© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated

with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 1
Covid-19: The many
shades of a crisis
A media and entertainment sector perspective

May 2020

home.kpmg/in
Speaker for the webinar

Girish Menon
Partner and Head

Media and Entertainment

gmenon@kpmg.com
KPMG in India

© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 3
Indian economy remains under continued pressure due to global pandemic
Covid-19 pandemic has led to considerable loss to Significant downward revision and potential contractions
human life and widespread economic hardships in GDP growth estimates for India in FY21

0.2 per cent for 2020 Moody’s

0.8 per cent for FY21 Fitch

Supply
01 Input constraints

1.9 per cent for FY21 IMF

Demand
Spending patterns, 02
Consumer confidence 0.0 per cent for 2020 Barclay’s

Market shocks
03 Financial conditions 1.5 to 2.8 per cent for FY21 World
Bank

-5.2 per cent for FY21 Nomura

-0.4 per cent for FY21 Goldman

Sachs

Source: 1. Potential impact of Covid-19 on the Indian economy, KPMG in India, April 2020. 2. Covid-19: The many shades of a crisis. KPMG in India, April 2020
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 4
Consumption models are altering and realigning across the M&E sector
Out of home entertainment At-home entertainment

• Films, events, theme • Digital, OTT and gaming

parks and other out of consumption and
home avenues have engagement levels have
been impacted severely seen significant growth
across demographics
• With social distancing
norms, the impact will • News consumption has
likely linger for a longer also witnessed growth
period as viewers follow
COVID-19 updates
• Recovery process may
be different across • Habit formation from
demographics based on ‘lockdown behaviour’
specific COVID-19 will likely result in new
experiences higher normal
consumption levels

Source: Covid-19: The many shades of a crisis. KPMG in India, April 2020
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 5
 Advertising witnessing major contraction with recovery timelines being delayed
Deceleration of India’s GDP impacting the overall growth of the sector

Key advertising sectors like FMCG, e-commerce, automotive, financial services,

real estate have taken major hits and scaled back their spends

GDP contraction, rising unemployment and income pressures will impact

consumption in key sectors and delay return to normalcy

Key Supply chain issues resulting from labour migration, phased lockdown and social
aspects distancing will likely compound the manufacturing normalcy delays

Q2 advertising pickup likely in certain segments such as FMCG, Ecommerce,

Financial services etc.
Q3 may see a strong rebound with festive season, aggressive push by brands
and realignment of sporting (IPL) spends

FY22 growth likely to be muted due to slow economic recovery

Source: Covid-19: The many shades of a crisis. KPMG in India, April 2020
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6
Segments impacted severely; digital consumption a potential opportunity
TV Digital, OTT and Gaming

• ‘Lockdown Effect’ - • Low ad-spend monetisation • Multiplier effect on user • Low monetisation
viewership, • No fresh content – is base and engagement due to drop in ad-
consumption growth viewership sustainable? metrics – all digital models spend
and subscription • ‘Lockdown behavior’ - Habit
pickup (particularly • Growing long term digital
threat formation – A new normal
GEC, News and
Movies) • Subscription pickup -
healthy long term indicator

• News genre has • Drop in circulation due to • Footfalls could take a while to return to its normalcy,
seen a significant distribution challenges particularly in COVID impacted areas.
pickup – particularly • Cash burn : low ad Social distancing norms add complexity
digital platforms monetisation and continued • Risk of narrowing of theatrical windows.
• Strong consumer operational spend
• Expansion delays are likely
sentiment due to • Digital monetisation and
higher credibility • Live events could see a delayed recovery as social
sustainable user base - a
distancing behaviour takes a while to dissipate
continued challenge

Print Films, Events, Theme park

Source: Covid-19: The many shades of a crisis. KPMG in India, April 2020
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 7
A whole new world - Key themes
M&E sector consumption no India vs Bharat COVID hotspots to behave A Digital future -
longer income inelastic and dichotomy to differently with longer India’s ‘digital billion’
the sector is no longer widen with recovery path trajectory likely to
insulated longer recovery • Fear psychosis and accelerate materially
• Long drawn process for path for weaker social gathering aversion
economic • Increased advertiser
economic recovery and will affect outdoor
sections. interest as engagement
consumption to bounce back entertainment
metrics settle into a
• Rising unemployment levels • ‘Pent-up’ demand new normal
and pay cuts will likely result behaviour among some
• Penetration of
in prioritising savings over sections of population may
subscription based
consumption provide some respite
digital models to
• Ad-spend pressures to linger • At-home entertainment accelerate
on the back of weak economy options (digital, TV,
and lower domestic gaming) to see
consumption an upswing
through habit
formation

