Digital is going to define 2016: Smita Jha

Smita Jha
Leader, E&M Practice
PwC India

It’s not easy to capture in a couple of sentences, but how would you say the year 2015 for the media and entertainment sector?  
I think for the industry, 2015 was a year where many developments happened. It was an exciting year as the television rating system moved from TAM to BARC. And BARC actually became operationalised in 2015. That was also a year in which the radio auctions, which had been much awaited for many years, took place. I think these two things -- along with the announcement of FDI being increased made 2015 a year with many good developments. 

Would you say the sector met with the expectations we had of it? 
Perhaps not fully but yes, a lot of expectations were met. Other than [the previously-mentioned] three, there was also the fact that advertising continued to show good growth. Despite the fact that 2014 was the year when general elections took place. It wasn’t such a big dip that we saw in 2015, so yes, it was pretty much as per expectations and forecasts.

Any major disappointments from last year? 
I wouldn’t say there are many, but I wish some things could have been better. For example, when the radio auctions happened, they were only for 34-odd cities. Similarly, we had hoped that the FDI announcement would come earlier. Nevertheless, it did take place around the festive season of Diwali, so that wasn’t too disappointing. 

So here we are in a new calendar year. What headline-making things would you forecast for the media sector this year?
If there was one headline if I had to pick, it would be about digital. I think digital is completely changing the way the media industry functions. Whether it is around content or around distribution, digital is completely transforming our industry. So the headline I would choose would be the change that digital will bring to media companies in India. 

The mobile phone has become ubiquitous and, as you said, digital is going to be a huge, huge player. Can we say that it is going to be a huge influence on how the industry functions?
I think the mobile will take centrestage for many industries, including mine, which is the media industry. As per PwC forecasts for 2017, more than half of the world’s population will actually become mobile internet subscribers. Imagine the impact mobile will [then] have on every industry, including the media industry. Particularly in the media industry, mobile will dictate the development of content as well as its consumption and distribution. I think mobile has an all-pervasive effect, and it has to now become the centre-point of strategy in every media company. You cannot ignore the mobile strategy any longer. 

Do you see traditional media getting affected because of all these? And do you see digital killing print, or even television?
I won’t say it’s as drastic as killing but yes, mobile and digital will definitely have an impact. As I said, [they will now need to have] a mobile-centered content strategy so that content is suitable for mobile platforms and devices, as well as a mobile-centered distribution strategy, both of which will really have an impact. When we say digital other than mobile, we actually [refer to] aspects around online content and online distribution of content. Technology as such in terms of devices for consumption that consumers use. These three will play a critical role going forward. 

We saw some M& A activity in the TV sector too. For example, Zee acquired Sarthak in Odisha, and Star acquired Maa...
The transactions you mentioned were more to do with growth strategy in an organic fashion. So companies who want to grow inorganically in terms of regional penetration, these are the transactions that highlight that. But I think where we expect a lot of consolidation to happen, is on the distribution side of television. With digitisation happening now, we expect a lot of smaller cable operators to now merge and consolidate with the larger MSO systems. That’s one consolidation we definitely expect. We have been watching consolidation in the DTH sector. In terms of television broadcasting as such, we don’t see any consolidation. We will continue to have a large number of television channels because, again, India is a very large country with many genres and languages. So I would see less consolidation on the broadcasting side but definitely more on the distribution side in television. 

Would you say digitisation will affect revenues for sure?
We expect digitisation to bring in transparency in sharing revenues. So yes, to some extent, broadcasters are likely to gain in terms of distribution revenues, but more than increase -- as long as there is transparency in terms of where consumers are watching which channels etc -- we expect there to be a bigger benefit of digitisation more than the revenue growth. 

And sectors like radio and TV, how they will do?
I think each of them is going through a different stage of evolution. As I said before, radio auctions happened in 2015 and we expect that in 2016, we will see the radio stations operational. We also hope that the balance frequencies that were not auctioned in 2015, would see the light of day in 2016. Out-of-home continues to suffer significantly, because of a lack of audience measurements, techniques and tools. Unfortunately, we don’t expect much change in that sector. Cinema will also continue to be in momentum. When we look at it from an industry perspective, we continue to see 1, 000-odd films produced every year. With 52 weekends, budgets are going up and the number of prints for each of these films are significantly increasing, [and will continue to do so] as and cinemas get digitised. So I think these sectors will continue to grow. Significant changes are to be seen in the radio sector, and some in cinema too. 

Do you see ad spends going up for the market this year?
Typically, the advertising industry follows the growth of an economy. The economic principle behind it is that as and when the GDP grows, advertising revenue grows by three or four per cent higher than the GDP growth. So as long as we continue to see GDP growth in the country, we can expect advertising revenues to follow the same path. The year 2016 is also when we expect -- as per our forecast -- advertising revenues to grow to about 12 to 14 per cent in different sectors. Television will be the highest growth sector, followed by print and other smaller segments. 

Firms like PwC keep studying markets. Who, according to you, will be the major player this year?
It will be difficult to say who the major player will be, but I can surely say that 2016 will define what digital means for the industry. For example we don’t expect content to now be classified as television content or film content. Content will now be defined as content, which is either long-form or short-form. It could be displayed or distributed across any platform, whether it’s a television screen or a film theatre or even your mobile or tablet. Digital will completely redefine the way content is produced and distributed. In 2015, you were already seeing activities around original content being produced for the mobile and tablet devices. We will see a lot more of that happening in 2016. Shows will be produced for tablets, and not necessarily for release in theatres or even on television screens. So I think digital will completely revolutionise a lot of things. Some bits had started in 2015; we can expect a lot more in 2016. 

One last question -- what according to you will give media bosses sleepless nights, and are there any specific areas they should focus on?
I think media bosses will continue to thrive on the growth of the industry. The new rating system will hopefully stabilise in 2016, so a lot of their lost sleep will be made up. Digital, of course would continue to -- I won’t say give them sleepless night --  but bother a lot of media executives, because they will need to evolve their media strategies around things like mobile content. Also, I think there is certainty in the environment, in the economic environment and the political environment, which also has a big influence on the media industry. If we see any instability, then that’s also cause for concern. It may not have a direct impact on revenue growth, but it may not [create a climate favourably viewed by] foreign investors when they look at the media sector in India. 

A part of this interview featured in BrandStand on Zee Business. Watch it on YouTube at https://www.youtube.com/watch?v=XWoQUYIQimY