Trends:

As any industry matures, inevitably its growth starts slowing down. The Indian television industry too is following this dictum, seeing its growth decelerating from over 20 percent, till a few years ago, to less than 15 percent currently. However, it would be completely wrong to say that television has become a mature, sunset industry. While the current sets of growth drivers are gradually reaching saturation, there are a number of new initiatives which can power a fresh round of expansion. Some of these key factors are: In spite of apprehensions, public debate and litigation, CAS was eventually launched, providing valuable lessons for future attempts to bring in addressability across the country.

• Various platforms: DTH broadcasting has introduced the power of choice to the consumer. The last mile distribution segment is expected to see further action with the entry of new DTH players, IP-TV, broadcasting services on DSL technologies, etc

  Digital distribution platforms such as direct-to-home (DTH) and Mobile TV are transforming the TV industry. Mobile TV—where content will stream in on mobile phones—is poised to grow big with the advent of 3G, according to experts. With the DTH industry estimated to grow by almost 100 per cent from US$ 310.16 million in 2008-09 to an expected US$ 620.25 million in 2009-10—leading DTH firms such as Sun Direct, Bharti Airtel DTH and Big TV have increased their marketing budget by 20-25 per cent in fiscal year 2010. India’s national television broadcaster, Doordarshan, is expected to completely digitized by 2017.

  In 2010, out of the estimated 85 million connected households (a household with C&S, DTH, IP-TV or any other form of connectivity other than terrestrial), digital platforms will have a market share of around 18 percent, or 13 million. There is a potential for this number to go up significantly, depending, inter alia, on the regulatory environment which will induce new players like established telecom operators to make the necessary investments.

  For digital cable, funds are required to not only finance set-top-boxes but also buy out LCOs for consolidation among MSOs. While the early round of funding has been quick for certain digital cable operators and DTH players; however, all these companies require further capital to sustain growth. Distribution companies are heavily frontloaded in terms of investments in infrastructure and customer acquisition costs. With the high upfront capex and minimum break-even periods of three to five years, even top-end distribution companies will find it challenging to raise capital at appropriate valuations in the current environment.

  The Indian broadcasting sector is interestingly poised – pay TV is growing, advertising growth is slowing down, funding is hard to come by and stiff competition is leading to rising costs and with the potential to keep viewers glued night-on-night. However, there is a silver lining to the recession. Viewing hours tend to increase in tough times as consumers stay at home. They may hold off on buying a new iPod or postpone a visit to the multiplex, but when they are home they will devote more time and attention to the television and internet.

• Content: In the television medium, the different genres are in different stages of their life cycle. Several channels have emerged recently in the space of children's entertainment and education. The news channels are in the next stage of evolution with an influx of players in the last two years, but market limitations and more transparent viewership patterns will lead to an inevitable shakeout. Up the maturity curve is the mass entertainment genre, which has established itself with 3-4 major players and the quality of programming (including innovative formats) determining their fortunes.

  Niche genres have significantly enhanced their proposition over the last few years with the entry of several new channels. While, news and children's programming segments accounted for most of the new entrants, other niche genres like religion and health also experienced the launch of several new channels.

  Television channels such as Cartoon Network, Pogo, Disney, MTV and Star Plus are expanding their product range to tap India's growing US$ 125.9 million licensing and merchandise market.

• Targeting NRI Diaspora: With more than 25 million NRIs spread across the globe, the international market is an important source for Indian broadcasters to augment their domestic revenues. Today, leading Indian broadcasters typically have a presence in foreign markets through distribution tie ups. For instance, Indian broadcaster Zee has channel bouquets in Europe, North America, Africa, Middle East and SouthEast Asia. Apart from Zee other broadcasters beaming to different parts of the world are NDTV, UTV, TV18, Aaj Tak and regional language players like Sun, Eenadu and Asianet. Besides the conventional cable networks, broadcasters also rely on new platforms like IPTV to distribute their content.

  Apart from beaming content, broadcasters have now begun taking things further and are starting to offer dedicated programs for the local audiences abroad. Zee network, for instance has Zee Astro which is broadcast in the South-East Asia in local language. NDTV too has launched two channels especially for markets outside India – Astro Awani in South-East Asia and NDTV Arabia in the Middle East.

Structure of Content

General Channels / Niche Channels:

With the influx of general entertainment, movie and news channels, television broadcasters are losing their audiences to their competition. Thus when one looks at the viewership ratings of the three main general entertainment channels in India, these do not vary significantly over a period.

Investors hence now need to look at developing targeted niche channels as in the case of most matured television markets in the world. Though some channels in the genre of lifestyle and music have been launched, these are still a handful and thus there still is potential in this area. For example, India could do with a dedicated ‘food’ channel or a ‘women’ channel as in the US. Certain niche channels for genres of English Business News and Sports are doing very well in India, which gives the impetus for broadcasters to explore content for such niche channels.

