 "Prime time rolls on")
The TV industry, comprising broadcast and distribution, has been growing steadily at an 11 per cent CAGR from 2010 to 2016 (estimated) and its current size stands at Rs 69,000 crores. The growth is equally driven by advertising and subscription revenue, both growing at a CAGR of 11 per cent. Subscription revenues continue to be the major contributor and accounts for two-thirds of the industry revenue driven by increasing penetration and broader access to cable channels. Advertising revenues in television have grown on the back of strong underlying economic growth and emergence of categories such as e-commerce as major advertisers. TV has outstripped print to claim a 41 per cent share of total advertising revenue in 2015, making it the biggest media platform for advertisers.
With growing digitisation, enhancing quality of content and investment in platforms, the industry could continue to grow at 11-13 per cent CAGR reaching revenues between Rs 1,03,000 and Rs 1,12,000 crores by 2020. However with better monetisation of content and digital consumption, the industry has the potential to grow at a faster clip.
Fundamental growth drivers
Subscription is a factor of increasing reach and digitisation:
The subscription revenue will be aided by structural increase in penetration with the number of TV-owning households growing from the current 168 million to 198 million in 2020 primarily driven by growth in rural India where current penetration is only 60 per cent. Further, as the digitisation rollout continues, there will be improvement in addressability as hitherto undeclared subscribers come into the fold.
With over 50 million analog subscribers yet to go digital, Phases III and IV of India’s push to complete digitisation are expected to bring new subscribers into the fold at higher ARPU. Rural penetration holds the greatest potential, with the highest conversion from analog to digital expected to come from the hinterland. Cable operators have already witnessed a sharp rise in ARPU compared to pre-digitisation levels in Phase I and II…
Advertising is driven by strong fundamentals and rural markets:
Against the backdrop of an overall upbeat economy, television advertising is expected to rise at an estimated 10 per cent to 12 per cent CAGR. FMCG (fast moving consumer goods) sector is the biggest spender in Indian television advertising, accounting for around 50 per cent of total spends. With the FMCG sector set to grow at 21 per cent CAGR over the next five years driven by favourable demographics, rise in rural consumption and improving lifestyle standards, the ad spend of FMCG companies is also expected to increase. Further as competition intensifies, FMCG companies are expected to sustain or increase their spending on TV ads and promotions.
The next leg of ad growth will be from rural markets as reach and consumption are expected to increase. Given the regional market’s increasing per capita income, they form an important consumption market making it significant for advertisers to reach consumers in regional markets. Further new TV measurement has also enabled more accurate tracking of rural audiences. This has led to a spike in favour of FTA (free to air) channels and indicates an imminent spurt in advertising revenue in rural markets.
How can the industry unlock growth?
Content is “king” — invest in differentiated content to unlock new consumption: Clutter breaking ideas and inventiveness, combined with premium content and region-centric programming, will bring better ratings, and, thus, higher advertising spends. With a range of platforms, creators and storytellers have been inspired to tell their stories in new and engaging ways. According to our research, consumers feel that there is unmet need for niche content such as career /education, regional cooking channel, men’s grooming channel etc...
Regionalisation gaining momentum, focus on local audience and content to accelerate growth:
The high viewership of regional channels — second only to Hindi GECs — is encouraging broadcasters to increase their regional footprint through organic and inorganic means. During the past five years, regional channels have improved content quality with increased investment. Strong advertising potential will further push regional TV growth. Broadcasters need to customise content/genres to each local market to attract viewership and revenue growth from regional markets.
Innovation in advertising, embrace technology to expand advertiser base:
Sharper segmentation of audiences will allow advertisers to leverage meaningful differentiations. This can happen if the supply side differentiates more sharply, or new technological advances come into play, marrying multiple data sources and creating richer pools of audiences. Channels could soon have different prime-time shows for rural and urban India or the big metros and small towns. Excerpted from BCG-CII report, Convergence: The new multiplier for Indian Media and Entertainment’s $100 billion vision
With growing digitisation, enhancing quality of content and investment in platforms, the industry could continue to grow at 11-13 per cent CAGR reaching revenues between Rs 1,03,000 and Rs 1,12,000 crores by 2020. However with better monetisation of content and digital consumption, the industry has the potential to grow at a faster clip.
