MUMBAI: The penetration of paid Cable & Satellite (C&S) television households in India is expected to grow to 173 million by 2017 representing 91 per cent of TV households.
The Ficci KPMG report on the Indian television industry pegs the number of paid C&S households to be in the region of 121 million, which is 79 per cent of the total TV households in 2012. The report excludes DD’s free Direct-to-Home platform DD Direct.
The number of TV households in the same period is expected to increase from 154 million to 191 million aided by strong growth in sale of television sets. The number of C&S households in India increased by 11 million in 2012 to reach 130 million.
Approximately 14 million television sets were sold in India in 2012, the report said adding that a large proportion of these television sales represent replacement of old television sets, institutional TV sales, and a second or third TV set entering a household.
The television industry in India is expected to grow at a CAGR of 18 per cent over 2012-17, to reach Rs 848 billion in 2017 from an estimated Rs 370 billion in 2012 aided by digitisation and the consequent increase in Average Revenue Per User (ARPUs).
The share of subscription revenue to the total industry revenue is expected to increase to 72 per cent (Rs 607 billion) in 2017 from 66 per cent (Rs 245 billion) in 2012. The television ad revenue to the total industry revenue during the same period will decrease to Rs 240 billion (28 per cent) in 2017 from Rs 125 billion (34 per cent) in 2012.
Digitisation of cable, which is expected to usher in an era of transparency, will reduce carriage fees, building a case for the launch of niche channels and investment in content for existing channels.
Developments and refinements in viewership measurement systems may affect the way advertising is distributed among channels, the report stated.
As per Ficci KPMG Indian M&E report, most stakeholders had indicated a delay of 6-12 months for complete digitisation across metros, and that DAS is likely to be successful in comparison with the earlier CAS.
While there have been implementation challenges in Chennai, DAS rollout is estimated to be almost complete in Delhi and Mumbai. Kolkata is expected to be largely digitised by the end of March 2013.
“The digital ecosystem in India cannot remain where it is. It will either move forward to completion, or regress, like CAS did. If Phase 2 and 3 don’t go through, even the metros will relapse,” said Ficci Media & Entertainment Committee chairman and Star India CEO Uday Shankar.
The TV industry has witnessed a trend of broadcasters coming together to consolidate their distribution functions, to improve negotiating power. Mediapro and One Alliance are examples. This trend continued in 2012, with the formation of IndiaCast to distribute Viacom18, Disney and Eenadu Group channels.
Digitisation upside was not materially felt in 2012 since MSOs are still in the process of establishing subscriber management systems, except for sports and niche segments. The broadcaster-MSO agreements continue to be based on fixed fee arrangements for the most part.
MSM COO NP Singh said, “Early benefits of cable digitisation were seen in the form of some increase in subscription revenue and some decrease in carriage in two major metros. However, real benefits will come in over the next 2-3 years as other towns get digitised.”
Industry experts pointed out that digitised markets of Mumbai and Delhi have witnessed a 15 to 20 per cent drop in carriage. In some cases, broadcasters have continued to pay the same carriage, but are able to carry a larger bouquet of channels at the same cost.
While carriage fee may decline further over the next 2-3 years, part of this may claw back in the form of placement fees, where broadcasters pay for placements in various tiers of channel packages.
“Placement fee shall never be an equal replacement for carriage, it will be a localised and a relatively small revenue stream since digital cable can easily carry 500 channels, and the channels anyway need to be grouped by genre which reduces the value of placement charges,” feels Zeel chief strategy officer Atul Das.
In the process of digitisation, while STBs have been seeded by MSOs, and the consumer has started receiving digital signals, packages have not yet been deployed. The consumer is receiving the full portfolio of channels from their MSO. However, this has helped MSOs retain a large share of their analogue subscriber base.
While MSOs appear to be optimistic about deploying packages by April 2013, the larger industry believes that this process may get done sometime in the second half of 2013. Deployment of packages, being a way to differentiate the customer base, is a key driver to raise Arpu.
DTH and Digital cable to co-exist
The Indian market, the report noted, is large enough to provide significant growth opportunities for digital cable as well as DTH service providers.
Digital cable, which has 19 million subscribers out of a total of 130 million TV homes, will grow to 81 million subscribers in 2017.
DTH with 44 million subscribers is expected to touch 90 million subscribers by 2017, thereby becoming the biggest platform.
The ARPU for digital cable is expected to be on par with DTH by 2017. Arpu for digital cable is projected at Rs 289 per month from Rs 166 in 2012 while Arpu for DTH is projected to grow to Rs 293 in 2017 from Rs 170 in 2012.
Ad slowdown and impact on the TV industry
The television advertising industry continued to be under pressure due to the soft global and domestic economic condition. This resulted in muted growth, particularly in the first half of 2012.
On an overall basis, the total TV advertisement market is estimated to have grown around 8 per cent in 2012, lower than industry expectations. In comparison, growth in the TV advertisement market was estimated to be 12 per cent in 2011 and 17 per cent in 2010.
“2012 has been the toughest year in recent times; in many ways, it was even worse than when the subprime crisis hit in 2008. At least then, the sentiment was still bullish coming on the back of a few years of robust growth. This time, the mood is a lot more downbeat. Everyone is going into capital conservation mode. Having said that, in 2008, the perception of things to come was much worse than reality and ad spends were perhaps cut down a lot more than was warranted,” Shankar elaborated.
The total number of channels increased from 623 in 2011 to 845 in 2012, leading to an increase in advertising inventory. Most of the volume expansion is estimated to have come from other genres while GEC volumes remained stable. Existing GEC broadcasters may have seen a limited increase in free commercial time.
The top 10 sectors continued to account for approximately 60 per cent of the overall TV advertising volume share during 2012; similar to the past three years. The FMCG sector continued to dominate the advertising space with 9 out of Top 10 advertisers being FMCG players. Personal products (care and hygiene, accessories, hair care, healthcare) accounted for 26 per cent of advertising volumes in 2012, up from 25 per cent in 2011, and 23 per cent in 2009.
Bulk buying on account of large FMCG companies maintained the pressure on advertising rates. Hindustan Unilever with the largest portfolio of brands continued to maintain its position as the top advertiser on TV by a wide margin.
Continuing the trend observed in the past few years, advertisement revenue growth was largely attributable to volume growth. Rates continued to remain flat or even declined in some cases.