The entertainment consumption story
Are Indians spending more on entertainment or less? The short answer — entertainment spend in rural India continues to rise (a bit) while that in urban India has fallen.
That is the somewhat disappointing picture given by the Household Consumption Expenditure Survey for 2022-23, released earlier this year by the Ministry of Statistics and Programme Implementation. It tracks consumption on both food and non-food items.
The share of entertainment in monthly per capita consumption expenditure (MPCE) in rural India has been rising consistently, going up from 0.42 per cent in 1999-2000 to 0.99 per cent in 2011-12. Over the next decade it went up to 1.09 per cent in 2022-23. That is a rise of just about 10 per cent in as many years.
The proportion of entertainment in urban MPCE rose from 1.16 per cent in 1999-2000 to 1.61 per cent in 2011-12. Since then it has fallen to 1.58 per cent in 2022-23. The survey states rural India spent an average of ~234 a month on miscellaneous goods, including entertainment: Urban India spent ~424 a month.
What does it all mean?
A few explanatory notes here. The survey, done across 261,746 homes by the National Sample Survey Office, doesn’t state clearly what is included in “entertainment”. Most entertainment businesses such as films, television, or streaming have two revenue streams. Advertising is earned by selling the audience’s time to advertisers: Pay or subscription revenue is earned by directly charging audiences. The figures in the survey obviously do not factor in the consumption of free-to-air or free-to-view entertainment that is ad-supported. Advertising revenue brings in 49 per cent of the ~2.3 trillion that Indian media and entertainment (M&E) businesses made last year. The survey then is, arguably, limited to pay revenue and, within that, possibly, to TV, films, and streaming.
TV is by far the biggest media in India. It reaches about 900 million people and made (ad plus pay) revenues of ~69,600 crore in 2023. This decade (and the one before that too) has been marked by tight price controls on TV by the Telecom Regulatory Authority of India (Trai). This control means that even normal inflation cannot touch cable or DTH (direct to home) prices and that shows in the consumption data. Most TV broadcasters push up pay revenues by negotiating better revenue share from DTH and cable operators. In the last three years, pay TV homes are estimated to have fallen from 165 million to 90 million. This naturally pushes down pay revenue growth. The FICCI-EY (Federation of Indian Chambers of Commerce and Industry-ernst & Young) report’s contention that television revenues shrank by 1.8 per cent in 2023 over 2022 then is totally in line with the MPCE data.
For context, look at cinema. The ability of multiplexes to vary prices by days, time, film, etc has meant average ticket prices have risen in tandem with inflation, unlike TV.
Why has industry-choking price regulation in TV not affected rural India? That is because pay TV penetration (through cable or DTH) has been terrible in most parts of rural India — especially the populous North. Kerala, Andhra Pradesh, and Tamil Nadu have some of the highest levels of cable penetration across rural and urban areas. This has already been factored into the data for 1999-2000 and the later years.
What has risen in reach and consumption is free video. And the two biggest platforms that offer it — DD Freedish and Youtube — have seen phenomenal growth.
Over the last decade the state-owned free DTH service, DD Freedish, has emerged as the biggest force in linear television. It now reaches an estimated 50 million homes (240 million people) in poorer, Hindi-speaking states. The kits for DD Freedish involve a one-time cost of ~1,000-1,200 and there is no recurring cost. This money probably shows up in rural spend on entertainment.
Going by the Comscore data, the bulk of the 510 million unique visitors to the internet in 2023 were consumers of Youtube, a (largely) free streaming service. Since it is an ad-supported service, the only money spent is on data and that will not show up in the line item on entertainment.
The poor rates of growth and the fact that a large chunk of poor urban and rural India is switching to free TV are indicative of something. If one was to use device penetration as a measure for reach then much of poor, small-town and rural India was in deep distress for more than two years beginning 2020. That is when internet penetration stagnated and fell as this paper has reported earlier.
This was because during and after the pandemic, prices of smartphones — the primary mode of entry into the internet for a large section of Indians — continued to rise on the back of a chip shortage. An average feature phone is less than ~1,200. The cheapest smartphone is ~5,500 and above. The gap of ~4,000 was too wide for many parts of India. That is why organic growth (from feature phones to smartphones) has slowed for almost three years. Even while Apple’s iphone continued to do well, brands like Realme and Xiaomi that offer phones at the mid and lower end of the market have seen sales fall.
Going by the IDC data in a country of 1.4 billion people, roughly 650 million, or only half, have a smartphone — read that as access to the internet. In the last part of 2023, the action in the second-hand market for smartphones has revived it somewhat. According to the Trai’s last available numbers for September 2023, broadband subscribers have risen at a healthier pace.
The consumption story on entertainment will take some time to reach a happy ending.