Fundamental growth drivers
Subscription is a factor of increasing reach and digitisation:
The subscription revenue will be aided by structural increase in penetration with the number of TV-owning households growing from the current 168 million to 198 million in 2020 primarily driven by growth in rural India where current penetration is only 60 per cent. Further, as the digitisation rollout continues, there will be improvement in addressability as hitherto undeclared subscribers come into the fold.
With over 50 million analog subscribers yet to go digital, Phases III and IV of India’s push to complete digitisation are expected to bring new subscribers into the fold at higher ARPU. Rural penetration holds the greatest potential, with the highest conversion from analog to digital expected to come from the hinterland. Cable operators have already witnessed a sharp rise in ARPU compared to pre-digitisation levels in Phase I and II…
Advertising is driven by strong fundamentals and rural markets:
Against the backdrop of an overall upbeat economy, television advertising is expected to rise at an estimated 10 per cent to 12 per cent CAGR. FMCG (fast moving consumer goods) sector is the biggest spender in Indian television advertising, accounting for around 50 per cent of total spends. With the FMCG sector set to grow at 21 per cent CAGR over the next five years driven by favourable demographics, rise in rural consumption and improving lifestyle standards, the ad spend of FMCG companies is also expected to increase. Further as competition intensifies, FMCG companies are expected to sustain or increase their spending on TV ads and promotions.
The next leg of ad growth will be from rural markets as reach and consumption are expected to increase. Given the regional market’s increasing per capita income, they form an important consumption market making it significant for advertisers to reach consumers in regional markets. Further new TV measurement has also enabled more accurate tracking of rural audiences. This has led to a spike in favour of FTA (free to air) channels and indicates an imminent spurt in advertising revenue in rural markets.
How can the industry unlock growth?
Content is “king” — invest in differentiated content to unlock new consumption: Clutter breaking ideas and inventiveness, combined with premium content and region-centric programming, will bring better ratings, and, thus, higher advertising spends. With a range of platforms, creators and storytellers have been inspired to tell their stories in new and engaging ways. According to our research, consumers feel that there is unmet need for niche content such as career /education, regional cooking channel, men’s grooming channel etc...
Regionalisation gaining momentum, focus on local audience and content to accelerate growth:
The high viewership of regional channels — second only to Hindi GECs — is encouraging broadcasters to increase their regional footprint through organic and inorganic means. During the past five years, regional channels have improved content quality with increased investment. Strong advertising potential will further push regional TV growth. Broadcasters need to customise content/genres to each local market to attract viewership and revenue growth from regional markets.
Innovation in advertising, embrace technology to expand advertiser base:
Sharper segmentation of audiences will allow advertisers to leverage meaningful differentiations. This can happen if the supply side differentiates more sharply, or new technological advances come into play, marrying multiple data sources and creating richer pools of audiences. Channels could soon have different prime-time shows for rural and urban India or the big metros and small towns. Excerpted from BCG-CII report, Convergence: The new multiplier for Indian Media and Entertainment’s $100 billion vision
| Key issues and challenges Delay in digitisation and its impact on revenues: DAS Phase III has already been delayed by more than eight months. With some states seeking legal intervention, a further delay in the launch of Phase IV is likely. As a result, there will be a lag in the monetisation impact of digitisation. Pricing issue poses major challenges: Broadcasters have been raising the issue of regulatory intervention in fixing prices and packaging of TV channels. TRAI has recently issued a draft tariff order imposing regulations pertaining to the pricing of channels. The order will come into force with effect from April 1, 2017 and is applicable to television broadcasting and cable services. Taxation and the need for collaborative reassessment for growth: Entertainment tax rates across the country vary from 15 to 110 per cent, with many states levying more than 30 per cent. Further, there is a dual levy of tax on DTH services — DTH players pay service tax to the Central govt. and entertainment tax to the state government. GST will potentially address some of these challenges, but its full impact on the sector needs further analysis. |