‘Made for India’ content set to drive digital media and entertainment industry

India’s digital media market is not only on the path of recovery but also on a high growth momentum. The sector, which had recently been heading southward due to a dip in digital ad spending and other macro challenges, seems well set for a three-time growth rate by 2030, in the face of signs of growing maturity of internet users coupled with increasing spend on digital media. Riding on high growth in OTT, Core Gaming and Digital Ad Spending, India’s digital media market currently stands at $12 billion, according to a recent study by Redseer Research. The country’s landscape of Internet users is dominated by a 450-500 million strong cohort of explorers, followed by 300-320 million transactors and 35-40 million mature users with the last one expected to outpace that of the US by 2030 as the digital media and entertainment landscape, which is currently valued at $12 billion, will triple in size. Non-RMG and the rise of OTT across audio and video are among the contributors to the sector's current growth trajectory despite regulatory changes affecting the RMG space.

In FY22-23, all segments of digital media and entertainment saw paid user growth, with OTT audio registering the highest. Formats like audio series and audiobooks are enabling this trend. The OTT video sector is expected to achieve profitability in the next 3-5 years on overcoming the challenges of higher CAC and lower user retention. The rise of eSports in the domestic gaming industry as well as the value proposition offered by SFV platforms are expected to fuel M&E growth. Sector analysts are of the view that as the sector looks to chart its way forward, there are three key factors that will be critical to its growth: a) the continued increase of paid users across OTT video, audio and gaming; b) the rise of regional content; c) the growing share of digital ad spend across new-age and traditional brands.

Interestingly, in FY23 alone, the media and entertainment landscape saw an accelerated growth in the paid user base and the Average Revenue Per Paying Users (ARPPU), thereof. Across M&E segments, paid user growth went up to 90 per cent in FY23. Subscription bundling, low-cost packs, micro-payment and pay-per views propelled this growth. However, the sector continues to face significant challenges in terms of higher Customer Acquisition Costs (CAC) and low user retention. Finding creative solutions to overcome these challenges will place the sector on the path toward profitability in the next 3-5 years. Typically, it takes two years for OTT video platforms to break even on CACs for individual customers. Long-term solutions such as innovative monetization models, localized and regional content for Tier-2+ demographics, and models such as keeping the first episode of original properties free could work in the favor of OTT platforms. Therefore it would not be a wrong notion to believe that going forward, the growth of ‘Made for India’ content would be oiling the wheels of India’s vibrant digital media and entertainment industry. The increased uptake of core gaming would also add to the sector’s growth potential. Creatively solving the challenges of CAC, user retention and subscriptions should enable the sector to grow exponentially in the years to come.