All eyes on India
India has finally rekindled its cable digitisation programme and upbeat growth is now forecast in the country’s already sizeable pay-TV sector. Gün Akyuz reports.
India’s pay-TV sector has attracted a steady stream of inward investment over the past decade, thanks to its sheer scale (160 million TV homes by 2015) and rapid expansion of an upwardly mobile younger adult demo (65% of the population are under 30). The latest example is Sony Pictures Television’s deal this month to take a 30% stake in Indian broadcaster MAA Television Network, which owns a stable of Telugu-language channels.
However, the country’s faltering cable digitisation programme has hindered its established but fragmented cabsat pay-TV industry’s route to profitability. This, as well as strong comptetion, may well have been a contributing factor in Turner Broadcasting System’s recent decision to close its Indian channel Imagine.
A key culprit is India’s sizeable cable infrastructure, which remains largely analogue thanks to the absence of a legislative framework to convert to digital. The programme launched in 2006, but digital still accounts for only around 7% of India’s 90 million or so cabled TV homes.
At the end of 2011 the cabsat sector totalled a sizeable 136 million TV homes (source: PINC Research), yet pay-TV channels remain heavily dependent on ad revenues. Notably, while channels continue to compete for carriage on restricted analogue bandwidth, local cable operators are able to under-report subscriber levels thanks to unaddressable (and untraceable) analogue set-top boxes. Also, they reportedly fail to pass on as much as 80% of subscription revenues to pay-TV broadcasters.
India’s already sizeable pay DTH market has gone some way to counter this creaking analogue cable infrastructure and practices. It now accounts for more than 40 million TV homes, but is also one of the most competitive markets anywhere, featuring six DTH operators – among them Tata Sky, Zee-owned Dish TV and Reliance Digital TV – all competing for a slice of the sector.
However, a government mandate to digitise India’s cable networks is now back on track, with a number of investor reports from the likes of PINC, KPMG and PwC now forecasting significant growth for India’s cabsat industry.
A report issued to clients by Mumbai-based PINC (aka Pioneer Investcorp) in December, for instance, forecast “a revolution” in the country’s cable and satellite sector on the back of the long-overdue digitisation. According to the report, India’s pay-TV industry, which currently generates around INR270 billion (US$5.36bn), is forecast to reach around 83 million digital TV homes (21% CAGR) between 2012 and 2015. And as a whole, India’s cabsat sector is set to cover 166 million homes over that period, including 64 million DTH and 20 million digital cable subscribers.
Under the latest timetable, India’s four largest cities – Delhi, Mumbai, Madras and Calcutta – turn fully digital by this June, followed by 35 other cities with more than a million residents in 2013, and then nationwide by 2015.
This won’t necessarily translate into significant extra landgrab for pay-TV players. Consolidation is already underway in a cluttered market of well over 500 channels, six DTH firms and several multiple system operators and local cable operators. But the overhaul will allow existing players to turn a profit, and PINC estimates this could begin to happen in 2013.
“We see great opportunity in the Indian television industry, which projects a high growth rate,” says Tarun Katial, CEO of Reliance Broadcast Networks. “Accurate reporting of subscriber bases, regulated pricing and the formation of an organised sector at a pan-India level will surely be the positives that can be expected from this migration to digital.” But he warns: “Generating finance for this mammoth migration stills remains a crucial factor, especially for the smaller players in rural and semi-urban areas.”
An immediate challenge is the not inconsequential capital outlay required for the first deadline in June, with about seven million digital boxes and around US$500m in hardware required, says Ajay Chacko, president of A+E Networks/TV 18. “This time around, one hopes that it will go through. But India being India, you can’t say it’s done until it’s done,” he notes.
And not before time, as India’s TV ad market is showing signs of strain. Worth around US$2.5bn, Indian TV advertising had been growing at annual rates of up to 20% over the past five years, but has now slowed to around 10-12% in urban areas. This, in turn, has sparked a shift by many players who are turning to local regional audiences as an alternative route to growth.
One of India’s largest general entertainment channels, Sony-backed SET, is among several now focusing on growth by making itself relevant to small-town as well as metropolitan audiences in the Hindi-speaking heartlands.
