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<ul><li>The 12th edition of <keyword id="50041" type="COMPANY" weightage="20" keywordseo="KPMG">KPMG</keyword>'s report on the <keyword id="176124" type="COMPANY" weightage="20" keywordseo="Media-Entertainment">Media &amp; Entertainment</keyword> sector examines the performance of the industry during a particularly challenging period.</li><li>The report reveals that digital advertising spends are now set to overtake those on TV by FY21, which is an important milestone and turning point in the evolution of M&amp;E in India. </li><li>It also states that the M&amp;E sector should recover to its current levels and post a 33% growth in FY22 (following a contraction of 20% in FY21), which still implies a loss of around two years of growth. </li></ul> KPMG in India has launched the 12th edition of its Media and Entertainment (M&amp;E) report, titled ‘A year off script: Time for resilience’ that examines the performance of the M&amp;E sector during a particularly challenging period. India was already experiencing a slowdown in economic activity even prior to the outbreak of COVID-19 in March, and the onset of the global pandemic and ensuing lockdown dealt a severe blow to the Indian economy. The M&amp;E sector has been affected but to varying degrees: outdoor entertainment formats (films and events) and traditional media (print and TV to some extent) have been badly impacted as people stayed indoors and advertising spends dried up. Digital advertising, OTT and gaming fared much better, with massive spikes in <keyword id="4654667" type="PERSON" weightage="20" keywordseo="Digital-Consumption">digital consumption</keyword> during the lockdown across geographies and socio-economic classes. Digital advertising spends are now set to overtake those on TV by FY21, which is an important milestone and turning point in the evolution of M&amp;E in India. As <keyword id="8003653" type="PERSON" weightage="20" keywordseo="Satya-Easwaran">Satya Easwaran</keyword>, Partner and Head, Technology, Media and Telecom, KPMG in India says, “The distinction among segments of M&amp;E has become more pronounced with the experience of the lockdown. Marketing spend has moved perceptibly towards digital media and away from traditional segments like print, radio and to some extent TV. A greater reliance on subscription and other paid options as well as the development of a credible digital business model is going to be inevitable for these traditional media segments.” Organisations face a multitude of challenges and competing priorities but based on a survey of CXOs conducted by KPMG in India, customer focus and revenue growth are expected to drive digital-first initiatives over the near term within organisations, with cost reduction also emerging as important to traditional media segments. <keyword id="3520955" type="PERSON" weightage="20" keywordseo="Girish-Menon">Girish Menon</keyword>, Partner and Head, Media and Entertainment, adds “There will be a deeper integration of digital technology across the M&amp;E value chain – from content production to distribution. Technology adoption could however face some challenges in terms of skill development and the shift to a digital-first mindset but will result in operational cost savings and potentially lower lead times over the longer term.” Finally, the M&amp;E sector should recover to its current levels and post a 33 per cent growth in FY22 (following a contraction of 20 per cent in FY21), which still implies a loss of around two years of growth. The two areas that offer encouragement are the continued economic growth of Bharat and the universal acceleration of digital adoption among users across geographies and SECs. As per our revised estimates, India could be home to a billion digital users by 2028 rather than the earlier projected 2030 timeline. There have been several structural changes to digital behaviour on account of the experience of the lockdown resulting in a new homogeneity among users, and it is our belief that many of these changes will translate into a more democratic and sophisticated digital citizenry within the country.

