viewers Worldwide, by Country," eMarketer, December 2016
15 “Digital Video Viewers Worldwide, by Country,” eMarketer, December 2016
20 | Digital opportunity - Indian M&ETelecom Operators, Content Aggregators, Media Entities, Comparatively, Video-on-Demand (VoD) services have a
DTH Players, etc. have ventured in the OTT space within higher penetration among the Indian audience. Young
the India Market. They are leveraging their strengths in adult, entertainment & celebrity driven clips are popular
order to establish a foothold in the market. formats in short form content.
Live TV streaming, however, is still at a nascent stage
in India and is primarily driven by sports and events.
Market preferences between video on demand and live TV digital platform
Video on demand Live TV
Penetration of apps
Reach Reach
35% 14%
Time spent by smartphone user (min/ month)
30 29
24 26 23
21
18-24 yrs 25-34 yrs 35+ yrs 18-24 yrs 25-34 yrs 35+ yrs
Source: Nielsen informate mobile insights
With the increasing growth in video
audience and consumption, the Indian
market provides an opportunity for
international studios and content
owners to showcase their content and
garner additional revenues.
Digital opportunity - Indian M&E | 212
Snackable content formats
Consumer preferences and content consumption Consumer preferences
patterns over the internet have evolved over a period of
time. This evolution is expected to drive and determine Short form content
the focus areas for the growth in the OTT market in India. The average length of
Shortform and snackable content is primarily driving the video viewed in India
20
growth in consumption of digital media, and is primarily is
driven by a younger audience. minutes
Consumers have shown increased preference towards
short-form content; with the average length of video
viewed in India being around 20 minutes. In addition,
62% of the content consumed on YouTube is short-form
62% of content consumed on
YouTube is Short Form Content
content. This trend has led content producers like Eros
International Viacom 18 and Star India to focus on Live TV driven by sports
exclusive and snackable content.
25 million
digital views of the India
vs Pak World Cup match
Mobile driven 2015
35% 100
YouTube is
accessed by million
of smartphone digital unique viewers for IPL 2016
users Driven by youth
The 15-24 and 25-34 age
categories constitute
Low willingness to pay for content 80% of the users
0.5-1 million
Curated content/playlists
pay for content, out of ~100
million digital users “Expert curated playlists are more
popular than the albums with about 33%
more clicks” -Airtel Wynk
Source: EY analysis
22 | Digital opportunity - Indian M&EThis evolving trend has led content
producers like Eros International
Viacom18 and Star India to focus
on exclusive and snackable content.
One of the reasons why digital video consumption in India penetration, elongated time to download movies, buffering
is primarily in the form of short-form content, is mainly time and bandwidth issues have caused Indians to prefer
because of slow and Öuctuating internet speeds which shorter and snackable content as compared to other
hinder the video viewing experience. Low levels of 3G countries.
Average length of video viewed in countries
Singapore Japan Indonesia
52 Minutes 49 Minutes 42 Minutes
Taiwan India
29 Minutes 20 Minutes
Source: Ooyala video index
Currently, most Indian OTT players have similar content content for its OTT platform Eros Now. Spuul, a
libraries of GEC TV shows, movies or regional content, Singapore based independent OTT platform targeted at
which means no differentiation in content. However, with Indian audience and diaspora is also planning to invest
increasing competition and new entrants in the market, in original content for India. With the inclination of the
the focus is shifting towards content differentiation by Indian audience towards short format content, OTT
investing in original snackable content. Eros International players also need to focus on snackable content for OTT
has invested $25 mn in FY 16 into building original platforms.
Digital opportunity - Indian M&E | 233
OTT and MCN
Over 50 mainstream SVOD services have launched
around the world since NetÖix’s SVOD service began in OTT Platform & Player
2010, and the Asia-PaciÕc region alone has about 140
major OTT platforms now. India has 8-10 mainline OTT Categories
platforms and over Õve SVOD platforms eg. Eros Now, Different types of Telecom operators, content
Hotstar, YuppTV, nexGTv, Ditto. aggregators, broadcasters, DTH Players, etc. have
Driven by the exponential growth of video consumption ventured in the OTT space within the India Market. They
over digital media, video OTT platforms have been a key are attempting to leverage their strengths in order to
focus areas for the leading media conglomerates and establish a foothold in the market.
start-ups alike. The market is also observing entry of • Device based players have preloaded apps on
large global digital video players (NetÖix entered India in handsets and are targeting existing users. However,
early 2016 while Amazon Prime Video was launched in they face very high content costs leading to small and
December 2016). Within this burgeoning market, each limited content libraries
of these different players are trying to build a niche with
the audience through their individual strengths across • Telcos provide built in payment options through
content, experience and eCommerce. Some examples of network billing and incentives for data usage.