A more recent entrant into the Indian channels business is Reliance Broadcast Networks, through its joint-venture English-language channels partnership with CBS Studios International set up in autumn 2010. The venture, Big CBS Networks, has pioneered three entertainment channels called Big CBS Spark, Big CBS Prime and Big CBS Love, offering Indians new US content virtually simultaneously with its US airing, thanks to its digital infrastructure.
But the venture is also increasingly focusing on the regions. The latest Big CBS launch, in January, was regional Punjabi-language channel Spark Punjabi. Last year, Reliance also launched the separate, wholly owned Hindi-language net Big Magic.
“India’s booming regional television industry with limited regional entertainment options is an opportunity that we are leveraging,” says Katial. The firm’s parent Reliance Group, which spans radio and mobile infrastructure as well as a DTH platform and its growing channels business, stands to benefit from cross-promotional marketing. Spark Punjabi, a fledgling ‘best of’ net carrying content from Big CBS’s English-language channels, is backed by a regional network of 22 radio stations. “It is seeing some very good traction, and is already the number one channel in primetime,” says Katial.
Meanwhile, Big Magic, which launched in April 2011 targeting India’s Hindi heartland (Madhya Pradesh, Uttar Pradesh, Bihar and Jharkhand), is now the number one channel in the region, says Katial. Positioned as a network with local content built around local insights ‘for the people, by the people,’ it includes India’s first devotional singing reality show Big Bal Kalakaar, which launched this January.
Other local schedule drivers on the channel include comedy series Hasya Panchayat, Hamaar, Nadaaniyan and Bulbulay, and music show Des Hamaar Sangeet.
But Reliance is also looking further afield for ideas for Big Magic, such as its recent deal with FremantleMedia for a local version of gamehsow Let’s Make a Deal, due to launch on the channel in the second quarter.
The company is also in the final stages of preparing two channels under a separate channel agreement forged last year with Europe’s RTL Group. Originally due to launch in December, a Hindi-language action entertainment channel is set for an expected June premiere, with a second reality-based channel to follow.
Another approach is TV18′s new joint-venture channel with A+E Networks, History TV18, which launched last October with no fewer than seven language feeds (English, Hindi, Tamil, Telugu, Bengali, Marathi and Gujarati) to tap into India’s different regions.
The channel also appears to have unlocked a growing appetite for factual entertainment, says Chacko. “Around 55-60% of the country watches general entertainment, but this is changing gradually,” he says. History TV18 launched on the back of viewer research and feedback indicating an opportunity for other forms of entertainment serving semi-urban, small-town India, as well as urban India.
The channel draws from the extensive A&E library, using shows with an Indian connection, such as Ice Road Truckers, which launched with an episode set in the Himalayas.
“Thrill and adventure shows like Ice Road Truckers and IRT Deadliest Roads have done well, but so have information shows done in a palatable, interesting format, such as Sliced and Food Tech, with a little bit of a connection with history,” says Chacko. “People understand that it’s a history connection, rather than a history lesson. Extensive local research before we launched indicated that if we provide universal shows with local context and languaging, people are ready to experiment with new forms of content.”
History claims to have shaken up the league table in the factual entertainment space, with viewing for the genre soaring by 59%. The channel has a weekly viewing reach of up to 23 million out of around 50 million households. Within a month of launch, History TV18 was the number one channel in large cities. It’s now also the leading factual entertainment channel across India in cities of one million-plus, ahead of Discovery and Nat Geo, and is second to Discovery across India as a whole. Its lead in bigger cities is significant, as it represents 70% of all viewing of factual entertainment, and such towns are home to about 70% of affluent Indians.
“In some areas factual entertainment is beginning to take off. Although I wouldn’t say it’s mainstream yet, it gives us enough positive figures to take things to the next level and introduce more local programming with increased budgets and take bigger risks,” says Chacko.
Leading the way to the next level is History TV18′s first format, a local adaptation of the BBC’s 100 Greatest Britons, remade as Greatest Indians. However, it will deviate fairly significantly from the UK version, as a cross-platform production made in association with TV18′s joint-venture news channel CNN IBN. The show, now in pre-production, is due to launch on History TV18 towards the end of April.
Impressive audience gains notwithstanding, the aim is to grow History TV18′s revenues before launching more local channels, says Chacko. “That’s the big challenge, and I wouldn’t say we’ve crossed that hump yet. It could happen over the next six months to a year, but it all depends on whether subscription revenues come raining in from June.”