Digital advertising spends set to overtake TV spends by FY21: KPMG Report

<ul><li>The report highlights that media consumption overtime has become income inelastic, however the current environment could result in a dip in media consumption in the near term; and also foresees key trends across Television, Print media, Films, OTT platforms during COVID along with the recovery time for the same. </li><li>At-home entertainment options (digital, TV, gaming) to see an upswing as ‘lockdown behaviour’ results in habit formation.</li></ul>KPMG has released a report titled ‘<keyword id="8763838" type="UNKNOWN" weightage="20" keywordseo="covid-19">COVID-19</keyword>: The many shades of a crisis - A media and entertainment sector perspective’ which discusses the impact of the novel virus on the Media and Entertainment industry. The report highlights that media consumption overtime has become income inelastic, however the current environment could result in a dip in media consumption in the near term; and also foresees key trends across Television, Print media, Films, OTT platforms during COVID along with the recovery time for the same. Furthermore, the report highlights that due to COVID-19, traditional media could face some challenges in the near to medium term, and there is likely to be a long-term upward shift in the integration of digital technologies into our everyday lives with media and entertainment being an immediate beneficiary. Speaking on the ongoing situation, <keyword id="8003653" type="UNKNOWN" weightage="20" keywordseo="Satya-Easwaran">Satya Easwaran</keyword>, Partner and Leader - Markets Enablement, Technology, Media and Telecom (TMT), KPMG in India says, “The COVID-19 pandemic has resulted in a drastic cut in advertising expenditure across all media. However, with people being homebound, consumption of media and entertainment – and digital media in particular – has seen considerable growth. Post crisis, we anticipate an even greater integration of technology into our everyday lives with a marked digital progression of Indians across socio-economic classes. Monetisation however might remain a challenge in the near term.” Girish Menon, Partner and Leader - Media and Entertainment, KPMG in India said “The COVID-19 experience is likely to result in a long-term upward shift in the integration of digital technologies into our everyday lives, with India’s ‘digital billion’ trajectory likely to accelerate materially. We expect greater affinity to be seen for at-home entertainment with subscription models, cord-shaving and streaming to larger screens seeing exponential pick-up in the near to medium term. Outdoor entertainment options including – films, events, theme parks – particularly in COVID-19 hotspots could see lingering risk aversion even in the medium term. With monetisation, particularly ad-spend, under pressure, the focus for M&amp;E companies in the near to medium term would be on cash management and profit protection with greater technology integration. Organisations might need to be risk focused and innovate existing business models and processes to survive and emerge stronger.” While traditional media could face some challenges in the near to medium term, digital media businesses have fared relatively better, albeit only on the consumption side. There is likely to be a long-term – upward – shift in the integration of digital technologies into our everyday lives, and media and entertainment will be an immediate beneficiary. This is likely to be true across socio-economic groups – i.e. for both India and Bharat. The differences could arise however with a more granular observation of individual behaviour, as we expect urban areas affected by COVID-19 to potentially show greater affinity for at-home entertainment, subscription content, cord-shaving and streaming to larger screens in the near to medium term. On the other hand, livelihoods of a large segment of Bharat have been severely affected by this pandemic, potentially making entertainment spends into an aspiration. Inequity and imbalance in consumption could even be exacerbated in our post-crisis reality. Below are the key highlights of the report: Insights into the crisis and its aftermath: <ul><li>Ad-spend