The Indian broadcasting industry is surely on a channel launching spree. Only last month did the Rs 1200-crore Hindi movie genre
witness the entry of yet another movie channel from the Zee stable with the launch of &pictures; at the same time, the R400-crore Marathi television market too decided to welcome its twelfth player with Maayboli, a ?music+comedy? channel from the Sri Adhikari Brothers network. This month, Benneth, Coleman
& Co. Ltd (BCCL) will broaden its broadcast horizon one more time with Romedy Now,
its latest venture in the English entertainment category. The channel will cater to the urban upscale audience and will be positioned as the go-to-destination for ?love
and laughter?.
This fling with new launches does not just stop here. Around May this year, Mahesh Samat, former managing director of Walt Disney India, along with a consortium of private financial investors, announced the launch of Epic?India?s first segmented
Hindi entertainment product with a focus
on historical/mythological content. The same month, Star India chose to launch the Hollywood action movie channel, Star Movies Action, to tap into the R600-crore
English movie genre. Go back a little further and one can easily recall HBO?another strong player in the English movie genre, launching two purely subscription-led movie channels, HBO Hits and HBO Defined, in February this year. Evidently, broadcasters are not just feeling competitive to move ahead and get the ball rolling but are also showcasing an exceptional eagerness to invest in fresh launches to expand their footprint across India. So, what is it that makes the Indian broadcasting industry so enthusiastic about new launches at a time when the Indian economy is battling one of its
worst crisis?
?Short economic panic attacks are going to happen and you don?t stop your business because of short economic panic attacks. We are here for the long term.?
Sunil Lulla,
Managing director and CEO, Times Television Network
Digitisation and its Power
According to industry experts, the year 2013 is expected to witness the launch of as many as 40-50 channels across various genres on the back of digitisation. Compared to the analog system which at best could accommodate 80-100 channels with poor reception quality afflicting the channels at the fag end of the queue, in a digitally addressable system (DAS), not only does the bandwidth capacity jump to 500 channels but the quality of reception for each of these channels is also equally good. Result? The desperation to grab a place on the prime band by paying more no longer exists thus leading to a cut in carriage costs. According to a study conducted by Chrome, a media market research company, if the cost per contact (CPC) paid by a channel to reach out to its customer is R20, digitisation brings that CPC down to one-fifth or R4.
Says Asheesh Chatterjee, CFO, Reliance Broadcast Network (RBNL), ?After almost 8-9 months of digitisation, we?re seeing impressive growth across key centres wherein the key advantage of digitisation is coming to the fore. The advantage is that it takes up less frequency space and also helps to overcome bandwidth scarcity.? Now, since digitisation allows direct landing on the genre/channel of choice through a set-top-box, it also reduces audience wastage wherein the given genre/channel witnesses more time spent on it.
?We are anticipating that there will be launches in two formats ? the super niche format and the regionalisation format.?
Jai Lala,
Principle partner, MindShare
Now comes the second advantage. Indian broadcasters have for long been suffering from the perils of under-reporting of their subscriber base. It is argued that the local
cable operator (LCO) never reported the exact number of households accessing a channel thus hurting a network?s total subscription revenue. Says Sundeep Nagpal, founder-director, Stratagem Media, ?One of the things that digitisation does is that it gives the exact number of people actually subscribing to a channel. So when there is a reasonably accurate subscription number available, you also have a better way of negotiating on the carriage fee.?
?While the channels with stronger content will grow stronger, the weak ones will fade away. There will be a natural process of elimination over the next five years.?
Ashish Bhasin,
Chairman, India, and CEO, South East Asia, Aegis Group
So, combine the advantages that digitisation brings to the table?better bandwidth capacity, equal reception quality, a reduction on carriage costs and transparency in the number of subscriber base?and broadcasters are ready to hope for more through new launches.
