Digital transformation to drive media revenue growth to 8% by FY2027

The Indian media industry is expected to see annual revenue growth of approximately 8 per cent by FY2027, driven by the increasing dominance of digital platforms, with annual revenue reaching approximately Rs 60,000 crore.

This follows a slower annual growth of 5 per cent between FY2019 and FY2024, as consumer preferences shifted to digital platforms, according to data provided in a CRISIL report. The revenue growth, along with a focus on rationalising costs, is projected to expand operating margins by almost 500 basis points (bps) to approximately 18 per cent by FY2027.

The key drivers for this growth include increasing ad revenue in traditional print and publication streams, in line with the growth in domestic retail demand in sectors such as fast-moving consumer goods, automobiles (especially with new launches), education services, online shopping, and real estate, the report stated.

 

The report analysed 20 media companies accounting for nearly 55 per cent of the media industry’s revenue.

It further noted that Indian media companies were slow to adapt to the growing digital influence, despite factors like the increasing number of smartphone users, rising internet penetration, affordable data prices in India (approximately $0.2 per GB of mobile data), and the adoption of 5G. However, this is likely to change in the coming years.

“To leverage the digital wave better, media companies have begun focusing on digital modes such as over-the-top platforms, social media, and mobile apps,” said Manish Gupta, senior director at CRISIL Ratings, in a statement. As a result, the digital segment will continue to grow its share of media players’ revenue, rising from approximately 12 per cent in FY2024 (up from about 8 per cent in FY2019) to over 18 per cent in FY2027, as consumers increasingly turn to digital platforms for news and other media content, he added.

However, the digital segment has been a drag on the profitability of media companies due to high initial expenditure for manpower, content creation, and marketing, as companies pushed to identify customers and markets for their products. Additionally, competition has limited margin improvement, as consumers have plenty of free alternatives for content.

“Operating performance in the digital segment is now expected to improve,” said Ankit Hakhu, director at CRISIL Ratings. “The discovery of product fits implies that companies have started to identify customer segments most appropriate for their product offerings, enabling control over promotional expenses by making them more targeted. Within CRISIL Ratings’ study, at least 8 out of 20 companies have achieved or identified this fit to a reasonable extent,” he added.

Targeted advertising and better identification of customer segments are expected to enhance margins in the digital segment, which has struggled with profitability in recent years. The industry recorded approximately 20 per cent operating losses in FY2024, according to the report.

The report also highlighted that the improvement in overall operating profitability remains sensitive to movements in the prices of key raw materials and input costs, such as newsprint (NP) prices, which account for 30-40 per cent of overall costs. Geopolitical or other issues in the global supply chain could lead to unexpected volatility in NP prices, as seen in FY2023, when prices averaged $840 per tonne, up about 23 per cent year-on-year.