pressures to linger on the back of weak economy and lower domestic consumption</li><li>Longer time lag to return to normalcy for weaker economic sections of the populations</li><li>Digital consumption to see rapid incremental growth with India’s digital billion trajectory likely to accelerate materially</li><li>At-home entertainment options (digital, TV, gaming) to see an upswing as ‘lockdown behaviour’ results in habit formation</li><li>Outdoor entertainment (films, events, theme parks) particularly in COVID-19 hotspots to see lingering risk aversion even in the medium term. ‘Pent-up’ demand behaviour among some sections of population may provide some respite</li><li>Delayed expansion plans though digital businesses aggressively target market opportunity</li></ul>Impact on the Media and Entertainment sector: <ul><li>Supply chain:</li></ul><ul><li>Innovations in content pipeline: A focus on building a stronger content bank may result in working capital being locked up across the value chain, leading to higher cash flow requirements</li><li>Innovations in delivery models: With outdoor entertainment and recreation facing challenges in the near term, innovative outreach and delivery models are likely to evolve</li><li>Greater emphasis on predictive analytics: Companies could place an increasing amount of reliance on Artificial Intelligence (AI)/ Machine Learning (ML) to predict consumer behavior in these uncertain times</li></ul><ul><li>Consumption:</li></ul><ul><li>India vs. Bharat dichotomy could likely widen</li><li>At-home consumption, particularly OTT and gaming, to see continued accelerated growth</li><li>Outdoor media consumption: M&amp;E segments such as films, events and theme parks are looking at a prolonged recovery cycle, owing to risk aversion towards social gatherings, particularly in COVID-19 affected cities and hotspots, which unfortunately includes some of the major cities</li><li>While India’s media consumption remains upbeat during the lockdown, indulgent expenses around purchase of latest hardware, technology upgrades etc. could be postponed for a while</li></ul><ul><li>Monetisation:</li></ul><ul><li>Longer timelines for ad spend recovery</li><li>Penetration of subscription based digital models to accelerate: Digital subscription revenues could see an upswing post COVID-19 as habit formation in terms of OTT video consumption sets in</li><li>Print will get a new lease of life</li><li>Medium term downside risk for outdoor entertainment segments: Aversion to social gatherings in the medium term (particularly in major COVID-19 hotspots) could result in lower footfalls and ticket sales for films, events and theme parks</li><li>M&amp;E services build on domestic opportunities: There is likely to be a greater emphasis on domestic markets in the services space, particularly in the animation and VFX segments, as global pipelines come under severe pressure</li></ul>Framework to help companies work through the transition to normalcy: <ul><li>Immediate focus for companies will be on value preservation and protection</li><li>Protection of the workforce: Focus first on the physical and mental well-being of the workforce with a gradual reintegration process. Time for leadership to deliver clear messages on organizational priorities and provide a fair assessment of the impact of the crisis on their business to employees</li><li>Stakeholder communication includes not just employees but also external parties including vendors, partners and customers</li><li>Identify short-term cash flow challenges and enable cost levers for savings opportunities</li><li>Medium term objective will be value creation</li><li>Agree and implement the recovery plan</li><li>Incorporate learnings from the crisis to streamline processes and potentially provide better insulation from such shocks</li><li>Devise tactical working capital projections in acknowledgement of the changed environment</li><li>Invest in upskilling teams to adapt to the new normal</li><li>Long-term vision will be value realisation</li><li>Carve-out of non-core businesses to unlock value</li><li>Identify strategically aligned inorganic growth opportunities</li><li>Develop deep and credible succession plans</li></ul>