Apart from government owned Doordarshan, the other prominent private broadcasters in this general entertainment segment are Sony Entertainment Television, Zee Telefilms, Star TV and Sun Network, Eeenadu TV, Asianet in the south. The prominent News channels are Aaj Tak, NDTV, CNBC-TV 18, Zee News etc.

These broadcasters have kept the General entertainment channels segment busy in the last two years. Aside from the three large incumbent players in this category - Star Plus, Sony and Zee TV –and the other relatively smaller players, Star One and Sahara One, four new GECs were launched between the end of 2007 and mid-2009. These were 9X (INX Group), NDTV Imagine (NDTV Group), Colors (Viacom 18 Group) and Real (Miditech Turner).

As per press reports, there are in excess of 150 applications to launch new channels awaiting permission from the Ministry of Information and Broadcasting. Approximately 400 broadcasting channels were given permission and 33 of these were awarded licences in 2008 alone. Keeping in mind urban viewers specialised channels such as Showbiz, NDTV Lumiere, World Movies, E24, Firangi and Topper TV among others were initiated.

Star India has aggressive plans in the home shopping space and plans to start a home shopping channel via a joint venture with CJ Home Shopping Co. of Seoul. Network18 already runs Home Shop18, in which private equity firm SAIF Partners recently increased its stake to 35 per cent via a fresh capital infusion of $16 million. In the first round, Saif Partners invested $10 million to take a 25 per cent stake in Home Shop18.

However, evolving around few ideas general channels are unable to sustain the interest of the viewers. As a result GEC shares which saw an 8% decline over the last two years despite a doubling the number of channels in the genre. However, the latest entrant, Viacom 18-owned Colors, had a dream launch and within 10 weeks became the number 2 behind Star Plus, pushing Zee TV to the 3rd spot. The success of the channel has been attributed to its (high-cost) disruptive content (male-skewed reality shows as anchor programs scheduled on weekday prime time), huge investments in distribution (ensuring presence in prime TV bands in the key markets covered by TV Audience Measurement system), aggressive marketing support and heavy cross promotion across group channels.

With the long-term objectives of leveraging their network strength and reducing dependence on the declining Hindi GEC genre, national players like Star TV and Zee Network expanded into regional markets like Maharashtra, West Bengal, Tamil Nadu, Kerala and Karnataka. Zee TV’s Telugu and Kannada channels made their presence felt in 2008, while the Tamil channel faced distribution issues in Tamil Nadu. Star TV’s, Star Jalsha had a remarkable launch in West Bengal and Star Pravah has also fared reasonably well in the Marathi GEC space.

The news and business channel space grew from virtually nothing in 1995, to just over INR 2 billion in 2002 (comprising two dominant news channels, one major business channel and two international English news channels). Since then, this segment has grown further - currently, there are around 11 mainstream news channels and a slew of regional channels which together generate revenues of over INR 5 billion. Increased production values, introduction of tabloid news formats and entering into bouquets have helped this segment in attracting more eyeballs in the recent past.

The business channel space, originally an offshoot of the news channel space, hitherto dominated by CNBC, is believed to be the next growth driver, within the news and business space. Currently valued at INR 1 billion, this space is expected to grow at 40-50 percent over the next 2-3 years.

Currently, there are around ten children's channels. International majors in children's broadcasting, Cartoon Network and Nickelodeon already have an established presence in India, while Disney has commenced operations recently. Established Indian broadcasters like Zee and content providers like UTV and Pentamedia have also entered this space over the last two years. The domestic players appear to be well-placed to exploit the current void in localised programming, which has empirically proven to be a strong driver in other mature television economies. The international channels too currently have a high degree of dubbed multi-lingual programming and are reportedly looking at including local programming in their offering as well. As a result of increased depth of programming, together with the expansion of the advertising space and the emergence of addressable distribution platforms facilitating pay television, the children's channel segment seems to have entered a period of sustained growth.

Key Players in the General Entertainment Market

Regional Market:

The size of the six major regional markets is estimated to be about a fourth of the overall TV advertising revenues in India. The share of advertising revenue for the regional language channels is estimated to be far less when compared to its viewership share. The key regional entertainment markets are Tamil, Telugu, Kannada, Malayalam, Marathi and Bangla, which are demonstrating high growth rates.

Key players in the regional market

Several national broadcasters in India made inroads into regional markets in 2008. The most notable move was that of Star India’s joint venture with Jupiter Entertainment for a majority interest in the regional markets of Malayalam (Asianet and Asianet Plus), Kannada (Suvarna) and Telugu (Sitara), in addition to expanding its presence in Tamil market through Star Vijay. Earlier, STAR had signed a JV with Balaji, for launching a South Indian channel, but the relation soured before concrete step could be taken in that direction. Star India also launched Star Pravah, a Marathi channel and Star Jalsa, a Bangla channel in 2008.

