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.

MUMBAI: Beating sluggish economic growth, a weakening rupee and an even weaker consumer demand, the Indian M&E industry registered an overall growth of 12.6 per cent from Rs 728 billion in 2011 to Rs 820 billion in 2012, says the FICCI-KPMG Media & Entertainment 2013 report.

The industry is estimated to grow at 11.8 per cent to touch Rs 917 billion in 2013, driven by the introduction of cable TV digitisation, continued growth of regional media, upcoming elections, continued strength in the film sector and fast increasing new media businesses.

In the long run, the sector is projected to grow at a healthy CAGR of 15.2 per cent to reach Rs 1661 billion by 2017.

Television, the report says, continues to be the dominant segment. However, the report records strong growth posted by new media sectors, animation/ VFX and a comeback in the Films and Music sectors on the back of strong content and the benefits of digitisation.
Radio is anticipated to see a spurt in growth at a CAGR of 16.6 per cent over the period 2012-2017, post the rollout of Phase 3 licensing.

Total advertising spend across media was Rs 327.4 billion in 2012. In light of continued economic slowdown, advertising revenues saw a growth of 9 per cent in 2012 as against 13 per cent in 2011 and 17 per cent in 2010.

Print continues to be the largest beneficiary, accounting for 46 per cent of the advertising pie at Rs 150 billion.

Speaking about the findings of the report, FICCI M&E committee chairman Uday Shankar said, ?2012 has been one of the toughest years in recent times. But it has also been a landmark year for the media and entertainment sector with significant progress in all verticals: the signs are already evident that digitalization will fundamentally change broadcasting, films have scaled-up their ambitions, and radio and print continue to defy global trends. If anything, 2013 promises to be even more disruptive. I am certain that the insights and findings from this report will provide a comprehensive and useful lens for all of us in the industry.?

KPMG India Head of Media and Entertainment Jehil Thakkar said, ?2012 though a challenging year for the M&E industry, was a year in which important foundations for future growth were laid. The advertising environment went through one of the toughest years in the last decade. However, the implementation of digitisation, the stellar performance of the film industry backed by excellent content and digital distribution, the continued growth in regional print, the momentum in new media and the announcement of Phase 3 radio implementation has all finally provided the much needed platform to boost the Indian Media & Entertainment industry.?

Greater sophistication of and segmentation in content

TV digitisation is likely to be a great catalyst for greater diversity and niche television programming. Digitisation is expected to improve broadcast economics significantly which in turn, could drive more investments in production quality, niche and targeted genres of content/packaging in the medium term.

Phase 3 licensing and anticipated provisions for permitting multiple frequencies in a city would encourage investments in differentiated content for the Radio sector. Internet and mobile platforms are a cost effective enabler to reach diverse audience segments with tailored content. The Indian audiences could look forward to more targeted and engaging content in the medium term.

Digitisation of film and TV distribution infrastructure

Digitisation of distribution has brought in the promise of more sustainable and profitable business models across media sectors. It has enabled the films sector to make a comeback this year. The industry has achieved 77 per cent digitisation of screens and expects to be close to 100 per cent digitised in the next 18 months to 2 years. These developments have resulted in increased ability to invest in differentiated content, marketing, and wider releases ? all contributing to greater audience engagement and unprecedented box office success across big and small budget movies alike. Overall, digital technology is expected to drive the M&E sector?s growth in a challenging macro environment, by spurring on end-user spending and transparency.

Growth in new media

The rapid increase in mobile and wireless connections continues to drive the growth of internet penetration in India. With better access through cheaper and smarter devices, audiences (especially the youth) are consuming more content and are getting increasingly engaged.
Key beneficiaries are emerging new media segments, which include internet advertising, online classifieds, and gaming, all of which are on a rapid growth path. Going forward, better uptake of 3G connections and the beginnings of the 4G rollout are expected to spur growth further.

Traditional media still going strong

India remains a growth market for ?traditional? media evidenced by the growth last year in TV audiences, radio listenership, and footfalls in theatres. India is an outlier country where print is still a growth market. There is growing overseas demand for quality Indian animation/VFX work at affordable pricing.

Traditional media is also increasingly offered on new media platforms. The need of the hour, of course, is the development of models for broader reach and monetisation of audiences for traditional media content on these new media platforms.

Regional markets remain key centers of growth
Advertisers continue to see higher growth in consumption from key regional markets. Hence regional media continues on a strong growth trajectory especially in the print and television sectors. Key media players are focusing on cherry picking acquisitions and expanding their presence in regional markets based on higher rates of advertising revenue growth, and better insulation from the slowdown than in metros, which may be close to saturation in many cases.

Examples in print include the launch of Ei Shomoy ? a Bengali paper by Bennett Coleman and the acquisition of Nai Duniya by the Jagran Group.

Many film studios are building a regional film pipeline. Reliance Big Pictures, Disney UTV Motion Pictures and Eros International are increasingly investing in the regional space. Hollywood films are expanding revenue potential by dubbing across regional languages such as Tamil and Telugu.

Coming LIVE to you?

With changing lifestyles, there is an increase in media consumed out of home. Brands are also increasingly keen to connect with consumers via ?experiences? to ensure greater recall and amplification of brand values. Activations/events are now increasingly a key facet of Radio and Print media solutions.

Live music events/festivals have been successful in attracting widespread audiences and engaging youth across key cities. Increased consumption of music/radio/video on-the-go via mobile and in cars provides opportunity for real time mobile geo-location advertising. The Out of Home (OOH) advertising sector has also seen higher rates of growth in transit advertising.

There is hence an increased need to provide 360 degree solutions to advertisers and provide multiple platforms to reach out to consumers, wherever they are.

Revenue models still advertising dependent ? But subscription grows for TV

M&E is still an advertising dependent industry in India. Hence, it remains sensitive to the impact of the economic slowdown.

While the print sector saw some increases in circulation revenues, and increases in cover price in some areas, cover prices are still significantly lower than global counterparts In the TV sector, digitisation has potential to increase ARPUs and improve the share of subscription revenues to the broadcasters. Increasing subscription revenues is key to the long term stability of the broadcasting sector.

Regulatory and policy support

Regulatory interventions have been a key enabler of growth for the sector. Anticipated events in 2013 such as continued cable DAS rollout, Phase 3 licensing for Radio and 4G rollout will spur growth from the medium term.

There is a need for measures to aid curtailment of piracy and encourage investments to support further growth. Co-production treaties, rationalisation of entertainment tax, government support to encourage formal skill development and training and incentives for animation/VFX and gaming are important areas of policy and regulation that need attention.

Gaps in availability of skilled media and entertainment professionals

The media and entertainment sector could be a noteworthy employer across creative, technical and business areas. With potential mushrooming of TV and Radio broadcast channels and growth in skill intensive sectors of film, animation, gaming, VFX, this is only set to escalate. In the talent driven media sector, companies could potentially differentiate based on ability to attract and retain the right people.

The vision set out for the sector of engaging communities entails reaching out and understanding multiple segments, creating greater connect, and leveraging this connect to influence for the greater social good. At the same time, it remains sensitive to the economic situation and a lot will depend on its ability to manage the risks of continued shortage of skilled manpower and the ability to spur end-user pricing across segments. It is a time for introspection and a time for innovation to see how companies can harness the powers of new technologies and convergence to realise its vision, the report says.