OTT services available in India are provided in the table. However, they also face issues around differentiating
content libraries
Broadcasters Start-ups / International • Media Entities/ Broadcasters are leveraging their
content houses platforms existing content libraries and providing an ad-
based product. Driving trafÕc and engagement is a
Hotstar YuppTV F]lÖap
challenge for them along with monetization
Ditto Balaji Alt Amazon
Prime Video • DTH Players are targeting their existing users
with white-labelled solutions. However, they lack
Ozee F]pl?LN Hooq differentiated content and have found few takers
Voot VuClip • Content Aggregators/Start Ups have opted for a
Liv Eros Now freemium model providing long-form content and
targeting NRI audiences. However, their reach is
limited because of limited app discovery. Increasing
Content genres like entertainment, sports, and kids are content costs are also a challenge for these
emerging as the key focus areas to create a niche / create aggregators
differentiators for the platforms. Most of these players
are at early stages of their maturity and are focusing on
rapid consumer aggregation and driving engagement.
24 | Digital opportunity - Indian M&EOTT Market in India - Different categories of players
1 3
Devices Content aggregators
Apple Music Hungama Play
Apple iPod and Apple TV The Hungama Digital’s video
Music streaming streaming service
subscription service
Spuul
Sony Playstation Video Streaming and download of
Movies and videos movies, short Õlms and
TV shows
4
Media entities
2
Telecos
Airtel Wynk Sony LIV
Music streaming Freemium model based
subscription service VOD service
HOOQ Hotstar
Music streaming Ad based VOD service for
subscription service Star
Video OTT Forecast at 64% for the same period. The market will continue
to be heavily advertising driven (we expect subscription
India’s online video advertising market will contribute revenues to be sub 5-7% in the near future) with some
close to INR 80 bn out of total digital advertising market models emerging around content transactions.
of INR 185 bn in revenue by 2020. Advertising video Live OTT – while still in early days – is garnering a sizeable
on demand (AVoD) services will see a compound annual audience base, led by news, events and sports. An
growth rate (CAGR) of 38% between 2016 and 2021. average of just 30 minutes of live programming per day
Subscription video on demand (SVoD) services, albeit can add upto 20% to a platform’s viewership.
starting from a much lower base will see a higher CAGR
Digital opportunity - Indian M&E | 25Multi-Channel Critical Success Factor
Network (MCN) for MCNs
MCNs are entities that afÕliate with multiple YouTube While the MCNs have grown rapidly by aggregating
channels to offer content creators assistance in areas viewers in the recent past, their capability to effectively
such as programming, funding, cross-promotion, partner monetize the same has been limited with constraints
management, digital rights management, monetization/ around content/ talent cost and monetization means. The
sales and/or audience development. long term success for MCNs in India would depend on:
Most MCNs are focused around a vertical or demographic • IP Creation - Investing and developing content
with large, targeted audiences for programming, IPs would be the key for MCNs to drive effective
distribution, and sales. With the proliferation of platforms utilization of the content across platforms/ media and
beyond YouTube (eg. Facebook, Instagram, Snapchat also enable these players to enhance engagement
etc.), the MCNs are evolving towards a Multi-Platform with the target audience.
distribution approach.
• Enhancing monetization avenues – With platform
Among the large MCNs present in the market, there has advertising being the major source of revenue for
been an active focus towards developing IPs for content MCNs, the average revenue realization per user
genres like entertainment, humour, music, kids, lifestyle will be limited. MCNs need to focus on enhancing
etc.; the idea being to build IP and then monetize it not monetization through sponsored content tie ups,
just through YouTube, but across TV rights, Õlm rights, content driven commerce, traditional media tie ups,
merchandising, and events. merchandising and other ancillary means.
Some leading Indian MCNs across different genres: • Analytics and customer targeting/re-targeting
capabilities – MCNs need to continue their
Music Entertainment & Kids investments in technology to improve their capability
Lifestyle to target/re-target their core audience, analyse
real time uptake of content, track consumption
T Series Qyuki Digital Media Chu Chu TV
preference, drive content recommendation etc.
