Streaming offers silver lining in struggling media landscape

18 May 2020 Consultancy.in

The Covid-19 crisis has had a mixed impact on India’s media & entertainment (M&E) landscape, with some segments thriving while others have come to a grinding halt. This is according to new analysis from KPMG.

No doubt, being locked at home has driven many to consumer more digital content. As a result, segments such as over-the-top (OTT) video content and streaming are winning out in this scenario, as is online gaming. These sectors have not only faced a minimal impact from Covid-19, but they appear to be growing.

TV consumption is also growing, with a considerable spike in news consumption. However, TV entertainment is taking a significant hit, for the simple reason that all production of new content has been halted due to the lockdown. Films, theme parks and events have all taken a hit for similar reasons.

OTT producers are also suffering from hindered production, although KPMG reports that major players in this segment such as Netflix and Amazon have substantial libraries and a backlog of content. These players continue to release content, and are likely to survive until restrictions are lifted and production can begin again.

Impact on segments

Alongside their backlog of content, these companies are benefitting from an increasing propensity to consume video content across India. As an increasing share of the population gains digital access and becomes digitally literate, online video consumption has become a flagship segment for media & entertainment in India.

Early last year, Boston Consulting Group reported that the number of hours spend on accessing digital content in India was jumping each year, while OTT consumption is increasing across all age segments. Deloitte reported last year that video consumption accounted for half of India’s mobile data traffic.

As a result, the segment is driving tremendous growth in India’s media & entertainment sector. Estimates have positioned M&E in India to reach a value of nearly $35 billion by next year, driven by a substantial population that is increasingly consuming digital content. The Covid-19 crisis might hinder this growth to some extent, as some segments slow down due to production constraints.

Fellow Big Four accounting and advisory firm EY also recently released its M&E analysis, reporting strong growth for the sector over the last year, but predicting tough times ahead in light of Covid-19. The sector’s future depends on the economic impact that the Covid-19 crisis eventually has, in India and across the globe.

Three scenarios for GDP disruption

KPMG has put forth three scenarios for how the Covid-19 disruption could play out in the near future. In scenario 1, the spread of the virus can be contained early, and the economy starts up again. In scenario 2, the global economy could enter a phase of recession, while India could contain the virus and its impact. Scenario 3 is the worst case scenario, where the global economy goes into a recession alongside the rapid spread of the virus in India.

Irrespective of which scenario plays out, KPMG has assumed a point T in the future when daily life will go back to normal to some extent, for the sake of predicting outcomes for M&E in India. By this characterisation, TV production might take up to four weeks after normalcy returns to resume in full flow, while revenues could take up to 12 weeks to regain momentum due to inertia in advertising spend.

The 12-week timeline for revenues after normalization is consistent across other media segments such as print and film as well. However, print and TV benefit from the fact that consumption will increase as soon as daily life is normalised, while it might take up to 12 weeks for footfalls in cinemas to resume their previous levels.

OTT: Silver lining

The OTT segment is the strongest across all scenarios. Consumption is only expected to increase up until normalisation, while production will take up to four weeks to resume. New revenue streams, meanwhile, will start to flow in no later than eight weeks after daily life returns to normal.

“While we hope for a quick recovery and look forward to putting the pieces of our lives back together over the next few months, much would have changed in our world. Entertainment across all its forms could provide some much-needed succor,” concluded the report.


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