The Indian media and entertainment (M&E) industry is expected to grow at an annual average rate of 11.6 percent  to reach Rs2 trillion by the year 2020.

The M&E sector reached about Rs1.5 trillion in 2017, a growth of around 13 percent over 2016, said a report released by the lobby group Federation of Indian Chambers of Commerce and Industry (Ficci) along with consulting firm EY.

The report was launched at the annual media and entertainment industry event Ficci Frames in Mumbai on Sunday.

Without doubt, this is a growth driven by digital media that has notched up the highest and most phenomenal numbers of the year, growing by 29.4 percent  in 2017. This includes a 28.8 percent  growth in advertising and a 50 percent  growth in subscription. The latter, which was just 3.3 percent  of total digital revenues in 2016, is expected to grow to 9 percent  by 2020.

“The Indian M&E sector reached Rs1.5 trillion in 2017 led by digital,” said Farokh Balsara, partner and M&E leader, EY India in a statement. “With digital revenues expected to cross Rs22,000 crore by 2020, has Indian M&E reached its digital tipping point? We now need to re-imagine the future of the Indian M&E sector.”

Subscription-based over-the-top (OTT) streaming services have flooded the Indian market over the past two years with around 30 players vying for audiences’ attention. These include both American services like Amazon Prime Video and Netflix as well as a host of local platforms like Balaji Telefilms’ ALTBalaji and those owned by broadcast networks like Star India’s Hotstar and Sony Entertainment Television’s SonyLIV.

OTT subscription in India is expected to touch Rs2,000 crore by 2020. And recent investments by companies such as Reliance Jio that already has stakes in Network18, ALT and movie studio Eros International, will make media convergence a reality. With over 300 million internet-enabled mobile phones and falling tariff rates, digital media presence in the country is only expected to grow.

About 250 million people viewed videos online in 2017 and these numbers are expected to double to 500 million by 2020. Around 40 percent  of total mobile traffic came from the consumption of video services in 2015 and this figure is expected to touch 72 percent  by 2020. Ninety-three percent of time spent on digital videos is in Hindi and other regional languages.

Among traditional forms of entertainment, films grew by the largest share—27 percent  in 2017 to reach overall figures of Rs15,600 crore with box office collections of the top 50 films growing by 11.6 percent .

The report attributes the growth to both domestic and international box office revenue, and the latter may be traced back to the phenomenal success of films like Dangal that grossed about Rs2,000 crore worldwide, including Rs1,200 crore in China alone.

This was coupled with increased returns from ancillary streams like satellite television and digital, with home video remaining the only segment that failed to display growth. While regional cinema drove the growth in terms of the number of releases, Hindi films continue to make up the majority of the Indian film segment, contributing almost 40 percent  of the net domestic box office collections annually, despite comprising only 17 percent  of the films made.

The number of Hindi movies crossing the Rs100 crore mark was the highest in 2017 in the past five years. Films in 29 other Indian languages, while accounting for 75 percent  of the total films released, together contributed only 50 percent  to the annual domestic box office earnings. Screen count, an age-old challenge for the Indian film industry increased marginally—from 9,481 in 2016 to 9,530 in 2017.

Television, meanwhile, grew by 11.2 percent , from Rs59,400 crore to Rs66,000 crore in 2017, with advertising growing to Rs267 billion and comprising 40 percent  of the revenues and distribution growing to Rs39,300 crore and making up the remaining 60 percent . At the broadcaster level, however, subscription revenues (including international subscription) made up approximately 28 percent  of revenues.

The report expects advertising to grow to 43 percent of total revenues by 2020 from its current contribution of 41 percent .

Print remained largely static, growing at 3 percent to reach Rs 30300 crore in 2017. India’s reader base stands at 395 million or 38 percent of the population, having grown by 110 million over the past three years. The rural reader base (52 percent ) is higher than urban (48 percent ). The print media is estimated to grow at an overall CAGR of approximately 7 percent  till 2020 with vernacular publications at 8 percent -9 percent  and English at slightly slower rates.

This growth is expected despite the 26 percent  foreign direct investment (FDI) limit remaining unchanged, restricting access to foreign print players and the imposition of 5 percent  GST on advertising revenues emerging from the print industry.

The Indian M&E sector witnessed a relatively new trend in deal activity with emerging segments such as gaming and digital gaining momentum, while deal activity in the traditional media segments was slower, the report stated.

The slowdown can be partially attributed to challenges faced by the advertising segments of the industry due to demonetization and GST that was implemented in July last year. Overall, the number of transactions in the M&E sector decreased from 56 deals in 2016 to 40 in 2017. Further, the total deal value was also lower at USD 1.26 billion in 2017 compared to USD 2.86 billion in 2016. – Live Mint