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How TV’s pay and ad revenues are shaping up to grow to Rs 1,166 bn by 2021

MUMBAI: Compressed by demonetisation, rapid progress of DD Freedish and extension of deadline for implementation of digital addressable system (DAS) in Phases III and IV due to court cases, subscription revenue grew slower at 7% over to touch Rs 387 billion in 2016 in an overall pie of Rs 588 billion for the Indian television industry.

Subscription revenue, however, is expected to grow at a CAGR of 14.8% to reach Rs 771 billion by 2021, according to the 2017 FICCI-KPMG Media and Entertainment industry report. This will be driven by the benefits of DAS flowing in post 2017.

Advertising revenue, which grew at 11% in 2016, will progress at a slightly slower pace than the pay TV engine. It will grow at a CAGR of 14.4% to reach Rs 394 billion, up from Rs 201 billion in 2016.

The television industry in India will grow at a CAGR of 14.7% to reach Rs 1,166 billion by 2021. In 2016, it stood at an estimated size of Rs 588 billion, posting a growth of 8.5% over the earlier year.

TV Industry size ( INR billion)

Subscription revenue

The overall TV subscription revenue growth at 7% in 2016 was lower than the 13% growth projected by FICCI-KPMG in last year’s report.

The decline in growth was due to:

  • Higher than anticipated uptake of Freedish, with the platform’s subscriber base estimated at 22 million
  • Slower than envisaged pace of digitisation, with Phase III and IV still having an analogue base of 47 million subscribers
  • Concerns around the readiness of subscriber management systems for channel packaging, transparent revenue sharing arrangement across the value chain, leading to non-realisation of the intended revenue benefits of digitisation
  • Marginal ARPU growth due to incremental customer additions coming at lower ARPU levels.

So, how will the landscape change to support a faster growth even as Freedish sees a rise in its subscriber base?

“We envisage some form of these regulations, taking into account the concerns of all the stakeholders, to emerge within the coming couple of years. The same are expected to result in better ARPU realisations and along with HD adoption and upselling to consumers, the subscription revenues are expected to grow at a CAGR of 14.8% from 2016-2021 to reach a size of Rs 771 billion,” the report said.

For broadcasters, the subscription revenue growth stood at 11% in 2016, helped by the ongoing digitisation process which results in a higher share of revenues compared to analogue cable.

Subscription revenue for broadcasters recorded in 2016 was Rs 95 billion out of Rs 297 billion of total broadcaster industry size.

Broadcaster Industry size (INR billion)
The dip in the revenue was due to the impact of DD Freedish subscriber additions and the slow progress of digitisation, with Phase III and Phase IV deadlines revised to January and March 2017, respectively.

Subscription revenue also suffered due to challenges such as the non-transparency of deals between broadcasters and distributers. There were also the problem of implementation of a subscriber management system, packaging for consumer’s revenue distribution between local cable operators (LCOs) and multi-system operators (MSOs), and non-implementation of RIO (reference interconnection offer) deals. This led to marginal growth in ARPU for pay TV operators in 2016.

Subscription revenue for broadcasters is expected to grow at a CAGR of 19.3% for the next five years to reach Rs 230 billion by 2021, which translates into a 30% share of the total TV subscription revenue. Factors such as growth in HD subscription and increase in addressability on ground in Phase III and Phase IV would help to increase subscriptions revenue.

Subscription revenue is also said to witness growth in the near future due to the implementation of TRAI’ regulations that would foster channel packaging and increased transparency among the stakeholders, resulting in higher ARPU growth and equitable up-streaming of revenues.

“The tariff orders and interconnect regulations released by TRAI in March 2017 could be a game changer for the industry and unit economics of each player,” the FICCI-KPMG report said.

Advertising revenue

The TV advertising industry grew by 11% in 2016 despite demonetisation. This was lower than the 16% earlier predicted by FICCI-KPMG.

Pre-demonetisation, the industry was expected to register a steady growth of 13–14%, lower than FICCI-KPMG’s earlier expectation of 16% which was outlined in last’s year report.

The TV advertising industry was impacted by the slower consumption growth across sectors, cutback in spends by e-commerce, durables, retail and FMCG, and the industry calibrating their internal planning processes to BARC data.

The advertising industry faced a further blow due to demonetisation in November 2016. Traditionally, Q4 contributes a large chunk of TV advertising revenue as it happens to be the festive season. With demonetisation came a cash crunch, as a result of which there was a sharp decline in consumption. The month of November and December bore the brunt as companies in sectors like FMCG, real estate and automobiles almost halved their planned advertising spends. Regional channels were affected more than the national GECs as national advertisers decided higher budget cuts when it came to regional channels. The impact is said to be short term and full recovery is expected by the end of Q1 2017.

The industry witnessed a growth of 11% due to the strong performance of sports properties like the Indian Premier League (IPL) and T20 Cricket World Cup. IPL and T20 clocked revenues of Rs 10–11 billion and Rs 2.5–3 billion, respectively. The launch of 4G services in the second half of the year also helped in the growth of ad money.

According to the report, the rise of the FTA channels would not only be a major source of reach and viewership, but it could also have the potential to translate into a large advertising market despite the risk of cannibalisation of subscription revenue.

The year 2017 is expected to see a growth of 11% due to four state assembly elections and the robust growth expected across the government, telecom and fintech sectors. Advertising revenue is expected to have a healthy growth of CAGR 14.4% between 2016 and 2021. The major driver of this growth would be marquee events like the IPL, T20, World Cups and the general elections in 2019.

“India remains a strong consumption story in the long run, with GDP growth expected to be at 7% levels and above in 2018. With marquee events like IPL, T20 and ODI World Cups scheduled, and general elections in 2019, a healthy CAGR of 14.4% for the TV advertising industry is projected over 2016-2021,” the report said.

Television subscriber base

According to the report, the number of TV households in India increased to 181 million in 2016, resulting in a TV penetration of 63%.

The industry witnessed net addition of nine million cable & satellite (C&S) subscribers in 2016, ending with a C&S base of 169 million.

“The net additions were short about a million due to slowdown in acquisitions owing to demonetisation,” the report said.

TV households and pay c&s penetration

The short-term blip of demonetisation is, however, not likely to affect the long-term macro-economic indicators. KPMG estimates TV households to reach 203 million by 2021, implying a total TV penetration of 67%.

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