Effective use of digital media in the Indian entertainment industry to optimise audience access

Abstract

The Indian Media & Entertainment industry is expected to grow at a higher rate than the national GDP in the coming years. Several factors such as the population demographic, favourable regulations, changes in technology and a different competitive landscape are expected to contribute to this growth. A key change in technology is the move to digitisation which has been facilitated by the growing penetration of mobile telephony and increasing access to the Internet. Digitisation is expected to bring about a paradigm change in the manner in which end users access and consume media content. Further, it is expected to improve quality of content and improve realisations. This report focuses on the impact of digitisation on three key media sectors – Television, Films and Music. Television: The Indian television industry faces several challenges including significant loss of revenue due to piracy and under-reporting of subscription. Currently, over 85% of revenues accrue to local cable operators resulting in low ARPUs for broadcasters. A shift to digital TV will allow broadcasters to encrypt content thus eliminating the risk of piracy. It also improves subscriber addressability, thereby preventing under-reporting losses. The Conditional Access System (CAS) mandate by TRAI and the entry of several digital platform players is expected to accelerate the shift to digital TV. As the number of digital households in rural areas is thrice that in urban areas, focussed programming for this segment will be a key differentiator. Digital TV allows a larger share of subscription revenues for broadcasters and also reduces their carriage cost – this improves profitability significantly and provides content generators the flexibility to produce niche content. TV channels must concentrate on building strong content libraries, backward integrating to produce their own content and optimising audience reach across multiple platforms. Films: Indian films are heavily dependent on theatrical revenues – hence low screen density, high production, marketing and distribution costs and piracy limit their earning potential. The move to digital screens in India is a means to reduce costs (in contrast to the quality enhancement motive elsewhere in the world). Several innovative technology and financing models have resulted in higher digital screen penetration in India, even when compared to developed markets such as the US. Digitisation will allow film producers to reach a wider audience in a shorter time span and to optimise their revenues from other platforms such as home entertainment and ‘Pay per View’. Music: The Indian music industry has seen a decline in revenues driven primarily by a fall in sale of physical format music (such as audio cassettes and CDs). The growth in the digital music segment driven by mobile value added services is expected to compensate for this decline. However, online piracy severely constrains the revenue potential of the Internet. While more music is being consumed today than ever before, monetisation issues (such as revenue sharing agreements with telcos and pricing of online music content) need to be resolved. A web-based survey was conducted to study media consumption patterns among a target audience of people of Indian origin in the age group of 22 – 35 years. It was found that a market exists for legitimate music and movie content, provided it is competitively priced. The Internet is a dominant source of information and services for this segment. As a result, it should serve as the preferred medium for advertising and promotions targeted at this segment. Similarly, the consumer engagement potential of the mobile phone is currently under-utilised. In summary, digitisation offers several avenues of growth for the media industry and provides a win-win solution for producers and consumers alike.