Broadcast & CableSat interacted with several industry stalwarts to get their feedback on the impact of continued economic slowdown on the broadcast products and technology market in India. Although several sectors and companies are holding back their investments, the good news is that the broadcast market has not been affected by the current economic crisis due to the long-term service contracts already made between the principals and distributors. Currency fluctuations certainly have had a great impact on certain sectors. However, advancement of technologies such as HDTV and IPTV would balance out any possible impact of slowdown on the broadcast equipment industry. The much awaited IPTV and HDTV would also be rolled out in full swing especially with efforts being made by broadcasters and service providers for the upcoming Commonwealth Games in 2010. The broadcast vendor community is confident that even with the rising costs, the sector would show robust growth in terms of volumes as well as subscriber base.

The impact of the continued economic slowdown on the broadcast products and technology market for content production and distribution is minimal. This is because of the long term contracts already made between buyers and sellers of broadcast products. Although currency fluctuations would impact certain segments within the broadcast market, companies are cautious and are taking innovative steps to cut wastage and increase overall efficiency. This is supported by the developments taking place in DTH, IPTV, and digital cable sector.

Stalwarts from the broadcast vendor community share their views on the impact of the continued economic slowdown.

We are fortunate that market fundamentals in India are strong and we are expecting the Asia Pacific region to experience dramatic growth over the coming few years. Growth is not uniform and some markets and organizations have slowed down for a short while, whereas others continue to thrive. Currency fluctuations have had an impact in some sectors with some affected companies taking a pause before pushing ahead with expansion plans.

Digitization has begun in the earnest in India and will continue to accelerate as viewers drive the need for new and better services in pay-TV and the introduction of new technologies like digital video recorders (DVRs). This presents great opportunities for operators and the Indian broadcast equipment industry as the mass market drives ARPU growth, bringing in additional revenue from the existing subscriber base. NDS' strength is in supporting operators to drive revenues, increasing ARPU growth, and building market leading services. We are confident 2009 and 2010 will continue to show good positive growth for the industry in India and the Asia Pacific region.

Despite some impact of slowdown, countries such as India and China continue to grow overall, though at a slower rate. Essentially for India, key segments that have been hit include banking and financial institutions, manufacturing, automobile, and real estate. Broadly, a host of sectors and companies are holding back investments, or deferring expansions for the time being. Though the overall effect of the global slowdown is being felt on the economy in general, certain segments have not been hit as badly. Specific to the broadcast equipment market in India, we really do not see any major impact of slowdown, especially as the broadband base continues to grow at a never-before rate. Telcos are also diversifying their risk portfolio by expanding into new areas other than the metros and Tier-I towns to smaller cities and rural areas. IPTV as a relatively newer technology offering is also now witnessing faster adoption in India and is moving beyond Delhi and Mumbai into Tier-I & II cities of Jammu and Kashmir, Punjab, Himachal Pradesh, Haryana, Rajasthan, Uttar Pradesh, and West Bengal. This will further keep up the momentum in broadcast equipment market. We expect introduction of newer technology offerings like HDTV to further offset any possible impact of slowdown on the broadcast equipment industry. We hope to see major operators, including both state-owned and private companies, planning to expand operations into newer areas in 2009.

However, the broadcast service industry may sustain due to long-term service contracts.
 

Building broadcast infrastructure is usually high cost and capital intensive. A project could usually take over a year from planning, budgeting to be finally on-air. Also the cost write off of such investments is spread over long periods of time - anywhere from 3 to 5 years or even longer.

The economic slowdown is impacting all industries, though with varying degrees. When we look at the broadcast equipment market, the immediate impact one sees is in terms of ongoing or upcoming projects being reviewed to ensure they are efficient from a cost and workflow perspective. Some projects are also delayed due to spending freeze on large capex items and others due to lack of cost-effective funding due to the credit crisis. However, largely the impact is still moderate to minimal - due to the long-term nature of projects from an execution and cost write off perspective.

The other important thing that I believe to be very important for companies to focus upon, is that their actions during an economic crisis decide their potential growth, once the crisis gets over. The economic crisis is definitely not permanent - it will get over at some stage, as each and every crisis has in the past. What companies do in terms of their investment and focus strategies during this economic crisis, will determine how they will do in the market compared to their competitors, once the crisis is over. This is a great time for broadcasters to re-look at their infrastructure and technology and develop a strategy/plan on how to solve their current problems. A good approach could be to use this slowdown to make changes to solve pending problems. When the times are good and business is booming, making changes becomes very difficult. This is a great time to overhaul one's infrastructure.

Today, with the FIIs wanting to guard their positions, funds drying up, and global liquidity crisis, there is still a consistent growth in the TV channels sector, which new players are betting on. Even under these circumstances, deals have been announced and, despite valuations not getting any easier on the pocket, there could be some more to follow. The pervasive game plan earlier was to quickly launch and practically buy some market share and then cash out either through an IPO (initial public offering) or a private placement. This will end, and only those with a strong business case and content advantage will survive.

Efficiencies are going to be put to an extreme test. A high level of efficiency will be expected of everyone since cash will be in short supply. The good fallout of this is that there will be a plenty of innovation. Investments in the media space will definitely slow down. New launches will be few and far between and the appetite for large global media firms for investments and acquisitions in India will also be under pressure. This will of course worsen due to lack of initiative from the government to maintain a robust investment ecosystem for the media space. Mergers and acquisitions are going to be the call of the day and cash rich companies will find opportunity in distress. The M&E industry has shown a 17 percent growth and the impact of recession could slow it down to 10 percent, which in absolute terms is quite substantial.

Entertainment tends to do well in good times and does better in difficult times.
 

The economic slowdown has not affected the media and entertainment industry as much as it has certain other industries as automobile or infrastructure. The demand for equipment is still there and the industry is spending on it. Only the payments are being deferred due to tight liquidity situation. Even that constraint is expected to improve in the next couple of months due to the intervention of the regulators. Overall, the impact on the media industry in general and the broadcast industry in particular during 2009 is expected to be much milder than on the manufacturing industry or on the IT industry.
 

Uncertainty, rather than a slowdown itself, has a negative impact on build out of commercial infrastructure. Given incidents that have transpired in the last 8-9 months of 2008, it is now more or less certain that financial and commodity markets are in recession - the balanced view developed by economists with respect to emerging markets like India is that the slowdown will run the course of approximately four quarters before turning around.

Whilst this slowdown will impact the media, entertainment, and broadcast services markets in the near term, the flip side is that service providers are expected to consolidate existing infrastructure and invest in new infrastructure as they prepare for the upturn that will follow in 3-5 quarters. This will be driven partly by the need to optimize costs, but largely because investments in new facilities are becoming viable as the overheated property market cools down.

I expect the broadcast equipment market to start coming back at the end of the AMJ 2009 quarter. This will be driven by high end media service providers consolidating facilities using newer technologies as well as investors expanding broadcast infrastructure for the reason described above - increased financial viability going forward given rational prices for commercial property. Equipment vendors and installers will need to be ready with customer value propositions that straddle economy and technology to meet this demand. Clearly, customers will be more demanding of optimizing technologies as well as more cautious in spending.