Sony Whacked Out Media Appu Series
Zee Music Culture Machine G`Eq?]famk
Saregama One Digital Toonz
Eros
Rajshri jshri
26 | Digital opportunity - Indian M&E4
E-celebrities
The proliferation of digital platforms have also given rise as Blogilates (Õtness based channel) and has created an
to the phenomena of ‘e-Celebs’. Number of these talents e-commerce business around the YouTube channel. India
has gained mass popularity nationally and internationally is also witnessing the growth of such e-celebrities. Nisha
on YouTube and other such digital platforms. Globally, Madhulika, Bhuvan Bam, Sanam Puri have more than
E-Celebs such as Michelle Phan and Casey who have 1 mn subscribers each. It is expected that such talents
created their own niche content areas in the Õelds of would be partnered extensively by content and brand
Make-up and Fitness respectively. Marketers are actively players to build offerings for consumers on different
tying up with these celebrities to leverage their growing digital platforms.
popularity and promote product and service offerings and
thereby increasing brand awareness and ‘viral’ presence.
For instance Casey Ho has set up her YouTube channel
Digital opportunity - Indian M&E | 275
Regional content propositions
The next wave of growth in India’s internet population Internet user base
is expected from tier II and tier III cities, where wireless
Figures in millions
mobile internet shall play a pivotal role thus enabling the 388
growth of vernacular and regional content. Currently 45% 358
of the users consume regional language content and this
percentage is expected to increase with the growth of
internet users. Digital media players should thus consider
aggregating / producing vernacular content to capture
246
the next set of users.
The growth has been fuelled by availability of low-cost
smart phones, low rates of data plans, increased adoption
and awareness in rural India. A few key elements that can 129
further help unlock the true potential would be:
• Providing affordable data packs and access through
the network reach with data enabled devices
• Facilitating digital transactions and ease of payments,
potentially through new instruments
2015 2020
• Developing a regulatory framework which would
encourage content development, protect artists Urban Rural
against piracy, etc.
Source: IAMAI, EY Estimates
• Enabling entrepreneurial ventures through ease of
Õnancing and mentorship programs
• Creation of regional language content to tap the
potential of non-urban areas
28 | Digital opportunity - Indian M&ERegional news Vernacular video
Regional news consumption is on the rise, with signiÕcant
trafÕc coming from rural and semi-urban regions. This
content
has given rise to several digital media companies focused The preference of the Indian consumers towards
on key regional and vernacular markets. vernacular and regional language content is constantly
on the upswing, with 93% of the time spent on videos in
Digital players growing in the key regional markets Hindi and other regional languages.
Content consumption (time spent)
Largest
regional digital English, 7%
Dainik Bhaskar news player in
India with 2 bn
page views
Other regional
languages, 30%
Half Hindi, 63%
of its users
base from Tier 2
and 3 cities like OneIndia
Pilani, Haridwar,
Source: Google Report: Online opportunities in Telecom
Mathura etc.
3 bn
page views every
Dailyhunt month with 95% of
Digital content
trafÕc for regional
content producers can thus
look at aggregating /
1.5 lakh
UVs everyday and
producing vernacular
Vikatan
200 million page
views every month
content to capture the
next set of users.
Source: EY analysis
Digital opportunity - Indian M&E | 296
Mobile gaming
The Indian gaming industry has been a dynamic and Emerging Opportunities: Mobile game publishers
evolving industry and is expected to touch INR 77 bn focused on regions like China and South East Asia have
by 2020 from the current INR 15 bn. Due to an increase seen tremendous growth. India, SAARC and MENA
in the number of mobile internet users, smartphones and focused game publishing is an opportunity waiting to
tablets in India, it can be expected that mobiles would be be tapped given the growth in smart phones and mobile
one of the most important platforms in gaming. Mobile gaming consumption. Moreover it is expected that app
gaming would pave the way to growth and it is expected stores launched in vernacular languages would further
that mobile gaming would take over the console gaming drive exponential growth of mobile games by through
market in India. This can be owed to various factors such dedicated focus from game developers and publishers.
as the easy access to budget smartphones, increased
mobile internet usage, increase in number of tablets used,
etc.
Owing to the large availability of free-to-play games
through app stores and mobile carriers, there has been
large interest by casual gamers in the market. There are a
large number of games in the market catering to different
segments of causal gamers such as arcade, adventure,
strategy, racing, card, etc. Also, on an average, men
spend 8.5 hrs per month on mobile games and women
spend 6 hrs per month. This is expected to grow rapidly in
the near future.
