Competition, costs — key factors for TV broadcasters

The median revenue of television broadcasting companies in the sample set selected by ICRA has reported a y-o-y growth of 13.2 per cent during 2010-11 led by the general entertainment channels (GECs) even though the news broadcasting companies registered a lower y-o-y revenue growth of 7.0 per cent during the fiscal.

Advertisement revenues continue to be the key driver of broadcaster revenue (˜80 per cent), as conventional analog cable distribution remains plagued by under declaration of subscribers. The subscription revenue, however, is expected to improve with increasing penetration of digital media with the number of direct-to-home (DTH) subscribers witnessing a growth of 62 per cent in 2010-11.

The pace of digitisation is set to get a fillip with the Ministry of Information and Broadcasting requiring services at the four Metros to be digitised by March 2012, and the rest of the country by December 2014.

The advent of digital distribution will help remove capacity constraints of analog cable distribution system, helping rationalise carriage costs for broadcasters. Digitisation may improve viability of niche channels with enhanced ability to target niche audiences.

The broadcasting space remains highly fragmented with a large number of channels competing. This fragmentation on broadcasters side, coupled with consolidation among media planning agencies and distributors (DTH and large multi system operators — MSOs) , is likely to keep the pricing power of broadcasters under pressure. There have been some efforts to consolidate channel bouquets, which may improve bargaining power of the broadcasters to an extent. The broadcasters, especially in the highly competitive GEC space, continue to face competitive pressures and rising content costs. Growth in advertisement revenue has been healthy, though impact of slowdown in key industries remains to be seen.

Mr Subrata Ray, Senior Group Vice-President and Head-Corporate Sector Ratings, ICRA, says, “Indian television broadcasting industry is expected to face cost pressures on rising production costs over the medium-term, given the line-up of new content by most broadcasters. While the advertisement revenue growth is expected to remain healthy for the industry in the coming few quarters on the back of hike in ad rates undertaken in April 2011, the rising costs and increased competition is likely to keep the margins under pressure. As far as content distribution is concerned, it is expected that the digital mode would eventually replace the analog cable distribution mode. With the sun-set clause notified by the Ministry of Broadcasting, the pace of digitisation is further expected to be accelerated, resulting in increasing subscription revenues for the broadcasters. While the carriage costs for 2011-12 are expected to remain high given the 25 per cent estimated increase in renewed contracts, the reduction in the bandwidth constraints post-digitisation would facilitate rationalisation of the carriage fees paid by the broadcasters..”

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