Ad spend on digital media could overtake TV by financial year 2021

Advertising spend on digital media is set to overtake TV by financial year 2021, with digital likely to be one of the only media and entertainment segments to continue to grow in double digits in the coming year.

According to the KPMG Media and Entertainment Report 2020, outdoor entertainment formats and traditional media have been badly impacted as people stayed indoors and advertising dried up. Digital advertising, OTT and gaming fared much better, with massive spikes in digital consumption during the lockdown across geographies and socio-economic classes.

The report notes that the low-touch economy that has burgeoned post Covid-19 will encourage every business to invest in credible digital fulfillment models as consumers migrate faster online.

"A more optimistic scenario for the M&E sector is that consumers simply rebalance-rather than reduce-expenditure away from outdoor options such as theatres, concerts and plays to indoor ones like OTT and gaming", the report said.

In the short term, however , the pain is likely to be pervasive, it added. Impacted by a slowing economy, the M&E sector grew by 7 per cent in FY20 - almost half its previous year's number - to Rs 1,751 billion.

The decline in advertising revenues was even more pronounced as growth fell to 3 per cent in FY20 from 14 per cent in FY19.

The experience of Covid-19 will unquestionably exacerbate these trends, and the M&E sector is expected to contract by 20 per cent over the coming year, with digital and gaming projected to be the only segments to grow.

By FY22, the sector should regain its growth trajectory and achieve a similar scale to today; an implied loss of around two years of growth due to Covid-19.

The M&E sector faced significant disruption with the ongoing lockdown forcing all forms of outdoor entertainment, particularly cinemas and events to shut down and content supply chains to dry up.

Additionally, advertising spends also declined as all major advertisement spend sectors were witnessing their own business continuity challenges. With lockdowns easing, the content supply appears to be restarting, albeit with baby steps.

Cinemas and events, however, continue to be shut and face significant uncertainty regarding return to normalcy in the near term.

Advertisement spends appear to be recovering and with a strong festive quarter expected in Q3FY21, there is likely to be a quicker recovery in marketing budgets. The overall reduction in advertising expenditure therefore may turn out to be lower than the contraction in economic activity.

The M&E sector in India is projected to see a significant decline of 20 per cent in total revenues in FY21, with deep cuts in print and films, followed by television, on account of the Covid-19 disruption.

The digital consumption segments i.e. Digital (including OTT video) and Online gaming are expected to be silver linings, with digital consumption across the board having seen a significant upswing owing to people working from home.

While advertising revenues on digital have been impacted from last year's hypercharged growth, the subscription revenues have seen an upswing and could end up at an accelerated new normal once the pandemic subsides.

Nearly 95 per cent of the respondents anticipated a much greater focus on digital initiatives in their organisation in the near future, with the rest already being present in a digital first environment.

Nearly 70 per cent of the respondents felt that the greatest benefit of technology could be felt in the content creation and post-production functions in their respective organisations.

'Customer focus' and 'Revenue growth' were the top priorities which the CXOs' digital initiatives are likely to drive, with cost minimisation and workforce mobilisation having the lowest priority, the report said. - IANS

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