Broadcast: Toast of the Town

Then over a 15 years ago Doordarshan's Ramayan became a
prime-time phenomenon and brought the nation to a standstill, who would have
thought that with the turn of the century, religion based channels offering a
heady mix of satsangs and aartis 24x7 will stare out of our 'idiot boxes'.
The entertainment and media (E&M) industry has finally arrived, both
commercially and technologically. In this era of neo-convergence and media-moghuls,
it is by and large a consumer-driven industry catering to user-specific demands
of a consumer. Gone are the days when a national screening of a single epic
would have the mass-audience glued to the screens. Today's consumer has an
endless appetite; single course meals just won't suffice!

It's also one of the fastest growing sectors in India and has
a growth rate that leaves the hugely publicized 9% economic growth' a distant
second. Though if we look beyond the bigger picture, facts tell us that they
actually complement each other. The epochal rise in the economy has contributed
to greater income levels which in turn led to media penetration across lower
socio-economic classes. A conducive foreign direct investment (FDI) environment
and low advertising spends throw open vast untapped potential for growth. Last
year saw the maximum flow of foreign investment in the industry with thirteen
proposals for FDI being cleared by the Ministry of Information and Broadcasting.
All these factors could be attributed to the 'Manmohanesque' brand of
liberalization ushered in the early nineties and have given a fillip to the
erstwhile stagnant industry.

GROWTH IS EVIDENT

According to PricewaterhouseCoopers (PwC)-FICCI study, the E&M industry
is expected to outgrow the Indian economy in every year from now till 2011. The
size of the E&M industry in India is currently estimated at Rs 43,700 crore
and is expected to grow at a compounded annual rate of 18% over the next five
years. Of this, television occupy over 40% of the market share at Rs 19,120 and
is expected to grow at a CAGR of 22% to cross Rs 51,900 crore by 2011 with a 51%
share in over all entertainment and media pie.

The television industry has profited the most from this
progressive economic curve and seems to have undergone a paradigm-shift in all
its spheres-be it content or broadcasting or distribution. The advent of novel
distribution technologies-such as digital cable, DTH, and IPTV-have been an
icing on the cake. The launch of Conditional Access System (CAS) grabbed the
maximum brownie points among all the technological developments in the new
millennium. But the upwardly mobile growth chart tells a story of a
roller-coaster ride, from the days of a single public service broadcaster to
over 350 channels available today. Going ahead, several channels are scheduled
to be launched in the coming 24-30 months. Over fifty channels in the news, life
style, and mass entertainment segments being lined up between companies like UTV,
Bag Films, NDTV, Television 18, INX Media, and Treveni Infrastructure. Launch of
a new channel requires around Rs 400—450 crore.

With the state television's monopoly liquidated, broadcasting
has become the toast of the town with big financial houses taking the plunge
across the length and breadth of electronic media. Recently, the news of a
tie-up between Tata Sky and Thomson Group for the manufacture and sales support
of set-top boxes have been doing the rounds and topping the headlines as well.
The channel bouquets being screened range from free-to-air to pay, niche
intensive to varied programming content, and vernacular to domestic. News based
channels are still the leaders by a distance when it comes to viewership,
scoring high on surveys with fair consistency over time. But it's neither the
news nor the entertainment channels, it's the niche channels ie lifestyle,
spirituality, and travel which hold the key to the Pandora's box of future
projections.

PRESENT SCENARIO

India is the third largest television market in the world today. There are
over 112 mn television households in India, which comprise only about 60% of the
total households in the country. Of the approximately 112 mn television
households, there are an estimated 70 mn pay TV households in India; cable
households account for 68 mn of these, with the remaining 2 mn Direct-to-Home (DTH)
households. This translates into a penetration of about 56%. As per the data
released by industry estimates and a PwC analysis, the rate of growth of cable
households hovers around 4-5% per annum over the next five years whereas the DTH
households are expected to grow by 43%. Thus, the combined pay TV households are
expected to reach 113 mn by 2011 with the cable presiding over the greater part
of the share. Hence, the tremendous potential for growth augurs well for the
future of the television industry.

