The shift in Indian Television Industry

India consists of 179 million households out of which 70 millions have a TV. The figures seem to be great in terms of penetration and also have an ample amount of scope for growth. The advent of private players, foreign investment, and growth in technology has brought this industry to a tipping point of an entirely new era.

The Key Growth Driver

Subscription revenues are projected to be the key growth driver for the Indian television industry over the next five years. Subscription revenues will increase both from the number of pay TV homes as well as increased subscription rates. The buoyancy of the Indian economy will drive the homes, both in rural and urban (second TV set homes) areas to buy televisions and subscribe for the pay services. New distribution platforms like DTH and IPTV will only increase the subscriber base and push up the subscription revenues.Industry estimates feel that industry will grow at a rate of 24% in the coming 5 years.

Evolution

The Indian TV industry seems to be evolving from three different stages and would reach a point where conversion of TV into a PC and into a telephone will not be distinct anymore. As the market matures the television wars will first compete on price in which mode of connectivity is going to play an important role and then on content and quality of picture and sound. Each of these stages has been studied in detail, keeping in view the initial investment and the feasibility in the Indian context

1. Stage One- It is more than obvious that sooner or later CAS will be rolled out considering its advantages over the present form in more customized offering, more transparency and better market pricing (Demand and supply of individual channels can be easily measured). CAS will involve an initial investment which can be broken down into monthly installments.

2. Stage two- Direct to Home; holds distinct advantage in terms of low involvement by the consumer with the cable operator (E.g. problems of power failure and poor picture quality). Direct to home model operations which uses direct satellite communication and major players like Tata, Zee & Reliance have invested in this. This model supports two way connectivity as well as a reach to any corner of India, thus increasing the connectivity in the non urban areas(successful launch of igo tv, with DD direct package). DTH also is a beneficiary of content makers as it would reduce piracy. The hindrance to acceptance of this model by the consumers is the initial investment to be incurred by him, high switching cost and less amount of flexibility(in terms of the preferred content). However we feel that there would be a gradual shift towards acceptance of DTH once CAS is rolled out.

3. Stage Three- Convergence, with a rapid change in technology and everything from camera, phone and radio becoming one, possibility of convergence of telephone, internet and TV into one in Indian context is no longer a dream. IPTV has been at the fore front of this convergence and has done very well in the developing markets of Malaysia and Taiwan. After about 20 years the Indian consumer will no longer be satisfied only with streaming content (which is being directly broadcast), but would demand interactive-ness and options like customizing his TV viewing on his choices to individual programs at his convenient time. For ex. A consumer would be able to buy a stock news from CNBC, and headlines from Aaj Tak, sop operas from Star while songs from MTV. With massive investment already being made in bandwidth & infrastructure setup; a set of new players in TV market would emerge mainly the Telecoms & ISPs. So Hutch TV might just not be an advertisement, but can also turn into reality.

Note: The current state of FDI in the Industry

Cable networks- FDI limit is up to 49% inclusive of both FDI and portfolio investment. Companies with a minimum 51% paid up share capital held by Indian citizens are eligible for providing cable TV services under the Cable Television Network Rules, 1994.

Direct-to-home- Maximum 49% foreign equity allowed including FDI/NRI/FII Within the foreign equity, FDI component should not exceed 20%