India's Media & Entertainment industry expected to grow to $70 Billion by 2030 led by rise in OTT, Gaming, Animation and VFX

We all have heard that food, water, shelter, and clothing are essential for living but in today’s world one more thing has become an important part of our lives and that is entertainment. 

We all love to watch movies, don’t we? So let us take a deep dive into the Entertainment Industry and Multiplex Universe.

It is said that India’s Media & Entertainment industry is expected to grow to $55-70 Billion by 2030 at 10-12% CAGR, led by OTT, Gaming, Animation, and VFX. By 2025, 71 percent of Indian families would be watching television, an increase of more than 5 percent per year.

Indians watched the most online video per week in 2020 with an average of 10 hours and 54 minutes, up 30% from the previous year.

By 2030, India's OTT revenue is anticipated to increase to USD 13–15 billion, expanding at a CAGR of 22–25 percent. 80 percent of all downloads in the entertainment app category in 2020 were made by Indians, who downloaded 9.2 billion game applications. By 2023, it is anticipated that revenue from online gaming will reach Rs.155 billion. at a CAGR of 27%. By 2023, it is anticipated that the Animation & VFX segment will reach Rs.129 billion.

In Q4FY22, the broadcasting sector faced difficulties with ad growth as FMCG businesses, a significant advertiser, reduced ad volumes as a result of rising input costs. Additionally, the withdrawal of free-to-air channels from DD Free Dish is anticipated to cause some short-term challenges in ad income. On the front of subscriptions, NTO 2 implementation efforts kept subscriber income at a minimum. The industry anticipates some loosening of the rules governing channel pricing while TRAI works on consultation surrounding NTO 2.0. Although commodity prices have begun to fall, the FMCG segment's advertising will be crucial for future growth. Similar to this, broadcasters continue to split their time between developing OTT platforms and investing heavily in filmmaking.

An important issue for the multiplex sector has been the relative underperformance of big-budget, star-studded Hindi films after the Covid reintroduction. Samrat Prithviraj, Dhaakad, Jayeshbhai Jordaar, Runway 34, and Jersey were some of the big-budget, star-studded Hindi films that were bombed in Q4 FY22. While failures are linked to social media "boycott" emotions, reasonable attribution is a content quality given viewers' rising expectations due to the massive growth in OTT usage over the past two years. However, the success of films like Gangubai, Kashmir Files, and Bhool Bhulaiyaa 2 was largely due to the quality of their material. However, KGF 2 (about Rs. 435 crore - Hindi), Bhool Bhulaiyaa 2 (Rs. 184+ crore collected), Doctor Strange, and the RRR residuals from April were the main contributors to Q4 box office receipts. Vikram (in Tamil) too performed phenomenal business.

Thus, despite strong films like Avengers: Endgame, Kabir Singh, Bharat, and De De Pyar De like smashes in the base, the net box office collections in Q1FY22 were only slightly lower than pre-Covid (Q1FY20). With a solid content lineup for H2CY22, it is anticipated that a strong collection momentum will continue and that the pre-Covid run rate will be reached sooner than anticipated.

Given the scale driving up revenues, costs, and expansion velocity (planning to add 2000+ screens in the next seven years as a combined organization), the merged PVR and Inox entity will have better bargaining leverage across the value chain. The low-hanging fruit in terms of revenues would be advertising as well as a broader F&B offering that would increase SPH for the merged firm. Additionally, they would have a greater influence on distribution revenue prospects and convenience fee agreements (when they are up for renewal in FY24). The box office appears to have recovered to pre-Covid levels.

Stocks in Multiplex Universe:

1. PVR:

Regarding the number of multiplex screens in India, PVR Ltd. dominates the market. As of FY22, it operated 854 screens in 173 theatres in 74 cities across India and Sri Lanka, with a total seating capacity of 1.79 lakh seats. It leads in the high-revenue main markets of Maharashtra and the NCR and outperforms its competitors in terms of ATP, SPH, and advertising. Strong content lineup to fuel the increase in visitors' numbers and sales. Given the rationalization efforts, the corporation should permanently save between 8 and 10 percent on costs (excluding rent). The expanded scope accelerated growth trajectory, and additional revenue/cost synergies will be advantageous for the combined firm (PVR Inox).

2. INOX:

In terms of the number of multiplex screens in India, Inox Leisure is the second-largest player. The firm currently runs 681 screens in 161 theatres in 72 Indian cities, with a combined seating capacity of 1.53 lakh seats as of FY22. It is the only multiplex in the country that has a net debt-free balance sheet. The expanded scope accelerated growth trajectory, and additional revenue/cost synergies will be advantageous for the combined firm (PVR Inox). benefits of permanent cost reductions (ex-rental) of 8–10% as a result of rationalization efforts. With all variables (apart from ad) returning to pre-Covid levels for the entire year, a significant recovery is anticipated in FY23.