Pay TV holds promise; fragmentation, tech and high capex are hurdles: Punit Goenka

MUMBAI: The Indian pay TV market, which at present stands at Rs 240 billion, has huge growth potential as it is underpenetrated and the ARPU (average revenue per user) is very low. However, there are challenges like fragmentation in the cable industry, outdated technology and high capex requirements which are hindrance in the growth path.

These were the thoughts expressed by Zee Entertainment Enterprises Ltd (Zeel) MD and CEO Punit Goenka while delivering the keynote address at the India Digital Pay-TV Summit (IDPS) 2011, organised here by and MPA.

Goenka warned that if the issues are not tackled in time, India could skip cable and evolve to a wireless delivery of TV market, like in the case of telecom sector.

He first started his presentation with the ground realities of today‘s pay TV scenario, saying that the market is under penetrated and the ARPUs are very low compared to the global markets. Also, the cable industry is fragmented and the there is no serious investment in the technology. He also pointed out that there is inequitable distribution of pay TV revenues.

However, on a positive note, Goenka added that these are the opportunities as the pay TV market is growing with robust pace and with increasing digitisation, transparency is now improving. "The pay TV market has evolved uniquely. Though initially all the channels were free to air, they were gradually converted to pay, albeit at a very low price. However, due to non-addressable pay TV model, transparency remained low but now with increasing digitisation, transparency is now improving," he said.
He noted that with digitisation, new business models will emerge. "With dependence on ad revenues going down, newer avenues will open up for content players. You will also see that niche and sports channels, which are currently unprofitable ventures, will start becoming viable businesses," he said.

Goenka added that while 3G, 4G and wireless broadband will evolve as new platforms for distribution of content, smart devices will drive consumption of content on-the-go.

He asserted that India will emerge as one of the largest pay TV markets in the world by the sheer number of subscribers and the ever-increasing number of personal/smart handheld devices will only add to this.

However, while talking about the challenges, he pointed five main roadblocks. Firstly, the fragmented industry. There are over 60,000 local cable operators, he voiced, saying dealing with 50 MSOs would make life for everyone easier. He opined that the cable TV infrastructure needs upgradation. "The current analogue infrastructure has various issues- it deteriorates the quality of broadcast, it is non-addressable in nature and it is not capable of triple-play. Even the broadband infrastructure is very primitive and always-on high speed internet connection is still a distinct dream. Customer service is of sub-optimal level," Goenka highlighted.
Quoting the FICCI-KPMG report, he said the industry has a capex requirement of Rs 80-100 billion on infrastructure (excluding subsidised customer premise equipments) in order to convert existing infrastructure to an addressable digital system. Moreover, there are regulatory issues of pricing and the customer mindset.

"The Indian consumer is not used to paying for premium content. So the challenge is to convince the consumer that better value is available at higher ARPU," Goenka said. He added that today‘s consumer is willing to pay for better value.

He ended on the note that the industry needs to adapt to the change in order to create value.

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