Digitisation to push TV industry to Rs 521 bn in 2014

MUMBAI: The Indian television industry is poised for a giant leap forward. With growth engines coming from both advertising and subscription revenues, the segment is estimated to touch Rs 521 billion by 2014, up from Rs 257 billion in 2009.

A CAGR of 15.2 per cent over the next five years will be fuelled by wider digital penetration, fiercer competition in the TV distribution business, and deeper advertising support.

Ad revenue will grow at a rate of 15.6 per cent, according to a Ficci-KPMG report released today at Frames 2010, slightly higher than subscription income that is set to run at a CAGR of 15 per cent.

The turning point is the improvement in the global economy. The slowdown had hurt the television industry in 2008-09 as it grew at 7 per cent during this period, compared to a 14 per cent grow in the year-ago period.

Digitisation will be the sweet spot as it increases transparency and unlocks undisclosed revenues for broadcasters from the cable TV operators. The share of broadcasters in the subscription pie is expected to go up from 18 per cent in 2009 to 27 per cent in 2014.

The share of subscription revenues in the top line of broadcasters is expected to increase from 26 per cent to 33 per cent by 2014. Subscription revenues for them are growing at a CAGR of 24 per cent compared with the segment’s ad revenue growth of 15.6 per cent.

2009 saw show budgets being cut by 15-20 per cent and certain cost effective formats becoming popular with producers. The disadvantage of reality TV is that it is more expensive than fiction and does not generate high TRPs compared to fiction.

On the advertising front, KMPMG notes that in 2009 regional general entertainment channels became popular with advertisers. Their ad spend grew to 29 per cent compared with 21 per cent in 2006. Their share came at the expense of Doordarshan which was earlier preferred by advertisers looking for a regional reach. Ad volumes on regional channels increased by 12 per cent due to new channel launches and increase in FCT.

The year gone by has not been good for English and Hindi news channels as both lost share. This was compensated to an extent by growth in the regional news channels. This reached a 3.4 per cent of all India viewership in 2009, up from 2.6 per cent in 2008. The share of Southern news channels reached 5.8 per cent.

2009 was also tough for music channels with viewership shares dipping across all TGs. They are finding it more and more difficult to attract and retain interest due to more competition from GECs and other genres. The maximum loss of share has been in the 25+ TG. A new development that took place was an attempt at re-positioning music channels, drawn from the fact that MTV and Channel V started focusing on non music content.

The kids genre grew their all India viewership across TGs. A positive trend for 2009 was that apart from children, the channels managed to attract the 15+ TG and adults as well. Kids channels tried to create a 360 degree communication platform by interacting with kids through sites, phones etc.

Challenges: The lack of transparency in analogue cable systems has traditionally been a challenge for broadcasters. LCOs still garner almost 75 per cent of subscription revenue due to under declaration while broadcasters get 20 per cent and MSOs five per cent. This scenario could change with the higher penetration of digital platforms.

Carriage fees eased during 2009, amounting to a payout of Rs 10-12 billion by broadcasters.

Another challenge lies in having an extended audience measurement system for the broadcasting industry. Though the current measurement system captures information from 8000 TV homes, the coverage is limited and the trends may not be descriptive of the entire nation.

The focus of advertisers is likely to rest on 360 degree connect with consumers. This may give rise to a need for multimedia campaigns. Broadcasters, thus, can expand their portfolio of services or tie ups with other players to offer ad packages.

“A continued focus on operational effectiveness and cost efficiency is likely to help improve overall profitability,” the KPMG report says.

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