KPMG India reveals how COVID-19 has impacted the media and entertainment industry

<ul><li>Online casual gaming to be the largest sub-segment amongst the online gaming segment in India, contributing ~58% to the overall revenues by FY25.</li><li>Growth to be led by a continued increase in consumption, robust brand interest and maturity of the Indian gamer in terms of consumer spends.</li></ul>The online gaming segment has grown at a rapid pace in the last 3-4 years and is now competing with traditional forms of entertainment for the share of time spent on media and entertainment in a day. While the COVID-19 induced lockdowns had an adverse impact on the economy and traditional segments of the M&amp;E industry, online gaming as a segment got a leg up in terms of both consumption and partly, monetization. This is evident from the fact that India had the highest game downloads in the casual mobile gaming sub-segment in the world (excluding China) in 2020, with Q1-Q3 2020 downloads standing at 7.3 billion, accounting for 17 per cent of the global mobile game downloads. Further, the monthly active users for the top 100 mobile games and the time spent on online gaming, are higher by 10-15 per cent post lockdown 2020, indicating the establishment of a new normal. Gamers across demographics took to online gaming as a means to connect with family and friends, with the supply side also playing its part, in terms of multiple titles getting multiplayer features, with a social layer to them, to encourage group consumption. With India experiencing a second wave of the COVID-19 pandemic currently, it is envisaged that the consumption of online casual gaming is likely to continue being robust, helped by the robust digital infrastructure that India has, and the continued investments by Indian and global developers and publishers in making world class games available to the Indian gamer. In order to decode the casual gaming market in India, its constituents and deep dive into what the future holds for this sub-segment, <keyword id="50041" type="COMPANY" weightage="20" keywordseo="KPMG">KPMG</keyword> in India today launched a report titled – ‘Beyond the tipping point – A primer on Casual <keyword id="1110821" type="PERSON" weightage="20" keywordseo="Gaming-in-India">gaming in India</keyword>’, which reveals that the overall online casual gaming sub-segment in India stood at a size of INR 60 billion in FY21 and is projected to grow at a CAGR of 29 per cent over FY21-25 to reach a size of INR 169 billion. The report aims to define the online casual gaming sub-segment in India, and the various lens through which this definition can be seen. It also throws light, on online casual gaming’s projected growth potential in terms of revenues &amp; user base, key growth drivers, current challenges and explores evolving themes such as cloud gaming, outsourcing of game development, platform plays, multi-game platforms and AI (Artificial Intelligence) in casual gaming. Additionally, it also places a specific emphasis on outlining the understanding of the monetisation models around both advertising and consumer spends, and how India’s movement up the casual gaming maturity curve is likely to help in improved monetisation across the board. It also highlights, the emerging phenomenon of rewarded advertisements as a means to strike a balance between monetisation and game experience, as advertisement revenues remain a unique feature to the Indian online casual gaming sub-segment. Highlights India’s online gaming ecosystem and its potential <ul><li>The online gaming segment in India was estimated at INR 136 billion in FY21 and is projected to grow at a CAGR of 21 per cent over FY21-FY25 to reach a size of INR 290 billion.</li><li>Of the total size, the online casual gaming sub-segment is the most significant one and stands at INR 60 billion in FY21, accounting for ~44 per cent of the total online gaming revenues</li><li>In terms of users, the online casual gaming sub-segment, at 420 million gamers in FY21 accounted for ~97 per cent of the total gamers in India and is expected to maintain this share by FY25 going ahead</li><li>The segment is significantly under indexed on monetization with lower ARPUs as compared to the gaming markets such as Indonesia, Malaysia and South Africa, which are comparable in terms of the per capita GDPs.</li></ul>Key Growth Drivers for the gaming industry <ul><li>Macro factors like increasing smartphone penetration, internet penetration, young population and adoption of digital payments adoption</li><li>Overall growth in digital consumption sophistication, which has helped online gaming become a mainstream entertainment option</li><li>Supply side factors such as increase in supply of world class titles, games with localized content, new features such as multiplayer and social elements added to games, and an increase in investor interest at large.</li><li>Further, COVID-19 induced lockdowns in 2020 was a tipping point in terms of online casual gaming consumption, with most metrics such as MAUs, DAUs, Average session times and even paid user conversion rates seeing strong traction.</li></ul>Key challenges faced by the online gaming segment <ul><li>Low average revenue per paying user (ARPPU): The ARPPU of online casual gaming in India is ~USD 2 (FY21), which is amongst the lowest in the world, given that India has the second largest base of online casual gamers in the world. This is owing to significantly lower penetration of consoles in India, which historically have instilled a culture of paying for games.