Zee Group, in 2008, launched several general entertainment channels (GECs) in regional languages in addition to new regional news channels:

• Following the launch of Zee in Telugu and Kannada, the Group launched its third channel, Zee Tamizh, in the Tamil Nadu market.
• Zee News acquired 26 per cent stake for a reported investment of Rs 20 crores in Sky B (Bangla) Pvt Ltd, the company which runs Bengali infotainment channel Akaash Bangla.
• Zee News also launched a Hindi news channel for Uttar Pradesh and Uttarkhand in April 2009 for a reported investment of $5 million.
• Two years after the launch of Tamil kids channel Chutti TV, Sun TV Network announced plans to launch the Telugu and Kannada kids channels, titled Kushi TV and Chintu TV. The channel is aimed at children in the age group of 2-14 years with plans to include local as well as international content.
• Television Eighteen Group announced plans to launch three regional language business news channels – CNBC TV18 South, CNBC TV18 Gujarati and CNBC TV18 Channel 3. During the year, the group received the nod from FIPB for these projects. The current slowdown has resulted in these plans being put on the backburner.
• Delhi-based Sadhna News announced plans to launch a Hindi regional news channel, targeting the Bihar-Jharkhand region. This will be the third Bihar-centric channel after Sahara Samay Bihar and ETV Bihar.

Sports Channels

Sports Marketing, which includes both marketing and sports events and sponsorships to market both teams and non-sports products, is today a business worth INR 20bn in India (out of which cricket alone accounts for INR 18bn).

Sports always maintained its place among hundreds of channels. As the number of channels has multiplied, large audience have become much harder to find, but sports has retained its ability to generate eyeballs for broadcasters. In fact, the average time spent watching sports channels in C&S households have been increasing steadily. With the growth in sports viewership, the number of advertisers in the sports genre grew at a CAGR of 32% from 2005-2007. Consequently, the size of the sports genre in terms of advertising revenues stood around INR 7bn in FY2008 as against INR 5bn in FY2005.

The successful launch of the India Premier League (IPL) Twenty20 (T20) cricket competition in April- May 2008 marked a significant change in India’s TV advertising landscape.

• Early in 2008, a consortium of the World Sports Group and Sony Entertainment paid BCCI $918 million for 10-year global rights to the IPL, and during the tournament Sony Max reportedly realised revenues of over Rs. 3 billion, while the BCCI reportedly earned a profit of Rs 3.5 billion from the event.
• ESPN paid a higher-than-anticipated $975 million (about Rs. 44 billion) for 10-year rights to the international Champions League Twenty20 tournament. This included $900 million for broadcast rights plus a commitment to spend $75 million on marketing. However, the attractiveness of the tournament to advertisers was not tested in 2008 because it was cancelled following the terrorist attacks in Mumbai.
• In 2009, after a tough fight for the second season of IPL, broadcaster Sony (MSM) managed to keep the IPL rights after entering into a fresh deal where it has signed up with the World Sport Group (WSG) in a $1.6 billion (Rs. 82 billion) deal, valid for the next nine years through 2017. The earlier 10-year contract, which MSM couldn't protect, was worth $918 million for telecast and $108 million for promotion of the tournament. Reportedly, Sony had paid $40 million for the first of the ten-year deal it had with IPL.
• The Board of Control for Cricket in India (BCCI) is expected to see a 30 to 40 per cent jump in revenues from the second edition of the Indian Premier League (IPL) tournament over the first edition, held in India last year. Profits, however, are expected to increase marginally. Early assessments by senior IPL executives show that the cricket body is expected to earn Rs 4.5- Rs. 5 billion as revenue. But owing to higher expenses incurred on the 36-day tournament, which was relocated to South Africa owing to security concerns in India, profits are reportedly estimated to be in the range of Rs. Rs 3- 3.5 billion, against Rs. Rs 3.05 billion in IPL-1.
• Overall, IPL2 was termed more successful than IPL1 despite it being held outside India, with more afternoon matches alongside elections – highlighting the success of the concept. IPL2 constituted ~8% of the television advertisement pie and grew ~ 50% year-on-years. Numbers of viewers in IPL2 were estimated at ~90million, significantly higher than IPL1 of 85 million. Advertising rates were at a premium to IPL1, despite the muted advertising market. As per press reports, valuations suggest significant value creation opportunity for IPL franchisees- Rajasthan Royals franchisee was paid US$15.4m for an 11.7% stake, valuing the franchise two times of the initial valuation, only after one year.

Even though cricket is still popular among sports genre, the market is slowly moving from one-sport market towards multi-sport market. The major factors for the change is launch of several new sports channels in India, acquiring and marketing properties across other sports, internationally and Indian sportsmen doing well internationally in sports other than cricket. For instance, Indian now has its own Formula 1 team and Grand Prix is expected to make its debut in India in 2010 or 2011.

• TV 18 enters Regional News Broadcasting with IBN – Lokmat
• Sun TV Forays into Film Production
• TV 18 forays into Print with the acquisition of Infomedia
• Reliance Big Entertainment enters TV distribution
• Dish TV offers free set up boxes to its consumers
• Miditech to start its TV Broadcasting channel
• NDTV expands into GEC segment with ‘NDTV imagine’
• TV 18 forays into GEC segment with the launch of ‘Colors’ channel

Indiabiznews, June 19, 2010