30 | Digital opportunity - Indian M&EDigital opportunity - Indian M&E | 31
The disruptors and
opportunities present
monteization opportunities
for M&E companies. In this
section we discuss how M&E
companies can innovate to
monetize the opportunities
Innovation
for
monetization
32 | Digital opportunity - Indian M&ESection
3
Digital opportunity - Indian M&E | 331
Partnerships
The Digital Market in the future will evolve to have Content owners are leveraging their strength and are
more digital supply chain partnerships to bring in providing it exclusively on their platform (Star has
complementary propositions suiting their strengths in removed all of its content from all other platforms
the market. With this evolution, international media including YouTube to maintain exclusivity of its content
companies have shown interest in the Indian market on Hotstar, Sony and Eros are offering exclusive premiers
through investments and partnerships and are building of movies on their OTT portals).
portfolios to leverage the market strength.
However, the OTT companies are facing monetization
OTT market
challenges as advertisement revenues do not provide
enough to cover for content & customer acquisition
partnerships
costs. In the long term, these players will have to garner
signiÕcant revenues from the subscription services. The
low penetration of credit and debit cards in the country
The OTT segment in India currently has companies from
acts as a constraint for the adoption of subscription
across the media ecosystem including broadcasters,
services, thus making it essential to provide operator
studios, DTH operators, telcos, and content aggregators.
billing/payment wallet options for internet services.
These companies can be broadly split in 3 types: Content
Telecom companies currently charge 30%-45% of revenue
owners (broadcasters & studios), Pipe / payment
earned through operator billing as transaction fees, which
channel owners (DTH/ Telcos) and Start-ups (content
acts as a deterring factor for OTT providers to integrate
aggregators).
operator billing.
The companies are currently focused on establishing
Partnerships across the value chain of media services
a foothold in the market based on their individual
could result in mutually beneÕcial relationships in
strengths. Eg. content owners, speciÕcally, in recent
bringing down both the content & the transaction costs
times have shown increasing interest in this space -
(i.e. broadcasters & studios partnering with Telecom
Viacom has launched its digital video service, VOOT,
companies & DTH providers):
in March 2016. Star has launched their OTT service,
Hotstar, early in 2015.
34 | Digital opportunity - Indian M&E;Yk]klm\q2@GGI2l`]Ôjklg^eYfqklm\ag$l]d][gehYjlf]jk`ahk
HOOQ
Sony Pictures The Singtel Group
Warner Bros. will
Television will bring provides market access
bring forward its
Sony forward its Singtel with its customer base Warner world class content
Pictures extensive library of Group of over half a billion Brothers library of movies
movies and TV mobile customers and
and TV programmes
programmes its billing capabilities
Strategy implemented
Pan-Asian planned service to cater to the Asian audience to counter Current presence
NetÖix’s entry in the South-east Asian Market Philippines India Thailand
Offer localized content with a selection of Indian, Chinese, Thai, Expansion plans
Filipino, Indonesian, Korean and Japanese movies and TV series China Korea Japan
Capitalizing on synergies attained through the tie-up to gain Content deals
exclusive content deals on a subscription only model Ź YashRaj Films Ź Shemaroo
Ź Disney UTV Ź Rajshri
Hooq would also offer exclusive content and other features such as
Ź Reliance Pictures Ź Whacked Out Media
ofÖine play, multiple device access
Partnerships with
global players
Many global and Southeast Asian players have shown of digital growth in the country. These players are looking
interest in partnering with India to capture the next phase at regional partners to provide ‘Glocal’ offerings.
Case study: Lionsgate & Alibaba: global media player partnering with a local major
LionsGate Entertainment Alibaba Group
Lions Gate Entertainment would LionsGate Alibaba Group, present across the
provide its content which Entertainment World internet and ecommerce space
includes a large library of movies would provide the distribution and
Tie up
and TV programmes market knowledge in this deal
The collaboration would lead to LionsGate’s expansion into the Chinese market and would have content offerings such
as “Twilight” Õlms, “The Hunger Games: Catching Fire,” “Divergent” and “Mad Men.”
