Market attractiveness-
The Indian entertainment and media industry can be characterized as follows –
- Current size of Indian television media industry: INR 191 billion (USD 4.7 billion). Expected CAGR over next 5 years: 22%
- Total no of households in India: 187 million
- Total no of TV households: 112 million (60% penetration)
- Total no of pay TV households: 70 million
- Total no of cable households: 68 million, projected CAGR over next 5 years: 5%
- Total no of DTH households: 2 million, projected CAGR over next 5 years: 43%
- The industry has been forecast to outperform the economic growth in each year, till 2011
- Foreign investment climate: Liberal FDI policies across every industry segment
- Regulatory status: Selective government intervention to accelerate industry growth.
Out of the total Indian entertainment and media industry, the composition on Television and Filmed entertainment industry is following:
Industry | 2006 US$ bn | % share | 05-10 CAGR % | FDI limit % |
Television | 3.7 | 42 | 24 | 49 |
Filmed entertainment | 1.7 | 20 | 18 | 100 |
Source: 2006 annual edition of the FICCI-PriceWaterhouseCoopers’ report
In India, television is the largest entertainment segment accounting for nearly 42% of the industry’s revenues followed by the print media (30%) and films (20%) in 2005-06.
Going ahead, the share of television in the advertising pie is expected to increase to more than 50% by 2010.
So whats driving this growth and is it sustainable?
- India growth story suggests strong economy sustaining the growth momentum and achieving an annual average growth of 7-8 % in the next five years. Strong economic growth are giving rise to employment and rising the household income. Rising income levels and consumerism are creating a growing demand for entertainment.
- This coupled with technological advancements, policy initiatives taken by the Indian Government that are encouraging the inflow of investment and initiative by private media companies.
- With the rise in consumerism and a consequent growth in corporate profitability, the total ad spend is expected to grow significantly in future. In 2004 the total ad spend stood at 0.5% of the GDP. This is further expected to growing interest from global brands attracted by India's huge and growing market.
- As per published data, Zenith publication 2004, India’s ad spend as a percentage of GDP is low as compared to other developing markets. This presents a good upside as the market matures for increased ad spend by corporate in the future.
- With the advent of digitalization, a lot of channels have turned in to pay channels. Pay TV penetration is expected to reach 113 million by 2011.
So what does all this mean?
All the above detailed reasons, figures and comparison with other markets indicate a healthy opportunity for the growth of advertising revenues for Indian broadcasters. The TV advertising market is expected to grow from Rs. 66 bn in 2006 to Rs. 123 bn by 2011.
DTH and IPTV are expected to strengthen cable and satellite advertising from $1.02 billion in 2005 to $1.8 billion by 2010 and $2.4 billion by 2015 (source MPA report, March 2007). TATA SKY has just signed its one millionth subscriber in less that one year of launch.
Who is watching what?
According to TAM peoplemeters, ADEX report on the share of viewership across genres of channels, the "Mass entertainment" (programmes like soap operas) has been consistently scoring high at around 40% of the total viewership, followed closely by regional language programmes at 37%.
India has a large number of medium class population. According to a McKinsey report if India achieves the growth of 7-8 %, its middle class will swell to 583 million people or 41 percent of the population. A majority of the Mass entertainment programmes (like soap opera ) viewers from this class of society can be characterized as housewives. TV soap operas targeted towards this audience have had high success rates and toped TRP ratings attracting maximum ad revenues. It comes as no surprise then that the leading segments of advertisements on TV comes from products targetted towards this same audience. According to TAM Adex data, shampoos and toilet soaps advertisements make the top two segments.
Socio-Economic Category (SEC) profiles are a commonly used tool by marketers to segment their target bases on the basis of income earned and educational classifications. Advertisers use channels that show popular soap operas to target specific viewer segment or SEC profile that matches with their targeted audience. FMCG companies selling products bought by housewives flock to TV soap operas for advertisements.
As programmes become popular with the targeted audience, the TRP ratings for the programmes start going up. Increase in viewership and viewer loyalty provides a strong case for negotiating rate hikes with broadcasters and advertisers. Average annual rate hikes can be 10-12% on popular content broadcasted at prime time on highly ranked channels. The price trends are closely related with the TRP ratings of the programmes.
Market dynamics and the 5 forces -
One the supply side, presently there are about 300 TV channels. It is expected that the total number of TV channels will grow to 500 in the next 2 years.
On the demand side, channels are falling short of quality programmes in the fight for viewership. Demand of quality programmes of mass entertainment at prime time continues to be high.
Bargaining power of viewers is relatively high as viewers have a surfeit of channels and programmes to choose from.
As a competitive strategy, channels are searching for niche areas. Programmes broadcasted during the prime time have been achieving higher TRP ratings. However prime time broadcasting is equally expensive as there is huge competition for this prime time slot.
In nutshell, competition for mass entertainments programmes is high. Quality programmes with differentiation offered by unique concepts provide great entertainment value and therefore attract wide viewership and revenues.
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