State of media: no💰 just vibes

Last year, media executives admitted that most Indians don’t want to pay for content. This year, they say they’re losing grip on advertisers too. What’s left?

Mar 06, 2024

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Last year, I told you that it’s increasingly clear Indian consumers want to be entertained, but for free (see this edition of The Impression). At last year’s edition of the annual media and entertainment business conference called FICCI Frames, a massive report and a three-day conference concluded that media subscriptions were stagnating, meaning the industry must come up with as many ad-funded business models as it could.

This year’s headline figures look rosy. India’s media and entertainment (M&E) industry grew 8.1% to be worth ₹2.3 lakh crore (~$27.7 billion) in 2023 and will cross ₹3 lakh crore ($37.1 billion) in two years. Almost all sectors—from digital entertainment and gaming to music and even radio and print—grew between 6-20% each.

But all this growth masks irreversible changes in the business of media, and top executives know it. Indians aren’t paying directly for content, yes. But advertisers are pulling back as well. And an impossible number of media formats are all fighting for ad revenue that isn’t growing like it once did.

Big box, small returns

It all starts with the biggest hole in this growth story: television.

Last year, the TV business declined 1.3% to ₹69,600 crore ($8.4 billion). This decline was the result of cascading effects. TV ads fell 6.5% in the first half 2023 because gaming and direct-to-consumer (D2C) companies, who were spending heavily on ads, hit a wall. Real money gaming companies have been struggling to survive ever since the government hit them with a 28% GST tax rate on the full value of bets, while D2C companies are suffering in the funding slowdown.

But isn’t digital here to save the day? Perhaps.

Digital media (video, audio, social media) grew 13.5% to ₹65,400 crore, the second largest piece of the media industry pie after TV. The FICCI-EY report (pdf) predicts that digital media will surpass TV in value by the end of this year. Already in 2023, digital advertising revenue crossed TV’s; more than 70% of it came from social media and e-commerce advertising.

This should be good news. Media companies everywhere are learning to let go of their traditional cash cows—such as cable TV—and find ways to make money from digital media. So far, there are few success stories. Look past the headline number, and you can see how precarious the growth of India’s digital media is too:

Digital media’s growth rate has halved: digital ads increased by 15%, but subscriptions grew by a paltry 8.3% last year
Splitting IPL rights hurt everybody: paid video subscriptions fell by two million last year as JioCinema made the IPL free to watch. It helped boost the IPL’s digital ad revenue by 40% but TV, which attracts more viewers, had a 50% drop in ad revenue
Small businesses are spending too carefully: digital advertising may have risen, but the long-tail of small and medium businesses accounted for only a third of it. Most of it went to search, social media, and e-commerce/classified ads, all part of low cost performance advertising. The FICCI-EY report said small and medium enterprises (SMEs) spend as little as ₹20,000 (~$241) a year on digital advertising.
We still consume without paying much: Indians download more apps and spend more hours online than every country in the world except China. Five hundred and sixty three million Indians watch online video alone, the most popular kind of content on the internet. Yet, in 2023, Indians spent only 60 cents per person on online media compared to over $45 per person in the US and $52 in China. This year and two years from now, digital subscriptions will remain at 12% of the total value of digital media.
There aren’t enough ads either: despite so much consumption, advertising is a paltry contributor to India’s economy. In 2023, it grew slower than our nominal GDP and accounted for only 0.33% of it, compared to the US (1%) and China (0.6%).

Top media executives understand this. That’s why at this year’s FICCI Frames panels, most of them emphasised being ‘platform agnostic’ and wanting to spend on every possible mass medium.

“We aren’t digital or traditional,” Kevin Vaz, CEO, Broadcast Entertainment at Viacom18, said at one panel. “At the end of the day, we are a content company. We are agnostic to all that [traditional vs digital media debate]. The number of screens are growing and our aim is to put great content on these screens.” Vaz cited Viacom18’s biggest reality TV hit Bigg Boss as an example: “About 30% of our viewership comes from our digital platforms at the same time when Bigg Boss plays on TV.”

Other executives are hoping they can outspend this period of uncertainty until Indian consumers (hopefully) settle into new ways. “Our investment thesis is built for this category [video streaming] over a long period of time,” Sushant Sreeram, country director for Prime Video India, said when asked about Amazon’s massive spending on prestige streaming shows and digital rights to big budget films. “We want to create a category… of customers who value great cinematic storytelling. Our investment thesis is looking through the lens of how to bring more customers to enjoy this multi-benefits programme called Prime.”

Amazon can afford to keep spending on Prime Video because it’s building many more lines of revenue from entertainment, including selling subscription bundles of other OTT platforms and offering movies on rent. Some of Prime Video’s plans feed directly into Amazon’s e-commerce business. For example, Amazon’s miniTV viewers buy 2.5x more from Amazon India compared to other shoppers, the FICCI-EY report said. Amazon identifies 40% of miniTV viewers as its top 20 percentile shoppers by money spent.

A slowdown in advertising isn’t entirely in the media industry’s control. A crunch in venture capital and private equity funding, a dramatic change in taxation, and an ongoing consumption slowdown among ordinary Indians may force brands to focus on survival and spend less on ads for the time being. Subscriptions are supposed to help tide over these lean periods, but they’re barely keeping up with even a slowed down digital advertising market. Meanwhile, TV continues to decline. Premium audiences in urban areas are cutting the cord, and at over 1.5 trillion impressions a year, TV viewership overall is still well below pre-pandemic levels.