The chief area of growth in the Indian television industry is
cable and satellite services, and especially in the rural and semi-urban areas.
The buoyancy of the Indian economy will drive homes, both in rural and urban
(second TV set homes) areas to buy televisions and subscribe for the pay
services.

The prime avenues for the growth of television homes comprise of
rising disposable income, which leads to an increase in the number of households
above the threshold income level and simultaneous rise of first-time buyers. Pay
revenues will be the primary growth driver for subscription revenues in the
semi-urban and rural areas.

Further, there is also a high potential for conversion of the
non-cable and satellite households into cable and satellite households. Due to
an increase in the upper middle class population and growing aspirations, the
demand for multiple TVs per household is also expected to increase. With the
market getting laden with newer models every other weekend, the average shelf
life of a TV has also registered a significant decrease lending further credence
to the ever-increasing growth rate of the industry. Moreover, with an increasing
number of families making the jump to higher income brackets, the demand is
triggered further.

The Indian television subscription market is estimated to around
Rs 11,700 crore followed by advertising revenues of Rs 6,600 crore and sale of
TV software contributes around Rs 800 crore. Within a small purview, growth is
projected at 14%, primarily from the number of cable and satellite households.
Subscription revenues are projected to be the key growth driver for the Indian
television industry over the next five years .The subscription revenues have
been boosted and the subscriber base broadened with the arrival of new
distribution platforms like DTH and IPTV. The gradual increase in pay TV homes
combine with enhanced subscription rates contribute effectively to the
subscription revenues.

Landmark growth is projected in the television software segment
at a compound rate of 16% over the next five years. Despite over 300 channels
being beamed across Indian skies the investment ventures for more keep coming.
Emphasis on content is the pre-dominant factor affecting future policy
decisions. The position of television as a mass medium for dissemination of
information remains untouched. It still can't be argued that television as a
medium has immense potential to reach a larger number of people which no other
medium can match.

Nowadays, the majority of free channels being beamed across our
homes ranging from alpha Bengali to Oriya TV gathering news from the nooks and
corners of India are hard to miss. A prime time share of 24% speaks volumes
about their capability as a viewer intensive service. When all channels of Star
TV went into exclusive Hindi programming two years back, the demand for local
language content was proved beyond doubt. The same phenomenon applies today to
vernacular languages.

Dubbed foreign content is yet another genre where content is
limited and opportunities are immense. It has become the part and parcel of the
industry raking in moolahs by a sackful through screenings across rural and
sub-urban India. Their success can be gauged by the fact that three movies of
this genre figured in the top ten chartbusters in the last year. Even multimedia
giants such as Disney (The Walt Disney Group) have recognized the need to tap
the local markets. Their channels in India show only dubbed Hindi programming 24
hours a day. The leading sports channel in India, ESPN-Star Sports, has also
started dual feed after being stuck with the realization of the considerable
opportunities in this sector.

ADVANCED TECHNOLOGIES

Poised to be the backbone of entertainment industry in the years to come,
CAS was launched selectively in three metros in India ie Delhi, Mumbai, and
Kolkata. According to the study conducted by broadcasting and cable services
regulator TRAI, about half a million subscribers opted to adopt CAS in the
afore-mentioned areas by mid-February 2007. Of the estimated 1.63 mn homes, the
overall CAS adoption rate was at 29%, with Mumbai notching the top spot at 41%.
The higher socio-economic groups were found to be more earnest in gladly
accepting CAS whereas the uptakes declined as one came down the SEC ladder. The
consumer research shone light on the all-important fact that cost was the
general reason for non-adoption of CAS especially in the lower strata of the
society. The price-cap of Rs 5 per channel per month imposed by the regulator
did precious little to improve the situation. The provision that revenue sharing
between the broadcaster, MSO, and local cable operators (LCO) must be in the
stipulated ratio of 45:30:25, respectively, grabbed the maximum eyeballs.

Other all-important CAS regulations include mandatory provision
of all pay channels on an a-la-carte basis by broadcasters, provision of a
minimum of thirty FTA channels at a rate of Rs 77 per month plus taxes, and
minimum period of subscription to a pay channel to be at least 4 months.

