Sahara One Media and Entertainment Limited (BSE Code: 503691) is
engaged in sale of television programmes and motion pictures production and distribution.
The Television business operates in three television channels namely: SAHARA ONE which is
a General Entertainment Channel (GEC), FILMY which is a Hindi movie channel and FIRANGI
which offers dubbed international shows and movies.
INDUSTRY STRUCTURE, DEVELOPMENT AND FUTURE OUTLOOK:
Over the past two years, scientists and physicians have amazed the
world with their unflinching efforts and support for humanity in the war against Covid-19.
In this fight against an unseen enemy, humans, backed by the entire medical fraternity,
put up a brave fight. With the relaxation of mobility, travel and social distancing
restrictions and the declining number of new infections, the Indian economy moved into a
gradual recovery mode showing steady and positive signs of revival in 2022-23.
Indias gross domestic product (GDP) reflected at 15% in 2022-23.
Several initiatives like the adoption of an accommodative stance by the RBI, relief
packages by the Government and the introduction of the PLI (Production Linked Incentive)
Scheme aided the growth of the Indian economy, bringing it on its path of revival post
lockdown.
During the first quarter of 2022-23, the Indian economy registered a
growth of 20.1%, led by a lower base effect. However, in the first half of 2022, the
second wave of the pandemic proved to be much more devastating than the first one. But
despite the country being in the grips of a more severe second wave of the pandemic,
factors like a faster and wider vaccination drive, limited lockdowns and robust demand
from consumers helped maintain growth. As a result, the economy registered 8.4% in the
second quarter. During the second half of 2022-23, the Indian economy faced major issues
like coal supply scarcity, energy crisis, and growing inflation. Thereby denting the
manufacturing industry. Alongside, trade, hotels, transport, communication and services
related to broadcasting also remained a bit sluggish.
The Indian economy looks positive and seems promising in terms of its
growth prospects. The overall macroeconomic stability and growing consumer demand
indicators suggest that the economy is well-positioned to take on future challenges. The
International Monetary Fund (IMF) slashed Indias gross domestic product (GDP) forecast to
8.2% for financial year 2022-23. The World Bank had cuts Indias GDP forecast to 8 per
cent from 8.7 per cent for FY 2022-23, citing impacts of the Russia-Ukraine war. (Source:
RBI https://timesofindia.indiatimes.com/ business/india-business/imf-slashes-indias-gdp-
forecast-to-8-2-for-fy23/articleshow/90939753.cms)
Key trends
Indian M&E sector grew 20% in 2022 to reach INR2.1 trillion
|
2019 |
2020 |
2021 |
2022 |
2023E |
2025E |
CAGR
2022-
2025 |
Television |
787 |
685 |
720 |
709 |
727 |
796 |
3.9% |
Digitalmedia |
308 |
326 |
439 |
571 |
671 |
862 |
14.7% |
Print |
296 |
190 |
227 |
250 |
262 |
279 |
3.7% |
Filmed entertainment |
191 |
72 |
93 |
172 |
194 |
228 |
9.8% |
Online gaming |
65 |
79 |
101 |
135 |
167 |
231 |
19.5% |
Animation and VFX |
95 |
53 |
83 |
107 |
133 |
190 |
21.1% |
Live events |
83 |
27 |
32 |
73 |
95 |
134 |
22.2% |
Out of Home media |
39 |
16 |
20 |
37 |
41 |
53 |
12.8% |
Music |
15 |
15 |
19 |
22 |
25 |
33 |
14.7% |
Radio |
31 |
14 |
16 |
21 |
22 |
26 |
7.5% |
Total |
1,910 |
1,476 |
1,750 |
2,098 |
2,339 |
2,832 |
10.5% |
Growth |
|
-23.2% |
19.3% |
19.9% |
11.5% |
|
|
All figures are gross of taxes (INR in billion) for calendar years : EY
estimates
The Indian M&E sector continued its strong growth trajectory. It
grew by INR348 billion (19.9%) to reach INR2.1 trillion (US$26.2 billion), 10% above its
pre- pandemic 2019 levels.
While television remained the largest segment, digital media cemented
its position as a strong number two segment, followed by a resurgent print.
The filmed entertainment segment recovered as theatrical releases
doubled, and reclaimed the fourth position overtaking online gaming.
The share of traditional media (television, print, filmed
entertainment, OOH, music, radio) stood at 58% of M&E sector revenues in 2022, down
from 71% in 2019.
We expect the M&E sector to grow 11.5% in 2023 to reach INR2.34
trillion (US$29.2 billion), then grow at a CAGR of 10% to reach INR2.83 trillion (US$35.4
billion) by 2025.