Music to their ears

There’s some hope in one segment: music. Despite losing 15 million monthly users, music streaming platforms were able to boost their subscriptions by 55% year-on-year “on the back of significant industry efforts in that direction”, the report said.

Just last month, music label Saregama’s management told investors it was confident that music subscriptions will grow in India. “You have just touched the tip of the iceberg,” Saregama’s managing director Vikram Mehra said in an earnings call in February (pdf). “As the subscription economy starts taking off in the next 18, 24 months, you will see lots of money being made… it's not that Indians don't want to pay. But you need to give them value and need to somewhere stop the availability of free content. Then people are ready to pay for entertainment.”

Mehra had told investors and analysts in earlier calls that the only way to nudge listeners to pay for music was for all major platforms to collectively enforce a paywall. Last year, Spotify took basic functions behind paywall, such as repeating a song or playing the previous track. Meanwhile, rival Resso moved to a subscription-only model like The Times Group-owned Gaana.

But this story isn’t a complete success just yet. YouTube is still India’s largest music streaming platform, and it still makes most of its money from ads. Only 4% of India’s 185 million music streamers are paying for a subscription. The FICCI-EY report predicts paying subscribers could grow to 15 million in two years and become 35-40 million before 2030, as long as subscription prices don’t change and the music streaming industry continues to expand its user base.

Nudging together is something the rest of the Indian media industry will need to think about too. After some years of fierce competition at any cost, we’ll likely see everyone engage in a little more cooperation (and consolidation).

Last Scroll Down📲

Scan the big media headlines from the week gone by

The flood is coming: The ad spend party has just kicked off for the BJP. In February alone, India’s ruling party spent nearly ₹30 crore ($3.62 million) on Search, YouTube, and other Google products, The News Minute reported. Three-fourths of these were video ads and most were served to North Indian viewers; but Google also took down more than half of these for violating its terms of service. Chief rival party Indian National Congress didn’t spend on Google ads in February.

Lights out: Facebook and Instagram stopped working globally for over two hours this Tuesday, logging users out and refusing to load feeds. There was also a minor outage in WhatsApp for Business. Meta did not explain why the outage happened.

Meanwhile, in crucial election years, Meta is junking its deals with news publishers in the US and Australia, saying most Facebook users in both countries had stopped using the ‘News’ tab.

It’s a face-off: Walt Disney’s heirs are rallying around Disney chief executive Bob Iger as they prepare to battle activist inventors and former top executives for board seats in April. Some, such as Abigail Disney, are setting aside their past differences with Iger to join hands. Meanwhile, activist investor Nelson Peltz published a 130-page memo identifying the factors holding back Disney’s growth. Tl;dr: he’s blaming the current board.

Idle pursuits: Since its merger with Sony unravelled, Zee Entertainment seems busy with lawsuits. Both companies are fighting to close the merger in the NCLT. Meanwhile, Zee has picked a fight with financial news firm Bloomberg. Last week, a Delhi court ordered Bloomberg to take down this story alleging Zee’s promoters had committed financial fraud worth $241 million, ten times more than what regulators had found. Now, Bloomberg has moved the Delhi High Court against the takedown order.

Trumpet 🎺

Dissecting this week’s viral ‘thing’

Santhosh Narayanan’s, Arivu’s, and Dhee’s indie composition Enjoy Enjaami has nearly 500 million views on YouTube in the three years since it was released. It is also Canadian-Tamilian indie music label Maajja’s most popular video; its second most popular video, Neeye Oli (featured in the Tamil sports period drama Sarpatta Parambarai), has only about 7.5 million views. Enjoy Enjaami’s success is incredible for a new label meant to support independent talent, one that launched only three years ago with the promise of supporting artists from the diaspora, especially from displaced communities including Sri Lankan Tamils.

But the label and its biggest hit can’t seem to shake off controversy. In late 2021, supporters of singer Arivu said Maajja and Narayanan sidelined him and took the spotlight on the hit song, including on the cover of Rolling Stone magazine, which featured only fellow singer Dhee. These supporters also accused the label of not paying Arivu for his work. Then, Maajja’s co-founder and CEO Noel Kirthiraj had refuted the allegations in this vague, roundabout response, and later in an even more scattered, one hour-long interview.

That allegation has now resurfaced. But this time Santhosh Narayanan himself claims he was never paid for the song, nor were the other artists who worked on the track. Some questioned singer-composer AR Rahman’s role in the fiasco because he was reported to be Maajja’s co-founder when the label first launched. However, he soon clarified that he too had never been paid by the label and was merely volunteering support in its earlier days.

Was anyone ever paid for Enjoy Enjaami? Narayanan claims Maajja even appropriated revenue earned by his own YouTube channel, and perhaps we will get one more vague clarification from CEO Kirthiraj (who does not list the label on his LinkedIn, nor is listed on the company website). But the entire case exposes how treacherous the business of independent labels can be.

Instead, some artists are abandoning labels altogether. They’re launching their own or going solo, producing and releasing their music with no label to back them. Narayanan promised in the linked video to launch his own label as well. The question is: if AR Rahman backed indie-saviour Maajja could turn out to be a dud, will fresh talent ever trust anyone promising to bat for the artist?

That’s all this week. If you enjoyed reading The Impression, please share it with your friends, family, and colleagues. And please write to me anytime at soumya@thesignal.co with thoughts, feedback, criticism or anything you’d like to see discussed in this space. I'd love to hear from you.

Thanks for reading, and see you again next Wednesday!