The content would be distributed through Alibaba’s latest generation of set-top boxes which would facilitate reach
LionsGate Entertainment World plans to engage customers in China by offering premium content and subscriber
beneÕts such as invitations to screenings, behind-the-scenes exclusives, etc
To facilitate further synergies, Alibaba group is also been in talks to gain control of Lions Gate by acquiring a 37 percent
stake in studio
Digital opportunity - Indian M&E | 35;Yk]Klm\q2Lae]k?dgZYdHYjlf]jk2 companies for growing their presence and
Times Global Partners (TGP) is an innovative business in India through growth of their brand,
initiative focused on Times Internet partnering audience, adoption, distribution and monetization.
with established and emerging global digital
Current partnerships
UBER Lifehacker Gizmodo Business Insider Dorkly
The HufÕngton
Askmen Pursuitist Techradar College Humor
Post
With increasing competition and challenges around monetization, companies are increasingly
looking at partnerships in order to mitigate market constraints. Many global players who are
entering into the Asian/ Indian market are looking at local partnerships in order to provide
‘Glocal’ offerings. The market is expected to witness more vertical and horizontal partnerships,
acquisitions to drive synergies.
36 | Digital opportunity - Indian M&E2
Niche content and communities
Children & women centric content has gained interest in Multiple MCNs including YoBoHo, Culture Machine, Appu
the recent past and many players are currently looking to series & Chu Chu TV have emerged in this space. The
create content in this genre segment has also seen investor interest: RTL Group
owned Canadian media company BroadbandTV acquired
MissMalini.com produces Bollywood, fashion & lifestyle
YoBoHo.
centric content speciÕcally for women. Ping Digital runs
multiple women centric channels.
Case study: popular kids centric players
YOBOHO CHUCHU TV APPU SERIES
YoBoHo’s Ecosystem around ChuChu TV’s Ecosystem around Appu Series Ecosystem around
Kids Content Kids Content Kids Content
YouTube Channels YouTube Channels YouTube Channels
Ź YoBoHo owns and operates 27 Ź Chu Chu TV owns and operates Ź Appu Series owns and operates
kids centric channels 5 kids centric channels 17 kids centric channels
Ź The prominent one is: Ź The prominent one is:
HooplaKidz Super Simple Songs
Library of Content Library of Content Library of Content
Ź 8000+ videos of Kids centric Ź 1100+ videos of Kids centric Ź ~7800+ videos of Kids centric
content content content
Ź Content featuring original Ź Content featuring original
programming is produced in programming is produced in
house house
Online views Online views Online views
Ź YoBoHo generates 3 billion Ź ChuCHu TV generates 2 billion Ź Appu Series generates 550
views per year views per year million views per year
Ź One of the largest pre school & Ź ~7 million subscribers on
educational networks on YouTube
YouTube
Source: EY analysis
Digital opportunity - Indian M&E | 37Case Study: Saregama
• Saregama has launched an app for Hindustani classical, Carnatic, fusion music etc. by leveraging its
library of over 8000 recordings of about 400 stalwarts
• The app features works of over 70 Carnatic classical musicians including MS Subbulakshmi,
Dr M Balamuralikrishna, Semmangudi to name just a few
• The app allows users access to over 50 specially curated radio stations and also allow them to
download music ofÖine
• This community/app around this music segment could be further enhanced to conisder a 360 degree
music proposition
With the changing demography & psychography of the
digital audience, there is an opportunity to build TG
centric content
38 | Digital opportunity - Indian M&E3
Leveraging transactions and
micro payments
With low credit and debit card penetration in India, the to drive payments in the digital transactions space.
market has evolved with players innovating on hybrid Global players also have evolved their offerings to cater
models where content library is split between premium to this particular market need. For example, players like
and non-premium content access. The premium content Spuul, offer one-day and three-day packs for as low as
is monetized through non-traditional payment models INR 6 to INR 30 to increase to monetize their premium
such as telco enabled payments, trial packs, one-day content in the Indian market. Going forward, 3-4% of
deals, per song payment, pre-loading content, etc. the total transactions are expected to be done through
These offerings have specially been catered to for the mobile wallets/ micro payments. Given the recent
Indian market considering that the consumers are less demonetisation by the Government, this rate could well
willing to pay large sums at a time for content. Going be higher in the near future.
forward, telco or mobile wallet propositions will be key
Digital opportunity - Indian M&E | 394
Differentiate between urban English
and vernacular propositions
India being a large and differentiated market with wide Digital penetration among consumer segments
disparity and differing level of access, users could be
primarily categorized into 3 segments – Media Dark,
80%-85% 90-95%
Regional Vernacular and Urban English. To leverage this
varied set of user needs, differentiated and innovative Urban English
product offerings could be launched for these consumer
segments.
