2023: The good, the bad and the ugly

Cinema celebrates a revival but the media and entertainment business faces headwinds on other fronts

Indian cinema has bounced back. After three miserable years, theatrical revenues are at an all-time high. From Rs 11,500 crore in 2019 (the last normal year), gross theatrical revenue from films is set to cross Rs 13,000 crore in 2023. Going by Ormax Media data, the revenue was just under Rs 10,000 crore until October this year, without factoring in recent successes such as Sam Bahadur, 12th Fail, and Animal. Then, there are some big releases due this month. There is Salaar starring Prabhas and Dunki featuring Shah Rukh Khan, who’s on a winning streak this year with Pathaan and Jawaan. Add in other revenue streams — streaming, satellite TV, music, and overseas theatricals — and the business should easily cross Rs 21,000 crore.

This is the best news emerging from India’s Rs 2.1 trillion media and entertainment industry in 2023.

Cinema serves as the Gangotri, the origin of all the value in the business. About a quarter of all TV and the majority of OTT viewing comes from films. More than 70 per cent of all music sold is film music. Cinema populates advertising, short video and social media ecosystems. Its revival has a ripple effect on all segments in the business.

The movie industry’s return to health is also, arguably, the only piece of good news from the media and entertainment business. From here on, things go from somewhat pessimistic to downright bleak.

Take digital media  — a hyper growth area so far, which surged from 273 million unique visitors a month in 2018 to 510 million currently (Comscore). It is now being beaten black and blue on several fronts. The most significant challenge is the decline in internet growth. From double-digit through 2016 to 2020, growth has slumped to about 4 per cent in 2021 and 2022, according to the Telecom Regulatory Authority of India data. In the first quarter of 2023, it grew just 1.7 per cent over the last quarter of 2022. This is largely due to the fall in the sales of entry and mid-level smartphones. For millions of Indians, a smartphone is the first port of entry into the internet. These phones can process bandwidth that allows you to watch a movie, listen to music, or have a meeting online. They have propelled the growth of social media, streaming and online publishing, among other things. However, the International Data Corporation says smartphone sales fell by a massive 10 per cent in 2022 compared to 2021. This year, the drop has been in low single digits. India is now roughly back to 2019 levels of smartphone sales.

Therefore, the number of regular internet users has been stuck at 510 million since December last year. That is about 78 per cent of the 650 million Indians who own a smartphone. Even if it were 100 per cent of smartphone users, it would mean that the internet is available to roughly half the Indian population only. You could argue that not everyone among India’s 1.41 billion citizens can be an internet user. Even if you did not count the 352 million under-14 age group, it still leaves 408 million without a smartphone and, therefore, without access to the internet. That is a sizeable market outside the grasp of education, media, online retail and other services.

Until earlier this year, time spent by existing users continued to grow, powering revenue growth. Now, as time spent by existing users plateaus, growth has to come from new users. And there are very few new users coming in.

The second thing hitting digital media revenues is the rising consumption of free video from DD Freedish, YouTube, JioCinema, among others. Media Partners Asia reckons that subscribers to streaming video services plummeted to about 80 million this year  from 112 million in 2022.

The third factor is the possibility of tariff controls and censorship. This could happen if streaming is brought under the Broadcasting Services (Regulation) Bill, 2023, which is currently in the draft and consultation stage. Ever since price regulation was imposed on television in 2004, all risk-taking and innovation in programming died. A business that was already dependent on advertising revenues became even more so, killing choice and variety as it tried to get the largest mass of viewers possible to win over advertisers.

Unlike TV, which is about family viewing, streaming is about private viewing. Bring in the same content guidelines and price controls and you kill the creative edge that has been getting India Emmy nominations (Four More Shots, Sacred Games, etc) and wins (Delhi Crime, Vir Das) for the first time ever.

The other miserable piece of news comes from television, where both cable and DTH are in steady decline. From just over 160 million homes (or 768 million people), pay TV is down to about 100 million (480 million) over the last four years. The people watching TV haven’t gone down. It is simply that they are not watching it through a DTH or cable connection.

The Indian market has historically been fragmented. Therefore, this column is, usually, in favour of consolidation. But as tech-media companies start dominating, consolidation is starting to look threatening. If Reliance (Viacom18, Jio, TV18) and Disney ally, and if the Sony-Zee deal goes through, the Indian media market will be dominated by four giants: Google (revenue Rs 25,000 crore), Meta (revenue Rs 18,000 crore), Reliance-Disney (revenue Rs 23,000 crore) and Sony-Zee (revenue Rs 15,000 crore) across news, entertainment and sports. Every other firm in the list of top 10 media firms is less than a fourth their size. A bulk of the media firms in India are in the Rs 100 to Rs 1,000 crore range.

Where that leaves independent media and creative freedom is a big question.

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