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India continues to be in the throes of an entertainment revolution spawned by economic liberalization and the subsequent rollout of CAS and DTH. The players in the entertainment industry can be classified into three-link chain. First are the studios (including the animation studios), which comprise the hardware part of the industry, the second are the content providers and the third link comprises the distribution trolley’s, which include the cable and satellite channels, multiplex theatres, MSO’s and the DTH players.
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There are around 112 m television households in India, 91 m TV sets, 70 m cable homes and only 2 m Direct-to-Home (DTH) households in India. The sector is set to witness a transformation through digitisation. Digitisation means that cable penetration will increase from 70 m homes in 2006 to around 13 m homes by 2011. This will benefit all the stakeholders. The broadcasters revenues will increase significantly increasing their ability to spend on content. Digitisation will also be beneficial to the viewers as it means a better visual quality at a lower cost.
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In India, the ratio of advertising expenditure to GDP is about 0.33%. This is substantially lower in comparison to the developed economies as well as developing economies. As the Indian economy continues to develop and the television reach increases, its advertising expenditure to GDP ratio is expected to increase over the next 5 years.
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Presently there are approximately 200 channels in the fight for viewer ship, which has led to a shortfall in quality programmes. In the near future around 82 more channels across different languages and genres will be launched.
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| Demand |
The highly fragmented viewership has led to an increasing preference for niche channels.
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| Barriers to entry |
High for broadcasting since it is very capital-intensive. It involves the cost of leasing the transponder, setting up up-linking facilities, setting up pre and post-production facilities. The barriers to entry are far lower for content providers. Besides, broadcasters themselves commission programmes and finance their production. Hence margins are lower. Broadcasters are tapping the international securities markets and the private equity investors for funds. The broadcasters are finding it increasingly difficult to retain their key personnel. Inspite of the high barriers to entry a slew of channels across languages and genres are slated to be launched in the near future.
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| Bargaining power of suppliers |
High for content providers, reflected by the fact that Balaji Telefilm’s relisations per hour are increasing. However, terrestrial broadcasters such as Doordarshan and regional broadcasters such as Sun TV actually commission time slots to content providers.
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| Bargaining power of customers |
Relatively high. There is a surfeit of channels and programmes to choose from for the viewer. In the near future around 82 more channels across different languages and genres will be launched. The rollout of CAS and DTH services will enable the consumer to choose the channels that he wishes to view increasing his bargaining power.
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| Competition |
High amongst broadcasters especially for general entertainment channels. The Hindi General Entertainment Space will become more competitive with the entry of the TV18 group, UTV, NDTV, and INX Media. |
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In FY07, the television media sector continued to witness launch of new channels catering to varied genres. Along with the growth in television and cable & satellite homes in the country, new players and channels have sprung up in niche segments like news, fashion, sports, lifestyle, tourism and children. Broadcasters such as UTV, Zee have plans to launch a youth oriented channel keeping in mind India’s vibrant young population.
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The Delhi High court, in FY07, set a deadline for implementing CAS in zone I areas of Delhi, Mumbai and Calcutta. Also, recently the Telecom Regulatory Authority of India (TRAI) recommended that CAS be rolled out further in these cities and has also provided a road map for CAS rollout in other cities. TRAI has suggested that CAS be rolled out to a further 55 cities (population of more than 1 m) by 2011.
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During CY06, the share of revenues in the total ad volumes of IT sector was 29% of the revenues of the broadcasting industry. Ad revenues continued to remain a majority, which is in sharp contrast to the pattern observed in the developed world. One of the key reasons why this discrepancy exists in India is due to the under-declaration of connections by cable operators leading to lower subscription revenues. However, it must be noted that over the last 2 to3 years, there has been a consistent improvement in realisations from the subscription segment for broadcasters, largely due to the rollout of CAS and DTH services and the advantages of being bundled with a bouquet of channels like One Alliance or the Zee bouquet, which leads to better bargaining with cable operators.
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The future of the entertainment industry will be decided on the interplay of a number of reasons like consumerism, advertising spend, content, pricing, technology and regulation. According to the FICCI-PWC report on the entertainment and media industry, it is estimated that the entertainment and the media industry is set to grow at a CAGR of 18% to reach an estimated size of Rs 1 trillion in 2011. The television industry revenues are expected to grow from the present size of Rs 191 bn to Rs 519 bn by 2011, implying a 22% compounded annual growth over the next five years. Subscription revenues are projected to be the key growth driver for the Indian television industry over the next five years. Subscription revenues will increase both from the number of pay TV homes as well as increased subscription rates. The sweeping effect of this is that it will lead to increased competition, in the form of increased number of channels and the growing importance of niche channels and content providers.
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The demographic profile of India also favours higher spends on entertainment. As per NCAER, by CY07, the consuming class will form around 46% of the country's total households as compared to around 17% in FY95. Thus, this could lead to the emergence of a huge consumer base for the various products and services (including entertainment).
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New distribution technologies like DTH, Conditional Access System (CAS) and IPTV, hold the future of the media industry as increasing digitalization will radically alter the ways in which consumers receive channels. Also, these distribution platforms will give broadcasters direct access to consumers providing not just routine content but also customized value added services (like video on demand). As a result of this, the average revenue per user will increase significantly. Moreover, broadcasters are also expected to rake in larger advertisement revenues, as adspend is likely to go up on the back of the robust economic growth.
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