</li><li>Lack of scale for Indian studios: Notmany Indian studios have made a mark on the global stage due to the emerging nature of the Indian market; low consumer spends on games and relatively lower game design capabilities. However, as monetisation improves in India, these aspects are likely to start getting addressed, evident by the success of some Indian titles during the lockdown 2020.</li></ul>Advertisement based monetisation <ul><li>The dependence on advertising as a means of monetization remains unique to India and is not likely to go away in the near to medium term as free to play games (With IAPs) dominate consumption in India.</li><li>Developers and publishers are increasing relying on tools such as rewarded/incentivized ads, to strike an optimum balance between monetisation and retention, and not hampering the overall user experience.</li><li>With an increasing share of time spent on gaming, advertisers/brands are looking at online casual gaming as a viable means to reach their intended target audiences. This is especially important as online casual gaming reaches the masses, across demographics.</li></ul>Consumer spends to evolve <ul><li>With a move up the gaming maturity curve for India, consumer spends; led by In App purchases (IAPs) are likely to see strong growth in the next 3-4 years.</li><li>With pricing of IAPs adjusted to Purchasing Power Parity (PPP), localisation of content, social aspects of gaming; and emerging opportunities around multi gaming platforms being able to devise monetary rewards; the consumer spends around online casual gaming is likely to see improved traction.</li></ul>Key evolving themes Cloud gaming: With the proposed launch of 5G services, cloud gaming has the potential to transform the gaming experience for a mass of users, taking device capabilities out of the picture. This is especially important for markets like India, with limited capacity to invest in hardware. Esports: Over the next five years, the esports segment is expected to grow rapidly due to increased interest from brands for sponsorship, publishers to promote games &amp; entry of new players across the value chain ranging from organisers to participating teams. The India esports sub-segment is expected to grow by CAGR 27 per cent over FY21-25 to reach a size of INR 5.7 billion Game development outsourcing can help resolve many challenges pertaining to cost, talent and time to market Artificial Intelligence in casual gaming: AI is being extensively used across game development (using AI generated storylines), player engagement, interactive experiences across gameplay, and personalization of each gamer’s journey with games. Satya Easwaran – Partner and Head of Technology, Media &amp; Telecom, KPMG In India commented “Our report - Beyond the tipping point – A primer on online casual gaming in India aims to simplify the multilayered ecosystem of the world’s second largest online casual gaming user geography. Poised at a 3X growth in revenues between FY21-25, we have been privy to the keen interest from corporates and investors who want to ride the incredible wave of opportunity that the business of online casual gaming has to offer. He further added “Having seen rapid growth in the last five years on account of the growth in digital infrastructure in the country coupled with the availability of leading titles, India’s online gaming segment is now a serious business with India’s gaming market being overwhelmingly mobile first.” Girish Menon, Partner and Head, Media and Entertainment, KPMG in India adds “The online casual gaming sub-segment in India has emerged as the largest in terms of consumption amongst overall online gaming, with close to 420 million gamers engaging in online casual gaming in FY21”. Menon says “Online casual gaming saw its tipping point in 2020, with consumption and engagement at an all time high. The growth potential of this sub-segment is immense, with improve monetisation helping the growth of the developer and publisher ecosystem, resulting in the likely emergence of players of scale. Both consumer spends and advertising based monetisation, which is unique to India, are likely to see strong traction, with India’s movement up the maturity curve and , supply of world class titles, the uptake of rewarded/incentivized ads and localisation of gaming titles being the key enablers. Further, with the emergence of ecosystem enablers such esports and game streaming, online casual gaming is likely to appeal to the masses and professionals alike.” Lastly, with technologies such as cloud gaming on the anvil and the adoption of latest AI/ML led technologies, online casual gaming in India is serious business, both for the players in the ecosystem as well as the investors. We envisage the online gaming segment to be amongst the largest segments of the M&amp;E industry in India in the years to come, garnering a share of both the time, and the wallet of the Indian digital billion”. Overall, the opportunities far outweigh challenges for online casual gaming in India. COVID-19 was the tipping point for the segment, and we see this segment amongst the fastest growing amongst the M&amp;E industry in India. It surely is interesting times for the online casual gaming ecosystem in India.

Advertising revenues in the casual gaming segment aggregated Rs 36 billion in FY21 and is expected to grow at a CAGR of ~29% to Rs 99 billion by FY25: KPMG Report

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Digital advertising spends set to overtake TV spends by FY21: KPMG Report

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KPMG India reveals how COVID-19 has impacted the media and entertainment industry

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Advertising revenues in the casual gaming segment aggregated Rs 36 billion in FY21 and is expected to grow at a CAGR of ~29% to Rs 99 billion by FY25: KPMG Report

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