Media, entertainment industry expected to grow 7% this year

New Delhi: The growth story in India’s media and entertainment business isn’t over, says a report by audit and consulting firm KPMG and industry lobby Federation of Indian Chambers of Commerce and Industry (Ficci).

The business, which grew 12.3% over 2007 (12 months to December) to Rs58,400 crore in 2008, will grow 7% in 2009, adds the report. And in 2010, it will grow 10%.

According to the report, the rate of expansion will accelerate over the next five years to 2013 by which time the business will be worth Rs1.05 trillion. That translates into a compounded average growth rate of 12.5% over the five years.

This rate of expansion, however, is slower than the 15% compounded average growth rate at which the business grew in the five years to 2008.

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That compares with the growth in advertising as well. Ad spends grew 17.1% a year over the past three years as companies sought to pitch their products and services to a growing number of well-heeled customers in an economy that was expanding by at least 9% a year.

Over the next five years, however, according to the KPMG-Ficci report, ad spends could grow by 12.4% a year—the result of a slowing economy that is expected to grow by 7.1% in 2008-09 and maybe lower in 2009-10.

The report’s definition of media and entertainment encompasses television, print media, films, music, radio, outdoor advertising, animation, gaming and Internet advertising.

“India is one of the few countries where economic growth will be led by domestic consumption,” Amit Mitra, secretary general, Ficci, said in a release. “With a low advertising spend-to-GDP (gross domestic product) ratio of 0.47%, a growing consumer class and middle class, young population, low media penetration and increasing discretionary spending,India continues to be an attractive market for media and entertainment.”

The numbers should bring some cheer to an industry that has been hit hard over the past few months. “There is a sense of caution that has set in in the past few months because of a global slowdown and pressing short-term concerns,” says Ajit Varghese, managing director, Maxus, a media buying agency and part of WPP Group’s media specialist company GroupM. “As a result, advertisers are now looking at efforts which can generate immediate results rather than making long-term investment.”

Still, the challenges posed by this could see the emergence of new business models. “Media companies are under pressure to change, innovate and re-examine their existing business models. Players need to draw upon new capabilities to survive in this environment,” said Rajesh Jain, head (information, communication and entertainment), KPMG India.

An expert at a rival firm agrees. “For instance, newspaper and television companies will work towards increase revenues from subscription by moving from an advertising-led business model to a subscription-led business,” says Farokh Balsara, partner and head, media and entertainment, Ernst and Young India.

Graphics by Sandeep Bhatnagar / Mint

Priyanka Mehra contributed to this story.