Emerging media and entertainment markets offer billions of screens of opportunity

Across the media and entertainment (M&E) industry, the ecosystem is shifting from wholesale to retail. Direct-to-consumer strategies, powered by the proliferation of smart mobile devices and high-speed connectivity, are rapidly gaining traction and scale in numerous subsectors, including video, music and gaming. The success of video streaming in particular has served as a catalyst for both strategic and operational change across all forms of traditional media.

In this era of low-friction distribution, M&E companies with catalogues of content that have global appeal are looking to invest in markets with strong fundamentals and powerful growth potential.

In this respect, India presents huge promise for international companies that can leverage content, technology and infrastructure already built for other markets.

India tops the priority list of M&E emerging-market investment destinations

With a population of 1.3 billion, robust GDP growth, an expanding middle class with disposable income and widening broadband connectivity, India has many positive attributes that appeal to M&E operators around the world.

EY and FICCI (Federation of Indian Chambers of Commerce & Industries) recently profiled India as a prime M&E investment destination in a comprehensive study, now summarized through a global lens in a new article, How a billion screens can turn India into a media and entertainment powerhouse. Our analysis notes that India’s M&E sector grew more than 13% to ~US$24 billion in 2018 and is expected to reach ~US$34 billion by 2021. And even while India remains underpenetrated in terms of internet connectivity and advertising spend, the M&E sector continues to outperform the country’s economy.

In fact, India is seeing growth across all M&E subsectors, including print and radio which have experienced long-term declines in many mature markets. India has the second largest pay TV subscriber base and number internet users globally (after China), and is among the top five markets in terms of online and mobile gaming users.

For global M&E companies that have been active in India’s M&E market for decades, the country is already a proven investment destination. As new opportunities for exponential growth continue to emerge, these companies are well-positioned to seize a competitive advantage.

Fragmentation makes the India market ripe for consolidation

India’s M&E market remains fragmented, with hundreds of local players operating alongside national leaders. As smaller companies look to scale up, consolidation opportunities are burgeoning. According to the EY-FICCI report, sector deal value doubled to US$2.8 billion in 2018, as M&E companies hunted for targets in both traditional and new media. Overall, India is a welcoming market for foreign players – unlike some emerging destinations which impose additional barriers to market entry.

With opportunity comes risks

Of course, as with any emerging economy, there are a host of challenges that M&E companies need to be mindful of as they consider the opportunities. Notably, while the rise of digital media has accelerated video consumption, it has also made piracy more prevalent. Also, the dual revenue stream common in other media markets is not as common in India, where M&E revenue is driven primarily by advertising, largely because of the challenge in adequately monetizing content through paid subscriptions.

India’s marketplace is fraught with complexity. M&E companies will need to understand the nuances and develop a strategy that allows them to successfully circumnavigate these challenges.

Other emerging markets offer similar opportunities

While India may offer a billion screens of opportunity, there are other emerging destinations that M&E companies may want to consider for many of the same reasons — blurring lines between traditional and digital media, rising middle classes with disposable income and expanding broadband connectivity.

·      China. With a population of 1.4 billion and boasting the largest pay TV market by subscribers as well as the largest number of internet users globally, China is an appealing market for international M&E companies. Foreign players that understand the opportunity for growth and can devise a workable entry strategy will be best placed to penetrate this complex yet hugely dynamic market.

·      Africa. Like many emerging economies, Africa has, in many senses, leapfrogged traditional media in favor of digital. It also has one of the fastest-growing media markets. This growth is expected to continue, driven by increasing smartphone penetration and mobile broadband speeds. However, network infrastructure remains a work-in-progress and rampant piracy in the region present challenges to long-term growth and investment prospects.

·      Latin America. The countries that comprise the Latin American region offer a combined population of 650 million and have a history of being substantial importers and exporters of television content and games. However, they lag many countries in terms of broadband internet penetration. For M&E companies that bide their time, rapidly evolving mobile technology, as well as initiatives by Mexico and some South American countries to improve broadband connectivity, will inevitably open new opportunities down the road.

Growth opportunities abound for M&E companies – if they know where to look

As growth in mature, developed markets becomes increasingly challenging, global M&E companies should continue looking over the horizon for new opportunities to expand their geographic footprint – either through licensing agreements, acquisitions or organic investment.  Many emerging markets share the same characteristics for structural growth opportunities, powered by growing populations and increasing connectivity. As a vibrant and diverse media market with a strong growth trajectory across M&E subsectors, for some global companies India may be chief among them as a prime investment destination.