• Media Dark Consumer: The media dark consumer 50% 75-80%
segment could be targeted through customized Regional
offerings that could be built along with telco or other Vernacular
such wider access means such as entertainment
through phone calls (Effectively used by Hindustan
Unilever’s ‘Kan Khajura Tesan’ platform) 8-10% 50-55%
• Regional Vernacular Consumer Segment: Targeting Media Dark
the local/ vernacular language speaking audience
by creating speciÕc offerings for these segments
Approximate EY estimates
on traditional and digital platforms. Dainik Bhaskar
and Vikatan cater to these segments by catering 2015 Increment expected by 2020
to content in regional languages through both
traditional and digital platforms
• Urban English Consumer Segments: Global and
Indian content offerings could be targeted at this
customer segment by enabling differentiated
Digital penetration in vernacular
offerings such as snackable content, opinion driven and media dark segments will
content, video formats, etc. be the two main sources driving
the digital consumer acquisition
in future
40 | Digital opportunity - Indian M&E5
Leverage India for the globe
Users across the globe have an afÕnity towards Indian Expanding NRI news consumption
content. On one hand there are prospective users from
the Indian sub-continent with similarity in languages,
40-42% The Times of India
traditions, and shared history uptaking the content. On
the other hand, there are users from the Indian diaspora
around the world interested in the Indian content 40-42% NDTV
offerings. With the ability to pay, shortage of Indian
content and good internet connectivity, these audiences
are willing to pay for digital content services. Players 25-30% HT Media
like Spuul, Saavn, etc have been able to monetise their
content targeting the right set of consumers across the 35-40% The Economics Times
globe.
Indian consumers have over the past several years
increased consumption of international content. To 15-20% India Today Group
make international content available to the audience
entering into the right content deal and planning content Unique visitors from outside India
window sizing and making content easily accessible to the Unique visitors from India
audience on the digital platforms are the critical aspects.
Nowadays, broadcaster centric OTT players in India enter
into TV plus digital deals wherein initially the content is
made available on TV and then in a couple of days on
digital platforms.
Innovative strategies leveraging the advantages of
the Indian media ecosystem for the globe has proven
advantageous in the following segments:
• Kids: Increasingly India’s ability to produce content
at optimal production costs combined with technical
competence has led to multiple Indian digital
propositions garnering a global audience. Leading
India based kids MCNs have more than 90% global
audience
• Advertising: Leading advertising agencies are
leveraging Indian creative talent and off shore cost
dynamics to set up shared service centers to serve
global clientele.
• Mobile /digital gaming: Multiple game development
houses in India are working along with global studios
to develop leading game titles as an outsourced
partner or a co-developer
Digital opportunity - Indian M&E | 416
Building India as the digital engine
India has been at
the cusp of drawing
exponential demographic
dividends from its young,
urban centric workforce.
The Indian market has
a vibrant IT/technology
backed ecosystem on
which the now thriving
start-ups have emerged.
With global partnerships
setting in and Asian
markets being looked at
as key growth segments
by global players,
India could provide an
ideal base for market
expansion for the Middle
East and South East
Asia. Several global
conglomerates also have
set up their dedicated
product development
centre out of India
providing solution on
emerging areas big data,
analytics, IOT, etc. areas.
For example, global
players like TechniColor
have set up their
animation studios in India
to serve as the shared
services centre catering
to global operations.
42 | Digital opportunity - Indian M&EChallenges and
Mitigating Strategies
Although digital media is on the cusp of growth in India, the ubiquity of media consumption still has inherent challenges.
Slow internet Low monetization Piracy Online Payments
speeds opportunities
India is plagued with The average revenue The digital media One of the primary forces
very low internet speeds, per user (ARPU) in industry has not been impeding the growth
which continue to inch India is extremely low able to fully monetize of subscription and
up but are signiÕcantly as compared with other the content due to pay-per-view revenue
lower than global developing countries. rampant piracy in India. models is the hassles
benchmarks. Internet Added to this is the Weak IP regulations and that the consumer faces
speeds witnessed a 29% fact the consumers are ineffective enforcement while making payments
y-o-y growth and reached not willing to spend has discouraged players on digital platforms,
an average of 2mbps, for digital content. In to produce original even when they are
compared to 10+ mbps fact, less than 1% of the content and IP. willing to pay. This is on
in developed countries total internet users are account of low credit
Mitigating strategy:
like US, Canada & Japan. currently paying for legal card penetration, fear of
content. For investors, In recent years, the using net banking and
Mitigating strategies:
this is a huge deterrent. industry has started credit cards online due
All the components of the to adopt cost-effective to security threats and
Mitigating strategy:
digital ecosystem would technologies to curb the lack of experience
have to work in unison to Subscription packages piracy. In addition, the of transacting online.