Launched in 2003 Zee's DishTV was the first of its kind in
India. However last year Tata Sky, a joint venture between Tatas and the STAR
group, entered the market. In the south Kalanidhi Maran's Sun TV has a DTH
offering. Currently, the DTH subscriber base is around 2.5 mn. With a projected
43% growth in the next four to five years, DTH is expected to supplement
subscription TV viewership in the non-CAS areas and hence contribute to the
rising revenue of the industry. Anil Ambani's DTH service, Blue Sky Magic has
also jumped into the fray and Sunil Bharti Mital's Bharti also plans to launch
DTH services by the end of 2007.

Internet protocol television (IPTV) is a system that allows
distribution of a television service over broadband access lines. It provides TV
service over telecommunication channels. The essential pre-requisites for
provisioning of IPTV at the consumer end are broadband connection and a PC/TV
interfaced with a converter. Also, access broadband speeds of 10-20 Mbps are
inherent necessities of an IPTV.

After conclusive trials and repeated black-box tests, MTNL
launched the first IPTV in India in 2006. Infrastructure and competition from
existing service providers (cable and DTH service providers) are the
pre-dominant challenges faced by IPTV service providers. Another significant
challenge is the ambivalence over the ambit of IPTV service-whether it falls
under the purview of telecom services or television services. These issues have
kept other telecom operators and Internet service providers away from IPTV even
when almost every major communications' company has a plan for triple play
offering including IPTV.

CHALLENGES

Though the television industry has grown in leaps and bounds, a large
untapped potential remains on the fringes. For its attainment, the need of the
hour is to remove roadblocks in the path to sustained revenue generation. One of
the immediate challenges that the Indian television industry faces is the
unavailability of a 'Converged' Bill which addresses the distribution of
television content over both the broadcasting medium and telecommunication
channels. The heated point of dispute is the lack of 'independence' of a
Broadcasting Regulatory Authority of India (BRAI) which was proposed to be set
up under the Broadcasting Bill.

With technological advancements in existing distribution
platforms such as Digital CAS and DTH, and emergence of new digital platforms
such as IPTV and Mobile TV the biggest challenge lies in digitizing content such
that the existing library contents not only be repurposed for distribution but
also reformatted to suit the typical needs of the relevant distribution
platform. Already major players like Zee group and Doordarshan have begun their
efforts in this direction by adopting plans of digitalization of content
libraries.

IPTV offers a service that intermingles an array of technologies
from the Internet to a set-top box. This necessitates the regulation of content
storage through a licensing policy and guidelines in conformity with the Telecom
Regulatory Authority of India (TRAI). Enhanced profitability in this era of
innumerous news channels can be brought about through sharing of infrastructure
and equipment. However, this could hamper to varying degrees the distinguishing
factors such as 'breaking news' or 'exclusive coverage' of news
channels. Hence, identical feed to various electronic media outfits poses a
challenge to the television industry.

According to requirements from the Commonwealth Games
Federation, the entire television production of the Delhi Commonwealth Games
2010 is required to be in the digital format. But the mode of broadcasting of
Prasar Bharati which owns the rights of production of content is analog. Heavy
capital investments (in tune of Rs 3,500 crore) need to be earmarked to
undertake this project.

Mobile TV has been lauded with the sobriquets technology for the
future, the next big thing. It promises to be the next big hope of the
television industry. But obstacles like allocation of 3G spectrum to private
operators and newer handsets supporting 3G technologies need to be rectified in
time to ensure timely and efficient progress on its various fronts.

The situation calls for a holistic and practical approach by the
government along with a comprehensive strategy to ensure that opportunities don't
go begging and are tapped at the earliest.

FUTURE OUTLOOK

The entry of new DTH and IPTV players promises a bright future for the
television market and a huge churning of the television distribution pattern.
Digitalization of content delivery system will change the whole arena of the
Indian TV market in a big way. The future offers a distinct style of functioning
of the television industry, towards a rich, personalized, and social media
environment-lifestyle media: a personalized media experience within a social
context. It bridges the world of unlimited content to the world of limited
consumer time and attention. As a result, subscription revenues are bound to
increase and are likely to drive growth in the television segment. With DTH
becoming stronger, the cable industry will have to undergo a sea change and the
quality of product and its price will have to meet the competition in the DTH
arena.

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