SEGMENTAL PERFORMANCE IN 2022-23:
Television Television advertising grew 2% to end 2022 just
behind its 2020 levels, on the back of volume growth. Subscription revenue continued to
fall for the third year in a row, experiencing a 4% de-growth due to a reduction of five
million pay TV homes and stagnant consumer-end ARPUs. While linear viewership declined 7%
over 2021, 8 to 10 million smart TVs connected to the internet each day, up from around 5
million in 2021.
Digital advertising Digital advertising grew 30% to reach INR499
billion, or 48% of total advertising revenues. Included in this is advertising by SME and
long-tail advertisers of INR180 billion and advertising earned by e-commerce platforms of
INR70 billion.
Digital subscription Digital subscription grew 27% to reach
INR72 billion. 99 million paid video subscriptions across almost 45 million Indian
households generated INR68 billion, an amount which is over 60% of broadcasters
share of TV subscription revenues. Due to a plethora of free audio options, just 4 to 5
million consumers bought music subscriptions, generating INR2.2 billion while online news
subscriptions generated INR1.2 billion.
Print Advertising revenues grew 13% in 2022 as print remained a
"go-to" medium for more affluent and non- metro audiences. Subscription revenues
grew 5% on the back of rising cover prices and has stabilized at 15% to 20% below the
pre-COVID-19 levels. Digital revenues remain elusive for most newspaper companies.
Music The segment grew by 19% to reach INR22 billion. Film
music, which had reduced during the pandemic, returned at scale. 87% of revenues were
earned through digital means, though most of it was advertising led, there being around
only 4 to 5 million paying subscribers despite streaming reach of over 200 million.
Film The segment grew 85% to reach 90% of its 2019 levels as
theaters re-opened. Over 1,600 films were released in 2022, theatrical revenues crossed
INR100 billion, and fewer films released directly on digital platforms. 335 Indian films
were released overseas.
Online gaming New players, marketing efforts, specialized
platforms and brand ambassadors all worked to grow the segment 34% in 2022 to reach INR135
billion. Regulatory clarity improved, and this could lead to more FDI in this segment.
There were over 400 million online gamers in India, of which around 90- 100 million played
frequently. Real money gaming comprised 77% of segment revenues.
Animation and VFX As content production resumed, service demand
- both domestic and exports- increased, resulting in the segment growing 29% and crossing
INR100 billion for the first time.
Live events The fastest growing segment of 2022, organized
events grew 129% over a depleted base as weddings, corporate events and activations,
government initiatives, and large marquee IP with international participation took place
after a gap of almost two year.
OOH OOH media grew 86% in 2022 and reached 94% of 2019 levels.
Capacity utilization improved in 2022, but rates remained challenged. Digital OOH screens
increased to around 100,000 and contributed 8% of total segment revenues.
Music The segment grew by 19% to reach INR22 billion. Film
music, which had reduced during the pandemic, returned at scale. 87% of revenues were
earned through digital means, though most of it was advertising led, there being around
only 4 to 5 million paying subscribers despite streaming reach of over 200 million.
Radio Radio segment revenues grew 29% in 2022 to INR21 billion
but were still just 66% of 2019 revenues. Ad volumes increased by 25% in 2022 as compared
to the previous year, though ad rates remained 20% below their 2019 levels. Many radio
companies are looking at alternate revenue streams to grow faster.
FUTURE OUTLOOK
The M&E sector will grow INR 734 billion to reach INR2.83 trillion
in 2025.
All figures are gross of taxes (INR in billion) : EY estimates
The Indian M&E sector will grow at a CAGR of 10.5% and add INR734
billion in three years.
THE M&E SECTOR HAS BECOME MEDIUM AGNOSTIC:
|
2019 |
2020 |
2021 |
2022 |
2025 |
| Video |
55% |
69% |
68% |
66% |
63% |
| Experiential |
22% |
16% |
16% |
21% |
25% |
| Textual |
19% |
12% |
13% |
10% |
9% |
| Audio |
4% |
3% |
3% |
3% |
3% |
| Total |
100% |
100% |
100% |
100% |
100% |
The key contributors to this growth will be digital, online gaming and
television (together contributing to 65% of the growth), followed by animation and VFX
(11%), live events (8%) and films (8%).
Digital and gaming aggregated 65% of deal volumes, but 33% of deal
value
Traditional media deals in television and film comprised 62% of deal
value
PE/ VC funds led 77% of M&E deals in 2022, contributing to 57% of
the total funding
KEY ELEMENTS FOR GROWTH
(i) Concentrate on additional revenues from digital pay platforms:
India is a fast digitising market and the consumer shift towards
digital services is exhibited through the rampant expansion of digital homes. Digital
homes now account for almost half of the total Pay TV homes in the Country.
