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Opportunities in offing for TV media companies? - Views on News from Equitymaster
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  • Nov 24, 2011

    Opportunities in offing for TV media companies?

    Analogue cable will soon become history in India. The government has approved full digitization of cable services. Although the implementation will be in a phased manner, by 2012, all metro cities will be completely digitized. This will be followed by the cities with a population of more than 1 m which will be covered by March 2013. By September 2014 all urban areas would be covered and by the end of year 2014, the entire country will be fully digitized. This digitization will bring in a whole new dynamic environment for companies in the TV media space.

    Analogue cable will have to be completely abandoned. Thus, there will be three options available for digitization. 1. Digital cable 2. Direct to Home services 3. Internet Protocol Television (IPTV).

    Digital Cable- Digital cable services are provided by cable operators themselves using set top boxes. The companies that provide these services are segmented into the Local Cable Operators and Multi System Operators. Local cable operators normally operate independently. Multi system operators like Hathway Cable and Den Networks are associated with a number of LCOs.

    Dish TV is the biggest DTH provider in India. Other players like Airtel, Videocon, Sun TV, Tata Sky and Reliance Big TV (Reliance Communications) are also vying for increasing pie of the direct to home segment.

    IPTV is the least preferred form of digitization. MTNL provides IPTV services in India.

    Although the biggest beneficiary of digitization among these would most likely be the DTH companies and MSOs, all the companies that provide digital services are likely to be positively impacted. Their revenues are expected to go up over the next couple of years till India is completely digitized.

    Win-win for all

    Digitization will not only benefit the distributors but the industry at large. Cable industry in India is plagued with the problems of under reporting of subscription numbers. The local cable operators more often than not under report actual subscription numbers to broadcasters who end up losing revenue because of this. With digitization, things will become transparent and the broadcasters (Zee and Sun TV are the broadcasters) will receive actual subscription revenues from cable operators. The cable service providers will also be able to provide other value added services like movie on demand, internet, high definition channels etc. It will also help in organizing the existing fragmented industry. This would also facilitate investment into the TV media space.

    Why are Local Cable Operators (LCOs) opposing?

    A few LCOs are opposing this stating that it would imply a financial burden for them. Digitization would require transmitters, encoders, decoders etc which require huge investments. As per the local operators, most of these equipments will have to be imported as these are not available in India. Also, the LCOs had near monopoly in their regions and with digitization they fear loss of revenues.

    To conclude

    While there is no denying the fact that the growth opportunities for media companies in the DTH space are immense, the returns will not be immediate. Further competition is intense and digitization requires huge investment. Thus, one should look at investing in companies that have strong balance sheets and can manage to finance their growth needs.



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