Medium of exchange

Digital media presents both opportunities and risks

The latest report of the Federation of Indian Chambers of Commerce and Industry and EY on the media and entertainment sector has several interesting observations, data points, and trends that can help businesses in this segment adapt or reinvent themselves to remain relevant. The headline numbers showed that the sector continues to grow, and with a growth rate of over 8 per cent it reached a size of about Rs 2.3 trillion in 2023. Although the industry is now about 21 per cent bigger than its pre-pandemic level, all segments have not grown at an even pace. The size of the television, print, and radio segments, for instance, was still below the pre-pandemic level. The sector thus is being driven by segments like digital media, online gaming, and filmed entertainment. The projections (2023-26) also suggest segments like online gaming, digital media, animation, and music will drive revenue for the industry.

The trend is clearly a reflection of changing consumer preferences and penetration of the internet in India. As the report showed, internet penetration increased by 8 per cent to 938 million subscriptions in December 2023. In 2023, Indians are estimated to have spent 4.8 hours daily on their phones. Further, about 50 per cent of the time spent was on social media, while 28 per cent was on entertainment and news. One of the most remarkable points of the report is the surge and adoption of online gaming in India. According to the numbers, online gaming expanded by 22 per cent in 2023 and overtook filmed entertainment to become the fourth-largest segment in the industry. The number of online gamers is estimated at over 450 million and 83 per cent of the revenue in this segment came from real money gaming. The increase in goods and services tax on online gaming doesn’t seem to have had a big impact.

Although the media and entertainment business is growing in India, advertising revenue is still low compared to that in developed markets. Advertising is estimated at 0.33 per cent of gross domestic product in India, compared to 0.6 to 1 per cent in large developed markets. Further, revenue in the industry is being driven by new-age media, which presents both opportunities and risks. Increasing online content consumption has pushed advertising to this medium. This helps even small businesses to reach their target audience. About a million small-scale businesses are estimated to have spent about Rs 20,000 crore on digital advertising in 2023. The trend suggests that large technology firms will corner incremental revenue in the industry. Digital media and print were roughly of the same size in 2019, but by 2026 digital is expected to be over three times print and would have also overtaken television.

The challenge for traditional media thus is to remain relevant. One way forward could be to use digital and social media to attract the audience more effectively. The traditional medium maintains its reach and needs to leverage it to attract more revenue. For policymakers, the challenge will be to ensure that digital mediums, including large social media giants, are not using vulnerabilities and biases of users to push content and advertising as has been revealed in several markets, including the United States. Such practices not only harm the user but can also be used by interest groups to polarise, resulting in long-term negative consequences for society and the nation as a whole.