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C&S TV sector hovers in a flux: MPA report

NEW DELHI: India's broadband cable and satellite TV industry, a $2.7 billion revenue opportunity in 2004, is in a state of flux as uncertainties surrounding market regulation and competition in the delivery of video services cloud visibility over the potential of one of Asia's most attractive consumer blocks.

According to a new research report, Asia Pacific Cable & Satellite Markets 2005 (ACSM 2005), published by the Hong- Kong-based Media Partners Asia Ltd (MPA), the total Indian pay TV industry revenues (subscription plus advertising) could grow from $2.7 billion in 2004 to $5.8 billion by 2010 and $8.6 billion by 2015.

We see the value of pay TV distribution (in India) growing from $2 billion in 2004 to $4.7 billion by 2010 and $7.3 billion by 2015. We forecast cable and satellite TV advertising to grow in line with nominal GDP with the revenue opportunity projected at over $1 billion by 2010 versus $644 million in 2004, growing to more than $1.3 billion by 2015, the report states.

MPA estimates total channel revenues at over $900 million in 2004 with 70 per cent coming from advertising and rest from subscription. In the long-term, market demand will spur competition to cable TV monopolies and provide a foundation for the deployment of digital video services. Such competition will likely obviate the need to regulate the distribution of pay TV channels.

Against the background of channel proliferation, rising programming costs (sports and movies, in particular), the increased commoditisation of content (that must provide regulation promises) and greater competition between platforms (that DTH and broadband TV promise), there will be growing consolidation in the channel space. MPA points out only the strongest would survive in a fragmented universe.

TRENDS

MPA forecasts that total multi-channel homes could grow from 51.6 million in 2004 to just under 80 million by 2010 and almost 95 million by 2015. Cable's share of total video subscribers will reduce to around 85 per cent in the long-term with DTH at 10 per cent and broadband TV (IPTV) at 5 per cent.

Cable & satellite TV consumption remains robust with total C&S homes reaching 51.6 million at Y/E 2004, representing 55 per cent penetration of TV households (TVHHs) and a CAGR of 10 per cent since 2000.

Cable TV advertising continued to grow, signifying a nine per cent increase in 2004 to $644 million. Though for the first time in recent years, print growth (estimated at 11 per cent) outpaced cable TV to sustain its dominant 45 per cent share of the total $1.96 billion Indian advertising ad market. MPA estimates total TV advertising at $810 million in 2004, a 41 per cent share of the total ad market.

Cable TV maintained its 80 per cent share of total TV advertising and a 33 per cent share of the overall market. Higher cable TV advertising growth is anticipated in 2005 with MPA estimates (10 per cent) at the low end of the industry consensus of 10 - 15 per cent. FMCG brands, which contribute 50 to 60 per cent annually to cable TV ad spend, are gearing up to increase expenditure after a marginal 6 per cent increase in 2004.

Cable TV industry subscription revenues totaled $2 billion in 2004, signifying a 10 per cent year on year (YoY) growth against 23 per cent in 2003.

Broadcasters extracted a 13 per cent share of the pie, implying $270 million in channel subscription revenues indicating a 20 per cent YoY growth versus almost 60 per cent in 2003.

Cable MSOs had only a 6 per cent share of the subscription pie in 2004 ($121 million), while local cable ops (LCOs) controlled 78 per cent with the government deriving a mere 3 per cent from taxes, the MPA report states.

The rollout of digital cable set-top boxes, envisaged under a

January 2003 government mandate for the deployment of conditional access systems (CAS) in four metros to view pay channels, has yet to gain momentum. But MPA estimates cable/MSOs, led by Hathway and INCablenet, have begun to aggressively market STB-enabled digital services in 2004, firming up plans to invest in programmes for pay-per-view services and secure more agreements with niche channels. The MSOs also intend to develop new revenue streams from broadband Internet services and VOIP telephony.

Competition to entrenched cable TV monopolies has yet to assume significance due to a number of regulatory and operational issues. Dish TV, the DTH platform 20 per cent directly owned by Zee Telefilms, had only acquired 190,000 subscribers as of Y/E 2004, with growth largely impacted by refusal of leading broadcasters like Star and Sony to supply channels to the Dish platform.

Broadband penetration remains low (TRAI estimates about 200,000 subscribers) as the delivery of high quality broadband at low consumer prices remains a tough proposition. There is significant pressure on the government to un-bundle the local loop, which will enable broadband services to be provided by private players (as opposed to just government monopolies like Bharat Sanchar Nigam Ltd) at cheap prices.

Competition for space on the cable dial was even more intense in 2004 amid a rate freeze and the launch of several new pay and FTA channels. MPA estimates total channel revenues at over $900 million in 2004, which breaks up into 70 per cent from advertising and 30 per cent from subscription.

Channel ad revenues grew by 9 per cent in 2004. Of this, Star obtained a 35 per cent share of the market (its ad growth coming in at between 20 and 25 per cent, outpacing the market), followed by Zee (20 per cent) and Sony (14 per cent). Following the top three were ESPN-STAR Sports (12 per cent), Sun TV (8 per cent) and various other broadcasters (11 per cent).

MPA estimates Star managed to achieve declaration rates of more than 13 million in 2004 in India versus 5.5 million for Zee.

Total channel distribution revenues reached over $270 million in 2004, signifying a 20 per cent YoY growth as against 60 per cent in 2003 with Star securing a 33 per cent market share, according to MPA estimates.

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