iron out the challenges and average ticket size Indian government’s
Mitigating strategies:
of low internet speeds. of transactions have focus on the National
Newer compression been reduced to lure IPR policy is expected to Integration with payment
technologies, innovations consumers to pay for create signiÕcant new gateways, mobile wallets
like adaptive streaming, sampling the content. market opportunities and other payment
etc. need to be developed Innovative pricing for IPR holders. mechanisms has reduced
to mitigate the challenges strategies, compelling the friction faced
caused by slow internet alternatives have been while making online
speeds in India. introduced to convert payments. Some digital
non-paying users to platforms are using
paid users. In addition, the billing systems of
deep discounts, cash telecom operators for
back schemes and other payment collections.
incentivising offers
are given to acquire
new consumers.
Digital opportunity - Indian M&E | 43Conclusions
Digital media companies need to develop a comprehensive
framework and an operational ecosystem that manages strategic
growth challenges, transforms traditional operations for seamless
digital integration, enables investments for scale and growth while
handling taxation and security related challenges effectively.
The future of digital media will have implications for every
component of a digital media company. We believe tomorrow’s
media company will transform into an ‘omni-platform media
company’. We expect the business to look like
Strategy and monetization
>jgflg^Ô[] Ea\\d]g^Ô[] :Y[cg^Ô[]
• Customer experience management • Support operations optimization: • Supply chain and distribution
Marketing, sales, service
• Customer and channel segmentation • Finance transformation
• Digital IP: products and services • Enterprise cost reduction
• Enterprise resource planning
• Pricing and bundling • Operating model and governance (ERP)
• Sales, service and marketing • Content monetization • Shared services optimization
transformation • Digital/media asset management • Intellectual property management:
rights, royalties, participations
• Social media strategy • Technology enablement: non-core
• Technology enablement: lead to IT, next-gen sales, operations and • IT Services Management: disaster
service, web, contact centers, engineering recovery, business continuity,
customer resource management digital content security, cloud
(CRM)
Business intelligence and advanced analytics
Organizational design, change management and governance
Technology selection and program management
Privacy, security and risk management
44 | Digital opportunity - Indian M&EWith the broadband and smart phone penetration to
cross 35% and 50% respectively by 2018-19, Indian
digital economy is expected to reach an inÖection
point as also observed in other developed economies.
India’s growing middle class, rising disposable incomes,
high volume of content consumption and favourable
regulatory environment are driving the Digital Media
Industry and helping it Öourish in India. While the
opportunity for M&E companies from digital media
consumption is signiÕcant, reaping the beneÕts requires
careful planning and execution. To help M&E companies
navigate the complex challenges, EY has identiÕed key
imperatives from our conversations with clients and
observations on ground:
Strategy Operation
• What is our long-term growth strategy and what is the • How can we optimize the balance between content
appropriate mix between organic growth and M&A? curation and content creation?
• Are we effectively monetizing our content across • Based on consumer segments across geographies,
media channels, leveraging effective rights what are the most effective digital distribution means?
management and content windowing? • What are the imperatives of digital transformation of
• Can we leverage piracy data to gain insight into your current traditional businesses?
untapped demand for our content? Can we make
adjustments to the timing, availability and format of
our content or services to enhance revenue?
Support
• As we grow, how can our operational model be further
Customer developed to help produce real tax savings?
• Do we have a long-term strategy in place to manage
• What digital experiences do our customers value? effective tax rates and address potential challenges
Do we have the ability to understand consumer from tax authorities?
preferences and sentiment?
• Have we proactively planned for how base erosion and
• Is our marketing strategy and approach tailored to proÕt shifting or similar legislative proposals might
match consumer preferences? impact the taxation of our digital media operations?
• How are we effectively developing our consumer • Have we identiÕed and developed appropriate policies
communities and driving 360 propositions to these and procedures?
communities?
Digital opportunity - Indian M&E | 45You can also read
