India outshines China in media business: Credit Suisse

NEW DELHI: Media companies in India are achieving double the advertising revenue than in China due to a favourable regulatory regime, says the Credit Suisse report titled "Opportunities of Hollywood in Bollywood." This is despite China enjoying a larger economy, 2.5 times the per capita GDP and a higher spending in advertising.

The Indian media market is experiencing a double-digit growth in advertising revenue, fuelled by a strong GDP growth and supported by the emergence of a strong consumer market and introduction of new product categories.
The report says that progress would be much higher in the coming years due to the government-mandated shift to conditional access systems (Cas), with additional competition coming in from direct-to-home (DTH).

While the growth in advertising revenue will be higher than at present, the report predicts that the revenue growth from subscriptions will be even faster with the transition to Cas and the available choice of DTH.

More interestingly, the benefit to the broadcaster will be more in actual terms because the Cas and DTH systems both help solve the problem of "perennial underdeclaration" of number of households by cable operators." At present, the actual subscription revenue stands at $2.4 billion with the broadcasters receiving as low as only 18 per cent of that amount, the report says.

It, however, observes that broadband is unlikely to emerge as a mass platform in the foreseeable future due to difficulties in last-mile access. As mobile phone platforms become increasingly sophisticated, it will become a better environment "for broadcasters to exploit their video content further".

The cable industry is expected to experience considerable consolidation as the last mile operators sell out to Multi-Systems Operators (MSOs) due to inability to fund digital upgradation.

There has been a significant shift of advertising revenue over the past 15 years from newspapers to TV, though "estimates suggest a stabilisation of shares" (between TV and print media in India) "as growing literacy rates support newspaper readership growth (in India) not supported in other parts of the world", the reports comments.

It also says that the growth of the radio sector will be higher "supported by issuance of new licenses, even as the government moves close to the public sector".

Regarding the Cas tariff restrictions (Rs 77 for free-to-air channels, plus Rs 5 per pay channel of choice) does not seem to be a long term regime. The report comments that it seems that the freeze in tariff is a temporary issue, with the government determined to protect the consumer over the transitory period.

Once the CAS reaches five to six million households, "pricing caps will be removed", is asserts.

The report notes that the "fragmentation of the cable industry results in significant challenges in rolling out digital infrastructure. Last mile operators have limited capability to fund rollout of STBs due to lack of access to finance. The consolidation of LMOs is highly difficult but inevitable, (as it is) driven by government mandated transition to Cas in notified parts of Kolkata, Delhi and Mumbai and entire Chennai… plus the competition from DTH."

Of the subscription revenue, the report says that news segment takes in 4 per cent viewership and 11 per cent of advertising, but it is a highly competitive arena, with 15 players in the fray. Annual revenue from sport events stands at around $125 to 150 million, "excepting mega events like World Cup/ Champions Cup", which together add another $100 m annually.

Disney, which has entered the market in a multi-faceted manner (with consumer products, books, magazines and TV broadcasting) has "rapidly achieved dominance in the kids' space, and should benefit from growing market share of advertising, supported by subscription revenue".

With foreign ownership rules expected to ease progressively, "India looks to be an important country for the expansion of Disney's global footprint". About Sony, the report cryptically says that "restructuring opportunities may provide for greater transparency of business."

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