Digitisation to propel pay-TV revenue to $17 billion by 2017 , MPA report

MUMBAI: Propelled by the government’s digitisation drive, pay TV revenues in India are projected to reach $17 billion by 2020 as opposed to the $7.8 billion in 2012, according to a new report by Singapore-based pay-TV research firm Media Partners Asia (MPA).

According to India Pay-TV & Broadband Markets, pay TV revenues are expected to grow at a compounded annual growth rate (CAGR) of 11.4 per cent from 2012-17 and 10.2 per cent between 2012 and 2020.

MPA forecasts indicate that total digital pay-TV homes will grow from 47 million in 2012 to 110 million by 2017 and 130 million by 2020.

The digital penetration of total pay-TV homes in the country is expected to double to almost 70 per cent by 2020 from 35 per cent in 2012. The digital pay-TV penetration of TV homes in India will grow from 28 per cent in 2012 to 54 per cent by 2017, and reach 60 per cent by 2020.

On the other hand, the total pay-TV homes are expected to grow from 128 million 2012 to 167 million by 2017, and 183 million by 2020. Pay-TV penetration of TV homes will grow from 80 per cent to 85 per cent between 2012 and 2020, adjusted for multiple connections in a household.

This implies that the pay-TV industry will remain in a prolonged investment mode, with significant capital intensity. With two more phase of digitisation to go, both DTH and cable operators already have high levels of debt. The majority of additional funding will have to come through equity, via IPOs and M&A, the MPA report states.

“A successful start for the roll-out of digital addressable systems (DAS) has revived interest in pay-TV among strategic and financial investors,” says MPA executive director Vivek Couto.

“The real benefits will become clearer in 2H 2013 and beyond, as multi-system operators (MSOs) drive addressability and work with last mile local cable operators (LCOs) to ramp up tiering, billing and collections. Regulators are committed to curbing delays in the next phases of DAS, while the DTH industry is keen to revive growth by capitalising on digital transition.”

Cable impact: Over the medium term, the majority of cable investments will be directed towards digital infrastructure, helping to build operator scale and improved addressability. In the long run, investments will be more focused towards acquiring primary subscriber points and the expansion of high-ARPU products such as broadband and HDTV.

According to MPA, the total proportion of cable households with DAS climb from 15 per cent in 2012 to 50 per cent by 2020.

DTH growth: In the DTH space, concerns focus on the growth of active subs (i.e. paying customers, net of churn and subscriber suspension), which has moderated in recent times. MPA says that the growth in active subs will rebound however, as more markets undergo analog switch-off. MPA forecasts indicate that active DTH subs will grow from 32 million in 2012 to 64 million by 2017, and 77 million by 2020.

Broadcasters: Subscription fees for pay-TV channels crossed US$1 billion in 2012, driven by the growing strength of aggregators. This growth has yet to factor in digitalisation, which will result in a bigger share of subscription revenue for broadcasters. Operating margins will remain under pressure in the short-to-medium term, due to heavy investments in content for existing channels and gestation losses on new channel launches.

MPA expects total pay-TV channel revenues, including advertising and subscription to grow from $3.6 billion in 2012 to $6.6 billion by 2017 and to $8.6 billion by 2020. The pay-TV ad market is expected to grow at a 10 per cent CAGR over 2012-20, while broadcaster subscription revenues are expected to grow at 15 per cent over the same period.

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