With no one behind the camera or in front of the big screen, the entertainment industry is on a complete break. This multi-billion dollar industry in India has now paused for long, and it's being pushed it off its limits. Be it the entertainment sector or media as a whole, even if we make an estimated guess there has been a loss of billions of dollars. Never in the history of entertainment, the industry witnessed such complete desolation combined with unemployment that the COVID-19 pandemic has been making it go through. The idea of recovery seems far-fetched for now, but people have already started to wonder how different will the post-COVID-19 era be than one we live in now.
The most perceptible effect that we see is on technology usage and generally in the kind of versatility through digital commerce and content. Now with most people being homebound, there has been an undeniable increase in media consumption through television, digital platforms and even with online gaming. However, bringing this new trend into the monetisation model now is the new challenge. Most of the revenues in the M&E sector are earned through ad spends but the financial impact on FMCG, financial services, automotive and e-commerce, therefore could have a knock-on effect. On the brighter side, subscription revenues for the sector based on this new trend could improve over the medium term, as the audience are exposed and get accustomed to a greater variety of content during this lockdown period.
Films and events are the segments most affected by the lockdown as they rely on a social gathering of people. The recovery here will take longer than anticipated. Another major point to be noted here is that the major COVID-19 red zones in India are the metropolitan cities where the majority part of the M&E industry is located. So it is understandable that the workforce here will be apprehensive of crowds.
Moreover, now that people have more time on their hands, they may think and re-think their priorities which may affect the time spent on leisure activities such as consumption of content for entertainment. Thus the full impact of this pandemic on the M&E industry will only be known in the next couple of months once the lockdown is completely lifted.
The world, for now, is finding ways to cut off the tentacles of this deadly virus, so we don’t know how much time it will take for the industry to recover and start functioning normally. At this point, we should forget the normal and come up with new ways of working with what we have.
Through a webinar hosted by Mehul Darooka, a noted corporate behavioural trainer, Sakal Times spoke to people from the industry about the ongoing industry situation.
Sakal Times spoke to people from the industry, on a webinar hosted by Mehul Darooka, a corporate behavioural trainer, about the ongoing industry situation.
“The media industry, as a whole, will be (is being) seriously impacted, so let’s not fool ourselves. Unless the shoot starts and theatres open, there will be no revenue which will create a huge liquidity problem. But of course, people want content, so the OTT platforms are doing well, the problem now is how to shoot the content because even when the lockdown is lifted, people will fear gatherings. So now we have to think and re-think our old ways” said Sidharth Jain, founder of Mumbai-based The Story Ink (TSI).
“The next six months (after the lockdown is completely lifted) will be challenging and crucial, so it’s time for us to wear the hustle cap. We can’t control the pandemic, but we can find a new way of working in this new world. We need to find a business solution for this so that the business doesn’t stop”, explains Jain.
Data from the last few years shows that India’s per capita growth had already decelerated to its lowest in over six years at 4.7 per cent in the third quarter of the financial year 2020, which means the real GDP has been falling drastically and this will leave a long term effect on all economic sectors.
The coronavirus pandemic, resultant lockdown and social distancing measures will only worsen prospects across manufacturing, services and agriculture. Pair this with lower income levels of people owing to the widespread unemployment during this period; we have already had an economic disaster on our plate.
So how bad is it for the media and entertainment industry?
World development indicators on the media and entertainment sector show that the media and entertainment sector (In India) was estimated at INR 1,631 billion in the financial year 2019 and grew at a compounded annual growth rate of 11.5 per cent over a five-year period that is from 2015 to 2019. This was against the overall rate of growth in the country’s GDP at 7.2 per cent during the same time. This means that the pre-pandemic M&E sector was pretty well fairing.
Typically, given the Indian demographics and majority level of income, India’s consumption of media in terms of entertainment has been income elastic. This means that people are more willing to spend on entertainment when they have more money and vice versa. But since the current environment is unparalleled to anything the industry has seen before it could result in a dip in media consumption in the near term once life returns to “normal” and importantly, will there be a new pattern in the content consuming behaviour of people?
The lockdown has been a low-blow to this industry as a whole, but certain segments of the industry see consumption growth, particularly in TV, gaming, digital and OTT. Contrastingly, outdoor consumption models – films, events, theatres – have been at a complete pause, given the social distancing norms in place. Further, the broadcast businesses (except news related businesses) are unable to offer new content with production being kept on hold.
As mentioned earlier, the majority earning in this sector comes from ad-spends. These advertisements are mostly of FMCG products, insurance and financial services and technological or automobile sector. But since the pandemic equally hits all these sectors, the overall ad-spend has drastically gone down. Therefore these sectors need to recover first only then can the M&E industry start improving
Let’s take a look individually at all the sectors under Media and Entertainment Industry
Print Industry is gearing up
Indian consumers have historically preferred print. This is also because most print organisations are old and established, so people trust them. This is again supported by the fact that total revenue earned by the print industry for the financial year 2019 was INR 333 Billion. This is almost equal to revenue earned by OTT and Films combined (INR 356 Billion). With door-to-door circulations taking a hit, the newspaper industry sees a serious struggle.
