Indian media industry is expected to grow at an annual average growth rate of 15% to touch Rs 1457 bn by 2016. The industry comprises of print, electronic, radio, internet and outdoor segments. With the government aggressively pushing in for digitisation of TV, Multi System Cable Operators (MSOs) are expected to lose 15-20 per cent of their subscribers to DTH during the phase one that requires the digitisation of Mumbai, Delhi, Chennai and Kolkata by the end of calendar year 2012.
There are nearly 148 m television households in India. DTH segment comprises of 45 m homes. Around 60% of the money in television segment comes from the subscriptions of DTH or cable services. The digital subscribers are expected to outdo the analog subscribers by 2013. The players in the electronic media can be classified into a 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 trolleys, which include the cable and satellite channels, multiplex theatres, MSOs and the DTH players.
In India, the ratio of advertising expenditure to GDP is about 0.4%. This is substantially lower in comparison to the developed economies as well as developing economies. As the Indian economy continues to develop and the media reach increases, the advertising expenditure to GDP ratio is expected to increase over the next 5 years.
Of the more than 70,000 newspapers printed in India, around 90% are published in Hindi and other vernacular languages. There are a total of 825 private satellite TV channels as at the end of December 2011, permitted by the Information and Broadcasting Ministry, out of which 163 channels are pay.
The demand for regional print media is growing at a faster pace than that of English language print media. In the electronic media, the highly fragmented viewership has led to an increasing preference for niche channels.
Barriers to entry
In the electronic media, it is 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. The broadcasters are finding it increasingly difficult to retain their key personnel. In spite of the high barriers to entry a slew of channels across languages and genres have been launched in the recent past.
Bargaining power of suppliers
In the print media, high for newsprint suppliers. It is medium to low for content providers in the electronic media. Terrestrial broadcasters such as Doordarshan and regional broadcasters such as Sun TV actually commission time slots to content providers.
Bargaining power of customers
Relatively high in both print and electronic media. The consumer finds a surfeit of players to choose from. The rollout of CAS and DTH services will enable the consumer to choose the channels that he wishes to view increasing his bargaining power.
High in print media, especially in Hindi dailies. The print sector includes listed entities like Jagran Prakashan, HT Media and Deccan Chronicle. Regional print media too is seeing increasing competition. Competition is high amongst broadcasters especially for general entertainment channels. The space includes listed entities like Zee TV, TV 18, UTV, NDTV and Sun TV.
Financial year 2012 was a tough year for the media industry. The slowdown in the economy resulted in companies spending less on advertisements. With dwindling ad budgets, the revenues of media companies declined substantially as they get a huge chunk of their revenues from this segment.
In the print space, efforts are being seen towards consolidation of business rather than aggressive expansions. The fall of rupee during the year hurt the bottomline of the print media companies as the cost of imported newsprint went up.
Digitisation deadline was further postponed on low availability of set top boxes. It is now expected that the 4 metro cities of the country will be fully digitized before the end of the calendar year.
The fortunes of the media industry are linked to the growth in the economy. India is set to grow at a rate of at least 8% in years to come. Rising incomes in the hands of people encourage them to spend more on discretionary items like media and entertainment. However, the trend is shifting more towards the online medium.
The demographic profile of India also favours higher spend on entertainment, with the consuming class forming a sizeable chunk of the country's total households. Thus, this could lead to the emergence of a huge consumer base for the various products and services (including entertainment).
New distribution technologies like DTH, Conditional Access System (CAS) and IPTV, hold the future of the media industry as increasing digitization will radically alter the ways in which consumers receive channels. The manadatory digitization in the four metros and the entire country will bring in more subscription revenues for the broadcasters as opposed to under reporting of numbers by cable operators at present.
With metros already being saturated, regional markets provide ample scope for growth in the media sector. In print media, newspapers are being published in vernacular language, In television, newer channels are introduced in local languages. Tier II and Tier III cities and towns are set to drive the Indian consumption story in the next few years.