It hasn't happened.
While this year's ranking of the top media companies has Bharti Airtel in the top 10, there are no other telecom companies (see Business Standard, August 27, 2013). Even if we factor in the large unlisted firms such as Vodafone, they wouldn't make it to the list. In a market where digital media is on steroids, how did telecom companies stop becoming serious players in the media sweepstakes?
The answer brings me to the point of this column. Digital media is growing in double digits and making money precisely because it has shaken off the stranglehold that telecom companies had on it.
For too long telecom companies had a vice-like grip on the money consumers paid to download ringtones et al. Telcos kept 70-80 per cent of this money; the rest was shared by content producers and aggregators. This made content companies completely dismissive about digital media in spite of the growing audience numbers. At more than Rs 6,000 crore in revenues from its other media businesses, why would Zee, for instance, spend time and effort chasing telcos for its 5-10 per cent share in a ringtone? It made no sense. The only people pushing the market were the aggregators such as IMImobile or Hungama, which made money on the volumes and by becoming back-end operators for telcos.
But the confluence of three factors - the rise of devices and bandwidth, the boom in the video segment, and the growth of aggregator brands - changed things. As competition within aggregators increased, margins started coming under pressure. This pushed both content companies (say T-Series or Star TV) and aggregators (Hungama or Zenga TV) into creating models that bypassed the mobile operator and allowed them to get their hands on a larger share of that Rs 25,000 crore.
Take, for example, the Rs 150-crore Zenga, a mobile television operator that offers more than 100 channels such as Aaj Tak, DD News and others. It is a profitable ad-supported venture that consciously chose to move away from the margin-stifling, arrogant monopoly of telcos. Google's YouTube is another favourite among companies selling video content. It usually offers half or more of the advertising revenues it makes from advertising to content owners. Many other content providers have found that doing deals directly with device manufacturers, who then embed their music or films into a smartphone or a tablet, brings in better returns than doing business with telcos.
These alternative models ensure that both pay and advertising revenues are spread more evenly among content makers and aggregators. This, in turn, incentivises them to create content meant for digital media instead of treating it as an addendum to their main business.
This is wonderful for consumers and for the industry. More than 227 million Indians currently go online using their mobile phones, smartphones or tablets. They do so to listen to music, watch a film, a television show or a cricket match, among other things. And they want everything that is available, not just the stuff to which their mobile operator decides to give them access. This surge in traffic is finally making advertisers sit up and take notice. They are paying better rates to reach the online audience for, say, the Indian Premier League or a television show, according to digital agency heads. At Rs 2,100 crore, advertising revenues on digital media are the fastest growing part of the national advertising pie. On the other hand, as services such as Saavn, Gaana or others take off, pay revenues too are rising. Much of this growth is coming from outside the telcos' ambit.
Telcos could still bounce back. They have the size and the staying power. Many are learning more about the business through other formats. Bharti Airtel, for instance, is a serious direct-to-home operator. So don't write them off yet.
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