- Now the challenge here is to find new models for monetisation as advertisers scale back expenditures
- Print still maintains higher credibility in the face of the proliferation of fake news on social media and digital media sites; thus it wins the trust of people
- Once the lockdown restrictions are relaxed print will start circulation again, resulting in improved ad monetisation opportunities
TV: A dicey situation
With people across demographics and economic sectors spending more time at home, there is no doubt that television consumption has increased, but that is largely owing to the broadcast news business. Also, at the same time, the overall ad-spend has gone down.
- Overall TV viewing has increased, but since there are no shoots or releases fresh content is absent. People are far more likely to get bored and shift their preferences
- Broadcast news is popular as viewers follow COVID-19 updates in real-time. But this will suddenly halt once the pandemic is over
- Monetisation has dropped substantially with advertisers (other industries) cutting back on spending given the current economic downfall
- It is anticipated that the dates of the Indian Premier League will be announced soon, so there is still hope for some recovery
Film Industry, the worst hit
No one is filming or being filmed, given the current situation. Also, no one is sitting in front of big screens to watch. This the main pipeline of revenue for the film industry has dried up completely. This is what we can expect in the coming months.
- Once the big screens open and the camera rolling with action starts, there will be money circulating the film industry again
- The production houses, for now, are scaling back everywhere possible to give employment
- The recovery process may be different across demographics based on specific COVID-19 experiences and perceived risk from a social gathering. The big production films might start shooting again before than smaller productions
- There is no release platform in place without the big screens, this releasing and making money will be affected in the long run
A question remains that will people flock to cinemas in the times to come or should newer models be explored?
OTT Platforms are booming
The dependence on OTT platforms has undoubtedly increased; however, to monetise this increase, there needs to a large ad spend money. Post-COVID-19 period, when the brands will start to recover ad-spend money will increase.
- Consistent rise in OTT consumption under the lockdown has been seen across all demographics and devices. Even niche platforms like Mubi and Hulu have seen increased demand and more Indian subscriptions
- The content pipeline, through where majority content was released (big screens) has dried up, which gives an advantage to OTT players like Netflix and Amazon Prime. This is precisely why we have been seeing all these new additions to our watching list
- Ad-spends currently down but once the big brands realise this consumer potential on these platforms the ad-spend is likely to shoot up
- Major OTT players offering extended free periods to drive subscription to pick up through habit formation. But we don’t know if this is going to last, perhaps people may shift back to their original viewing habits once they are back in their offices
The new trend in online gaming
Online gaming has never been paid enough heed, it was always left on young boys and gamers. But with the changing trends in the media industry, people are picking up that gaming console more often. Now with most games coming under a paid model, this sector is likely to show revenue growth-
- Noticeable increase in time spent since mid-March (since lockdown started)
- Monetisation gap due to a limited consumer community, but it is likely to grow like in most developed nations
- Paid models could see growth as online gaming gets more entrenched into overall time spent on M&E
- However, fantasy sports and e-Sports like games based on football or racing may be adversely impacted with a stalling of the sporting activity in real life
Radio remains more or less consistent
Radio is still popular across the globe. However, the reliance is shifting to a new audio medium, i.e. the podcasts. Podcasts bring a variety of content based on your taste and preferences, so consumers are far more likely to shift. However, most users tend to be younger, so the older population remains loyal to radio content consumption. This trend is expected to remain similar since radio jockeys have been operating from home there has been a regular supply of new content. Also, local content is popular as people tune in to listen to the latest COVID-19 related updates.
- Radio jockeys operating from home, so content continues to be refreshed
- Local content remains popular as people look to follow COVID-19 news relevant to their specific area
- An overall decline in advertising revenues, though some branding has been converted into corporate social responsibility and government safety announcements in the current scenario
Drop-in transit audience listeners as people are working from home, but at the same time equal increase as people tune in from homes
The extent of damage India’s economic growth will be a result of what the global economy faces and also on the extent of proliferation of the virus. It is estimated that GDP growth could be closer to 5.3-5.7 per cent in more favourable circumstances or fall to below 3 per cent if we face exceptionally major challenges in our recovery. As for the media and entertainment sector in particular, for the next six months, we hope to see the current trend making a shift in content consumption habits. To monetise this, the M&E sector would mostly have to wait for other ad-spend sectors to gain recovery momentum. Once this upward momentum is achieved in the FMGC, manufacturing, automobile and technology industries, the ad-spend would increase. This ad-spend would then be directed towards the new engaging platforms such as OTT, online gaming, television and even the print.
The new decade started with a lot of promise and expectations. However, we now stare at an unknown path. Now the big players in this sector need to be focused on new strategies, taking high risks and rethinking ways of monetising this new consumer behaviour pattern. Sure the recovery will be hard, but if trends work in favour of entertainment, this will prove to be a more sustainable model for the M&E sector.
The data is obtained from the April 2020 KPMG report on Media and entertainment sector