Catch-up time for digital ads

Online advertising grew 38% in 2015, but constitutes less than 1% of global ad spends; television will be another key driver: KPMG-Ficci report

In the midst of a global slowdown, the Indian media and entertainment (M&E) industry grew at a brisk 12.8 per cent, with digital advertising, radio and television clocking the fastest rise. Digital advertising grew at 38.2 per cent, albeit on a smaller base, from Rs 4,350 crore in 2014 (calendar year) to Rs 6,010 crore in 2015. However, a reality check is due here: digital ad revenues in India still constitute less than one per cent of global advertising spends and has quite a long way to go.

According to the KPMG-Ficci 2016 report titled The future: now streaming, the M&E industry grew from Rs 1.03 lakh crore in 2014 to Rs 1.16 lakh crore in 2015, while advertising revenues for the sector grew at 14.7 per cent from Rs 41,400 crore in 2014 to Rs 47,500 crore in 2015.

Growth in digital was aided by the growing internet base in the country, increased consumption of video online and the shift of traditional companies towards digital channels. The sector will continue growing at 35 per cent in 2016, and is expected to clock a CAGR of 33.5 per cent to reach Rs 25,520 crore by 2020. The other key driver of ad revenues and sectoral growth is television. It grew at 14.2 percent in 2015 and is slated to grow at 34 per cent CAGR till 2020.

Driving ad revenues sky high in the current fiscal are the FMCG and auto sectors, also expected to be the largest spenders in 2016 on the back of new product launches. E-commerce too is expected to be a big spender.

With close to 944 million connections in India, mobile advertising spends are the proverbial pot of gold that every media player is after. It stood at Rs 900 crore in 2015 and is expected to grow at a CAGR of a staggering 62.5 per cent by 2020. The report also highlights the booming over-the-top (OTT) platforms in 2015. With more launches slated this year, the segment is fast becoming a relevant advertising medium for brands and consequently, will be a serious revenue stream for the platform owners. Currently, the size of the OTT industry would be in the range of Rs 1,200-1,300 crore, according to Varun Gupta, partner, deals and advisory, KPMG. He adds that the sector is set to grow at 40 to 50 per cent, mainly on the back of advertising but subscription revenues will scale up eventually.

Television had a mixed bag of a year as advertising continued to grow despite a high base in 2014. Subscription revenues, however, slowed down as phase three and four of digitisation hit roadblocks. Television advertising outdid the overall sectoral advertising numbers, growing at 17 per cent to touch Rs 18,130 crore. Advertising grew thanks to high decibel sporting events like the Indian Premier League and the ICC Cricket World Cup 2015.

Print, on the other hand, saw a lower growth at 7.6 per cent in 2015 (7.3 per cent in 2014 over 2013). While advertising continued to be the larger contributor growing at 7.3 per cent, the subscription market grew at 8.2 per cent. The report says that with English newspaper readership being restricted mainly to the metro and tier-1 territories, brands are increasingly looking at Hindi and vernacular language newspapers to reach small towns.

Coming off a flat year in 2014, the film industry returned to a healthy growth of 9.3 per cent (Rs 13,820 crore) in 2015. Bollywood however, was constrained by the slow pace of screen growth and also increased competition from Hollywood and regional content.