Aug 29, 2007|
Media: Television broadcasting
In the previous article we had dealt with the Television industry structure. In this article we shall dwell on the prospects of the Television broadcasters.
Robust growth in advertisement revenues: Indian advertising spends as a percentage of gross domestic product (GDP) - at 0.3% - is abysmally low, as opposed to other developed and developing countries. Strong economic growth is expected to propel a compounded average growth rates of 15% per annum in the ad revenues of the television industry in the next four years.
Increase in subscription revenues: Digitisation process (rollout of CAS and DTH) would lead to an increase in cable penetration from 70 m homes in 2006 to around 113 m homes by 2011. The average revenue per user (ARPU) in India is very low compared to other developing and developed countries. The share of broadcasters in the total subscription revenue is also low compared to developed nations. Subscription revenues are expected to grow at a CAGR of 25% over the next 4 years and the broadcasters' share is expected to grow faster at 58%
(source: Zee Investor Presentation)
Competition: Around 82 channels across various languages and genres are slated to be launched in the next couple of fiscals. The Hindi general entertainment space will become intensely competitive with the entry of players like TV 18 group, UTV, Viacom, INX Media, NDTV. All these channels will be competing for limited eyeballs. Advertisement and the financial revenues may get fragmented threatening the financial existence of some broadcasters.
Content costs: The entry of more channels will increase the demand for quality content. The bargaining power of the content providers will increase which will lead to an increase in the cost of content. This is reflected in the constantly increasing realisations per hour of Balaji Telefilms, which is the industry's largest content producer
High attrition rates: The talent pool is limited in the television industry. Entry of more players has lead to an increase in the attrition rates and the personnel costs of the broadcasters. An increase in competition would lead to further escalation in employee costs. The marketing and distribution costs would also increase.
The key players…
Star TV network is one of the leading television broadcasters in India. Its channel 'Star Plus' is the leader in the general entertainment segment with its content (serials) dominating the TRP ratings. Trailing close behind is Zee Entertainment, whose channel Zee TV has the second position across all genres. Zee TV had earlier lost its number two position to Sony but now has been able to regain its position due to new programming initiatives. The TV 18 group operates the channels 'CNBC-TV 18' and 'CNBC Awaaz', popular in the business news genre. This is especially due to its coverage of foreign markets in collaboration with CNBC.
We believe that while in the short run some broadcasters may incur losses due to excessive competition, which may lead to some consolidation. In the longer run, it will be the survival of the strongest.
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