Indian pay-TV industry facing shake-out

Indian pay-television industry is facing a shake-out amid intense competition during the economic crisis. Multinationals are expected to suffer a squeeze on profits from the region this year, while others could suffer losses on investment in new channels that are struggling in tougher conditions. Media Partners Asia (MPA), a Hong Kong based Media Research firm, has come out with a study, which says India has been a standout market in Asia for pay-TV channels and distributors because of its large audiences and relatively liberal foreign ownership and content laws – particularly compared with China.

"After a significant softening in 2009/10, pay-TV advertising will see double-digit growth from 2011. And, all of foreign players have to rationalise their costs because advertising sales and subscriptions are falling," said Vivek Couto, executive director of MPA. Foreign-owned or affiliated companies in India's pay-TV industry last year generated about $ 1.2 billion in sales compared with about $ 500 million in China. The country's pay-TV market is one of the world's largest, with more than 94 million customers generating $ 5.89 billion in revenue a year, about 29 per cent from adverting and the remainder from subscriptions.

Large foreign investors have rushed to capture part of the pie, including News Corp, Viacom, Time Warner, Walt Disney and Singapore government investment company Temasek. However, the industry has become overcrowded. MPA estimates there are 350 channels in India competing for space on distribution systems capable of carrying only about 150 each. This has sharply increased the cost of carriage, the price of being carried on a cable system.

MPA estimates channels paid nearly half their revenues from subscriptions to distributors last year just to carry their content. Another problem is much of the industry is controlled by the unorganised sector, small cable TV operators, who misreport earnings from customers to broadcasters and pocket the difference. Subscribers to digital pay-TV, controlled by larger conglomerates, often with foreign investors, number only about 13.4 million.

MPA predicts a relatively mild slowdown in revenue growth, from 20 per cent last year to 16 per cent this year, with ad growth slowing to 7 per cent. News Corp's consolidated profit from ventures in the region, led by Star TV in India, is forecast in the report to fall from about $ 150 million to $ 80 million.

Courtesy - Televisionpoint.com