It?s been a tough year for the media and entertainment industry, one it will not forget in a hurry. As per the FICCI-KPMG report, released at FICCI-Frames 2010, in Mumbai on Tuesday, in 2009, the M&E sector grew by 1.4% over 2008 to Rs 58,700 crore. Though over the next five years, the report says the industry is slated to grow at a CAGR (compound annual growth rate) of 13% to touch Rs 1,09,100 crore in 2014, some sectors like films and radio have a lot of catching up to do.

The entire industry went through a tough phase due to the global economic slowdown and cut in advertising spends. However, the industry witnessed a recovery in the last quarter of 2009 and this is expected to continue going forward. This year, the industry is expected to come out of the shackles of the slowdown, with ad spends increasing. Incidentally, the subscription revenues of TV and print grew by 8.5% in 2009 to reach Rs 24,100 crore. Some sectors were impacted more than the others. OOH (out of home), films and radio registered negative growth during the year. In 2010, they are expected to recover with a moderate growth rate. Last year, print showed a very moderate growth, whereas TV industry showed a good growth rate. Music, Internet, gaming and animation brought reasons to cheer for the industry, with their growth rates touching double digits, though on a smaller base.

Advertising spends grew at a CAGR of 10% in the past three years with almost flat growth in 2009. Going forward, it is expected to exhibit a robust growth CAGR of 14% over the next five years.

Growing potential of the regional markets, penetration of newer digital TV distribution platforms, increasing competition, innovation across product, processes, marketing and distribution models and growing importance of pay audiences were some of the key trends of 2009. However, it was DTH that proved to be a very successful medium and helped in increasing the pay TV subscriber base even during challenging market conditions. IPL as a sports property has grown from strength to strength, with advertising revenue growth of 80% to reach Rs 450 crore in 2009. Commenting on the report Amit Mitra, secretary general, FICCI, said, ?The media and entertainment industry represents the face of consumers in India. It is a part of our daily life and touches the maximum number of people. Despite the challenging last year, I am excited by the potential of the industry to perhaps grow beyond 13% per annum over the next few years.?

Rajesh Jain, head, media and entertainment, KPMG India, said, ?Last year saw the M&E industry going through a tough phase, as advertising revenues were impacted in line with the challenging economic scenario.? The projected 13% growth rate per annum for the sector for next five years will be driven on the back of favourable demographics, expected recovery in the GDP growth rate, strong long-term fundamentals of the Indian economy, expected rise in advertising to GDP ratio compared to developed economies and increasing media penetration, says the report. Given the industry?s changing landscape and emerging challenges, the focus of industry players is also changing. Now, there?s a greater emphasis on profitability. Hence, media companies are increasingly concentrating on cost optimisation, strengthening existing operations and processes, talent and human capital management, innovation and assessing options for growth through consolidation.

TV: growth momentum up

The industry is estimated to have reached a size of Rs 25,700 crore, a growth of 6.8% over 2008. This was on account of growth in TV penetration and an increase in the number of digital homes leading to rise in subscription revenues for the distributors and broadcasters. The broadcasters also benefited from a 7% growth in advertising revenues, as per the report. The television industry is projected to grow at 15% over 2010-14 and reach a size of Rs 52,100 crore in 2014, riding on a rise in subscription and advertisement revenues for the industry.

Films: more screens

The filmed entertainment sector is estimated to have grown at a CAGR of 5% over the past three years. The industry has clocked revenues of around Rs 8,900 crore in 2009, a de-growth of 14% over 2008. The sector suffered a setback due to the multiplex-producer stalemate, plans of expansion by multiplex players being shelved, impact of IPL, poor content and dismal performance of movies at the box office. The last quarter of 2009 saw some light with success of a few films like 3 Idiots boosting the flagging morale of producers. Over the past few years, the relative importance of multiplexes for Hindi and English movies has become important and the overall distribution model is changing.

Over the next five years, the industry is projected to grow at a CAGR of 9% and reach Rs 13,700 crore by 2014. Growth drivers for the sector would include expansion of multiplex screens, resulting in better realisations, increase in number of digital screens facilitating wider releases, improving collections from the overseas markets and ancillary revenue streams.

Print: regional growth

The print media industry is estimated to have shown a very moderate growth of 2% in 2009 and reached around Rs 17,500 crore in size. There was a decline in advertisement revenues being offset by growth in circulation revenues. In the second half of 2009, the sector took some steps towards recovery supported by a general perception of improvement in the overall economy. Regional markets for print showed growth, while the national players (particularly English) were affected.

The industry is projected to grow at a CAGR of 9% over the next five years and reach around Rs 26,900 crore in size by 2014. Growth in the print media industry is achievable through sustained growth in advertisement revenues due to increased advertising spends from emerging sectors such as education, organised retail and telecom, improving literacy levels in the country, optimisation of cover prices leading to improved penetration and growth in sales volume, increasing importance of regional print, etc.

Radio: immense potential

The radio industry is estimated to have grown at a CAGR of 9% over 2006-09. It is estimated to have reached a size of Rs 780 crore by end of 2009, a decline of 0.3% over the previous year. Radio, like other sectors, was affected by recession, showing an almost flat trend. However, the situation improved during the course of the year, with the industry returning to modest growth during the last quarter. It is expected to grow at a CAGR of 16% over 2010-14 and reach a size of Rs 1,640 crore by 2014. Increase in the number of radio stations in phase III, expected regulatory reforms that are likely to improve profitability and stimulate foreign investments, enhancement of current measurement systems and growth in locally targeted advertising are growth drivers.

Music: increasing revenue

The size of the Indian music industry was estimated at around Rs 830 crore in 2009, up from Rs 730 crore in 2008. One of the primary reasons for this growth was the increased acceptability of different digital distribution models, acceptability of music genres other than the film industry, and broadcast and public performance licensing revenues, all of which compensated for declining physical sales and are expected to drive growth going forward. Overall, the music industry is expected to grow at a CAGR of 16% over 2010-14 to reach Rs 1,720 crore.

OOH: focus on small towns

Out of home (OOH) media has grown at a CAGR of 5% over the past three years and is estimated to have reached Rs 1,370 crore in size in 2009, a de-growth of 15% over 2008. The sector?s performance was affected owing to the overall economic slowdown. Till now, the growth has been centred largely in tier-I towns, but 2009 saw increased investments in tier-II and III cities. Currently, the top six metros account for 60% of OOH spends, but only 30% of consumption presented a tremendous latent potential for growth. It is projected to grow at a compounded rate of 12% reach a size of around Rs 2,410 crore by 2014.

Animation: outsourcing

The Animation and VFX segment in 2009 registered a growth of 13.6% over 2008. The Indian animation industry largely relied on outsourced work and co-production deals that led to a growth rate of approximately 9% over 2008. While animation services registered a growth rate of 15%, product development saw a marginal 2% growth. However, capacity expansion was frozen by most studios and higher value was derived from existing infrastructure. The industry is expected to grow at a CAGR of 18.7% to reach Rs 4,660 crore by 2014. This growth is going to be triggered by the increased consumption of animated content, focus on IP creation and growth of 3D formats.

Gaming: fast growth

Gaming is expected to be the fastest growing sector in the M&E industry. While the sector has shown a 22% growth in 2009, it is expected to grow at a CAGR of 32% in the next five years to reach Rs 3,200 crore by 2014. Console gaming currently constitutes the largest share of the pie, but mobile gaming platform is expected to eventually prevail.