Indian media companies were slow to adapt to growing digital influence (Photo: Wikimedia Commons)
The Indian media industry is expected to witness annual revenue growth of approximately 8 per cent by fiscal 2027, driven by the growing dominance of digital platforms, with annual revenue reaching approximately Rs 60,000 crore.
This follows slower annual growth of 5 per cent between FY2019 and FY2024, as consumer preferences shifted towards digital platforms, according to data provided in a CRISIL report. Revenue growth, coupled with a focus on cost rationalization, is projected to expand operating margins by nearly 500 basis points (bps) to approximately 18 percent by fiscal 2027.
Key drivers of this growth include rising advertising revenues in print and traditional publishing streams, in line with growth in domestic retail demand in sectors such as fast-moving consumer goods, automobiles (especially with new launches), educational services, online shopping, and real estate, according to the report.
The report analyzed 20 media companies that account for almost 55 percent of the media industry’s revenue.
He further noted that Indian media companies were slow to adapt to the growing digital influence, despite factors such as growing number of smartphone users, growing internet penetration, affordable data prices in India (approximately 0.2 dollars per GB of mobile data) and the adoption of 5G. However, this is likely to change in the coming years.
“To better ride the digital wave, media companies have started focusing on digital modes like over-the-top platforms, social media and mobile apps,” Manish Gupta, senior director at CRISIL Ratings, said in a statement. As a result, the digital segment will continue to increase its share of media player revenue, rising from approximately 12 percent in fiscal 2024 (up from approximately 8 percent in fiscal 2019) to more than 18 percent in fiscal 2027, as consumers increasingly turn to digital platforms for news and other media content, he added.
However, the digital segment has been a drag on media companies’ profitability due to high initial spending on labor, content creation and marketing, as companies struggled to identify customers and markets for their products. Additionally, competition has limited margin improvement as consumers have many free content alternatives.
“Operational performance in the digital segment is now expected to improve,” said Ankit Hakhu, director, CRISIL Ratings. “Product discovery means that companies have begun to identify the customer segments most appropriate for their product offerings, allowing them to control promotional spending by making them more targeted. Within the CRISIL Ratings study, at least 8 out of 20 companies have achieved or identified this adjustment to a reasonable degree,” he added.
Targeted advertising and better identification of customer segments are expected to improve margins in the digital segment, which has struggled with profitability in recent years. According to the report, the industry recorded approximately 20 percent operating losses in fiscal 2024.
The report also highlighted that the improvement in overall operating profitability remains sensitive to movements in key raw material prices and input costs, such as newsprint (NP) prices, which account for between 30 and 40 percent of total costs. Geopolitical or other issues in the global supply chain could cause unexpected volatility in NP prices, as seen in fiscal 2023, when prices averaged $840 per ton, a year-over-year increase of about 23 percent.
First published: October 3, 2024 | 14:29 IS
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