India's media industry to reach Rs. 117,936 crore in five years

The Indian media and entertainment industry currently valued at Rs. 63,216 crore is projected to grow at a compound annual growth rate of 13 percent over the next five years. The industry is expected to reach Rs. 117,936 crore by 2014, according to a report released by KPMG.

The television industry, which is currently pegged at Rs. 27,504 crore, has been growing at the rate of 6.8 percent since 2008. The industry has seen growth in TV penetration and an increase in the number of digital homes, leading to a rise in subscription revenues for distributors and broadcasters. The industry is projected to grow at the rate of 15 percent over 2010-14 and reach a size of Rs. 56,112 crore by 2014. This growth is expected to be driven by a rise in subscription revenues for distributors and broadcasters.

Though the average time spent on watching television remained largely flat, the number of TV advertisers increased from 8,500 in 2008 to 9,400 in 2009. Out of this, 4,600 were new advertisers on the medium. Apart from that, TV's share of ad spend was 40 percent in 2009, indicating its nature as a powerful medium for advertisers. The growing potential of the regional markets, penetration of newer digital TV distribution platforms, increasing competition, innovation across products, processes , marketing and distribution models and growing importance of pay audiences were some of the key highlights of the previous year. However, it was the DTH sector that proved to be successful medium and helped in increasing the pay TV subscriber base even during challenging market conditions.

In order to see positive results taking shape, the Indian M&E industry is in need of improved institutional mechanisms to ensure greater transparency and strong enforcement of the existing laws.

Satellite pay-TV market poised for further growth

Growth in the satellite pay-TV market remained strong in 2009 despite the global economic downturn. The number of TV platforms in service increased to 113 in 2009 (+38% in three years) and pay-TV platforms combined currently reach 131 million subscribers and earned Rs 3,36,000 crore as revenues in 2009. However, more aggressive pricing strategies, both due to the crisis and to more intense competition, weighed down the average revenue per subscriber (ARPU), resulting in revenues growing more modestly than subscribers.

While the aggressive pricing strategy currently practiced by many platforms drive subscriptions more than revenues in the short term, fee increases, which are very likely over time, should help secure long-term revenue growth. In addition, emerging digital markets have experienced tremendous growth in the past few years. The number of platforms in emerging digital markets reached 88 in 2009, up from only 30 in 2000. Subscribers in these markets grew from 11.9 million to nearly 60 million from 2003 to 2009. In India alone, there were 19 million subscribers spread over six platforms in 2009, despite a slow start in 2003-2004. The adjustment of subscription fees to compete more effectively with analogue cable-TV is partially responsible for stimulating subscriptions.

Satellite-TV platforms in the most developed TV markets performed well generally, in spite of the economic crisis and growing competition from other delivery networks, including IPTV and digital terrestrial TV (DTT). In recent years, satellite pay-TV platforms have accelerated the roll-out of value-added services such as HDTV and digital video recorders (DVRs), with the more mature digital TV (DTV) markets leading the way and emerging DTV markets recently jumping on the bandwagon.

Consolidation and vertical integration are still likely and the outlook for satellite pay-TV is expected to remain positive while continuous growth is expected by the next decade, with an estimated 240 million subscribers worldwide by 2019.Vertical integration could also continue in both emerging and developed markets, driven by telecom operators' investments in the content-distribution business.

Set top box market hits all time high

Global demand for digital set top boxes has hit a new high with worldwide set top box unit shipments increasing 11 percent, according to In-Stat. Record demand for both satellite and terrestrial set top boxes has fueled the market growth. Still, even after a record year, the market likely faces challenges in the future. The set top box market is poised to be solid for the next few years. However, there are some emerging threats that will test the market's long-term viability. Foremost among these threats are over-the-top video products, like Apple TV or TiVo's premiere product which could permit consumers to "cut the cord" of their pay-TV service. Also, software platforms that enable consumer electronic devices to function like, or even replace, a set top box could pose a threat to the set top market. Other consumer electronic devices, such as video game consoles and TV sets, can increasingly replicate the capabilities of a digital set top box thereby challenging the future of the set top market growth.

Indian pay TV & broadband subscribers require new focus

The Indian Pay TV market is small, by international standards, in terms of the total revenue generated. However, it holds promise for long term players, to bear rich dividends. Currently, broadcasters and content distributors such as MSOs and DTH operators seem to operate with a focus on growing subscribers, even at the expense of profitability. Media Partners Asia (MPA) has predicted that media owners and broadcasters will instead focus on profits, and cherry pick only profitable growth opportunities.

The Indian pay-TV sector generated sales of Rs. 29,250 Crores for financial year ending March 2010, says MPA. Total pay-TV subscription revenues will grow at an average annual rate of 14 percent over the next 5 years and 10 percent over the next decade, reaching Rs. 38,400 crore by 2014 and more than Rs. 57,600 crore by 2020. The profits were modest, with an industry average EBITDA profits pegged at Rs. 3,600 Crores. The sales are projected to grow to Rs. 58,080 crore by 2014 and Rs. 88,800 crore by 2020. Simultaneously, margins are expected to improve to 15 percent and 23 percent over the same period.

Revenues from HDTV and VAS (including VOD, HDTV and PVR) are projected to contribute more than Rs. 2,400 crore by 2014, rising to Rs. 7,200 crore by 2020.

Digital CATV roll out in India is expected to grow at a relatively slower rate. According to the MPA report, digital cable will grow to 17 million subscribers by 2014, and 29 million (out of a total 110 million CATV homes) by 2020. In 2009, 15 percent of India's pay-TV homes had at least 1 set-top box. This number is expected to grow to 38 percent by 2014 and almost 50 percent by 2020 with HDTV gaining more traction after 2010, driven by DTH satellite networks.

Cable broadband, a key driver of future cable sector profits, is expected to grow from 850,000 homes in 2009 to 3 million by 2014. The Indian DTH net installed subscriber base (not necessarily active subscribers) numbers is expected to double from 20 Million in 2010 (March) to 40 million by 2012 March. As a result, by March 2012, India is poised to overtake the USA to emerge as the World's largest DTH market in terms of subscriber numbers. However, in terms of revenues, the Indian market will remain miniscule compared to the US market.