Source: Covid-19: The many shades of a crisis. KPMG in India, April 2020

© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 8
A whole new world - Organisational imperatives (1/2)
Cash is ‘King’ and Building supply Managing
profit - ‘the Queen’ chain resilience people

• Uncertainty on pandemic • Emphasis on building content • Managing and communicating

resolution timelines – cash bank and in-depth library expectations – employment,
conversation is a priority • Realignment of supply chain salaries, roles etc
• Monetisation pressures may processes to improve • Labour supply gaps and
linger – cost management turnaround speed, efficiencies migration challenges
and optimisation, lowering and incorporate remote • Performance monitoring and
operating leverage critical working models incentivisation under remote
• Expansion plans may • Social distancing implications working models (part or full)
need to be delayed in on content creation
the near term

Source: Covid-19: The many shades of a crisis. KPMG in India, April 2020
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 9
A whole new world - Organisational imperatives (2/2)
Technology takes a center stage
• Investing in business continuity plans through technology
• Harnessing cloud and remote working solutions
• Greater emphasis on predictive analysis – AI/ML, analytics

Business strategy in an disruptive environment

• The Digital conundrum – monetisation and customer acquisition challenges remain
• Innovations needed in customer offerings and outreach given the shifts in consumption
model and pandemic constraints (social distancing, risk aversion etc)
• Tracking growth opportunities while balancing conservative mindset
• M&A and inorganic opportunities – stressed assets, merge to scale, ancillary businesses etc

Source: Covid-19: The many shades of a crisis. KPMG in India, April 2020
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 10
News as a
‘genre’
News is facing an unique set of circumstances
Opportunities Challenges

• TV news viewership share doubled to • Print is facing major circulation constraints

around 15% with 13% new viewers due to lockdown which is impacting the
readership
• Online news consumption surged across
platforms • Monetisation aross models significantly
impacted (both ad and circulation)
– 22% increase in user base
• High operational cost – ‘News’ as
– >40% increase in time spent at 21/
essential service
views/user/week
• Cash flow pressures and concerns around
• Higher credibility for traditional news brands
survival, particularly for smaller
organisations
• Monetising digital continues to be a
challenge

Source: Covid-19: The many shades of a crisis. KPMG in India, April 2020
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 12
News - organisational imperatives
Managing cash flows and bottomlines Strategic user engagement initiatives
• Uncertainty on pandemic resolution timelines – cash to sustain viewership
conversation and cost management is a priority • Focus on building brand positioning
• News has a fixed cost base - lowering operating leverage • Holistic cross platform customer outreach
is critical and engagement
• Cross platform integration to be explored

Monetising greater user and Solving the digital conundrum Inorganic opportunities
advertiser interest • Emphasis on building an to scale and partner
• Opportunity to increase circulation integrated traditional + digital
prices post pandemic strategy for sustained user and
monetization growth
• Value of news as a reach and
engagement medium demonstrated –
opportunity to challenge advertiser
mindsets

Source: Covid-19: The many shades of a crisis. KPMG in India, April 2020
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 13
The Digital conundrum
Integrated approach Emphasis on brand and No one size fits Localisation and
to digital needed engagement vs content all strategy personalisation

• Traditional organisations • Content is not a • Monetisation strategy • Know your customer

can no longer afford to differentiator in digital needs to be tailored – across platforms
look at digital as a • Cross platform user based on brand, market • Data is key for
separate, non priority engagement is key to positioning and engagement and
business – needs a survival demographics monetisation
dedicated focus • Pricing digital products,
• Digital cannot survive particularly for Print
without branding and players
network benefits of • Alliances and
traditional businesses partnerships

Source: Covid-19: The many shades of a crisis. KPMG in India, April 2020
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 14
Q&A
Thank you
Girish Menon
Partner and Head
Media and Entertainment
gmenon@kpmg.com
KPMG in India

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour
to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate
in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
This document is for e-communication only
© 2020 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 17