Budget 2022 Impact Analysis- All Things Digital

The Union Budget 2022 had a strong focus on digital push and digital consumption. There were multiple factors which augur well for boosting growth in digital media. Some of them are below:

1) Encourage rural broadband connectivity

India has always lagged other developed nations as wired broadband penetration in India stands to be at mere 16% as compared to mobile internet penetration which is at almost 70%. Push towards affordable and high speed fixed broadband internet will boost 1) digital content consumption 2) smart TV penetration 3) lead to shift of eyeballs from TV to digital at a much rapid pace in smaller towns too, just like it has happened in metros.  

2) Set up an Animation, Visual Effects, Gaming and Comics (AVGC) promotion task force

This, I believe will be an important driver for gaming industry in India. India’s gaming industry has lagged behind developed nations in terms of penetration. This move will enable and attract new talent in the industry, which will propel innovation in the gaming and animation industry; this in turn will help Indian games go global 

3) 5G auctions to be conducted in 2022

This will have a big implication on the new age tech like Metaverse, AR/VR, gaming etc; it will increase consumption towards new age tech, as social media too will innovate into a new form under Web 3.0 world. This will augur well for video content consumption too to a certain extent due to faster connectivity. I believe this move will help a lot of new age companies to advertise heavily across all segments of media, with a higher bias towards digital advertising (E-comm vertical contributes 15% to ad. spends in India)

4) Affordable mobile internet in rural areas/tier -2 and tier -3 cities

Penetration into rural and smaller towns has been one of the key growth divers for any internet company. This will help enable strong user and consumption growth for the B2C led internet and new age companies (Zomato, Nykaa , Paytm, CarTrade, Hotstar , Netflix , Amazon etc) , which in turn will lead to rapid shift from traditional to digital. I believe this too will have a positive impact on overall advertising , as internet companies now account for a sizeable share of ad spends in India 

Challenges for traditional media persists as the there was no announcement made to protect their interests despite a big negative impact for COVID , as the pandemic led to trends accelerating towards digital in a big way. There was no 1) relaxation on the license fees or royalty for radio industry 2) no financial grant or tax benefit for the traditional media which has seen a sharp decline over last two years and still struggles to get back to pre Covid levels 3) no reduction in GST for cinema ticket prices , despite cinema being one of the most impacted medium during the pandemic 

I continue to believe that TV and cinema remain to be the preferred forms of traditional medium in the entertainment sector which will co-exist in the near term and continue to grow at a healthy rate even after, breaching pre Covid levels; growth for TV media companies can be even stronger if they are able to execute well on digital strategy, whereas growth in cinema will be driven by expansion of new screens and large scale cinematic content . Other traditional mediums like print and radio will need reinvent their business models or push hard in terms of transition to digital ad media consumption on digital remains to be on the rise

Budget 2022 – Implications on Digital / Media / Internet Sectors

*The author is Karan Taurani, SVP – Research Analyst (Media, Internet & Consumer Discretionary), Elara Securities

Karan Taurani

Guest Author Karan Taurani is VP – Research Analyst (Media & Consumer Discretionary) Elara Securities (India)