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The pace of global GDP growth declined to 2.4 per cent in 2015 from 2.6 per cent in 20141, driven by a collusion of multiple factors such as volatility and rebalancing in the Chinese economy, drop in oil and other commodity prices, slowdown in emerging economies and slow pickup in major developed economies. However, The Indian economy remained resilient and grew at 7.3 percent over 2014 and outgrew most major economies including on the back of strong domestic demand coupled with drop in crude and commodity prices. This resilience is also reflected in the performance of the M&E sector which grew by 12.9 per cent from INR1026 billion in 2014 to INR1157 billion in 20152.

TV - 2014:  INR474.9 bn | 2015:  INR542.2 bn | Growth: 14.2% | CAGR(2015-2020): 15.1%
Print - 2014:  INR263.4 bn | 2015:  INR283.4 bn | Growth: 7.6% | CAGR(2015-2020): 7.8%
Films - 2014:  INR126.4 bn | 2015:  INR138.2 bn | Growth: 9.3% | CAGR(2015-2020): 10.5%
Radio - 2014:  INR17.2 bn | 2015:  INR19.8 bn | Growth: 15.3% | CAGR(2015-2020): 16.9%
Music - 2014:  INR9.8 bn | 2015:  INR10.8 bn | Growth: 10.2% | CAGR(2015-2020): 13.8%
OOH - 2014:  INR22.0 bn | 2015:  INR24.4 bn | Growth: 10.9% | CAGR(2015-2020): 13.1%
Animation and VFX - 2014:  INR44.9 bn | 2015:  INR51.1 bn | Growth: 13.8% | CAGR(2015-2020): 16.1%
Gaming - 2014:  INR23.5 bn | 2015:  INR26.5 bn | Growth: 12.8% | CAGR(2015-2020): 13.9%
Digital Advertising - 2014:  INR43.5 bn | 2015:  INR60.1 bn | Growth: 38.2% | CAGR(2015-2020): 33.5%

Television growth was led by increased e-commerce spends, renewed spending by other sectors such as Auto, Telecom, Mobile Handsets, and strong performance of sports properties. Print saw a slower growth, coming off an election year though increased cover prices partially contributed to growth. Films grew at 9.3 percent but the underlying fundamentals were mixed, with Hollywood and Regional releases contributing to growth while Bollywood had a flat year. Digital Advertising continued its strong run as a growing internet user base and usage was supplemented by increased spend allocation by marketeers.

Key trends:

The digitisation process continues to face delays: Phase 3 digitisation failed to meet its deadline in 2015. While the government has not officially extended the timelines, the process has slowed down due to multiple court cases challenging the process.
Rollout of BARC was a landmark event: The implementation of the viewership measurement system by Broadcast Audience Research Council (BARC), was a major theme in 2015. While inclusion of rural markets and increase in sample size led to a reshuffle in the rankings of channels, there was no immediate impact on ad budget allocations among channels or genres.
Growing prominence of ecommerce advertising: The ecommerce segment continued to aggressively chase market share by continuing to spend on customer acquisition.
Regional continues to drive Print growth: As companies are increasing their focus on tier-II and tier-III cities, and rural areas, hyperlocalisation is emerging as an effective theme among print players and advertisers.
Emerging shift in films in favor of Hollywood and Regional content: The growth in the film sector was primarily driven by strong performance by Hollywood and Regional content which offset another weak year for Bollywood.
Radio is becoming a ‘Reach’ platform: Following the new stations licensed in Phase 3 and consolidation in the industry, Radio is transforming from a ‘coverage’ medium to a ‘reach’ platform. Major radio stations have been operating at high ad inventory utilisation levels and this coupled with the growing advertiser interest has enabled increases in ad rates.
OTT: building for the future: While there is a significant level of interest in building out OTT platforms, viability in the short term remains a concern given bandwidth constraints, high cost of customer acquisition, dependence on advertisement led models and high cost of data access.
Sports is looking beyond cricket for growth: The last couple of years has seen the launch of various sporting leagues over the across varied sports such as Kabaddi, Football, Tennis etc.

Future outlook

The Indian media and entertainment industry is expected to grow at a CAGR of 14.3 per cent to INR 2260 bn by 2020 with advertising revenues expected to grow to INR 994 bn at a CAGR of 15.9 percent. Television is expected to grow at a CAGR of 15.1 percent as advertising revenues will continue to show robust growth. Print and film growths will continue to be driven by growing demand of regional content. Digital advertising will witness a shift towards mobile and video advertising on the back of increased mobile users and improved digital infrastructure. 

While we remain bullish on the growth of the sector, it should also be noted that we are on the cusp of a technological revolution which could dramatically change consumption patterns in the long run. Though this will present significant challenges to existing business models, there are also significant opportunities which could far outweigh the risks.

1 Global Economic Prospects, A World Bank Group Flagship Report, January 2016
2 KPMG in India analysis
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