Says Sunil Lulla, managing director and CEO, Times Television Network, ?Short economic panic attacks are going to happen
and you don?t stop your business because of short economic panic attacks. We are here for the long term. Yes, there is an economic scenario but I don?t think any self-respecting Indian will believe that this is going to last forever. We would all like to see it done and dusted with.?
?With the development of digitisation in the country, new businesses like us will get more opportunity to explore subscription-driven varied content offerings to bring more choice to the viewers.?
Mahesh Samat,
Managing director, Epic Television Network
As per the 2013 Ficci-KPMG report, the television industry in India is estimated at R370 billion in 2012, and is expected to grow at a compounded annual growth rate (CAGR) of 18% over 2012-17, to reach R848 billion in 2017. Aided by digitisation and the consequent increase in average revenue per user (ARPUs), the share of subscription revenue to the total industry revenue is expected to increase from 66% in 2012 to 72% in 2017.
10+2 cap a reason too?
With the advertising inventory soon to be capped at 12 minutes an hour on a channel as per Telecom Authority of India?s (Trai) order, there is also the impeding danger of losing ad revenues. Since channels may not be able to raise their ad rates by as much as the loss in ad volumes, networks will look at launching new channels to make up for the lost revenues by providing additional inventory on the new channel as part of a package deal.
As of now, Telecom Dispute Settlement and Appellate Tribunal (TDSAT) has asked Trai to keep its order in abeyance till November 11, but broadcasters are bracing for the worst.
Says Navin Khemka, managing partner at Zenith Optimedia, ?With the 10+2 cap in place soon, salable inventory on channels will go down despite the increasing demands; and to counter that reduction in the inventory, networks will try to increase the inventory by launching new channels.?
?But there is a flip
side to this story too,? cautions Harit Nagpal, CEO and MD, Tata Sky. He says that add-on channels must also garner similar eyeballs for advertisers to consider them in their ad spends. ?At least big networks can look at selling inventory in packages. The television industry is in a very dynamic state now and the next year shall be very crucial for the media industry looking at the flux and the many key changes that are taking place in this platform,? he says.
Now, when it comes to subscription revenues, the walk-ins will happen in two ways: First, from the exiting channels which have got and will get digitised and, second, from new launches. So, when it comes to launches, what are the genres that will find new players?
?We are anticipating that there will be launches in two formats ? the super niche format and the regionalisation format,? says Jai Lala, principle partner at MindShare.
He explains that the niche channels will have a very small base but will cater to very specific groups. Quite like HBO Defined and HBO Hits, there will be more such launches which will be 100% subscription-led with no advertising at all. These channels will be completely SEC A++ who obviously have much higher disposable income and also come with varied interests. ?So, subscription led channels will be a highly metro phenomenon,? he says.
Adds Smita Jha, leader ? entertainment and media practice, PricewaterhouseCoopers (PwC) India, ?Launching such premium channels will be feasible as broadcasters will be able to charge significantly more per channel per connection from a smaller addressable consumer base with greater ability and willingness to pay for relevant content. This was earlier very difficult in non-addressable, non-digitised market conditions.?
According to PwC, genres such as movies, children?s entertainment, science, history, travel and food are likely to witness more launches. Another area of growth will be HD (high-definition) channels with greater per-channel subscription payments complimenting advertising revenues. For the record, as per industry estimates, the GEC genre from the national broadcasting stable requires the highest launch investment and run costs ? an estimated Rs 200 crore?while for the non-GEC genres, the cost is almost half. Coming to the expected growth in regional channels, the launches could include formats within movies, music and/or news.
?So, while in the regional space it will be more about expansion of genres, in the top metros it will be more of slicing and dicing within the niche,? Lala avers. For the record, RBNL launched Big RTL Thrill (the dubbed Hindi channel) in December-January 2013 and Big Magic Bihar and Jharkhand in January 2013 on the back of digitisation. It also expanded the reach of its regional GEC, Big Magic, from a central India focus (Uttar Pradesh and Uttarakhand) to 40-plus cities. Broadcasters state that some of the investments made will have a long gestation period and they will look to recover their costs over the next few years.
