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Television Media: Who's watching?

Oct 1, 2007

The growth of the television broadcasting sector depends on the penetration of television sets in India. Increase in the penetration of television sets would shore up the advertisement and the subscription revenues of the broadcasters enabling them to spend more on content. The revenues of the MSO's, local cable operators and the DTH operators would also increase, as more people would opt for their services. The penetration of television sets is primarily determined by the general price level of television sets, disposable income levels, reach of terrestrial television (Doordarshan) and availability of electricity. The scenario so far..

  • Low penetration of television: As per the PWC FICCI Report, the penetration of television in India is very low compared to other developing and developed countries. In CY06 112 m households had a television set (penetration of 43% as per our calculations) and the cable and satellite households were only 68 m.

    Country Penetration %
    USA 333
    Japan 250
    Brazil 111
    China 98
    Source:Balaji Telefims Annual Report FY 02

  • Concentrated in urban areas: In India around 70 % of the population lives in the rural areas and out of the population living in urban areas around 53% belongs to the lower socio economic class. It is observed that the penetration of television is higher in the urban areas than in the rural areas. It is also more in the higher socio economic classes than in the lower socio economic classes. As urbanization and per capita income increases the penetration of television would increase.

    Television penetration in SEC Classes
    SEC* Reach (mn people) % of total in category
    Urban
    A1 7.6 96.1
    A2 14.5 94.5
    B1,B2 35.7 90.6
    C 41.7 85.8
    D 43.2 77.5
    E1,E2 45.3 65
    Rural
    R1 15.2 72.8
    R2 38.3 64.2
    R3 109.6 51.6
    R4 76.5 30.8

    *The socioeconomic classification (SEC) groups urban Indian households on the basis of education and occupation of the chief wage earner (CWE: the person who contributes the most to the household expenses) of the household into five segments (SEC A, SEC B, SEC C, SEC D and SEC E households in that order). High socioeconomic classes refers to SEC A&B, Mid socioeconomic class refers to SEC C and Low socioeconomic classes refers to SEC D&E.

    ..is set to change
    Increase in Personal disposable incomes: The higher personal disposable incomes have increased enabling people to increase their spend on consumer durables. Households owning a television set have increased from 82 mn in CY 02 to 112 mn in CY06. (Source: NRS 2006) Currently 97% households having a TV set are single TV households. Thus the rapid TV penetration is adding first time consumers to the medium itself. We believe that this growth in penetration has primarily happened due to the surge in personal disposable income, decline in interest rates and also a decline in the price of television sets. The price of a 20-inch colour TV, for instance, has declined from Rs 18,500 in 1996 to Rs 8500 in 2001-02. (Source: Balaji Telefilms Annual report FY02)

    Year Personal disposable Income (Rs m) % change
    FY03 2.1
    FY04 2.3 11.7
    FY05 2.5 7.0
    FY06 2.8 13.1

  • Decline in Interest rates: Interest rates have also declined leading to cheaper financing costs for the purchase of television sets. However it is observed that an increase in interest rates hampers the sale of television sets. Nominal interest rates increased from 10.25% in FY06 to around 11% in FY 07 causing a dent in the sales of television sets.

Increase in the penetration of television sets would shore up the advertisement and the subscription revenues of the broadcasters. However, we believe that first time buyers of television sets would initially opt for only terrestrial television or FTA (Free to air) channels. We expect these first time buyers to opt for paid subscription services in the distant future. People buying a second television set are likely to opt for DTH services or at least the pay channels offered by the cable operators. Moreover their viewing habits are also likely to differ. First time buyers of television sets would prefer viewing regional and GEC channels whereas second time television buyers would prefer viewing niche channels. In India most of the television buyers are first time buyers. Niche channels in India can be successful only when the number of households having more than one television set increases.

Thus the increase in the penetration of television would benefit the broadcasters, content providers as well as the DTH and MSO operators. Broadcasters such as SUN TV, ETC Punjabi, Zee TV would benefit from the television medium adding first time buyers to itself. However broadcasters having niche channels such as TV 18, UTV would benefit on an increase in the number of households having more than one television set.

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