Digital music industry expected to cross INR 31 billion by FY20 in India: Deloitte Report

New Delhi, April 21, 2015: Online music users in India are expected to touch 273 million and digital music industry revenues are expected to cross INR 31 billion by FY20, according to a report titled Digital Media: Rise of On-demand Content by Deloitte in India. Moreover, the Digital Video subscription market alone is estimated to be around INR 35-40 billion by 2020 (excluding advertising). The report has been prepared to analyze how the on-demand content eco-system is evolving in India and how the future looks like.

“Increasing internet and smartphone penetration along with rising spend on entertainment by Indian youth will drive the on-demand digital content industry,” said Rajat Banerji, Senior Director, Deloitte India. “Digital media consumption pattern has drastically changed since a decade ago when ringtones were expected to boost the music industry’s revenues. With remarkable improvement in mobile devices technology and internet connectivity, marketers are shifting their business models in tune with the shift of viewer preference towards digital media from traditional media.”

India’s digital media landscape augurs well for all the stakeholders. Internet traffic originating from mobile devices has already surpassed the desktop internet traffic. Total internet users crossed 254 million in September 2014, out of which 235 million users accessed internet through mobile devices. The growth in internet users was seen both in rural and urban parts of India. Internet users in rural India is expected to reach 138 million by June 2015, while 216 million internet users are expected to be in urban India by then.

While the internet user base in India is growing at a rapid rate, most of these users (75%) belong to the age group of less than 35 years. More than half of the app users in India are between 18 and 24 years, and a further 29% between 25 and 35. Social media and entertainment (Music & Video) are the two activities on which the Indian mobile internet users spend their time the most followed by games, general search, and emails. Out of the total time spent on digital media by youths, about 21% of the time is spent on audio and video entertainment.

On-demand entertainment services led by audio and video content are at the cusp of inflection point in India. A whole ecosystem around such services is coming up, including content providers / aggregators, Distribution channels, Technology Platforms, Advertising Platforms, Payment Channels and marketing channels. Users have shown willingness to pay for premium services / content and convenience to use that make better value proposition for them. Leading OTT players are monetizing this opportunity across audio and video services through multiple monetization models like subscription and advertisement. Evolving payment mechanisms like OTT mobile wallets will drive on-demand content monetization.

Marketers are also shifting their advertising spends towards digital media and about 36% of their ad spend is expected to go to digital space. The s-curve growth expectations for the overall digital ad market in India that include probable cannibalization of ad revenues from other traditional segments like TV, radio, and print media indicate the digital ad market size of INR 354 billion by 2020.

Currently, the Indian music industry is undergoing an evolution towards the digital delivery platforms and digital consumption habits. There were an estimated 27 million online music users in India in March 2015. The number of online music listeners is expected to grow to 273 million by March 2020, mostly driven by the youth and also increased demand for regional content. At the same time, the paid subscriber penetration among online music users is expected to reach 10-15%.

Video industry in India is also seeing the shift towards digital content. Younger demographics are guiding the video consumption. With improved network speeds, demand for HD and UHD video content is expected to rise along with standard definition video streaming online. Total Internet video traffic in India is expected to be 72% of all Indian Internet traffic in 2018, up from 45% in 2013. Like digital music players, digital video players are adopting both subscription and ad monetization models and offering personalized offerings to maximize adoption.