Experts point out that it is the English genre on television that has shown the most rapid growth in the post-digitisation era. Interestingly, the English GECs emerged as the fastest growing genre with 45% growth suggesting an increased relevance of the category in metros, especially to brands targeting SEC A audiences.
According to Kevin Vaz, business head?English channels, Star Jalsha and Jalsha Movies, Star India, the biggest advantage that digitisation brings to the English channels is that it helps make them available. ?Earlier, most of the English channels were available at a very low frequency. With a limited bandwidth, the channels would come way down and appear hazy. But now that viewing quality is good, the English genre has shown huge growth,? he says. Vaz claims that Star Action Movies recorded a TVT (television viewership in thousands) of 10,81,000 in the first week of its launch (week 23 of 2013) which grew to 23,80,000 TVT by week 32 primarily on the back of digitisation.
So, if the hope for more subscription revenues will usher in new channels in the super-niche and regional segment, the desire of networks to earn advertising revenue through additional inventory capacity will bring about the launch of channels with a mass flavour. And yes, channels which come with a strong network backing will be the ones that will have an upper hand when compared to standalones. In an earlier conversation with BrandWagon, Bharat Ranga, chief content and creative officer, Zee Entertainment Enterprises Ltd, had noted that for a GEC or even a movie channel, it could take anywhere between 3-5 years to turn profitable. And this is where the network strength and the group synergy come into play. ?For a standalone channel it could become difficult to continue investing and sustaining for such a long time,? he said.
However, there are a few who disagree. According to Epic Television Network?s managing director Samat, it sometimes becomes a challenge for large networks to be able to innovate with content, given their existing legacy and perceptions amongst key stakeholders. ?Therefore, with the development of digitisation in the country, new businesses like us will get more opportunity to explore subscription driven, varied content offerings to bring more choice to the viewers,? he believes. Epic is currently waiting for regulatory clearances and is expected to launch later this year.
Jha of PwC notes that before the onset of digitisation, broadcasters with a bigger bouquet of channels had an edge in negotiations with cable operators for carriage of channels. ?But now, even channels without network backing will be better placed as the bandwidth capacity of cable networks will increase significantly, thereby pulling down the carriage and placement costs,? she says.
But will advertisers pay?
According to industry estimates, television is expected to add 11-12
million subscribers annually for the next couple of years. So, while subscription revenues will definitely increase, they will still continue to be more dependent on ad revenues for a while. This is because the advertising to subscription ratio is still at a nascent stage favouring advertising. And even with digitisation, it will take a while for that ratio to change and for broadcasters to actually reap the benefits. So, when broadcasters launch channels to attract additional revenues through the dual stream of advertising and subscription, will advertisers be willing to play ball?
Brands are expected to invest in new launches in two ways. If the launch is in an existing genre, then it will be more about observing if there is a price benefit. If so, then there can be a certain amount of trial advertising which can be put onto that channel. In case it is a new genre, the target audience can be pinpointed much better, thereby ensuring less spillover. Advertisers would want to invest in the second case more as the return on investment (ROI) would be better.
Some indicate that while the channel launching spree could continue, it will eventually lead to consolidation ,such that in any single genre, there will probably be around 3-4 strong players, as is the global norm. ?Therefore, while the ones with stronger content will grow stronger, the weak ones will fade away. There will be a natural process of elimination over the next five years,? says Ashish Bhasin, chairman, India, and CEO, South East Asia at Aegis Group.
Well, come what may, the optimism in the industry is on an absolute high. Broadcasters are treading on a new-found impetus to survive and grow, thanks to digitisation and also to the 10+2 cap to some extent. Frankly, both will act as catalysts for broadcasters to launch more new channels for now. As Subhadarshi Tripathy, business head, ZeeQ, puts it, ?Channels in every genre will come up, especially because of digitisation. From niche movie channels to sports and learning channels, the Indian broadcast industry is set for a revolution.?