(ii) Rationalize on costs across different heads:
The Company has always believed that higher spends will not necessarily
result in sustained incremental viewership. Even in the wake of competition, the network
maintained its cost structures, though with increased competition our costs also moved up.
Better negotiations with suppliers and stricter control on distribution spends will help
in further keeping costs under check.
(iii) Corporate Governance:
Sahara one media and entertainment firmly believes that good governance
is critical to sustaining corporate development, increasing productivity and
competitiveness and creating shareholder wealth. The governance process should ensure that
the available resources are utilised in a manner that meets the aspirations of all its
stakeholdeRs Your Companys essential charter is shaped by the objectives of
transparency, professionalism and accountability. The Company continuously endeavours to
improve on these aspects on an ongoing basis. While the increasing emphasis on
transparency and accountability, standards have been set by various governing bodies on
disclosure as well as judiciousness in conduct. Our Company has always tried to go a step
further in this direction.
(iv) Cinema will focus on two different segments:
High-end cinemas will evolve into "experience zones" to cater
to top-end multiplex audiences who watch movies for their spectacular experience and to
enjoy an evening out with friends and family a market we estimate at around over 100
million customers / 40 million households by 2025.
In addition, a set of lower-priced "cinema products" will
emerge for the next 100 to 150 million audiences across the top 75 cities of India, which
will also require a change to the type of content being produced for these audiences, and
which could even see regional OTT products releasing in a windowed manner.
We expect more exhibition pricing innovation in future around loyalty
programs, discounting, group pricing, rentals, etc.
KEY AREAS TO BE FOCUSED ON FOR GROWTH
Development in terms of quality and quantity:
The demand drivers clearly point toward a requirement for substantial
manpower both in terms of quantity and quality. For a sector that is still evolving, the
challenge to get a skilled workforce commensurate with growth is immense. Industry players
are yet to fully recognize the importance of training, skill development or education in
media. The students trained in a media course industry continues to hire general stream
graduate students at the entry level who are expected to learn on the job. There is
clearly a gap in the number of quality institutions, given Indias size and the
concentration of education institutions in tier-I cities. A lot of production houses in
television, films, animation and news, in both print and broadcast, have in-house training
schools but they lead to creation of a captive talent pool and do not benefit the industry
at large.
Content Management:
The Internet has forced M&E content creators to reengineer
content-related processes. New content types require newer content management
capabilities. Designing the ‘next best product can be done through implementing
analytics solutions on past data. Search and browse requirements need metadata tagging and
SEO.
Distribution Channel:
The emerging digital world requires new methods of distributing
content. Identifying the optimum distribution channel mix is expected to reduce a lot of
operational expenditure for the media and entertainment organisation. With the advent of
kindle and smart phones, ‘any content on any device at any time becomes the
expectation. Providing an active role for the readers in defining their products could
decide the success rate of the distribution channel.
KEY CHALLENGES AND RISKS:
The Company has implemented a robust framework for identification,
management and mitigation of potential risks. Some of these risks are discussed below:
EXTERNAL RISKS AND MITIGATION:
Regulatory uncertainty: The M&E industry is governed by the rules
and regulations framed by the authorities and regulatory bodies of the different countries
we operate in. The policies and regulations issued by them have a bearing on the industry
as a whole. We continue to abide by all regulations and also proactively consult our
stakeholders to keep ahead of any changes in regulation. We engage with external
consultants and subject matter experts where necessary
(ii) Lack of fresh talent pool. Creative profiles like actors and
writers are mostly in short supply. This can impact not only costs but quality and
differentiation as well, since most of the available talent pool is used across a range of
productions. Few media schools imparting courses in creative writing or ideation leading
to paucity of content creation in the television industry, where number of channels have
grown exponentially.
(iii) Most courses in media marketing and sales are not very popular
with media schools and the industry often has to look to other sectors to hire manpower
for these job roles. FMCG tends to be a key poaching ground for the media industry.
(iv) Budget constraints which tend to limit creativity and often hamper
the possibility of exploring innovative concepts or formats.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has in place adequate Internal Control systems &
procedures commensurate with the size and the nature of its business for the purchase of
goods, TV programmes, films / programme rights, equipment and other assets and for the
sale of goods. The Management also keeps close watch on the Internal Control system and
consistently takes necessary corrective steps, wherever necessary, to further strengthen
the Internal Control systems and procedures of the Company.
Source FICCI-EY M&E Report 2023
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