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Television - Awaiting the digital dawn


The TV industry continued its good run in 2015, growing at 14.2 per cent year-on-year to reach INR 542 billion in revenues. The total number of TV households stood at 175 million, implying a TV penetration of 62 per cent. The number of paid Cable & Satellite (C&S) subscribers is estimated to have reached 160 million (including DD FreeDish).1 At the end of 2015, the digitisation of C&S households (in terms of STBs rolled out) stood at 60 per cent including DD FreeDish subscribers.1

TV advertising revenue growth surpassed expectations in 2015, growing at 17 per cent to INR 181 billion.1 The launch of the viewership measurement system by Broadcast Audience Research Council (BARC) was a landmark event in 2015,2 but the phased rollout meant that advertisers and broadcasters were waiting for stability in the ratings before starting to depend completely on the measurement data from BARC India.

On the distribution side, however, 2015 proved to be a mixed bag for the TV industry, with subscription revenues growing slower than expected as monetisation remains a challenge. Subscription revenue growth for the overall TV industry is estimated at 13 per cent in 2015, reaching INR 361billion. Of this, broadcaster share of subscription revenues is expected to be INR 85 billion, growing at growing at an estimated 15 per cent lower than our expectations of 20 per cent in the previous year’s report.1

Trends and challenges

TV advertising revenue growth for broadcasters across genres was strong and better than expected, in spite of a high base in 2014 due to elections. TV advertising was buoyed by surging ad spends from e-commerce companies and strong performance of IPL and ICC Cricket World Cup. As a share of total TV ad spends, e-tailing category spends in TV advertising increased from approximately 3 per cent in 2014 to approximately 5 per cent in 2015, while total e-commerce spend on TV contributed to approximately 7 per cent in 2015.1
While the BARC viewership measurement system brought rural markets under the purview of measurement for the first time and an increase in the sample size led to a reshuffle in the rankings of channels, there was no immediate impact on ad budget allocations among channels or genres.3
HD channels are also contributing significantly to subscription revenue growth for DTH operators and broadcasters and ad revenue growth for some broadcasters.
Although the shortage of STBs resulted in many state high courts granting stays on MIB’s December 2015 deadline for Phase III,4 STB seeding in Phase III areas was relatively successful. As per our estimates, STB seeding in Phase III areas as of Dec 2015 was ~70 per cent complete, excluding DD FreeDish (~75 per cent including DD FreeDish).1
The industry continued facing challenges in improving the share of subscription revenues among the different participants or carriage fees. DTH operators continued to have a healthy revenue growth on account of an increase in ARPU by around 10 per cent in 2015. Digital cable operators however, continued to face issues in increasing consumer level subscription ARPUs, as they failed to roll out tiered channel packages and ensure collection as per channel packages.5
Against the backdrop of continuing disputes between the stakeholders in the TV distribution value chain, TDSAT ruled that RIO was to be the starting point for content deals between broadcasters and distribution platforms, starting April 1 2016. TRAI initiated a consultation process seek comments from stakeholders on issues related to the various tariff models for cable TV.6
DD FreeDish, Prasar Bharati’s free-to-air DTH service gained prominence during the year due to: i) Rollout of DAS in Phase III areas with high proportion of cable dark areas and low affordability for paid DTH packages by consumers, and ii) Inclusion of rural market data by BARC in its TV viewership measurement that has led to advertisers realizing that there is a large audience being catered to by DD FreeDish.
With growing content consumption on digital platforms supported by the increasing availability of TV content on OTT platforms, most TV broadcasters view OTT as a complementary platform to provide their content rather than as a threat to the traditional TV business.

Future outlook

In 2016, the key things to watch for will be the continuation of e-commerce ad spend growth on TV and BARC India TV ratings leading to an impact on ad spends across genres and ad rates among channels within genres. The industry is also likely to be keenly awaiting the outcome of TRAI’s consultation paper on content pricing models, since it is likely to have a significant impact on subscription revenue growth and more equitable sharing of revenues within the value chain. OTT services will continue to be a big theme that is likely to drive dynamics of this industry over the next decade.7

The future outlook for TV is positive, with the industry expected to grow to INR 1,098 billion in 2020, at a CAGR of 15 per cent. The number of TV households is expected to increase to 200 million, with paid C&S subscriber base expected to grow to 174 million by 2020, representing 87 per cent of TV households. TV advertising in India is expected to grow at a CAGR of 15 per cent between 2015-20, to reach INR 365 billion. Subscription revenue for broadcasters is expected to grow at a CAGR of 18 per cent between 2015-20 to INR 203 billion, driven by increase in the declared subscriber base in Phase III and IV, increase in subscription revenues collected on the ground due to channel packaging and increasing HD penetration, and increase in revenue share of broadcasters in the subscription pie.


1 KPMG in India’s analysis 2016 based on data collected from industry discussions
2 A milestone year for media, The Mint, 31 December 2015
3 Based on industry discussions
4 DAS Phase III stayed in 5 states including Maharashtra as Bombay HC issues restraining order, IndianTelevison, http://www.indiantelevision.com/cable-tv/das/das-phase-iii-stayed-in-5-statesincluding-maharashtra-as-bombay-hc-issues-restraining-order-160104 accessed on 15 February 2016
5 Industry discussion conducted by KPMG in India
6 RIO to form starting point for negotiations between broadcasters and platforms: TDSAT, TelevisionPost, http://www.televisionpost.com/trai-tdsat/rio-to-form-the-starting-point-for-negotiationsbetween-broadcasters-and-platforms-tdsat/ accessed on 19 March 2016
7 Based on industry discussions
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