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The growth of FTA channels, Freedish and their impact on revenues

MUMBAI: Free-to-air (FTA) channels, which are seeing strong growth in viewership after TV ratings agency BARC India started reporting rural data, are expected to almost double their combined revenue in 2017.

While in 2016 the genre garnered an estimated Rs 4–5 billion in ad revenue, this is expected to climb to Rs 8–10 billion this year.

FTA channels will gain prominence in the upcoming annual budget-planning exercise of advertisers. Brands that have a substantial rural consumption base are now able to measure the performance of their ad expenditure. This has resulted in sustained inflow of advertising monies, according to the 2017 FICCI–KPMG Media and Entertainment industry report.

Ad rates for FTA channels have grown significantly from where they were at the start of 2016. They have grown from one-10th of the pay GECs to being about one-fifth now.

Ashish Sehgal“The FTA market has seen rapid growth in terms of advertising revenues in 2016, opening up the rural markets for advertisers. Robust ratings of FTA GECs have seen advertisement rates rising to 1/5th of the pay GECs, from 1/10th at the start of 2016. However, the threat to subscription revenues is real, and the onus lies with broadcasters collectively to ensure pay channels remain relevant,” the report quoted Zee Unimedia COO Ashish Sehgal as saying.

On the flip side, though, the rapid ad revenue growth of the FTA genre in the near term could result in an adverse impact on subscription revenues in the long run, with a material number of subscribers in Phases III and IV, and new additions to the C&S fold, likely to find Doordarshan’s free direct-to-home (DTH) platform Freedish as an attractive option compared to pay DTH and cable TV.

The increase in the ad revenue pie could partly compensate for the negative impact on subscription revenues. Even then, the total industry revenues could take a hit.

With a projected subscriber base of 30 million on the Freedish platform by 2021, a net negative impact of Rs 90–110 billion on the total industry revenues over 2016–21 is estimated, the report said.

The Freedish projections take into account upgrade of Freedish subscribers to pay TV each year. Also taken into account is the inflow of incremental FTA advertising revenues to arrive at the potential impact of Freedish.

NP-Singh_CEO_INSIDE01“FTA channels are here to stay. Advertisers are yet to realise the full potential of this segment, and with categories like farm products, tractors, etc. coming in, the overall advertising pie is likely to increase. Subscriber movement to DD Freedish in DAS III and IV could put pressure on subscription revenues, but broadcasters need to clearly differentiate between content on pay and free platforms to alleviate this,” the report quoted Sony Pictures Networks India CEO NP Singh as saying.

The report notes that the performance of the FTA Hindi general entertainment channels (GECs) has rivalled that of respective pay GECs, with major Hindi FTA GECs appearing consistently among the top 10 Hindi GECs. Some of the key factors that have led to the success of FTA channels are:

• With BARC reaching 98.5 million rural households out of their universe estimate of 183 million TV households, the needs of the now ‘measurable’ rural markets are among the top priorities for the broadcasters.

• The FTA genre provides a robust way for the broadcasters to achieve reach and viewership for the GECs in a relatively quick time, with the added incentive of cost effectiveness as compared to a pay GEC.

• The continued resurgence of Freedish has ensured that broadcasters having an FTA presence on this platform is a given. Freedish is estimated to have garnered 22 million active customers at the end of 2016, providing a large potential viewership base to the broadcasters.

• The delay window of archived content aired on FTA channels (compared to the same content on corresponding pay channels) shrunk considerably in 2016, having been reduced to around 1–3 months for some of the broadcasters, compared to more than one year when the channels were initially launched. For instance, ‘Bajirao Mastani’, which had a world TV premiere on Colors on 23 April 2016, was telecast on Rishtey Cineplex on 8 May 2016, in a gap of a mere two weeks.

Moreover, the report noted that the FTA phenomenon in 2016 was not just restricted to the Hindi GECs or movies. The news genre saw Zee News (Hindi), NDTV India (Hindi) and News18 (Hindi, Kerala, TN and Assam) go FTA in 2016, where leading channels like Aaj Tak and India TV are already present.

Towards the end of 2016, Maha Cartoon TV debuted on Freedish, signalling the entry of the kids genre in the FTA segment. A look at the Freedish channels outlines the breadth of the FTA content available to the end consumer across genres. However, the platform has negligible presence in Southern entertainment apart from the Doordarshan’s language channels, and the same may be a hindrance in terms of adoption of Freedish by Southern markets.

The growing interest in a slot on Freedish was evidenced by the 31st auction in October 2016, with DD garnering Rs 1.3 billion from renewals and addition of three new channels on empty slots. As compared to a base price of Rs 43 million, the average winning slot rate stood at Rs 48 million.

The February 2017 auctions saw a further increase in slot rates, with the highest bid at Rs 73 million as against a reserve price of Rs 48 million. With renewal of 10 slots and sale of three new slots, DD was able to garner Rs 0.66 billion. The platform also ramped up its channel catalogue to 104 from 80, along with an intention to start encrypting its signals from April 2017.

Rohit JainTalking about the Freedish challenge, Videocon d2h deputy CEO Rohit Jain stated in the report: “The content overlap with Freedish is a serious concern. Concept of windowing and differentiated content needs to be thought through. We are cannibalising long-term pay TV market for easy short-term money at the moment. With an estimated 150 million HHs for the pay TV market, each customer lost to Freedish is a long-term revenue loss for DTH and MSOs [multi-system operators].”

Some of the measures devised by pay TV platforms to counter the above potential impact are:

• The success of Freedish as a platform has been largely observed in the Hindi-speaking markets (HSM). With a greater proportion of Southern markets currently undigitised, pay TV platforms would look to garner additional market share in them.

• Almost all DTH players have launched Rs 99+ (add-on) entry-level packs to counter the Freedish value proposition, with the FTA channels a part of this package. The Freedish platform could also emerge as an intermediate medium for a subscriber coming into the Harit-Nagpal-2C&S fold for the first time. Pay TV operators could use this opportunity to upgrade such potential users to a premium content viewing experience.

“While Freedish has indeed registered impressive growth in 2016, it has the potential of opening up new markets for distributors. With about 30 million HHs in India coming into the C&S fold, Freedish as a first step connection for them, as compared to analogue TV, presents an opportunity for the pay DTH market in the long run. Having said that, both broadcasters and distributors need to be cognisant of ensuring a pay TV subscriber continues to be delivered value for the share of his/her wallet,” the report quoted Tata Sky CEO Harit Nagpal as saying.