This blog post is a detailed rationale behind the smallcase It’s Showtime. This smallcase is an intelligently weighted portfolio of stocks belonging to media & entertainment sector.
Indian media & entertainment industry is on a high growth trajectory and the trend is expected to continue in the future. It is expected to grow from the current market size of approximately INR 1400 billion to INR 4230 billion over the next decade. This translates to a growth rate of 13.0%, one of the highest globally. Factors listed below are driving the growth:
- Expanding middle class, increasing urbanization, rising income levels and changing lifestyle all resulting into higher demand
- Growing young user base with improved access to technology, expansion of 3G/4G network and growth of portable devices
- Advertising revenue is expected to increase from INR 41,000 crore in 2015 to INR 80,000 crore by 2020
- Government providing necessary support through policies like increasing FDI limits and introduction of Cable television network amendment act. The resultant digitization is expected to improve transparency, efficiency & profitability of the sector while simultaneously enhancing user experience.
Graph below depicts growth in the market size of media & entertainment industry in USD billion:
Foreign investors are also bullish on the industry and the same is reflected in constantly increasing foreign direct investment (FDI) into the sector. Below chart displays the FDI inflow into the sector:
Digital Media and Advertising
This is the fastest growing segment of the industry. It is expected to grow at rate of more than 30.0% over the next five years. Increasing mobile penetration, technology savvy young population, cheaper data services and increased use of portable devices are the factors fueling growth of this segment. New companies with innovative solutions are rapidly entering the market and the space is expected to see a lot more action in the future.
This segment is growing rapidly and is second only to digital advertising. Radio industry is expected to grow at a rate of 18.2% till 2019. Phase 3 auction of 135 frequencies across 69 cities is expected to increase advertising revenues of private FM operators, as now they will be able to offer a wider boutique of channels to advertisers and will be in a position to give tough competition to print media.
India is expected to be the second largest television market in the world. Television segment contributes approximately 50.0% of the media industry’s revenues. It is expected to grow at a rate of 15.0% during the FY 2014-19 period. Cable Televisions Amendment Act, 2011 has proved to be a game changer. The act ushered in digitalisation of cable TV network in the country and the digitalisation process is expected to be completed soon. This will bring in more profitability for broadcasters by making subscription reporting more transparent and efficient. DTH (direct to home) connections are also increasing rapidly and is expected to reach 76 million by 2019.
Indian film industry is the largest film producer globally with an annual production rate of around 1500-2000 movies. The Industry is expected to grow at a rate of 10.0% during the FY 2015-19 period. Multiplex chains are rapidly expanding their network to tier-2 and tier-3 cities. Government has also provided necessary policy support by allowing 100% FDI into this segment and entering into co-production treaties with different countries in order to improve export potential.